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BUSINESS ACQUISITIONS | 12 Months Ended
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Mar. 26, 2022
Business Combinations [Abstract] |
BUSINESS ACQUISITIONS | NOTE 9 – BUSINESS ACQUISITIONS Tangent: Effective December 31, 2021, Transcat purchased all the outstanding membership units of Tangent Labs, LLC, a privately held company (“Tangent”). Tangent provides in-house and on-site calibrations of precision measurement and control instrumentation to customers in the life science, aerospace and other regulated industries, and has lab locations in Indianapolis, Indiana and Huntsville, Alabama. This transaction aligned with a key component of the Company’s strategy of acquiring local capabilities in attractive geographies. The Tangent goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All the goodwill and intangible assets relating to the Tangent acquisition has been allocated to the Service segment. Intangible assets related to the Tangent acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to fifteen years and are deductible for tax purposes. Amortization of goodwill related to the Tangent acquisition is not deductible for tax purposes. The purchase price for Tangent was approximately $8.9 million, all paid in cash, and is subject to certain customary holdback provisions and a portion of which was placed in escrow to secure the sellers’ obligations in the event that a key employee terminates employment with Tangent on or before the first anniversary of the closing of the transaction. $7.9 million was paid in cash and $1.0 million of the purchase price has been put into escrow as a holdback for indemnification claims, if any. The purchase price allocation is subject to revision based upon our final review of intangible asset valuation assumptions, working capital adjustments, assets acquired, and liabilities assumed. The following is a summary of the preliminary purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Tangent’s assets and liabilities acquired on December 31, 2021 (in thousands):
Goodwill |  | $ | 5,587 |
Intangible Assets – Customer Base & Contracts |  |  | 4,150 |
Intangible Assets – Covenant Not to Compete |  |  | 220 |
|  |  | 9,957 |
Plus: | Cash |  |  | 26 |
| Accounts Receivable |  |  | 187 |
| Other Current Assets |  |  | 16 |
Less: | Current Liabilities |  |  | (67 | )
| Deferred Tax Liability |  |  | (1,195 | )
Total Purchase Price |  | $ | 8,924 |
From the date of acquisition, Tangent has contributed revenue of $0.6 million and operating income of $0.1 million, which includes the negative impact of amortization of the acquired intangible assets, for fiscal year 2022. NEXA: Effective August 31, 2021, Transcat purchased all of the outstanding capital stock of Cal OpEx Limited (d/b/a NEXA Enterprise Asset Management), a private Irish company, which owns all of the issued and outstanding capital stock of its U.S.-based subsidiary, Cal OpEx Inc., a Delaware corporation (collectively, “NEXA”). NEXA provides calibration optimization and other technical solutions to improve asset and reliability management programs to pharmaceutical, biotechnology, and medical device companies worldwide. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities. The NEXA goodwill is primarily attributable to the workforce acquired, as well as operational synergies and other intangibles that do not qualify for separate recognition. All of the goodwill and intangible assets relating to the NEXA acquisition has been allocated to the Service segment. Intangible assets related to the NEXA acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to five years and are deductible for tax purposes. Amortization of goodwill related to the NEXA acquisition is not deductible for tax purposes. The purchase price for NEXA was approximately $26.2 million and was paid with $23.9 million in cash and the issuance of 34,943 shares of our common stock valued at $2.4 million. Additionally, there are potential earn-out payments of up to $7.5 million over the four-year period following the closing of the transaction based upon NEXA achieving certain annual revenue and EBITDA goals. If achieved, the earn-out payments will also be made in shares of common stock unless certain criteria is met for cash payment. As of August 31, 2021 and March 26, 2022, the estimated fair value for the contingent earn-out payments, classified as Level 3 in the fair value hierarchy, was $0.2 million and included in the purchase price allocation below. This amount was calculated using a Geometric Brownian motion distribution that was then used in a Monte Carlo simulation model. Assumptions used in the Monte Carlo simulation model included: 1) weighted-average cost of capital of 6.60%, 2) risk-free interest rate of 0.58%, 3) asset volatility of 20.00%, and 4) forecasted revenue and EBITDA. This contingent consideration is remeasured quarterly. If, as a result of remeasurement, the value of the contingent consideration changes, any charges or income will be included in the Company’s Consolidated Statements of Income. For fiscal year 2022, there were no changes to the range of outcomes for the Monte Carlo simulation model for the valuation of the contingent consideration, no gains or losses recognized in earnings for changes in the remeasurement of the contingent consideration, and no other issuance or settlement of the contingent consideration. $0.1 million of the purchase price has been put into escrow as a holdback for indemnification claims, if any. The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of NEXA’s assets and liabilities acquired on August 31, 2021 (in thousands):
Goodwill |  | $ | 15,679 |
Intangible Assets – Customer Base & Contracts |  |  | 5,600 |
Intangible Assets – Backlog |  |  | 490 |
Intangible Assets – Covenant Not to Compete |  |  | 600 |
|  |  | 22,369 |
Plus: | Cash |  |  | 3,732 |
| Accounts Receivable |  |  | 2,434 |
| Non-Current Assets |  |  | 38 |
Less: | Current Liabilities |  |  | (572 | )
| Deferred Tax Liability |  |  | (1,769 | )
Total Purchase Price |  | $ | 26,232 |
From the date of acquisition, NEXA has contributed revenue of $5.5 million and operating loss of $0.3 million, which includes the negative impact of amortization of the acquired intangible assets, for fiscal year 2022. Upstate Metrology: Effective April 29, 2021, Transcat acquired substantially all of the assets of Upstate Metrology Inc. (“Upstate Metrology”), a New York based provider of calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that can leverage the Company’s already existing operating infrastructure. All the goodwill related to the Upstate Metrology acquisition has been allocated to the Service segment. Amortization of goodwill related to the Upstate Metrology acquisition is deductible for tax purposes. The total purchase price for the assets of Upstate Metrology was approximately $0.9 million. The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of Upstate Metrology’s assets and liabilities acquired on April 29, 2021 (in thousands):
Goodwill |  | $ | 483 |
Plus: | Current Assets |  |  | 189 |
| Non-Current Assets |  |  | 270 |
Less: | Current Liabilities |  |  | (11 | )
Total Purchase Price |  | $ | 931 |
From the date of acquisition, Upstate Metrology has contributed revenue of $1.0 million. Since this operation was integrated immediately into our existing operation, its separate operating income in undeterminable. BioTek: Effective December 16, 2020, Transcat acquired substantially all of the assets of BioTek Services, Inc. (“BioTek”), a Virginia based provider of pipette calibration services. This transaction aligned with a key component of the Company’s acquisition strategy of targeting businesses that expand the depth and breadth of the Company’s Service capabilities. BioTek’s focus on pipettes complements the current offerings Transcat provides to the life science sector. All of the goodwill and intangible assets relating to the BioTek acquisition has been allocated to the Service segment. Intangible assets related to the BioTek acquisition are being amortized for financial reporting purposes on an accelerated basis over the estimated useful life of up to 10 years and are deductible for tax purposes. Amortization of goodwill related to the BioTek acquisition is deductible for tax purposes. The total purchase price for the assets of BioTek was approximately $3.5 million. $0.4 million of the purchase price had been put into escrow as a holdback for indemnification claims, if any. This escrow was released during the fourth quarter of fiscal year 2022. The following is a summary of the purchase price allocation, in the aggregate, to the fair value, based on Level 3 inputs, of BioTek’s assets and liabilities acquired during the period presented (in thousands):
Goodwill |  | $ | 1,063 |
Intangible Assets – Customer Base & Contracts |  |  | 1,930 |
Intangible Assets – Covenant Not to Compete |  |  | 100 |
|  |  | 3,093 |
Plus: | Current Assets |  |  | 406 |
| Non-Current Assets |  |  | 8 |
Total Purchase Price |  | $ | 3,507 |
The results of acquired businesses are included in Transcat’s consolidated operating results as of the dates the businesses were acquired. The following unaudited pro forma information presents the Company’s results of operations as if the acquisitions of Tangent, NEXA, Upstate Metrology and BioTek had occurred at the beginning of fiscal year 2021. The pro forma results do not purport to represent what the Company’s results of operations actually would have been if the transactions had occurred at the beginning of the period presented or what the Company’s operating results will be in future periods.
|  | (Unaudited) |
|  | Fiscal Years Ended |
(in thousands except per share information) |  | March 26, 2022 |  |  | March 27, 2021 |
Total Revenue |  | $ | 210,463 |  |  | $ | 183,908 |
Net Income |  | $ | 12,151 |  |  | $ | 9,986 |
Basic Earnings Per Share |  | $ | 1.62 |  |  | $ | 1.35 |
Diluted Earnings Per Share |  | $ | 1.60 |  |  | $ | 1.32 |
Certain of the Company’s acquisition agreements include provisions for contingent consideration and other holdback amounts. The Company accrues for contingent consideration and holdback provisions based on their estimated fair value at the date of acquisition. As of March 26, 2022, $0.2 million of contingent consideration and $0.1 million of other holdback amounts were unpaid and reflected in current liabilities on the Consolidated Balance Sheets. During fiscal year 2022 and fiscal year 2021, no contingent consideration or other holdback amounts were paid. During fiscal year 2022, acquisition costs of $0.9 million were recorded as incurred as general and administrative expenses in the Consolidated Statements of Income. During fiscal year 2021, acquisition costs of less than $0.1 million were recorded as incurred as general and administrative expenses in the Consolidated Statements of Income.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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