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Note 8 - Commitments

12 Months Ended

Mar. 30, 2024

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE 8 – COMMITMENTS

Leases:

The Company determines if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Historically, non-lease components such as utilities have been immaterial. Payments under our lease arrangements are primarily fixed. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Transcat leases facilities, equipment, and vehicles under various non-cancelable operating leases. As of March 30, 2024, the remaining lease terms on our operating leases range from approximately one year to fifteen years, and include any renewal and/or termination options that are reasonably certain to be exercised by the Company. There is no transfer of title or option to purchase the leased assets upon expiration. The weighted average discount rate for fiscal years 2024, 2023 and 2022 was 4.1%, 3.9% and 4.2%, respectively. The weighted average remaining lease term is approximately eleven years. Short-term leases are leases having a term of 12 months or less. The Company recognizes short-term leases on an as incurred basis and does not record a related lease asset or liability for such leases. Short-term lease expense was immaterial in fiscal years 2024, 2023 and 2022.

The components of lease expense for the current and prior-year comparative periods were as follows (dollars in thousands):

		*FY 2024*				*FY 2023*				*FY 2022*
Operating lease cost		$	5,948			$	4,730			$	3,687
Variable lease cost			666				608				619
Total lease cost		$	6,614			$	5,338			$	4,306

Supplemental cash flow information related to leases was as follows:

		*FY 2024*				*FY 2023*				*FY 2022*
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow from operating leases		$	2,954			$	2,469			$	2,207
Right to Use Assets obtained in exchange for lease liabilities		$	4,965			$	4,519			$	3,874

Total rental expense was approximately $6.6 million, $5.3 million and $4.3 million in fiscal years 2024, 2023 and 2022, respectively. The minimum future annual rental payments under the non-cancelable leases at March 30, 2024 are as follows (in millions):

Fiscal Year			Amount
2025			4.6
2026			3.9
2027			3.6
2028			2.9
2029			2.0
Thereafter			8.5
Total minimum lease payments			25.5
Less: Imputed interest			8.1
Present value of remaining lease payments			17.4

Term Loan:

Effective December 2018, the Company has term loan repayments (principal plus interest) of $0.2 million per month through December 2025. Principal payments relating to the 2018 Term Loan will be $2.3 million in fiscal year 2025 and $1.8 million in fiscal year 2026.

Contingent Consideration:

In connection with the acquisition of NEXA, there were 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. As of March 25, 2023, the estimated fair value for the earn-out payments was zero.

During fiscal year 2024, the Company entered into an Amendment to the Share Purchase Agreement (the “First Amendment”). Pursuant to the First Amendment, the potential earn-out payments would have been up to $7.1 million for the Earn-Out years of calendar year 2023, 2024 and 2025 based upon NEXA achieving certain EBITDA goals. If achieved, the earn-out payments would be made in shares of common stock unless certain criteria is met for cash payment. Subsequent to fiscal year 2024, the Company entered into an Amendment to the Share Purchase Agreement (the “Second Amendment”). Pursuant to the Second Amendment, the Company agreed to pay approximately $0.5 million for the Earn-Out year of calendar year 2023 and removed the entitlement for any future earn-out payments. As of March 30, 2024, the estimated fair value of the 2023 earn-out payment was approximately $0.5 million. As of March 30, 2024, the estimated fair value of the 2024 and 2025 earn-out payments was zero. See Note 9.