News Release

View printer-friendly version

<< Back

TESSCO Reports Fourth Quarter and Fiscal Year Earnings

Share Repurchase Program Expanded to $10 Million

Dividend of $0.20 per Share Declared

Highlights

  • Completed successful transition from the Third Party Logistics (3PL) business
  • Fiscal year 2014 EPS, which did not include any 3PL contribution, was $1.94
  • Revenues slowed in the second half of the fiscal year, largely as a result of weather and macro-economic issues
  • Revenues steadily increased in March and that trend has continued into the new fiscal year
  • Share repurchase program expanded to $10 million
  • Dividend of $0.20 per share declared
  • EPS guidance range for fiscal 2015 of $2.05 to $2.15

HUNT VALLEY, Md.--(BUSINESS WIRE)--May 6, 2014-- TESSCO (NASDAQ: TESS), Your Wireless Source for the knowledge, and the product and supply chain solutions to build, use and maintain wireless systems, today reported its fourth quarter and fiscal year results for the period ended March 30, 2014. TESSCO reported fourth quarter revenue of $124.5 million and net income of $3.0 million, or $0.35 per diluted share, equaling earnings per share from the prior-year fourth quarter.

Financial Highlights

            Fourth Quarter           Fiscal Year 2014
Revenue           $124.5M           $560.1M
Diluted EPS           $0.35           $1.94
EBITDA** per share           $0.70           $3.74
Operating margin           3.8%           4.7%
Cash from operations           $7.0M           $18.7M
Cash balance           $11.5M           $11.5M
                   

“We ended our fiscal year with strong financials after successfully transitioning out of a $213 million third party logistics relationship,” said Robert Barnhill, Chairman and CEO. “We also are making excellent progress shaping and executing strategic initiatives to achieve sustainable, profitable growth.

“We began the first half of the year strongly with 11% growth from our core* business,” Barnhill continued. “In the second half, the weather and an uncertain economy affected our growth momentum, resulting in 4% core revenue growth for the fiscal year. Revenues began to rebound late in the fourth quarter, and continued to accelerate in April. Our growth was largely driven by sales to our Public Carrier market, which grew 34% in the fiscal year. Ventev® proprietary product sales grew 20% and contributed to the annual improvement in margins in the Public Carrier and Retail markets.

“For fiscal 2015, we expect our digital and on-line marketing, solutions team-based selling, expansion of the systems we support, broad product offering, excellent customer experience, Ventev® proprietary products, and strategic marketing campaign initiatives to accelerate revenue growth and improve productivity as the year progresses,” Barnhill added.

“We are continuing to strengthen our growth platform. Considering the investments we are making in new business generation, organizational talent, digital and on-line marketing and our enterprise technology foundation, as well as continued concerns about the state of the economy, we are providing EPS guidance for fiscal year 2015 in the range of $2.05 to $2.15.

“Our Board of Directors has expanded our existing share repurchase program and continued our $0.20 quarterly dividend. These programs underscore the confidence we have in TESSCO’s position in a vastly growing industry, as well as our strong value proposition, strategy and balance sheet,” Barnhill said.

“As the convergence of wireless and the Internet continues to drive the expansion of new voice, data and video systems, TESSCO is uniquely positioned to be the source of the knowledge and product solutions for the organizations that build, use, maintain or resell wireless. I would like to thank our customers, manufacturers, team members and shareowners for their continued support. We look forward to accelerating our growth in fiscal year 2015 and beyond,” Barnhill concluded.

Fourth-Quarter Fiscal 2014 Financial Results

For the fiscal 2014 fourth quarter, revenues totaled $124.5 million compared to $158.4 million in the comparable 2013 quarter, which included $26.9 million in revenue from the since transitioned 3PL relationship, and $131.6 million core revenues. Core revenues* declined 5% from the prior-year period.

Fourth-quarter fiscal 2014 gross profit was $30.1 million compared to $34.0 million in the year-ago quarter, which included a $1.7 million gross profit contribution from the transitioned 3PL business. Gross margin was 24.2%, compared to 21.4% in last year’s fourth quarter.

Selling general and administrative (SG&A) expenses were $25.3 million, compared to $29.1 million in last year's fourth quarter, primarily due to a reduction in expenses associated with the transitioned 3PL business, as well as lower reward plan expenses. Operating margin was 3.8%, versus 3.0% in the prior-year quarter.

Net income and diluted earnings per share totaled $3.0 million and $0.35 for the fourth quarter of fiscal 2014, respectively, compared to $2.9 million and $0.35 for the prior-year quarter, respectively.

EBITDA** totaled $5.9 million, or $0.70 per diluted share, in the fourth quarter of fiscal 2014, compared to $6.1 million, or $0.73 per diluted share, in the prior-year quarter.

Fiscal 2014 Year Financial Results

For the 2014 fiscal year, TESSCO reported revenues of $560.1 million and net income of $16.2 million, or $1.94 per diluted share. These results compare to revenues of $752.6 million and net income of $17.8 million, or $2.15 per diluted share, for full year fiscal 2013. EBITDA** for fiscal 2014 totaled $31.4 million, or $3.74 per share, compared to $34.2 million, or $4.12 per share, for fiscal 2013. Overall, core revenues grew 4% year over year and gross profits grew 5%.

Quarterly Cash Dividends

The Board of Directors declared a quarterly cash dividend of $0.20 per common share payable on June 4, 2014 to holders of record on May 22, 2014. Any future declaration of dividends, and the establishment of record and payment dates, is subject to further determinations of the Board of Directors.

Share Repurchase Program

On April 23, 2014, the Board of Directors expanded the Company’s existing share repurchase program. The Board believes that the repurchase of the Company’s shares, when appropriate, is an excellent use of funds to enhance long-term shareholder value. The Board has authorized the purchase on a non-accelerated basis of up to $10 million of TESSCO stock over a 24-month period, ending in April 2016. Shares may be purchased from time to time in the open market, by block purchase, or through negotiated transactions, or possibly other transactions managed by broker-dealers. Any purchases will be funded from working capital and/or the Company’s credit facility. The actual number of shares to be repurchased remains to be determined.

Business Outlook

Considering the investments TESSCO is making in new business generation, organizational talent, digital and on-line marketing and its enterprise technology foundation, as well as continued concerns about the state of the economy, the Company is providing EPS guidance for fiscal year 2015 in the range of $2.05 to $2.15. As TESSCO's fiscal year progresses and visibility increases, management may review and update its financial targets as appropriate.

Forecasting future results is inherently difficult for any business, and actual results may differ materially from those forecasted. The nature of our business is that we typically ship products within several days after booking orders. The lack of an order backlog makes it even more difficult to forecast future results. 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.

Fourth-Quarter Fiscal 2014 Conference Call

Management will host a conference call to discuss its fourth-quarter 2014 results on Tuesday, May 6, 2014 at 5:00 PM ET. To participate in the conference call, please call: 866-515-2908 (domestic call-in) or 617-399-5122 (international call-in) and reference code #32074464. Please make special note of the date and time of the call as TESSCO has historically held its conference call on the day following the issuance of the news release.

A live webcast of the conference call will be available at www.tessco.com/go/corporatepresentations. All participants should call or access the website approximately 10 minutes before the conference begins.

A telephone replay of the conference call will be available from 7:00 p.m. ET on May 6, 2014 until 12:00 p.m. ET on May 13, 2014 by calling 888-286-8010 (domestic) or 617-801-6888 (international) and entering confirmation #58258253. An archived replay of the conference call will also be available on the company's website at www.tessco.com/go/corporatepresentations.

*Core Revenues

"Core revenues" are our total revenues other than and excluding revenues related to the major 3PL relationship with a Tier 1 Carrier that transitioned at the completion of fiscal year 2013. The amount of "core revenues" for a given period is determined by subtracting from total revenues, any revenues related to the major 3PL relationship for the corresponding period. There are no revenues related to this relationship in fiscal 2014, and thus, total revenues and core revenues are the same for fiscal 2014. The term “core business” refers to our overall business, generally, but excludes our business related to the major 3PL relationship with the Tier 1 Carrier that transitioned at the completion of fiscal year 2013.

**Non-GAAP Information

EBITDA, a measure used by management to evaluate the Company's ongoing operations and as a general indicator of its operating cash flow (in conjunction with a cash flow statement which also includes among other items, changes in working capital and the effect of non-cash charges), is defined as income from operations, plus interest expense, net of interest income, provision for income taxes, and depreciation and amortization. Management believes EBITDA as well as EBITDA per share are useful to investors because they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies. Because not all companies use identical calculations, the Company's presentation of EBITDA and EBITDA per share may not be comparable to other similarly titled measures of other companies. EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. EBITDA per diluted share is also a non-GAAP calculation defined as EBITDA divided by the Company's diluted weighted average shares outstanding. Additionally, EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not reflect certain cash requirements such as interest payments, tax payments and debt service requirements. The amounts shown for EBITDA as presented herein differ from the amounts calculated under the definition of EBITDA used in the Company's loan agreements. The definition of EBITDA as used in the Company's loan agreements is further adjusted for certain cash and non-cash charges/credits, including stock compensation expense, and is used to determine compliance with financial covenants and the ability to engage in certain activities such as incurring additional debt.

A reconciliation of the Company's non-GAAP to GAAP results is included as an exhibit to this release.

About TESSCO

TESSCO (NASDAQ:TESS), the source of wireless knowledge, and product and supply chain solutions, helps organizations build, use, and maintain wireless voice, data and video systems. The Company is a component of the Russell 2000® index.

Forward-Looking Statements

This press release, including the statements of Robert Barnhill and the discussion under the heading "Business Outlook," contains forward-looking statements as to anticipated results and future prospects. These forward-looking statements are based on current expectations and analysis, and actual results may differ materially. These forward-looking statements may generally be identified by the use of the words "may," "will," "expects," "anticipates," "believes," "estimates," and similar expressions, but the absence of these words or phrases does not necessarily mean that a statement is not forward-looking. Forward-looking statements involve a number of risks and uncertainties. Our actual results may differ materially from those described in or contemplated by any such forward-looking statement for a variety of reasons, including those risks identified in our most recent Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission, under the heading "Risk Factors" and otherwise. 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. Without limiting the risks that we describe in our periodic reports and elsewhere, among the risks that could lead to a materially adverse impact on our business or operating results are the following: termination or non-renewal of limited duration agreements or arrangements with our vendors and affinity partners that are typically terminable by either party upon several months or otherwise relatively short notice; loss of significant customers or relationships, including affinity relationships; loss of customers as a result of consolidation among the wireless communications industry; the strength of our customers', vendors' and affinity partners' business; economic conditions that may impact customers' ability to fund or pay for our products and services; failure of our information technology system or distribution system; technology changes in the wireless communications industry; third-party freight carrier interruption; increased competition; our inability to access capital and obtain financing as and when needed; and 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.

       

TESSCO Technologies Incorporated

Consolidated Statements of Income (Unaudited)

 
Fiscal Quarters Ended Year Ended
March 30, 2014     December 29, 2013     March 31, 2013 March 30, 2014     March 31, 2013
 
Revenues $ 124,536,600 $ 144,915,200 $ 158,449,800 $ 560,086,600 $ 752,565,000
Cost of goods sold 94,451,800 108,772,800 124,498,600 421,928,700 605,525,800
Gross profit 30,084,800 36,142,400 33,951,200 138,157,900 147,039,200
Selling, general and administrative expenses 25,315,700 28,974,800 29,144,900 111,668,000 117,820,600
Income from operations 4,769,100 7,167,600 4,806,300 26,489,900 29,218,600
Interest, net 18,300 37,800 141,100 177,700 224,200
Income before provision for income taxes 4,750,800 7,129,800 4,665,200 26,312,200 28,994,400
Provision for income taxes 1,795,500 2,709,300 1,745,400 10,063,100 11,200,500
Net income $ 2,955,300 $ 4,420,500 $ 2,919,800 $ 16,249,100 $ 17,793,900
 
Basic earnings per share $ 0.36 $ 0.54 $ 0.36 $ 1.98 $ 2.22
Diluted earnings per share $ 0.35 $ 0.53 $ 0.35 $ 1.94 $ 2.15
           

TESSCO Technologies Incorporated

Consolidated Balance Sheets

 

March 30, 2014

March 31, 2013
(unaudited) (audited)
 
ASSETS
Current Assets:
Cash and cash equivalents $ 11,467,900 $ 4,468,000
Trade accounts receivable, net 67,495,700 82,177,600
Product inventory 61,182,500 60,913,600
Deferred tax assets 6,913,000 6,227,300
Prepaid expenses and other current assets   2,336,600     3,482,300  
Total current assets 149,395,700

157,268,800

 
Property and equipment, net 22,765,400 23,202,000
Goodwill, net 11,684,700 11,684,700
Other long-term assets   2,341,300     2,144,500  
Total assets $ 186,187,100   $ 194,300,000  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable $ 49,983,700 $ 65,209,300
Payroll, benefits and taxes 7,670,100 11,678,500
Income and sales tax liabilities 2,477,700 2,530,700
Accrued expenses and other current liabilities 923,600 1,048,900
Revolving line of credit -- --
Current portion of long-term debt   250,200     249,700  
Total current liabilities 61,305,300 80,717,100
 
Deferred tax liabilities 4,260,700 3,951,800
Long-term debt, net of current portion 2,208,200 2,458,300
Other long-term liabilities   3,584,800     4,370,200  
Total liabilities   71,359,000     91,497,400  
 
Shareholders’ Equity:
Preferred stock -- --
Common stock 94,200 91,500
Additional paid-in capital 53,987,700 50,481,600
Treasury stock, at cost (50,084,600 ) (48,438,300 )
Retained earnings   110,830,800     100,667,800  
Total shareholders’ equity   114,828,100  

 

  102,802,600  
 
Total liabilities and shareholder’s equity $ 186,187,100   $ 194,300,000  
 
           

TESSCO Technologies Incorporated

Reconciliation of Net Income to Earnings Before Interest, Taxes and Depreciation and Amortization (EBITDA) (Unaudited)

 
Fiscal Quarters Ended Year Ended
March 30, 2014       December 29, 2013       March 31, 2013 March 30, 2014       March 31, 2013
Net income $ 2,955,300 $ 4,420,500 $ 2,919,800 $ 16,249,100 $ 17,793,900
Add:
Provision for income taxes 1,795,500 2,709,300 1,745,400 10,063,100 11,200,500
Interest, net 18,300 37,800 141,100 177,700 224,200
Depreciation and amortization   1,149,600   1,241,200   1,259,900   4,865,000   4,979,400
EBITDA $ 5,918,700 $ 8,408,800 $ 6,066,200 $ 31,354,900 $ 34,198,000
EBITDA per diluted share $ 0.70 $ 1.00 $ 0.73 $ 3.74 $ 4.12
 
 
TESSCO Technologies Incorporated
Supplemental Results Summary (in thousands) (Unaudited)
               
Three months ended March 30, 2014 Year ended March 30, 2014
Total Total

Market Revenues

Public Carriers, Contractors & Program Managers $ 33,315 $ 149,196
Private & Government System Operators 26,420 115,316
Commercial Dealers & Resellers 31,445 140,552
Retailer, Independent Dealer Agents & Carriers   33,357     155,023  
Revenue, excluding Major 3PL relationship 124,537 560,087
Major 3PL relationship   --     --  
Total revenues   124,537     560,087  
 

Gross Profit

Public Carriers, Contractors & Program Managers 6,229 31,013
Private & Government System Operators 7,239 31,607
Commercial Dealers & Resellers 8,761 39,396
Retailer, Independent Dealer Agents & Carriers   7,856     36,142  
Gross profit, excluding Major 3PL relationship 30,085 138,158
% of revenues 24.2 % 24.7 %
Major 3PL relationship   --     --  
Total gross profit   30,085     138,158  
% of revenues 24.2 % 24.7 %
 
Direct expenses   16,678     70,673  
Segment net profit contribution 13,407 67,485
% of revenues 10.8 % 12.0 %
Corporate support expenses*   8,656     41,173  
Income before provision for income taxes $ 4,751   $ 26,312  
% of revenues 3.8 % 4.7 %
 
Growth Rates Compared to Prior Year Period:

Revenues

Public Carriers, Contractors & Program Managers 1.7 % 34.2 %
Private & Government System Operators -3.0 % -4.9 %
Commercial Dealers & Resellers -9.3 % 1.3 %
Retailer, Independent Dealer Agents & Carriers   -9.5 %   -7.7 %
Revenue, excluding Major 3PL relationship -5.3 % 3.9 %
Major 3PL relationship   -100.0 %   -100.0 %
Total revenues   -21.4 %   -25.6 %
 

Gross Profit

Public Carriers, Contractors & Program Managers -14.2 % 28.2 %
Private & Government System Operators -6.3 % -5.9 %
Commercial Dealers & Resellers -8.0 % 2.7 %
Retailer, Independent Dealer Agents & Carriers   1.1 %   0.7 %
Gross profit, excluding Major 3PL relationship -6.8 % 4.6 %
Major 3PL relationship   -100.0 %   -100.0 %
Total gross profit -11.4 % -6.0 %
 
Direct expenses   2.2 %   0.2 %
Segment net profit contribution -23.9 % -11.8 %
Corporate support expenses*   -33.2 %   -13.4 %
Income before provision for income taxes   1.8 %   -9.3 %
 
* Includes corporate overhead, facilities expense, depreciation, interest and company-wide pay-for-performance bonus expense
 
 
TESSCO Technologies Incorporated
Supplemental Results Summary (in thousands) (Unaudited)
               

Three months ended March 30, 2014

Year ended March 30, 2014

Revenues

Base station infrastructure $ 55,721 $ 252,983
Network systems 21,654 89,411
Installation, test and maintenance 9,312 45,343
Mobile device accessories   37,850     172,350  
Total revenues 124,537 560,087
 

Gross Profit

Base station infrastructure 14,680 69,451
Network systems 3,774 16,040
Installation, test and maintenance 2,083 10,286
Mobile device accessories   9,548     42,381  
Total gross profit $ 30,085 $ 138,158
% of revenues 24.2 % 24.7 %
 
Growth Rates Compared to Prior Year Period
 

Revenues

Base station infrastructure -7.0 % 11.2 %
Network systems 11.4 % 13.2 %
Installation, test and maintenance -19.9 % -5.1 %
Mobile device accessories   -43.9 %   -56.7 %
Total revenues -21.4 % -25.6 %
 

Gross Profit

Base station infrastructure -11.5 % 6.1 %
Network systems 8.9 % 7.7 %
Installation, test and maintenance -23.1 % -7.8 %
Mobile device accessories   -14.7 %   -23.7 %
Total gross profit -11.4 % -6.0 %
 

Source: TESSCO

TESSCO Technologies Incorporated
Aric Spitulnik, 410-229-1419
Chief Financial Officer
spitulnik@tessco.com
or
Sharon Merrill
David Calusdian, 617-542-5300
TESS@investorrelations.com