TESSCO Announces Record Revenues and Earnings

TESSCO Announces Record Revenues and Earnings

Third Quarter Earnings Per Share Reach $0.40 on $136 Million in Revenues

HUNT VALLEY, Md., Jan. 24 /PRNewswire-FirstCall/ -- TESSCO Technologies (NASDAQ:TESS), a leading supplier of integrated product plus supply chain solutions to the wireless communications industry, today reported its financial performance for its third quarter ended December 26, 2004.

Comments from Chairman, President and Chief Executive Officer

Robert Barnhill, Chairman, President and Chief Executive Officer stated:


"As a result of sales growth in all lines of business and improved operating productivity, we achieved record earnings per share of $0.40 in the third fiscal quarter ended December 26, 2004. Revenues grew 46% over last year's comparable quarter driven by a 100% growth in consumer and affinity channel sales, and 15% growth in commercial and government channel sales. Commercial and government buyers grew 9% and their purchases of network infrastructure, mobile devices and accessories, and installation, test and maintenance products, increased 12%, 23% and 13% respectively.

"We are continuing to diversify and expand our markets; the success of these diversification strategies is important in light of the August 2005 transition by T-Mobile USA from the TESSCO Ecommerce Marketing and Sales System to an in-house system to serve its business-to-business, consumer direct and telesales channels. During the quarter we continued to develop and execute specific programs to aggressively grow a diversified mix of customers and their monthly purchases, and expand the wireless product and services offering."

Financial Results for the Third Quarter

Total revenues reached $135.8 million for the third quarter, up 46% compared to $93.1 million for the third quarter of last fiscal year, and up 17% on a sequential basis as compared to the second quarter of this fiscal year. Gross profit was $24.4 million for the third quarter compared to $19.9 million for the third quarter of last fiscal year and $23.0 million for the second quarter of fiscal 2005. Gross profit margin declined, totaling 18.0% for the third quarter compared to 21.4% in the third quarter of last fiscal year and 19.9% in the second quarter. The gross profit margin decline was driven by the very large growth in lower margin consumer handset sales. Gross profit margin for the commercial and government channel was 24.9% in the third quarter, as compared to 25.8% in the prior year quarter and 24.7% in the second quarter of this fiscal year.

As gross profit increased by 22% compared to the prior year third quarter, selling, general and administrative expenses increased by only 17%. Total selling, general and administrative expenses for the third quarter totaled $21.6 million, as compared to $18.5 million in the prior year quarter, and $20.3 million in the second quarter of fiscal 2005.

Net income for the third quarter totaled $1.7 million. Net loss for the prior year third quarter included $2.3 million in restructuring charges and totaled $542,800. Diluted earnings per share were $0.40 for the third quarter. Diluted loss per share for the prior year third quarter included $0.31 loss per share from restructuring charges and totaled $0.12. Net income and diluted earnings per share in the second quarter of fiscal 2005 totaled $1.6 million and $0.36, respectively.

The third quarter ended with cash and cash equivalents totaling $3.5 million and corporate borrowings of only $5.5 million, all of which are facility mortgages.

Revenues for the first nine months of fiscal year 2005 were $362.1 million as compared to $245.1 million for the first nine months of last fiscal year, or a 48% increase. This increase was the result of a 19% increase in commercial and government channel sales and a 110% increase in sales in the consumer and affinity channel. Gross profit totaled $69.8 million for the first nine months of fiscal 2005 compared to $56.5 million for the same period in the prior year.

The growth in our consumer channel continues to be driven by the T-Mobile ecommerce relationship. T-Mobile associated revenues accounted for 47% and 41% of total TESSCO revenues, but only 23% and 21% of total gross profit, for this quarter and year to date respectively. T-Mobile gross profit margin is after product-material costs only, and does not include operating or indirect expenses necessary to support this business. These expenses are a significant portion of overall selling, general and administrative expenses.

Net income for the first nine months of the fiscal year totaled $4.8 million. Net income for the prior year period totaled $1.4 million. Diluted earnings per share for the first nine months of fiscal year 2005 totaled $1.08. Diluted earnings per share for the prior year period totaled $0.32. The prior year net income and earnings per share totals include a $3.1 million benefit from insurance proceeds, partially offset by a $2.3 million restructuring charge (net positive effect of $0.11 on diluted earnings per share).

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. Continuing uncertainty in economic conditions make it particularly difficult to forecast product demand and other related matters.

For the fourth fiscal quarter ending in March 2005, earnings per share are expected to be in the range of $0.30 to $0.35. Earnings per share for the fiscal year should be in the range of $1.38 to $1.43.

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 (http://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.

Third quarter results will be discussed in a teleconference on January 25, 2005 at 10 a.m. ET. The conference call will be webcast live on the Internet at http://www.tessco.com/.

About TESSCO

TESSCO Technologies Incorporated (NASDAQ:TESS), "the vital link to a wireless world(TM)." TESSCO connects wireless system operators, service organizations, and resellers with the product and supply chain solutions required to keep networks and users on the air. TESSCO's vision is to be Your Total Source(R) supplier for everything needed to design, build, run, maintain or use wireless. TESSCO delivers to its customer what they need, when and where they need it, to the point of use or sale, streamlining the supply chain process and lowering inventories and total costs.

For manufacturers, TESSCO presents, markets, sells, supplies and supports their products as part of a total customer solution, thus providing a cost- effective channel to a broad and diverse customer base.

TESSCO began its "total source" operations in 1982 and completed its public offering (NASDAQ:TESS) in 1994. Today, TESSCO operates 24 hours a day, seven days a week, under ISO 9001:2000 registration. TESSCO's Global Logistics Center in Maryland and Americas Sales and Logistics Center in Nevada configure orders for complete, on-time delivery throughout the world.

TESSCO delivers best-of-breed, end-to-end solutions from its product offering of 34,000 items from 450 manufacturers. Product solutions fall within the broad categories of network infrastructure, mobile devices and accessories, and installation, test and maintenance products and services.

TESSCO currently serves customers through three distinct sales channels: sell-to, sell-through and affinity channels. TESSCO sells to over 9,400 commercial and government sell-to and sell-through customers per month, including a diversified mix of cellular, PCS and paging carriers; system operators; Internet service providers; infrastructure site owners and contractors; integrators; enterprise, utility and transportation; education and healthcare; state and local government; federal government and military; wireless dealers; value-added resellers; and retailers.

Within the consumer-direct affinity channel, TESSCO sells to over 34,500 subscribers per month through its private and co-branded phone and Web "stores."

To learn more about TESSCO Technologies Incorporated, we invite you to search our world-class TESSCO.com(R) Web site for information about our company, our value proposition and our commitment to marketing innovation and operational excellence.

This press release contains 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 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 factors discussed above, 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

Fiscal Quarters Ended
December 26, 2004 September 26, 2004 December 28, 2003
(unaudited) (unaudited) (unaudited)

Revenues $ 135,825,100 $ 115,689,700 $93,131,700
Cost of goods
sold 111,420,400 92,708,200 73,185,200

Gross profit 24,404,700 22,981,500 19,946,500
Selling, general
and
administrative
expenses 21,569,300 20,309,500 18,510,000

Restructuring
charges - - 2,285,700
Benefit from
insurance
proceeds - - -
21,569,300 20,309,500 20,795,700

Income (loss)
from
operations 2,835,400 2,672,000 (849,200)

Interest, net 37,100 42,700 40,600

Income (loss)
before provision
for income taxes 2,798,300 2,629,300 (889,800)

Provision for
(benefit from)
income taxes 1,091,400 1,025,400 (347,000)

Net income
(loss) $1,706,900 $ 1,603,900 $ (542,800)


Basic earnings
(loss) per share $0.41 $0.37 $(0.12)

Diluted earnings
(loss) per share $0.40 $0.36 $(0.12)

Basic weighted
average shares
outstanding 4,211,000 4,376,500 4,420,300

Diluted weighted
average shares
outstanding 4,233,700 4,440,700 4,420,300



Nine Months Ended
December 26, 2004 December 28, 2003
(unaudited) (unaudited)

Revenues $362,119,800 $245,051,300
Cost of goods sold 292,344,200 188,535,300

Gross profit 69,775,600 56,516,000
Selling, general and
administrative expenses 61,867,900 54,814,300
Restructuring charges - 2,285,700
Benefit from insurance
proceeds - (3,054,000)
61,867,900 54,046,000

Income (loss) from
operations 7,907,700 2,470,000

Interest, net 114,400 121,100

Income (loss) before
provision for income taxes 7,793,300 2,348,900

Provision for (benefit from)
income taxes 3,039,400 916,000

Net income (loss) $4,753,900 $1,432,900


Basic earnings (loss) per share $1.10 $0.32

Diluted earnings (loss)
per share $1.08 $0.32

Basic weighted average shares
outstanding 4,340,900 4,435,700

Diluted weighted average
shares outstanding 4,406,300 4,455,600



TESSCO Technologies Incorporated
Consolidated Balance Sheets

December 26, March 28,
2004 2004
(unaudited) (audited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $3,540,000 $6,765,600
Trade accounts receivable, net 53,836,700 47,124,600
Product inventory 54,804,400 40,987,100
Deferred tax asset 2,079,000 2,079,000
Prepaid expenses and other current assets 2,402,300 2,494,300
Total current assets 116,662,400 99,450,600

PROPERTY AND EQUIPMENT, net 26,266,200 25,944,700
GOODWILL, net 2,452,200 2,452,200
OTHER LONG-TERM ASSETS 1,295,400 1,281,200
Total assets $ 146,676,200 $129,128,700



LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Trade accounts payable $ 70,134,400 $55,250,000
Accrued expenses and other current
liabilities 6,649,000 6,588,500
Revolving line of credit - -
Current portion of long-term debt 361,500 282,000
Total current liabilities 77,144,900 62,120,500

DEFERRED TAX LIABILITY 3,419,100 3,419,100
LONG-TERM DEBT, net of current portion 5,091,900 5,354,700
OTHER LONG-TERM LIABILITIES 1,679,900 1,900,900
Total liabilities 87,335,800 72,795,200

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
Preferred stock - -
Common stock 48,800 48,500
Additional paid-in capital 23,359,100 22,250,200
Treasury stock, at cost (7,403,200) (4,547,000)
Retained earnings 43,335,700 38,581,800
Total shareholders' equity 59,340,400 56,333,500
Total liabilities and shareholders'
equity $146,676,200 $129,128,700



Source: TESSCO Technologies

CONTACT: Robert C. Singer, Chief Financial Officer of TESSCO
Technologies, +1-410-229-1378, singer@tessco.com

Web site: http://www.tessco.com/


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