Exhibit 99.1
Contact: David Young
TESSCO Technologies Incorporated
Acting Chief Financial Officer
(410) 229-1380
young@tessco.com
FOR IMMEDIATE RELEASE
TESSCO Announces Record Year
Fiscal Year Earnings Per Share Grew 114% on Revenues of $513 Million
HUNT VALLEY, MARYLAND, APRIL 27, 2005 — TESSCO Technologies Incorporated (Nasdaq: TESS), Your Total Source® supplier for everything needed to design, build, run, maintain or use wireless mobile, fixed and in-building systems, today reported its financial performance for the fiscal year and fourth quarter ended March 27, 2005.
Sales for fiscal year 2005 totaled $513.0 million, a 45% increase over sales of $352.7 million in fiscal year 2004. For the fourth quarter of fiscal year 2005, sales totaled $150.9 million, up 40% year-over-year.
Net income for fiscal year 2005 was $6.1 million, or $1.39 per diluted share, an increase of 110% and 114%, respectively, over fiscal year 2004 net income of $2.9 million and diluted earnings per share of $0.65. Fourth quarter net income was $1.3 million, or $0.31 per diluted share, compared to $1.5 million and $0.32 per diluted share for last year’s fourth quarter.
At the request of T-Mobile, on April 25, 2005 we agreed to continue to operate our e-commerce, marketing, sales and fulfillment system on their behalf, for one additional month, now through the end of August 2005. Under this extension, TESSCO will provide standby services in August for a fee, which we believe will provide a net profit contribution comparable to prior months, before profits generated by sales, if any.
“TESSCO had a great year, delivering record revenue and earnings,” said Robert B. Barnhill, chairman, president, and chief executive officer. “I am pleased that we successfully continued our diversification into new emerging product solutions and markets. Our focus has been, and continues to be, the aggressive diversification from the still difficult public carrier network infrastructure market, and from the soon to be transitioned relationship with our largest affinity program. Our product solutions for wireless broadband and in-building applications, retailing and private branded accessories, replacement and component parts, and other test and maintenance products have led to strong year-over-year revenue and gross profit growth in all of our lines of business and across each of our markets.”
Highlights for fiscal year 2005:
• Total sales to our commercial and government customers grew 20%. Within this market, self-maintained user, government and reseller sales grew 26%, while public carrier and network operator sales grew 7%. Gross margin for the commercial and government market was consistent at approximately 25% for both fiscal years.
• Affinity consumer direct sales increased 91% from fiscal year 2004. Gross margin for these sales was 11.1%, down from 16.0% in fiscal 2004, pulling total corporate gross margin down to 18.5%.
• Sales of network infrastructure products increased 13% in fiscal 2005 as compared to fiscal 2004, while gross profit in this line of business increased 6%. The decrease in gross margin from 25.1% to 23.5% was primarily due to product mix.
• Sales of mobile devices and accessory products to our commercial and government market increased 27% in fiscal 2005 as compared to fiscal 2004, while gross profits in this business increased 33%.
• Sales of installation, test and maintenance products increased 25% in fiscal 2005 as compared to fiscal 2004, while gross profits increased 28%.
• Operating income for fiscal year 2005 was $10.1 million, up 103% from the prior year. Earnings per share reached a record of $1.39, up 114% over last year.
• Cash flow from operations for the fiscal year was $4.3 million resulting in a cash balance of $3.9 million and total borrowings of only $5.4 million at year end, all relating to facility mortgages.
Highlights for the fourth quarter:
• Total commercial and government sales grew 20% over the prior year fourth quarter; self-maintained user, government and reseller sales grew 24%, while public carrier and network operator sales grew 11%. Gross margin in these markets was down slightly as a result of product mix, to 25.6% in the fourth quarter, as compared to 26.1% in fiscal 2004.
• Affinity consumer direct sales and gross profit increased 64% and 21%, respectively, over the fourth quarter of fiscal year 2004.
• Sales of network infrastructure products increased 7% in the fourth quarter of fiscal 2005 as compared to fiscal 2004, but gross profit declined 3%. Gross margin declined from 26.1% to 23.9% primarily due to product mix.
• Sales of mobile devices and accessory products to the commercial and government market increased 37% in the fourth quarter of fiscal 2005 as compared to fiscal 2004, while gross profit in this business increased 40%.
• Sales of installation, test and maintenance products increased 27% in the fourth quarter of fiscal 2005 as compared to fiscal 2004, while gross profits increased 35%.
• Operating income for the quarter was $2.2 million, down 12% from the prior year quarter.
• We implemented a state-of-the-art new order Configuration, Fulfillment and Delivery technology system, which was designed to improve customer service and drive productivity. The implementation was a success; however, start-up issues led to increased costs in the quarter of approximately $1.0 million, primarily due to increased expenses in premium freight, overtime and temporary labor to meet our customer promise of complete, on-time and error-free delivery. The new system provides vastly
• greater scalability to our fulfillment operations and we expect it to drive strong productivity improvements throughout this new fiscal year.
Mr. Barnhill continued, “At this time I want to recognize our team members, whose commitment, talent and contribution led to our record results this year, and will strive to accelerate our diversification and transition in our new fiscal year. We are looking forward to our new year, leveraging our strong foundation to pursue the many opportunities in the wireless industry. Thank you for your support.”
Business Outlook
The following statements and the statements above made by Robert Barnhill as to anticipated results, are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Due the current uncertainty of sales volumes related to the T-Mobile relationship, as well as potential continued start-up costs associated with the new Configuration, Fulfillment and Delivery technology system, the Company estimates that earnings per share for the first quarter are expected to be in the range of $0.25 to $0.30. As a result of these uncertainties, as well as general economic conditions, the Company is able to provide only quarter-by-quarter, and not fiscal year, business outlook at this time.
TESSCO will conduct a conference call on April 28, 2005 at 10 a.m. ET to discuss the financial results for the fourth quarter of fiscal year 2005. The conference call will be webcast live on the Internet at http://www.tessco.com.
TESSCO expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, TESSCO may reiterate the Business Outlook published in this press release. At the same time, TESSCO will keep this press release and Business Outlook publicly available on its Web site (www.tessco.com). However, the Business Outlook published in this press release reflects only the Company’s current best estimate and the Company assumes no obligation to update the information contained in this press release, including the Business Outlook, at any time.
About TESSCO
TESSCO Technologies Incorporated is a value-added supplier of the product solutions needed to design, build, run, maintain or use wireless systems. TESSCO is committed to delivering, fast and complete, the product needs of wireless system operators, program managers, contractors, resellers, and self- maintained utility, transportation, enterprise and government organizations. As Your Total Source(R) supplier of mobile and fixed-wireless network infrastructure products, mobility devices and accessories, and installation, test and maintenance equipment and supplies, TESSCO assures customers of on- time availability, while streamlining their supply chain process and lowering inventories and total costs. To learn more, please visit TESSCO.com.
Forward-Looking Statements
This press release may contain forward-looking statements. These forward- looking statements may generally be identified by the use of the words “may,” “will,” “expects,” “anticipates,” “believes,” “estimates,” and similar expressions and involve a number of risks and uncertainties. For a variety of reasons, actual results may differ materially from those described in or contemplated by any such forward-looking statement. Consequently, the reader is cautioned to consider all forward-looking statements in light of the risks to which they are subject. In addition to any factors discussed elsewhere in this press release, other factors could cause actual results to differ materially. Such factors include, but are not limited to, the following: the Company’s dependence on a relatively small number of suppliers and vendors, which could hamper the Company’s ability to maintain appropriate inventory levels and meet customer demand; the effect that the loss of certain customers or vendors could have on the Company’s net profits; economic conditions that may impact customers’ ability to fund purchases of our products and services; the possibility that unforeseen events could impair the Company’s ability to service its customers promptly and efficiently, if at all; the possibility that, for unforeseen reasons, the Company may be delayed in entering into or performing, or may fail to enter into or perform, anticipated contracts or may otherwise be delayed in realizing or fail to realize anticipated revenues or anticipated savings; existing competition from national and regional distributors and the absence of significant barriers to entry which could result in pricing and other pressures on profitability and market share; and continuing changes in the wireless communications industry, including risks associated with conflicting technologies, changes in technologies, inventory obsolescence and evolving Internet business models and the resulting competition. Consequently, the reader is cautioned to consider all forward-looking statements in light of the risks to which they are subject.
TESSCO Technologies Incorporated Consolidated Statements of Income | |
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| | | | | | | | | | | |
| | Fiscal Quarters Ended | | Fiscal Years Ended | |
| | March 27, 2005 | | December 26, 2004 | | March 28, 2004 | | March 27, 2005 | | March 28, 2004 | |
| | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | |
| | | | | | | | | | | |
Revenues | | $ | 150,907,500 | | $ | 135,825,100 | | $ | 107,623,000 | | $ | 513,027,300 | | $ | 352,674,300 | |
Cost of goods sold | | 125,836,300 | | 111,420,400 | | 86,492,900 | | 418,180,500 | | 275,028,200 | |
Gross profit | | 25,071,200 | | 24,404,700 | | 21,130,100 | | 94,846,800 | | 77,646,100 | |
| | | | | | | | | | | |
Selling, general and administrative expenses | | 22,879,500 | | 21,569,300 | | 18,630,000 | | 84,747,400 | | 73,444,300 | |
Restructuring charges | | — | | — | | — | | — | | 2,285,700 | |
Benefit from insurance proceeds | | — | | — | | — | | — | | (3,054,000 | ) |
| | 22,879,500 | | 21,569,300 | | 18,630,000 | | 84,747,400 | | 72,676,000 | |
Income from operations | | 2,191,700 | | 2,835,400 | | 2,500,100 | | 10,099,400 | | 4,970,100 | |
Interest, net | | 51,800 | | 37,100 | | 46,600 | | 166,200 | | 167,700 | |
Income before provision for income taxes | | 2,139,900 | | 2,798,300 | | 2,453,500 | | 9,933,200 | | 4,802,400 | |
Provision for income taxes | | 826,600 | | 1,091,400 | | 994,600 | | 3,866,000 | | 1,910,600 | |
Net income | | $ | 1,313,300 | | $ | 1,706,900 | | $ | 1,458,900 | | $ | 6,067,200 | | $ | 2,891,800 | |
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Basic earnings per share | | $ | 0.31 | | $ | 0.41 | | $ | 0.33 | | $ | 1.41 | | $ | 0.65 | |
Diluted earnings per share | | $ | 0.31 | | $ | 0.40 | | $ | 0.32 | | $ | 1.39 | | $ | 0.65 | |
Basic weighted average shares outstanding | | 4,209,400 | | 4,211,000 | | 4,422,400 | | 4,308,000 | | 4,432,400 | |
Diluted weighted average shares outstanding | | 4,276,500 | | 4,233,700 | | 4,509,300 | | 4,373,900 | | 4,469,000 | |
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TESSCO Technologies Incorporated | |
Consolidated Balance Sheets | |
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| | March 27, 2005 | | March 28, 2004 | |
| | (audited) | | (audited) | |
ASSETS | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 3,880,800 | | $ | 6,765,600 | |
Trade accounts receivable, net | | 60,907,400 | | 47,124,600 | |
Product inventory | | 60,832,600 | | 40,987,100 | |
Deferred tax asset | | 2,170,000 | | 2,079,000 | |
Prepaid expenses and other current asset | | 2,828,400 | | 2,494,300 | |
Total current assets | | 130,619,200 | | 99,450,600 | |
| | | | | |
Property and equipment, net | | 26,193,000 | | 25,944,700 | |
Goodwill, net | | 2,452,200 | | 2,452,200 | |
Other long-term assets | | 1,292,800 | | 1,281,200 | |
Total assets | | $ | 160,557,200 | | $ | 129,128,700 | |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | |
Current liabilities: | | | | | |
Trade accounts payable | | $ | 82,618,000 | | $ | 55,250,000 | |
Accrued expenses and other current liabilities | | 6,591,600 | | 6,588,500 | |
Revolving line of credit | | — | | — | |
Current portion of long-term debt | | 362,600 | | 282,000 | |
Total current liabilities | | 89,572,200 | | 62,120,500 | |
| | | | | |
Deferred tax liability | | 3,561,300 | | 3,419,100 | |
Long-term debt, net of current portion | | 5,000,700 | | 5,354,700 | |
Other long-term liabilities | | 1,600,900 | | 1,900,900 | |
Total liabilities | | 99,735,100 | | 72,795,200 | |
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Shareholders’ equity: | | | | | |
Preferred stock | | — | | — | |
Common stock | | 48,900 | | 48,500 | |
Additional paid-in capital | | 23,578,600 | | 22,250,200 | |
Treasury stock, at cost | | (7,454,400 | ) | (4,547,000 | ) |
Retained earnings | | 44,649,000 | | 38,581,800 | |
Total shareholders’ equity | | 60,822,100 | | 56,333,500 | |
| | | | | |
Total liabilities and shareholders’ equity | | $ | 160,557,200 | | $ | 129,128,700 | |
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TESSCO Technologies IncorporatedSupplemental Revenue and Gross Profit Results Summary | |
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(Amounts in Thousands) | | Network Infrastructure | | Mobile Devices and Accessories | | Installation, Test and Maintenance | | Total | |
Fiscal Year Ended March 27, 2005: | | | | | | | | | |
Commercial and Government: | | | | | | | | | |
Revenue | | $ | 129,826 | | $ | 75,252 | | $ | 64,396 | | $ | 269,474 | |
Gross profit | | $ | 30,534 | | $ | 20,184 | | $ | 17,072 | | $ | 67,790 | |
Gross margin | | 23.5 | % | 26.8 | % | 26.5 | % | 25.2 | % |
| | | | | | | | | |
Affinity Consumer Direct: | | | | | | | | | |
Revenue | | $ | — | | $ | 243,553 | | $ | — | | $ | 243,553 | |
Gross profit | | $ | — | | $ | 27,057 | | $ | — | | $ | 27,057 | |
Gross margin | | — | | 11.1 | % | — | | 11.1 | % |
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Total: | | | | | | | | | |
Revenue | | $ | 129,826 | | $ | 318,805 | | $ | 64,396 | | $ | 513,027 | |
Gross profit | | $ | 30,534 | | $ | 47,241 | | $ | 17,072 | | $ | 94,847 | |
Gross margin | | 23.5 | % | 14.8 | % | 26.5 | % | 18.5 | % |
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Fiscal Year Ended March 28, 2004: | | | | | | | | | |
Commercial and Government: | | | | | | | | | |
Revenue | | $ | 114,401 | | $ | 59,200 | | $ | 51,500 | | $ | 225,101 | |
Gross profit | | $ | 28,689 | | $ | 15,221 | | $ | 13,347 | | $ | 57,257 | |
Gross margin | | 25.1 | % | 25.7 | % | 25.9 | % | 25.4 | % |
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Affinity Consumer Direct: | | | | | | | | | |
Revenue | | $ | — | | $ | 127,573 | | $ | — | | $ | 127,573 | |
Gross profit | | $ | — | | $ | 20,389 | | $ | — | | $ | 20,389 | |
Gross margin | | — | | 16.0 | % | — | | 16.0 | % |
| | | | | | | | | |
Total: | | | | | | | | | |
Revenue | | $ | 114,401 | | $ | 186,773 | | $ | 51,500 | | $ | 352,674 | |
Gross profit | | $ | 28,689 | | $ | 35,610 | | $ | 13,347 | | $ | 77,646 | |
Gross margin | | 25.1 | % | 19.1 | % | 25.9 | % | 22.0 | % |
