What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-05-28 compared with 2023-06-06 · 686 added, 782 removed, 520 unchanged (74% of the section changed)

1 unchanged sentence

INDEX TO FINANCIAL STATEMENTS

Management's Annual Report on Internal Control over Financial Reporting  

Management's Annual Report on Internal Control over Financial Reporting 42

Report of Independent Registered Public Accounting Firm (PCAOB ID 317 )

1 unchanged sentence

Consolidated Statements of Comprehensive Income for the Fiscal Years Ended March 30, 2024, March 25, 2023 and March 26, 2022

Consolidated Balance Sheets as of March 25, 2023 and March 26, 2022

Consolidated Balance Sheets as of March 30, 2024 and March 25, 2023

Consolidated Statements of Cash Flows for the Fiscal Years Ended March 30, 2024, March 25, 2023 and March 26, 2022

Consolidated Statements of Changes in Shareholders’ Equity for the Fiscal Years Ended March 25, 2023, March 26, 2022 and March 27, 2021

Consolidated Statements of Changes in Shareholders’ Equity for the Fiscal Years Ended March 30, 2024, March 25, 2023 and March 26, 2022

Notes to Consolidated Financial Statements

Management ’

s Annual Report on Internal Control over Financial Reporting

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 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. 

Management ’ s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

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 30, 2024.

Freed Maxick CPAs, P.C., our independent registered public accounting firm, has audited and reported on the consolidated financial statements of the Company and the Company’s internal control over financial reporting, as stated in their report included in this Annual Report on Form 10-K.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Transcat, Inc.

Rochester, New York

To the Shareholders and the Board of Directors of Transcat, Inc.

Opinions on the Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Transcat, Inc.

and subsidiaries (the Company) as of March 25, 2023 and March 26, 2022, and the related consolidated statements of income, comprehensive income, cash flows and changes in shareholders' equity for each of the three years in the period ended March 25, 2023, 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 25, 2023, 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 25, 2023 and March 26, 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended March 25, 2023, 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 25, 2023, based on criteria established in Internal Control —

and subsidiaries (the Company) as of

March 30, 2024 and

March 25, 2023, and the related consolidated statements of income, comprehensive income, cash flows and changes in shareholders' equity for each of the three years in the period ended

March 30, 2024, 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 30, 2024, 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 30, 2024 and March 25, 2023, and the results of its operations and its cash flows for each of the three years in the period ended March 30, 2024, 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 30, 2024, 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.

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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.

Those standards require that we plan and perform the audit 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.

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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 $3.6 million and $5.1 million, respectively. 

As a result of a business combination in the prior year the Company is still obligated under a contingent consideration arrangement where the potential payout is up to $7,125,000.

The Company’s determination of the fair value of assets acquired and contingent consideration related to a prior acquisition 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.

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.

Assumptions used include the weighted-average cost of capital, risk free rate, customer attrition, as well as forecasted revenue and earnings before income tax, interest, depreciation, and amortization (“EBITDA”).

Aggregate intangible assets and goodwill represented an allocation of purchase price in the amount of $11.9 and $36.2 million, respectively.

The Company’s determination of the fair value of assets acquired 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 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 and reassessment of contingent consideration.

We obtained an understanding of management’s controls and tested the operating effectiveness of the controls.

Our audit procedures related to the estimation of fair value of assets acquired 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.

We tested management’s estimate of the fair value of assets identified.

This included testing the completeness and accuracy of source information used, testing the mathematical accuracy of management’s calculations, and evaluating the reasonableness and consistency of methodology and assumptions used.

Nexa Earn-Out

Critical Audit Matter Description

As discussed in Notes 1, 8 and 9 to the consolidated financial statements as a result of a business combination in a previous year the Company is still obligated under a contingent consideration arrangement where the potential payout is up to $7.1 million.

This arrangement is recorded at fair value at each reporting period, which was estimated as zero as of March 25, 2023.

During the year ended March 30, 2024 the Company entered into an Amendment to the Share Purchase Agreement.

Pursuant to the Amendment, the potential earn-out payments remained the same.

The Amendment changed the conditions necessary for the sellers to receive potential earn-out payments as well as the lines of business included in the calculation of EBITDA.

Assumptions used to estimate fair value include the discount rate, risk free rate, asset volatility, as well as forecasted EBITDA.

As a result of the Amendment, the fair value of the contingent consideration was initially determined to be $2.8 million for which the Company recorded a liability.

Later in the year ended March 30, 2024 the Company determined the fair value of the contingent consideration was $0.5 million and recognized a net $2.3 million non-cash gain.

The Company’s determination of the fair value of the contingent consideration is based upon assumptions of the future performance of the acquisition and other factors.

Due to the subjectivity involved we identified the fair value estimate of the 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.

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.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the estimation of fair value of the contingent consideration included the following, among others:

We obtained an understanding of the terms of the Amendment.

We obtained an understanding of the process and assumptions used by management to develop the estimate.

We obtained an understanding of the associated controls and tested those controls.

We engaged an internal valuation specialist to test certain assumptions and approaches used.

● We tested management’s assumptions to determine fair value of the earn-out including projected EBITDA, discount rate, risk-free rate and asset volatility.

We also tested the completeness and accuracy of source information used, tested mathematical accuracy of management’s calculations, and evaluated reasonableness and consistency of methodology and assumptions.

/s/ Freed Maxick CPAs, P.C.

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Service Revenue

$ 169,525 $ 144,883 $ 122,005

Distribution Sales

89,956 85,686 82,954

Total Revenue

259,481 230,569 204,959

Cost of Service Revenue

112,272 98,245 83,084

Cost of Distribution Sales

63,403 63,969 63,436

Total Cost of Revenue

175,675 162,214 146,520

83,806 68,355 58,439

Selling, Marketing and Warehouse Expenses

28,710 24,761 20,649

General and Administrative Expenses

35,315 27,346 23,647

Total Operating Expenses

64,025 52,107 44,296

Operating Income

Interest and Other Expenses, net

19,781 16,248 14,143

Interest Expense

1,835 2,417 810

Interest Income

Other Expense

Total Interest and Other

1,342 2,761 953

Income Before Provision for Income Taxes

18,439 13,487 13,190

Provision for Income Taxes

4,792 2,799 1,810

$ 13,647 $ 10,688 $ 11,380

Basic Earnings Per Share

$ 1.66 $ 1.42 $ 1.52

Average Shares Outstanding

8,239 7,551 7,496

Diluted Earnings Per Share

$ 1.63 $ 1.40 $ 1.50

Average Shares Outstanding

8,352 7,645 7,589

See accompanying notes to consolidated financial statements.

3 unchanged sentences

For the Fiscal Years Ended

$ 10,688  

$ 11,380  

$ 7,791  

$ 13,647 $ 10,688 $ 11,380

Other Comprehensive (Loss) Income:

Currency Translation Adjustment

( 918 )  

( 207 )  

152 ( 918 ) ( 207 )

Other, net of tax effects of $( 26 ), $ 14 and $( 146 ) for the years ended March 30, 2024, March 25, 2023 and March 26, 2022 respectively.

( 49 )  

Total Other Comprehensive (Loss) Income

( 967 )  

99 ( 49 ) 425

Total Other Comprehensive Income (Loss)

251 ( 967 ) 218

Comprehensive Income

$ 9,721  

$ 11,598  

$ 8,350  

$ 13,898 $ 9,721 $ 11,598

See accompanying notes to consolidated financial statements.

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Current Assets:

$ 1,531  

$ 1,396  

Accounts Receivable, less allowance for doubtful accounts of $ 457 and $ 460 as of March 25, 2023 and March 26, 2022, respectively

44,698  

39,737  

Cash and Cash Equivalents

$ 19,646 $ 1,531

Marketable Securities

Accounts Receivable, less allowance for credit losses of $ 544 and $ 457 as of March 30, 2024 and March 25, 2023, respectively

47,779 44,698

Other Receivables

Inventory, net

16,929  

12,712  

17,418 16,929

Prepaid Expenses and Other Current Assets

Total Current Assets

67,599  

59,704  

105,158 67,599

Property and Equipment, net

29,064  

26,439  

69,360  

65,074  

38,944 29,064

105,585 69,360

Intangible Assets, net

13,799  

14,692  

19,987 13,799

Right to Use Assets, net

14,876  

11,026  

$ 195,749  

$ 177,762  

16,823 14,876

$ 287,552 $ 195,749

LIABILITIES AND SHAREHOLDERS' EQUITY

1 unchanged sentence

Accounts Payable

$ 15,869  

$ 14,171  

$ 11,495 $ 15,869

Accrued Compensation and Other Current Liabilities

10,201  

11,378  

16,739 10,201

Income Taxes Payable

Current Portion of Long-Term Debt

Total Current Liabilities

28,318  

27,710  

33,499 28,318

Long-Term Debt

46,869  

46,291  

Deferred Tax Liabilities, net

Lease Liabilities

12,960  

14,873 12,960

Other Liabilities

Total Liabilities

96,119  

91,586  

62,383 96,119

Shareholders' Equity:

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Capital in Excess of Par Value

27,886  

23,900  

141,624 27,886

Accumulated Other Comprehensive Loss

( 1,200 )  

( 949 ) ( 1,200 )

Retained Earnings

69,163  

58,744  

80,074 69,163

Total Shareholders' Equity

99,630  

86,176  

225,169 99,630

Total Liabilities and Shareholders' Equity

$ 195,749  

$ 177,762  

$ 287,552 $ 195,749

See accompanying notes to consolidated financial statements.

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Provided by Operating Activities:

Loss on Disposal of Property and Equipment

Net Loss on Disposal of Property and Equipment

Deferred Income Taxes

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Business Acquisitions, net of cash acquired

Purchases of Marketable Securities

Net Cash Used in Investing Activities

Cash Flows from Financing Activities:

Proceeds from (Repayment of) Revolving Credit Facility, net

(Repayment of) Proceeds from Revolving Credit Facility, net

Repayments of Term Loan

Issuance of Common Stock

Issuance of Common Stock, net of direct costs

Repurchase of Common Stock

Net Cash Provided by (Used In) Financing Activities

Net Cash Provided by Financing Activities

Effect of Exchange Rate Changes on Cash

Net Increase in Cash

Cash at Beginning of Fiscal Year

Cash at End of Fiscal Year

Net Increase in Cash and Cash Equivalents

Cash and Cash Equivalents at Beginning of Fiscal Year

Cash and Cash Equivalents at End of Fiscal Year

Supplemental Disclosures of Cash Flow Activity:

Cash paid during the fiscal year for:

Income Taxes, net

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

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Accrued holdback consideration related to acquisitions

Balance Sheet Reclassification of Property and Equipment, net to Inventory

See accompanying notes to consolidated financial statements.

TRANSCAT, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS ’

(In Thousands, Except Per Share Amounts)

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS ’ EQUITY

(In Thousands)

$0.50 Par Value

2 unchanged sentences

Balance as of March 27, 2021

Issuance of Common Stock

Proceeds from Issuance of Common Stock

Repurchase of Common Stock

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Balance as of March 26, 2022

Issuance of Common Stock

Proceeds from Issuance of Common Stock

Repurchase of Common Stock

Stock-Based Compensation

Other Comprehensive Income

Other Comprehensive Loss

Balance as of March 25, 2023

Issuance of Common Stock

Proceeds from Issuance of Common Stock

Direct costs of Stock Offering

Repurchase of Common Stock

Stock-Based Compensation

Other Comprehensive Loss

Other Comprehensive Income

Balance as of March 30, 2024

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 –

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.

(“Transcat,” “we,” “us,” “our” or the “Company”) is a leading provider of accredited calibration services, cost control and optimization services, and distribution and rental of value-added 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.

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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 Transcat Ireland), Cal OpEx Inc.

(d/b/a NEXA EAM) and Tangent Labs LLC.

All intercompany balances and transactions have been eliminated in consolidation.

(d/b/a NEXA EAM), SteriQual LLC, Tangent Labs LLC, TIC-MS, LLC and Axiom Test Equipment, LLC.

All interco mpany 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, fair value of the goodwill reporting units, and the valuation of assets acquired, liabilities assumed and consideration transferred in business acquisitions.

Significant estimates and assumptions are used for, but not limited to, allowance for credit losses 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, fair value of the goodwill reporting units, and the valuation of assets acquired, liabilities assumed and consideration transferred in business acquisitions.

Future events and their effects cannot be predicted with certainty;

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In a 53 -week fiscal year, the last quarter is a 14 -week period.

The fiscal years ended March 25, 2023 ("fiscal year 2023 "), 

March 26, 2022 ("fiscal year 2022 ") and 

March 27, 2021  ("fiscal year 2021" ) all consisted of 52 weeks.

The fiscal year ended March 30, 2024 ("fiscal year 2024 ") consisted of 53 weeks and fiscal year 2023 which ended on March 25, 2023 consisted of 52 weeks.

Cash and Cash Equivalents:

Cash equivalents consist of highly liquid investments with an original maturity when purchased of three months or less and are stated at cost, which approximates fair value.

Marketable Securities:

Marketable securities consist of highly liquid investments with an original maturity when purchased of more than three months and are stated at fair value on the Consolidated Balance Sheets.

These securities are considered trading securities.

Earnings on the marketable securities are included in interest income in the Consolidated Statements of Income.

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.

These amounts are recorded net of the allowance for credit losses and returns in the Consolidated Balance Sheets.

The allowance for credit losses 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.

After all attempts to collect a receivable have failed, the receivable is written-off against the allowance for credit losses.

The accounts receivable balance, less the allowance, as of March 26, 2022, was $ 39.7 million.

Inventory consists of products purchased for resale and is valued at the lower of average cost or net realizable value.

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The Company evaluates the adequacy of the reserve on a quarterly basis.

The Company had reserves for inventory losses totaling $ 0.3 million and $ 0.5 million at March 25, 2023 and March 26, 2022 , respectively.

The Company had reserves for inventory losses totalin g $ 0.3 mil lion at both March 30, 2024 and March 25, 2023 .

Property and Equipment, Depreciation and Amortization:

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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 30, 2024 and March 25, 2023 .

The Company estimates the fair value of its reporting units using the fair market value measurement requirement.

Intangible assets, namely customer base and covenants not to compete, represent an allocation of purchase price to identifiable intangible assets of an acquired business.

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):

Intangible Assets

Net Book Value as of March 27, 2021

$ 11,454  

$ 30,086  

$ 41,540  

$ 1,297  

$ 6,680  

$ 7,977  

( 377 )  

( 2,161 )  

$ 11,458 $ 31,814 $ 43,272 $ 920 $ 6,593 $ 7,513

- 21,749 21,749 - 11,060 11,060

- - - ( 273 ) ( 3,611 ) ( 3,884 )

Currency Translation Adjustment

- 53 53 - 3 3

Net Book Value as of March 26, 2022

11,458  

31,814  

43,272  

21,749  

11,060  

( 273 )  

( 3,611 )  

11,458 53,616 65,074 647 14,045 14,692

- 5,094 5,094 - 3,576 3,576

Measurement Period Adjustments

- ( 203 ) ( 203 ) - - -

- - - ( 199 ) ( 4,255 ) ( 4,454 )

Currency Translation Adjustment

- ( 605 ) ( 605 ) - ( 15 ) ( 15 )

Net Book Value as of March 25, 2023

11,458  

53,616  

65,074  

14,045  

14,692  

Measurement Period Adjustments

( 203 )  

( 199 )  

( 4,255 )  

11,458 57,902 69,360 448 13,351 13,799

26,758 9,393 36,151 7,900 3,983 11,883

- - - ( 1,355 ) ( 4,342 ) ( 5,697 )

Currency Translation Adjustment

( 605 )  

( 15 )  

- 74 74 - 2 2

Net Book Value as of March 30, 2024

$ 11,458  

$ 57,902  

$ 69,360  

$ 13,351  

$ 13,799  

$ 38,216 $ 67,369 $ 105,585 $ 6,993 $ 12,994 $ 19,987

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 $ 3.8 million in fiscal year 2024, $ 3.2 million in fiscal year 2025, $ 2.4  million in fiscal year 2026, $ 1.1  million in fiscal year 2027  and $ 0.8  million in fiscal year 2028.

Amortization expense relating to in tangible assets is expected to be $ 5.4 million in fiscal year 2025, $ 4.2 million in fiscal year 2026, $ 2.6 million in fiscal year 2027, $ 2.0 million in fiscal year 2028 and $ 0.9 million in fiscal year 2029.

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 25, 2023 and March 26, 2022 .

There were no unamortized catalog costs at March 30, 2024.

Total unamortized catalog costs, included as a component of prepaid expenses and other current assets on the Consolidated Balance Shee ts, were $ 0.1 million at March 25, 2023 .

Deferred Taxes:

10 unchanged sentences

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 each of  

March 25, 2023 and March 26, 2022 , investment assets totaled $ 0.2 million and are included as a component of other assets (non-current) on the Consolidated Balance Sheets.

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 and cash equivalents, marketable securities, 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 30, 2024 and March 25, 2023 , investment assets totaled $ 0.1 million and $ 0.2 mil lion, respectively and are included as a component of other assets (non-current) on the Consolidated Balance Sheets.

Stock-Based Compensation:

5 unchanged sentences

The Company estimates forfeiture rates based on its historical experience.

During fiscal years 2023 , 2022  and 

2021 , the Company recorded non-cash stock-based compensation cost in the amount of $ 3.4 million, $ 2.3 million and $ 1.5 million, respectively, in the Consolidated Statements of Income.

During fiscal years 2024 , 2023 and 2022 , the Company recorded non-cash stock-based compensation cost in the am ount of $ 4.5 million, $ 3.4 million and $ 2.3 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.

Distribution non-rental sales are recorded when an order’s title and risk of loss transfers to the customer, which is generally upon shipment.

Distribution rental sales are recognized over time using the time-elapsed output method as this portrays the transfer of control to the customer.

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.

Some Service revenue is generated from managing customers’ calibration programs in which the Company recognizes revenue over time using the time-elapsed output method 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.

4 unchanged sentences

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.

Under Accounting Standards Codification ("ASC") 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.

1 unchanged sentence

As of March 30, 2024 , 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 25, 2023 and March 26, 2022 were immaterial.

Pursuant to ASC 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 30, 2024 and March 25, 2023 were immaterial.

See Note 7 for disaggregated revenue information.

The following table presents a summary of the Company's net sales by revenue recognition method as a percentage of total net sales:

% of Total Net Sales

Point-in-Time

89.7 % 91.0 % 91.1 %

Over Time - Output Method

10.3 % 9.0 % 8.9 %

100.0 % 100.0 % 100.0 %

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.

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 $ 0.6 million, $ 1.0 million and $ 0.7 million in fiscal years 2023 , 

2022  and 

2021 , respectively, as a reduction of cost of distribution sales.

The Company recorded vendor rebates of $ 0.6 million, $0 .6 million and $ 1.0 million in fiscal years 2024 , 2023 and 2022 , respectively, as a reduction of cost of distribution sales.

Cooperative Advertising Income:

1 unchanged sentence

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 $ 1.0 million, $ 0.8 million and $ 0.6 million in fiscal years 2023 , 

2022  and 

2021 , respectively, in connection with these programs.

The Company recorded consideration in the amount of $ 1.1 millio n, $ 1.0 million and $ 0.8 million in fiscal years 2024 , 2023 and 2022 , respectively, in connection with these programs.

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 $ 1.2 million, $ 1.1 million and $ 0.9 million in fiscal years 2023 , 

2022  and 

2021 , respectively.

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 approxim ately $ 1.6 million, $ 1.2 m illion and $ 1.1 million in fiscal years 2024 , 2023 and 2022 , respectively.

Shipping and Handling Costs:

Freight expense and direct shipping costs are included in the cost of revenue.

These costs totaled approximately $ 2.9 million, $ 2.7 million and $ 2.4 million in fiscal years 2023 , 

2022  and 

2021 , respectively.

These costs totaled approximatel y $ 3.1 milli on, $ 2.9 million and $ 2.7 million in fiscal years 2024 , 2023 and 2022 , 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 $ 0.7 million, $ 0.8 million and $ 0.8 million in fiscal years 2023 , 

2022  and 

2021 , respectively.

Direct handling costs were approximately $ 0.5 million, $0 .7 million and $ 0.8 million in fiscal years 2024 , 2023 and 2022 , respectively.

Foreign Currency Translation and Transactions:

The accounts of Cal OpEx Limited (d/b/a Transcat Ireland), 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.

The accounts of Cal OpEx Limited (d/b/a Transcat Ireland), an Irish company, and Transcat Canada Inc., both of which are wholly-owned subsidiaries of the Company, are maintained in their local currencies, the Euro and the Canadian dollar, respectively, and have been translated to U.S.

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’

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 loss was $ 0.7 million in fiscal year 2023 , a gain of $ 0.1 million in fiscal year 2022  and a loss of less than $ 0.1 million in fiscal year 

The net foreign currency loss was $ 0.1 million in fiscal year 2024 , a loss of $ 0.7 million in fiscal year 2023 and a gain of $ 0.1 million in fiscal year 2022 .

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 gain of $ 0.4 million, a loss of less than $ 0.1 million and a loss of less than $ 0.1 million in fiscal year 2023 , 2022  and 

2021 , respectively, was recognized as a component of Interest and Other Expenses, net in the Consolidated Statements of Income.

The Company does not apply hedge accounting and therefore the net change in the fair value of the contracts, which totaled a loss of less tha n $ 0.1 million, a gain of $ 0.4 million and a loss of less than $ 0.1 million in fiscal year 2024 , 2023 and 2022 , respectively, was recognized as a component of Interest and Other Expenses, net 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 25, 2023 , the Company had a foreign exchange contract, which matured in April 2022, outstanding in the notional amount of $ 2.5 million.

On March 30, 2024 , the Company had a foreign exchange contract, which matured in April 2024, outstanding in the notional amount of $ 1.8 millio n.

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.

Other Comprehensive Income (Loss):

Other comprehensive income (loss) 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 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 25, 2023 , accumulated other comprehensive loss consisted of cumulative currency translation losses of $ 1.1 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 26, 2022 , accumulated other comprehensive loss consisted of cumulative currency translation gains 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 30, 2024 , accumulated other comprehensive loss consisted of cumulative currency translation losses of $ 0.9 million, unrecognized prior service costs, net of tax, of less than $ 0.1 million and an unrealized gain on other assets, net of tax, of less than $ 0.1 million.

At March 25, 2023 , accumulated other comprehensive loss consisted of cumulati ve currency translation losses of $ 1.1 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.

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.

Basic earnings per share of the Company's common stock, par value $ 0.50 per share ("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 2023 , 2022  and 2021 , the net additional common stock equivalents had a $( 0.02 ) per share effect on the calculation of dilutive earnings per share.

For the fiscal year 2024 , the net additional common stock equivalents had a $( 0.03 ) per s hare effect on the calculation of dilutive earnings per share.

For each of fiscal years 2023 and 2022 , the net additional common stock equivalents had a $( 0.02 ) per s hare 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):

Fiscal Year Ended

Average Shares Outstanding –

Average Shares Outstanding – Basic

8,239 7,551 7,496

Effect of Dilutive Common Stock Equivalents

Average Shares Outstanding –

Average Shares Outstanding – Diluted

8,352 7,645 7,589

Anti-dilutive Common Stock Equivalents

Shareholders ’

During fiscal years 2023 , 

2022  and 2021 , the Company repurchased and subsequently retired less than 0.1 million shares, 0.1 million shares and 0.1 million shares, respectively, 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 $ 0.4 million in fiscal year 2023 , $ 6.7 million in fiscal year 2022  and $ 3.1 million in fiscal year 

There were no stock option redemptions during fiscal year 2023 , fiscal year 2022  or fiscal year 

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 financial assets, including trade accounts receivable.

Other Liabilities:

A summary of other current and non-current liabilities is as follows (amounts in thousands):

Current Liabilities:

Accrued Payroll and Employee Benefits

$ 5,508 $ 3,243

Accrued Incentives

Current Portion of Lease Liabilities

Accrued Acquisition Holdbacks

Accrued Sales Tax

Accrued Contingent Consideration

Other Current Liabilities

Accrued Compensation and Other Current Liabilities

$ 16,739 $ 10,201

Non-Current Liabilities:

Postretirement Benefit Obligation

$ 1,134 $ 1,266

Accrued Acquisition Holdbacks

Other Non-Current Liabilities

Other Liabilities

$ 2,903 $ 1,434

Recently Adopted Accounting Pronouncements:

The ASU replaces the “incurred loss” model with an “expected credit loss” model that requires entities to estimate an expected lifetime credit loss on 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.

Allowance for credit losses for accounts receivable is the most significant item for the Company under this ASU.

The Company adopted ASU 2016 - 13 effective on March 26, 2023.

The adoption of this standard did not have a material impact on our consolidated financial statements.

Recent Accounting Guidance Not Yet Adopted:

In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures.

The ASU expands the income tax disclosure requirements, principally related to the rate reconciliation table and income taxes paid.

ASU 2023 - 09 is effective for annual periods beginning in fiscal 2025, with early adoption permitted.

The adoption of the ASU is not expected to have a material impact on the Company’s financial statement disclosures.

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

NOTE 2 – PROPERTY AND EQUIPMENT

Property and equipment consists of (amounts in thousands):

Machinery, Equipment and Software

$ 59,689  

$ 55,220  

$ 64,971 $ 59,689

Rental Equipment

10,000  

19,773 10,000

Furniture and Fixtures

1 unchanged sentence

Total Property and Equipment

80,813  

73,444  

97,287 80,813

Accumulated Depreciation and Amortization

( 51,749 )  

( 58,343 ) ( 51,749 )

Total Property and Equipment, net

$ 29,064  

$ 26,439  

Total depreciation and amortization expense relating to property and equipment amounted to $ 6.5 million, $ 5.7 million and $ 5.0 million in fiscal years 2023 , 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 fiscal year 2022 and $ 50.0 million during fiscal year 2023 and 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 %.

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 $ 40.0 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 25, 2023 , $ 80.0 million was available under the revolving credit facility, of which $ 42.7 million was outstanding and included in long-term debt on the Consolidated Balance Sheets.

During fiscal year 2023 , $ 9.1 million was used for four business acquisitions.

$ 38,944 $ 29,064

Total depreciation and amortization expense relating to property and equipment amounted to $ 7.8 mill ion, $ 6.5 million and $ 5.7 million in fiscal years 2024 , 2023 and 2022 , respectively.

NOTE 3 – LONG-TERM DEBT

On July 7, 2021, the Company entered into the Second Amended and Restated Credit Facility Agreement (the “Credit Agreement”) with Manufacturers and Traders Trust Company (“M&T”), that amended and restated in its entirety the Company’s prior credit agreement with M&T.

The Credit Agreement provides for a revolving credit commitment (the “revolving credit facility”) of $ 80.0 million through June 2026, with a letter of credit subfacility of $ 10.0 million.

The Company's 2018 term loan, with an original principal amount of $ 15.0 million (the "2018 Term Loan"), is also provided for under the Credit Agreement.

The Credit Agreement allows the Company to use up to $ 50.0 million under the revolving credit facility for acquisitions in any single fiscal year.

The Credit Agreement restricts the Company's ability to complete acquisitions of businesses with a principal place of business located in the United Kingdom or the European Union to an aggregate purchase price of $ 40.0 million during the term of the Credit Agreement, if the acquisition is financed directly or indirectly with the revolving credit facility.

Under the Credit Agreement, the Company may make restricted payments up to $ 25.0 million in the aggregate over the term of the Credit Agreement and $ 10.0 million in any single fiscal year to repurchase shares and pay dividends.

As of March 30, 2024 , $ 80.0 million was available for borrowing under the revolving credit facility.

As of March 30, 2024 there were no amounts out standing under the revolving credit facility.

During fiscal year 2024 , $ 12.9 million from the revolving credit facility was used for three business acquisitions.

As of March 30, 2024 , $ 4.2 million was outstanding on the 2018 Term Loan, of which $ 2.3 million was included in current liabilities on the Consolidated Balance Sheets with the remainder included in long-term debt.

1 unchanged sentence

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 (subject to a 1.0 % floor during the first quarter of fiscal year 2022 and a 0.25 % floor for subsequent periods), in each case, 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 accrued or will accrue at a fixed rate of 3.90 % over the term of the loan for subsequent periods.

Effective July 1, 2023, interest on outstanding borrowings under the revolving credit facility accrue, at Transcat’s election, at either the variable Daily Simple SOFR or a fixed rate for a designated period at the SOFR corresponding to such period (subject to a 0.25 % floor), in each case, plus a margin.

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 2023 ranged from 1.6 % to 6.5 %.

The 2021 Credit Agreement has certain covenants with which the Company must comply, including a fixed charge ratio covenant and a leverage ratio covenant.

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 2024 ranged from 6.4 % to 7.1 %.

Interest on outstanding borrowings under the 2018 Term Loan accrue at a fixed rate of 3.90 % over the term of the loan.

The Credit Agreement has certain covenants with which the Company must comply, including a fixed charge ratio covenant, which prohibits the Company's fixed charge ratio from being less than 1.15 to 1.00, and a leverage ratio covenant, which prohibits the Company's leverage ratio from exceeding 3.00 to 1.00.

The Company was in compliance with all loan covenants and requirements during fiscal years 2024 and 2023 .

Our leverage ratio, as defined in the 

2021 Credit Agreement, was 1.60 at March 25, 2023 , compared with 1.74 at March 26, 2022 .

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 first quarter of fiscal year 2022 was a maximum multiple of 4.0 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 year 2022, pursuant to the 

2021 Credit Agreement, the allowable leverage ratio is a maximum multiple of 3.0 .

The Company's leverage ratio, as defined in the Credit Agreemen t, was 0.10 at March 30, 2024 , compared with 1.60 at March 25, 2023 .

The Company has pledged all of its U.S.

1 unchanged sentence

as collateral security for the loans made under the revolving credit facility.

NOTE 4 –

Transcat’s income before income taxes on the Consolidated Statements of Income is as follows (amounts in thousands):

NOTE 4 – INCOME TAXES

Transcat’s income before income taxes on the Consolidated Statements of Income is as follows (amounts in thousands):

United States

$ 9,879  

$ 10,417  

$ 9,187  

$ 13,487  

$ 13,190  

$ 9,982  

The provision for income taxes for fiscal years 2023 , 2022  and 2021  is as follows:

$ 15,064 $ 9,879 $ 10,417

3,375 3,608 2,773

$ 18,439 $ 13,487 $ 13,190

The provision for income taxes for fiscal years 2024 , 2023 and 2022 is as follows:

Current Tax Provision:

$ 1,938  

$ 1,449  

$ 2,985  

$ 1,406  

$ 1,980  

$ 4,099 $ 1,938 $ 414

1,067 652 240

1,185 395 752

$ 6,351 $ 2,985 $ 1,406

Deferred Tax (Benefit) Provision:

$ ( 334 )  

( 258 )  

( 10 )  

( 42 )  

$ ( 186 )  

$ ( 809 ) $ ( 334 ) $ 456

( 316 ) ( 258 ) ( 10 )

( 434 ) 406 ( 42 )

$ ( 1,559 ) $ ( 186 ) $ 404

Provision for Income Taxes

$ 2,799  

$ 1,810  

$ 2,191  

$ 4,792 $ 2,799 $ 1,810

A reconciliation of the income tax provision computed by applying the statutory U.S.

1 unchanged sentence

Federal Income Tax at Statutory Rate

$ 2,832  

$ 2,770  

$ 2,096  

$ 3,872 21.0 % $ 2,832 $ 2,770

State Income Taxes, net of federal benefit

Foreign Taxes and Federal, State and Foreign Tax Credits

( 56 )  

( 127 )  

593 3.2 % 311 172

Federal, State and Foreign Tax Credits

( 87 ) - 0.5 % ( 99 ) ( 182 )

Foreign Rate Differential

41 0.2 % 43 55

Tax Impact of Equity Awards

( 416 )  

( 1,395 )  

( 634 ) - 3.4 % ( 416 ) ( 1,395 )

162(m) Limitation

805 4.4 % - -

Non-Deductible Acquisition Costs

71 0.4 % 6 206

GILTI and 78 Gross Up

$ 2,799  

$ 1,810  

$ 2,191  

112 0.6 % 83 161

19 0.1 % 39 23

$ 4,792 26.0 % $ 2,799 $ 1,810

Deferred Tax Assets:

8 unchanged sentences

Total Deferred Tax Assets

$ 4,551  

$ 4,590  

$ 6,851 $ 4,551

Deferred Tax Liabilities:

Goodwill and Intangible Assets

$ ( 3,504 )  

$ ( 5,945 ) $ ( 3,504 )

Right of Use Assets

( 1,957 )  

( 5,462 )  

( 166 )  

( 3,636 ) ( 1,957 )

( 6,498 ) ( 5,462 )

( 63 ) ( 166 )

Total Deferred Tax Liabilities

$ ( 11,089 )  

$ ( 16,142 ) $ ( 11,089 )

Net Deferred Tax Liabilities

$ ( 6,538 )  

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 2019  and prior, by state tax authorities for fiscal years 2017  and prior, by Canadian tax authorities for fiscal years 2017  and prior, and by Ireland tax authorities for calendar years 2018  and prior.

There are no income tax years currently under examination by the Internal Revenue Service, Canadian and Irish tax authorities.

state has selected Transcat for analysis, the results of this analysis will determine if further action is required. 

$ ( 9,291 ) $ ( 6,538 )

The Company files income tax returns with the U.S.

government and various states as well as foreign governments.

Open fiscal years subject to U.S.

Government federal examination are 2021 through 2023.

Open fiscal years subject to state examination are 2019 through 2023.

The Company also files in Canada and Ireland.

Open fiscal years subject to examination for Canada are 2020 through 2023;

open fiscal years subject to examination for Ireland are 2020 to 2023.

There are no income tax years currently under examination by the Internal Revenue Service, states, Canadian and Irish tax authorities.

The Company's foreign subsidiary undistributed earnings are considered to be permanently reinvested.

During fiscal years 2023 , 2022  and 2021 , there were no uncertain tax positions.

No interest or penalties related to uncertain tax positions were recognized in fiscal years 2023 , 2022  and 

2021  or were accrued at March 25, 2023 and March 26, 2022 .

The Company’s effective tax rate for fiscal years 2023 , 

2022 and 

2021  was 20.8 %, 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 2023 , 

2022 and 

2021  were $ 0.4 million, $ 1.4 million 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 2024.

As such, it expects its effective tax rate in fiscal year 2024 to be between 21.0 % and 23.0 %.

NOTE 5 –

EMPLOYEE BENEFIT PLANS

The Company’s policy regarding interest and/or penalties related to income tax matters is to recognize such items as a component of the income tax provision.

The Company recognized no interest expense or penalties associated with uncertain tax benefits accrued for fiscal years 2024 , 2023 and 2022 .

In accordance with applicable accounting guidance, the amount of unrecognized tax liability from uncertain positions was $ 0 at year-end fiscal year 2024 , 2023 and 2022 .

The Company assesses its deferred tax assets annually for expected utilization.

If deemed necessary, valuation allowances are established to reduce the deferred tax assets to their net realizable value to the extent it is more likely than not that some portion or all of the deferred tax assets will not be realized based on the character of the carryforward item, the associated taxing jurisdiction, the relevant history for the particular item, the applicable expiration dates, and identified actions under the control of the Company in realizing such assets.

The Company assesses the available positive and negative evidence surrounding the recoverability of the deferred tax assets and applies its judgment in estimating the amount of valuation allowance necessary.

The Company has determined that a valuation allowance of $ 0 is appropriate for fiscal years 2024 , 2023 and 2022 .

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 years 

2023  and 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.

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 years 2024 , 2023 and 2022 , 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 $ 1.2 million, $ 1.1 million and $ 0.4 million in fiscal years 2023 , 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 2023 , 2022  and 

The Company’s matching contributions to the 401K Plan were approximat ely $ 1.5 million, $ 1.2 million and $ 1.1 million in fiscal years 2024 , 2023 and 2022 , 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 2024 , 2023 and 2022 .

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 2023 , 2022  and 

The expense related to the ESPP was less th an $ 0.1 million i n each of fiscal years 2024 , 2023 and 2022 .

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 2023 , 

2022  and 

2021 , the Company did not match any employee contributions.

During fiscal years 2024 , 2023 and 2022 , 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 the Company’s general creditors.

The liability for compensation deferred under the NQDC Plan was $ 0.2 million as of both 

March 25, 2023 and 

March 26, 2022 , and is included as a component of other liabilities (non-current) on the Consolidated Balance Sheets.

In the event of bankruptcy, the assets of the NQDC Plan are available to satisfy the claims of the Company’s general creditors.

The liability for compensation deferred under the NQDC Plan was $ 0.1 mill ion as of March 30, 2024 and $ 0.2 million as of March 25, 2023 , 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

$ 1,326  

$ 1,831  

$ 1,509  

$ 1,266 $ 1,326 $ 1,831

Interest cost

1 unchanged sentence

Benefits paid

( 136 )  

( 125 )  

( 121 ) ( 136 ) ( 125 )

Actuarial (gain) loss

( 179 )  

( 528 )  

( 85 ) ( 179 ) ( 528 )

Post-retirement benefit obligation, at end of fiscal year

1,134 1,266 1,326

Fair value of plan assets, at end of fiscal year

Funded status, at end of fiscal year

$ ( 1,266 )  

$ ( 1,326 )  

$ ( 1,134 ) $ ( 1,266 ) $ ( 1,326 )

Accumulated post-retirement benefit obligation, at end of fiscal year

$ 1,266  

$ 1,326  

$ 1,831  

$ 1,134 $ 1,266 $ 1,326

The accumulated post-retirement benefit obligation is included as a component of other liabilities (non-current) in the Consolidated Balance Sheets.

1 unchanged sentence

Net periodic post-retirement benefit cost:

$ 14 $ 17 $ 96

Interest cost

Amortization of prior service cost

Benefit obligations recognized in other comprehensive income:

Benefit obligations recognized in other comprehensive income (loss):

Amortization of prior service cost

( 15 ) ( 1 ) ( 1 )

Prior service cost

Net actuarial (gain) loss

( 185 )  

( 583 )  

( 584 )  

Total recognized in net periodic benefit cost and other comprehensive income

$ ( 435 )  

Amount recognized in accumulated other comprehensive income, at end of fiscal year:

Net actuarial gain

( 85 ) ( 185 ) ( 583 )

( 100 ) 7 ( 584 )

Total recognized in net periodic benefit cost and other comprehensive income (loss)

$ ( 11 ) $ 70 $ ( 435 )

Amount recognized in accumulated other comprehensive income (loss), at end of fiscal year:

Unrecognized prior service cost

$ 63 $ 163 $ 156

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 2024 is less than $ 0.1 million.

The estimated prior service cost that will be amortized from accumulated other comprehensive income into net periodic post-retirement benefit cost during fiscal year 2025 is les s than $ 0.1 million.

The post-retirement benefit obligation was computed by an independent third -party actuary.

8 unchanged sentences

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):

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

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.

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 25, 2023 , 0.7 million shares of common stock were available for future grant under the 2021 Plan.

At March 30, 2024 , 0.6 mi llion 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 and stock option activity in fiscal years 2023 , 2022  and 

2021 were $ 0.4  million, $ 1.4 million and $ 0.3 million, respectively.

The discrete benefits related to share-based compensation and stock option activity in fiscal years 2024 , 2023 and 2022 w ere $ 0.7 million , $ 0.4 million and $ 1.4 million, respectively.

Restricted Stock Units:

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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 2023 , fiscal year 

2022  and fiscal year 

2021 restricted stock unit grants to non-employee directors were made in September 2022, September 2021 and September 2020, respectively.

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 or cumulative Adjusted EBITDA targets over the eligible period.

On the date of each annual meeting of shareholders, the Company’s non-employee directors receive an annual grant of restricted stock units valued at $ 50,000 that vest after one year.

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.

1 unchanged sentence

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 

2023 , 19,000 shares of time-vested restricted stock units were granted and 11,000 shares of performance-based restricted stock units were granted. 

During fiscal year 2024 , 38 ,000 s hares of time-vested restricted stock units were granted and 10,000 shares of performance-based restricted stock units were granted.

During fiscal year 2023 , 19,000 shares of time-vested restricted stock units were granted and 11,000 shares of performance-based restricted stock 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 2023 , 

2022  and 

2021 (amounts in thousands, except per unit data):

April 2018 –

$ 15.65  

April 2017 –

$ 12.90  

$ 27.08  

September 2019

September 2019 –

September 2020

$ 22.77  

During fiscal year 2022 , 30,000 shares of time-vested restricted stock units were granted and 15,000 shares of performance-based stock units were granted.

The following table summarizes the restricted stock units vested and shares issued during fiscal years 2024 , 2023 and 2022 (amounts in thousands, except per unit data):

April 2018 – March 2020

1 $ 15.65 Time Vested

April 2017 – March 2020

62 $ 12.90 79 % 49 May 2020

1 $ 27.08 Time Vested

September 2019

October 2018 –

September 2019 – September 2020

18 $ 22.77 Time Vested

18 September 2020

$ 20.81  

$ 34.68  

April 2018 –

$ 15.30  

April 2018 –

$ 15.65  

April 2018 –

$ 15.30  

October 2018 – September 2020

1 $ 20.81 Time Vested

1 October 2020

3 $ 34.68 Time Vested

3 January 2021

April 2018 – March 2021

29 $ 15.30 Time Vested

29 March 2021

April 2018 – March 2021

1 $ 15.65 Time Vested

April 2018 – March 2021

29 $ 15.30 64 % 19 May 2021

September 2020

September 2020 –

September 2020 – September 2021

14 $ 28.52 Time Vested

14 September 2021

$ 28.52  

October 2018 – September 2021

1 $ 20.81 Time Vested

1 October 2021

April 2019 – March 2022

20 $ 23.50 Time Vested

20 March 2022

April 2019 – March 2022

20 $ 23.50 82 % 16 May 2022

1 $ 59.33 Time Vested

September 2021

October 2018 –

September 2021 – September 2022

7 $ 66.09 Time Vested

7 September 2022

$ 20.81  

April 2019 –

$ 23.50  

April 2019 –

$ 23.50  

$ 59.33  

Time Vested  

September 2022

September 2021 –

September 2022

$ 66.09  

Time Vested  

1 $ 73.30 Time Vested

1 September 2022

October 2018 – September 2022

1 $ 20.81 Time Vested

1 October 2022

April 2020 - March 2023

2 $ 26.25 Time Vested 2 April 2023

July 2020 - July 2023

26 $ 27.08 Time Vested 26 July 2023

September 2020

September 2020 - July 2023

4 $ 28.54 Time Vested 4 July 2023

September 2020

$ 73.30  

Time Vested  

September 2020 - July 2023

5 $ 29.76 Time Vested 5 July 2023

September 2022

October 2018 –

September 2022 - September 2023

5 $ 73.80 Time Vested 5 September 2023

September 2020

$ 20.81  

Time Vested  

September 2020 - September 2023

3 $ 29.76 Time Vested 3 September 2023

October 2018 – September 2023

1 $ 20.81 Time Vested 1 October 2023

June 2021 - March 2024

11 $ 53.17 Time Vested 11 March 2024

The following table summarizes the non-vested restricted stock units outstanding as of March 30, 2024 (amounts in thousands, except per unit data):

1 unchanged sentence

March 30, 2024

October 2018 –

September 2027

$ 20.81  

April 2020 –

$ 26.25  

July 2020 –

$ 27.08  

September 2020

September 2020 –

$ 28.54  

September 2020

September 2020 –

$ 29.76  

September 2020

September 2020 –

September 2023

$ 29.76  

May 2021 –

$ 54.21  

June 2021 –

$ 53.17  

October 2018 – September 2027

5 $ 20.81 Time Vested

May 2021 – May 2024

1 $ 54.21 Time Vested

June 2021 – March 2024

10 $ 53.17 136% of target level

June 2021 –

$ 53.17  

September 2021

September 2021 –

September 2024

$ 67.76  

January 2022 –

$ 90.92  

September 2021 – September 2024

4 $ 67.76 Time Vested

January 2022 – March 2024

1 $ 90.92 136% of target level

January 2022 –

$ 90.92  

January 2022 –

$ 90.41  

March 2022 –

$ 76.31  

January 2022 – January 2025

1 $ 90.41 Time Vested

March 2022 – March 2025

1 $ 76.31 Time Vested

May 2022 - March 2025

$ 63.17  

11 $ 63.17 55% of target level

May 2022 - March 2025

$ 63.17  

12 $ 63.17 Time Vested

August 2022 - August 2025

$ 78.04  

September 2022

September 2022 –

1 $ 78.04 Time Vested

September 2022

$ 73.80  

September 2022 – September 2023

5 $ 73.80 Time Vested

December 2022

December 2022 - December 2025

$ 81.26  

1 $ 81.26 Time Vested

December 2022

December 2022 - December 2025

$ 67.48  

Total expense relating to restricted stock units, based on grant date fair value and the achievement criteria, was $ 2.0 million, $ 1.6 million and $ 1.4 million in fiscal years 2023 , 2022  and 

2021 , respectively.

Unearned compensation totaled $ 1.9 million as of March 25, 2023 which is expected to be realized over a period of three years.

1 $ 67.48 Time Vested

May 2023 – March 2026

10 $ 89.70 150% of target level

May 2023 – March 2026

11 $ 89.70 Time Vested

May 2023 – May 2026

19 $ 89.70 Time Vested

August 2023 – August 2024

6 $ 90.56 Time Vested

September 2023

September 2023 – September 2024

4 $ 109.55 Time Vested

Total expense relating to restricted stock units, based on grant date fair value and the achievem ent criteria, was $ 3.2 million, $ 2.0 million and $ 1.6 million in fiscal years 2024 , 2023 and 2022 , respectively.

As of March 30, 2024 , unearned compensation, to be recognized over the grants’ respective service periods, totaled $ 3.5 million based on estimated achievement levels as of March 30, 2024.

If the maximum performance levels were achieved, the unearned compensation could be a maximum of $ 3.7 million .

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.

2 unchanged sentences

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 2023 , 2022  and 

The following weighted-average assumptions were used to value options granted during fiscal years 2024 , 2023 and 2022 :

Risk-Free Interest Rate

2.65 %  

1.01 %  

4.08 % 2.65 % 1.01 %

Volatility Factor

37.62 %  

30.22 %  

37.27 % 37.62 % 30.22 %

Expected Term (in Years)

6.34 4.58 6.25

Annual Dividend Rate

0.00 %  

0.00 % 0.00 % 0.00 %

We calculate expected volatility for stock options by taking an average of historical volatility over the expected term.

2 unchanged sentences

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 2023 , the Company granted options for 46,000 shares of common stock in the aggregate to Company employees that vest over three years and an option for 10,000 shares of common stock to a new member of the Board of Directors that vests over five years.

During fiscal year 2022 , the Company 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 five 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 five years and an option for 6,000 shares of common stock to a Company employee that vests over three years.

During fiscal year 2021 , the Company 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 $ 1.4 million in fiscal year 2023 , $ 0.7  million in fiscal year 2022  and $ 0.1 million in fiscal year 

The following table summarizes the Company’s options for fiscal years 2023 , 2022  and 

2021 (amounts in thousands, except per option data):

Weighted  

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 2024 , the Company granted options for 7,000 shares of common stock in the aggregate to Company employees that vest over three years, an option for 10,000 shares of common stock to a Company employee that vests over five years and options for 30,000 shares of common stock ( 10,000 each) to three Company directors that vest over five years.

During fiscal year 2022 , the Company granted an option for 10,000 shares of common stock each to two Company directors ( 20,000 shares in the aggregate) that vest over five 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, and an option for 90,000 shares of common stock in the aggregate to employees during an acquisition that vests over five years and an option for 6,000 shares of common stock to a Company employee that vests over three years.

The expense related to all stock option awards w as $ 1.3 mi llion in fiscal year 2024 , $ 1.4 million in fiscal year 2023 and $ 0.7 million in fiscal year 2022 .

The following table summarizes the Company’s options for fiscal years 2024 , 2023 and 2022 (amounts in thousands, except per option data):

Outstanding as of March 27, 2021

$ 14.63  

( 45 )  

Outstanding as of March 26, 2022

( 85 )  

Outstanding as of March 25, 2023

Outstanding as of March 30, 2024

$ 6,628  

234 63.43 5 $ 11,095

Exercisable as of March 30, 2024

$ 56.23  

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 2023 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 25, 2023 .

The amount of aggregate intrinsic value will change based on the fair market value of the Company’s common stock.

61 $ 32.96 5 $ 4,276

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 2024 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 30, 2024 .

The amount of aggregate intrinsic value will change based on the fair market value of the Company’s common stock.

Total unrecognized compensation cost related to non-vested stock options as of March 30, 2024 was $ 2.4 million, which is expected to be recognized over a period of three years.

The aggregate intrinsic value of stock options exercised in fiscal years 2023 , 2022  and 

2021 was $ 0.3 million, $ 5.3 million and $ 1.6 million, respectively.

Cash received from the exercise of options in fiscal years 

2023 , 2022  and 

2021 was $ 0.1 million, $ 1.0 million and $ 0.8 million, respectively.

NOTE 7 –

SEGMENT AND GEOGRAPHIC DATA

The aggregate intrinsic value of stock options exercised in fiscal years 2024 , 2023 and 2022 was $ 1.3 million, $ 0.3 million and $ 5.3 million, respectively.

Cash received from the exercise of options in fiscal years 2024 , 2023 and 2022 was $ 1.5 million, $ 0.1 milli on and $ 1.0 million, respectively.

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.

5 unchanged sentences

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 2023 , 2022  and 

2021 (dollars in thousands):

$ 144,883  

$ 122,005  

$ 101,274  

85,686  

82,954  

72,061  

230,569  

204,959  

173,335  

The following table presents segment and geographic data for fiscal years 2024 , 2023 and 2022 (dollars in thousands):

$ 169,525 $ 144,883 $ 122,005

89,956 85,686 82,954

259,481 230,569 204,959

Gross Profit:

46,638  

38,921  

30,695  

21,717  

19,518  

15,423  

68,355  

58,439  

46,118  

57,253 46,638 38,921

26,553 21,717 19,518

83,806 68,355 58,439

Operating Expenses:

35,216  

28,107  

20,254  

42,210 35,216 28,107

Distribution (1)

16,891  

16,189  

14,791  

52,107  

44,296  

35,045  

21,815 16,891 16,189

64,025 52,107 44,296

Operating Income:

11,422  

10,814  

10,441  

16,248  

14,143  

11,073  

15,043 11,422 10,814

4,738 4,826 3,329

19,781 16,248 14,143

Unallocated Amounts:

Interest and Other Expense, net

1,342 2,761 953

Provision for Income Taxes

$ 10,688  

$ 11,380  

$ 7,791  

4,792 2,799 1,810

6,134 5,560 2,763

$ 13,647 $ 10,688 $ 11,380

Total Assets:

$ 118,568  

$ 109,472  

52,340  

46,107  

24,841  

22,183  

$ 195,749  

$ 177,762  

$ 134,415 $ 118,568 $ 109,472

96,602 52,340 46,107

56,535 24,841 22,183

$ 287,552 $ 195,749 $ 177,762

Continued on next page

Depreciation and Amortization (2) :

$ 8,800  

$ 7,543  

$ 5,597  

$ 10,955  

$ 9,567  

$ 7,580  

$ 9,193 $ 8,800 $ 7,543

4,284 2,155 2,024

$ 13,477 $ 10,955 $ 9,567

Capital Expenditures:

$ 5,569  

$ 7,885  

$ 4,236  

$ 9,414  

$ 10,152  

$ 6,617  

$ 6,141 $ 5,569 $ 7,885

7,139 3,845 2,267

$ 13,280 $ 9,414 $ 10,152

Geographic Data:

1 unchanged sentence

United States (4)

$ 207,143  

$ 187,165  

$ 159,270  

16,468  

14,623  

13,040  

$ 235,117 $ 207,143 $ 187,165

16,666 16,468 14,623

Other International

$ 230,569  

$ 204,959  

$ 173,335  

7,698 6,958 3,171

$ 259,481 $ 230,569 $ 204,959

Property and Equipment:

United States (4)

$ 24,721  

$ 22,042  

$ 19,897  

$ 33,507 $ 24,721 $ 22,042

5,415 4,326 4,397

Other International

$ 29,064  

$ 26,439  

$ 22,203  

Operating expense allocations between segments are based on actual amounts, a percentage of revenues, headcount, and management’s estimates.

$ 38,944 $ 29,064 $ 26,439

Operating expense allocations between segments are based on actual amounts, a percentage of revenues, headcount, and management’s estimates.

Including amortization of catalog costs and intangible assets.

1 unchanged sentence

United States includes Puerto Rico.

NOTE 8 –

NOTE 8 – COMMITMENTS

The Company determines if an arrangement is a lease at inception.

9 unchanged sentences

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 3.90 %, 4.15 % and 4.15 %, respectively.

The weighted average remaining lease term is approximately eleven  years.

The weighted average discount rate for fiscal years 2024 , 2023 and 2022 was 4.1 %, 3.9 % and 4.2 %, respectively.

The weighted average remaining lease term is approximately eleven 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 fiscal years 2023 , 

Short-term lease expense was immaterial in fiscal years 2024 , 2023 and 2022 .

The components of lease expense for the current and prior-year comparative periods were as follows (dollars in thousands):

Operating lease cost

$ 4,730  

$ 3,687  

$ 3,206  

$ 5,948 $ 4,730 $ 3,687

Variable lease cost

Total lease cost

$ 5,338  

$ 4,306  

$ 3,783  

$ 6,614 $ 5,338 $ 4,306

Supplemental cash flow information related to leases was as follows:

1 unchanged sentence

Operating cash flow from operating leases

$ 2,207  

$ 2,153  

$ 2,954 $ 2,469 $ 2,207

Right to Use Assets obtained in exchange for lease liabilities

$ 4,519  

$ 3,874  

$ 2,945  

Total rental expense was approximately $ 5.3 million, $ 4.3 million and $ 3.8 million in fiscal years 2023 , 

2022  and 

2021 , respectively.

$ 4,965 $ 4,519 $ 3,874

Total rental expense was approximatel y $ 6.6 millio n, $ 5.3 million and $ 4.3 million in fiscal years 2024 , 2023 and 2022 , respectively.

The minimum future annual rental payments under the non-cancelable leases at March 30, 2024 are as follows (in millions):

Amount  

Total minimum lease payments

$ 21.2  

Imputed interest

Present value of remaining lease payments

$ 15.3  

Effective December 2018, the Company has term loan repayments (principal plus interest) of $ 0.2 million per month through December 2025.

Principal payments relating to the 2018 Term Loan will be $ 2.2 million in fiscal year 2024, $ 2.3 million in fiscal year 2025 and $ 1.8 million in fiscal year 2026.

Principal payments relating to the 2018 Term Loan will be $ 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 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.

  During the second quarter of fiscal year 2023, the Company reduced the contingent consideration down to zero. 

As a result of remeasurement, the change was included in the Company’s Consolidated Statements of Income. 

There were no remeasurement adjustments during the second half of fiscal year 2023.

NOTE 9 –

BUSINESS ACQUISITIONS

Effective February 2, 2023, Transcat acquired substantially all of the assets of Elite Calibration LLC (“Elite”), a California 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.

In connection with the acquisition of NEXA, there were 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.

As of March 25, 2023, the estimated fair value for the earn-out payments was zero.

During fiscal year 2024, the Company entered into an Amendment to the Share Purchase Agreement (the “First Amendment”).

Pursuant to the First Amendment, the potential earn-out payments would have been up to $ 7.1 million for the Earn-Out years of calendar year 2023, 2024 and 2025 based upon NEXA achieving certain EBITDA goals.

If achieved, the earn-out payments would be made in shares of common stock unless certain criteria is met for cash payment.

Subsequent to fiscal year 2024, the Company entered into an Amendment to the Share Purchase Agreement (the “Second Amendment”).

Pursuant to the Second Amendment, the Company agreed to pay approximately $ 0.5 million for the Earn-Out year of calendar year 2023 and removed the entitlement for any future earn-out payments.

As of March 30, 2024, the estimated fair value of the 2023 earn-out payment was approximately $ 0.5 million.

As of March 30, 2024, the estimated fair value of the 2024 and 2025 earn-out payments was zero.

NOTE 9 – BUSINESS ACQUISITIONS

Effective August 8, 2023, Transcat purchased all of the outstanding capital stock of Axiom Test Equipment, Inc.

(“Axiom”), a privately-held California rental provider of electronic test equipment to customers across the United States.

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 Distribution capabilities.

The Axiom 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 Axiom acquisition has been allocated to the Distribution segment.

Intangible assets related to the Axiom acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to twelve years and are not deductible for tax purposes.

Amortization of goodwill related to the Axiom acquisition is not deductible for tax purposes.

The total purchase price for Axiom was approximately $ 38.7 million and was paid with $ 10.0 million in cash and the issuance of our common stock valued at $ 28.6 million.

Pursuant to the asset purchase agreement, the Company held back approximately $ 3.9 million of the purchase price for certain potential post-closing adjustments.

The following is a summary of the preliminary purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Axiom's assets and liabilities acquired on August 8, 2023 ( in thousands):

Intangible Assets – Customer Base & Contracts

Accounts Receivable

Other Current Assets

Property and Equipment

Current Liabilities

Deferred Tax Liability

Total Purchase Price

From the date of acquisition throu gh the end of fiscal year 2024, Axi om has contributed revenue o f $ 7.2 million and operating income of $ 0.7 million, which in cludes the negative impact of amortization of the acquired intangible assets.

Effective July 12, 2023, Transcat purchased all of the outstanding capital stock of SteriQual, Inc.

(“SteriQual”), a Florida based provider of expert consulting services to pharmaceutical, biopharmaceutical, medical device and diagnostic equipment manufacturers.

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 SteriQual 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 SteriQual acquisition has been allocated to the Service segment.

Intangible assets related to the SteriQual acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to fifteen years and are not deductible for tax purposes.

Amortization of goodwill related to the SteriQual acquisition is not deductible for tax purposes.

The total purchase price for SteriQual was approximately $ 4.3 million and was paid by the issuance of our common stock.

Pursuant to the asset purchase agreement, the Company held back approximately $ 0.9 million of the purchase price for certain potential post-closing adjustments.

Pursuant to the asset purchase agreement, the purchase price is subject to reduction by $ 0.5 million if certain revenue targets are not met through July 12, 2024.

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.

The purchase price was reduced to $ 3.8 million as of December 23, 2023 as the Company recorded a receivable in the amount of $ 0.5 million related to the revenue target contingent consideration.

This receivable was recognized based on the facts and circumstances at the date of acquisition and is recognized as a component of goodwill and not recorded in the Consolidated Statement of Income.

The following is a summary of the preliminary purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of SteriQual's assets and liabilities acquired on July 12, 2023 ( in thousands):

Intangible Assets – Customer Base & Contracts

Intangible Assets – Covenant Not to Compete

Intangible Assets – Sales Backlog

Accounts Receivable

Current Liabilities

Deferred Tax Liability

Total Purchase Price

From the date of acquisitio n through the end of fiscal year 2024, SteriQual has contributed revenue of $ 2.6 million and operating income of $ 0.3 million, which in cludes the negative impact of amortization of the acquired intangible assets.

Effective March 27, 2023, Transcat purchased all of the outstanding capital stock of TIC-MS, Inc.

(“TIC-MS”), a Missouri 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 TIC-MS 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 TIC-MS acquisition has been allocated to the Service segment.

Intangible assets related to the TIC-MS acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to fifteen years and are not deductible for tax purposes.

Amortization of goodwill related to the TIC-MS acquisition is not deductible for tax purposes.

The total purchase price for TIC-MS was approximately $ 9.7 million and was paid with $ 2.9 million in cash, including $0.

5 million placed in escrow for contingent consideration, certain post-closing adjustments and indemnification claims, if any, and the issuance of 77,387 shares of our common stock valued at $ 6.9 million.

Pursuant to the asset purchase agreement, the purchase price was be subject to reduction by up to $ 0.5 million if a key customer relationship was not retained through March 27, 2024.

As of March 30, 2024, we continued to retain this key customer relationship.

As a result, there has not been a receiv able recognized relating to the $ 0.5 million contingent consideration.

The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of TIC-MS's assets and liabilities acquired on March 27, 2023 ( in thousands):

Intangible Assets – Customer Base & Contracts

Intangible Assets – Covenant Not to Compete

Accounts Receivable

Property and Equipment

Current Liabilities

Deferred Tax Liability

Total Purchase Price

From the date of acquisition through the end of fiscal year 2024, TIC-MS has contributed revenue of $ 3.2 million and operating income of $ 1.3 million, which includes the negative impact of amortization of the acquired intangible assets.

Effective February 2, 2023, Transcat acquired substantially all of the assets of Elite Calibration LLC (“Elite”), a California 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.

All the goodwill related to the Elite acquisition has been allocated to the Service segment.

Amortization of goodwill related to the Elite acquisition is deductible for tax purposes.

The goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition.

The total purchase price for the assets of Elite was approximately $ 0.9 million, of which $ 0.8 million was paid in cash.

Pursuant to the asset purchase agreement, the Company held back $ 0.1 million of the purchase price for certain potential post-closing adjustments. 

The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Elite’s assets and liabilities acquired on February 2, 2023 ( in thousands):

Pursuant to the asset purchase agreement, the Company held back $ 0.1 million of the purchase price for certain potential post-closing adjustments.

As of March 30, 2024, no amounts have been paid.

Accounts Receivable

Total Purchase Price

From the date of acquisition through the end of fiscal year 2023, Elite has contributed revenue of $ 0.1 million.

Since this operation was integrated immediately into our existing operations, its separate operating income in undeterminable.

Since this operation was integrated immediately into our existing operations, its separate contributed revenue and operating income is undeterminable.

Complete Calibrations :

Effective September 28, 2022, Transcat purchased all of the outstanding capital stock of Galium Limited (d/b/a Complete Calibrations) ("Complete Calibrations"), an Irish company. 

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. 

Effective September 28, 2022, Transcat purchased all of the outstanding capital stock of Galium Limited (d/b/a Complete Calibrations) ("Complete Calibrations"), an Irish company.

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.

All the goodwill related to the Complete Calibrations acquisition has been allocated to the Service segment.

Amortization of goodwill related to the Complete Calibrations acquisition is not deductible for tax purposes.  The goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition.

The total purchase price paid for Complete Calibrations was approximately $ 1.2 million in cash. 

In connection with this transaction, the Company also entered into a Technology License Agreement with Calibration Robots Limited, an Irish company and related party to Complete Calibrations, for the use of their proprietary robotics in completing calibrations. 

The Technology License Agreement includes transactional royalties in the amount of 3 Euros (approximately $ 3.23 ) per calibration performed by technology covered under this license agreement, with a royalty term of up to ten years commencing from the earlier of (i) the date on which cumulative revenue earned from technology covered under this license agreement equals 0.75 million Euros (approximately $ 0.81 million), and (ii) March 28, 2024. 

In addition to the transactional royalties, as long as a key employee is employed by the Company, there is an annual royalty fee of 0.1 million Euros (approximately $ 0.11 million). 

For purposes of this paragraph, we used a conversion rate of 1.0762 to convert Euro to U.S.

dollar as of March 25, 2023 .

The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Complete Calibrations’

assets and liabilities acquired on September 28, 2022 ( in thousands):

$ 1,123  

Amortization of goodwill related to the Complete Calibrations acquisition is not deductible for tax purposes.

The goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition.

The total purchase price paid for Complete Calibrations was approximately $ 1.2 million in cash.

The Technology License Agreement includes transactional royalties in the amount of 3 Euros ($ 3.19 ) per calibration performed by technology covered under this license agreement, with a royalty term of up to ten years commencing from the earlier of (i) the date on which cumulative revenue earned from technology covered under this license agreement equals 0.75 million Euros ($ 0.80 million), and (ii) March 28, 2024.

In addition to the transactional royalties, as long as a key employee is employed by the Company, there is an annual royalty fee of 0.1 million Euros ($ 0.11 million).

For purposes of this paragraph, we used a conversion rate of 1.0851 to c onvert Euro to U.S.

dollar as of March 30, 2024 .

As of March 30, 2024 , the key employee is still employed by the Company.

The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Complete Calibrations’ assets and liabilities acquired on September 28, 2022 ( in thousands):

Total Purchase Price

$ 1,177  

From the date of acquisition through the end of fiscal year 2023, Complete Calibrations has contributed revenue of $ 0.2 million and operating loss of less than $ 0.1 million.

Effective September 27, 2022, Transcat acquired substantially all of the assets of e2b Calibration ( “e2b”

), 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. 

During fiscal year 2024, Complete Calibrations has contributed revenue of $ 0.4 million and operating loss of less than $ 0.1 million.

Effective September 27, 2022, Transcat acquired substantially all of the assets of e2b Calibration ( “e2b” ), 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 e2b goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition.

2 unchanged sentences

Amortization of goodwill related to the e2b acquisition is deductible for tax purposes.

The total purchase price paid for the assets of e2b was approximately $ 3.1  million in cash. 

Pursuant to the asset purchase agreement, $ 0.9 million of the purchase price was placed in escrow for certain potential post-closing adjustments. 

During the third quarter of fiscal year 2023, $ 0.6 million of the escrow was released to the sellers. 

As of March 25, 2023, $ 0.3 million remains in escrow.

The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of e2b’s assets and liabilities acquired on September 27, 2022 ( in thousands):

$ 1,367  

Intangible Assets –

Customer Base & Contracts

Intangible Assets –

Covenant Not to Compete

The total purchase price paid for the assets of e2b was approximately $ 3.1 million in cash.

Pursuant to the asset purchase agreement, the Company held back $ 0.9 million of the purchase price in escrow for certain potential post-closing adjustments.

During the third quarter of fiscal year 2023, $ 0.6 million of the escrow was released to the sellers.

During the third quarter of fiscal year 2024, $ 0.3 million was released to the sellers.

As of March 30, 2024 , there is no money remaining in escrow.

Intangible Assets – Customer Base & Contracts

Intangible Assets – Covenant Not to Compete

Accounts Receivable

3 unchanged sentences

Total Purchase Price

$ 3,099  

From the date of acquisition through the end of fiscal year 2023, e2b has contributed revenue of $ 1.8 million and operating income of $ 0.3  million, which includes the negative impact of amortization of the acquired intangible assets.

During fiscal year 2024, e2b has contributed revenue of $ 3.1 million and operating income of $ 0.4 million, which includes the negative impact of amortization of the acquired intangible assets.

Effective 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.

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 Alliance goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition.

3 unchanged sentences

The purchase price for Alliance was approximately $ 4.7 million and was paid with $ 4.0 million in cash and the issuance of 2,284 shares of our common stock valued at $ 0.1 million.

Pursuant to the asset purchase agreement, the Company held back $ 0.5 million of the purchase price for certain potential post-closing adjustments, and the purchase price will be subject to reduction by $ 0.5 million if a key customer relationship is not retained.

The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Alliance’s assets and liabilities acquired on May 31, 2022 ( in thousands):

$ 1,783  

Intangible Assets –

Customer Base & Contracts

Intangible Assets –

Covenant Not to Compete

Accounts Receivable

Property and Equipment

Current Liabilities

Total Purchase Price

$ 4,703  

From the date of acquisition through the end of fiscal year 2023, Alliance has contributed revenue of $ 2.0 million and operating income of $ 0.3  million, which includes the negative impact of amortization of the acquired intangible assets.

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 for indemnification claims, if any.

During the second quarter of fiscal year 2023, the key employee terminated their employment with the Company. 

As a result, the Company took $ 0.2 million out of the escrow account and it was recorded as a gain in the Company's Consolidated Statement of Income.  During the second quarter of fiscal year 2023, an amendment to the Membership Unit Purchase Agreement was entered into which allows the sellers to earn the remaining $ 0.3 million in the escrow account based on revenue and gross profit during the period of October 2022 to September 2023. 

During the fourth quarter of fiscal year 2023, the Company determined that they would not hit the gross profit target and recorded a gain of $ 0.2 million in the Company’s Consolidated Statement of Income

During the second quarter of fiscal year 2023, a measurement period adjustment was recorded to recognize the fair value of Property and Equipment acquired, with a corresponding reduction to Goodwill.

There was no remeasurement period adjustment in the second half of fiscal year 2023.

The following is a summary of the 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):

$ 5,385  

Intangible Assets –

Customer Base & Contracts

Intangible Assets –

Covenant Not to Compete

Pursuant to the asset purchase agreement, the Company held back $ 0.5 million of the purchase price for certain potential post-closing adjustments, and the purchase price would have been subject to reduction by $ 0.5 million if a key customer relationship was not retained.

During the first quarter of fiscal year 2024, $ 0.5 million of the holdback was released to the sellers.

Intangible Assets – Customer Base & Contracts

Intangible Assets – Covenant Not to Compete

Accounts Receivable

Other Current Assets

Property and Equipment

Current Liabilities

Deferred Tax Liability

Total Purchase Price

$ 8,924  

During fiscal year 

2023, Tangent contributed revenue of $ 2.4 million and operating income of $ 0.3 million, which includes the negative impact of amortization of the acquired intangible assets.

Effective August 31, 2021, Transcat purchased all of the outstanding capital stock of Cal OpEx Limited (d/b/a Transcat Ireland), a private Irish company, which owns all of the issued and outstanding capital stock of its U.S.-based subsidiary, Cal OpEx Inc.

(d/b/a NEXA EAM), 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.

During fiscal year 2024, Alliance has contributed revenue of $ 2.4 million and operating income of $ 0.7 million, whic h includes the negative impact of amortization of the acquired intangible assets.

Effective August 31, 2021, Transcat purchased all of the outstanding capital stock of Cal OpEx Limited (d/b/a NEXA Enterprise Asset Management), an 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”).

On September 11, 2023, the Company entered into the first amendment (the “First Amendment”) to a Share Purchase Agreement dated August 31, 2021 ( the “Purchase Agreement”) with John Cummins and Ross Lane (the “Sellers”) associated with the Company’s purchase of all of the outstanding capital stock of NEXA.

As described below, the First Amendment changed the conditions necessary for the Sellers to receive potential earn-out payments, changes the lines of business included in the calculation of earnings before income taxes, depreciation and amortization (“EBITDA”), and changes the outside due date of any potential earn-out payments.

On May 20, 2024, the Company entered into the second amendment to the Purchase Agreement (the “Second Amendment”).

As described below, the Second Amendment removed the entitlement for future earn-out payments.

Pursuant to the Purchase Agreement, the Sellers were entitled to potential earn-out payments in an aggregate amount of up to $ 7.5 million for the calendar years ending December 31, 2022, 2023, 2024, and 2025 (each, an “Earn-Out Year”) if NEXA’s consolidated gross revenue, as defined in the Purchase Agreement, equaled or exceeded 70% of the target revenue specified in the Purchase Agreement and NEXA’s consolidated EBITDA percentage, as defined in the Purchase Agreement, equaled or exceeded 25% for a given earn-out year.

The potential earn-out payment of up to $ 0.4 million for the 2022 Earn-Out Year was not earned under the Purchase Agreement.

Pursuant to the First Amendment, the Sellers were entitled to potential earn-out payments in an aggregate amount of up to $ 7.1 million for the remaining Earn-Out Years ( 2023, 2024 and 2025 ) if NEXA’s consolidated EBITDA, as defined in the Amendment, equaled or exceeded 70% of the target EBITDA specified in the Amendment for a given earn-out year.

Pursuant to the First Amendment, the definition of EBITDA was revised to include EBITDA from the Commissioning, Qualification and Validation business ("CQV") and incremental EBITDA from the SteriQual, Inc.

The maximum earn-out payment would have been received if NEXA’s consolidated EBITDA equaled or exceeded 150% of the target EBITDA specified in the First Amendment.

The earn-out payments, if any, would be paid in shares of common stock, calculated using the volume-weighted average closing price of the common stock for 30 consecutive trading days ending on the trading day that is two days prior to the date the earn-out payment is to be paid (“VWAP”).

If the VWAP is less than $ 45.07 per share, then the Company may pay the earn-out payment in cash in lieu of shares of common stock.

As of March 25, 2023, the estimated fair value for the total earn-out obligations under the original Purchase Agreement, classified as Level 3 in the fair value hierarchy, was zero.

After entering into the First Amendment during the third quarter of fiscal year 2024, the Company revalued the earn-out obligations.

As of September 23, 2023, the estimated fair value for the total earn-out obligations under the First Amendment, classified as Level 3 in the fair value hierarchy, was approximately $ 2.8 million.

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. 

During the second quarter of fiscal year 2023, the Company reduced the contingent consideration down to zero. 

As a result of remeasurement, the change was included in the Company’s Consolidated Statements of Income. 

There were no remeasurement adjustments during the second half of fiscal year 2023.

During the calendar year 2022  (the first measurement period), NEXA did not achieve the EBITDA goals in the agreement and no earn-out payments were made. 

$ 0.1 million of the purchase price has been put into escrow 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):

$ 15,679  

Intangible Assets –

Customer Base & Contracts

Intangible Assets –

Covenant Not to Compete

22,369  

Accounts Receivable

Non-Current Assets

Current Liabilities

Deferred Tax Liability

Total Purchase Price

$ 26,232  

During fiscal year 2023, NEXA contributed revenue of $ 13.2 million and operating income of less than $ 0.1  million, which includes the negative impact of amortization of the acquired intangible assets.

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.

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):

Current Assets

Non-Current Assets

Current Liabilities

Total Purchase Price

Since this operation was integrated immediately into our existing operations, its separate contributed revenue and operating income is undeterminable.

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 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):

$ 1,063  

Intangible Assets –

Customer Base & Contracts

Intangible Assets –

Covenant Not to Compete

Current Assets

Non-Current Assets

Total Purchase Price

$ 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 Elite, Complete Calibration, e2b, Alliance, 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.

1 ) discount rate of 9.00 %, 2 ) risk-free interest rate of 5.00 %, 3 ) asset volatility of 25.00 %, and 4 ) forecasted revenue and EBITDA.

The Company recognized a non-cash expense of $ 2.8 million, which was recorded in general and administrative expenses in its Consolidated Statement of Income for the quarter ended September 23, 2023.

As of December 23, 2023, the estimated fair value of the total earn-out obligations under the First Amendment was approximately $ 2.9 million.

The change in accrual is due to the actual results of the 2023 calendar Earn-Out Year and the accretion of the 2024 and 2025 Earn-Out Years.

As a result, the Company recognized a non-cash expense of $ 0.1 million, which was recorded in general and administrative expenses in its Consolidated Statement of Income for the quarter ended December 23, 2023.

After reviewing the fiscal year 2025 budget and revised revenue and EBITDA forecasts for the remainder of calendar 2025, during the fourth quarter of fiscal year 2024, the Company revalued the earn-out obligations.

As of March 30, 2024, the estimated fair value for the total earn-out obligations under the First Amendment, classified as Level 3 in the fair value hierarchy, was zero.

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 ) discount rate of 12.00 %, 2 ) risk-free interest rate of 4.70 %, 3 ) asset volatility of 22.50 %, and 4 ) forecasted revenue and EBITDA.

The Company recognized a non-cash gain of approximately $ 2.4 million, which was recorded in general and administrative expenses in its Consolidated Statement of Income for the quarter ended March 30, 2024.

As of March 30, 2024, the 2023 calendar Earn-Out Year was $ 0.5 million.

This will be paid during the first quarter of fiscal year 2025.

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.

Due to the uncertainty with utilizing these significant unobservable inputs for this Level 3 fair value measurement, materially higher or lower fair value measurements may be recognized at subsequent remeasurement periods.

Pursuant to the Second Amendment, the Company agreed to pay approximately $ 0.5 million for the 2023 Earn-Out Year and removed the entitlement for any future earn-out payments.

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 Axiom, SteriQual, TIC-MS, Elite, Complete Calibrations, e2b and Alliance had occurred at the beginning of fiscal year 2022 .

Fiscal Year Ended

1 unchanged sentence

Total Revenue

$ 233,098  

$ 217,000  

$ 189,730  

$ 11,419  

$ 12,052  

$ 6,901  

$ 263,554 $ 252,835 $ 225,281

$ 14,254 $ 11,568 $ 12,242

Basic Earnings Per Share

$ 1.51  

$ 1.61  

$ 0.93  

$ 1.73 $ 1.53 $ 1.63

Diluted Earnings Per Share

$ 1.49  

$ 1.59  

$ 0.91  

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 25, 2023, no contingent consideration and $ 0.6 million of other holdback amounts were unpaid and reflected in current liabilities on the Consolidated Balance Sheets. 

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.

$ 1.71 $ 1.51 $ 1.61

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 and at subsequent remeasurement periods, as applicable.

As of March 30, 2024 , $ 0.5 million of contingent consideration and $ 2.6 million of other holdback amounts were unpaid and are reflected in current liabilities on the Consolidated Balance Sheets and $ 1.6 mill ion of other holdback amounts unpaid are reflected in other liabilities on the Consolidated Balance Sheets.

During fiscal year 2024 , $ 0.8 mi llion of holdback amounts were paid.

During fiscal years 2023 and 2022 , no contingent consideration or other holdback amounts were paid.

During fiscal years 2023, 2022 and 2021, acquisition costs of $ 0.2 million, $ 0.9 million and less than $ 0.1 million were recorded as incurred as general and administrative expenses in the Consolidated Statements of Income.

During fiscal years 2024 , 2023 and 2022 , acquisition cos ts of $ 1.2 million, $ 0.2 million and $ 0.9 million, respectively, were recorded as incurred as general and administrative expenses in the Consolidated Statements of Income.

NOTE 10 – SHAREHOLDERS' EQUITY

On September 21, 2023, the Company entered into an underwriting agreement with Oppenheimer & Co.

Inc., as representative of several underwriters, for the sale of common stock in an underwritten public offering at a public offering price of $ 95.00 per share (the “Offering”).

The Offering closed on September 25, 2023 and the Company sold an aggregate of 847,371 shares in the Offering, which included 110,526 shares issued upon the exercise by the underwriters of their over-allotment option, for total gross proceeds of $ 80.5 million.

Net proceeds received after direct costs in the Offering were $ 75.2 million.

A portion of the net proceeds from this Offering were used to pay off the revolving credit facility in full.

During fiscal years 2024 , 2023 and 2022 , the Company repurchased and subsequently retired less tha n 0.1 mill ion shares, less than 0.1 million shares and 0.1 million shares, respectively, 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, tot aling $ 4.9 million i n fiscal year 2024 , $ 0.4 million in fiscal year 2023 and $ 6.7 million in fiscal year 2022 .

There were no stock option redemptions during fiscal year 2024 , fiscal year 2023 or fiscal year 2022 .

NOTE 11 – SUBSEQUENT EVENT

Effective March 27, 2023, Transcat purchased all of the outstanding capital stock of TIC-MS, Inc. (“TIC-MS”), a Missouri 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 TIC-MS was approximately $ 9.8 million, of which $ 2.9 million was paid in cash, including $ 0.5 million placed in escrow for certain post-closing adjustments and indemnification claims, if any, and the issuance of 77,387 shares of our common stock valued at approximately $ 6.8 million. 

Pursuant to the purchase agreement, the purchase price will be subject to reduction by up to $ 0.5 million if a key customer relationship is not retained.

Effective April 15, 2024, the Company acquired Becnel Rental Tools, LLC, a privately-held Louisiana limited liability company (“Becnel”), pursuant to an Agreement and Plan of Merger (the “Agreement”), by and among the Company, Becnel and the other parties thereto.

Becnel is an ISO 9001:2015 certified provider of rental tools and services primarily utilized in the decommissioning and maintenance of oil wells.

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 rental capabilities.

Pursuant to the Agreement, the Company acquired Becnel for approximately $ 50.8 million, consisting of a combination of (i) $ 17.5 million in cash and (ii) approximately $ 33.3 million of common stock, or 301,707 shares of common stock.

Of the acquisition consideration, approximately $ 1.5 million in cash and approximately $ 1.0 million in shares of common stock, or 9,283 shares, are subject to certain customary holdback provisions.

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 29, 2024.

The pro forma results of operations from the TIC-MS acquisition will be disclosed in the Quarterly Report on Form 10 -Q for the fiscal quarter ending June 24, 2023.

The goodwill related to TIC-MS is not expected to be deductible for income tax purposes.

All of the goodwill and intangible assets relating to the TIC-MS acquisition will be allocated to the Service segment.

The pro forma results of operations from the Becnel acquisition will be disclosed in the Quarterly Report on Form 10 -Q for the fiscal quarter ending June 29, 2024.

The goodwill related to Becnel is not expected to be deductible for income tax purposes.

The goodwill and intangible assets relating to the Becnel acquisition will be allocated to the Distribution segment.

On May 20, 2024, the Company entered into the Second Amendment to the Purchase Agreement relating to the purchase of all of the outstanding capital stock of NEXA to amend the earn-out terms under the Purchase Agreement.

See Note 9 for further information on the Second Amendment.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data