Rochester, New York-based Transcat, Inc. (NASDAQ:TRNS) recently released its financial and operating results for the quarter which ended last year on December 23. During the quarter revenues grew by 7.1% to reach a record high of $40.5 million while operating income grew by 13%.
“We are pleased to report strong third quarter results in both segments. This quarter represents record results for our Distribution segment as momentum in our core sales as well as rentals continues to be strong,” said the president and chief executive officer of Transcat, Lee D. Rudow.
In the reported quarter there was an improvement in the gross margin by 40 basis points while the growth of consolidated gross profit was 8.8%. Administrative and general expenses increased significantly by $0.5 million to reach a figure of $2.9 million and this was on the back of continued investment in operational excellence initiatives as well as infrastructure. Operating margin on the other hand grew to 6.6% while operating income reached a figure of $0.3 million.
Transcat also benefited from the overhaul of the tax code in the United States last year. Under the act which became law in December last year the corporate tax rate fell to 21% from 35% and this resulted in Transcat paying an effective tax rate of 21.9% in Q3 of fiscal year 2018 when new and old income tax rates were combined. As a result of the tax cuts the diluted EPS for Q3 thus increased to $0.25 from $0.07 with $0.04 being attributed to the reforms in the tax code.
Revenues from services recorded an organic growth rate of 7.5% and this was partly due to new business in the life sciences market as well as due to growth in the general industrial segment which consists of aerospace and defense markets.
The gross profit of Transcat rose by $0.4 million while there was an improvement of 30 basis points in the gross margin. This was attributed to improvements in productivity especially employee productivity.
Distribution sales also increased as a result of improved industrial demand. This included new equipment sold the independent representative network of the company as well as through online channels.