TRANSCAT INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 45 Report of Independent Registered Public Accounting Firm (PCAOB ID 317) 48 Consolidated Statements of Income for the Fiscal Years Ended March 28, 2026, March 29, 2025 and March 30, 2024 50 Consolidated Statements of Comprehensive Income for the Fiscal Years Ended March 28, 2026, March 29, 2025 and March 30, 2024 51 Consolidated Balance Sheets as of March 28, 2026 and March 29, 2025 52 Consolidated Statements of Cash Flows for the Fiscal Years Ended March 28, 2026, March 29, 2025 and March 30, 2024 53 Consolidated Statements of Changes in Shareholders’ Equity for the Fiscal Years Ended March 28, 2026, March 29, 2025 and March 30, 2024 54 Notes to Consolidated Financial Statements 55 44 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Transcat, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Transcat, Inc. and subsidiaries (the “Company”) as of March 28, 2026, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows, for the fiscal year ended March 28, 2026, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 28, 2026, and the results of its operations and its cash flows for the fiscal year ended March 28, 2026, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 28, 2026, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 27, 2026, expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. 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. Our audit 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. 45 Table of Contents Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Acquisition of Essco Calibration Laboratory, LLC — Fair Value of Customer Base & Contracts Intangible Asset — Refer to Note 9 of the financial statements Critical Audit Matter Description The Company completed the acquisition of Essco Calibration Laboratory, LLC (“Essco”) on August 5, 2025. This acquisition was accounted for as a business combination. The Company accounts for acquisitions of entities or asset groups that qualify as businesses using the acquisition method of accounting. Accordingly, the purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date, which are measured in accordance with fair value measurement principles. As part of the purchase price allocation, the Company recorded $34.0 million for acquired customer base and contracts intangible assets based on estimated fair value. We identified the fair value determination of the customer base and contracts intangible asset as a critical audit matter because of the significant estimates management made to determine such balances. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s assumptions related to future cash flows, attrition rate, and discount rate. 46 Table of Contents How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the customer base and contracts acquired included the following, among others: ● We assessed the reasonableness of management's estimated cash flows by inquiring of management regarding its processes for developing projected financial information ● We compared the cash flow projections to historical performance, and to historical and future projected performance of other guideline companies within the same industry ● With the assistance of our fair value specialists, we evaluated the (1) valuation methodology, (2) mathematical accuracy of the valuation for customer base and contracts, and (3) the following significant valuation assumptions: ○ Discount rate by developing a range of independent estimates and comparing those to the assumptions selected by management ○ Attrition rate by testing the source information underlying the determination of the rate and recalculating the rate using the applicable underlying customer data /s/ Deloitte & Touche LLP Rochester, NY May 27, 2026 We have served as the Company's auditor since 2025. 47 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Transcat, Inc. Opinions on the Financial Statements We have audited the accompanying consolidated balance sheet of Transcat, Inc. and subsidiaries (the Company) as of March 29, 2025, and the related consolidated statements of income, comprehensive income, cash flows and changes in shareholders' equity for each of the two years in the period ended March 29, 2025, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 29, 2025, and the results of its operations and its cash flows for each of the two years in the period ended March 29, 2025, in conformity with accounting principles generally accepted in the United States of America. 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 the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. 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. 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion. 48 Table of Contents Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Business Combinations As discussed in Notes 1 and 9 to the consolidated financial statements, during the year ended March 29, 2025, the Company completed multiple business combinations for an aggregate purchase price of approximately $131.6 million. The Company applied the acquisition method of accounting for the acquisitions. 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, 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 $43.2 and $71.7 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. 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. ● We updated our understanding of the associated controls and tested controls. ● We engaged an internal valuation specialist to test certain assumptions and approaches used. ● We tested identification of appropriate reporting units, including assignment of assets acquired, liabilities assumed, consideration and goodwill to the reporting units. ● We tested management’s valuation of intangible assets acquired, including valuation of any contingent consideration. This included testing the completeness and accuracy of source information used, mathematical accuracy of management’s calculations, and evaluating the reasonableness and consistency of methodology and assumptions used. We served as the Company’s auditor from 2012 to 2025. /s/ Freed Maxick P.C. (f/k/a Freed Maxick CPAs, P. C.) Rochester, New York May 27, 2026 49 Table of Contents TRANSCAT, INC. CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands, Except Per Share Amounts) For the Fiscal Years Ended March 28, March 29, March 30, 2026 2025 2024 Service Revenue $ 217,209 $ 181,428 $ 169,525 Distribution Sales 114,668 96,993 89,956 Total Revenue 331,877 278,421 259,481 Cost of Service Revenue 146,677 120,769 112,272 Cost of Distribution Sales 76,896 68,199 63,403 Total Cost of Revenue 223,573 188,968 175,675 Gross Profit 108,304 89,453 83,806 Selling, Marketing and Warehouse Expenses 42,765 33,341 28,710 General and Administrative Expenses 52,276 38,238 35,315 Total Operating Expenses 95,041 71,579 64,025 Operating Income 13,263 17,874 19,781 Interest Expense 4,602 798 1,835 Interest Income ( 23 ) ( 825 ) ( 808 ) Other (Income) Expense 695 ( 425 ) 315 Total Interest and Other (Income)/Expense, net 5,274 ( 452 ) 1,342 Income Before Provision for Income Taxes 7,989 18,326 18,439 Provision for Income Taxes 2,613 3,811 4,792 Net Income $ 5,376 $ 14,515 $ 13,647 Basic Earnings Per Share $ 0.58 $ 1.58 $ 1.66 Average Shares Outstanding 9,334 9,185 8,239 Diluted Earnings Per Share $ 0.57 $ 1.57 $ 1.63 Average Shares Outstanding 9,380 9,254 8,352 See accompanying notes to consolidated financial statements. 50 Table of Contents TRANSCAT, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in Thousands) For the Fiscal Years Ended March 28, March 29, March 30, 2026 2025 2024 Net Income $ 5,376 $ 14,515 $ 13,647 Other Comprehensive (Loss)/Income: Currency Translation Adjustment 707 ( 591 ) 152 Other, net of tax effects of $ 73 , $ (24) and $ (26) for the years ended March 28, 2026, March 29, 2025 and March 30, 2024 respectively. ( 161 ) 71 99 Total Other Comprehensive (Loss)/Income 546 ( 520 ) 251 Comprehensive Income $ 5,922 $ 13,995 $ 13,898 See accompanying notes to consolidated financial statements. 51 Table of Contents TRANSCAT, INC. CONSOLIDATED BALANCE SHEETS (Amounts in Thousands, Except Share and Per Share Amounts) March 28, March 29, 2026 2025 ASSETS Current Assets: Cash and Cash Equivalents $ 4,942 $ 1,517 Accounts Receivable, less allowance for credit losses of $ 851 and $ 659 65,170 55,941 Other Receivables 672 373 Inventory 13,705 14,483 Prepaid Expenses and Other Current Assets 7,973 5,695 Total Current Assets 92,462 78,009 Property and Equipment, net 57,801 50,024 Goodwill 218,185 176,928 Intangible Assets, net 77,706 54,777 Right to Use Assets, net 32,365 24,345 Other Assets 1,968 1,159 Total Assets $ 480,487 $ 385,242 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 17,931 $ 16,755 Accrued Compensation and Other Current Liabilities 21,697 15,466 Current Portion of Long-Term Debt - 1,816 Total Current Liabilities 39,628 34,037 Long-Term Debt 99,885 30,892 Deferred Tax Liabilities, net 10,167 9,286 Lease Liabilities 29,000 21,395 Other Liabilities 1,188 2,752 Total Liabilities 179,868 98,362 Commitments and Contingencies (Note 8) Shareholders' Equity: Common Stock, par value $ 0.50 per share, 30,000,000 shares authorized; 9,333,953 and 9,315,840 shares issued and outstanding as of March 28, 2026 and March 29, 2025, respectively 4,670 4,658 Capital in Excess of Par Value 199,115 191,167 Accumulated Other Comprehensive Loss ( 923 ) ( 1,469 ) Retained Earnings 97,757 92,524 Total Shareholders' Equity 300,619 286,880 Total Liabilities and Shareholders' Equity $ 480,487 $ 385,242 See accompanying notes to consolidated financial statements. 52 Table of Contents TRANSCAT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) For the Fiscal Years Ended March 28, March 29, March 30, 2026 2025 2024 Cash Flows from Operating Activities: Net Income $ 5,376 $ 14,515 $ 13,647 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Net (Gain) Loss on Disposal of Property and Equipment 232 ( 31 ) 53 Noncash Lease Expense 6,021 3,447 765 Deferred Income Taxes 827 ( 5 ) ( 1,597 ) Depreciation and Amortization 26,172 18,567 13,544 Gain on Sale of Assets - ( 855 ) - Amortization of Deferred Financing Costs 104 - - Provision for Accounts Receivable and Inventory Reserves 471 336 406 Stock-Based Compensation Expense 7,549 3,248 4,512 Changes in Assets and Liabilities, net of acquisitions: Accounts Receivable and Other Receivables ( 6,578 ) ( 1,292 ) ( 1,259 ) Inventory 839 4,393 2,318 Prepaid Expenses and Other Current Assets ( 2,209 ) ( 992 ) ( 299 ) Accounts Payable 965 4,940 ( 5,005 ) Accrued Compensation and Other Current Liabilities 924 ( 1,118 ) 3,102 Lease Liabilities ( 5,842 ) ( 3,243 ) ( 470 ) Income Taxes Payable - ( 2,925 ) 2,899 Net Cash Provided by Operating Activities 34,850 38,985 32,616 Cash Flows from Investing Activities: Purchase of Property and Equipment ( 15,298 ) ( 13,197 ) ( 13,280 ) Business Acquisitions, net of cash acquired ( 82,525 ) ( 87,436 ) ( 12,859 ) Proceeds from Sale of Assets - 1,100 - Sales/(Purchases) of Marketable Securities - 15,533 ( 15,533 ) Net Cash Used in Investing Activities ( 97,823 ) ( 84,000 ) ( 41,672 ) Cash Flows from Financing Activities: Proceeds From Revolving Credit Facility, net of lender fees 156,675 68,630 58,068 Repayment of Revolving Credit Facility ( 88,086 ) ( 37,739 ) ( 100,781 ) Repayments of Term Loan ( 1,816 ) ( 2,338 ) ( 2,248 ) Payments of Deferred Financing Costs ( 365 ) - - Principal Payments on Finance Leases ( 280 ) - - Issuance of Common Stock, net of direct costs 842 1,874 77,266 Repurchase of Common Stock ( 469 ) ( 3,565 ) ( 4,906 ) Net Cash Provided by Financing Activities 66,501 26,862 27,399 Effect of Exchange Rate Changes on Cash ( 103 ) 24 ( 228 ) Net (Decrease) Increase in Cash and Cash Equivalents 3,425 ( 18,129 ) 18,115 Cash and Cash Equivalents at Beginning of Fiscal Year 1,517 19,646 1,531 Cash and Cash Equivalents at End of Fiscal Year $ 4,942 $ 1,517 $ 19,646 Supplemental Disclosures of Cash Flow Activity: Cash paid during the fiscal year for: Interest, net $ 4,184 $ ( 151 ) $ 1,240 Income Taxes, net $ 2,217 $ 7,843 $ 3,099 Supplemental Disclosure of Non-Cash Investing and Financing Activities: Common stock issued for acquisitions $ - $ 45,410 $ 34,769 Balance Sheet Reclassification of Inventory to Property and Equipment $ 741 $ 443 $ 230 Balance Sheet Reclassification of Property and Equipment, net to Inventory $ 877 $ 1,510 $ 1,056 See accompanying notes to consolidated financial statements. 53 Table of Contents TRANSCAT, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS ’ EQUITY (Amounts in Thousands) Capital Common Stock In Accumulated Issued Excess Other $0.50 Par Value of Par Comprehensive Retained Shares Amount Value Income (Loss) Earnings Total Balance as of March 26, 2023 7,562 3,781 27,886 ( 1,200 ) 69,163 $ 99,630 Proceeds from Issuance of Common Stock 1,267 634 116,724 - - 117,358 Direct costs of Stock Offering - - ( 5,323 ) - - ( 5,323 ) Repurchase of Common Stock ( 50 ) ( 25 ) ( 2,145 ) - ( 2,736 ) ( 4,906 ) Stock-Based Compensation 60 30 4,482 - - 4,512 Other Comprehensive Income - - - 251 - 251 Net Income - - - - 13,647 13,647 Balance as of March 30, 2024 8,839 4,420 141,624 ( 949 ) 80,074 225,169 Proceeds from Issuance of Common Stock 466 233 47,800 - - 48,033 Repurchase of Common Stock ( 30 ) ( 15 ) ( 1,485 ) - ( 2,065 ) ( 3,565 ) Stock-Based Compensation 40 20 3,228 - - 3,248 Other Comprehensive Loss - - - ( 520 ) - ( 520 ) Net Income - - - - 14,515 14,515 Balance as of March 29, 2025 9,315 4,658 191,167 ( 1,469 ) 92,524 286,880 Proceeds from Issuance of Common Stock 21 14 828 - - 842 Repurchase of Common Stock ( 2 ) ( 2 ) ( 429 ) - ( 143 ) ( 574 ) Stock-Based Compensation - - 7,549 - - 7,549 Other Comprehensive Income - - - 546 - 546 Net Income - - - - 5,376 5,376 Balance as of March 28, 2026 9,334 $ 4,670 $ 199,115 $ ( 923 ) $ 97,757 $ 300,619 See accompanying notes to consolidated financial statements. 54 Table of Contents TRANSCAT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – GENERAL Description of Business: Transcat, Inc. (“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 devices and other FDA-regulated businesses. Additional industries served include industrial manufacturing; energy and utilities, including oil and gas; chemical manufacturing; FAA-regulated businesses, including aerospace and defense and other industries that require accuracy in their processes, confirmation of the capabilities of their equipment, and for which the risk of failure is very costly. Principles of Consolidation: The consolidated financial statements of Transcat include the accounts of Transcat and the Company’s wholly-owned subsidiaries, Transcat Canada, Inc, Cal OpEx Limited (d/b/a Transcat Ireland), Cal OpEx Inc. (d/b/a NEXA EAM), Axiom Test Equipment, LLC, Becnel Rental Tools, LLC, Martin Calibration, LLC, and Essco Calibration Laboratory, LLC. All intercompany 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, revenue recognition, estimated lives of intangible assets, fair value of the Company's reporting units, income taxes, and the valuation of assets acquired, liabilities assumed and consideration transferred in business acquisitions. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the Consolidated Financial Statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes. Actual results could differ from those estimates. Such changes and refinements in estimation methodologies are reflected in reported results of operations in the period in which the changes are made and, if material, their effects are disclosed in the Notes to the Consolidated Financial Statements. Fiscal Year: Transcat operates on a 52/53 -week fiscal year, ending the last Saturday in March. In a 52 -week fiscal year, each of the four quarters is a 13 -week period. In a 53 -week fiscal year, the last quarter is a 14 -week period. The fiscal year ended March 28, 2026 and March 29, 2025 ("fiscal year 2026 " and "fiscal year 2025 ", respectively) consisted of 52 weeks and the fiscal year ended on March 30, 2024 ("fiscal year 2024" ) consisted of 53 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. Accounts Receivable: Accounts receivable represents amounts due from customers in the ordinary course of business. These amounts are recorded net of the allowance for credit losses 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 credit losses. A summary of changes in the Company’s allowance for credit losses is as follows (amounts in thousands): Allowance for Credit Losses Allowance for Credit Losses at March 30, 2024 $ ( 544 ) Additions from Acquisitions ( 43 ) Charges to Earnings ( 453 ) Deductions 378 Effect of Foreign Exchange on Allowance for Credit losses 3 Allowance for Credit Losses at March 29, 2025 $ ( 659 ) Additions from Acquisitions ( 25 ) Charges to Earnings ( 443 ) Deductions 279 Effect of Foreign Exchange on Allowance for Credit losses ( 3 ) Allowance for Credit Losses at March 28, 2026 $ ( 851 ) 55 Table of Contents Inventory: Inventory consists of products purchased for resale and is valued at the lower of average cost or net realizable value. In the normal course of business, certain inventory items are transferred to property and equipment to be rented to customers. Costs are determined using the average cost method of inventory valuation. The Company performs physical inventory counts and cycle counts on inventory throughout the year and adjusts the recorded balance to reflect the results. Inventory is reduced for items not saleable at or above cost by applying a specific loss factor, based on historical experience, to specific categories of inventory. The Company evaluates the valuation of inventory on a quarterly basis. The Company recorded inventory valuation adjustments totaling $ 0.2 million at March 28, 2026 and March 29, 2025 . Property and Equipment, Depreciation and Amortization: Property and equipment are stated at cost. Depreciation and amortization are computed under the straight-line method over the following estimated useful lives: Years Machinery, Equipment and Software 2 – 15 Rental Equipment 5 – 15 Furniture and Fixtures 3 – 10 Leasehold Improvements 2 – 12 In the normal course of business, certain items that have been capitalized as property and equipment may be sold to customers as used equipment. Property and equipment determined to have no value are written off at their then remaining net book value. The Company capitalizes certain costs, including internal payroll costs incurred in the procurement and development of computer software used for internal purposes. Leasehold improvements are amortized under the straight-line method over the estimated useful life or the lease term, whichever is shorter. Maintenance and repairs are expensed as incurred. See Note 2 for further information on property and equipment. Business Acquisitions: The Company applies the acquisition method of accounting for business acquisitions. Under the acquisition method, identifiable assets acquired, liabilities assumed, and consideration transferred are measured at their acquisition-date fair value. The Company uses a valuation hierarchy, as further described under Fair Value of Financial Instruments below, to determine the fair values. Historically, we have relied, in part, upon the use of reports from third -party valuation specialists to assist in the estimation of fair values. Purchase price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition. Costs to acquire a business may include, but are not limited to, fees for accounting, legal and valuation services, and are expensed as incurred in the Consolidated Statements of Income. Goodwill and Intangible Assets: Goodwill represents the excess of the purchase price over the fair values of the underlying net assets of an acquired business. Goodwill is allocated to the Company's two reporting units: Service and Distribution. The Company tests goodwill for impairment for each reporting unit on an annual basis as of the first day of the fourth quarter of each fiscal year, or more frequently 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, as it did in fiscal 2025, or the Company can elect to perform a quantitative analysis, as it did for fiscal 2026. The Company estimated the fair values of each reporting unit for fiscal 2026 utilizing the income and market approaches, weighted equally, to prepare the analysis. The projected cash flows used in the analysis reflect management’s expectations of revenue growth and margin expansion based on historical performance, anticipated customer demand, and current market conditions. The weighted-average cost of capital ("WACC") for the Service and Distribution reporting units was 10 %, and the long-term growth rate assumed was 3 %. Based on the results of the Company's impairment assessments in fiscal 2026 and fiscal 2025, the Company was able to conclude that it was more likely than not that the fair values of the reporting units exceeded the carrying values. 56 Table of Contents A summary of changes in the Company’s goodwill is as follows (amounts in thousands): Goodwill Distribution Service Total Book Value as of March 30, 2024 38,216 67,369 105,585 Additions 21,783 49,896 71,679 Currency Translation Adjustment - ( 336 ) ( 336 ) Book Value as of March 29, 2025 59,999 116,929 176,928 Additions - 41,364 41,364 Measurement Period Adjustments - ( 287 ) ( 287 ) Currency Translation Adjustment - 180 180 Book Value as of March 28, 2026 $ 59,999 $ 158,186 $ 218,185 As of March 28, 2026, no accumulated impairment loss has been recognized for the Company's goodwill. The gross carrying amount and accumulated amortization of Transcat's acquired identifiable intangible assets as of March 28, 2026 were as follows (in thousands): Gross Carrying Accumulated Amount Amortization Total Customer Base $ 118,844 $ ( 46,859 ) $ 71,985 Covenant not to Compete 3,611 ( 3,258 ) 353 Tradenames/Trademarks 6,740 ( 1,396 ) 5,344 Other 905 ( 881 ) 24 Intangible Assets, net $ 130,100 $ ( 52,394 ) $ 77,706 57 Table of Contents The gross carrying amount and accumulated amortization of Transcat's acquired identifiable intangible assets as of March 29, 2025 were as follows (in thousands): Gross Carrying Accumulated Amount Amortization Total Customer Base $ 84,755 $ ( 34,531 ) $ 50,224 Covenant not to Compete 3,603 ( 2,866 ) 737 Tradenames/Trademarks 4,040 ( 263 ) 3,777 Other 905 ( 866 ) 39 Intangible Assets, net $ 93,303 $ ( 38,526 ) $ 54,777 Intangible assets, namely customer base, covenants not to compete, and tradenames/trademarks, 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. There were no indicators of impairment for fiscal 2026 or fiscal 2025. Amortization expense relating to intangible assets was $ 13.8 million in fiscal year 2026 and $ 8.4 million in fiscal year 2025 and is recorded in Selling, Marketing and Warehouse Expenses in the Company's Consolidated Statements of Income. Intangible amortization for future periods is expected to be the following (in $ millions): Fiscal Year Amount 2027 $ 12.9 2028 11.3 2029 9.9 2030 8.6 2031 7.3 Thereafter 27.7 Total $ 77.7 Deferred Taxes: The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the consolidated financial statement carrying amounts and the tax bases of its assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in the Consolidated Statements of Income in the period that includes the enactment date. The Company establishes valuation allowances if it believes that it is more-likely-than- not that some or all of its deferred tax assets will not be realized. See Note 4 for further discussion on income taxes. 58 Table of Contents Fair Value of Financial Instruments: The Company measures certain financial and nonfinancial assets and liabilities at fair value on a recurring and nonrecurring basis in accordance with ASC 820, Fair Value Measurement . Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Transcat has determined the fair value of debt and other financial instruments using a valuation hierarchy. The hierarchy, which prioritizes the inputs used in measuring fair value, consists of three levels. Level 1 uses quoted prices in active markets for identical assets and liabilities; Level 2 uses inputs other than quoted prices in active markets that are either directly or indirectly observable; 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 about assumptions a market participant would use, developed based on the best information available under the circumstances. The carrying amount of debt on the Consolidated Balance Sheets approximates fair value due to variable interest rate pricing that approximates current market rates, and the carrying amounts for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short-term nature. Investment assets, which funded the Company’s non-qualified deferred compensation plan, consist of mutual funds and are valued based on Level 1 inputs. At March 28, 2026, there were no investment assets. At March 29, 2025, investment assets totaled $ 0.1 million and are included as a component of other assets (non-current) on the Consolidated Balance Sheets. Certain nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis, including assets acquired and liabilities assumed in connection with business combinations and assets subject to impairment testing. Valuations of identifiable intangible assets (such as customer relationships and trade names) and certain liabilities typically involve the use of valuation techniques such as the income approach (e.g., discounted cash flow or relief-from-royalty methods) and may incorporate significant unobservable inputs, including: (i) forecasted revenues and cash flows, (ii) discount rates, (iii) customer attrition rates, and (iv) royalty rates and useful lives. These measurements are generally classified within Level 3 of the fair value hierarchy. Stock-Based Compensation: The Company measures the cost of services received in exchange for all equity awards granted, including stock options and restricted stock units, based on the fair market value of the award as of the grant date. The Company records compensation cost related to unvested equity awards by recognizing, on a straight-line basis, the unamortized grant date fair value over the remaining service period for awards expected to vest. Excess tax benefits for share-based award activity are reflected in the Consolidated Statements of Income as a component of the provision for income taxes. Excess tax benefits are realized benefits from tax deductions for exercised awards in excess of the deferred tax asset attributable to stock-based compensation costs for such awards. The Company did not capitalize any stock-based compensation costs as part of an asset. The Company estimates forfeiture rates based on its historical experience. During fiscal years 2026 , 2025 and 2024, the Company recorded non-cash stock-based compensation cost in the amount of $ 7.5 million, $ 3.2 million and $ 4.5 million, respectively, in the Consolidated Statements of Income. Revenue Recognition: The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers . The Company generates revenue from distribution product sales, equipment rental arrangements, and service offerings. The following is a description of principal activities from which the Company generates its revenue and how revenue is recognized: Service Revenue Calibration and other related service activities - Service revenue is generated from calibration, repair, inspection, analytical qualifications, preventative maintenance, and other related service activities, including third -party managed services. Revenue is generally recognized at a point in time when control transfers to the customer in accordance with the contract terms. For certain service arrangements involving managing customers’ calibration programs and technical, consulting, and staffing solutions, we recognize revenue over time, using the time-elapsed output method (for example, hours worked), as the customer simultaneously receives and consumes the benefits of the Company’s performance. These service arrangements are typically less than 12 months, and are primarily recognized over time, including in certain cases using the “right to invoice” practical expedient. Distribution Sales Product Sales - Revenue from product sales is recognized at a point in time when control transfers to the customer, which often occurs upon shipment, when title and risk of loss pass to the customer. 59 Table of Contents Equipment Rental - These arrangements provide customers with the right to use specified equipment for defined contractual periods. These contracts vary in duration with offerings including weekly, monthly and other extended durations. The related performance obligation is generally satisfied over time, and rental revenue is recognized using the time-elapsed output method, as this pattern depicts the transfer of control to the customer. Certain rental contracts provide a stand-ready obligation for equipment, and as a result, consideration is variable and based on the actual duration of use. Depending upon the structure of a particular arrangement, we (i) recognize revenue as each distinct service period is performed, (ii) recognize the estimate of variable consideration ratably over the period to which it relates, or (iii) apply the ‘right to invoice’ practical expedient and recognize revenue based on the amount invoiced to the customer during the period. Revenue is measured based on the transaction price, which represents the amount of consideration the Company expects to receive in exchange for satisfying its performance obligations. Transaction prices are generally fixed and stated in customer contracts, which typically include payment terms ranging from net 30 to 90 days. Provisions for customer returns are estimated and recorded in the same period as the related revenue based on historical experience and have been immaterial. Sales taxes and other similar taxes collected on behalf of governmental authorities are excluded from revenue. The Company generally bills customers for freight charges, which are included in revenue. Shipping and handling activities are considered fulfillment activities rather than separate performance obligations. For rental and certain service arrangements that extend across reporting periods, the Company records unbilled revenue or deferred revenue, as applicable, to reflect revenue recognized in advance of or subsequent to billing. Deferred revenue, unbilled revenue, and deferred contract costs recorded on the Company’s Consolidated Balance Sheets as of March 28, 2026 and March 29, 2025 were immaterial. Revenue recognized during fiscal year 2026 from performance obligations satisfied in prior periods was immaterial. The application of ASC 606 requires management to exercise judgment in identifying performance obligations, determining whether such obligations are satisfied at a point in time or over time, and estimating transaction prices. These judgments primarily relate to product shipment terms, service completion criteria, and the determination of the appropriate pattern of revenue recognition for rental and managed service arrangements. 60 Table of Contents Estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period was $ 7.3 million and $ 3.3 million as of March 28, 2026 and March 29, 2025, respectively. These are expected to be recognized revenue in one year or less. As of March 28, 2026, the Company had a de minimis amount of unsatisfied performance obligations for contracts with an original expected duration of greater than one year. Accordingly, the Company has elected to not disclose information about remaining performance obligations. See Note 7 for disaggregated revenue information related to the Company's segments and geographical data. 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 2026 2025 2024 Point-in-Time 81.8 % 86.8 % 89.7 % Over Time - Output Method 18.2 % 13.2 % 10.3 % Total 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. 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 $ 1.4 million, $ 0.9 million and $ 0.6 million in fiscal years 2026, 2025 , and 2024 , respectively, as a reduction of cost of distribution sales. 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 $ 2.6 million, $ 2.0 million and $ 1.6 million in fiscal years 2026 , 2025 and 2024 , respectively. Shipping and Handling Costs: Freight expense and direct shipping costs are included in the cost of revenue. These costs totaled approximately $ 3.7 million, $ 3.4 million and $ 3.2 million in fiscal years 2026 , 2025 and 2024 , 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 $ 0.6 million, $ 0.6 million and $ 0.5 million in fiscal years 2026 , 2025 and 2024 , 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 their local currencies, the Euro and the Canadian dollar, respectively, and have been translated to U.S. dollars. 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’ equity. 61 Table of Contents Transcat records foreign currency gains and losses on business transactions denominated in foreign currency. The net foreign currency loss was $ 0.2 million in fiscal year 2026 , a loss of $ 0.1 million in fiscal year 2025 and a loss of $ 0.1 million in fiscal year 2024 . The Company has utilized 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 did not apply hedge accounting and therefore the net change in the fair value of the contracts, which totaled a loss of less than $ 0.1 million, a gain of $ 0.2 million and a loss of $ 0.1 million in fiscal years 2026 , 2025 and 2024 , respectively, was recognized as a component of Other (Income) Expense in the Consolidated Statements of Income. The change in the fair value of the contracts was offset by the change in fair value on the underlying accounts receivables denominated in Canadian dollars being hedged. On March 28, 2026 , the Company did not hold a foreign exchange contract. The Company does not use hedging arrangements for speculative purposes. 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 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 28, 2026 , accumulated other comprehensive loss consisted of cumulative currency translation losses of $ 0.8 million, unrecognized prior service costs, net of tax, of $ 0.2 million and an unrealized loss on other assets, net of tax, of less than $ 0.1 million. At March 29, 2025 , accumulated other comprehensive loss consisted of cumulative currency translation losses of $ 1.5 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 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 fiscal years 2026, 2025 and 2024 , the net additional common stock equivalents had a $( 0.01 ), $( 0.01 ) and $( 0.03 ) per share effect on the calculation of dilutive earnings per share, respectively. The average shares outstanding used to compute basic and diluted earnings per share are as follows (amounts in thousands): Fiscal Year Ended March 28, March 29, March 30, 2026 2025 2024 Average Shares Outstanding – Basic 9,334 9,185 8,239 Effect of Dilutive Common Stock Equivalents 46 69 113 Average Shares Outstanding – Diluted 9,380 9,254 8,352 Anti-dilutive Common Stock Equivalents 162 52 50 62 Table of Contents Other Liabilities: A summary of other current and non-current liabilities is as follows (amounts in thousands): March 28, March 29, 2026 2025 Current Liabilities: Accrued Payroll and Employee Benefits $ 5,938 $ 5,592 Accrued Incentives 5,534 1,670 Current Portion of Lease Liabilities - Operating 4,107 3,624 Current Portion of Lease Liabilities - Financing 270 - Accrued Acquisition Holdbacks 2,247 2,784 Accrued Sales Tax 609 654 Other Current Liabilities 2,992 1,142 Accrued Compensation and Other Current Liabilities $ 21,697 $ 15,466 Non-Current Liabilities: Postretirement Benefit Obligation $ 1,188 $ 1,012 Accrued Acquisition Holdbacks - 1,647 Other Non-Current Liabilities - 93 Other Liabilities $ 1,188 $ 2,752 Recently Adopted Accounting Pronouncements: In December 2023, the FASB issued Accounting Standards Update ("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 2026, with early adoption permitted. The prospective adoption of the ASU did not have a material impact on the Company’s financial statement disclosures. See Note 4. Recent Accounting Guidance Not Yet Adopted: In November 2024, the FASB issued ASU 2024 - 03 “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses” which requires public entities to disclose specified information about certain costs and expenses. ASU 2024 - 03 is effective for annual reporting periods beginning in fiscal 2028, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The adoption of the ASU is not expected to have a material impact on the Company’s financial statement disclosures. In July 2025, the FASB issued ASU 2025 - 05 “Financial Instruments—Credit Losses (Topic 326 ): Measurement of Credit Losses for Accounts Receivable and Contract Assets,” which introduces a practical expedient for the application of the current expected credit loss model to current accounts receivable and contract assets. ASU 2025 - 05 is effective for interim and annual reporting periods beginning in fiscal 2027, with early adoption permitted. The adoption of the ASU is not expected to have a material impact on the Company’s financial statement disclosures. The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and has determined that there are no standards that are expected to have a material impact on its consolidated financial statements or related 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. Specifically, the Company: ( 1 ) separated the noncash lease expense from the change in lease liabilities in the operating activities section of the cash flow statement; ( 2 ) separated proceeds from revolving credit facility from repayments of the revolving credit facility in the financing activities section of the cash flow statement; ( 3 ) separated accumulated amortization by intangible asset class in Note 1; ( 4 ) enhanced the segment disclosure to include additional data for each segment in Note 7; and ( 5 ) updated prior periods' acquisition disclosures to include the useful lives of the intangible assets in Note 9. These changes in presentation did not affect net income, operating income, total assets, liabilities, or stockholders’ equity for any period presented. 63 Table of Contents NOTE 2 – PROPERTY AND EQUIPMENT, NET Property and equipment consists of (amounts in thousands): March 28, March 29, 2026 2025 Machinery, Equipment and Software $ 82,651 $ 72,141 Rental Equipment 34,363 29,916 Furniture and Fixtures 3,286 3,134 Leasehold Improvements 12,162 9,791 Fixed Assets in Process 1,241 888 Total Property and Equipment 133,703 115,870 Less: Accumulated Depreciation and Amortization ( 75,902 ) ( 65,846 ) Total Property and Equipment, net $ 57,801 $ 50,024 Total depreciation and amortization expense relating to property and equipment amounted to $ 12.1 million, $ 10.1 million and $ 7.8 million in fiscal years 2026 , 2025 and 2024 , respectively. Of these amounts, $ 10.3 million, $ 8.2 million and $ 5.9 million was charged to cost of service revenue and cost of distribution sales in fiscal years 2026, 2025 and 2024, respectively. The remaining depreciation and amortization expense was charged to Selling, Marketing and Warehouse Expenses and General and Administrative Expenses on the Company's Consolidated Statements of Income. 64 Table of Contents NOTE 3 – LONG-TERM DEBT On July 29, 2025, the Company entered into a Credit Agreement (the “Credit Agreement”) with a group of three lenders establishing a new five -year $ 150.0 million secured revolving credit facility (the “Credit Facility”). Borrowing options under the Credit Facility include: (i) a revolving loan option; (ii) a swingline loan option; and (iii) letters of credit, each of which is provided on a committed basis. The Credit Facility replaced the Company’s former $ 80.0 million credit facility (the “Replaced Facility”), which included a letter of credit subfacility of $ 10.0 million and the Company’s 2018 term loan, with an original principal amount of $ 15.0 million (the “2018 Term Loan”). In connection with the Credit Agreement, the Company entered into a syndicated loan. The lender of the Replaced Facility participated in the Credit Agreement. For accounting purposes, the transaction was accounted for as a debt modification; however, there were no remaining unamortized costs from the Replaced Facility. The Company incurred financing costs that will be deferred and amortized on a straight-line basis over the term of the Credit Agreement. These amounts are included in Other Assets in the Consolidated Balance Sheets. On July 7, 2021, the Company entered into the Replaced Facility 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 Replaced Facility provided for a revolving credit commitment of $ 80.0 million through June 2026, with a letter of credit subfacility of $ 10.0 million. The 2018 Term Loan was also provided for under the Replaced Facility. The Credit Agreement allows the Company to use up to $ 50.0 million under the Credit Facility for acquisitions in any single fiscal year with an exception for the acquisition of Essco. In addition, we are permitted to make restricted payments up to $ 25.0 million in the aggregate over the term of the Credit Facility and $ 10.0 million in any single fiscal year to repurchase shares and pay dividends. As of March 28, 2026, $ 150.0 million was available for borrowing, subject to covenant restrictions, under the Credit Facility, of which $ 99.9 million was outstanding. Interest and Other Costs: Effective July 1, 2023, interest on outstanding borrowings under the revolving credit facility accrued, 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 1.00 % floor), in each case, plus a margin. Unused fees accrued 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 weighted average interest rate for the revolving credit facility for fiscal year 2026 was 5.6 %. Covenants: The Credit Facility has certain covenants with which the Company is required to comply, including a fixed charge ratio covenant, which prohibits the Company's fixed charge ratio from being less than 1.20 to 1.00, and a leverage ratio covenant, which prohibits the Company's leverage ratio of outstanding indebtedness to consolidated EBITDA from exceeding 3.00 to 1.00. The Company was in compliance with all financial covenants and requirements during fiscal years 2026 and 2025. Other Terms: The Company pledged all of its U.S. tangible and intangible personal property, the equity interests of its U.S.-based subsidiaries, and a majority of the common stock of Transcat Canada Inc. and Cal Op Ex Limited as collateral security for the loans made under the Credit Facility. 65 Table of Contents NOTE 4 – INCOME TAXES Transcat’s income before income taxes on the Consolidated Statements of Income is as follows (amounts in thousands): FY 2026 FY 2025 FY 2024 United States $ 7,760 $ 16,983 $ 15,064 Foreign 229 1,343 3,375 Total $ 7,989 $ 18,326 $ 18,439 The provision for income taxes for fiscal years 2026 , 2025 and 2024 is as follows: FY 2026 FY 2025 FY 2024 Current Tax Provision: Federal $ 690 $ 2,437 $ 4,099 State 905 971 1,067 Foreign 191 383 1,185 $ 1,786 $ 3,791 $ 6,351 Deferred Tax (Benefit) Provision: Federal $ 1,179 $ 182 $ ( 809 ) State ( 88 ) ( 173 ) ( 316 ) Foreign ( 264 ) 11 ( 434 ) $ 827 $ 20 $ ( 1,559 ) Provision for Income Taxes $ 2,613 $ 3,811 $ 4,792 A reconciliation of the income tax provision computed by applying the statutory U.S. federal income tax rate and the income tax provision reflected in the Consolidated Statements of Income for fiscal year 2026 is as follows (amounts in thousands): FY 2026 (Effective Tax Rate) Federal Income Tax at Statutory Rate $ 1,678 21.0 % State Income Taxes, net of federal benefit^ 646 8.1 % Federal, State and Foreign Tax Credits - 0.0 % Foreign tax effects: Canada: Deferred tax basis adjustment ( 232 ) (2.9) % Other 51 0.6 % Other foreign jurisdictions 59 0.7 % Effect of cross-border tax laws: Other ( 9 ) (0.1) % Nontaxable or nondeductible items: Restricted Stock award shortfall (windfall) 153 1.9 % 162(m) Limitation 236 3.0 % Other Adjustments, net 31 0.4 % Total $ 2,613 32.7 % ^ The state and local jurisdictions that contribute the majority (greater than 50% ) of the tax effect in this category are Massachusetts, Minnesota, California, New York, Pennsylvania and Puerto Rico. 66 Table of Contents A reconciliation of the income tax provision computed by applying the statutory U.S. federal income tax rate and the income tax provision reflected in the Consolidated Statements of Income for fiscal years 2025 and 2024 is as follows (amounts in thousands): FY 2025 FY 2024 Federal Income Tax at Statutory Rate $ 3,848 $ 3,872 State Income Taxes, net of federal benefit 630 593 Federal, State and Foreign Tax Credits - ( 87 ) Foreign Rate Differential 110 41 Tax Impact of Equity Awards ( 1,130 ) ( 634 ) 162(m) Limitation 276 805 Non-Deductible Acquisition Costs - 71 GILTI and 78 Gross Up ( 30 ) 112 Other, net 107 19 Total $ 3,811 $ 4,792 March 28, March 29, 2026 2025 Deferred Tax Assets: Accrued Liabilities $ 539 $ 423 Lease Liabilities 7,780 5,707 Performance-Based Stock Award Grants 1,709 1,053 Net Operating losses 414 337 Inventory Reserves 57 61 Non-Qualified Deferred Compensation Plan - 24 Post Retirement Health Care Plans 253 262 Stock-Based Compensation 1,251 870 Capitalized Inventory Costs 279 183 Other 904 829 Total Deferred Tax Assets $ 13,186 $ 9,749 Deferred Tax Liabilities: Goodwill and Intangible Assets $ ( 5,830 ) $ ( 5,701 ) Right of Use Assets ( 7,512 ) ( 5,635 ) Depreciation ( 10,011 ) ( 7,667 ) Other - ( 32 ) Total Deferred Tax Liabilities $ ( 23,353 ) $ ( 19,035 ) Net Deferred Tax Liabilities $ ( 10,167 ) $ ( 9,286 ) 67 Table of Contents Income taxes paid (net of refunds) for the year ended March 28, 2026, are disaggregated by jurisdiction as follows (in thousands): March 28, 2026 U.S. Federal $ 1,284 State: Minnesota 193 California 57 New York 41 Wisconsin 41 Other 314 Canada 287 Other Foreign - Total Income Taxes Paid $ 2,217 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 2023 through 2025. Open fiscal years subject to state examination are 2021 through 2025. The Company also files in Canada and Ireland. Open fiscal years subject to examination for Canada are 2022 through 2025; open fiscal years subject to examination for Ireland are 2022 to 2025. 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. At March 28, 2026, the Company had net operating loss (NOL) carryforwards of $ 1.3 million in the U.S. and $ 0.7 million in Ireland, which could be used to offset future taxable income and reduce income tax expense. These NOL carryforwards do not expire. 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 2026 , 2025 and 2024 . In accordance with applicable accounting guidance, the amount of unrecognized tax liability from uncertain positions was $ 0 at year-end for fiscal years 2026 , 2025 and 2024 . 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 2026 , 2025 and 2024 . On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted into law. The legislation includes several changes to U.S. federal income tax law that generally allow for more favorable deductibility of certain business expenses beginning in calendar year 2025, including the restoration of immediate expensing for domestic research and development expenditures and the reinstatement of 100% bonus depreciation for qualified property. The OBBBA also includes certain modifications to the U.S. taxation of foreign activity, including changes to rules governing foreign tax credits, Global Intangible Low-Taxed Income (“GILTI”), Foreign-Derived Intangible Income (“FDII”), and the Base Erosion and Anti-Abuse Tax (“BEAT”), among other changes. Most of these modifications to the U.S. taxation of foreign activity are generally effective for tax years beginning after December 31, 2025. Certain benefits from the OBBBA, such as utilizing the restored 100% bonus depreciation rules for assets acquired after January 19, 2025, were included in the provision for income taxes for fiscal year 2026. The impacts of the benefits of the OBBBA were not material to the provision for income taxes for fiscal year 2026. 68 Table of Contents 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 2026 , 2025 and 2024 , 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 $ 2.1 million, $ 1.8 million and $ 1.5 million in fiscal years 2026 , 2025 and 2024 , respectively, and were recorded in general and administrative expenses in the accompanying Consolidated Statements of Income. 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 2026 , 2025 and 2024 . 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 expenses in the accompanying Consolidated Statements of Income. The expense related to the ESPP was $ 0.1 million in fiscal year 2026 and less than $ 0.1 million in fiscal years 2025 and 2024 . 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 2026 , 2025 and 2024 , 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 de minimis as of March 28, 2026 and $ 0.1 million as of March 29, 2025 , 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): FY 2026 FY 2025 FY 2024 Post retirement benefit obligation, at beginning of fiscal year $ 1,012 $ 1,134 $ 1,266 Service cost 12 13 14 Interest cost 53 56 60 Plan Amendments 17 - - Benefits paid ( 78 ) ( 102 ) ( 121 ) Actuarial (gain) loss 171 ( 89 ) ( 85 ) Post retirement benefit obligation, at end of fiscal year 1,187 1,012 1,134 Fair value of plan assets, at end of fiscal year - - - Funded status, at end of fiscal year $ ( 1,187 ) $ ( 1,012 ) $ ( 1,134 ) Accumulated post retirement benefit obligation, at end of fiscal year $ 1,187 $ 1,012 $ 1,134 69 Table of Contents The accumulated post retirement benefit obligation is included as a component of other liabilities (non-current) in the Consolidated Balance Sheets. The components of net periodic post-retirement benefit cost and other amounts recognized in other comprehensive income are as follows (amounts in thousands): FY 2026 FY 2025 FY 2024 Net periodic post retirement benefit cost: Service cost $ 12 $ 13 $ 14 Interest cost 53 56 60 Amortization of prior service cost ( 7 ) 10 15 Total Net periodic post retirement benefit cost: 58 79 89 Benefit obligations recognized in other comprehensive income (loss): Amortization of prior service cost 7 ( 10 ) ( 15 ) Prior service cost - - - Net actuarial (gain)/loss 171 ( 89 ) ( 85 ) 178 ( 99 ) ( 100 ) Total recognized in net periodic benefit cost and other comprehensive income (loss) $ 236 $ ( 20 ) $ ( 11 ) Amount recognized in accumulated other comprehensive income (loss), at end of fiscal year: Unrecognized prior service cost $ 143 $ ( 36 ) $ 63 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 2027 is less than $ 0.1 million. The post retirement benefit obligation was computed by an independent third -party actuary. Assumptions used to determine the post retirement benefit obligation and the net periodic postretirement benefit cost were as follows: March 28, March 29, 2026 2025 Weighted average discount rate 5.5 % 5.4 % Medical care cost trend rate: Trend rate assumed for next year 8.5 % 7.8 % Ultimate trend rate 4.0 % 4.0 % Year that rate reaches ultimate trend rate 2075 2075 Dental care cost trend rate: Trend rate assumed for next year and remaining at that level thereafter 4.0 % 3.5 % 70 Table of Contents 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): Fiscal Year Amount 2027 $ 116 2028 127 2029 137 2030 135 2031 85 Thereafter $ 587 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 In September 2021, the Transcat, Inc. 2021 Stock Incentive Plan (the “2021 Plan”) was approved by shareholders and became effective. 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 28, 2026 , 0.4 million 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 2026 , 2025 and 2024 were $ 0.7 million, $ 1.3 million and $ 0.6 million, respectively. Restricted Stock Units: The Company grants time-based and performance-based restricted stock units as a component of executive and key employee compensation. 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 (ending with fiscal year 2025 ) or cumulative Adjusted EBITDA targets over the eligible period. During fiscal year 2026, on the date of the annual meeting of shareholders, the Company’s non-employee directors received an annual grant of restricted stock units valued at $ 120,000 that vests after one year. During fiscal years 2025 and 2024, the Company's non-employee directors received an annual grant of restricted stock units valued at $ 85,000 and $ 50,000 , respectively, that vested 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. On an interim basis, the Company records compensation cost based on the estimated level of achievement of the performance conditions. The expense relating to the time vested restricted stock units is recognized on a straight-line basis less estimate for forfeitures over the requisite service period for the entire award. Performance-based restricted stock units can be earned up to a maximum of 150 % of shares awarded. On January 6, 2026, the Compensation Committee (the "Committee") of the Board of Directors of the Company granted a special one -time equity award to certain members of the executive team under the 2021 Plan (the “Retention Awards”). The Committee granted approximately 56,000 restricted stock units with a grant date fair value of approximately $ 3.4 million. The Retention Awards will vest on January 6, 2028, subject to continued employment and except as otherwise described in the form of award agreement. 71 Table of Contents The following table summarizes the non-vested restricted stock units outstanding as of March 28, 2026 ( in thousands, except per unit data): Weighted Average Number Grant Date Of Fair RSUs Value Outstanding as of March 29, 2025 74,171 $ 101.63 Granted 168,261 $ 75.47 Vested 39,840 $ 92.24 Forfeited 877 $ 89.71 Outstanding as of March 28, 2026 201,715 $ 81.72 72 Table of Contents Total expense relating to restricted stock units, based on grant date fair value and the achievement criteria, was $ 6.8 million, $ 2.4 million and $ 3.2 million in fiscal years 2026 , 2025 and 2024 , respectively. As of March 28, 2026 , unearned compensation, to be recognized over the grants’ respective service periods, totaled $ 12.0 million based on estimated achievement levels as of March 28, 2026. If the maximum performance levels were achieved, the unearned compensation could be a maximum of $ 12.6 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. Expense for stock options is recognized on a straight-lined basis over the requisite service period for each award. Options vest over a period of up to five years either in annual tranches or cliff vesting and expire either five years or ten years from the date of grant. The following weighted-average assumptions were used to value options granted during fiscal years 2026 , 2025 and 2024 : FY 2026 FY 2025 FY 2024 Risk-Free Interest Rate 4.09 % 4.35 % 4.08 % Volatility Factor 46.75 % 40.98 % 37.27 % Expected Term (in Years) 4 4 6.34 Annual Dividend Rate 0.00 % 0.00 % 0.00 % The Company calculates expected volatility for stock options by taking an average of historical volatility over the expected term. The computation of expected term was determined based on safe harbor rules, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield in effect at the time of grant. We assume no expected dividends. The expense related to all stock option awards was $ 0.7 million, $ 0.8 million and $ 1.3 million in fiscal years 2026, 2025 and 2024, respectively. The following table summarizes the Company’s options for fiscal year 2026 (amounts in thousands, except per option data): Weighted Weighted Average Average Remaining Number Exercise Contractual Aggregate Of Price Per Term Intrinsic Options Option (in Years) Value Outstanding as of March 29, 2025 174 72.14 Granted 4 82.59 Exercised ( 1 ) 64.39 Forfeited - - Outstanding as of March 28, 2026 177 72.42 5 $ 1,445 Exercisable as of March 28, 2026 113 $ 64.11 4 $ 1,293 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 2026 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 28, 2026 . 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 28, 2026 was $ 0.7 million, which is expected to be recognized over a period of three years. The aggregate intrinsic value of stock options exercised in fiscal years 2026 , 2025 and 2024 was less than $ 0.1 million, $ 3.2 million and $ 1.3 million, respectively. Cash received from the exercise of options in fiscal years 2026 , 2025 and 2024 was less than $ 0.1 million, $ 1.3 million and $ 1.5 million, respectively. 73 Table of Contents NOTE 7 – SEGMENT AND GEOGRAPHIC DATA An operating segment is a component of the Company that engages in business activities from which it may recognize revenues and incur expenses whose operating results are regularly reviewed by the public entity’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Once operating segments were identified, the Company determined which of those operating segments are required to be presented as reportable segments based on the quantitative thresholds. Transcat has two reportable segments: Service and Distribution. Through its Service segment, the Company offers calibration, repair, inspection, analytical qualifications, preventative maintenance, consulting and other related services. Through its Distribution segment, the Company sells and rents national and proprietary brand instruments to customers globally. There are no intersegment revenues. The Company's CODM is the President & Chief Executive Officer. Both of the Company's reportable segments are regularly reviewed by the CODM through monthly revenue, operating income and consolidated financial forecast updates and through regular and monthly meetings with the executive leadership team. The primary financial measures used by the CODM for the Company's reportable segments are revenue and operating income (loss). These measures are used by the CODM to make decisions on resource allocation, assess the performance of the business, and monitor budget versus actual results. Significant expenses that are regularly reviewed by the CODM include segment cost of revenue, segment selling, general and administrative expenses and various items affecting comparability, which are primarily related to the Company's acquisitive nature. The primary drivers of segment cost of revenue include labor, product and facilities costs, and the primary drivers of segment selling, general and administrative expenses include payroll, benefit and incentive costs. Items affecting comparability include depreciation, amortization, executive transition costs, transaction expenses and non-cash stock compensation. The CODM does not review assets or other balance sheet information in evaluating the results of the Company's segments, and therefore, such information is not presented. Year Ended March 28, 2026: Distribution Service Total Revenue $ 114,668 $ 217,209 $ 331,877 Less Significant Segment Expenses Cost of Revenue 76,896 146,677 Selling, Marketing & Warehouse Expenses 15,073 27,692 General and Administrative Expenses 14,379 37,897 Operating Income $ 8,320 $ 4,943 $ 13,263 Reconciliation of Segment Operating Income to Income Before Taxes Interest Expense 4,602 Interest Income (23) Other Expense 695 Income Before Provision For Income Taxes $ 7,989 Capital Expenditures $ 6,779 $ 8,519 Depreciation and Amortization $ 7,526 $ 18,646 74 Table of Contents Year Ended March 29, 2025: Distribution Service Total Revenue $ 96,993 $ 181,428 $ 278,421 Less Significant Segment Expenses Cost of Revenue 68,199 120,769 Selling, Marketing & Warehouse Expenses 14,328 19,013 General and Administrative Expenses 11,772 26,466 Operating Income $ 2,694 $ 15,180 $ 17,874 Reconciliation of Segment Operating Income to Income Before Taxes Interest Expense 798 Interest Income (825) Other Income (425) Income Before Provision For Income Taxes $ 18,326 Capital Expenditures $ 8,007 $ 5,190 Depreciation and Amortization $ 7,485 $ 11,082 Year Ended March 30, 2024: Distribution Service Total Revenue $ 89,956 $ 169,525 $ 259,481 Less Significant Segment Expenses Cost of Revenue 63,403 112,272 Selling, Marketing & Warehouse Expenses 11,769 16,941 General and Administrative Expenses 10,046 25,269 Operating Income $ 4,738 $ 15,043 $ 19,781 Reconciliation of Segment Operating Income to Income Before Taxes Interest Expense 1,835 Interest Income (808) Other Expense 315 Income Before Provision For Income Taxes $ 18,439 Capital Expenditures $ 7,139 $ 6,141 Depreciation and Amortization $ 4,284 $ 9,193 The following table presents geographic data for fiscal years 2026 , 2025 and 2024 (dollars in thousands): FY 2026 FY 2025 FY 2024 Geographic Data: Revenues to Unaffiliated Customers (1) : United States (2) $ 309,883 $ 255,811 $ 235,117 Canada 17,275 17,162 16,666 Other International 4,719 5,448 7,698 Total $ 331,877 $ 278,421 $ 259,481 Property and Equipment: United States (2) $ 51,891 $ 44,727 $ 33,507 Canada 4,830 4,866 5,415 Other International 1,080 431 22 Total $ 57,801 $ 50,024 $ 38,944 ( 1 ) Revenues are attributed to the countries based on the destination of a product shipment or the location where service is rendered. ( 2 ) United States includes Puerto Rico. 75 Table of Contents NOTE 8 – COMMITMENTS AND CONTINGENCIES Leases: The Company determines if an arrangement is a lease at inception. Payments under our lease arrangements are primarily fixed. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Our lease agreements generally contain lease and non-lease components. Historically, non-lease components such as utilities have been immaterial. Transcat leases facilities, equipment, and vehicles under various non-cancelable operating leases. As of March 28, 2026 , the remaining lease terms on our operating leases range from approximately one year to fifteen years, and include any renewal and/or termination options that are reasonably certain to be exercised by the Company. There is no transfer of title or option to purchase the leased assets upon expiration. 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 2026 , 2025 and 2024 . The components of lease expense for the current and prior-year comparative periods were as follows (dollars in thousands): FY 2026 FY 2025 FY 2024 Operating lease cost $ 6,021 $ 6,606 $ 5,948 Amortization of Finance Right to Use Assets 280 - - Interest on Finance Right to Use Assets 26 - - Short Term Lease Expense 166 - - Variable lease cost 1,392 691 666 Total lease cost $ 7,885 $ 7,297 $ 6,614 Supplemental cash flow information related to leases was as follows: FY 2026 FY 2025 FY 2024 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow from operating leases $ 5,842 $ 2,018 $ 2,954 Operating cash flow from financing leases $ 26 $ - $ - Financing cash flows from financing leases $ 280 $ - $ - Right to Use Assets obtained in exchange for lease liabilities -operating $ 12,131 $ 9,723 $ 4,965 Right to Use Assets obtained in exchange for lease liabilities - financing $ 44 $ - $ - The minimum future annual rental payments under the non-cancelable leases at March 28, 2026 are as follows (in millions): Fiscal Year Operating Financing 2027 $ 5.9 $ 0.3 2028 5.4 0.2 2029 4.5 0.1 2030 3.8 - 2031 3.3 - Thereafter 21.3 - Total minimum lease payments $ 44.2 $ 0.6 Less: Imputed interest 11.1 - Present value of remaining lease payments $ 33.1 $ 0.6 76 Table of Contents The weighted average remaining lease term and weighted average discount rate for operating and finance leases are as follows: FY 2026 FY 2025 FY 2024 Weighted Average Lease Term - Finance Leases 2.33 years - - Weighted Average Lease Term - Operating Leases 10 years 11 years 11 years Weighted Average Discount Rate - Finance Leases 4.4% - - Weighted Average Discount Rate - Operating Leases 5.7 % 4.4 % 4.1 % Contingencies: In the normal course of business, the Company may have pending claims and legal proceedings. The Company maintains accrued expense balances for the estimated amounts of legal costs expected to be billed related to any significant matter. In the opinion of management, based on information available at this time, there are no current claims and proceedings that would have a material adverse effect on the consolidated financial statements. However, the outcomes of such legal claims and proceedings are subject to inherent uncertainties. 77 Table of Contents NOTE 9 – BUSINESS ACQUISITIONS Essco: Effective August 5, 2025, the Company acquired 100 % of the membership units of Essco Calibration Laboratory, LLC (“Essco”), a privately-held calibration services corporation located in the Boston Metro area that is ISO 17025 certified. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the Company’s geographic reach and the depth and breadth of the Company’s service capabilities. The Essco goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. The goodwill and intangible assets related to the Essco acquisition have been allocated to the Service segment. Intangible assets related to the Essco acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful lives of up to 15 years and are deductible for tax purposes. Amortization of goodwill related to the Essco acquisition is deductible for income tax purposes. The Essco Customer Base & Contracts intangible asset was calculated using the MPEEM (Multi-Period Excess Earnings Method) under the Income approach and adjusting for the cash flow benefit of tax amortization of purchased intangibles. The fair value was determined to be $ 34.0 million and was assigned a useful life of 15 years. The Essco Trademarks and Tradenames intangible asset was calculated using the Relief-From-Royalty Method, which is a variant of the income approach and the market approach, and adjusting for the cash flow benefit of tax amortization of purchased intangibles. The fair value was determined to be $ 2.7 million and was assigned a useful life of seven years. The weighted average useful life of acquired intangible assets acquired is 14 years. The total purchase price for Essco is approximately $ 85.4 million, consisting of $ 82.8 million in cash paid at closing and $ 2.8 million in accrued liabilities related to certain post-closing adjustments and payments less $ 0.2 million working capital receivable. There was a measurement period adjustment in December 2025 related to working capital that resulted in a $ 0.2 million decrease in goodwill. Subsequent to March 28, 2026, the working capital settlement was received. As of March 28, 2026, $ 2.8 million remains unpaid and is reflected in accrued compensation and other current liabilities in the Consolidated Balance Sheets. The purchase was primarily financed by a draw on the Credit Agreement. See Note 3 - Long-Term Debt for more details. The Company has preliminarily estimated fair values for the assets purchased and liabilities assumed as of the date of the acquisition. The amounts reported are considered preliminary as the Company is completing the valuations required to allocate the purchase price. The following is a summary of the preliminary purchase price allocation, in the aggregate, to the fair value of Essco's assets and liabilities acquired on August 5, 2025 ( in thousands): Goodwill $41,161 Intangible Asset – Customer Base & Contracts 34,000 Intangible Asset – Trademarks and Tradenames 2,700 77,861 Plus: Cash and Cash Equivalents 272 Accounts Receivable, net 2,928 Property and Equipment, net 4,679 Right To Use Assets 4,049 Prepaid Expenses and Other Current Assets 189 Other Assets 16 Less: Current Liabilities ( 735 ) Lease Liabilities ( 3,865 ) Total Purchase Price $ 85,394 Since the acquisition, Essco has contributed revenue of $ 14.9 million and operating income of $ 0.2 million, which includes the negative impact of amortization of the acquired intangible assets. 78 Table of Contents Martin: Effective December 10, 2024, the Company acquired a 100 % membership interest in Martin Calibration, LLC, a Delaware limited liability calibration services company ("Martin"). Martin is ISO 17025 certified. 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 Martin goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. The goodwill and intangible assets relating to the Martin acquisition have been allocated to the Service segment. Intangible assets related to the Martin acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to 14 years and are deductible for tax purposes. Amortization of goodwill related to the Martin acquisition is deductible for income tax purposes. The Martin Customer Base & Contracts intangible was calculated using the MPEEM (Multi-Period Excess Earnings Method) approach and adjusting for the cash flow benefit of tax amortization of purchased intangibles. The fair value was determined to be $ 32.0 million and was assigned a useful life of 14 years. The Martin Trademarks and Tradenames asset was calculated using the relief from royalty approach, which is a variant of the income approach, and adjusting for the cash flow benefit of tax amortization of purchased intangibles. The fair value was determined to be $ 3.2 million and was assigned a useful life of 11 years. The weighted average useful life of acquired intangible assets acquired is 14 years. The total purchase price for Martin was $ 81.7 million, consisting of $ 71.9 million in cash and the issuance of common stock valued at $ 9.9 million, including $ 2.0 million placed in escrow for certain post-closing adjustments and claims against the sellers, if any. There was a measurement period adjustment related to working capital that resulted in a $ 0.1 million decrease in goodwill. The $ 2.0 million escrow was released to the sellers in December 2025. The following is a summary of the final purchase price allocation, in the aggregate, to the fair value of Martin's assets and liabilities acquired on December 10, 2024 ( in thousands): Goodwill $ 38,787 Intangible Assets – Customer Base & Contracts 32,000 Intangible Assets – Trademarks and Tradenames 3,200 73,987 Plus: Cash and Cash Equivalents 296 Accounts Receivable, net 4,652 Property and Equipment, net 3,412 Right To Use Assets 5,811 Prepaid Expenses and Other Current Assets 475 Less: Current Liabilities ( 1,098 ) Lease Liabilities ( 5,813 ) Total Purchase Price $ 81,722 79 Table of Contents Becnel: Effective April 15, 2024, the Company acquired Becnel Rental Tools, LLC, a Louisiana limited liability company ("Becnel"), pursuant to an Agreement and Plan of Merger (the “Becnel 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 service and rental capabilities. The Becnel goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. The goodwill and intangible assets relating to the Becnel acquisition have been allocated to both the Service and Distribution segment. Intangible assets related to the Becnel acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to eleven years and are deductible for tax purposes. Amortization of goodwill related to the Becnel acquisition is deductible for income tax purposes. The Becnel Customer Base & Contracts intangible was calculated using the MPEEM approach and adjusting for the cash flow benefit of tax amortization of purchased intangibles. The fair value was determined to be $ 7.2 million and was assigned a useful life of 10 years. The Becnel Trademarks and Tradenames asset was calculated using the relief from royalty approach, which is a variant of the income approach and adjusting for the cash flow benefit of tax amortization of purchased intangibles. The fair value was determined to be $ 0.8 million and was assigned a useful life of 11 years. The weighted average useful life of acquired intangible assets acquired is 10 years. The total purchase price for Becnel was $ 49.8 million consisting of up to $ 17.5 million in cash and the issuance of our common stock valued at $ 32.3 million. Pursuant to the Becnel agreement, the Company held back approximately $ 2.5 million of the purchase price for certain potential post-closing adjustments. This included $ 0.5 million withheld for ordinary post-closing adjustments and $ 2.0 million withheld that was subject to revenue target achievement. The $ 0.5 million holdback was paid to the sellers in April 2025. Pursuant to the Becnel agreement, the purchase price was subject to reduction by $ 2.0 million if certain revenue targets were not met through April 15, 2026. As of April 15, 2024, the estimated fair value of this contingent consideration, classified as Level 3 in the fair value hierarchy, was approximately $ 1.5 million. 50 % of this contingent consideration was payable in cash and 50 % of this contingent consideration was payable in 9,283 shares of Transcat common stock. The cash portion of the contingent consideration was initially classified as a liability and recorded in other liabilities in the Consolidated Balance Sheets. The stock portion of the contingent consideration was classified as equity and recorded in shareholders equity in the Consolidated Balance Sheets. The cash portion of the contingent consideration was remeasured quarterly. After reviewing the fiscal year 2026 forecast, the Company revalued the contingent consideration payout during the fourth quarter of fiscal year 2025 and recognized a non-cash gain of approximately $ 0.8 million, which left a contingent liability of zero as of March 29, 2025. The gain was recorded in general and administrative expenses in its Consolidated Statement of Income. As of March 28, 2026, the estimated fair value of the contingent consideration, classified as Level 3 in the fair value hierarchy, remained zero. Subsequent to year end, on April 15, 2026, the adjustment period expired and revenue targets were not met. 80 Table of Contents The following is a summary of the final purchase price allocation of Becnel's assets and liabilities acquired on April 15, 2024 (in thousands): Goodwill $ 32,811 Intangible Assets – Customer Base & Contracts 7,200 Intangible Assets – Trademarks and Tradenames 840 40,851 Plus: Cash and Cash Equivalents 214 Accounts Receivable, net 3,041 Property and Equipment, net 5,848 Prepaid Expenses and Other Current Assets 79 Less: Current Liabilities ( 210 ) Total Purchase Price $ 49,823 NEXA: 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. During fiscal year 2024, the Company entered into an Amendment to the Share Purchase Agreement with NEXA (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 was met for cash payment. In fiscal year 2025, the Company entered into an Amendment to the Share Purchase Agreement with NEXA (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. This payment was made during fiscal year 2025. 81 Table of Contents 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 Essco had occurred at the beginning of fiscal year 2025. 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. (Unaudited) Fiscal Year Ended March 28, March 29, (in thousands except per share information) 2026 2025 Total Revenue $ 339,951 $ 300,747 Net Income $ 6,029 $ 14,163 Basic Earnings Per Share $ 0.65 $ 1.54 Diluted Earnings Per Share $ 0.64 $ 1.53 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 28, 2026 , no contingent consideration and $ 2.2 million of other holdback amounts were unpaid and are reflected in accrued compensation and other current liabilities on the Consolidated Balance Sheets. As of March 29, 2025, no contingent consideration and $ 2.8 million of other holdback amounts were unpaid and reflected in current liabilities on the Consolidated Balance Sheets and $ 1.6 million of other holdback amounts unpaid were reflected in other liabilities in the Consolidated Balance Sheets. $ 2.7 million of holdback amounts were paid in fiscal year 2026 and 2025, respectively. During fiscal year 2024, $ 0.8 million of holdback amounts were paid. During fiscal years 2026 , 2025 and 2024 , acquisition costs of $ 0.7 million, $ 1.3 million and $ 1.2 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. The Company allows its employees the option of satisfying the employee tax withholding obligations with either cash or a net share issuance. The net issuance of shares was due to covering employee tax-withholding obligations for share award and stock option activity, totaling $ 0.4 million in fiscal year 2026 , $ 3.6 million in fiscal year 2025 and $ 4.9 million in fiscal year 2024 . 82 Table of Contents NOTE 11 – SUBSEQUENT EVENTS Effective March 29, 2026, Jaime Irick became the Company's President and Chief Executive Officer. The Company entered into an executive employment agreement (the “Employment Agreement”) with Mr. Irick that is effective as of March 29, 2026. Pursuant to the Employment Agreement, Mr. Irick will be entitled to an initial base salary of $ 650,000 per annum, a target performance-based cash incentive award of 100% of his base salary for fiscal 2027, and equity incentive awards under the Company’s long-term incentive compensation plan, consistent with the Company’s historical awards for executive officers, with a target value of $ 2.3 million for fiscal 2027. Mr. Irick will be subject to the Company’s stock ownership objectives for directors and executive officers and is eligible to participate in and receive benefits under the Company’s standard benefit programs. On April 9, 2026, the Company acquired SCM Metrology and Laboratories S.A, a privately-held calibration services provider, based in Costa Rica to advance the Company's strategy to grow alongside customers in high-growth, highly regulated markets. The acquisition price of approximately $ 13 million was paid in cash and is subject to customary adjustments and holdback provisions. The acquisition will be accounted for as a business combination under ASC 805, Business Combinations . As of the date these financial statements were issued, the Company has not completed its initial accounting for the acquisition because the valuation of certain assets acquired and liabilities assumed, including but not limited to identifiable intangible assets, property and equipment, and contingent liabilities, is still in process. Accordingly, the Company is unable to provide the disclosures required by ASC 805, including the preliminary allocation of purchase consideration and certain pro forma financial information. The Company expects to finalize the initial accounting for the acquisition as soon as practicable during the measurement period. 83 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.