10q10k10q10k.net

What changed in TRANSCAT INC's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of TRANSCAT INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+285 added−282 removedSource: 10-K (2024-05-28) vs 10-K (2023-06-06)

Top changes in TRANSCAT INC's 2024 10-K

285 paragraphs added · 282 removed · 234 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

74 edited+13 added−12 removed72 unchanged
Biggest changeOur calibration services strategy encompasses multiple ways to manage a customer’s calibration and laboratory instrument service needs: ● We offer an “Integrated Calibration Service Solution” that provides a complete wrap-around service, which can be delivered in the following ways: ● in-house services: services are performed at one of our twenty-seven Calibration Service Centers (often accompanied by pick-up and delivery services); ● periodic onsite services: Transcat technicians travel to a customer’s location, including aboard vessels docked at shipyards, and provide bench-top or in-line calibration or laboratory services on predetermined service cycles; ● client-based-laboratory services: Transcat establishes and manages a calibration service program within a customer’s facility; and ● mobile calibration services: services are completed on a customer’s property within one of our mobile calibration units. ● For companies that maintain an internal calibration operation, we can provide: ● calibration of their primary calibration assets, also called “standards”; and ● overflow capability, either onsite or at one of our Calibration Service Centers, during periods of high demand. 6 Table of Contents ● Enterprise Asset Management ● Calibration – criticality risk assessment; calibration interval analysis; calibration plans/task lists; planning and scheduling. ● Maintenance and Spares – PM optimization; spares/BOM management; PM plans/task lists; planning and scheduling. ● Reliability – asset criticality assessments; asset hierarchy development; PdM plans/task lists; FMECA/RCA. ● CMMS – implementation and migration; data optimization; business intelligence; CMMS KPIs/reporting. ● Quality and Compliance – technical writing; compliance audits; remediation; compliance management. ● Validation – validation master plan; confidence assessment model; validation interval analysis; validation method/process optimization.
Biggest changeOur calibration services strategy encompasses multiple ways to manage a customer’s calibration and laboratory instrument service needs: ● We offer an “Integrated Calibration Service Solution” that provides a complete wrap-around service, which can be delivered in the following ways: ● in-house services: services are performed at one of our twenty-nine Calibration Service Centers (often accompanied by pick-up and delivery services); ● periodic onsite services: Transcat technicians travel to a customer’s location, including aboard vessels docked at shipyards, and provide bench-top or in-line calibration or laboratory services on predetermined service cycles; ● client-based-laboratory services: Transcat establishes and manages a calibration service program within a customer’s facility; and ● mobile calibration services: services are completed on a customer’s property within one of our mobile calibration units. ● For companies that maintain an internal calibration operation, we can provide: ● calibration of their primary calibration assets, also called “standards”; and ● overflow capability, either onsite or at one of our Calibration Service Centers, during periods of high demand. ● Transcat Cost Control and Optimization Services: ● Calibration – criticality risk assessment; calibration interval analysis; calibration plans/task lists; planning and scheduling. ● Maintenance and Spares – PM optimization; spares/BOM management; PM plans/task lists; planning and scheduling. ● Reliability – asset criticality assessments; asset hierarchy development; PdM plans/task lists; FMECA/RCA. ● CMMS – implementation and migration; data optimization; business intelligence; CMMS KPIs/reporting. ● Quality and Compliance – technical writing; compliance audits; remediation; compliance management. ● CQV – equipment and facility C&Q; cleaning and sterilization validation; process and software validation; warehouse environmental mapping. ● Transcat Single Source Solution: ● Commissioning, Qualification and Validation. ● Data build for the computerized maintenance and calibration system (CMMS). ● Reliability Planning. ● Maintenance & Spares delivery. ● Execution of initial Calibrations. ● Final activities leading to the successful turn-over of the fully completed equipment and systems to the Client in an operationally-ready state.
Wellness Our Calibrated Wellness Program prioritizes our employees’ well-being and is designed to enhance their health. Our program includes wellness resources, health education, pharmaceutical cost guidance, and a no-cost Employee Assistance Program, which includes worldwide access to visits with mental health care providers.
Our Calibrated Wellness Program prioritizes our employees’ well-being and is designed to enhance their health. Our program includes wellness resources, health education, pharmaceutical cost guidance, and a no-cost Employee Assistance Program, which includes worldwide access to visits with mental health care providers.
Compensation and Benefits Our compensation and benefits program is designed to attract and reward individuals who demonstrate the ability and desire to enhance our workplace culture, support our values, drive our operational and strategic goals, and create long-term value for our shareholders.
Our compensation and benefits program is designed to attract and reward individuals who demonstrate the ability and desire to enhance our workplace culture, support our values, drive our operational and strategic goals, and create long-term value for our shareholders.
We differentiate ourselves from our competitors by demonstrating our commitment to quality, expanding upon the largest 17025 scope of accreditation and calibration capabilities of any commercial calibration laboratory that are tailored to the markets we serve, leveraging a geographical footprint that spans North America and Puerto Rico providing a comprehensive suite of services that spans many disciplines and hundreds of manufacturers which is not limited to certain product lines or brands.
We differentiate ourselves from our competitors by demonstrating our commitment to quality, expanding upon the largest 17025 scope of accreditation and calibration capabilities of any commercial calibration laboratory that are tailored to the markets we serve, leveraging a geographical footprint that spans North America, Puerto Rico and Ireland providing a comprehensive suite of services that spans many disciplines and hundreds of manufacturers which is not limited to certain product lines or brands.
We believe an important element in taking market share is our ability to expand into new technical capabilities and adjacent service solutions that are in demand by our current and target customer base. The other component to our Service growth strategy is acquisitions. There are three drivers of our acquisition strategy: geographic expansion, increased capabilities and infrastructure leverage.
We believe an important element in taking market share is our ability to expand into new technical capabilities and adjacent service solutions that are in demand by our current and target customer base. The other component to our Service growth strategy is acquisitions. There are three drivers of our acquisition strategy: geographic expansion, increased capabilities and expertise, and infrastructure leverage.
Under our integrated sales model, we have both inside and outside sales teams that seek to acquire new customers in our targeted markets by leveraging our unique value proposition, including our broad geographic footprint and comprehensive suite of services. We target regulated, enterprise customers with multiple manufacturing operations throughout North America and Europe.
Under our integrated sales model, we have both inside and outside sales teams that seek to acquire new customers in our targeted markets by leveraging our unique value proposition, including our broad geographic footprint and comprehensive suite of services. We target regulated customers with multiple manufacturing operations throughout North America and Europe.
We have agreements with certain product vendors that provide for rebates based on meeting a specified cumulative level of purchases and/or incremental distribution sales. These rebates are recorded as a reduction of cost of distribution sales. Purchase rebates are calculated and recorded quarterly based upon our volume of purchases with specific vendors during the quarter.
Distribution Vendor Rebates. We have agreements with certain product vendors that provide for rebates based on meeting a specified cumulative level of purchases and/or incremental distribution sales. These rebates are recorded as a reduction of cost of distribution sales. Purchase rebates are calculated and recorded quarterly based upon our volume of purchases with specific vendors during the quarter.
Diversity and Inclusion Recognizing and respecting our employees’ backgrounds and experiences, and our international presence, we strive to maintain a diverse workforce and inclusive work environment everywhere we operate. Our diversity and inclusion principles are reflected in our employee training, in particular with respect to our policies against harassment and bullying and the elimination of bias in the workplace.
Diversity and Inclusion. Recognizing and respecting our employees’ backgrounds and experiences, and our international presence, we strive to maintain a diverse workforce and inclusive work environment everywhere we operate. Our diversity and inclusion principles are reflected in our employee training, in particular with respect to our policies against harassment and bullying and the elimination of bias in the workplace. Wellness.
The calibration services industry is highly fragmented and is composed of companies ranging from internationally recognized and accredited OEMs to non-accredited sole proprietors as well as companies that perform their own calibrations in-house, resulting in a tremendous range of service levels and capabilities.
Service Competition . The calibration services industry is highly fragmented and is composed of companies ranging from internationally recognized and accredited OEMs to non-accredited sole proprietors as well as companies that perform their own calibrations in-house, resulting in a tremendous range of service levels and capabilities.
By delivering these services, NEXA is able to provide unique value to their end customers in managing their asset portfolios, avoiding asset downtime and helping to accelerate delivery of their life changing products to market, ultimately driving significant cost savings and improved reliability.
By delivering these services, NEXA is able to provide unique value to our end customers in managing their asset portfolios, avoiding asset downtime and helping to accelerate delivery of their life changing products to market, ultimately driving significant cost savings and improved reliability.
Our equipment rental business continues to be a strong growth segment for us and helps support our distribution and service segment growth strategies. Having new, used and rental equipment further differentiates us from our Service segment competitors.
Our equipment rental business continues to be a strong growth offering for us and helps support our distribution and service segment growth strategies. Having new, used and rental equipment further differentiates us from our Service segment competitors.
We conduct policy and procedure reviews to ensure compliance with health and safety guidelines and regulatory requirements. We provide protective gear (e.g., eye protection, masks, and gloves) as required by applicable standards and as appropriate. Our goal is to achieve a level of work-related injuries as close to zero as possible through continuous investment in our safety program.
We conduct policy and procedure reviews to ensure compliance with health and safety guidelines and regulatory requirements. We provide protective gear (e.g., eye protection, masks, and gloves) as required by applicable standards and as appropriate. Our goal is to achieve a level of work-related injuries as close to zero as possible through continuous investment in our safety program. Hiring Practices.
Hiring Practices We seek to recruit and hire the most qualified people for our open positions without regard to protected status (age, color, creed, disability, domestic violence victim status, gender identity, genetic predisposition or carrier status, marital status, national origin, pregnancy, race religion, sex, sexual orientation, status as a protected veteran or as a member of any other protected group or status).
We seek to recruit and hire the most qualified people for our open positions without regard to protected status (age, color, creed, disability, domestic violence victim status, gender identity, genetic predisposition or carrier status, marital status, national origin, pregnancy, race, religion, sex, sexual orientation, status as a protected veteran or as a member of any other protected group or status).
We strive to differentiate ourselves within the markets we serve and build barriers to competitive entry by offering a broad range of products and services and by integrating these solutions in a value-added manner to benefit our customers’ operations. During fiscal year 2023, we continued our commitment to capital, people and leadership investments, advancing our “Operational Excellence” initiative.
We strive to differentiate ourselves within the markets we serve and build barriers to competitive entry by offering a broad range of products and services and by integrating these solutions in a value-added manner to benefit our customers’ operations. During fiscal year 2024, we continued our commitment to capital, people and leadership investments, advancing our “Operational Excellence” initiative.
Our acquisition strategy primarily targets service businesses that expand our geographic reach, increase the depth and/or breadth of our service capabilities and expertise and leverage our infrastructure.
Our acquisition strategy primarily targets service businesses that expand our geographic reach, increase the depth and/or breadth of our service and distribution capabilities and expertise and leverage our infrastructure.
We believe that effective purchasing is a key element to maintaining and enhancing our position as a provider of high-quality test and measurement instruments. We frequently evaluate our purchase requirements and suppliers’ offerings to obtain products at the best possible cost. We obtain our products from approximately 550 suppliers of brand name and private-labeled equipment.
We believe that effective purchasing is a key element to maintaining and enhancing our position as a provider of high-quality test and measurement instruments. We frequently evaluate our purchase requirements and suppliers’ offerings to obtain products at the best possible cost. We obtain our products from approximately 450 suppliers of brand name and private-labeled equipment.
We believe our customers do business with us because of our integrity and commitment to quality service, our broad range of product and service offerings, our proprietary asset management system, CalTrak®, and our online customer portal, C3®. In our fiscal years 2023 and 2022, no customer or controlled group of customers accounted for 5% or more of our total revenue.
We believe our customers do business with us because of our integrity and commitment to quality service, our broad range of product and service offerings, our proprietary asset management system, CalTrak®, and our online customer portal, C3®. In our fiscal years 2024 and 2023, no customer or controlled group of customers accounted for 5% or more of our total revenue.
In addition to its being an element of quality control and risk management, calibration improves an operation’s productivity and efficiency to optimal levels by assuring accurate, reliable instruments and processes. The need for calibration is often driven by regulation, which identifies a requirement for quality calibration and laboratory instrument services as a critical component of a company’s business operation.
In addition to its being an element of quality control and risk management, calibration improves an operation’s productivity and efficiency to optimal levels by assuring accurate, reliable instruments and processes. 5 Table of Contents The need for calibration is often driven by regulation, which identifies a requirement for quality calibration and laboratory instrument services as a critical component of a company’s business operation.
Our scopes of accreditation can be found at http://www.transcat.com/calibration-services/accreditation/calibration-lab-certificates. 8 Table of Contents Distribution Segment Distribution Summary. We distribute professional grade test, measurement and control instrumentation throughout North America and internationally. Our customers use test and measurement instruments to ensure that their processes, and ultimately their end products, are within specification.
Our scopes of accreditation can be found at http://www.transcat.com/calibration-services/accreditation/calibration-lab-certificates. Distribution Segment Distribution Summary. We distribute professional grade test, measurement and control instrumentation throughout North America and internationally. Our customers use test and measurement instruments to ensure that their processes, and ultimately their end products, are within specification.
The Company recorded vendor rebates of $0.6 million and $1.0 million in fiscal years 2023 and 2022, respectively, as a reduction of cost of distribution sales. Distribution Operations. Our Distribution operations primarily take place at our 48,500 square-foot facility in Rochester, New York which includes 17,000 square feet of warehouse space.
The Company recorded vendor rebates of $0.6 million in both fiscal years 2024 and 2023, and $1.0 million in fiscal year 2022, respectively, as a reduction of cost of distribution sales. Distribution Operations. Our Distribution operations primarily take place at our 48,500 square-foot facility in Rochester, New York which includes 17,000 square feet of warehouse space.
These co-branded marketing initiatives typically feature specific vendors, new products or targeted product categories and take the form of direct mailers, web-based initiatives or outbound sales efforts. 9 Table of Contents Distribution Competition. The distribution market for industrial test and measurement instrumentation is fragmented and highly competitive.
These co-branded marketing initiatives typically feature specific vendors, new products or targeted product categories and take the form of direct mailers, web-based initiatives or outbound sales efforts. Distribution Competition. The distribution market for industrial test and measurement instrumentation is fragmented and highly competitive.
While typically representing approximately 13% to 15% of our Service segment revenue, we believe the management of these items is highly valued by our customers and providing this service has enabled us to continue our pursuit of having the broadest calibration offerings in these targeted markets. We regularly review outsourced services to identify opportunities for in-house capability expansion. Continuous Improvement.
While typically representing approximately 13% to 15% of ou r Service segment revenue, we believe the management of these items is highly valued by our customers and providing this service has enabled us to continue our pursuit of having the broadest calibration offerings in these targeted markets. We regularly review outsourced services to identify opportunities for in-house capability expansion.
Copies of such documents are available in print at no charge to any shareholder who makes a request. Such requests should be made to our corporate secretary at our corporate headquarters, 35 Vantage Point Drive, Rochester, New York 14624.
Copies of such documents are available in print at no charge to any shareholder who makes a request. Such requests should be made to our corporate secretary at our corporate headquarters, 35 Vantage Point Drive, Rochester, New York 14624. 13 Table of Contents
Our program also incentivizes health and well-being by providing reduced health insurance premiums for employees who complete certain actions that encourage health and wellness.
Our program also incentivizes health and well-being by providing reduced health insurance premiums for employees who complete certain actions that encourage health and wellness. Compensation and Benefits.
NEXA provides asset management services to the biopharmaceutical industry by leveraging its six service tracks: (i) calibration, (ii) maintenance and spare, (iii) reliability, (iv) computerized maintenance management systems solutions (“CMMS”), (v) quality and compliance, and (vi) validation.
NEXA provides asset management services to the biopharmaceutical industry by leveraging its six service tracks: (i) calibration, (ii) maintenance and spare, (iii) reliability, (iv) computerized maintenance management systems solu tions (“CMMS”), (v) quality and compliance, and (vi) validation.
Because many laboratory instrument service customers operate in regulated industries, these same customers typically also require accredited calibration services. This requirement allows a natural synergy between our laboratory instrument and calibration services. Our strategy includes cross-selling our services within our customer accounts to maximize our revenue opportunities with each customer. Proprietary Asset Management Software.
Because many laboratory instrument service customers operate in regulated industries, these same customers typically also require accredited calibration services. This requirement allows a natural synergy between our laboratory instrument and calibration services. Our strategy includes cross-selling our services within our customer accounts to maximize our revenue opportunities with each customer.
We provide other services to our customers such as inspection, repair and consulting services, which appeal to customers across all sectors in our customer base. These are generally value-added services and allow us to provide “one-stop shopping” for our customers. Service Value Proposition.
We provide other services to our customers such as inspection, repair and consulting services, which appeal to customers across all sectors in our customer base. These are generally value-added services and allow us to provide “one-stop shopping” for our customers. 6 Table of Contents Service Value Proposition.
In addition to offering pre-shipment value-added services, we offer our customers the options of renting selected test and measurement equipment or buying used equipment, furthering our ability to answer all of our customers’ test and measurement equipment needs. We continuously evaluate our offerings to add new in-demand vendors or products, or remove less relevant vendors and products.
In addition to offering new products, we offer our customers the options of renting selected test and measurement equipment or buying used equipment, furthering our ability to answer all of our customers’ test and measurement equipment needs. We continuously evaluate our offerings to add new in-demand vendors or products, or remove less relevant vendors and products.
In addition, we have diversified our offerings by expanding the brands and product lines that we offer and adding higher gross margin equipment rentals and used equipment sales, which we believe makes Transcat unique among our competitors. Distribution Suppliers and Purchasing.
In addition, we have diversified our offerings by expanding the product lines that we offer and adding higher gross margin equipment rentals and used equipment sales, which we believe makes Transcat unique among our competitors. 10 Table of Contents Distribution Suppliers and Purchasing.
Overall, we consider our employee relations to be good and believe our culture to be central to the success of the Company. Health and Safety The health and safety of our employees is of utmost importance to us. We are enhancing our Safety Program with additional training and internal risk and hazard assessments.
Overall, we consider our employee relations to be good and believe our culture to be central to the success of the Company. Health and Safety. The health and safety of our employees is of utmost importance to us. We have enhanced our Safety Program with additional training, communications, and internal risk and hazard assessments.
The table below illustrates the strategic drivers for the acquisitions described above: Geographic Expansion Increased Capabilities Leveraged Infrastructure Elite ✓ Complete Calibrations ✓ ✓ e2b ✓ ✓ Alliance ✓ ✓ Tangent ✓ ✓ NEXA ✓ ✓ Upstate Metrology ✓ We believe our combined Service and Distribution segment offerings, experience, technical expertise and integrity create a unique and compelling value proposition for our customers, and we intend to continue to grow our business through organic revenue growth and business acquisitions.
The table below illustrates the strategic drivers for the acquisitions described above: Geographic Expansion Increased Capabilities and Expertise Leveraged Infrastructure Axiom ✓ ✓ SteriQual ✓ ✓ TIC-MS ✓ ✓ Elite ✓ Complete Calibrations ✓ ✓ e2b ✓ ✓ Alliance ✓ ✓ We believe our combined Service and Distribution segment offerings, experience, technical expertise and integrity create a unique and compelling value proposition for our customers, and we intend to continue to grow our business through organic revenue growth and business acquisitions.
Customers may place orders via: ● Mail to Transcat, Inc., 35 Vantage Point Drive, Rochester, NY 14624; ● Telephone at 1-800-828-1470; ● Email at sales@transcat.com; ● Online at www.transcat.com; or ● Fax at 1-800-395-0543 INFORMATION REGARDING EXPORT SALES In fiscal year 2023, approximately 10% of our total revenue resulted from sales to customers outside the United States.
Customers may place orders via: ● Mail to Transcat, Inc., 35 Vantage Point Drive, Rochester, NY 14624; ● Telephone at 1-800-828-1470; ● Email at sales@transcat.com; ● Online at www.transcat.com; or ● Fax at 1-800-395-0543 11 Table of Contents INFORMATION REGARDING EXPORT SALES In fiscal year 2024, approximatel y 10% of our total revenue resulted from sales to customers outside the United States.
As of the end of our fiscal year ended March 25, 2023 (“fiscal year 2023”), we operated twenty-seven calibration service centers (“Calibration Service Centers”) strategically located across the United States, Puerto Rico, Canada and Ireland. We also serve our customers onsite at their facilities for daily, weekly or longer-term periods.
As of the end of our fiscal year ended March 30, 2024 (“fiscal year 2024 ”), we operated twenty-nine calibration service centers (“Calibration Service Centers”) strategically located across the United States, Puerto Rico, Canada and Ireland. We also serve our customers onsite at their facilities for daily, weekly or longer-term periods.
We continually evaluate when to integrate these acquired systems with a focus on obtaining operational synergies while imposing minimal disruption to customers. INTELLECTUAL PROPERTY We have federally registered trademarks for Transcat®, CalTrak®, C3® and Procision® which we consider to be of material importance to our business. The registrations for these trademarks are in good standing with the U.S.
We continually evaluate when to integrate these acquired systems with a focus on obtaining operational synergies while imposing minimal disruption to customers. INTELLECTUAL PROPERTY We have U.S. federally registered trademarks for Transcat®, CalTrak®, C3®, Procision®, and TIC-MS, INC. ® which we consider to be of material importance to our business.
We utilize print media, trade shows and web-based initiatives to market our services to customers and prospective customers with a strategic focus in the highly regulated industries including life science and other FDA-regulated industries, aerospace and defense, energy and utilities, and chemical manufacturing.
We utilize print media, trade shows and web-based initiatives to market our services to customers and prospective customers with a strategic focus in the highly regulated industries including life science and other FDA-regulated industries, aerospace and defense, energy and utilities, and chemical manufacturing. We also target industrial manufacturing and other industries that appreciate the value of quality calibrations.
Our sales, customer service and support teams provide expert advice, application assistance and technical support to our customers. Since calibration is an intangible service, our customers rely on us to uphold high standards and provide integrity in our people and processes. Our customers include leading manufacturers in the life science/pharmaceutical, energy, defense, aerospace and industrial process control sectors.
Since calibration is an intangible service, our customers rely on us to uphold high standards and provide integrity in our people and processes. Our customers include leading manufacturers in the life science/pharmaceutical, energy, defense, aerospace and industrial process control sectors.
ITEM 1. BUSINESS BUSINESS OVERVIEW Transcat, Inc. (“Transcat”, the “Company,” “we” or “us”) is a leading provider of accredited calibration services, enterprise asset management services, and value-added distributor of professional grade handheld test, measurement and control instrumentation.
ITEM 1. BUSINESS BUSINESS OVERVIEW Transcat, Inc. (“Transcat”, the “Company,” “we” or “us”) 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.
Fiscal year 2024 which ends on March 30, 2024 (“fiscal year 2024”) will have 53 weeks. ENVIRONMENTAL MATTERS We believe that we are in compliance with federal, state, and local provisions relating to the protection of the environment, and that continued compliance will not have any material effect on our capital expenditures, earnings, or competitive position.
Fiscal year 2025 which ends on March 29, 2025 (“fiscal year 2025”) will have 52 weeks. 12 Table of Contents ENVIRONMENTAL MATTERS We believe that we are in compliance with federal, state, and local provisions relating to the protection of the environment, and that continued compliance will not have any material effect on our capital expenditures, earnings, or competitive position.
We conduct our business through two operating segments: service (“Service”) and distribution (“Distribution”). See Note 7 to our Consolidated Financial Statements in this report for financial information for these segments. We concentrate on attracting new customers in each segment, retaining existing customers and cross-selling to customers to increase our total revenue.
See Note 7 to our Consolidated Financial Statements in this report for financial information for these segments. We concentrate on attracting new customers in each segment, retaining existing customers and cross-selling to customers to increase our total revenue.
Complete Calibrations is an ISO 17025 accredited calibration company specializing in calibration services for the life sciences industry. ● Effective September 27, 2022, Transcat acquired substantially all of the assets of e2b, an Ohio based provider of calibration services. ● Effective May 31, 2022, Transcat acquired substantially all of the assets of Alliance, an Ohio based provider of calibration services. ● Effective December 31, 2021, Transcat purchased all of the outstanding membership units of Tangent, a privately-held company.
Complete Calibrations is an ISO 17025 accredited calibration company specializing in calibration services for the life sciences industry. ● Effective September 27, 2022, Transcat acquired substantially all of the assets of e2b, an Ohio based provider of calibration services. ● Effective May 31, 2022, Transcat acquired substantially all of the assets of Alliance, an Ohio based provider of calibration services.
Through our vendor relationships we have access to more than 140,000 products, which we market to our existing and prospective customers both with and without value-added service options that are unique to Transcat.
Through our vendor relationships we have access to more th an 150,000 products, wh ich we market to our existing and prospective customers both with and without value-added service options that are unique to Transcat.
This NEXA suite of services, combined with the existing Transcat service offerings, provides a very comprehensive and robust value proposition to existing and new customers, which allows us to manage the complexity that is tied to doing business in these highly regulated industries. All of our Calibration Service Centers have obtained ISO/IEC 17025:2017 scopes of accreditation.
This NEXA suite of services, combined with the existing Transcat service offerings, provides a very comprehensive and robust value proposition to existing and new customers, which allows us to manage the complexity that is tied to doing business in these highly regulated industries.
Our dedication to quality is highly valued by businesses that operate in the industries we serve, particularly those in life science and other regulated industries, and our accreditations provide our customers with confidence that they will receive a consistent and uniform service, regardless of which of our service centers completes the service.
Our dedication to quality is highly valued by businesses that operate in the industries we serve, particularly those in life science and other regulated industries, and our accreditations provide our customers with confidence that they will receive a consistent and uniform service, regardless of which of our service centers completes the service. 2 Table of Contents Through our Distribution segment, we sell and rent national and proprietary brand instruments to customers globally.
The Rochester location also serves as our corporate headquarters, houses our customer service, sales and administrative functions, and is a Calibration Service Center. We also have two smaller warehouse facilities. Our Wisconsin warehouse fulfills orders for certain large industrial scales and our Houston, Texas warehouse fulfills orders for used equipment and rental equipment.
The Rochester location also fulfills orders for rental equipment, serves as our corporate headquarters, houses our customer service, sales and administrative functions, and is a Calibration Service Center. We also have three smaller warehouse facilities.
Whether a facility is in preconstruction, operational or decommissioning stage, NEXA’s experienced teams can deliver results in all phases of the asset lifecycle. NEXA’s full suite of services or combination solutions are customizable to meet our customer’s unique needs. Other Services.
NEXA offers six service tracks that support the creation or optimization of our client’s enterprise asset management program. Whether a facility is in preconstruction, operational or decommissioning stage, NEXA’s experienced teams can deliver results in all phases of the asset lifecycle. NEXA’s full suite of services or combination solutions are customizable to meet our customer’s unique needs. Other Services.
Our unique ability to bundle our products with our compliance and calibration services also provides a high level of differentiation from our competitors. As one of the only North American compliance and calibration service providers who also distributes product, our customers can seamlessly replace instruments that cannot be calibrated or are otherwise deemed to be at end of life.
As one of the only North American compliance and calibration service providers who also distributes product, our customers can seamlessly replace instruments that cannot be calibrated or are otherwise deemed to be at end of life.
We plan our product mix and inventory stock to best serve the anticipated needs of our customers, whose individual purchases vary in size. We can usually ship our top selling products to our customers the same day they are ordered. Distribution Vendor Rebates.
In fiscal year 2024 , our top 10 vendors accounted for approximately 58% of our aggregate Distribution sales. We plan our product mix and inventory stock to best serve the anticipated needs of our customers, whose individual purchases vary in size. We can usually ship our top selling products to our customers the same day they are ordered.
Additional industries served include FAA-regulated businesses, including aerospace and defense industrial manufacturing; energy and utilities, including oil and gas and alternative energy; 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.
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. We conduct our business through two operating segments: service (“Service”) and distribution (“Distribution”).
In fiscal year 2023, we shipped approximately 30,000 product orders. Distribution Backlog . Distribution orders include orders for instruments that we routinely stock in our inventory, customized products, and other products ordered less frequently, which we do not stock.
Distribution orders include orders for instruments that we routinely stock in our inventory, customized products, and other products ordered less frequently, which we do not stock.
Our total backlog was $8.1 million and $7.7 million as of March 25, 2023 and March 26, 2022, respectively. 10 Table of Contents CUSTOMER SERVICE AND SUPPORT Key elements of our customer service approach are our business development sales team, outbound sales team, account management team, inbound sales and customer service organization.
Our total backl og was $5.1 million and $8.1 million as of March 30, 2024 and March 25, 2023, respectively. CUSTOMER SERVICE AND SUPPORT Key elements of our customer service approach are our business development sales team, outbound sales team, account management team, inbound sales and customer service organization.
HUMAN CAPITAL MANAGEMENT As of March 25, 2023, we had 1,030 employees, 899 of whom were employed in the United States and 131 employed outside the United States. None of our employees are covered by collective bargaining agreements or work councils.
HUMAN CAPITAL MANAGEMENT As of March 30, 2024, we had 1,104 employees, 976 of whom were employed in the United States and 128 employed outs ide the United States. None of our employees are covered by collective bargaining agreements or work councils.
To maintain our competitive position in this segment, we maintain internationally recognized third-party accredited quality systems, further detailed in the section entitled “Service Quality” below, and provide our customers with access to proprietary asset management software solutions, which offer tools to manage their internal calibration programs and provide them with visibility to their service records. 5 Table of Contents Through our Service segment, we perform recurring periodic calibrations (typically ranging from three-month to twenty-four month intervals) on new and customer-owned instruments.
To maintain our competitive position in this segment, we maintain internationally recognized third-party accredited quality systems, further detailed in the section entitled “Service Quality” below, and provide our customers with access to proprietary asset management software solutions, which offer tools to manage their internal calibration programs and provide them with visibility to their service records.
As with phone numbers, we do not have, and cannot acquire any property rights to an Internet address. The regulation of domain names in the United States and in other countries is also subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names.
The regulation of domain names in the United States and in other countries is also subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names.
We specifically target industries and companies that are regulated by the U.S. FDA, FAA or other regulatory bodies. As a result of the various levels of regulation within our target industries, our customers’ calibration and laboratory instrument service sourcing decisions are generally made based on the provider’s quality systems, accreditation, reliability, trust, customer service and documentation of services.
As a result of the various levels of regulation within our target industries such as life sciences, pharmaceutical manufacturing and medical device manufacturing, our customers’ calibration and laboratory instrument service sourcing decisions are generally made based on the provider’s quality systems, accreditation, reliability, trust, customer service and documentation of services.
Of those export sales in fiscal year 2023, approximately 7% were denominated in U.S. dollars, 69% were denominated in Canadian dollars and 24% were denominated in Euros.
Of those export sales in fiscal year 2024 , approximately 8% were denominated in U.S. dollars, 67% were denominated in Canadian dollars and 25% were deno minated in Euros.
Calibrating before shipping means the customer can place their instruments into service immediately upon receipt, reducing downtime. Other value-added options we offer through our Distribution segment include equipment kitting (which is especially valued in the power generation sector), equipment rentals and used equipment sales. Our commitment to quality goes beyond the services and products we deliver.
Other value-added options we offer through our Distribution segment include equipment kitting (which is especially valued in the power generation sector), equipment rentals and used equipment sales. Our commitment to quality goes beyond the services and products we deliver. Our sales, customer service and support teams provide expert advice, application assistance and technical support to our customers.
We provide our customers with value-added services, including technical support, to ensure our customers receive the right product for their application, and more comprehensive instrument suitability studies to customers in regulated industries who are concerned about the technical uncertainties that their testing or in-process instruments may bring to a process.
Our online presence, including our website and e-newsletters, master catalog, supplemental mailings, and other sales and marketing activities are designed to create interest and maintain a constant presence in front of our customers to ensure we receive the order when they are ready to purchase. 9 Table of Contents We provide our customers with value-added services, including technical support, to ensure our customers receive the right product for their application, and more comprehensive instrument suitability studies to customers in regulated industries who are concerned about the technical uncertainties that their testing or in-process instruments may bring to a process.
Through NEXA we provide technical, consulting, and staffing solutions in the US, Canada, Ireland, Europe, and Asia Pacific to improve asset management programs for our most highly-regulated customers, especially those in the pharmaceutical, biotechnology, and medical device industries. NEXA offers six service tracks that support the creation or optimization of our client’s enterprise asset management program.
Driving Continuous Improvement through Transcat’s Cost Control and Optimization Services, we provide technical, consulting, and staffing solutions in the U.S., Canada, Ireland, Europe, and Asia Pacific to improve asset management programs for our most highly-regulated customers, especially those in the pharmaceutical, biotechnology, and medical device industries.
We serve approximately 30,000 customers through our Service and Distribution segments, with approximately 20% to 25% of those customers transacting with us through both of our business segments.
We serve approximately 30,000 customers through our Service and Distribution segments, with approximately 20% to 25% of those customers transacting with us through both of our business segments. Through the Company’s acquisition strategy, we have been focused on building out our business segments by entering adjacent and complimentary markets.
Most instruments we sell and rent require calibration service to ensure that they maintain the most precise measurements. By having the capability to calibrate these instruments at the time of sale and at regular post-sale intervals, we can give customers a value-added service that most of our competitors are unable to provide.
By having the capability to calibrate these instruments at the time of sale and at regular post-sale intervals, we can give customers a value-added service that most of our competitors are unable to provide. Calibrating before shipping means the customer can place their instruments into service immediately upon receipt, reducing downtime.
FISCAL YEAR We operate 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. Fiscal years 2023 and 2022 each consisted of 52 weeks.
In a 53-week fiscal year, the last quarter is a 14-week period. Fiscal year 2024 consisted of 53 weeks and fiscal year 2023 consisted of 52 weeks.
We trade on the Nasdaq Global Market under the ticker symbol “TRNS”. 2 Table of Contents OUR STRATEGY Our two operating segments are highly complementary in that their offerings are of value to customers within the same industries.
Our website is www.transcat.com. Information available on our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K. We trade on the Nasdaq Global Market under the ticker symbol “TRNS”. OUR STRATEGY Our two operating segments are highly complementary in that their offerings are of value to customers within the same industries.
We perform approximately 800,000 calibrations annually and can address a significant majority of the items requested to be calibrated with our in-house capabilities. For customers’ calibration needs in less common and highly specialized disciplines, we subcontract some calibrations to third-party vendors that have unique or proprietary capabilities.
For customers’ calibration needs in less common and highly specialized disciplines, we subcontract some calibrations to third-party vendors that have unique or proprietary capabilities.
As a result, we might not be able to maintain our domain names or obtain comparable domain names, which could harm our business. 11 Table of Contents SEASONALITY Our business has certain historical seasonal factors.
As a result, we might not be able to maintain our domain names or obtain comparable domain names, which could harm our business. SEASONALITY Our business has certain historical seasonal factors. Historically, our fiscal third and fourth quarters have been stronger than our fiscal first and second quarters due to the operating cycles of our industrial sector customers.
Through our Distribution segment, we sell and rent national and proprietary brand instruments to customers globally. Through our website, in-house sales team and printed and digital marketing materials, we offer access to more than 140,000 test, measurement and control instruments, including products from approximately 550 leading brands.
Through our website, in-house sales team and printed and digital marketing materials, we offer access to more than 150,000 test, measurement and control instruments, including products from approxima tely 450 leading brands. M ost instruments we sell and rent require calibration service to ensure that they maintain the most precise measurements.
Our Distribution segment strategy is to be the premier distributor and rental source of leading test and measurement equipment while also providing cross-selling opportunities for our Service segment.
One focus of our Operational Excellence initiative is to strengthen our acquisition integration process, allowing us to capitalize on acquired sales and cost synergies at a faster pace. 3 Table of Contents Our Distribution segment strategy is to be the premier distributor and rental source of leading test and measurement equipment while also providing cross-selling opportunities for our Service segment.
In addition to cash and equity compensation, we also offer employees benefits including health (medical, dental and vision), life, and disability insurance, paid time off, paid parental leave, tuition benefits, and a 401(k) plan. 12 Table of Contents AVAILABLE INFORMATION We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (“SEC”).
In addition to salary and equity compensation, we also offer employees benefits including health (medical, dental and vision), life, and disability insurance, paid time off, paid parental leave, tuition benefits, and a 401(k) plan with a Company match.
We also have a fleet of mobile calibration laboratories that can provide service at customer sites which may not have the space or utility capabilities we require to service their equipment. 1 Table of Contents Through the Company’s acquisition strategy, we have been focused on building out our Services segment by entering adjacent and complimentary markets.
We also have a fleet of mobile calibration laboratories that can provide service at customer sites which may not have the space or utility capabilities we require to service their equipment. All of our Calibration Service Centers have obtained ISO/IEC 17025:2017 scopes of accreditation.
Our filings with the SEC are available on the SEC’s website at www.sec.gov. We also maintain a website at www.transcat.com.
AVAILABLE INFORMATION We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Our filings with the SEC are available on the SEC’s website at www.sec.gov. We also maintain a website at www.transcat.com.
This has been demonstrated by the acquisitions of Elite Calibration, LLC ("Elite"), Galium Limited (d/b/a Complete Calibrations) ("Complete Calibrations"), e2b Calibration ("e2b"), and Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. d/b/a Alliance Calibration ("Alliance") in fiscal year 2023, and the acquisitions of Tangent Labs, LLC ("Tangent"), Cal OpEx Limited (d/b/a Transcat Ireland) which owns all of the issued and outstanding capital stock of its U.S. based subsidiary, Cal OpEx Inc.
Prior to fiscal year 2023, the Company acquired Cal OpEx Limited (d/b/a Transcat Ireland) which owns all of the issued and outstanding capital stock of its U.S. based subsidiary, Cal OpEx Inc. (d/b/a NEXA EAM), a Delaware corporation (collectively, "NEXA").
This differentiation and diversification strategy has been deliberately instituted in recent years as a means to mitigate the effect of price-driven competition and to lessen the impact that any particular industry or market will have on the overall performance of this segment. 3 Table of Contents As part of our growth strategy, we completed four acquisitions during our fiscal year 2023 and three acquisitions during our fiscal year 2022: ● Effective February 2, 2023, Transcat acquired substantially all of the assets of Elite, a California based provider of pipette calibration services. ● Effective September 28, 2022, Transcat purchased all of the outstanding capital stock of Complete Calibrations, an Irish company.
This differentiation and diversification strategy has been deliberately instituted in recent years as a means to mitigate the effect of price-driven competition and to lessen the impact that any particular industry or market will have on the overall performance of this segment.
CalTrak® and C3® are utilized by our customers in an integrated manner, providing a competitive barrier as customers realize synergies and efficiencies as a result of this integration. Competition for laboratory instrument services is composed of both small local and regional service providers and large multi-national OEMs.
CalTrak® and C3® are utilized by our customers in an integrated manner, providing a competitive barrier as customers realize synergies and efficiencies as a result of this integration. 8 Table of Contents Service Quality. The accreditation process is the only system currently in existence that validates measurement competence.
Patent & Trademark Office. Our CalTrak® trademark is also registered in Canada for one class with the Canada Intellectual Property Office and in Puerto Rico. Our trademark registrations must be renewed at various times, and we intend to renew our trademarks, as necessary, for the foreseeable future. In addition, we own www.transcat.com, www.transcat.ca and pipettes.com among other Internet domain names.
Our trademark registrations must be renewed at various times, and we intend to renew our trademarks, as necessary, for the foreseeable future. We have International trademark registrations for TRANSCAT TRUST IN EVERY MEASURE, CALIBRATED BY TRANSCAT, and TRANSCAT BIOMEDICAL, with pending extensions of protection to Canada and the European Union.
Historically, our fiscal third and fourth quarters have been stronger than our fiscal first and second quarters due to the operating cycles of our industrial sector customers. Our Distribution segment has historically been strongest in our third fiscal quarter while Service has historically been strongest in our fourth fiscal quarter.
Our Distribution segment has historically been strongest in our third fiscal quarter while Service has historically been strongest in our fourth fiscal quarter. FISCAL YEAR We operate 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.
Removed
(d/b/a NEXA EAM), a Delaware corporation (collectively, "NEXA"), and Upstate Metrology Inc. ("Upstate Metrology") in our fiscal year ended March 26, 2022 ("fiscal year 2022").
Added
This has been demonstrated by the acquisitions of Axiom Test Equipment, Inc. (“Axiom”), SteriQual, Inc. (“SteriQual”) and TIC-MS, Inc.
Removed
Our website is www.transcat.com. Information available on our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K.
Added
("TIC-MS") in the fiscal year 2024, and Elite Calibration, LLC ("Elite"), Galium Limited (d/b/a Complete Calibrations) ("Complete Calibrations"), e2b Calibration ("e2b"), and Charlton Jeffmont Inc., Raitz Inc. and Toolroom Calibration Inc. d/b/a Alliance Calibration ("Alliance") in our fiscal year ended March 25, 2023 (“fiscal year 2023 ”).
Removed
The majority of our acquisition opportunities have been in the $500 thousand to $10 million annual revenue range, and we are disciplined in our approach to selecting target companies. One focus of our Operational Excellence initiative is to strengthen our acquisition integration process, allowing us to capitalize on acquired sales and cost synergies at a faster pace.
Added
We are disciplined in our approach to selecting target companies.

… 19 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

53 edited+21 added−14 removed64 unchanged
Biggest changeChanges in U.S. and foreign governments’ trade policies have resulted in, and may continue to result in, tariffs on imports into and exports from the U.S. Tariffs on certain products can increase our costs of doing business. If we are unable to recover these costs, our profit margins may be negatively impacted.
Biggest changeTariffs on certain products can increase our costs of doing business. If we are unable to recover these costs, our profit margins may be negatively impacted. Diminished trade relations, conflicts between the United States and other countries, and any escalation of tariffs could have a material adverse effect on our financial performance and results of operations.
Our future business acquisition efforts may not be successful, which may limit our growth or adversely affect our results of operations, and financing of any future acquisitions could result in shareholder dilution and/or increase our leverage. Business acquisitions are an important part of our growth strategy.
Our future business acquisition efforts may not be successful, which may limit our growth or adversely affect our results of operations, and financing future acquisitions could result in shareholder dilution and/or increase our leverage. Business acquisitions are an important part of our growth strategy.
Any such interruptions to our management information systems could disrupt our business and could result in decreased revenues, increased overhead costs, excess inventory and product shortages, causing our business and results of operations to suffer. In addition, our management information systems are vulnerable to security breaches.
Any such interruptions to our management information systems could disrupt our business and could result in decreased revenues, increased overhead costs, excess inventory or product shortages, causing our business and results of operations to suffer. In addition, our management information systems are vulnerable to security breaches.
We may subsequently experience unforeseen issues with the businesses we acquire, which may adversely affect the anticipated returns of the business or value of the intangible assets and trigger an evaluation of the recoverability of the recorded goodwill and intangible assets for such business.
We may subsequently experience unforeseen issues with the businesses we acquire, which may adversely affect the anticipated returns of the business or value of the intangible assets and trigger an evaluation of the recoverability of the recorded goodwill and intangible assets for the business.
The following factors, among others, may have a significant effect on the market price of our common stock: ● Developments in our relationships with current or future manufacturers of products we distribute; ● Announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; ● Litigation or governmental proceedings or announcements involving us or our industry; ● Economic and other external factors, such as inflation, recession, disasters or other national or global crises; ● Public health issues including pandemics and epidemics, such as the COVID-19 pandemic; ● Sales of our common stock or other securities in the open market; ● Repurchases of our common stock on the open market or in privately-negotiated transactions; ● Period-to-period fluctuations in our operating results; and ● Our ability to satisfy our debt obligations.
The following factors, among others, may have a significant effect on the market price of our common stock: ● Developments in our relationships with current or future manufacturers of products we distribute; ● Announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; ● Litigation or governmental proceedings or announcements involving us or our industry; ● Economic and other external factors, such as inflation, changes in interest rates, a recession, disasters or other national or global crises; ● Public health issues including pandemics and epidemics, such as the COVID-19 pandemic; ● Sales of our common stock or other securities in the open market; ● Repurchases of our common stock on the open market or in privately-negotiated transactions; ● Period-to-period fluctuations in our operating results; and ● Our ability to satisfy our debt obligations.
Additionally, if the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed.
Additionally, if the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess our internal controls adequately could be delayed.
Our failure to keep pace with changes in technology, industry standards and customer preferences in the markets we serve could diminish our ability to retain and attract customers and retain our competitive position, which could adversely impact our business and results of operations. 17 Table of Contents We rely on our CalTrak ®, Application Plus (our enterprise resource planning system) and other management information systems for inventory management, distribution, workflow, accounting and other functions.
Our failure to keep pace with changes in technology, industry standards and customer preferences in the markets we serve could diminish our ability to retain and attract customers and retain our competitive position, which could adversely impact our business and results of operations. 18 Table of Contents We rely on our CalTrak ®, Application Plus (our enterprise resource planning system ( “ ERP ” )) and other management information systems for inventory management, distribution, workflow, accounting and other functions.
The prices we charge for our services, including the NEXA business, are affected by a number of factors, including: ● Clients’ perception of our ability to add value through our services; ● The market demand for the services we provide; ● Our ability to develop new services and the introduction of new services by competitors; ● The pricing policies of our competitors; ● The extent to which our clients develop in-house or other capabilities to perform the services that they might otherwise purchase from us; and ● General financial and economic conditions.
The prices we charge for our services, including the NEXA business, are affected by a number of factors, including: ● Customers’ perception of our ability to add value through our services; ● The market demand for the services we provide; ● Our ability to develop new services and the introduction of new services by competitors; ● The pricing policies of our competitors; ● The extent to which our customers develop in-house or other capabilities to perform the services that they might otherwise purchase from us; and ● General financial and economic conditions.
Some manufacturers of the products we sell may also offer calibration and compliance services for their products. Within our Distribution segment, we compete with numerous companies, including several major manufacturers and distributors. Most of our products are available from several sources and our customers tend to have relationships with several distributors.
Some manufacturers of the products we sell may also offer calibration and compliance services for their products. Within our Distribution segment, we compete with numerous companies, including several major manufacturers and distributors to make product sales. Most of the products we sell are available from several sources and our customers tend to have relationships with several distributors.
Future hurricanes could result in damage to certain of our facilities and the equipment located at such facilities, or equipment on rent with customers in those areas. Even if our properties suffer no direct damage from such events, the operations of our customers could be disrupted, and our supply chain impacted.
Future hurricanes or other extreme weather events could result in damage to certain of our facilities and the equipment located at such facilities, or equipment on rent with customers in those areas. Even if our properties suffer no direct damage from such events, the operations of our customers could be disrupted, and our supply chain impacted.
Any alleged or actual violations of these or other relevant regulations may subject us to government scrutiny, severe criminal or civil sanctions and other liabilities and could negatively affect our business, reputation, operating results and financial condition. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Any alleged or actual violations of these or other relevant regulations may subject us to government scrutiny, severe criminal or civil sanctions and other liabilities and could negatively affect our business, reputation, operating results and financial condition. 22 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Our utilization rates are affected by a number of factors, including: ● The number, scope and timing of ongoing client engagements; ● The timing of the commencement, completion and termination of engagements, which in many cases is unpredictable; ● Our ability to continually secure new business engagements; ● Our ability to transition technical service providers promptly from completed projects to new assignments, and to engage newly-hired technical service providers quickly in revenue-generating activities; ● Our ability to forecast demand for our services and thereby maintain appropriate headcount in each of our geographies and workforces; ● Unanticipated changes in the scope of client engagements; ● Our need to devote time and resources to sales, training, professional development and other non-billable activities; ● Our ability to retain key colleagues and consulting professionals; ● Conditions affecting the life sciences industry; and ● General financial and economic conditions.
Our utilization rates are affected by a number of factors, including: ● The number, scope and timing of ongoing customer engagements; ● The timing of the commencement, completion and termination of engagements, which in many cases is unpredictable; ● Our ability to continually secure new business engagements; ● Our ability to transition technical service providers promptly from completed projects to new assignments, and to engage newly-hired technical service providers quickly in revenue-generating activities; ● Our ability to forecast demand for our services and thereby maintain appropriate headcount in each of our geographies and workforces; ● Unanticipated changes in the scope of customer engagements; ● Our need to devote time and resources to sales, training, professional development and other non-billable activities; ● Our ability to retain key colleagues and consulting professionals; ● Conditions affecting the industries in which our customers operate; and ● General financial and economic conditions.
The market price of our common stock could decline if a large number of our shares are sold in the public market by our existing shareholders or as a result of the perception that such sales could occur.
If significant existing shareholders sell large numbers of shares of our common stock, our stock price could decline. The market price of our common stock could decline if a large number of our shares are sold in the public market by our existing shareholders or as a result of the perception that such sales could occur.
If we are unable to effectively compete with our current and future competitors, our ability to sell products could be harmed and could result in a negative impact on our Distribution segment. Any erosion of our competitive position could have a material adverse effect on our business, results of operations, and financial condition.
If we are unable to effectively compete with our current and future competitors, our ability to sell products could be harmed and negatively impact our Distribution segment. Any erosion of our competitive position could have a material adverse effect on our business, results of operations, and financial condition.
Risk Factors." The industries in which we compete are highly competitive, and we may not be able to compete successfully.
The industries in which we compete are highly competitive, and we may not be able to compete successfully.
Our enterprise resource planning system ( “ ERP ” ) is aging and may not be capable of integrating management information systems that we use or are used by companies we acquire, and we may experience issues from any implementation of a new ERP or be required to operate some management information systems separately from our ERP.
Our ERP is aging and may not be capable of integrating management information systems that we use or are used by companies we acquire, and we may experience issues from any implementation of a new ERP or be required to operate some management information systems separately from our ERP.
Macroeconomic and Business Risks Adverse changes in economic and market conditions, including rising inflation, or uncertainty about future market conditions, may result in increased costs of operations and negatively impact the credit and securities markets generally, which could have a material adverse effect on our results of operations and the market price of our common stock.
Macroeconomic and Business Risks Adverse changes in economic and market conditions, including an ongoing inflationary environment, or uncertainty about future market conditions, may result in increased costs of operations and negatively impact the credit and securities markets generally, which could have a material adverse effect on our results of operations and the market price of our common stock.
During fiscal year 2023, the value of the U.S. dollar relative to one Canadian dollar and to one Euro ranged from 1.25 to 1.39 and from 0.90 to 1.04, respectively. We continually utilize short-term foreign exchange forward contracts to reduce the risk that future earnings denominated in Canadian dollars would be adversely affected by changes in currency exchange rates.
During fiscal year 2024, the value of the U.S. dollar relative to one Canadian dollar and to one Euro ranged from 1.31 to 1.39 and from 0.89 to 0.96, respectively. We continually utilize short-term foreign exchange forward contracts to reduce the risk that future earnings denominated in Canadian dollars would be adversely affected by changes in currency exchange rates.
The stock market, from time to time, has experienced significant price and volume fluctuations that are both related and unrelated to the operating performance of companies. Our stock may be affected by market volatility and by our own performance.
The stock market experiences significant price and volume fluctuations that are both related and unrelated to the operating performance of companies. Our stock may be affected by market volatility and by our own performance.
We are subject to risks arising from adverse changes in general economic market conditions, including supply chain delays or interruptions, labor shortages, wage pressures, rising inflation, volatility in the banking industry, geopolitical events, global health crises, including epidemics and pandemics such as the COVID-19 pandemic, or interruptions and other force majeure events.
We are subject to risks arising from adverse changes in general economic market conditions, including supply chain delays or interruptions, labor shortages, wage pressures, the ongoing inflationary environment, changes in interest rates, volatility in the banking industry, geopolitical events, political instability, global health crises, including epidemics and pandemics, such as the COVID-19 pandemic, or interruptions and other force majeure events.
Successful integration of acquisitions involves many challenges, including: ● The difficulty of integrating acquired operations and personnel with our existing operations; ● Implementation or remediation of controls, procedures, and policies at the acquired company; ● Integration of the acquired company’s accounting and other administrative systems; ● In the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries; ● Currency and regulatory risks associated with operations in foreign countries; ● The difficulty of developing and marketing new products and services; ● The diversion of our management’s attention as a result of evaluating, negotiating and integrating acquisitions; ● Our exposure to unforeseen liabilities of acquired companies; and ● The loss of key employees of an acquired operation .
Successfully integrating acquisitions involves many challenges, including: ● The difficulty of integrating acquired operations and personnel with our existing operations; ● Implementing or remediating controls, procedures, and policies at the acquired company; ● Integrating of the acquired company’s accounting and other administrative systems; ● In the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries; ● Currency and regulatory risks associated with operations in foreign countries; ● The difficulty of developing and marketing new products and services; ● Diverting management’s attention while evaluating, negotiating and integrating acquisitions; ● Our exposure to unforeseen liabilities of acquired companies; and ● The potential loss of key employees of an acquired operation.
The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) made broad and complex changes to the U.S. tax code, including, but not limited to reducing the Federal corporate income tax rate from 35% to 21%. Any additional modifications to key aspects of the tax code could materially affect our tax obligations and negatively impact our effective tax rate.
The Tax Cuts and Jobs Act of 2017 made broad and complex changes to the U.S. tax code, such as reducing the Federal corporate income tax rate from 35% to 21%. Any additional modifications to key aspects of the tax code could materially affect our tax obligations and negatively impact our effective tax rate.
In addition, economic conditions could impact and reduce the number of customers who purchase our products or services as credit becomes more expensive or unavailable. Although interest rates have increased and are expected to increase further, inflation may continue.
In addition, economic conditions could impact and reduce the number of customers who purchase our products or services as credit becomes more expensive or unavailable. Although interest rates have increased and may continue to increase or remain relatively high for a sustained period, inflation may continue.
We currently transact a portion of our business in foreign currencies, namely the Canadian dollar and the Euro. During fiscal years 2023 and 2022, approximately 10% of our total revenues were denominated in Canadian dollars and Euros.
We currently transact a portion of our business in foreign currencies, namely the Canadian dollar and the Euro. During fiscal years 2024 and 2023, approximat ely 10% of our tot al revenues were denominated in Canadian dollars and Euros.
Inflation has accelerated in the U.S. and globally due in part to global supply chain issues, a rise in energy prices, and strong consumer demand. An inflationary environment can increase our cost of labor as well as our energy and other operating costs which may have a material adverse impact on our financial results.
Inflation has persisted in the United States and globally due in part to geopolitical events, a rise in energy prices, and strong consumer demand. An inflationary environment can increase our cost of labor as well as our energy and other operating costs which may have a material adverse impact on our financial results.
Additionally, our vendors who decide to sell directly to customers, may choose to not to sell to us or to provide products to us on less favorable and more costly terms, any of which could have a material and adverse impact on our results of operations.
Additionally, if our vendors sell directly to customers, they may choose not to sell to us or to do so on less favorable and more costly terms, which could have a material and adverse impact on our results of operations.
The loss of, or a substantial decrease in the availability of, products from our suppliers or the loss of key supplier arrangements could adversely impact our financial condition, operating results, and cash flows, as well as our ability to benefit from ongoing supply chain initiatives.
The loss of, or a substantial decrease in the availability of, products from our suppliers or the loss of key supplier arrangements could adversely impact our financial condition, operating results, and cash flows, as well as our ability to benefit from ongoing supply chain initiatives. 19 Table of Contents Our future success may be affected by our current and future indebtedness.
In our Service segment our subsidiary, NEXA, provides all of its services in the technical, consulting and staffing solutions market by providing services to improve asset management programs for customers in the life science, pharmaceutical and other FDA-regulated or industrial manufacturing industries.
In our Service segment our subsidiary, NEXA, provides all of its services in the technical, consulting and staffing solutions market by providing services to improve asset management programs for our customers.
For example, we sell our products and services to customers in several industries that may experience rapid technological changes, new product introductions, and evolving industry standards, including the life science, pharmaceutical and other FDA-regulated or industrial manufacturing industries.
For example, we sell our products and services to customers in several industries that may experience rapid technological changes, new product introductions, and evolving industry standards, including highly regulated industries.
This concentration of our customer base affects our overall risk profile, since a significant portion of our customers would be similarly affected by changes in economic, political, regulatory, and other industry conditions.
We also serve the industrial manufacturing, energy and utilities, chemical manufacturing, aerospace and defense industries. This concentration of our customer base affects our overall risk profile, since a significant portion of our customers would be similarly affected by changes in economic, political, regulatory, and other industry conditions.
Under our credit agreement, as of March 25, 2023, we owed $49.1 million to our secured creditor, a commercial bank, including $6.4 million borrowed under a $15.0 million term loan to fund acquisitions and provide additional working capital. We may borrow additional funds in the future to support our growth and working capital needs.
Under our credit agreement, as of March 30, 2024, we owe d $4.2 mill ion to our secured creditor, a commercial bank, under a $15.0 million term loan to fund acquisitions and provide additional working capital. We may borrow additional funds in the future to support our growth and working capital needs.
We face substantial and increased competition throughout the world, especially in our Distribution segment. The competition is changing, with certain of our vendors engaging directly with customers and web-based distributors continuing to be a presence with increasing their market share. Some of our competitors are much larger than us.
We face substantial and increased competition throughout the world, especially in our Distribution segment. The competition is changing, with certain of our vendors engaging directly with customers and web-based distributors increasing their market share. Some of our competitors are much larger than us. Changes in the competitive landscape pose new challenges that could adversely affect our ability to compete.
In addition, to successfully complete targeted acquisitions, we may issue additional equity securities that could dilute our stockholders’ ownership, or we may incur additional debt, which could increase our leverage and our risk of default under our existing credit facility.
In addition, to successfully complete targeted acquisitions, we may issue additional equity securities that could dilute our shareholders’ ownership, or we may incur additional debt, which would increase our leverage and our risk of default under our existing credit facility. If we fail to successfully acquire businesses, our growth and results of operations could be materially and adversely affected.
Our Service segment has a concentration of customers in the life science and other FDA-regulated and industrial manufacturing industries. A number of our Service segment customers operate in the life science, pharmaceutical and other FDA-regulated or industrial manufacturing industries.
Our Service segment has a concentration of customers in the life science and other FDA-regulated businesses, as well as the industrial manufacturing, aerospace, defense, energy and utilities industries. A number of our Service segment customers operate life science, pharmaceutical, biotechnology, medical device and other FDA-regulated businesses.
Future determinations of significant write-offs of goodwill or intangible assets because of an impairment test or any accelerated amortization of other intangible assets could have a material negative impact on our results of operations and financial condition. 14 Table of Contents Tariffs imposed by the U.S. and other countries, as well as changing trade relations, could have a material adverse effect on our business and results of operations.
Future determinations of significant write-offs of goodwill or intangible assets because of an impairment test or any accelerated amortization of other intangible assets could have a material negative impact on our results of operations and financial condition.
Such extraordinary events and their aftermaths can cause investor fear and panic, which could further materially and adversely affect our operations, the economies in which we operate, and the financial markets generally in ways that cannot necessarily be predicted. 13 Table of Contents The effects of the COVID-19 pandemic, or any future public health crisis, and mitigation measures taken in response, could have a material and adverse impact on our business and results of operations and may amplify many of the other risk factors disclosed elsewhere in this "Item 1A.
Such extraordinary events, like the COVID-19 pandemic, and their aftermath can cause investor fear and panic, which could further materially and adversely affect our operations, the economies in which we operate, and the financial markets generally in ways that cannot be predicted, but may amplify many of the other risk factors disclosed elsewhere in this "Item 1A.
Industry consolidation among distributors, the unavailability of products, whether due to our inability to gain access to products or interruptions in supply from manufacturers, or the emergence of new competitors could also increase competition and adversely affect our business or results of operations.
Industry consolidation among distributors, the unavailability of products, whether due to our inability to gain access to products or interruptions in supply from manufacturers, or the emergence of new competitors could also increase competition and adversely affect our business or results of operations. 14 Table of Contents In each of the industries in which we compete, some of our competitors have greater financial and other resources than we do, which could allow them to compete more successfully.
Any impairment of goodwill or intangible assets could negatively impact our results of operations. Our goodwill and intangible assets are subject to an impairment test on an annual basis and are also tested whenever events and circumstances indicate that goodwill and/or intangible assets may be impaired.
Our goodwill and intangible assets are subject to an impairment test on an annual basis and are also tested whenever events and circumstances indicate that goodwill and/or intangible assets may be impaired. Any excess goodwill and/or indefinite-lived intangible assets value resulting from the impairment test must be written off in the period of determination.
The loss of services of any member of our senior management team or key employees, and the inability to attract and retain other qualified personnel, especially skilled service technicians, could affect our ability to achieve our stated corporate objectives and could adversely impact our business and results of operations. We expect that our quarterly results of operations will fluctuate.
The loss of services of any member of our senior management team or key employees, and the inability to attract and retain other qualified personnel, especially skilled service technicians, could affect our ability to achieve our stated corporate objectives and could adversely impact our business and results of operations. 17 Table of Contents The profitability of our subsidiary, NEXA, depends to a large extent on our ability to achieve or maintain adequate utilization and pricing rates for our technical service providers.
In addition, although we believe we are in full compliance with all such existing rules, regulations and standards, should we be or become unable to comply with any of such rules, regulations and standards, as they presently exist or as they may exist in the future, our results of operations could be adversely affected and the market price of our common stock could decline. 20 Table of Contents Our international operations expose us to legal and regulatory risks, which could have a material effect on our business.
Should we be or become unable to comply with any of such rules, regulations and standards, as they presently exist or as they may exist in the future, our results of operations could be adversely affected and the market price of our common stock could decline.
In addition, from time to time, we may acquire or make an investment in a business that will require us to record goodwill based on the purchase price and the value of the acquired tangible and intangible assets.
Intangible assets (other than goodwill and indefinite-lived intangible assets) are amortized over the useful life of such assets. In addition, we may record goodwill when we acquire or make an investment in a business based on the purchase price and the value of the acquired tangible and intangible assets.
Changes in the competitive landscape pose new challenges that could adversely affect our ability to compete. Entry or expansion of other vendors into this market may establish competitors that have larger customer bases and substantially greater financial and other resources with which to pursue marketing and distribution of products.
Entry or expansion of other vendors into this market may establish competitors that have larger customer bases and substantially greater financial and other resources with which to pursue marketing and distribution of products. Their current customer base and relationships, as well as their relationships and ability to negotiate with manufacturers, may provide them with a competitive advantage.
Further, increased interest rates could have a negative effect on the securities markets generally which may, in turn, have a material adverse effect on the market price of our common stock. Further, uncertainty about future economic conditions could negatively affect our current and prospective customers causing them to delay purchase of services or test and measurement instruments.
Further, uncertainty resulting from interest rate policy or changes to interest rates in the future could have a negative effect on the securities markets generally which may, in turn, have a material adverse effect on the market price of our common stock.
Due to the relatively low trading volume of our common stock, the sale of a large number of shares of our common stock may significantly depress the price of our common stock. Regulatory Risks Tax rates applicable to us may change. Tax legislation initiatives could adversely affect our net earnings and tax liabilities.
Due to the relatively low trading volume of our common stock, the sale of a large number of shares of our common stock may significantly depress the price of our common stock.
Our international operations are governed by various U.S. laws and regulations, including the Foreign Corrupt Practices Act (“FCPA”), and other foreign anti-bribery laws. The FCPA generally prohibits companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business.
The FCPA generally prohibits companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business.
If we fail to successfully acquire businesses, our growth and results of operations could be materially and adversely affected. 15 Table of Contents Operational Risks Cybersecurity incidents could adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, results of operations or financial condition.
We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our financial results. 16 Table of Contents Operational Risks Cybersecurity incidents could adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, results of operations or financial condition.
If our low trading volume continues in the future, holders of our shares may have difficulty selling shares of our common stock in the manner or at a price that they desire. If significant existing shareholders sell large numbers of shares of our common stock, our stock price could decline.
Although our shares of common stock are listed on the Nasdaq Global Market, we have historically experienced a relatively low trading volume of approximately 43,000 shares a day. If our low trading volume continues in the future, holders of our shares may have difficulty selling shares of our common stock in the manner or at a price that they desire.
Fluctuations in industrial demand for products we sell and services we provide could cause our revenues and operating results to fluctuate.
Fluctuations in industrial demand for products we sell and services we provide could cause our revenues and operating results to fluctuate. If our operating results in some quarters fail to meet the expectations of stock market analysts and investors, our stock price may decline. Our stock price may be volatile.
In addition, climate change could lead to an increase in intensity or occurrence of hurricanes or other adverse weather events, including severe winter storms.
In addition, climate change could lead to an increase in intensity or occurrence of hurricanes or other adverse weather events, including severe winter storms. Future occurrences of these events, as well as regional or national catastrophes or natural disasters, and their effects may adversely impact our business or results of operations.
Any adverse widespread public health developments in locations where we conduct business, as well as any governmental restrictive measures implemented to control such outbreaks and consumer responses to such outbreaks, could have a material adverse impact on our business and results of operations. These impacts, which are highly uncertain and cannot be accurately predicted, could be significant and long term.
Any adverse widespread public health crises in locations where we conduct business, as well as any measures implemented to control these events, could have a material adverse impact on our business and results of operations. Further, any actions taken to mitigate any health crises could lead to an economic recession.
An abrupt or unforeseen change in conditions in these industries could adversely affect customer demand for our services, which could have a material adverse effect on our financial results. We face significant competition in our Distribution segment, including from suppliers and web-based distributors. We may not be able to compete successfully.
An abrupt or unforeseen change in conditions in these industries could adversely affect customer demand for our services, which could have a material adverse effect on our financial results. Any impairment of goodwill or intangible assets could negatively impact our results of operations.
Poor economic conditions could materially and adversely impact our business, financial condition, operating results and cash flows. The impact of widespread public health crises, pandemics or other epidemics is difficult to predict and could materially and adversely affect our business and results of operations .
If our brand is negatively impacted, we may lose existing customer relationships, which would reduce our sales and negatively impact our results of operations and financial condition, and we may be unable to attract and retain key personnel, which would negatively impact our prospects. 15 Table of Contents The impact of widespread public health crises, pandemics or other epidemics is difficult to predict and could materially and adversely affect our business and results of operations .
Diminished trade relations between the U.S. and other countries, as well as any escalation of tariffs, could have a material adverse effect on our financial performance and results of operations. Risks Related to Acquisitions We may not successfully integrate business acquisitions. We completed four acquisitions during fiscal year 2023 and three acquisitions during fiscal year 2022.
Tariffs imposed by the United States and other countries, as well as changing trade relations, regional and international conflicts, and political conditions could have a material adverse effect on our business and results of operations.
Removed
Further, any actions taken to mitigate any health crises could lead to an economic recession.
Added
Further, uncertainty about future economic conditions could negatively affect our current and prospective customers causing them to delay purchase of services or test and measurement instruments. Poor economic conditions could materially and adversely impact our business, financial condition, operating results and cash flows.
Removed
For example, the COVID-19 pandemic and the efforts to control it caused significantly increased economic uncertainty, inflationary pressure in the U.S. and globally, supply chain disruptions, volatility in the capital markets, a decline in consumer confidence, changes in consumer behavior, significant economic deterioration, and an increasingly competitive labor market.
Added
In the future, we may be unable to compete successfully and competitive pressures may reduce our sales. We face significant competition in our Distribution segment, including from suppliers and web-based distributors, to make product sales and to source products. We may not be able to compete successfully.
Removed
The ultimate impact of the COVID-19 pandemic or any other widespread public health crisis on our business and results of operations will depend on, among other things, the severity and length of the health crisis, the duration, effectiveness and extent of the mitigation measures and actions designed to contain the outbreak, the emergence, contagiousness and threat of new and different strains of the disease, the availability and efficacy of vaccines and effective treatments, public acceptance of vaccines and treatments for the disease, if any, changes in customer and consumer behavior as a result of the crisis, as well as the resulting economic conditions and how quickly and to what extent normal economic and operating conditions resume, all of which are highly uncertain.
Added
Changes in United States and foreign governments’ trade policies, as well as volatility caused by regional and international conflicts, such as the conflict between Russia and Ukraine, Israel and Hamas, and the political climate in the United States, China, and Taiwan, have resulted in, and may continue to result in, tariffs on imports into and exports from the United States.
Removed
In each of the industries in which we compete, some of our competitors have greater financial and other resources than we do, which could allow them to compete more successfully. In the future, we may be unable to compete successfully and competitive pressures may reduce our sales.
Added
Negative publicity and other reputational harm could impact the value of our brand and materially and adversely affect our business and results of operations.
Removed
Their current customer base and relationships, as well as their relationships and ability to negotiate with manufacturers, may also provide them with a competitive advantage.
Added
Negative publicity and other reputational harm relating to events or activities attributed to us, our policies, our employees or others associated with us, whether or not justified, may tarnish our reputation and reduce the value of our brand.
Removed
Any excess goodwill and/or indefinite-lived intangible assets value resulting from the impairment test must be written-off in the period of determination. Intangible assets (other than goodwill and indefinite-lived intangible assets) are amortized over the useful life of such assets.
Added
Additionally, disclosure of our corporate governance practices, such as our environmental, social and governance initiatives, may draw negative publicity from our shareholders and other stakeholders.
Removed
If our operating results in some quarters fail to meet the expectations of stock market analysts and investors, our stock price may decline. 16 Table of Contents The profitability of our subsidiary, NEXA, depends to a large extent on our ability to achieve or maintain adequate utilization and pricing rates for our technical service providers.
Added
Risk Factors." Risks Related to Acquisitions We may not successfully integrate business acquisitions. We completed three acquisitions during fiscal year 2024 and four acquisitions during fiscal year 2023. We have a robust and diverse acquisition pipeline and may complete additional acquisitions in the future.
Removed
For example, in fiscal year 2023, our supply chains have been and may continue to be negatively impacted by the COVID-19 pandemic and general economic factors such as rising inflation. When shortages occur, our suppliers often allocate products among distributors.
Added
The indemnification provisions of acquisition agreements by which we have acquired companies or may, in the future, acquire companies may not fully protect us and as a result we may face unexpected liabilities.
Removed
Due to current global supply chain disruptions, we may experience increased difficulties in obtaining products at stable pricing levels. As a result, we may need to restructure or change some of our product lines in the future.
Added
Certain of the acquisition agreements by which we have acquired companies or may, in the future, acquire companies generally require the former owners to indemnify us against certain liabilities related to the operation of the company before we acquired it.
Removed
We cannot provide any assurance that particular products, or product lines, will be available to us, or available in quantities sufficient to meet customer demand.
Added
In most of these agreements, however, the liability of the former owners is limited, and certain former owners may be unable to meet their indemnification responsibilities.
Removed
If we are unable to enter into and maintain satisfactory distribution arrangements with leading manufacturers, if we are unable to maintain an adequate supply of products, or if manufacturers do not regularly invest in, introduce to us, and/or make new products available to us for distribution, our Distribution segment sales could suffer materially.
Added
When shortages occur, our suppliers often allocate products among distributors.
Removed
This is of particular significance to our Distribution segment business because the products we sell are often only available from one source. Any limits to product access could materially and adversely affect our Distribution segment business. 18 Table of Contents Our future success may be affected by our current and future indebtedness.
Added
We may be involved in legal proceedings from time to time arising from the operation of our business and, as such, we could incur substantial judgments, fines, legal fees, or other costs. From time to time, we may be the subject of complaints or litigation from customers, employees, vendors, or other third parties for various actions.
Removed
Future occurrences of these events, as well as regional or national catastrophes or natural disasters, and their effects may adversely impact our business or results of operations. 19 Table of Contents Risks Related to our Stock Our stock price may be volatile.
Added
We also may be involved in litigation involving claims related to breach of contract, tortious conduct, employment and labor law matters, and others. The damages sought against us in these matters could be substantial.
Removed
The relatively low trading volume of our common stock may limit your ability to sell your shares. Although our shares of common stock are listed on the Nasdaq Global Market, we have historically experienced a relatively low trading volume of approximately 44,700 shares a day.

… 8 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed0 unchanged
Biggest changePROPERTIES The following table presents the leased and owned properties that are material to our business as of March 25, 2023: Approximate Property Location Square Footage Corporate Headquarters, Calibration Service Center and Distribution Center Rochester, NY 48,500 Calibration Service Center and Headquarters for Canadian Operations Montreal, QC 27,500 Calibration Service Center, Rental and Used Equipment Distribution Center Houston, TX 22,300 Calibration Service Center Denver, CO 19,400 Calibration Service Center Los Angeles, CA 18,200 Calibration Service Center Toronto, ON 16,900 Calibration Service Center Philadelphia, PA 14,000 Calibration Service Center Cleveland, OH 13,800 Calibration Service Center Milford, MA 12,100 Calibration Service Center Dayton, OH 12,000 Calibration Service Center Boston, MA 8,900 Calibration Service Center Indianapolis, IN 7,600 Calibration Service Center Palm Beach, FL 7,600 Calibration Service Center Portland, OR 7,000 Calibration Service Center Cincinnati, OH 5,900 Calibration Service Center St.
Biggest changePROPERTIES The following table presents the leased and owned properties that are material to our business as of March 30, 2024: Approximate Property Location Square Footage Corporate Headquarters, Calibration Service Center and Distribution Center Rochester, NY 48,500 Calibration Service Center and Headquarters for Canadian Operations Montreal, QC 27,500 Calibration Service Center, Rental and Used Equipment Distribution Center Houston, TX 22,300 Calibration Service Center Denver, CO 19,400 Calibration Service Center Los Angeles, CA 18,200 Calibration Service Center Toronto, ON 16,900 Calibration Service Center Philadelphia, PA 14,000 Calibration Service Center Cleveland, OH 13,800 Calibration Service Center Milford, MA 12,100 Calibration Service Center Dayton, OH 12,000 Rental and Used Equipment Distribution Center Vista, CA 9,900 Calibration Service Center Boston, MA 8,900 Calibration Service Center Indianapolis, IN 7,600 Calibration Service Center Palm Beach, FL 7,600 Calibration Service Center Somerset, PA 7,200 Calibration Service Center Portland, OR 7,000 Calibration Service Center Cincinnati, OH 5,900 Calibration Service Center St.
Louis, MO 5,600 Calibration Service Center San Diego, CA 5,500 Calibration Service Center Charlotte, NC 4,900 Calibration Service Center Chesapeake, VA 4,600 Calibration Service Center Phoenix, AZ 4,200 Calibration Service Center Ottawa, ON 4,000 Calibration Service Center Decatur, AL 1,700 Calibration Service Center San Juan, PR 1,600 Calibration Service Center Cork, Ireland 1,600 Mobile Service Unit and Offices Pittsburgh, PA 6,300 United Scale & Engineering: Calibration Service Center and Warehouse New Berlin, WI 16,000 Calibration Service Center and Warehouse Madison, WI 6,000 Calibration Service Center Green Bay, WI 3,300 Spectrum Technologies Inc.
Louis, MO 5,600 Calibration Service Center San Diego, CA 5,500 Calibration Service Center Chesterfield, MO 5,500 Calibration Service Center Charlotte, NC 4,900 Calibration Service Center Chesapeake, VA 4,600 Calibration Service Center Phoenix, AZ 4,200 Calibration Service Center Ottawa, ON 4,000 Calibration Service Center Decatur, AL 1,700 Calibration Service Center San Juan, PR 1,600 Calibration Service Center Cork, Ireland 1,600 Mobile Service Unit and Offices Pittsburgh, PA 6,300 United Scale & Engineering: Calibration Service Center and Warehouse New Berlin, WI 16,000 Calibration Service Center and Warehouse Madison, WI 6,000 Calibration Service Center Green Bay, WI 3,300 Spectrum Technologies Inc.
(“STI”): Calibration Service Center and Warehouse Paxinos, PA 14,500 We believe that our properties are in good condition, are well maintained and are generally suitable and adequate to carry on our business in its current form. 21 Table of Contents
(“STI”): Calibration Service Center and Warehouse Paxinos, PA 14,500 We believe that our properties are in good condition, are well maintained and are generally suitable and adequate to carry on our business in its current form. 25 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+1 added−0 removed0 unchanged
Biggest changeDIVIDENDS Our credit agreement, as amended, limits our ability to pay cash dividends to $3.0 million in any fiscal year. We have not declared any cash dividends since our inception and have no current plans to pay any dividends in the foreseeable future. ITEM 6. [RESERVED]
Biggest changeWe have not declared any cash dividends since our inception and have no current plans to pay any dividends in the foreseeable future. ITEM 6. [RESERVED]
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the Nasdaq Global Market under the symbol “TRNS”. As of June 1, 2023, we had approximately 500 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the Nasdaq Global Market under the symbol “TRNS”. As of May 22, 2024, we had approximat ely 500 sh areholders of record.
Added
DIVIDENDS Our credit agreement limits our ability to pay cash dividends to certain amounts in any single fiscal year and over the term of the credit agreement. See Note 3 to the Consolidated Financial Statements included in Item 8 of Part II of this report.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

91 edited+16 added−21 removed55 unchanged
Biggest changeInterest on the revolving credit facility continues to accrue, at our election, at either the variable one-month LIBOR or a fixed rate for a designated period at the LIBOR corresponding to such period (subject to a 1.0% floor during the first quarter of fiscal year 2022 and a 0.25% floor for subsequent periods), in each case, plus a margin.
Biggest changeUnder the Credit Agreement, we may make restricted payments up to $25.0 million in the aggregate over the term of the Credit Agreement and $10.0 million in any single fiscal year to repurchase shares and pay dividends. 36 Table of Contents Effective July 1, 2023, interest on outstanding borrowings under the revolving credit facility accrue, at our election, at either the variable Daily Simple SOFR or a fixed rate for a designated period at the SOFR corresponding to such period (subject to a 0.25% floor), in each case, plus a margin.
The year-over-year change is a result of strategic inventory purchases during fiscal year 2023. ● Accounts Payable: Changes in accounts payable may or may not correlate with changes in inventory balances at any given quarter end due to the timing of vendor payments for inventory, as well as the timing of payments for outsourced Service vendors and capital expenditures.
The year-over-year change is a result of strategic inventory purchases during fiscal year 2024. ● Accounts Payable: Changes in accounts payable may or may not correlate with changes in inventory balances at any given quarter end due to the timing of vendor payments for inventory, as well as the timing of payments for outsourced Service vendors and capital expenditures.
The year-over-year increase in selling, marketing and warehouse expenses is due to increased expenses related to recent acquisitions, especially acquisition related amortization expense, and higher incentive-based employee costs due to higher sales. The increase in general and administrative expenses includes incremental expenses related to acquired companies, increased payroll costs for new employees and continued investments in technology.
The year-over-year increase i n selling, marketing and warehouse expenses is due to increased expenses related to recent acquisitions, especially acquisition related amortization expense, and higher incentive-based employee costs due to higher sales. The increase in general and administrative expenses includes incremental expenses related to acquired companies, increased payroll costs for new employees and continued investments in technology.
However, unexpected changes or deterioration in economic conditions could materially change these expectations. 24 Table of Contents Inventory. Inventory consists of products purchased for resale and is valued at the lower of cost or net realizable value. Costs are determined using the average cost method of inventory valuation.
However, unexpected changes or deterioration in economic conditions could materially change these expectations. 28 Table of Contents Inventory. Inventory consists of products purchased for resale and is valued at the lower of cost or net realizable value. Costs are determined using the average cost method of inventory valuation.
Adjusted EBITDA: In addition to reporting net income, a GAAP measure, we present Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, non-cash stock compensation expense, acquisition related transaction expenses, non-cash loss on sale of building, and restructuring expense), which is a non-GAAP measure.
Non-GAAP Financial Measures Adjusted EBITDA: In addition to reporting net income, a GAAP measure, we present Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, non-cash stock compensation expense, acquisition related transaction expenses, non-cash loss on sale of building, and restructuring expense), which is a non-GAAP measure.
While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our unrecognized tax benefits reflect the most likely outcome. 25 Table of Contents Stock-Based Compensation.
While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our unrecognized tax benefits reflect the most likely outcome. 29 Table of Contents Stock-Based Compensation.
In evaluating our results for fiscal year 2023, investors should consider that we operate 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.
In evaluating our results for fiscal year 2024, investors should consider that we operate 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.
Financing Activities : During fiscal year 2023, $2.8 million was borrowed from our revolving line of credit and $0.7 million in cash was generated from the issuance of common stock.
During fiscal year 2023, $2.8 million was borrowed from the revolving line of credit and $0.7 million in cash was generated from the issuance of our common stock.
A discussion regarding our financial condition and results of operations for the fiscal year ended March 26, 2022 and year-to-year comparisons between fiscal year 2022 and fiscal year 2021, which are not included in this Form 10-K, can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 26, 2022 and are incorporated by reference herein.
A discussion regarding our financial condition and results of operations for the fiscal year ended March 25, 2023 and year-to-year comparisons between fiscal year 2023 and fiscal year 2022, which are not included in this Form 10-K, can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 25, 2023 and are incorporated by reference herein.
We apply a specific formula to our accounts receivable aging, which may be adjusted on a specific account basis where the formula may not appropriately reserve for loss exposure. After all attempts to collect a receivable have failed, the receivable is written-off against the allowance for doubtful accounts.
We apply a specific formula to our 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.
The year-over-year decrease in cash provided by operations is primarily the result of changes in net working capital (defined as current assets less current liabilities).
The year-over-year increase in cash provided by operations is primarily the result of changes in net working capital (defined as current assets less current liabilities).
In addition, we used $2.1 million for scheduled repayments of our term loan and $6.7 million for the “net” award of certain share awards to cover tax-withholding obligations for share award activity in the period which are shown as a repurchase of shares of our common stock on our Consolidated Statements of Cash Flows.
In addition, we used $2.1 million for scheduled repayments of our term loan and $0.4 million for the “net” award of certain share awards to cover tax-withholding obligations for share award activity in the period which are shown as a repurchase of shares of our common stock on our Consolidated Statements of Cash Flows.
Based on the results of our qualitative impairment testing, we have determined that it was more likely than not that the fair values exceeded the carrying values of goodwill for each reporting unit and there were no impairments as of each of March 25, 2023 and March 26, 2022.
Based on the results of our qualitative impairment testing, we have determined that it was more likely than not that the fair values exceeded the carrying values of goodwill for each reporting unit and there were no impairments as of each of March 30, 2024 and March 25, 2023.
There were no intangible asset impairment indicators identified during the years ended March 25, 2023 or March 26, 2022. Income Taxes. We record deferred income taxes for the effects of timing differences between financial and tax reporting.
There were no intangible asset impairment indicators identified during the years ended March 30, 2024 or March 25, 2023 . Income Taxes. We record deferred income taxes for the effects of timing differences between financial and tax reporting.
Significant estimates and assumptions are used for, but not limited to, allowance for doubtful accounts and returns, inventory reserves, estimated levels of achievement for performance-based restricted stock units, fair value of stock options, depreciable lives of fixed assets, estimated lives of major catalogs and intangible assets, and the valuation of assets acquired, liabilities assumed and consideration transferred in business acquisitions.
Significant estimates and assumptions are used for, but not limited to, allowance for credit losses and returns, inventory reserves, estimated levels of achievement for performance-based restricted stock units, fair value of stock options, depreciable lives of fixed assets, estimated lives of major catalogs and intangible assets, fair value of the goodwill reporting units, and the valuation of assets acquired, liabilities assumed and consideration transferred in business acquisitions.
The following table presents the quarterly historical trend of our Service gross margin as a percent of Service revenue: FY 2023 FY 2022 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Service Gross Margin 34.0% 30.0% 32.6% 32.0% 33.1% 29.7% 32.9% 31.8% Our Distribution gross margin includes net sales less the direct cost of inventory sold and the direct costs of equipment rental revenues, primarily depreciation expense for the fixed assets in our rental equipment pool, as well as the impact of rebates and cooperative advertising income we receive from vendors, freight billed to customers, freight expenses and direct shipping costs.
The following table presents the quarterly historical trend of our Service gross margin as a percent of Service revenue: FY 2024 FY 2023 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Service Gross Margin 35.7% 32.5% 34.0% 32.5% 34.0% 30.0% 32.6% 32.0% Our Distribution gross margin includes net sales less the direct cost of inventory sold and the direct costs of equipment rental revenues, primarily depreciation expense for the fixed assets in our rental equipment pool, as well as the impact of rebates and cooperative advertising income we receive from vendors, freight billed to customers, freight expenses and direct shipping costs.
The year-over-year increase in selling, marketing and warehouse expenses was due to increased expenses related to recent acquisitions, especially acquisition related amortization expense, and higher incentive-based employee costs due to higher sales.
The year-over-year increase in sell ing, marketing and warehouse expens es was due to increased expenses related to recent acquisitions, especially acquisition related amortization expense, and higher incentive-based employee costs due to higher sales.
Our Service segment has shown consistent revenue growth over the past several years, ending fiscal year 2023 with its 56th consecutive quarter of year-over-year growth. This segment has benefited from both organic growth as well as acquisitions over those 56 quarters.
Our Service segment has shown consistent revenue growth over the past several years, ending fiscal year 2024 with its 60th consecutive quarter of year-over-year growth. This segment has benefited from both organic growth as well as acquisitions over those 60 quarters.
The following table illustrates our days sales outstanding as of March 25, 2023 and March 26, 2022: As of March 25, March 26, 2023 2022 Net Sales, for the last two fiscal months $ 46,679 $ 42,005 Accounts Receivable, net $ 44,698 $ 39,737 Days Sales Outstanding 57 57 ● Inventory: Our inventory strategy includes making appropriate large quantity, high dollar purchases with key manufacturers for various reasons, including maximizing on-hand availability of key products, expanding the number of SKUs stocked in anticipation of customer demand, reducing backorders for products with long lead times and optimizing vendor purchase and sales volume discounts.
The following table illustrates our days sales outstanding as of March 30, 2024 and March 25, 2023: As of March 30, March 25, 2024 2023 Net Sales, for the last two fiscal months $ 54,871 $ 46,679 Accounts Receivable, net $ 47,779 $ 44,698 Days Sales Outstanding 52 57 ● Inventory: Our inventory strategy includes making appropriate large quantity, high dollar purchases with key manufacturers for various reasons, including maximizing on-hand availability of key products, expanding the number of SKUs stocked in anticipation of customer demand, reducing backorders for products with long lead times and optimizing vendor purchase and sales volume discounts.
Accounts receivable represent amounts due from customers in the ordinary course of business. These amounts are recorded net of the allowance for doubtful accounts and returns in the Consolidated Balance Sheets. The allowance for doubtful accounts is based upon the expected collectability of accounts receivable.
Accounts receivable represent amounts due from customers in the ordinary course of business. These amounts are recorde d net of the allowance for credit losses and returns in the Consolidated Balance Sheets. The allowance for credit losses is based upon the expected collectability of accounts receivable.
For a discussion of the newly issued accounting pronouncements see “Recently Issued Accounting Pronouncements” under Note 1 to the Consolidated Financial Statements included in Item 8 of Part II of this report. 26 Table of Contents RESULTS OF OPERATIONS The following table sets forth, for fiscal years 2023 and 2022, the components of our Consolidated Statements of Income.
For a discussion of the newly issued accounting pronouncements see “Recently Adopted Accounting Pronouncements” and "Recent Accounting Guidance Not Yet Adopted" under Note 1 to the Consolidated Financial Statements included in Item 8 of Part II of this report. 30 Table of Contents RESULTS OF OPERATIONS The following table sets forth, for fiscal years 2024 and 2023, the components of our Consolidated Statements of Income.
The increase in Adjusted EBITDA during fiscal year 2023 was primarily driven by the increase in operating income, depreciation and amortization expense and non-cash stock compensation expense. 31 Table of Contents Adjusted Diluted Earnings Per Share: In addition to reporting Diluted Earnings Per Share, a GAAP measure, we present Adjusted Diluted Earnings Per Share (net income plus acquisition related amortization expense, acquisition related transaction expenses, acquisition related stock-based compensation, acquisition amortization of backlog and restructuring expense, on a diluted per share basis), which is a non-GAAP measure.
The increase in Adjusted EBITDA during fiscal year 2024 was primarily driven by the increase in operating income, depreciation and amortization expense, transaction expense and non-cash stock compensation expense. 35 Table of Contents Adjusted Diluted Earnings Per Share: In addition to reporting Diluted Earnings Per Share, a GAAP measure, we present Adjusted Diluted Earnings Per Share (net income plus acquisition related amortization expense, acquisition related transaction expenses, acquisition related stock-based compensation, acquisition amortization of backlog and restructuring expense; divided by the average diluted shares outstanding during the period), which is a non-GAAP measure.
Our fiscal years 2023 and 2022 Distribution sales growth in relation to prior fiscal year quarter comparisons were as follows: FY 2023 FY 2022 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Distribution Sales Growth 5.1% 3.7% 1.6% 2.7% 7.2% 7.2% 22.2% 27.0% Distribution sales orders include orders for instruments that we routinely stock in our inventory, customized products, and other products ordered less frequently, which we do not stock.
Our fiscal years 2024 and 2023 Distribution sales growth in relation to prior fiscal year quarter comparisons were as fo llows: FY 2024 FY 2023 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Distribution Sales Growth 8.4% 10.4% 0.9% (0.2)% 5.1% 3.7% 1.6% 2.7% Distribution sales orders include orders for instruments that we routinely stock in our inventory, customized products, and other products ordered less frequently, which we do not stock.
The following table presents the source of our Service revenue and the percentage of Service revenue derived from each source for each quarter during fiscal years 2023 and 2022: FY 2023 FY 2022 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 In-House 86.9 % 86.2 % 86.2 % 85.4% 85.4 % 84.1 % 83.2 % 83.1% Outsourced 11.9 % 12.6 % 12.6 % 13.2% 13.1 % 14.4 % 15.3 % 15.4% Freight Billed to Customers 1.2 % 1.2 % 1.2 % 1.4% 1.5 % 1.5 % 1.5 % 1.5% 100.0 % 100.0 % 100.0 % 100.0% 100.0 % 100.0 % 100.0 % 100.0% Our Distribution sales accounted for 37.2% and 40.5% of our total revenue in fiscal years 2023 and 2022, respectively.
The following table presents the source of our Service revenue and the percentage of Service revenue derived from each source for each quarter during fiscal years 2024 and 2023: FY 2024 FY 2023 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 In-House 87.0 % 86.2 % 85.8 % 87.3 % 86.9 % 86.2 % 86.2 % 85.4 % Outsourced 11.9 % 12.6 % 13.0 % 11.6 % 11.9 % 12.6 % 12.6 % 13.2 % Freight Billed to Customers 1.1 % 1.2 % 1.2 % 1.1 % 1.2 % 1.2 % 1.2 % 1.4 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Our Distribution sales accounted for 34.7% and 37.2% of our total revenue in fiscal years 2024 and 2023, respectively.
In addition, we used $2.1 million for scheduled repayments of our term loan and $0.4 million for the “net” awarding of certain share awards to cover employee tax-withholding obligations for share award and stock option activity in fiscal year 2023, which is shown as a repurchase of shares of our common stock on our Consolidated Statements of Cash Flows.
In addition, we used $42.7 million to repay our revolving credit facility, $2.2 million for scheduled repayments of our term loan and $4.9 million for the “net” awarding of certain share awards to cover employee tax-withholding obligations for share award and stock option activity in fiscal year 2024, which is shown as a repurchase of shares of our common stock on our Consolidated Statements of Cash Flows.
These differences relate primarily to accrued expenses, bad debt reserves, inventory reserves, operating leases, goodwill and intangible assets, depreciation and amortization and stock-based compensation.
These differences relate primarily to accrued expenses, reserves for credit losses, inventory reserves, operating leases, goodwill and intangible assets, depreciation and amortization and stock-based compensation.
Accounts receivable increased by a net amount of $5.7 million during fiscal year 2022, inclusive of $2.8 million of accounts receivable acquired as part of three acquisitions completed during the period. The year-over-year change reflects the timing of collections.
Accounts receivable increased by a net amount of $5.0 million during fiscal year 2023 , inclusive of $0.8 million of acco unts receivable acquired as part of acquisitions completed during the period. The year-over-year change reflects the timing of collections.
The year-over-year increase in general and administrative expenses was due to by incremental expenses from acquired businesses (including stock expense), increased payroll costs for new employees and continued investments in technology. Net income for fiscal year 2023 was $10.7 million compared with $11.4 million in fiscal year 2022, a $0.7 million decrease.
The year-over-year increase in general and administrative expense s was due to incremental expe nses from acquired businesses (including stock expense), increased payroll costs for new employees and continued investments in technology. Net income for fiscal year 2024 was $13.6 million compared with $10.7 million in fiscal year 2023, a $3.0 million increase.
As a result, inventory levels may vary from quarter-to-quarter based on the timing of these large orders in relation to our quarter end. Our inventory balance increased $4.2 million during fiscal year 2023. Our inventory balance increased $1.1 million during fiscal year 2022.
As a result, inventory levels may vary from quarter-to-quarter based on the timing of these large orders in relation to our quarter end. Our inventory balance increas ed $0.5 million du ring fiscal year 2024, inclusive of $1.8 million of inventory acquired during the year. Our inventory balance increased $4.2 million during fiscal year 2023.
As a percentage of revenue, net income was 4.6% in fiscal year 2023, down from 5.6% in fiscal year 2022. This year-over-year change reflects higher operating income discussed offset by higher interest expense and a higher provision for income taxes.
As a percentage of revenue, net income was 5.3% in fiscal year 2024, up f rom 4.6% in fiscal year 2023. This year-over-year change reflects higher operating income discussed, lower interest expense, offset by a higher provision for income taxes.
Investing Activities: During fiscal year 2023, we invested $9.4 million in capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities and capacity and our rental business. During fiscal year 2022, we invested $10.2 million in capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities and our rental business.
During fiscal year 2023 , we invested $9.4 million in capital expenditures that was used primarily for customer-driven expansion of Service segment capabilities and our rental business. During fiscal year 2024 , we used $12.9 million for business acquisitions. During fiscal year 2023 , we used $9.1 million for business acquisitions.
In general, our Distribution gross margin can vary based upon the mix of products sold, price discounting, the timing of periodic vendor rebates offered and cooperative advertising programs from suppliers. 29 Table of Contents The following table reflects the quarterly historical trend of our Distribution gross margin as a percent of Distribution sales: FY 2023 FY 2022 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Distribution Gross Margin 25.2% 26.2% 24.9% 25.0% 24.5% 22.5% 23.5% 23.6% Distribution segment gross margin increased 180 basis points in fiscal year 2023 compared to fiscal year 2022.
In general, our Distribution gross margin can vary based upon the mix of products sold, price discounting, the timing of periodic vendor rebates offered and cooperative advertising programs from suppliers. 33 Table of Contents The following table reflects the quarterly historical trend of our Distribution gross margin as a percent of Distribution sales: FY 2024 FY 2023 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Distribution Gross Margin 30.3% 31.5% 28.3% 27.7% 25.2% 26.2% 24.9% 25.0% Distribution segment gross margin incre ased 420 basis poi nts in fiscal year 2024 compared to fiscal year 2023.
Diluted earnings per share for fiscal year 2023 was $1.40 compared with $1.50 for fiscal year 2022, a $0.10 per diluted share decrease. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Use of Estimates.
Diluted earnings per share for fiscal year 2024 was $1.63 compared with $1.40 for fiscal year 2023, a $0.23 per diluted share increase. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Use of Estimates.
The following table presents the trailing twelve-month Service segment revenue for each quarter in fiscal years 2023 and 2022 as well as the trailing twelve-month revenue growth as a comparison to that of the prior fiscal year period: FY 2023 FY 2022 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Trailing Twelve-Month: Service Revenue $ 144,883 $ 139,787 $ 134,047 $ 128,324 $ 122,005 $ 116,315 $ 110,854 $ 105,864 Service Revenue Growth 18.8 % 20.2 % 20.9 % 21.2 % 20.5 % 19.5 % 17.2 % 13.1 % Our strategy has been to focus our investments in the core electrical, temperature, pressure, physical/dimensional and radio frequency/microwave calibration disciplines.
The following table presents the trailing twelve-month Service segment revenue for each quarter in fiscal years 2024 and 2023 as well as the trailing twelve-month revenue growth as a comparison to that of the prior fiscal year period: FY 2024 FY 2023 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Trailing Twelve-Month: Service Revenue $ 169,525 $ 162,556 $ 157,024 $ 150,860 $ 144,883 $ 139,787 $ 134,047 $ 128,324 Service Revenue Growth 17.0 % 16.3 % 17.1 % 17.6 % 18.8 % 20.2 % 20.9 % 21.2 % Our strategy has been to focus our investments in the core electrical, temperature, pressure, physical/dimensional and radio frequency/microwave calibration disciplines.
Management uses pending product shipments and backorders as measures of our future business performance and financial performance within the distribution segment. 28 Table of Contents Our total pending product shipments increased $0.4 million, or 4.6%, at the end of fiscal year 2023 compared to the end of fiscal year 2022.
Management uses pending product shipments and backorders as measures of our future business performance and financial performance within the Distribution segment. 32 Table of Contents Our total pending product shipments decreased $3.0 million, or 37.3%, at th e end of fiscal year 2024 compared to the end of fiscal year 2023.
See the discussion under “Forward Looking Statements” beginning on page 1 of this annual report OVERVIEW Operational Overview. We are a leading provider of accredited calibration services, enterprise asset management services, and value-added distributor of professional grade handheld test, measurement and control instrumentation.
See the discussion under “Cautionary Note Regarding Forward Looking Statements” beginning on page 1 of this annual report. OVERVIEW Operational Overview. We are 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 business acquisitions that we made have been heavily focused on expanding our service capabilities, increasing our geographic reach and leveraging our Calibration Service Centers and other infrastructure to create operational synergies. 22 Table of Contents Our Service segment revenue growth was 18.8% for fiscal year 2023 from fiscal year 2022, and included a combination of organic growth and acquisition related revenue.
The business acquisitions that we made have been focused on expanding our service capabilities, increasing our geographic reach and leveraging our Calibration Service Centers and other infrastructure to create operational synergies. 26 Table of Contents Our Service segment revenue growth was 17.0% for fiscal year 2024 from fiscal year 2023.
Goodwill represents the excess of the purchase price over the values assigned to the underlying net assets of an acquired business and is not amortized. As of March 25, 2023, we had $69.4 million of recorded goodwill.
Goodwill represents the excess of the purchase price over the values assigned to the underlying net assets of an acquired business and is not amortized. As of March 30, 2024, we had $105.6 mill ion of recorded goodwill.
The significant working capital fluctuations were as follows: ● Receivables: Accounts receivable increased by a net amount of $5.0 million during fiscal year 2023, inclusive of $0.8 million of accounts receivable acquired as part of four acquisitions completed during the period.
The significant working capital fluctuations were as follows: ● Receivables: Accounts receivable increased by a net amount of $3.1 million during fiscal year 2024 , inclusive of $2.1 million of accounts receivable acquired as part of three acquisitions completed during the year.
During fiscal year 2021, the Company deferred $2.0 million of employer social security payroll taxes.
During fiscal year 2021, the Company deferred $2.0 million of employer social security payroll taxes. The Company repaid $1.0 million of the deferred amounts and during each of fiscal year 2023 and fiscal year 2022.
At the end of any particular period, the amounts accrued for such compensation may vary due to many factors including, but not limited to, changes in expected performance levels, the performance measurement period, and the timing of payments to employees. During fiscal year 2023, accrued compensation and other liabilities decreased by $1.2 million, primarily due to reduced accrued incentives.
At the end of any particular period, the amounts accrued for such compensation may vary due to many factors including, but not limited to, changes in expected performance levels, the performance measurement period, and the timing of payments to employees.
Operating expenses were $52.1 million, or 22.6% of total revenue, in fiscal year 2023 compared with $44.3 million, or 21.6% of total revenue, in fiscal year 2022. Operating income was $16.2 million, or 7.0% of total revenue, in fiscal year 2023 compared with $14.1 million, or 6.9% of total revenue, in fiscal year 2022.
Operating expenses were $64.0 million, or 24.7% of total revenue, in fiscal year 2024 compared with $52.1 million, or 22.6% of total revenue, in fiscal year 2023. Operating income was $19.8 million, or 7.6% of total revenue, in fiscal year 2024 compared with $16.2 million, or 7.0% of total revenue, in fiscal year 2023.
FY 2023 FY 2022 As a Percentage of Total Revenue: Service Revenue 62.8 % 59.5 % Distribution Sales 37.2 % 40.5 % Total Revenue 100.0 % 100.0 % Gross Profit Percentage: Service Gross Profit 32.2 % 31.9 % Distribution Gross Profit 25.3 % 23.5 % Total Gross Profit 29.6 % 28.5 % Selling, Marketing and Warehouse Expenses 10.7 % 10.1 % General and Administrative Expenses 11.9 % 11.5 % Total Operating Expenses 22.6 % 21.6 % Operating Income 7.0 % 6.9 % Interest and Other Expenses, net 1.2 % 0.5 % Income Before Provision for Income Taxes 5.8 % 6.4 % Provision for Income Taxes 1.2 % 0.9 % Net Income 4.6 % 5.6 % FISCAL YEAR ENDED March 25, 2023 COMPARED TO FISCAL YEAR ENDED March 26, 2022 (dollars in thousands): Revenue: Fiscal Year Ended March 25, March 26, Change 2023 2022 $ % Revenue: Service $ 144,883 $ 122,005 $ 22,878 18.8 % Distribution 85,686 82,954 2,732 3.3 % Total $ 230,569 $ 204,959 $ 25,610 12.5 % Total revenue was $230.6 million in fiscal year 2023 compared to $205.0 million in fiscal year 2022, an increase of $25.6 million or 12.5%.
FY 2024 FY 2023 As a Percentage of Total Revenue: Service Revenue 65.3 % 62.8 % Distribution Sales 34.7 % 37.2 % Total Revenue 100.0 % 100.0 % Gross Profit Percentage: Service Gross Profit 33.8 % 32.2 % Distribution Gross Profit 29.5 % 25.3 % Total Gross Profit 32.3 % 29.6 % Selling, Marketing and Warehouse Expenses 11.1 % 10.7 % General and Administrative Expenses 13.6 % 11.9 % Total Operating Expenses 24.7 % 22.6 % Operating Income 7.6 % 7.0 % Interest and Other Expenses, net 0.5 % 1.2 % Income Before Provision for Income Taxes 7.1 % 5.8 % Provision for Income Taxes 1.8 % 1.2 % Net Income 5.3 % 4.6 % FISCAL YEAR ENDED March 30, 2024 COMPARED TO FISCAL YEAR ENDED March 25, 2023 (dollars in thousands): Revenue: Fiscal Year Ended March 30, March 25, Change 2024 2023 $ % Revenue: Service $ 169,525 $ 144,883 $ 24,642 17.0 % Distribution 89,956 85,686 4,270 5.0 % Total $ 259,481 $ 230,569 $ 28,912 12.5 % Total revenue was $259.5 million in fiscal year 2024 compared to $230.6 million in fiscal year 2023, an increase of $28.9 million or 12.5%.
This represented an increase of $7.8 million, or 17.6%, compared to fiscal year 2022. As a percentage of total revenue, operating expenses increased 100 basis points from 21.6% in fiscal year 2022 to 22.6% in fiscal year 2023.
This represented an increase of $11.9 million, or 22.9% , compared to fiscal year 2023 . As a percentage of total revenue, operating expenses increased 210 bas is points from 22.6% in fiscal year 2023 to 24.7% in fiscal year 2024.
Fiscal Year Ended March 25, March 26, 2023 2022 Net Income $ 10,688 $ 11,380 + Interest Expense 2,417 810 + Other Expense 344 143 + Tax Provision 2,799 1,810 Operating Income 16,248 14,143 + Depreciation & Amortization 10,955 9,077 + Transaction Expense 185 902 + Other Expense (344 ) (143 ) + Noncash Stock Compensation 3,377 2,328 Adjusted EBITDA $ 30,421 $ 26,307 During fiscal year 2023, Adjusted EBITDA was $30.4 million, an increase of $4.1 million or 15.6% compared to fiscal year 2022.
Fiscal Year Ended March 30, March 25, 2024 2023 Net Income $ 13,647 $ 10,688 + Interest Expense, net 1,027 2,417 + Other Expense 315 344 + Tax Provision 4,792 2,799 Operating Income 19,781 16,248 + Depreciation & Amortization 13,477 10,955 + Transaction Expense 1,158 185 + Other Expense (315 ) (344 ) + Noncash Stock Compensation 4,512 3,377 Adjusted EBITDA $ 38,613 $ 30,421 During fiscal year 2024, Adjusted EBITDA was $38.6 million, an increase of $8.2 million or 26.9% compared to fiscal year 2023.
As such, we expect our effective tax rate in fiscal year 2024 to be between 21.0% and 23.0%. 30 Table of Contents Net Income: Fiscal Year Ended March 25, March 26, Change 2023 2022 $ % Net Income $ 10,688 $ 11,380 $ (692 ) (6.1)% Net income for fiscal year 2023 decreased by $0.7 million or 6.1% compared to fiscal year 2022.
As such, we expect our effective tax rate in fiscal year 2025 to be between 24.0% and 26.0% . 34 Table of Contents Net Income: Fiscal Year Ended March 30, March 25, Change 2024 2023 $ % Net Income $ 13,647 $ 10,688 $ 2,959 27.7 % Net income for fiscal year 2024 increased by $3.0 million or 27.7% compared to fiscal year 2023.
Distribution sales accounted for 37.2% of our total revenue in fiscal year 2023. 23 Table of Contents Sales to domestic customers comprised 92.1% of total Distribution sales in fiscal year 2023, while 6.6% were to Canadian customers and 1.3% were to customers in other international markets.
Distribution sales accounted for 34.7% of our total revenue in fiscal year 2024. 27 Table of Contents Sales to domestic customers com prised 92.6% of total Distribution sales in fiscal year 2024 , while 5.9% were to Canadian customers and 1.5% were to customers in other international markets.
The following table presents the percentage of total pending product shipments that were backorders at the end of each quarter in fiscal years 2023 and 2022 and our historical trend of total pending product shipments: FY 2023 FY 2022 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Total Pending Product Shipments $8,101 $9,543 $9,116 $9,034 $7,747 $8,943 $7,707 $8,272 % of Pending Product Shipments that were Backorders 84.8% 78.4% 80.8% 78.1% 83.2% 80.5% 77.2% 77.5% Gross Profit: Fiscal Year Ended March 25, March 26, Change 2023 2022 $ % Gross Profit: Service $ 46,638 $ 38,921 $ 7,717 19.8 % Distribution 21,717 19,518 2,199 11.3 % Total $ 68,355 $ 58,439 $ 9,916 17.0 % Total gross profit in fiscal year 2023 was $68.4 million compared to $58.4 million in fiscal year 2022, an increase of $9.9 million or 17.0%.
The following table presents the percentage of total pending product shipments that were backorders at the end of each quarter in fiscal years 2024 and 2023 and our historical trend of total pending product shipments: FY 2024 FY 2023 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Total Pending Product Shipments $ 5,079 $ 4,652 $ 6,332 $ 7,109 $ 8,101 $ 9,543 $ 9,116 $ 9,034 % of Pending Product Shipments that were Backorders 88.8 % 82.0 % 87.4 % 85.0 % 84.8 % 78.4 % 80.8 % 78.1 % Gross Profit: Fiscal Year Ended March 30, March 25, Change 2024 2023 $ % Gross Profit: Service $ 57,253 $ 46,638 $ 10,615 22.8 % Distribution 26,553 21,717 4,836 22.3 % Total $ 83,806 $ 68,355 $ 15,451 22.6 % Total gross profit in fiscal year 2024 was $83.8 million compared to $68.4 million in fiscal year 2023, an increase of $15.5 million or 22.6%.
The Company repaid $1.0 million of the deferred amounts and during each of fiscal year 2023 and fiscal year 2022. 33 Table of Contents Cash Flows: The following table is a summary of our Consolidated Statements of Cash Flows (dollars in thousands): Fiscal Year Ended March 25, March 26, 2023 2022 Cash Provided by (Used in): Operating Activities $ 16,951 $ 17,618 Investing Activities $ (18,513 ) $ (39,851 ) Financing Activities $ 876 $ 23,694 Operating Activities: Net cash provided by operating activities was $17.0 million during fiscal year 2023 compared to $17.6 million during fiscal year 2022.
Cash Flows: The following table is a summary of our Consolidated Statements of Cash Flows (dollars in thousands): Fiscal Year Ended March 30, March 25, 2024 2023 Cash Provided by (Used in): Operating Activities $ 32,616 $ 16,951 Investing Activities $ (41,672 ) $ (18,513 ) Financing Activities $ 27,399 $ 876 37 Table of Contents Operating Activities: Net cash provided by operating activities was $32.6 million during fiscal year 2024 compared to $17.0 million during fiscal year 2023 .
Accounts payable increased $1.7 million during fiscal year 2023, inclusive of $0.1 million of accounts payable acquired during the period. Accounts payable increased by $1.9 million during fiscal year 2022.
Acc ounts payable decreased $4.4 million during fiscal year 2024 , inclusive of $0.6 million of accounts payable acquired during the year. Accounts payable increased by $1.7 million during fiscal year 2023 , inclusive of $0.1 million of accounts payable acquired during the year.
Fiscal Year Ended March 25, March 26, 2023 2022 Net Income $ 10,688 $ 11,380 + Amortization of Intangible Assets 4,454 3,394 + Acquisition Amortization of Backlog - 490 + Acquisition Deal Costs 1,018 1,458 + Income Tax Effect @ 25% (1,368 ) (1,335 ) Adjusted Net Income 14,792 15,387 Average Diluted Shares Outstanding 7,645 7,589 Diluted Earnings Per Share – GAAP $ 1.40 $ 1.50 Adjusted Diluted Earnings Per Share $ 1.93 $ 2.03 LIQUIDITY AND CAPITAL RESOURCES We expect that foreseeable liquidity and capital resource requirements will be met through anticipated cash flows from operations and borrowings from our Revolving Credit Facility (as defined below).
Fiscal Year Ended March 30, March 25, 2024 2023 Net Income $ 13,647 $ 10,688 + Amortization of Intangible Assets 5,630 4,454 + Acquisition Amortization of Backlog 67 - + Acquisition Deal Costs 1,651 1,018 + Income Tax Effect @ 25% (1,837 ) (1,368 ) + Acquisition Earn-out Adjustment 529 - Adjusted Net Income 19,687 14,792 Average Diluted Shares Outstanding 8,352 7,645 Diluted Earnings Per Share – GAAP $ 1.63 $ 1.40 Adjusted Diluted Earnings Per Share $ 2.36 $ 1.93 LIQUIDITY AND CAPITAL RESOURCES We expect that foreseeable liquidity and capital resource requirements will be met through cash and cash equivalents, anticipated cash flows from operations and borrowings from our revolving credit facility.
We were in compliance with all loan covenants and requirements during fiscal years 2023 and 2022. Our leverage ratio, as defined in the 2021 Credit Agreement, was 1.60 at March 25, 2023, compared with 1.74 at March 26, 2022.
Our leverage ratio, as defined in the Credit Agreement, was 0.10 at March 30, 2024, compared with 1.60 at March 25, 2023. We were in compliance with all loan covenants and requirements during fiscal years 2024 and 2023. As of March 30, 2024 , $80.0 million was available for borrowing under the revolving credit facility.
As a percentage of total revenue, total gross margin was 29.6% in fiscal year 2023 compared to 28.5% in fiscal year 2022, a 110 basis point increase. Service gross profit was $46.6 million, an increase of $7.7 million, or 19.8%, from fiscal year 2022 to fiscal year 2023.
As a percentage of total revenue, total gross margin was 32.3% in fiscal year 2024 compared to 29.6% in fiscal y ear 2023 , a 270 basis point increase. Service gross profit was $57.3 million, an increase of $10.6 million, or 22.8%, from fiscal year 2023 to fiscal year 2024.
Among those factors are variations in the timing of periodic calibrations and other services, customer capital expenditures and customer outsourcing decisions. Because the timing of Service segment orders can vary on a quarter-to-quarter basis, we believe a trailing twelve-month trend provides a better indication of the progress of this segment.
Because the timing of Service segment orders can vary on a quarter-to-quarter basis, we believe a trailing twelve-month trend provides a better indication of the progress of this segment.
The growth in fiscal year 2023 and fiscal year 2022 reflected both organic growth and acquisitions. The growth in Service segment revenue in fiscal year 2023 includes revenue from Alliance, e2b and Complete Calibration. The growth in Service segment revenue in fiscal year 2022 includes revenue from NEXA and Tangent.
The growth in Service segment revenue in fiscal year 2024 includes revenue from TIC-MS and SteriQual. The growth in Service segment revenue in fiscal year 2023 includes revenue from Alliance, e2b and Complete Calibration.
During fiscal year 2022, accrued compensation and other liabilities increased by $1.0 million, inclusive of $0.5 million of accrued compensation and other liabilities acquired as part of three acquisitions completed during the period. 34 Table of Contents ● Income Taxes Payable: In any given period, net working capital may be affected by the timing and amount of income tax payments.
During fiscal year 2023 , accrued compensation and other liabilities decreased by $1.2 million. ● Income Taxes Payable: In any given period, net working capital may be affected by the timing and amount of income tax payments. During fiscal year 2024, income taxes payable increased $2.9 million. During fiscal year 2023, income taxes payable decreas ed by $0.4 milli on.
Service gross margin was 32.2% in fiscal year 2023 compared with 31.9% in fiscal year 2022, a 30 basis point increase. Distribution gross margin was 25.3% in fiscal year 2023 compared with 23.5% in fiscal year 2022, a 180 basis point increase.
Service gross margin was 33.8% in fiscal year 2024 compared with 32.2% in fiscal year 2023, a 160 basis point in crease. Distribution gross margin was 29.5% in fiscal year 2024 compared with 25.3% in fiscal year 2023, a 420 basis poin t increase.
We also expect to receive discrete tax benefits related to share-based compensation awards in fiscal year 2024.
We expect to receive certain federal, st ate, Canadian and Irish tax credits in future years. We also expect to receive discrete tax benefits related to share-based compensation awards in fiscal year 2025.
As of March 25, 2023, $80.0 million was available under the revolving credit facility, of which $42.7 million was outstanding and included in long-term debt on the Consolidated Balance Sheets. During fiscal year 2023 and 2022 we used $9.1 million and $29.8 million, respectively, for business acquisitions.
During fiscal year 2024 and 2023 we used $12.9 million and $9.1 million, respectively, from the revolving credit facility for business acquisitions. As of March 30, 2024,$4.2 million was outstanding on the 2018 Term Loan, of which $2.3 m illion was included in current liabilities on the Consolidated Balance Sheets with the remainder included in long-term debt.
As a percentage of revenue, Adjusted EBITDA was 13.2% during fiscal year 2023 versus 12.8% during fiscal year 2022, a 40 basis point increase.
As a percentage of revenue, Adjusted EBITDA was 14.9% during fiscal year 2024 versus 13.2% during fisca l year 2023 , a 170 bas is point increase.
The increase in segment gross margin was primarily due to a favorable mix of products sold, strong demand for our higher-margin products sold and rented.
The increase in segment gross margin was primarily due to increased margins from rental revenue, which now includes Axiom, and a favorable mix of higher margin products sold.
Unused fees accrue based on the average daily amount of unused credit available on the revolving credit facility. Interest rate margins and unused fees are determined on a quarterly basis based upon our calculated leverage ratio. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted.
Unused fees accrue based on the average daily amount of unused credit available on the revolving credit facility. Interest rate margins and unused fees are determined on a quarterly basis based upon our calculated leverage ratio. Our interest rate for the revolving credit facility for fiscal year 2024 ranged from 6.4% to 7.1%.
Interest on outstanding borrowings under the 2018 Term Loan accrued at a fixed rate of 4.15% during the first quarter of fiscal year 2022 and accrued or will accrue at a fixed rate of 3.90% over the term of the loan for subsequent periods.
Interest on outstanding borrowings under the 2018 Term Loan accrue at a fixed rate of 3.90% over the term of the loan.
Fiscal years 2023 and 2022 each consisted of 52 weeks.
Fiscal year 2024 consisted of 53 weeks and fiscal year 2023 consisted of 52 weeks.
Total gross profit was $68.4 million in fiscal year 2023 compared to $58.4 million in fiscal year 2022, an increase of $9.9 million or 17.0%. Total gross margin was 29.6%, which is a 110 basis point increase versus fiscal year 2022.
Total gross profit was $83.8 million in fiscal year 2024 compared to $68.4 million in fiscal year 2023, an increase of $15.5 million or 22.6%. Total gross margin was 32.3%, whic h is a 270 basis point inc rease versus fiscal year 2023.
Our fiscal years 2023 and 2022 Service revenue growth in relation to prior fiscal year quarter comparisons, was as follows: FY 2023 FY 2022 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Service Revenue Growth 14.7% 19.0% 19.4% 22.9% 19.6% 22.1% 20.4% 20.0% 27 Table of Contents Within any year, while we add new customers, we also have customers from the prior year whose service orders may not repeat for any number of factors.
Our fiscal years 2024 and 2023 Service revenue growth in relation to prior fiscal year quarter comparisons, was as follows: FY 2024 FY 2023 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Service Revenue Growth 17.5 % 15.4 % 17.5 % 17.6 % 14.7 % 19.0 % 19.4 % 22.9 % 31 Table of Contents The growth in fiscal year 2024 and fiscal year 2023 reflected both organic growth and acquisitions.
Our provision for income taxes is affected by discrete items that may occur in any given period but are not consistent from year to year. The discrete benefits related to share-based compensation activity in fiscal years 2023 and 2022 were $0.4 million and $1.4 million, respectively.
The increase in effective tax rate is due to tax expense recognized in fiscal year 2024 associated with executive compensation limitations that resulted from share-based awards. Our provision for income taxes is affected by discrete items that may occur in any given period but are not consistent from year to year.
Operating Expenses: Fiscal Year Ended March 25, March 26, Change 2023 2022 $ % Operating Expenses: Selling, Marketing and Warehouse $ 24,761 $ 20,649 $ 4,112 19.9 % General and Administrative 27,346 23,647 3,699 15.6 % Total $ 52,107 $ 44,296 $ 7,811 17.6 % Total operating expenses were $52.1 million in fiscal year 2023 compared to $44.3 million in fiscal year 2022.
Operating Expenses: Fiscal Year Ended March 30, March 25, Change 2024 2023 $ % Operating Expenses: Selling, Marketing and Warehouse $ 28,710 $ 24,761 $ 3,949 15.9 % General and Administrative $ 35,315 $ 27,346 7,969 29.1 % Total $ 64,025 $ 52,107 $ 11,918 22.9 % Total operating expenses were $64.0 million in fiscal year 2024 compared to $52.1 million in fiscal year 2023 .
During fiscal year 2023, we saw a decrease in the rebates offered by our vendors. We recorded vendor rebates of $0.6 million and $1.0 million in fiscal years 2023 and 2022, respectively, as a reduction of cost of Distribution sales.
We recorded vendor rebates of $0.6 m illion in both fiscal years 2024 and 2023, as a reduction of cost of Distribution sales.
Backorders at the end of fiscal year 2023 were $6.9 million, compared to $6.4 million at the end of fiscal year 2022. The year-over-year increase in pending product shipments was a result of the disruption to the supply of products as well as increased orders.
Backorders at the end of fiscal year 2024 wer e $4.5 million, c ompared to $6.9 million at the end of fiscal year 2023. The year-over-year decrease in pending product shipments and backorders was a result of improved fulfillment of existing orders.
We continue to evaluate our tax provision on a quarterly basis and adjust, as deemed necessary, our effective tax rate given changes in facts and circumstances expected in the future. We expect to receive certain federal, state, Canadian and Irish tax credits in future years.
The discrete benefits related to share-based compensation activity in fiscal years 2024 and 2023 w ere $0.6 mi llion and $0.4 million, respectively. We continue to evaluate our tax provision on a quarterly basis and adjust, as deemed necessary, our effective tax rate given changes in facts and circumstances expected in the future.
This increase in service gross margin in fiscal year 2023 was primarily the result of improved productivity offset by increased start-up costs from new client-based lab implementations. The increase in Distribution segment gross margin was primarily due to a favorable mix of products sold and strong demand for our higher-margin rentals business.
This increase in service gross margin in fiscal year 2024 was primarily largely the result of operating leverage on our fixed costs and increased technician productivity. The increase in the distribution segment gross margin was primarily due to increased margins from rental revenue, which now includes Axiom, and a favorable mix of higher margin products sold.
Service revenue accounted for 62.8% of our total revenue during fiscal year 2023. Of our Service revenue in fiscal year 2023, 86.2% was generated by our Calibration Service Centers and enterprise asset management services while 12.6% was generated through subcontracted third-party vendors, compared with 84.0% and 14.5%, respectively, in fiscal year 2022.
Of our Service revenue in fiscal y ear 2024 , 86.6% was generated by our Calibration Service Centers and cost control and optimization services while 12.3% was generated through subcontracted third-party vendors, compared with 86.2% and 12.6% , respectively, in fiscal year 2023 . The remainder of our Service revenue in each pe riod was derived from freight charges.
During fiscal year 2023, we used $9.1 million for business acquisitions. During fiscal year 2022, we used $29.8 million for business acquisitions. During each of fiscal year 2023 and fiscal year 2022, no contingent consideration or other holdback amounts were paid related to a business acquisition.
During each of fiscal year 2024 and fiscal year 2023, no contingent consideration was paid related to a business acquisition. During fiscal year 2024, $0.8 million of holdback amounts were paid. During fiscal year 2023, no holdback amounts were paid. During fiscal year 2024, we purchased $15.5 million of marketable securities with the proceeds from our stock offering.
In fiscal year 2023, Distribution segment sales increased by 3.3%. This increase in sales primarily due to increased demand for rental orders. The Distribution segment gross margin in fiscal year 2023 increased by 180 basis points. The increase in segment gross margin was primarily due to a favorable mix of products sold and strong demand for our higher-margin rentals business.
The increase in the Distribution segment gross margin was primarily due to increased margins from rental revenue, which now includes Axiom and a favorable mix of higher margin products sold.
Total revenue for fiscal year 2023 was $230.6 million. This represented an increase of $25.6 million or 12.5% versus total revenue of $205.0 million for fiscal year 2022. Total revenue increased due to increases in both Service revenue and Distribution sales increases. Service revenue was $144.9 million in fiscal year 2023, an increase of $22.9 million or 18.8%.
This represented an increase of $28.9 million or 12.5% versus total revenue of $230.6 million for fiscal year 2023. This increase was primarily due to recently completed acquisitions, strong demand in our Service segment’s highly-regulated end markets and increased rental sales, which includes incremental revenue from an acquisition completed in fiscal year 2024.
This estimate includes Federal, various state, Canadian and Irish income taxes and reflects the discrete tax accounting associated with share-based payment awards. Although the tax rate is consistent with recent years, there will be a difference in calendarization of the tax benefit from vesting of share-based payments in fiscal year 2024.
Transcat expects its income tax rate to range between 24.0% and 26.0% in fiscal 2025. This estimate includes Federal, various state, Canadian and Irish income taxes and reflects the discrete tax accounting associated with share-based payment awards. 39 Table of Contents
Distribution sales increased $2.7 million, or 3.3% in fiscal year 2023 compared to fiscal year 2022. This increase in sales was primarily due to strong demand for rental orders. The increase in sales in fiscal year 2023 were all organic.
The change in fiscal year 2023 versus fiscal year 2022 was due to increased demand for rental products and was all organic.
Provision for Income Taxes: Fiscal Year Ended March 25, March 26, Change 2023 2022 $ % Provision for Income Taxes $ 2,799 $ 1,810 $ 989 54.6% Our effective tax rate for fiscal years 2023 and 2022 was 20.8% and 13.7%, respectively. The increase in tax rate is due to the lower discrete tax benefits from share-based compensation activity.
Provision for Income Taxes: Fiscal Year Ended March 30, March 25, Change 2024 2023 $ % Provision for Income Taxes $ 4,792 $ 2,799 $ 1,993 71.2 % Our effective tax rate for fiscal years 2024 and 2023 was 26.0% and 20.8% , respectiv ely.
Recent Events Effective March 27, 2023, we purchased all of the outstanding capital stock of TIC-MS, Inc. (“TIC-MS”), a Missouri based provider of calibration services. This transaction aligned with a key component of our acquisition strategy of targeting businesses that expand the depth and breadth of our Service capabilities.
Recent Events Effective April 15, 2024, the Company acquired Becnel Rental Tools LLC (“Becnel”). This transaction aligned with a key component of our acquisition strategy of targeting businesses that expand the depth and breadth of our rental capabilities.

… 48 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+0 added−1 removed1 unchanged
Biggest changeAt our option, we borrow from our revolving credit facility at the variable one-month LIBOR or at a fixed rate for a designated period at the LIBOR (subject to a 1.0% floor during the first quarter of fiscal year 2022 and a 0.25% floor for subsequent periods) corresponding to such period, in each case, plus a margin.
Biggest changeEffective July 1, 2023, at our option, we borrow from our revolving credit facility at either the variable one-month Daily Simple SOFR or a fixed rate for a designated period at the SOFR corresponding to such period (subject to a 0.25% floor), in each case, plus a margin.
We monitor the relationship between the U.S. and Canadian currencies and the U.S. and Euro currencies on a monthly basis and adjust sales prices for products and services sold in Canadian dollars or Euros as we believe to be appropriate.
We monitor the relationship between the U.S. dollar and Canadian dollar and the U.S. dollar and Euro on a monthly basis and adjust sales prices for products and services sold in Canadian dollars or Euros as we believe to be appropriate.
On March 25, 2023, we had no hedging arrangements in place for our revolving credit facility to limit our exposure to upward movements in interest rates. FOREIGN CURRENCY Approximately 90% of our total revenues for each of fiscal years 2023 and 2022 were denominated in U.S. dollars, with the remainder denominated in Canadian dollars and Euros.
On March 30, 2024, we had no hedging arrangements in place for our revolving credit facility to limit our exposure to upward movements in interest rates. FOREIGN CURRENCY Approximately 90% of our total revenues for each of fiscal years 2024 and 2023 were denominated in U.S. dollars, with the remainder denominated in Canadian dollars and Euros.
We do not apply hedge accounting and therefore the net change in the fair value of the contracts, which totaled a gain of $0.4 million and a loss of less than $0.1 million during fiscal year 2023 and 2022, respectively, was recognized as a component of other expense in the Consolidated Statements of Income.
We do 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 milli on and a gain of $0.4 million during fiscal year 2024 and 2023, respectively, was recognized as a component of other expense in the Consolidated Statements of Income.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our exposure to changes in interest rates results from our borrowing activities. In the event interest rates were to move by 1%, our yearly interest expense would increase or decrease by approximately $0.4 million assuming our average borrowing levels remained constant.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our exposure to changes in interest rates results from our borrowing activities. In the event interest rates were to move by 1%, our yearly interest expense would increase or decrease by approximately $0.5 million assuming our average borrowing levels during fiscal year 2024 remained constant.
A 10% change in the value of the Canadian dollar to the U.S. dollar and the Euro to the U.S. dollar would impact our revenue by approximately 1%.
A 10% chang e in the value of the Canadian dollar to the U.S. dollar and the Euro to the U.S. dollar would impact our revenue by approximately 1%.
The foreign exchange contract was renewed in April 2023 and continues to be in place. We do not use hedging arrangements for speculative purposes. 36 Table of Contents
The foreign exchange contract was renewed in April 2024 and continues to be in place. We do not use hedging arrangements for speculative purposes. 40 Table of Contents
As of March 25, 2023, $6.4 million was outstanding on the 2018 Term Loan and was included in long-term debt and current portion of long-term debt on the Consolidated Balance Sheets. The 2018 Term Loan requires total (principal and interest) repayments of $0.2 million per month.
As of March 30, 2024, $4.2 million was outstanding on the 2018 Term Loan and was included in long-term debt and current portion of long-term debt on the Consolidated Balance Sheets. The 2018 Term Loan requires total (principal and interest) repayments of $0.2 million per month through December 2025.
The change in the fair value of the contracts is offset by the change in fair value on the underlying accounts receivables denominated in Canadian dollars being hedged. On March 25, 2023, we had a foreign exchange contract, which matured in April 2023, outstanding in the notional amount of $2.5 million.
The change in the fair value of the contracts is offset by the change in fair value on the underlying accounts receivables denominated in Canadian dollars being hedged. On March 30, 2024, we had a foreign exchange contract, which matured in April 2024, outstanding in the notional amount of $1.8 milli on.
As of March 25, 2023, $80.0 million was available under our revolving credit facility, of which $42.7 million was outstanding and included in long-term debt on the Consolidated Balance Sheets. As described above under “Liquidity and Capital Resources,” we also have a $15.0 million (original principal) term loan. The 2018 Term Loan is considered a fixed interest rate loan.
As of March 30, 2024, $80.0 million was available under the revolving credit facility, and there were no amounts outstanding. As described above under “Liquidity and Capital Resources,” we also have a $15.0 million (original principal) term loan. The 2018 Term Loan is considered a fixed interest rate loan.
Our interest rate margin is determined on a quarterly basis based upon our calculated leverage ratio. Our interest rate during fiscal year 2023 for our revolving credit facility ranged from 1.6% to 6.5%.
Our interest rate margin is determined on a quarterly basis based upon our calculated leverage ratio. Our interest rate during fiscal year 2024 for our revolving credit facility ranged from 6.4% to 7.1%. Interest on outstanding borrowings on the 2018 Term Loan accrued at a fixed rate of 3.90% over the term of the loan.
Removed
Interest on outstanding borrowings on the 2018 Term Loan accrued at a fixed rate of 4.15% over the term of the loan during the first quarter of fiscal year 2022 and 3.90% over the term of the loan for subsequent periods. Our revolving credit facility includes a mechanism for adoption of a different benchmark rate upon the discontinuation of LIBOR.

Other TRNS 10-K year-over-year comparisons