Performance at Transcat Inc., aided by its service segment and stabilization in the national economy, steadied in the second quarter fiscal 2010, the Ogden company reported. The company expects a stronger second half.
Transcat’s net income dipped to $200,000, or two cents a diluted share, from $400,000, or 6 cents a year ago. Net revenue was fairly flat at $18.5 million, off slightly from $18.6 million a year ago. The fiscal 2009 results included six weeks of Westcon Inc. operations, which Transcat acquired on Aug. 14, 2008.
The company reported its results after the market closed Monday. Shares of Transcat (NasdaqCM: TRNS) were unchanged at midday. The stock closing at $6.25 Monday, within a 52-week trading range of $3.81 to $9.24 a share.
Service segment revenue at the calibration company grew 15.5 percent, offsetting a 7.6 percent decline in product segment sales. Sales and marketing investments helped grow revenue in the service segment. Services constituted more than 35 percent of total revenue, at $6.5 million, up from $5.7 million a year ago.
“This growth was leveraged into expanding that segment’s gross profit margin by 180 basis points and achieving near break-even segment operating profit,” said Charles Hadeed, president and CEO, in a statement. “Although product segment results remained soft, sustained growth within our wind energy customer base, which accounted for 13.1 percent of product segment sales, somewhat mitigated external economic factors.”
Product segment sales, representing the company’s distribution business, were $12 million in the quarter, down $1 million, or 7.6 percent.
For the first half of fiscal 2010, net revenue was $35.7 million, down 2.1 percent from $36.5 million. Net sales in the product segment fell 8 percent in the first half; the service segment logged an 11.4 percent uptick.
Sales to wind energy customers in the first half accounted for 11.9 percent, or $2.8 million, of net product sales. Product sales generated over the company’s Web site were $1.9 million, up 17.5 percent.
Net income in the first half was $100,000, or a penny a diluted share, compared with $700,000, or 9 cents a diluted share, a year ago. Net cash generated from operations was $3.5 million in the first six months, compared with $1 million.
The incremental cash, officials said, was used to repay long-term debt which decreased to $1.6 million at Sept. 26, compared with $2.2 million at June 27 and $3.6 million at March 28.
Hadeed noted expectations for a stronger second half.
“We are cautiously optimistic that things will continue to improve, which should result in our second half being stronger than the first,” Hadeed said. “It is still too early for us to define how wind energy sales will affect our overall business, though we feel product sales to wind energy customers should continue to be strong.
“Our solid cash flow generation and balance sheet will allow us to continue to make prudent and strategic investments in our infrastructure and people, so that we can maintain our focus on the execution of our long-term strategy.”
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