ROCHESTER, NY---Transcat Inc., a distributor of professional-grade handheld test, measurement and control instruments and accredited provider of calibration, repair, inspection and other compliance services, reported financial results for its second quarter ended September 29, 2012.  Included in the report ed results are those of Newark Corp.'s calibration services business, which the Company acquired on September 8, 2011 and those of Anacor Compliance Services, Inc., which the Company acquired on July 16, 2012.

Fiscal 2013 second quarter total revenue increased 6.4%, to $26.8 million from $25.2 million in the second quarter of the prior fiscal year on strong Service segment revenue growth of 19.8%.  Product segment sales were consistent with the prior year at $16.9 million.

Net income was $0.7 million, or $0.10 per diluted share, in the second quarter of fiscal 2013 and fiscal 2012.

Charles P. Hadeed, CEO of Transcat, commented, "Our revenue growth in the second quarter, against fairly challenging economic headwinds and prior year comparables, demonstrates the effectiveness of our strategy to take market share in our Service segment both organically and through acquisitio ns.

"We achieved 33.8% incremental operating margin in the Service segment reflecting the potential earnings power of this segment as organic volume increases.  Our product distribution business is a strong, steady performer despite the challenging economy and increased competition in the marketplace."

Operating income for the second quarter of fiscal 2013 was $1.2 million, a slight decrease from the prior fiscal year period, while operating margin declined 50 basis points to 4.4% in the second quarter of fiscal 2013 compared with 4.9% for the prior-year period.  Total operating expenses in the second quarter of fiscal 2013 and 2012 were consistent.

During the second quarter of fiscal 2013, Transcat generated $1.8 million of EBITDA (earnings before interest, taxes, depreciation and amortization), a decrease of $0.2 million when compared with the same quarter of the prior fiscal year. 

Lee D. Rudow, President and COO of Transcat, noted, "The impact of vendor rebates, w hich are based on sales growth targets, can vary significantly from period to period and impact our Product segment gross profit and gross margin.  In the second quarter, we realized a decrease in annual rebates which had a negative impact on our Product segment results." 

• Product segment sales were $16.9 million in the second quarter of fiscal 2013, consistent with the prior-year period.  Average Product segment sales per day were unchanged at $269 thousand in the second quarter of fiscal 2013 and 2012.
• Online sales of the Company's products increased 31.7% to $2.0 million, or 11.7% of Product segment sales, in the second quarter of fiscal 2013 compared with $1.5 million, or 8.9% of Product segment sales, in the prior-year period.
• Second quarter Product segment gross profit decreased 13.6%, to $3.7 million, or 22.0% of Product segment sales, primarily due to reduced volume-based rebate income.
• Product segment operating income decreased $0.6 million, or 41.9% to $0.8 million in the second quarter of fiscal 2013 as a result of the contraction in gross profit.  Operating margin was 5.0% and 8.6% of Product segment sales in the second quarter of fiscal 2013 and 2012, respectively.
• Product segment EBITDA was $1.0 million, or 6.2% of segment sales, in the second quarter of fiscal 2013, compared with $1.7 million, or 9.9% of segment sales, in the prior-year period.  See Note 1 on page 4 for a description of this non-GAAP financial measure and page 9 for the EBITDA Reconciliation table.

Mr. Rudow added, "We remain encouraged with the resiliency of our product sales in the current economic climate.  In the prior-year period, sales were strengthened by one-time opportunistic orders.  Excluding those orders, Product segment sales increa sed by 4%.  Our investment in online marketing has continued to generate quarter-over-quarter double-digit sales growth within our online product business and remains a key focus as we move forward.

"Strong second quarter organic revenue growth combined with expense control and operating efficiency have demonstrated the inherent leverage in our Service segment," stated Mr. Rudow.  "We will continue to focus our efforts on this segment and believe we can continue to strengthen the segment's contribution margin and EBITDA."

• Service segment revenue increased 19.8%, or $1.6 million, to $9.8 million in the second quarter of fiscal 2013 from the second quarter of the prior fiscal year.
• Second quarter fiscal 2013 Service segment gross profit improved $0.5 million, or 27.9%, to $2.4 million compared with the same period in the prior fiscal year, while gross margin expanded 150 basis points from the second quarter of fiscal 2012 to 23.9%. 
• Service segment contribution margin increased 83.5% to $1.2 million compared with the second quarter of fiscal 2012.  See Note 1 on page 4 for a description of this non-GAAP financial measure and page 10 for the Contribution Margin Reconciliation in the Business Segment Data.
• Operating expenses associated with the Service segment decreased 1.7% to $2.0 mill ion in the second quarter of fiscal 2013 compared with the second qu arter of the prior fiscal year. 
• Service segment operating income increased to $0.3 million in the second quarter of fiscal 2013, an improvement from an operating loss of $0.2 million in the second quarter of fiscal 2012.  Operating margin over the same comparable period expanded 600 basis points.
• Service segment EBITDA increased $0.46 million, to $0.7 million in the fiscal 2013 second quarter compared with $0.3 million in the second quarter of fiscal 2012.  As a percentage of Service segment revenue, EBITDA for the Service segment was 7.5% and 3.5% in the second quarters of fiscal 2013 and 2012, respectively.