8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) May 16, 2006

Transcat, Inc.

  (Exact name of registrant as specified in its charter)

Ohio	000-03905	16-0874418
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
35 Vantage Point Drive, Rochester, New York		14624
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code 585-352-7777

  (Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

     On May 16, 2006, Transcat, Inc. (the “Company”) issued a press release regarding its financial results for fiscal year 2006 and the fourth quarter ended March 25, 2006. The press release is attached as Exhibit 99.1 to this Form 8-K.

Item 1.01 Entry into a Material Definitive Agreement.

Fiscal 2006 Bonus Performance Standards

     In April 2005, the Compensation Committee of the Board of Directors (the “Compensation Committee”) of the Company established certain performance standards under the Company’s Performance Incentive Plan (the “Performance Plan”) for the fiscal year ending March 25, 2006 (“Fiscal 2006”). The Performance Plan, which includes Carl E. Sassano, the Company’s Chairman of the Board, President and Chief Executive Officer and Charles P. Hadeed, the Company’s Chief Operating Officer, Chief Financial Officer and Vice President of Finance, provides for performance-based awards if the Company attains specific targeted performance goals. Assuming the targets are met, Mr. Sassano and Mr. Hadeed are eligible to receive an annual cash bonus.

      The following table illustrates the Fiscal 2006 target amount of annual cash bonus payments for Mr. Sassano and Mr. Hadeed, and the relative weights assigned to each performance standard :

	Target Annual	Relative weighting of factors in determining
	Cash Bonus Amount as a	Annual Cash Bonus amount
	Percentage of	Operating
	Base Salary	Earnings	Service Sales	Product Sales
Carl E. Sassano	40%	60%	25%	15%
Charles P. Hadeed	33%	60%	25%	15%

Payment of Fiscal 2006 Bonuses to Certain Executives

     Based on the above-referenced performance standards, the Compensation Committee approved, effective May 16, 2006, the payment of the following cash bonuses to Mr. Sassano and Mr. Hadeed under the Performance Plan for Fiscal 2006:

	Fiscal 2006 Bonus Payment
Carl E. Sassano	$113,000
Charles P. Hadeed	$83,000

Establishment of Fiscal 2007 Bonus Performance Standards

     The Compensation Committee established, effective May 16, 2006, identical performance standards under the Performance Plan set forth in the table above for the fiscal year ending March 31, 2007, except that Mr. Hadeed’s Target Annual Cash Bonus Amount as a Percentage of Base Salary was increased from 33% to 40%.

Approval of Fiscal 2007 Salary Increases for Certain Executives

     The Compensation Committee approved, effective May 16, 2006, increases to the annual base salary for Mr. Sassano and Mr. Hadeed for the fiscal year ending March 31, 2007 as follows:

	Fiscal 2006 Base Salary	Fiscal 2007 Base Salary
Carl E. Sassano	$278,330	$300,000
Charles P. Hadeed	$215,000	$240,000

Item 9.01 Financial Statements and Exhibits.

     (d) Exhibits.

Exhibit No.	Description
99.1	Transcat, Inc. Press Release dated May 16, 2006

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	TRANSCAT, INC.
Dated: May 19, 2006	By:	/s/ Charles P. Hadeed
		Charles P. Hadeed
		Chief Operating Officer, Vice
		President of Finance and Chief
		Financial Officer

EX-99.1

News Release

Corporate Offices
35 Vantage Point Drive, Rochester, New York 14624
Telephone: 585-352-7777 Fax: 585-352-7788

Contact:
Charles P. Hadeed, COO, VP Finance & CFO	Van Negris/Lexi Terrero
Transcat, Inc.	Van Negris & Company, Inc.
585-352-7777	212-759-0290

FOR IMMEDIATE RELEASE

Transcat Announces Fiscal Year 2006 and Fourth Quarter Results;

Revenues and Profitability Rise in Fiscal Year 2006

ROCHESTER, NY — May 16, 2006 — Transcat, Inc. (Nasdaq: TRNS), a leading global distributor of professional grade test, measurement, and calibration instruments and a provider of calibration and repair services, today announced financial results for fiscal year 2006 and the fourth quarter ended March 25, 2006.

Fiscal Year 2006 and Fourth Quarter Overview

• Net sales increased 9.3% to $60.5 million in fiscal year 2006 and 3.2% to $16.1 million in the fiscal year 2006 fourth quarter.

• Gross profit ratio for fiscal year 2006 decreased 0.1 points to 25.0% from fiscal year 2005. Gross profit ratio for the fiscal year 2006 fourth quarter decreased 2.8 points to 25.1% from the fiscal year 2005 fourth quarter, primarily because of the timing of purchase rebates earned in the fiscal year 2005 fourth quarter.

• Operating income for fiscal year 2006 increased $0.6 million to $1.5 million from fiscal year 2005. Operating income for the fiscal year 2006 fourth quarter decreased $0.4 million to $0.3 million from the fiscal year 2005 fourth quarter, primarily because of the timing of purchase rebates earned in the fiscal year 2005 fourth quarter.

• In the fourth quarter of fiscal year 2006, a substantial portion of the net deferred tax asset valuation reserve was reversed, resulting in a net tax credit for the quarter and the year of $2.7 million.

• Net income for fiscal year 2006 was $3.6 million, or $0.50 per diluted share, compared with net income of $0.3 million, or $0.04 per diluted share, in fiscal year 2005. Net income for the 2006 fiscal year fourth quarter was $2.8 million, or $0.38 per diluted share, compared with net income of $0.5 million, or $0.07 per diluted share, in the 2005 fiscal year fourth quarter.

• Distribution Products - Net sales increased 10.1% to $40.8 million in fiscal year 2006 from $37.1 million in fiscal year 2005. Net sales increased 4.6% to $10.5 million in the fiscal year 2006 fourth quarter from $10.1 million in the fiscal year 2005 fourth quarter. Distribution Products gross profit ratio for fiscal year 2006 increased 0.4 points to 24.0% from fiscal year 2005. Distribution Products gross profit ratio for the fiscal year 2006 fourth quarter decreased 2.4 points to 23.1% from the fiscal year 2005 fourth quarter, the majority of which was attributable to the timing of certain product purchase rebates earned in the fiscal year 2005 fourth quarter.

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Transcat, Inc.
Page Two - May 16, 2006

• Calibration Services - Net sales increased 7.9% to $19.7 million in fiscal year 2006 from $18.2 million in fiscal year 2005. Net sales slightly increased 0.7% to $5.54 million in the fiscal year 2006 fourth quarter from $5.50 million in the fiscal year 2005 fourth quarter. Calibration Services gross profit ratio for fiscal year 2006 decreased 1.2 points to 26.9% from fiscal year 2005. Calibration Services gross profit ratio for the fiscal year 2006 fourth quarter decreased 3.3 points to 28.9% from the fiscal year 2005 fourth quarter, impacted by ongoing investments in service infrastructure and sales mix.

Operations Review

Commenting on the fiscal year 2006 and fourth quarter results, Carl E. Sassano, Chairman of the Board, President and Chief Executive Officer, stated: “We delivered significant value to our shareholders in fiscal year 2006 as our fiscal year 2006 pre-tax earnings were more than three times the pre-tax earnings of fiscal year 2005.

“We achieved sales growth in both Distribution Products and Calibration Services in relation to prior fiscal year quarter comparisons, resulting in a very positive 9.3% overall sales growth rate for the fiscal year.

“Operating earnings for fiscal year 2006 increased 69% to $1.5 million, inclusive of investments in calibration sales and service infrastructure, product marketing initiatives and increased manpower. The Company’s strong operating cash flow was used to reduce our debt by 41% over the course of the year.

“Our excellent results for fiscal year 2006 are due to the continued implementation of our strategic plan. Transcat’s customers in the Process, Utility, Pharmaceutical and Electrical industries have an ongoing need for both our products and calibration service for those products. Our strategy of cross-selling to these customers is expanding our presence in these strategically targeted market segments.

“The continued growth in revenues in fiscal years 2005 and 2006, resulting from the execution of the Company’s strategic plan and aggressive management of operating expenses, has strengthened our balance sheet and improved cash flow. As a result of the Company’s continued profitability over the last four years and our belief that our future performance will result in sustained profitability and taxable income, we have reversed a significant portion of the Company’s deferred tax valuation reserve. We believe that Transcat’s business turnaround from problems of the late 90’s has been accomplished.

“In February 2006, we were pleased to announce the acquisition of N.W. Calibration Inspection, Inc. in Fort Wayne, Indiana, which has expanded the Transcat Calibration Services Laboratories network to 12 Transcat Calibration Centers of Excellence. Our strategic acquisition of NWCI has expanded the services we offer our customers. The addition of these new services, working with our customers’ Quality Engineering departments on new product development projects, which include First Part Inspection and Reverse Engineering, is allowing Transcat to increase Calibration Services sales and become a more integral service supplier within our identified target markets.”

Looking Ahead

Mr. Sassano continued: “As we look ahead, we expect to build on the solid foundation that has been established over the previous four years, with continued steady growth in revenues. In fiscal year 2007, our goals are to achieve Distribution Products sales growth in the high single digits and Calibration Services sales growth in the low to mid teens.

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Transcat, Inc.
Page Three - May 16, 2006

“We are confident that the strategies and resources we have in place will win us greater recognition in our markets and generate increased demand for our services and products. I believe the interests of our shareholders, customers and employees have been advanced by the strategic initiatives we have been implementing and I expect this to continue in the future.”

Fiscal Year 2006 and Fourth Quarter Financial Summary

For fiscal year 2006, net sales were $60.5 million, an increase of $5.2 million, or 9.3%, compared with net sales of $55.3 million for fiscal year 2005. Distribution Products net sales for fiscal year 2006 were $40.8 million, an increase of $3.7 million, or 10.1%, compared with net sales of $37.1 million for fiscal year 2005. Calibration Services net sales for fiscal year 2006 were $19.7 million, an increase of $1.4 million, or 7.9%, compared with net sales of $18.2 million for fiscal year 2005.

For the fiscal year 2006 fourth quarter, net sales were $16.1 million, an increase of $0.5 million, or 3.2%, compared with net sales of $15.6 million during the fiscal year 2005 fourth quarter. Distribution Products net sales for the fourth quarter of fiscal year 2006 were $10.5 million, an increase of $0.5 million, or 4.6%, compared with net sales of $10.1 million for the fourth quarter of fiscal year 2005. Calibration Services net sales for the fourth quarter of fiscal year 2006 were $5.54 million, a slight increase of $0.04 million, or 0.7%, compared with net sales of $5.50 million for the fourth quarter of fiscal year 2005.

Net income for fiscal year 2006 was $3.6 million, or $0.50 per fully diluted share, which includes a net tax credit of $2.7 million, as compared with $0.3 million, or $0.04 per fully diluted share, in fiscal year 2005. Net income for the fiscal year 2006 fourth quarter was $2.8 million, or $0.38 per fully diluted share, which includes a net tax credit of $2.7 million, compared with $0.5 million, or $0.07 per fully diluted share, for the fiscal year 2005 fourth quarter.

About Transcat, Inc.

Transcat, Inc. is a leading global distributor of professional grade test, measurement and calibration instruments and an accredited provider of calibration and repair services primarily to the process, life science and manufacturing industries.

Through the Company’s Calibration Services segment, Transcat offers precise, reliable, fast calibration services through twelve Calibration Centers of Excellence strategically located across the United States and Canada to approximately 8,000 customers. To support the Company’s customers’ calibration service needs, Transcat delivers the industry’s highest quality calibration services and repairs. Each of the calibration laboratories is ISO-9001: 2000 and the scope of accreditation to ISO/IEC 17025 is the widest in the industry.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements, which are subject to various risks and uncertainties. The Company’s actual results could differ from those anticipated in such forward-looking statements as a result of numerous factors that may be beyond the Company’s control.

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- Statistical Tables Follow

Transcat, Inc.
Page Four - May 16, 2006

Transcat, Inc.
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)

	(Unaudited)
	Fourth Quarter Ended				Twelve Months Ended
	March		March		March		March
	25, 2006		26, 2005		25, 2006		26, 2005
Product Sales	$	10,517	$	10,058	$	40,814	$	37,086
Service Sales		5,537		5,499		19,657		18,221
Net Sales		16,054		15,557		60,471		55,307
Cost of Products Sold		8,085		7,486		31,002		28,307
Cost of Services Sold		3,939		3,732		14,370		13,108
Total Cost of Products and Services Sold		12,024		11,218		45,372		41,415
Gross Profit		4,030		4,339		15,099		13,892
Selling, Marketing, and Warehouse Expenses		2,354		2,196		8,553		7,948
Administrative Expenses		1,421		1,465		5,028		5,045
Total Operating Expenses		3,775		3,661		13,581		12,993
Operating Income		255		678		1,518		899
Interest Expense		106		116		427		350
Other Expense		32		58		162		293
Total Other Expense		138		174		589		643
Income Before Income Taxes		117		504		929		256
Benefit for Income Taxes, net		2,648		-		2,648		-
Net Income	$	2,765	$	504	$	3,577	$	256
Basic Earnings Per Share	$	0.41	$	0.08	$	0.54	$	0.04
Average Shares Outstanding		6,754		6,478		6,647		6,396
Diluted Earnings Per Share	$	0.38	$	0.07	$	0.50	$	0.04
Average Shares Outstanding		7,336		7,165		7,176		6,966

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Transcat, Inc.
Page Five - May 16, 2006

Transcat, Inc.
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Amounts)

	March			March
	25, 2006			26, 2005
ASSETS
Current Assets:
Cash	$	115		$	106
Accounts Receivable, less allowance for doubtful accounts of $63 and $56 as of March 25, 2006 and March 26, 2005, respectively		7,989			8,089
Other Receivables		-			358
Finished Goods Inventory, net		3,952			5,952
Prepaid Expenses and Deferred Charges		732			630
Deferred Tax Assets		1,038			-
Total Current Assets		13,826			15,135
Property, Plant and Equipment, net		2,637			1,984
Capital Leases, net		50			115
Goodwill		2,967			2,524
Prepaid Expenses and Deferred Charges		113			188
Deferred Tax Assets		1,624			-
Other Assets		271			261
Total Assets	$	21,488		$	20,207
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	4,219		$	4,544
Accrued Payrolls, Commissions, and Other		2,530			2,126
Income Taxes Payable		102			100
Current Portion of Term Loan		667			758
Current Portion of Capital Lease Obligations		56			66
Revolving Line of Credit		3,252			5,498
Total Current Liabilities		10,826			13,092
Term Loan, less current portion		353			1,020
Capital Lease Obligations, less current portion		-			56
Deferred Compensation		118			181
Deferred Gain on TPG Divestiture		1,544			1,544
Total Liabilities		12,841			15,893
Stockholders’ Equity:
Common Stock, par value $0.50 per share, 30,000,000 shares authorized; 7,048,028 and 6,700,505 shares issued as of March 25, 2006 and March 26, 2005, respectively; 6,791,240 and 6,453,241 shares outstanding as of March 25, 2006 and March 26, 2005, respectively		3,524			3,350
Capital in Excess of Par Value		4,641			3,995
Warrants		329			430
Unearned Compensation		(15	)		(17	)
Accumulated Other Comprehensive Gain		181			96
Retained Earnings (Deficit)		875			(2,702	)
Less: Treasury Stock, at cost, 256,788 and 247,264 shares as of March 25, 2006 and March 26, 2005, respectively		(888	)		(838	)
Total Stockholders’ Equity		8,647			4,314
Total Liabilities and Stockholders’ Equity	$	21,488		$	20,207

Certain reclassifications of prior year’s financial information have been made to conform with current fiscal year’s presentation.

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Transcat, Inc.
Page Six - May 16, 2006

Transcat, Inc.
Consolidated Statements of Cash Flows
(In Thousands)

	For the Years Ended
	March			March
	25, 2006			26, 2005
Cash Flows from Operating Activities:
Net Income	$	3,577		$	256
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Loss on Disposal of Assets		-			16
Deferred Taxes Valuation Allowance		(2,662	)		-
Depreciation and Amortization		1,401			1,486
Provision for Doubtful Accounts Receivable		40			69
Provision for Returns		(1	)		(32	)
Provision for Slow Moving or Obsolete Inventory		6			13
Common Stock Expense		78			170
Amortization of Unearned Compensation		46			135
Changes in Assets and Liabilities, excluding acquisition:
Accounts Receivable and Other Receivables		499			(376	)
Inventories		1,994			(2,229	)
Income Taxes Payable		2			144
Prepaid Expenses, Deferred Charges, and Other		(592	)		(507	)
Accounts Payable		(325	)		405
Accrued Payrolls, Commissions, and Other		404			468
Deferred Compensation		(32	)		(24	)
Net Cash Provided by (Used in) Operating Activities		4,435			(6	)
Cash Flows from Investing Activities:
Purchase of Property, Plant and Equipment		(914	)		(866	)
Purchase of N.W. Calibration Inspection, Inc.		(863	)		-
Net Cash Used in Investing Activities		(1,777	)		(866	)
Cash Flows from Financing Activities:
Revolving Line of Credit, net		(2,246	)		(943	)
Payments on Term Loans		(758	)		(890	)
Proceeds from Term Loan Borrowings		-			2,000
Payments on Capital Leases		(66	)		(61	)
Issuance of Common Stock		416			162
Net Cash (Used in) Provided by Financing Activities		(2,654	)		268
Effect of Exchange Rate Changes on Cash		5			163
Net Increase (Decrease) in Cash		9			(441	)
Cash at Beginning of Period		106			547
Cash at End of Period	$	115		$	106
Supplemental Disclosure of Non-Cash Financing Activity:
Expiration of Warrants	$	101		$	88
Treasury Stock Acquired in Cashless Exercise of Stock Options	$	50		$	385
Disposal of Fully Reserved Obsolete Inventory	$	104		$	-
Non-Cash Issuance of Common Stock	$	153		$	-
Stock Issued in Connection with Business Acquisition	$	100		$	-

Certain reclassifications of prior year’s financial information have been made to conform with current fiscal year’s presentation.

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