Exhibit 99.1
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Contact: | David Young |
| TESSCO Technologies Incorporated |
| Acting Chief Financial Officer |
| (410) 229-1380 |
| young@tessco.com |
For immediate release
TESSCO Reports First Quarter Revenue Growth of 34%
and Earnings per Share of $0.29
HUNT VALLEY, MARYLAND, JULY 26, 2005 - TESSCO Technologies Incorporated (Nasdaq: TESS) today reported earnings for the quarter ended June 26, 2005.
Sales for the first quarter of fiscal year 2006 increased 34 percent to $148.3 million over the same period last year. First quarter 2006 net income was down slightly to $1.2 million, or $0.29 per diluted share, compared with net income of $1.4 million and diluted earnings per share of $0.32 last year.
“We are encouraged that our efforts to expand our commercial and government business are showing positive results,” said TESSCO Technologies Chairman, President and CEO Robert B. Barnhill. “Our self-maintained user, government and reseller markets, in particular, achieved 26 percent year-over-year revenue growth. Growing these and other areas is an important part of our marketing strategy as we phase out our relationship with our largest affinity-consumer direct partner this September. Our corporate initiatives continue to increase monthly commercial and government buyers and purchases per customer.”
Noteworthy items in the first quarter of fiscal 2006 included the following:
• Total commercial/government business grew 13 percent year-over-year and 7 percent sequentially.
• Revenues from self-maintained users, government and resellers grew 26 percent year-over-year and 17 percent sequentially. Monthly buyers in this market grew 16 percent and 7 percent, respectively.
• Revenues from public carriers and network operators showed a 12 percent year-over-year decline and a 13 percent sequential decline.
• In the network infrastructure line of business, sales and gross profits increased year-over-year 5 percent and 3 percent, respectively, primarily driven by increased fixed wireless broadband product sales.
• In the mobile devices and accessories line of business, sales and gross profits in our commercial and government markets increased year-over-year 38 percent and 33 percent, respectively, primarily as a result of increased sales of accessory products to retail customers.
• In the installation, test and maintenance line of business, sales and gross profits increased year-over-year 1 percent and 13 percent, respectively. The increase in gross profits was primarily driven by the repair components business.
• Total consumer direct-affinity revenue and gross profit increased 65 percent and 24 percent, respectively, year-over-year. Sequentially, consumer direct-affinity revenue and gross profit declined 9 percent and 5 percent, respectively.
• TESSCO retained RTC Relationship Marketing, a direct- and database- marketing firm to increase market awareness of TESSCO’s value proposition and product and solutions offering among potential and existing customers.
• In summary, comparing this quarter with the same quarter of last year,
• Total revenues grew 34 percent and gross profit increased 16 percent
• Expenses increased 20 percent, largely driven by the new order configuration, fulfillment and delivery computer system launch, and expenses related to business generation activities designed to expand the commercial/government customer base and product offering. Also, the continuing high volumes related to our large consumer-affinity relationship have not yet allowed the reduction of operating expenses associated with this relationship. However, TESSCO plans to shed unnecessary expenses beginning in September, when the relationship terminates.
• Net income and diluted earnings per share declined 14 percent and 9 percent, respectively.
“Our goal is to dramatically increase our customer base, diversifying into new emerging product solutions and markets. A major corporate initiative is to make the customer experience easier and more productive, and to aggressively communicate the value proposition,” said Mr. Barnhill. “At the same time, we are also streamlining our internal operations, working to improve processes so new products, manufacturers, customers, and orders can be more effectively and profitability integrated into our system. We look forward to emerging from this transition period with a productive and profitable business that is more strategically healthy and less concentrated. ”
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.
TESSCO estimates that for the second quarter ending September 25, 2005, earnings per share are expected to be in the range of $0.30 to $0.35.
Generally TESSCO provides guidance only for the next quarter, but to provide further visibility of expected results after the September transition of its major consumer-affinity relationship, TESSCO will now provide guidance for its third fiscal quarter.
At this time, TESSCO estimates for the third quarter ending December 25, 2005, earnings per share will be in the range of $0.10 to $0.20. This wide range is due in part to the uncertainty of the impact of the business generation and productivity initiatives
underway, and the finalization, timing and profit contribution of anticipated new opportunities derived through these initiatives.
TESSCO will conduct a conference call on July 27, 2005, at 10 a.m. ET to discuss the financial results for the first quarter of fiscal year 2006. 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® supplier of mobile and fixed-wireless network infrastructure products, mobile devices and accessories, and installation, test and maintenance equipment and supplies, TESSCO assures customers of on-time availability, while streamlining their supply chain 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.
We are not able to identify or control all circumstances that could occur in the future that may adversely affect our business and operating results. Included among the risks that could lead to a materially adverse impact on our business or operating results are the termination or non-renewal of limited duration agreements or arrangements with our vendors and affinity partners which are typically terminable by either party upon several months notice; loss of significant customers or relationships, including affinity relationships; loss of customers either directly or indirectly as a result of consolidation among large wireless service carriers and others within the wireless communications industry; the strength of the customers’, vendors’ and affinity partners’ business; economic conditions that may impact customers ability to fund purchase of our products and services; our dependence on a relatively small number of suppliers and vendors, which could hamper our ability to maintain appropriate inventory levels and meet
customer demand; failure of our information technology system or distribution system; technology changes in the wireless communications industry, which could lead to significant inventory obsolescence and/or our inability to offer key products that our customers demand; third-party freight carrier interruption; increased competition from competitors, including manufacturers or national and regional distributors of the products we sell and the absence of significant barriers to entry which could result in pricing and other pressures on profitability and market share; the possibility that, for unforeseen reasons, we 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; and inability to protect certain intellectual property, including systems and technologies on which we rely.
TESSCO Technologies Incorporated
Consolidated Statements of Income
| | Fiscal Quarters Ended | |
| | June 26, 2005 | | June 27, 2004 | | March 27, 2005 | |
| | (unaudited) | | (unaudited) | | (unaudited) | |
| | | | | | | |
Revenues | | $ | 148,323,300 | | $ | 110,605,000 | | $ | 150,907,500 | |
Cost of goods sold | | 122,301,200 | | 88,215,600 | | 125,836,300 | |
Gross profit | | 26,022,100 | | 22,389,400 | | 25,071,200 | |
Selling, general and administrative expenses | | 23,959,800 | | 19,989,100 | | 22,879,500 | |
Income from operations | | 2,062,300 | | 2,400,300 | | 2,191,700 | |
Interest, net | | 38,000 | | 34,600 | | 51,800 | |
Income before provision for income taxes | | 2,024,300 | | 2,365,700 | | 2,139,900 | |
Provision for income taxes | | 789,500 | | 922,600 | | 826,600 | |
Net income | | $ | 1,234,800 | | $ | 1,443,100 | | $ | 1,313,300 | |
| | | | | | | |
Basic earnings per share | | $ | 0.29 | | $ | 0.33 | | $ | 0.31 | |
Diluted earnings per share | | $ | 0.29 | | $ | 0.32 | | $ | 0.31 | |
Basic weighted average shares outstanding | | 4,236,700 | | 4,435,000 | | 4,209,400 | |
Diluted weighted average shares outstanding | | 4,277,000 | | 4,544,600 | | 4,276,500 | |
TESSCO Technologies Incorporated
Consolidated Balance Sheets
| | June 26, 2005 | | March 27, 2005 | |
| | (unaudited) | | (audited) | |
ASSETS | | | | | |
Current Assets: | | | | | |
Cash and cash equivalents | | $ | — | | $ | 3,880,800 | |
Trade accounts receivable, net | | 56,366,300 | | 60,907,400 | |
Product inventory | | 55,056,900 | | 60,832,600 | |
Deferred tax asset | | 2,170,000 | | 2,170,000 | |
Prepaid expenses and other current asset | | 2,309,600 | | 2,828,400 | |
Total current assets | | 115,902,800 | | 130,619,200 | |
| | | | | |
Property and Equipment, Net | | 25,635,000 | | 26,193,000 | |
Goodwill, Net | | 2,452,200 | | 2,452,200 | |
Other Long-Term Assets | | 1,185,100 | | 1,292,800 | |
Total assets | | $ | 145,175,100 | | $ | 160,557,200 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
Current Liabilities: | | | | | |
Trade accounts payable | | $ | 66,256,000 | | $ | 82,618,000 | |
Accrued expenses and other current liabilities | | 6,373,700 | | 6,638,400 | |
Revolving credit facility | | — | | — | |
Current portion of long-term debt | | 363,700 | | 362,600 | |
Total current liabilities | | 72,993,400 | | 89,619,000 | |
| | | | | |
Deferred Tax Liability | | 3,561,300 | | 3,561,300 | |
Long-Term Debt, Net of Current Portion | | 4,909,400 | | 5,000,700 | |
Other Long-Term Liabilities | | 1,412,000 | | 1,554,100 | |
Total liabilities | | 82,876,100 | | 99,735,100 | |
| | | | | |
Stockholders’ Equity: | | | | | |
Preferred stock | | — | | — | |
Common stock | | 48,900 | | 48,900 | |
Additional paid in capital | | 23,820,700 | | 23,578,600 | |
Treasury stock, at cost | | (7,454,400 | ) | (7,454,400 | ) |
Retained earnings | | 45,883,800 | | 44,649,000 | |
Total stockholders’ equity | | 62,299,000 | | 60,822,100 | |
| | | | | |
Total liabilities and stockholders’ equity | | $ | 145,175,100 | | $ | 160,557,200 | |
TESSCO Technologies Incorporated
Supplemental Revenue and Gross Profit Results Summary
(Amounts in Thousands) | | Network Infrastructure | | Mobile Devices and Accessories | | Installation, Test and Maintenance | | Total | |
Quarter Ended June 26, 2005: | | | | | | | | | |
| | | | | | | | | |
Commercial Revenue: | | | | | | | | | |
Public Carriers and Network Operators | | $ | 14,441 | | $ | 659 | | $ | 4,383 | | $ | 19,483 | |
User, Governments and Resellers | | 20,512 | | 22,743 | | 10,992 | | 54,247 | |
Total Commercial Revenue | | 34,953 | | 23,402 | | 15,375 | | 73,730 | |
Consumer Revenue | | — | | 74,593 | | — | | 74,593 | |
Total Revenue | | $ | 34,953 | | $ | 97,995 | | $ | 15,375 | | $ | 148,323 | |
| | | | | | | | | |
Commercial Gross Profit: | | | | | | | | | |
Public Carriers and Network Operators | | $ | 3,358 | | $ | 185 | | $ | 989 | | $ | 4,532 | |
User, Governments and Resellers | | 4,949 | | 5,868 | | 3,606 | | 14,423 | |
Total Commercial Gross Profit | | 8,307 | | 6,053 | | 4,595 | | 18,955 | |
Consumer Gross Profit | | — | | 7,067 | | — | | 7,067 | |
Total Gross Profit | | $ | 8,307 | | $ | 13,120 | | $ | 4,595 | | $ | 26,022 | |
| | | | | | | | | |
Change from the Quarter Ended June 27, 2004: | | | | | | | | | |
| | | | | | | | | |
Commercial Revenue: | | | | | | | | | |
Public Carrier and Network Operators | | (8.7 | )% | (19.6 | )% | (21.5 | )% | (12.3 | )% |
User, Government and Reseller | | 18.2 | | 40.9 | | 13.8 | | 25.7 | |
Total Commercial Revenue | | 5.4 | | 37.9 | | 0.9 | | 12.8 | |
Consumer Revenue | | — | | 64.9 | | — | | 64.9 | |
Total Revenue | | 5.4 | % | 57.6 | % | 0.9 | % | 34.1 | % |
| | | | | | | | | |
Commercial Gross Profit: | | | | | | | | | |
Public Carriers and Network Operators | | (14.6 | )% | (17.4 | )% | (26.0 | )% | (17.5 | )% |
User, Governments and Resellers | | 19.7 | | 35.8 | | 32.3 | | 29.0 | |
Total Commercial Gross Profit | | 3.0 | | 33.2 | | 13.1 | | 13.7 | |
Consumer Gross Profit | | — | | 23.6 | | — | | 23.6 | |
Total Gross Profit | | 3.0 | % | 27.8 | % | 13.1 | % | 16.2 | % |
| | | | | | | | | |
Change from the Quarter Ended March 27, 2005: | | | | | | | | | |
| | | | | | | | | |
Commercial Revenue: | | | | | | | | | |
Public Carrier and Network Operators | | 2.9 | % | 0.9 | % | (42.5 | )% | (12.6 | )% |
User, Government and Reseller | | 22.5 | | 10.2 | | 21.2 | | 16.7 | |
Total Commercial Revenue | | 13.6 | | 9.9 | | (7.9 | ) | 7.2 | |
Consumer Revenue | | — | | (9.2 | ) | — | | (9.2 | ) |
Total Revenue | | 13.6 | % | (5.3 | )% | (7.9 | )% | (1.7 | )% |
| | | | | | | | | |
Commercial Gross Profit: | | | | | | | | | |
Public Carriers and Network Operators | | 2.3 | % | (3.6 | )% | (36.0 | )% | (9.7 | )% |
User, Governments and Resellers | | 20.2 | | 4.2 | | 25.1 | | 14.2 | |
Total Commercial Gross Profit | | 12.3 | | 3.9 | | 3.8 | | 7.4 | |
Consumer Gross Profit | | — | | (4.8 | ) | — | | (4.8 | ) |
Total Gross Profit | | 12.3 | % | (0.9 | )% | 3.8 | % | 3.8 | % |