SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to _________
Commission file number 0-24746
TESSCO Technologies Incorporated
(Exact name of registrant as specified in its charter)
Delaware 52-0729657
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
34 Loveton Circle, Sparks, Maryland 21152-5100
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 410-472-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock, $.01 par
value, held by non-affiliates of the registrant based on the closing sales price
of the Common Stock as quoted on the National Association of Securities Dealers,
Inc. National Market System as of May 17, 1996 was $107,295,006.
The number of shares of the registrant's Common Stock, $.01
par value, outstanding as of May 17, 1996 was 4,227,897.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders
for the fiscal year ended March 29, 1996 are incorporated by reference into
Parts II and IV.
Portions of the registrant's Proxy Statement for the 1996
Annual Meeting of Shareholders are incorporated by reference into Part III.
2
Part I
Item 8 - Financial Statements and Supplementary Data
QUARTERLY RESULTS OF OPERATIONS TESSCO TECHNOLOGIES INCORPORATED [logo]TM
Fiscal 1995 Quarters Ended Fiscal 1996 Quarters Ended
..................................................................................................................................
July 1, Sept. 30, Dec. 30, March 31, June 30, Sept. 29, Dec. 29, March 29,
1994 1994 1994 1995 1995 1995 1995 1996
..................................................................................................................................
Revenues $18,241,000 $18,198,900 $19,844,100 $18,233,600 $19,185,100 $21,989,600 $23,805,600 $27,309,800
Cost of
goods sold 14,214,200 14,149,300 15,486,000 13,979,300 14,599,500 16,709,200 17,365,600 20,300,100
..................................................................................................................................
Gross profit 4,026,800 4,049,600 4,358,100 4,254,300 4,585,600 5,280,400 6,440,000 7,009,700
Selling,
general, and
administrative
expenses 3,100,500 3,044,100 3,150,500 3,205,100 3,359,200 3,818,000 4,722,200 5,227,300
..................................................................................................................................
Income from
operations 926,300 1,005,500 1,207,600 1,049,200 1,226,400 1,462,400 1,717,800 1,782,400
Interest income
(expense), net (110,700) (113,100) 9,700 57,000 70,300 63,600 52,800 (7,700)
..................................................................................................................................
Income before
provision
for taxes 815,600 892,400 1,217,300 1,106,200 1,296,700 1,526,000 1,770,600 1,774,700
Provision for
income taxes 322,500 358,900 458,100 419,100 477,900 540,800 643,300 665,000
..................................................................................................................................
Net income $ 493,100 $ 533,500 $ 759,200 $ 687,100 $ 818,800 $ 985,200 $ 1,127,300 $ 1,109,700
..................................................................................................................................
Percentage of Revenues
...................................................................................................................................
Fiscal 1995 Quarters Ended Fiscal 1996 Quarters Ended
...................................................................................................................................
July 1, Sept. 30, Dec. 30, March 31, June 30, Sept. 29, Dec. 29, March 29,
1994 1994 1994 1995 1995 1995 1995 1996
...................................................................................................................................
Revenues 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of
goods sold 77.9 77.7 78.0 76.7 76.1 76.0 72.9 74.3
...................................................................................................................................
Gross profit 22.1 22.3 22.0 23.3 23.9 24.0 27.1 25.7
Selling,
general, and
administrative
expenses 17.0 16.7 15.9 17.5 17.5 17.4 19.8 19.1
...................................................................................................................................
Income from
operations 5.1 5.5 6.1 5.8 6.4 6.7 7.2 6.5
Interest income
(expense), net (0.6) (0.7) 0.0 0.3 0.4 0.3 0.2 (0.0)
...................................................................................................................................
Income before
provision for taxes 4.5 4.9 6.1 6.1 6.8 6.9 7.4 6.5
Provision for
income taxes 1.8 2.0 2.3 2.3 2.5 2.5 2.7 2.4
...................................................................................................................................
Net income 2.7 2.9 3.8 3.8 4.3 4.5 4.7 4.1
(C) TESSCO, Year Ending 3/96 15
BALANCE SHEETS TESSCO TECHNOLOGIES INCORPORATED [logo]TM
ASSETS
March 29, March 31,
1996 1995
...............................................................................................................
Current Assets:
Cash and marketable securities $ 439,400 $ 8,453,100
Trade accounts receivable, net of allowance
for doubtful accounts and sales returns of
$431,800 and $474,000, respectively 14,312,500 8,057,300
Product inventory 13,689,400 8,573,900
Deferred tax asset 280,600 277,100
Prepaid expenses and other current assets 566,700 474,500
...............................................................................................................
Total current assets 29,288,600 25,835,900
...............................................................................................................
Property and Equipment:
Building 4,808,600 --
Computer equipment and software 1,781,200 1,439,600
Furniture and equipment 1,187,300 886,500
Tooling 295,100 295,100
Leasehold improvements 591,200 569,100
Equipment held under capital lease 600,000 600,000
...............................................................................................................
9,263,400 3,790,300
Less-accumulated depreciation and amortization 2,660,700 2,093,500
...............................................................................................................
Property and Equipment, net 6,602,700 1,696,800
Deferred Tax Asset 87,900 32,500
Other Assets 548,700 610,800
...............................................................................................................
Total assets $36,527,900 $28,176,000
...............................................................................................................
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of capital lease obligation $ 126,400 $ 120,600
Trade accounts payable 9,642,700 6,607,700
Accrued expenses and other current liabilities 2,129,700 1,052,200
...............................................................................................................
Total current liabilities 11,898,800 7,780,500
Capital Lease Obligation, Net of Current Portion 85,000 199,300
Other Long-Term Liabilities -- 27,800
...............................................................................................................
Total liabilities 11,983,800 8,007,600
Commitment and Contingencies
Stockholders' Equity
Preferred stock, $.01 par value, 500,000 shares authorized
and no shares issued and outstanding -- --
Common stock, $.01 par value, 9,500,000 shares authorized;
4,462,572 shares issued and 4,218,814 shares outstanding
as of March 29, 1996 and 4,328,397 shares issued and
4,091,785 shares outstanding as of March 31, 1995 44,600 43,300
Additional paid-in capital 18,232,900 17,739,000
Treasury stock at cost, 243,758 shares and 236,612 shares, respectively (2,126,400) (1,965,900)
Retained earnings 8,393,000 4,352,000
...............................................................................................................
Total stockholders' equity 24,544,100 20,168,400
Total liabilities and stockholders' equity $36,527,900 $28,176,000
...............................................................................................................
The accompanying notes are an integral part of these financial statements.
16 (C) TESSCO, Year Ending 3/96
STATEMENTS OF INCOME TESSCO TECHNOLOGIES INCORPORATED [logo]TM
Fiscal Years Ended
..................................................................................................................................
March 29, March 31, April 1,
1996 1995 1994
..................................................................................................................................
Revenues $92,290,100 $74,517,600 $61,375,600
Cost of goods sold 68,974,400 57,828,800 47,317,100
..................................................................................................................................
Gross profit 23,315,700 16,688,800 14,058,500
Selling, general and administrative expenses 17,126,700 12,500,200 11,099,400
Retroactive compensation adjustment -- -- 746,600
..................................................................................................................................
Income from operations 6,189,000 4,188,600 2,212,500
Interest income (expense), net 179,000 (157,100) (511,300)
..................................................................................................................................
Income before provision for income taxes 6,368,000 4,031,500 1,701,200
Provision for income taxes 2,327,000 1,558,600 673,400
..................................................................................................................................
Net income $ 4,041,000 $ 2,472,900 $ 1,027,800
..................................................................................................................................
Primary earnings per share $0.89 $0.64 $0.34
..................................................................................................................................
..................................................................................................................................
Fully diluted earnings per share $0.88 $0.64 $0.32
..................................................................................................................................
..................................................................................................................................
Primary weighted average shares outstanding 4,555,200 3,834,000 3,030,900
..................................................................................................................................
..................................................................................................................................
Fully diluted weighted average shares outstanding 4,591,300 3,894,200 3,248,800
..................................................................................................................................
The accompanying notes are an integral part of these financial statements.
(C) TESSCO, Year Ending 3/96 17
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
TESSCO TECHNOLOGIES INCORPORATED [logo]TM
Total
Common Additional Subscriptions and Treasury Retained Stockholders'
Stock Paid-In Capital Notes Receivable Stock Earnings Equity
....................................................................................................................................
Balance at
March 26, 1993 $ 16,400 $ 822,700 $ (216,700) $ (177,600) $ 877,500 $ 1,322,300
Repurchase of common
stock for treasury -- -- -- (1,100) -- (1,100)
Payment received on
common stock
subscriptions and
notes receivable -- -- 63,700 -- -- 63,700
Accretion of redemption
value of mandatory
redeemable convertible
preferred stock -- -- -- -- (26,200) (26,200)
Redemption of
common stock -- (153,000) 153,000 -- -- --
Conversion of
mandatory redeemable
convertible preferred
stock to common stock 12,400 3,964,500 -- -- -- 3,976,900
Net income -- -- -- -- 1,027,800 1,027,800
....................................................................................................................................
Balance at
April 1, 1994 28,800 4,634,200 -- (178,700) 1,879,100 6,363,400
Net proceeds from
initial public offering 9,700 10,023,200 -- -- -- 10,032,900
Net proceeds from
exercise of options
and warrants in exchange
for cash and treasury stock 4,800 2,367,400 -- (1,787,200) -- 585,000
Tax benefit of option exercises -- 714,200 -- -- -- 714,200
Net income -- -- -- -- 2,472,900 2,472,900
....................................................................................................................................
Balance at
March 31, 1995 43,300 17,739,000 -- (1,965,900) 4,352,000 20,168,400
Net proceeds from exercise
of options in exchange
for cash and treasury stock 1,300 463,900 -- (160,500) -- 304,700
Tax benefit of option exercises -- 30,000 -- -- -- 30,000
Net income -- -- -- -- 4,041,000 4,041,000
....................................................................................................................................
Balance at
March 29, 1996 $ 44,600 $18,232,900 -- $(2,126,400) $8,393,000 $ 24,544,100
....................................................................................................................................
....................................................................................................................................
The accompanying notes are an integral part of these financial statements.
18 (C) TESSCO, Year Ending 3/96
STATEMENTS OF CASH FLOWS TESSCO TECHNOLOGIES INCORPORATED [logo]TM
Fiscal Years Ended
..................................................................................................................................
March 29, March 31, April 1,
1996 1995 1994
..................................................................................................................................
Cash Flows from Operating Activities:
Net income $ 4,041,000 $2,472,900 $ 1,027,800
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 629,300 552,300 519,900
Provision for bad debts 166,200 186,300 204,900
Deferred income taxes (58,900) (79,800) 13,100
Increase in trade accounts receivable (6,421,400) (652,400) (2,165,700)
(Increase) decrease in product inventory (5,115,500) (289,100) 211,000
(Increase) decrease in prepaid expenses and
other current assets (92,200) 374,000 (334,400)
Increase (decrease) in trade accounts payable 3,035,000 2,025,300 (994,400)
Increase in accrued expenses and other
current liabilities, net of non-cash items in fiscal 1996 and 1995 1,107,500 1,225,600 175,500
Decrease in other long-term liabilities (27,800) (41,800) (19,800)
..................................................................................................................................
Net cash (used in) provided by operating activities (2,736,800) 5,773,300 (1,362,100)
Cash Flows from Investing Activities:
Acquisition of property and equipment (5,473,100) (759,900) (150,200)
Advances on note receivable -- -- (232,500)
Repayment of note receivable -- -- 390,500
..................................................................................................................................
Net cash (used in) provided by investing activities (5,473,100) (759,900) 7,800
Cash Flows from Financing Activities:
Net (decrease) increase in borrowings under
credit facility and cash overdraft -- (6,881,500) 1,383,800
Net proceeds from initial public offering -- 10,032,900 --
Proceeds from exercise of stock options 304,700 585,000 --
Proceeds from common stock subscriptions and
notes receivable -- -- 63,700
Repurchase of common stock for treasury -- -- (1,100)
Payment of capital lease obligation (108,500) (296,700) (143,900)
..................................................................................................................................
Net cash provided by financing activities 196,200 3,439,700 1,302,500
Net (decrease) increase in cash and marketable securities (8,013,700) 8,453,100 (51,800)
Cash and Marketable Securities, beginning of year 8,453,100 -- 51,800
..................................................................................................................................
Cash and Marketable Securities, end of year $ 439,400 $8,453,100 $ --
..................................................................................................................................
..................................................................................................................................
The accompanying notes are an integral part of these financial statements.
(C) TESSCO, Year Ending 3/96 19
NOTES TO FINANCIAL STATEMENTS TESSCO TECHNOLOGIES INCORPORATED [logo]TM
1. Organization and Initial Public Offering:
TESSCO Technologies Incorporated (the Company) is a leading distributor of
products to the wireless communications industry.
On September 28, 1994, the Company sold 966,870 shares of its common
stock for $12.00 per share in connection with an initial registration
with the Securities and Exchange Commission. In connection with this
transaction, the Company incurred costs of $1,569,500 consisting
principally of underwriting, legal, accounting and other fees. Additionally,
certain existing stockholders sold 1,218,130 shares of their common stock
holdings to the public and certain officers and directors of the Company
exercised certain stock options and warrants, resulting in the issuance of an
additional 325,851 shares of common stock.
The net proceeds to the Company of $10,032,900 from the offering and
$585,000 from the exercise of certain stock options and warrants were used to
repay the Company's borrowing under a working capital revolving line of credit
and for general corporate purposes. The unaudited pro forma supplemental
earnings per share would have been $0.58 for fiscal year 1995 assuming the
Offering and the application of proceeds therefrom occurred at the beginning of
the period.
In connection with the initial public offering, the Company effected a
three-for-one stock split. In addition, the Company increased the number of
authorized shares of common stock to 9,500,000 and authorized 500,000 shares of
a newly-created class of preferred stock. All references in the accompanying
financial statements and related notes with respect to common stock, preferred
stock, and per share amounts have been retroactively restated for the effects of
the split and the new number of authorized shares. The Company also approved, in
connection with the public offering, the granting of options to purchase 424,400
shares of common stock at the initial public offering price.
2. Summary of Significant Accounting Policies:
Fiscal Year
The Company maintains its accounts on a fifty-two/fifty-three week fiscal
year ending on the Friday falling on or between March 26 and April 1. The fiscal
years ending March 29, 1996 and March 31, 1995 each contained 52 weeks, and the
fiscal year ended April 1, 1994, contained 53 weeks.
Cash and Marketable Securities
Cash and marketable securities includes marketable securities with a
maturity of 90 days or less.
Product Inventory
Product inventory is stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method and includes certain
charges directly and indirectly incurred in bringing product inventories to the
point of sale.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets as
follows:
Useful lives
Computer equipment and software 5 years
Furniture, equipment and tooling 3-10 years
Building 30 years
Amortization is provided on leasehold improvements and equipment held under
capital lease using the straight-line method over the terms of the leases
ranging from three to ten years.
Other Assets
Other assets consist mainly of goodwill and trademarks which are being
amortized using the straight-line method over 15 and 5 years, respectively.
Accumulated amortization as of March 29, 1996 and March 31, 1995 was
approximately $250,100 and $188,000, respectively.
Revenue Recognition
The Company records sales when product is shipped to the customers.
Advertising Costs
The Company capitalizes certain costs related to the printing and
production of its product catalogs. These costs are amortized over a period of
six months commencing with the distribution of the catalogs.
Supplemental Cash Flow Information
Cash paid for interest during fiscal years 1996, 1995 and 1994 totaled $0,
$181,400 and $339,900 respectively. Cash paid for income taxes for fiscal years
1996, 1995 and 1994 totaled $1,547,000, $712,000 and $652,000 respectively.
The Company had noncash transactions during fiscal years 1996, 1995 and
1994 as follows:
1996 1995 1994
Accretion of redemption
value of preferred stock $ -- $ -- $ 26,200
Exercise of options and
warrants in exchange for
treasury stock 160,500 1,787,200 --
Redemption of stock
subscription and
note receivable -- -- 153,000
Tax benefit from exercise
of stock options 30,000 714,200 --
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could significantly differ from those
estimates.
20 (C) TESSCO, Year Ending 3/96
NOTES TO FINANCIAL STATEMENTS TESSCO TECHNOLOGIES INCORPORATED [logo]TM
3. Note Receivable From Officer:
As of March 26, 1993, the Company had a note receivable from the Chief
Executive Officer with a balance of $158,000. This note bore interest at the
annual short-term applicable Federal rate. During fiscal year 1994, the Company
provided an additional $232,500 to the Officer under the note. The total note
balance was repaid by the Officer in March 1994.
4. Borrowings Under Credit Facility:
Effective February 28, 1994, the Company entered into an Amended and
Restated Financing and Security Agreement (the Agreement) with a bank for a
$10,000,000 revolving credit facility available through December 31, 1996. There
was no balance outstanding under the Agreement as of March 29, 1996 and March
31, 1995. The Company repaid the outstanding balance under the Agreement during
fiscal 1995 from a portion of the proceeds from the initial public offering.
Borrowings are secured by accounts receivable, inventory and certain other
assets of the Company. Borrowings available to the Company under the Agreement
are based upon the Company's trade accounts receivable and product inventory and
at March 31, 1995, the maximum borrowing capacity was $10,000,000. The Company
also pays a 0.25% fee based on the average daily unused balance.
Interest rates under the Agreement are based on the Company's quarterly
debt service coverage ratios as follows:
Debt Service
Coverage Interest Rate
................................................................................
Less than 2.5 Prime plus 1/2% or LIBOR plus 2 1/2%
2.5 to 3.0 Prime plus 1/4% or LIBOR plus 2 1/4%
3.0 to 4.5 Prime or LIBOR plus 2%
Greater than 4.5 Prime or LIBOR plus 1 3/4%
The provisions of the Agreement require the Company to meet certain
financial covenants and ratios and contain other limitations including a
restriction on dividend payments.
During fiscal 1996, the Company renegotiated its existing revolving line of
credit. The new line is unsecured and bears interest at either the prime rate or
the London Interbank Offered Rate (LIBOR) with the minimum rate being LIBOR plus
1.75%. The unsecured line of credit expires on March 31, 1998.
During fiscal years 1996, 1995 and 1994, the maximum borrowings under the
revolving credit facility totaled $0, $6,413,500 and $6,445,400, respectively.
The average borrowings totaled $0, $5,383,200 and $5,033,800 in fiscal years
1996, 1995 and 1994, respectively. The weighted average interest rate on
borrowings was 0.0%, 6.6% and 6.9% for the respective fiscal years.
Interest expense on the credit facility for fiscal years 1996, 1995 and
1994, totaled $0, $166,000 and $355,200, respectively.
5. Leases:
The Company has entered into a lease for various property and equipment
expiring in fiscal year 1998 which has been capitalized using an interest rate
of 10.2%. The Company also has several noncancelable operating leases for office
and warehouse facilities and equipment that expire at various times through
December 31, 2000. Rent expense for fiscal years 1996, 1995 and 1994 totaled
$520,200, $463,400 and $466,900, respectively.
As of March 29, 1996, future minimum lease payments related to leases were
as follows:
Capital Operating
Lease Leases
................................................................................
1997 $141,000 $ 372,200
1998 88,200 219,200
1999 -- 267,700
2000 -- 267,700
2001 -- 200,700
................................................................................
229,200 $1,327,500
Less -- Interest 17,800
................................................................................
Present value of future
minimum lease payments $211,400
6. Stock Options and Warrants:
The Company has two stock option plans -- the 1984 Employee Incentive Stock
Option Plan (the 1984 Plan) and the 1994 Stock and Incentive Plan (the 1994
Plan). Under the 1984 Plan and 1994 Plan, options for a maximum of 401,250 and
333,000 shares, respectively, may be granted at prices not less than 100% of the
fair market value at the date of option grant and for a term of not greater than
ten years. The 1994 Plan also allows for the granting of non-qualified options,
stock appreciation rights, restricted stock and restricted stock units, and
other performance awards, none of which have been granted as of March 29, 1996.
In addition, non-plan options and warrants have been granted at the
discretion of the Board of Directors. Transactions involving options and
warrants are summarized as follows:
Options 1996 1995 1994
................................................................................
Outstanding,
beginning of year 699,600 625,900 411,600
Granted 148,600 424,400 322,900
Exercised (134,200) (350,700) --
Cancelled -- -- (108,600)
................................................................................
Outstanding,
end of year 714,000 699,600 625,900
Available for grant
at end of year 74,000 222,600 447,000
................................................................................
Total reserved shares 788,000 922,200 1,072,900
Prices per share $3.00-28.00 $3.00-13.20 $3.00-6.67
Warrants 1996 1995 1994
................................................................................
Outstanding,
beginning of year -- 135,000 135,000
Granted -- -- --
Exercised -- (135,000) --
Cancelled -- -- --
................................................................................
Outstanding, end of year -- -- 135,000
Total reserved shares -- -- 135,000
Prices per share N/A N/A $3.00-3.33
7. Common Stock and Mandatory Redeemable
Convertible Preferred Stock:
Effective September 29, 1993, the Company's mandatory redeemable
convertible preferred stock was converted to common stock. The redemption value
of the mandatory redeemable convertible preferred stock was being accreted using
the effective-
(C) TESSCO, Year Ending 3/96 21
NOTES TO FINANCIAL STATEMENTS TESSCO TECHNOLOGIES INCORPORATED [logo]TM
interest method over the related redemption periods. Accretion for fiscal
years 1996, 1995 and 1994 totaled $0, $0 and $26,200, respectively, as reflected
in the accompanying statements of changes in stockholders' equity.
8. Retroactive Compensation Adjustment:
During fiscal year 1994, the Board of Directors approved a compensation
adjustment for the Chief Executive Officer of the Company totaling $746,600,
related to services rendered since 1984. This compensation amount has been
shown as "retroactive compensation adjustment" in the accompanying statements
of operations.
9. Income Taxes:
A reconciliation of the difference between the provision for income taxes
computed at statutory rates and the provision for income taxes provided on
income is as follows:
1996 1995 1994
................................................................................
Statutory federal rate 34.0% 34.0% 34.0%
State taxes,
net of federal benefit 2.3 2.3 2.3
Non-deductible expenses 0.5 0.8 1.9
Other (0.3) 1.6 1.4
................................................................................
Effective rate 36.5% 38.7% 39.6%
The provision for income taxes was comprised of the following:
1996 1995 1994
................................................................................
Federal:
Current $2,128,000 $1,473,700 $600,100
Deferred (51,700) (69,600) 11,800
State:
Current 257,900 164,700 60,200
Deferred (7,200) (10,200) 1,300
................................................................................
Provision for
income taxes $2,327,000 $1,558,600 $673,400
................................................................................
Total deferred tax assets and deferred tax liabilities as of March 29, 1996
and March 31, 1995, and the sources of the differences between financial
accounting and tax basis of the Company's assets and liabilities which give rise
to the deferred tax assets and deferred tax liabilities are as follows:
1996 1995
................................................................................
Deferred tax assets:
Property, equipment
and capital leases $134,500 $ 94,700
Accrued expenses and reserves 297,800 295,500
Other assets 9,600 11,300
Miscellaneous -- 16,900
................................................................................
$441,900 $418,400
Deferred tax liabilities:
Prepaid expenses $17,200 $ 35,300
Other assets 56,200 73,500
................................................................................
$73,400 $ 108,800
10. Profit Sharing Plan:
The Company has implemented a 401(k) profit sharing plan that covers all
eligible employees. Contributions to the plan are made at the discretion of
the Company's Board of Directors. The Company's contribution to the plan
during fiscal years 1996, 1995 and 1994 totaled $47,200, $69,800 and $9,000,
respectively.
11. Asset Purchase:
During fiscal year 1993, the Company acquired certain assets and assumed
certain liabilities of Cellular Solutions Incorporated (CSI). The assets
acquired were inventory, tooling, catalog development, and certain intangible
assets, including trademarks and trade names. In consideration for these assets,
the Company assumed liabilities of CSI totaling $1,362,000. The acquisition has
been accounted for as a purchase with the purchase price being allocated to the
assets acquired based on their estimated fair values. The excess of the
liabilities assumed over the fair value of assets acquired of $713,300 is being
amortized over 15 years.
12. Earnings Per Share:
Primary and fully diluted earnings per share were computed based on the
weighted average number of common and common equivalent shares outstanding. The
mandatory redeemable convertible preferred stock was converted to common stock
during fiscal year 1994 (see Note 7) and, as a common stock equivalent, has been
treated as if it was converted at the beginning of the periods presented. The
dilutive effect of all options and warrants outstanding has been determined by
using the treasury stock method. The weighted average shares outstanding is
calculated as follows:
1996 1995 1994
................................................................................
Common stock 4,159,300 3,447,700 2,791,700
Effect of dilutive
common equivalent
shares 395,900 386,300 239,200
................................................................................
Primary weighted
average shares
outstanding 4,555,200 3,834,000 3,030,900
Effect of change in
share price 36,100 60,200 217,900
................................................................................
Fully diluted
weighted average
shares outstanding 4,591,300 3,894,200 3,248,800
................................................................................
The "effect of change in share price" above represents the impact on the
treasury stock method of the difference between the average share price during
the year and the year-end share price.
13. Subsequent Events
On April 18, 1996, the Company announced it had received a 30-day notice of
termination of its distributor agreement with Andrew Corporation. TESSCO filed a
lawsuit seeking a declaration that Andrew violated the Maryland Anti-Trust Act
and the Maryland Fair Distributor Act.
The Company was granted an ex parte injunction pursuant to which the
Company is assured a continued supply of Andrew product. The Company has asked
the court for permanent injunctive relief.
Sales of Andrew product as a percentage of total sales represented 29% and
23% for fiscal 1996 and the fourth quarter of fiscal 1996 respectively. (See
page 14, Other Matters, for additional information.)
On June 3, 1996, the Company announced the completion of the acquisition of
Cincinnati, Ohio-based Cartwright Communications. The transaction is valued at
$3,800,000 plus the net value of inventory, receivables and payables. The
purchase was for cash and the assumption of certain liabilities.
22 (C) TESSCO, Year Ending 3/96
MANAGEMENT'S RESPONSIBILITY FOR TESSCO TECHNOLOGIES INCORPORATED [logo]TM
FINANCIAL STATEMENTS
The consolidated statements of TESSCO Technologies Incorporated have been
prepared by the Company in accordance with generally accepted accounting
principles. The financial information presented is the responsibility of
management and accordingly includes amounts upon which judgment has been
applied, or estimates made, based on the best information available.
The financial statements have been audited by Arthur Andersen LLP,
independent public accountants, for the fiscal years ended March 29, 1996,
March 31, 1995 and April 1, 1994.
The consolidated financial statements, in the opinion of management, present
fairly the financial position, results of operations and cash flows of the
Company as of the stated dates and periods in conformity with generally
accepted accounting principles. The Company believes that its accounting
systems and related internal controls used to record and report financial
information provide reasonable assurance that financial records are reliable
and that transactions are recorded in accordance with established policies and
procedures.
/s/ Robert B. Barnhill, Jr. /s/ Gerald T. Garland
Robert B. Barnhill, Jr. Gerald T. Garland
Chairman and Chief Executive Officer Treasurer and Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
TESSCO Technologies Incorporated:
We have audited the accompanying balance sheets of TESSCO Technologies
Incorporated as of March 29, 1996 and March 31, 1995, and the related statements
of income, changes in stockholders' equity and cash flows for the years ended
March 29, 1996, March 31, 1995 and April 1, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TESSCO Technologies
Incorporated as of March 29, 1996 and March 31, 1995, and the results of its
operations and its cash flows for the years ended March 29, 1996, March 31,
1995 and April 1, 1994, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Baltimore, Maryland
June 3, 1996
(C) TESSCO, Year Ending 3/96 23
Part IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. The following report and financial statements are incorporated
herein by reference to Item 8 of this Report:
Report of Independent Public Accountants
Balance Sheets
Statements of Operations
Statements of Changes in Stockholders' Equity
Notes to Financial Statements
2. The following financial statement schedules are incorporated by
reference to the Company's 1996 Annual Report on Form 10-K:
Schedule Description
Schedule II Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable.
3. Exhibits
2.1.1 Cartwright Communications Acquisition Agreement (incorporated by
reference to the Current Report on from Form 8-K dated June 3, 1996).
3.1.1. Amended and Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1.1. to the Company's
Registration Statement on Form S-1 (No. 33-81834)).
3.1.2 Certificate of Retirement of the Registrant (incorporated by reference
to Exhibit 3.1.2 to the Company's Registration Statement on Form S-1
(No. 33-81834)).
3.1.3 First Certificate of Amendment to Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1.3. to the
Company's Registration Statement on Form S-1 (No. 33-81834)).
3.2.1. Amended and Restated By-laws of the Registrant (incorporated by
reference to Exhibit 3.2.1. to the Company's Registration
Statement on Form S-1 (No. 33-81834)).
3.2.2. First Amendment to Amended and Restated By-laws of the Registrant
(incorporated by reference to Exhibit 3.2.2. to the Company's
Registration Statement on Form S-1 (No. 33-81834)).
10.1 Employment Agreement dated March 31, 1994 with Robert B. Barnhill, Jr.
(incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-1 (No. 33-81834)).
11
10.2 Stockholders' Agreement dated September 29, 1993 by and among the
Company, Robert B. Barnhill, Jr., Privest I N.V., Privest II N.V.,
Grotech Partners II, L.P., Grotech Partners III, L.P., Grotech III
Companion Fund, L.P., Grotech III Pennsylvania Fund, L.P. and
Centennial Business Development Fund, Ltd. (incorporated by reference
to Exhibit 10.2 to the Company's Registration Statement on Form S-1
(No. 33-81834)).
10.3 Stock Option by and between the Registrant and Robert B. Barnhill, Jr.
dated September 28, 1994 (incorporated by reference to Exhibit 10.3 to
the Company's 1995 Annual Report on Form 10-K).
10.4 1993 Non-Statutory Stock Option Agreement with the Trustees of the
TESSCO Technologies Incorporated Retirement Savings Plan
(incorporated by reference to Exhibit 10.20 to the Company's
Registration Statement on Form S-1 (No. 33-81834)).
10.5 Employee Incentive Stock Option Plan, as amended (incorporated by
reference to Exhibit 10.21 to the Company's Registration Statement on
Form S-1 (No. 33-81834)).
10.6 1994 Stock and Incentive Plan, as amended (incorporated by reference
to Exhibit 10.22 to the Company's Registration Statement on Form S-1
(No. 33-81834)).
10.7 Financing Agreement dated March 31, 1995 by and between the Company
and NationsBank, N.A. (incorporated by reference to Exhibit 10.7 to
the Company's 1995 Annual Report on Form 10-K).
10.8 Lease Agreement dated April 13, 1992 by and between the Registrant
and Loveton Center Limited Partnership, as amended (incorporated by
reference to Exhibit 10.24 to the Company's Registration
Statement on Form S-1 (No. 33-81834)).
10.9 Lease Agreement dated September 16, 1991 by and between the Registrant
and Valley Associates, as amended (incorporated by reference to
Exhibit 10.25 to the Company's Registration Statement on Form S-1 (No.
33-81834)).
10.10 Distribution Agreement dated October 1, 1993 by and between the
Registrant and Andrew Corporation (incorporated by reference to
Exhibit 10.27 to the Company's Registration Statement on Form S-1 (No.
33-81834)).
10.11 Stock Compensation Plan for Chief Executive Officer dated January 15,
1996 (incorporated by reference to Exhibit 10.11 to the Company's
1996 Annual Report on Form 10-K).
11.1 Statement re: Computation of Per Share Earnings (incorporated by
reference to Exhibit 11.1 to the Company's 1996 Annual Report on
Form 10-K).
13.1 1996 Annual Report to Shareholders (incorporated by reference to
Exhibit 13.1 to the Company's 1996 Annual Report on Form 10-K).
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit
21.1 to the Company's Registration Statement on Form S-1 (No.
33-81834)).
23.1. Consent of Arthur Andersen LLP.
(b) The registrant did not file a report on Form 8-K for the quarter ended
March 29, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this amended
report to be signed on its behalf by the undersigned, thereunto duly authorized.
TESSCO TECHNOLOGIES INCORPORATED
By: /s/ Robert B. Barnhill, Jr., President
Robert B. Barnhill, Jr., President
July 26, 1996
EXHIBIT INDEX
2.1.1 Cartwright Communications Acquisition Agreement (incorporated by
reference to the Current Report on Form 8-K dated June 3, 1996).
3.1.1. Amended and Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1.1. to the Company's
Registration Statement on Form S-1 (No. 33-81834)).
3.1.2 Certificate of Retirement of the Registrant (incorporated by reference
to Exhibit 3.1.2 to the Company's Registration Statement on Form S-1
(No. 33-81834)).
3.1.3 First Certificate of Amendment to Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1.3. to the
Company's Registration Statement on Form S-1 (No. 33-81834)).
3.2.1. Amended and Restated By-laws of the Registrant (incorporated by
reference to Exhibit 3.2.1. to the Company's Registration
Statement on Form S-1 (No. 33-81834)).
3.2.2. First Amendment to Amended and Restated By-laws of the Registrant
(incorporated by reference to Exhibit 3.2.2. to the Company's
Registration Statement on Form S-1 (No. 33-81834)).
10.1 Employment Agreement dated March 31, 1994 with Robert B. Barnhill, Jr.
(incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-1 (No. 33-81834)).
10.2 Stockholders' Agreement dated September 29, 1993 by and among the
Registrant, Robert B. Barnhill, Jr., Privest I N.V., Privest II N.V.,
Grotech Partners II, L.P., Grotech Partners III, L.P., Grotech III
Companion Fund, L.P., Grotech III Pennsylvania Fund, L.P. and
Centennial Business Development Fund, Ltd. (incorporated by
reference to Exhibit 10.2 to the Company's Registration Statement
on Form S-1 (No. 33-81834)).
10.3 Stock Option by and between the Company and Robert B. Barnhill, Jr.
effective September 28, 1994 (incorporated by reference to Exhibit 10.3
to the Company's 1995 Annual Report on Form 10-K)
10.4 1993 Non-Statutory Stock Option Agreement with the Trustees of the
TESSCO Technologies Incorporated Retirement Savings Plan
(incorporated by reference to Exhibit 10.20 to the Company's
Registration Statement on Form S-1 (No. 33-81834)).
10.5 Employee Incentive Stock Option Plan, as amended (incorporated by
reference to Exhibit 10.21 to the Company's Registration Statement on
Form S-1 (No. 33-81834)).
10.6 1994 Stock and Incentive Plan, as amended (incorporated by reference to
Exhibit 10.22 to the Company's Registration Statement on Form S-1 (No.
33-81834)).
10.7 Financing Agreement dated March 31, 1995 by and between the Company and
NationsBank, N.A. (incorporated by reference to Exhibit 10.7 to the
Company's 1995 Annual Report on Form 10-K).
10.8 Lease Agreement dated April 13, 1992 by and between the Registrant and
Loveton Center Limited Partnership, as amended (incorporated by
reference to Exhibit 10.24 to the Company's Registration
Statement on Form S-1 (No. 33-81834)).
10.9 Lease Agreement dated September 16, 1991 by and between the Registrant
and Valley Associates, as amended (incorporated by reference to Exhibit
10.25 to the Company's Registration Statement on Form S-1 (No.
33-81834)).
10.10 Distribution Agreement dated October 1, 1993 by and between the
Registrant and Andrew Corporation (incorporated by reference to Exhibit
10.27 to the Company's Registration Statement on Form S-1 (No.
33-81834)).
10.11 Stock Compensation Plan for Chief Executive Officer dated January 15,
1996 (incorporated by reference to Exhibit 10.11 to the Company's
1996 Annual Report on Form 10-K).
11.1 Statement re: Computation of Per Share Earnings (incorporated by
reference to Exhibit 11.1 to the Company's 1996 Annual Report on
Form 10-K).
13.1 1996 Annual Report to Shareholders (incorporated by reference to
Exhibit 13.1 to the Company's 1996 Annual Report on Form 10-K).
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit
21.1 to the Company's Registration Statement on Form S-1 (No.
33-81834)).
23.1. Consent of Arthur Andersen LLP.