TESSCO TECHNOLOGIES INC (Form: 8-K, Received: 07/18/2017 16:46:55)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 17, 2017

TESSCO Technologies Incorporated

(Exact name of registrant as specified in its charter)

Delaware	001-33938	52-0729657
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

11126 McCormick Road, Hunt Valley, Maryland 21031

(Address of principal executive offices) (Zip Code)

(410) 229-1000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

On July 17, 2017, TESSCO Technologies Incorporated (the “Company”) and its primary operating subsidiaries, as co-borrowers, and the administrative agent and lenders party thereto, entered into a First Amendment to Credit Agreement (the “First Amendment”), effective as of July 13, 2017, to amend select terms of the Credit Agreement dated June 24, 2016 (the "Credit Agreement") by and among the co-borrowers and SunTrust Bank, as administrative agent and lender, and Wells Fargo Bank NA, as lender, for the Company's existing $35 million senior asset backed revolving credit facility. Capitalized terms used herein but not defined have the meaning ascribed thereto in the Credit Agreement, as amended by the First Amendment.

Pursuant to the First Amendment, the term "Availability" as used in the Credit Agreement was amended for a period of time ending no later than October 31, 2017, to allow for the inclusion of an additional sum when calculating "Availability" for certain limited purposes. This additional sum is equal to the lesser of $10 million, and the amount by which the Borrowing Base exceeds $35 million. This does not increase the $35 million Aggregate Revolving Commitment Amount, but will allow the Company greater flexibility under the Credit Agreement for a limited period of time in response to business opportunities the Company is pursuing.

The discussion of the First Amendment as set forth in this Item 1.01 is qualified in its entirety by the actual terms and provisions of the First Amendment, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1 and incorporated fully herein by this reference, and of the Credit Agreement.

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On July 18, 2017, TESSCO Technologies Incorporated (the “Company”) issued a press release which contained, among other things, an announcement of the Company’s financial results for the first quarter ended June 25, 2017. A copy of the Press Release is furnished as Exhibit 99.1 to this Form 8-K.

The information in this Item 2.02, including the information in Exhibit 99.1 attached hereto pertaining to this Item 2.02, is furnished solely pursuant to Item 2.02 of this Form 8-K. Consequently, pursuant to this Item 2.02, it is not deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that Section. It may only be incorporated by reference in another filing under the Securities Exchange Act of 1934 or Securities Act of 1933 if such subsequent filing specifically references this Item 2.02 of this Form 8-K.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

Financial Statements of Businesses Acquired.

None.

Pro Forma Financial Information.

None.

Exhibits.


Exhibit No.		Description of Exhibits
10.1		First Amendment to Credit Agreement, dated as of July 13, 2017, by and among the Company and certain subsidiaries, as co-borrowers, and SunTrust Bank, as administrative agent and lender, and Wells Fargo Bank NA, as lender
99.1		Press Release dated July 18, 2017

Information presented in this Current Report on Form 8-K may contain forward-looking statements and certain assumptions upon which such forward-looking statements are in part based. Numerous important factors, including those factors identified in the TESSCO Technologies Incorporated Annual Report on Form 10-K and other of the Company’s filings with the Securities and Exchange Commission, and the fact that the assumptions set forth in this Current Report on Form 8-K could prove incorrect, could cause actual results to differ materially from those contained in such forward-looking statements.

SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			TESSCO Technologies Incorporated


Date:	July 18, 2017	By:	/s/ Aric M. Spitulnik
			Aric M. Spitulnik
			Principal Financial Officer

EXHIBIT INDEX


Exhibit No.		Description of Exhibits
10.1		First Amendment to Credit Agreement, dated as of July 13, 2017, by and among the Company and certain subsidiaries, as co-borrowers, and SunTrust Bank, as administrative agent and lender, and Wells Fargo Bank NA, as lender
99.1		Press Release dated July 18, 2017

Exhibit 10.1

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “ Agreement ”) is dated as of July 13, 2017, by and among TESSCO TECHNOLOGIES, INCORPORATED, a Delaware corporation (“ Parent ”), TESSCO INCORPORATED, a Delaware corporation (“ TESSCO ”), TESSCO SERVICE SOLUTIONS, INC., a Delaware corporation (“ SERVICE ”), GW SERVICE SOLUTIONS, INC., a Delaware corporation (“ GW ”), and TCPM, INC., a Delaware corporation (“ TCPM ”; TESSCO, SERVICE, GW, and TCPM, each a “Borrower,” and, collectively, the “ Borrowers ”), the “Subsidiary Loan Parties” party hereto, the Lenders (as defined below) party hereto, and SUNTRUST BANK, in its capacity as administrative agent for the Lenders (the “ Administrative Agent ”).

W I T N E S S E T H :

WHEREAS, Borrowers, the banks and financial institutions party thereto from time to time (the “ Lenders ”), and Agent are party to that certain Credit Agreement dated as of June 24, 2016 (as the same may have been amended, restated, supplemented, or otherwise modified from time to time before the date hereof, the “ Credit Agreement ”); and

WHEREAS, Borrowers have requested, and Agent and the Lenders party hereto have agreed to, subject to the terms and conditions hereof, certain amendments to the Credit Agreement.

NOW, THEREFORE, for and in consideration of the above premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, each of the parties hereto hereby covenants and agrees as follows:

1. Definitions . Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement.

2. Amendments to the Credit Agreement .

(a) Section 1.1 to the Credit Agreement is amended by including the following new definition therein, in appropriate alphabetical order:

“ Suppressed Availability ” means, at any time of determination, the lesser of (a) the positive amount (if any) by which the Borrowing Base exceeds the Aggregate Revolving Commitment Amount and (b) $10,000,000.

(b) The definition of “Availability in Section 1.1 of the Credit Agreement is amended so that it reads, in its entirety, as follows:

“ Availability ” shall mean, as of any date of determination, the sum of:

(a) the positive amount (if any) by which (i) the lesser of (A) the Borrowing Base and (B) the Aggregate Revolving Commitment Amount exceeds (ii) the Aggregate Revolving Credit Exposure on such date; plus

(b) solely for purposes of determining “Availability” in the definitions of “Cash Dominion Period,” “Increased Reporting Period,” and

“Liquidity Period” and in Section 7.5(d), in each case, during the period commencing on and including July 13, 2017, and ending on the earlier to occur of (i) the date on which an Event of Default occurs and (ii) October 31, 2017, Suppressed Availability.

3. Miscellaneous .

(a) Representations and Warranties . To induce Agent and those Lenders party hereto to enter into this Agreement, each Loan Party represents and warrants as follows:

(i) Authority . Such Loan Party has the requisite corporate or limited liability company, as applicable, power and authority to execute and deliver this Agreement and to perform its obligations hereunder and under the Loan Documents, as amended by this Agreement, to which it is a party. The execution, delivery, and performance by such Loan Party of this Agreement have been duly approved by all necessary corporate or limited liability company, as applicable, action, do not require any governmental approval or consent (which has not been obtained), and do not contravene any law or any contractual restriction binding on such Loan Party.

(ii) Enforceability . This Agreement has been duly executed and delivered by such Loan Party. This Agreement and each Loan Document (as amended or modified by this Agreement) to which such Loan Party is a party constitute legal, valid, and binding obligations of such Loan Party, enforceable against such Loan Party in accordance with their terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.

(iii) Representations and Warranties . The representations and warranties set forth in the Loan Documents are true and correct in all material respects (or, with respect to any representation and warranty which contains a materiality, Material Adverse Effect, or similar qualifier, in all respects) on and as of the date hereof as though made on and as of the date hereof (other than representations or warranties which, by their terms, are specifically made as of a date other than the date hereof, in which case such representations and warranties shall be true and correct in all material respects (or, with respect to any representation and warranty which contains a materiality, Material Adverse Effect, or similar qualifier, in all respects) on and as of such other date).

(iv) No Default . As of the date hereof, and after giving effect to the terms of this Agreement, no Default or Event of Default exists.

(b) Effect of Agreement .

(i) Upon and after the effectiveness of this Agreement, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” or words of similar effect or import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement,” “thereof,” or words of similar effect or import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended by this Agreement.

(ii) Except as specifically set forth in this Agreement, the Credit Agreement and all other Loan Documents are and shall continue to be in full force and effect and shall constitute the legal, valid, binding, and enforceable obligations of the Loan Parties which are party thereto, without defense, offset, claim, or contribution.

(iii) The amendments set forth in this Agreement shall be deemed to have prospective application only, unless otherwise specifically stated herein.

(c) Ratification and Reaffirmation . Each of the Loan Parties (i) consents to the execution and delivery of this Agreement; (ii) confirms, ratifies, and reaffirms the terms and provisions of each Loan Document to which it is a party, as amended by this Agreement, effective as of the date hereof; (iii) confirms, ratifies, and reaffirms all of its respective obligations and covenants under each of the Loan Documents to which it is a party, as amended by this

Agreement; and (iv) agrees that none of its obligations and covenants under such Loan Documents is reduced or limited by the execution and delivery of this Agreement, except to the extent expressly provided in this Agreement.

(d) No Novation or Mutual Departure . Each Loan Party expressly acknowledges and agrees that (i) there has not been, and this Agreement does not constitute or establish, a novation with respect to the Credit Agreement or any of the other Loan Documents, or a mutual departure from the strict terms, provisions, and conditions thereof, or the Obligations, other than as expressly set forth herein, and (ii) nothing in this Agreement shall affect or limit Agent’s or any Lender’s right to demand payment of liabilities owing from any Loan Party to such Persons under, or to demand strict performance of the terms, provisions, and conditions of, the Credit Agreement and the other Loan Documents, to exercise any and all rights, powers, and remedies under the Credit Agreement or the other Loan Documents or at law or in equity, or to do any and all of the foregoing, immediately at any time after the occurrence of a Default or an Event of Default under the Credit Agreement or the other Loan Documents.

(e) Further Assurances . Each Loan Party agrees to take such further actions as Agent shall reasonably request in connection herewith to evidence the agreements herein contained.

(f) Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument.

(g) Fax or Other Transmission . Delivery by one or more parties hereto of an executed counterpart of this Agreement via facsimile, telecopy, or other electronic method of transmission pursuant to which the signature of such party can be seen (including, without limitation, Adobe Corporation’s Portable Document Format or PDF) shall have the same force and effect as the delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by facsimile or other electronic method of transmission shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability, or binding effect of this Agreement.

(h) Section References; Loan Document; Incorporation of Recitals . Section titles and references used in this Agreement shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto evidenced by this Agreement. This Agreement constitutes a Loan Document. The recitals to this Agreement are incorporated herein by this reference.

(i) Governing Law . This Agreement and the rights and obligations of the parties hereunder shall be governed by and construed and interpreted in accordance with the laws of the State of New York, without giving effect to the choice of law provisions thereof, other than Sections 5-1401 and 5-1402 of the New York General Obligations Law.

(j) Severability . If any provision of this Agreement shall be invalid, illegal, or unenforceable, such provision shall be severable from the remainder of this Agreement and the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

4. Conditions Precedent . This Agreement shall become effective only Agent’s receipt, on or before July 15, 2017, of this Agreement, duly executed and delivered by Agent, the Required Lenders, Parent, each Borrower, and each Subsidiary Loan Party.

[Continued on following page.]

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed, under seal, by its duly authorized officer as of the day and year first above written.


	PARENT:

	TESSCO TECHNOLOGIES INCORPORATED, a Delaware corporation

	By:	/s/ Aric M. Spitulnik
	Name: Aric M. Spitulnik
	Title: Senior Vice President


	BORROWERS:

	TESSCO INCORPORATED, a Delaware corporation:

	By:	/s/ Aric M. Spitulnik
	Name: Aric M. Spitulnik Title: Vice President


	GW SERVICE SOLUTIONS, INC., a Delaware corporation:

	By:	/s/ Aric M. Spitulnik
	Name: Aric M. Spitulnik Title: Vice President


	TESSCO SERVICE SOLUTIONS, INC., a Delaware corporation

	By:	/s/ Aric M. Spitulnik
	Name: Aric M. Spitulnik Title: Vice President


	TCPM, INC., a Delaware corporation

	By:	/s/ Aric M. Spitulnik
	Name: Aric M. Spitulnik Title: Vice President


	SUBSIDIARY LOAN PARTIES:

	WIRELESS SOLUTIONS INCORPORATED, a Maryland corporation

	By:	/s/ Aric M. Spitulnik
	Name: Aric M. Spitulnik Title: Vice President


	TESSCO FINANCIAL CORPORATION, a Delaware corporation

	By:	/s/ Aric M. Spitulnik
	Name: Aric M. Spitulnik Title: Vice President


	TESSCO COMMUNICATIONS INCORPORATED, a Delaware corporation

	By:	/s/ Aric M. Spitulnik
	Name: Aric M. Spitulnik Title: Vice President


	TESSCO BUSINESS SERVICES, LLC, a Delaware limited liability company

	By:	/s/ Aric M. Spitulnik
	Name: Aric M. Spitulnik Title: Vice President


	TESSCO INTEGRATED SOLUTIONS, LLC, a Delaware limited liability company

	By:	/s/ Aric M. Spitulnik
	Name: Aric M. Spitulnik Title: Vice President


AGENT AND LENDERS:	SUNTRUST BANK, as Agent and as a Lender

	By:	/s/ Christopher M Waterstreet
	Name:	Christopher M Waterstreet
	Title:	Director


	WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender

	By:	/s/ Derek Lynch
	Name:	Derek Lynch
	Title:	Vice President

Exhibit 99.1

TESSCO Reports First Quarter 2018 Financial Results

Quarterly Revenues Increase 9% Year Over Year

Quarterly Dividend of $0.20 Per Share Continued

HUNT VALLEY, MD, July 18, 2017—TESSCO TECHNOLOGIES INCORPORATED (NASDAQ: TESS) , today reported financial results for its first quarter of fiscal 2018, ended June 25, 2017.

First-Quarter Highlights:

Revenue increased 9% year over year to $140.0 million; third straight quarter of year-over-year growth

Public carrier market sales grew 60% compared with last year’s first quarter

All markets except government grew year-over-year and sequentially

$0.08 EPS and $0.27 EBITDA per share*; second straight quarter of year-over-year growth

Investments in working capital made to support growing public carrier sales

Declared quarterly dividend of $0.20 per share


	First Quarter FY 2018	First Quarter FY 2017	Fourth Quarter FY 2017
Revenue	$140.0M	$128.9M	$122.6M
Earnings per diluted share	$0.08	$0.01	$(0.10)
EBITDA per diluted share*	$0.27	$0.16	$(0.11)
Operating margin	0.9%	0.1%	(1.4)%
Cash balance	$0.2M	12.6M	$8.5M
Line of credit balance outstanding	$8.3M	$0	$0

* EBITDA per diluted share and EBITDA (on which EBITDA per diluted share is based) are Non-GAAP financial measures. Non-GAAP financial measures indicated by an asterisk (*) either in the above chart or in the text of this press release are so indicated as a means to direct the reader to the discussion of Non-GAAP Information below and the reconciliation of Non-GAAP to GAAP results included as an exhibit to this press release.

First-Quarter Revenue by Market:


	Year over Year Q1 FY 2018 vs. Q1 FY 2017	Sequential Q1 FY 2018 vs. Q4 FY 2017
Public Carrier	60.4%	26.3%
Commercial Resellers	2.2%	10.5%
Government	(14.3)%	(11.9)%
Private System Operators	3.6%	15.1%
Retail	2.2%	16.5%
Total	8.7%	14.2%

“We continued to build on the sales momentum we have seen since last fall, achieving year-over-year revenue growth for the third consecutive quarter and year-over-year EPS growth for the second straight quarter,” said Murray Wright, President and Chief Executive Officer. “The improved top-line results primarily were driven by a 60% increase in sales to the public carrier market ecosystem and to a lesser extent by a solid performance in our VAR, private system and retail markets. This reinvigorated overall sales performance was in line with our expectations and led directly to the increase in our bottom line results.

“In my first nine months with TESSCO, we have implemented a number of new initiatives, incorporated them into a sound operating plan and executed on that plan,” Wright said. “Among these initiatives, we have enhanced our senior leadership, reorganized and revitalized our sales organization, improved our sales compensation plans to incentivize portfolio growth, regionalized our sales force and continued to invest in our ecommerce capabilities. We are improving how we engage with customers and vendor partners, as we develop

stronger relationships to drive increased sales. While we recognize that many of these changes will take hold over time, we are optimistic about the positive trend and the opportunities ahead of us. We look forward to building on our recent track record of year-over-year sales growth during our fiscal second quarter as we strive for improved profitability throughout this year.”

First-Quarter Fiscal 2018 Financial Results

For the fiscal 2018 first quarter, revenues totaled $140.0 million, compared with $128.9 million for the first quarter of fiscal 2017. The increase in revenues from the prior-year period resulted primarily from a significant increase in sales to the public carrier ecosystem and from strong VAR, private system and retail sales.

Gross profit was $29.2 million for the first quarter of fiscal 2018, up from $27.1 million for the same quarter of fiscal 2017. The year-over-year increase in gross profit was primarily the result of the increase in overall sales. Gross margin was 20.8% of revenue for the first quarter of fiscal 2018, compared with 21.0% for last year’s first quarter. The decrease in gross margin was largely due to changes in the customer and product mix, including the increase in lower-margin sales to the public carrier market.

Selling, general and administrative (SG&A) expenses were $27.9 million for the first quarter of fiscal 2018, compared with $27.0 million for the same quarter of the prior year. The increase in quarterly SG&A expenses year over year primarily resulted from increased variable costs associated with higher sales, as well as increased accruals related to the Company’s performance-based reward programs.

Net income and earnings per share (EPS) were $0.7 million and $0.08, respectively, for the first quarter of fiscal 2018, compared with net income and EPS of $0.1 million and $0.01, respectively, for the prior-year first quarter.

Balance Sheet and Cash Flows

Increasing sales to the Company’s public carrier customers at times require significant investments in inventory, and these customers generally demand more favorable payment terms. Therefore, increasing the Company’s positioning and market share with these customers requires a working capital investment. During the first quarter, sales to public carrier customers increased 60% over last year’s first quarter and 26% over the sequential fourth quarter of fiscal 2017. Accordingly, during the first quarter, the Company experienced increases in inventory and accounts receivable and a corresponding decrease in its cash position, including increased borrowings on its line of credit. As of June 25, 2017, cash and equivalents totaled $0.2 million, and the outstanding balance on the Company’s line of credit was $8.3 million. Cash flow used in operations was $14.1 million during the first quarter, primarily due to increases in inventory and accounts receivable. Inventory increased by $8.1 million during the first quarter to $72.1 million as of June 25, 2017. Trade accounts receivable increased by $15.0 million during the first quarter to $79.8 million. The Company is currently evaluating its line of credit facility in an effort to ensure its ability to continue to make appropriate investments in it business. The Company believes the long-term benefit from serving these carrier customers more than offsets the investments in cash required to support this business.

Cash Dividend

TESSCO’s Board of Directors declared a quarterly cash dividend of $0.20 per common share payable on August 23, 2017 to common stockholders of record on August 9, 2017. Any future declaration of dividends, and the establishment of record and payment dates, is subject to future determinations of the Board of Directors.

Business Outlook

The Company is not providing earnings guidance at this time for fiscal 2018.

First-Quarter Fiscal 2018 Conference Call

Management will host a conference call to discuss first quarter 2018 results tomorrow, July 19, 2017 at 8:30 a.m. ET. To participate in the conference call, please call: 855-319-5921 (domestic call-in) or 503-343-6034 (international call-in) and reference code #51620241.

A live webcast of the conference call will be available at http://tesscotechnologies.gcs-web.com/investor-resources/events . 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 11:30 a.m. ET on July 19, 2017 until 11:59 p.m. ET on July 26, 2017 by calling 855-859-2056 (domestic) or 404-537-3406 (international) and entering confirmation #51620241. An archived replay of the conference call will also be available on the Company's website at http://tesscotechnologies.gcs-web.com/investor-resources/webcasts-and-presentations .

Non-GAAP Information

EBITDA and EBITDA per diluted share are measures used by management to evaluate the Company’s ongoing operations, and to provide a general indicator of the Company's 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). EBITDA is defined as income from operations, plus interest expense, net of interest income, provision for income taxes, and depreciation and amortization. EBITDA per diluted share is defined as EBITDA divided by TESSCO’s diluted weighted average shares outstanding.

Management believes EBITDA and 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 these Non-GAAP measures may not be comparable to other similarly titled measures of other companies. Neither EBITDA nor EBITDA per diluted share is a recognized term under GAAP, and EBITDA 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. Additionally, neither EBITDA nor EBITDA per diluted share is intended to be a measure of free cash flow for management's discretionary use, as certain cash requirements, such as interest payments, tax payments and debt service requirements, are not reflected.

A reconciliation of Non-GAAP to GAAP results is included as an exhibit to this release.

About TESSCO Technologies Incorporated (NASDAQ: TESS)

TESSCO Technologies, Inc. (NASDAQ: TESS) is a value-added technology distributor, manufacturer and solutions provider. TESSCO was founded more than 30 years ago with a commitment to deliver industry-leading products, knowledge, solutions and customer service and supports customers in the public and private sector. TESSCO supplies more than 50,000 products from 400 of the industry’s top manufacturers in mobile communications, Wi-Fi, Internet of Things, wireless backhaul and more. TESSCO is a single source for outstanding customer experience, expert knowledge and complete end-to-end solutions for the wireless industry. For more information, visit www.tessco.com .

Forward-Looking Statements

This press release 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; negative or adverse economic conditions, including those adversely affecting consumer confidence or consumer or business spending or otherwise adversely impacting our vendors or customers, including their access to capital or liquidity, or our customers' demand for, or ability to fund or pay for, the 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; changes in customer and product mix that affect gross margin; effect of “conflict minerals” regulations on the supply and cost of certain of our products; failure of our information technology system or distribution system; system security or data protection breaches; technology changes in the wireless communications industry or technological failures, 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 and the absence of significant barriers to entry which could result in pricing and other pressures on profitability and market share ; our relative bargaining power and inability to negotiate favorable terms with our vendors and customers; our inability to access capital and obtain financing as and when needed; claims against us for breach of the intellectual property rights of third parties; product liability claims; our inability to protect certain intellectual property, including systems and technologies on which we rely ; our inability to hire or retain for any reason our key professionals, management and staff; and the possibility that, for unforeseen or other 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
Aric Spitulnik
Chief Financial Officer
410-229-1419
spitulnik@tessco.com
or

David Calusdian
Sharon Merrill Associates
617-542-5300

TESS@investorrelations.com

TESSCO Technologies Incorporated

Consolidated Statements of Income (Unaudited)


	Fiscal Quarters Ended
	June 25, 2017		June 26, 2016		March 26, 2017

Revenues	$	140,010,800	$	128,860,000	$	122,602,900
Cost of goods sold		110,844,000		101,754,000		96,665,300
Gross profit		29,166,800		27,106,000		25,937,600
Selling, general and administrative expenses		27,881,500		26,955,700		26,890,400
Restructuring Charge		-		-		806,600
Income (loss) from operations		1,285,300		150,300		(1,759,400)
Interest expense, net		68,600		11,400		(7,100)
Income (loss) before provision for income taxes		1,216,700		138,900		(1,752,300)
Provision for income taxes		533,800		58,400		(895,000)
Net income (loss)	$	682,900	$	80,500	$	(857,300)
Basic earnings (loss) per share	$	0.08	$	0.01		(0.10)
Diluted earnings (loss) per share	$	0.08	$	0.01	$	(0.10)

TESSCO Technologies Incorporated

Consolidated Balance Sheets


	June 25,		March 26,
	2017		2017
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	158,700	$	8,540,100
Trade accounts receivable		79,792,700		64,778,900
Product inventory, net		72,105,700		63,984,300
Prepaid expenses and other current assets		4,685,700		3,864,100
Total current assets		156,742,800		141,167,400

Property and equipment, net		13,485,600		13,830,900
Goodwill, net		11,677,700		11,677,700
Other long-term assets		7,462,900		7,304,500
Total assets	$	189,369,000	$	173,980,500

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	63,111,800	$	53,581,400
Payroll, benefits and taxes		5,061,000		6,772,100
Income and sales tax liabilities		1,472,300		1,364,700
Accrued expenses and other current liabilities		1,925,100		2,228,200
Revolving line of credit		8,338,100		—
Current portion of long-term debt		26,900		26,500
Total current liabilities		79,935,200		63,972,900

Deferred tax liabilities		380,800		386,800
Long-term debt, net of current portion		22,800		29,800
Other long-term liabilities		1,736,400		1,574,700
Total liabilities		82,075,200		65,964,200

Shareholders’ equity:
Preferred stock		—		—
Common stock		98,600		98,400
Additional paid-in capital		59,337,600		59,006,000
Treasury stock		(57,502,400)		(57,437,600)
Retained earnings		105,360,000		106,349,500
Total shareholders’ equity		107,293,800		108,016,300
Total liabilities and shareholders’ equity	$	189,369,000	$	173,980,500

TESSCO Technologies Incorporated

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


		Fiscal Quarters Ended
		June 25, 2017		June 26, 2017		March 26, 2017

Net Income (loss) as reported	$	682,900	$	80,500	$	(857,300)
Add:
Income tax provision (benefit)		533,800		58,400		(895,000)
Interest, net		68,600		11,400		(7,100)
Depreciation and amortization		989,600		1,176,700		877,700
EBITDA	$	2,274,900	$	1,327,000	$	(881,700)
Add:
Stock based compensation		247,600		115,800		143,300
EBITDA, adjusted	$	2,522,500	$	1,442,800	$	(738,400)

EBITDA per diluted share	$	0.27	$	0.16	$	(0.11)
Adjusted EBITDA per diluted share	$	0.30	$	0.17	$	(0.09)


TESSCO Technologies Incorporated
Supplemental Results Summary (in thousands) (Unaudited)

	Three Months Ended						Three Months Ended						Growth Rates Compared to
	June 25, 2017						June 26, 2016						Prior Year Period

Market Revenues	Commercial		Retail		Total		Commercial		Retail		Total		Commercial	Retail	Total
Public Carriers, Contractors & Program Managers	$	26,598	$	-	$	26,598	$	16,578	$	-	$	16,578	60.4%	-	60.4%
Government System Operators		8,445		-		8,445		9,852		-		9,852	(14.3%)	-	(14.3%)
Private System Operators		21,042		-		21,042		20,305		-		20,305	3.6%	-	3.6%
Commercial Dealers & Resellers		35,040		-		35,040		34,291		-		34,291	2.2%	-	2.2%
Retailer, Independent Dealer Agents & Carriers		-		48,886		48,886		-		47,834		47,834	-	2.2%	2.2%
Total revenues	$	91,125	$	48,886	$	140,011	$	81,026	$	47,834	$	128,860	12.5%	2.2%	8.7%

Market Gross Profit	Commercial		Retail		Total		Commercial		Retail		Total		Commercial	Retail	Total
Public Carriers, Contractors & Program Managers	$	4,128	$	-	$	4,128	$	3,017	$	-	$	3,017	36.8%	-	36.8%
Government System Operators		2,004		-		2,004		2,140		-		2,140	(6.4%)	-	(6.4%)
Private System Operators		4,607		-		4,607		4,566		-		4,566	0.9%	-	0.9%
Commercial Dealers & Resellers		8,961		-		8,961		9,283		-		9,283	(3.5%)	-	(3.5%)
Retailer, Independent Dealer Agents & Carriers		-		9,467		9,467		-		8,100		8,100	-	16.9%	16.9%
Total gross profit	$	19,700	$	9,467	$	29,167	$	19,006	$	8,100	$	27,106	3.7%	16.9%	7.6%
% of revenues		21.6%		19.4%		20.8%		23.5%		16.9%		21.0%

TESSCO Technologies Incorporated

Supplemental Results Summary (in thousands) (Unaudited)


	Three Months Ended		Three Months Ended		Growth Rates Compared
	June 25, 2017		June 26, 2016		to Prior Year Period
Revenues
Base station infrastructure	$	59,070	$	52,395	12.7	%
Network systems		23,837		18,430	29.3	%
Installation, test and maintenance		6,993		8,755	(20.1)	%
Mobile device accessories		50,111		49,280	1.7	%
Total revenues	$	140,011	$	128,860	8.7	%

Gross Profit
Base station infrastructure	$	14,057	$	13,428	4.7	%
Network systems		3,829		2,898	32.1	%
Installation, test and maintenance		1,419		1,568	(9.5)	%
Mobile device accessories		9,862		9,212	7.1	%
Total gross profit	$	29,167	$	27,106	7.6	%


TESSCO Technologies Incorporated
Supplemental Results Summary (in thousands) (Unaudited)

	Three Months Ended						Three Months Ended						Growth Rates Compared to
	June 25, 2017						March 26, 2017						Prior Period

Market Revenues	Commercial		Retail		Total		Commercial		Retail		Total		Commercial	Retail	Total
Public Carriers, Contractors & Program Managers	$	26,598	$	-	$	26,598	$	21,054	$	-	$	21,054	26.3%	-	26.3%
Government System Operators		8,445		-		8,445		9,584		-		9,584	(11.9%)	-	(11.9%)
Private System Operators		21,042		-		21,042		18,286		-		18,286	15.1%	-	15.1%
Commercial Dealers & Resellers		35,040		-		35,040		31,717		-		31,717	10.5%	-	10.5%
Retailer, Independent Dealer Agents & Carriers		-		48,886		48,886		-		41,962		41,962	-	16.5%	16.5%
Total revenues	$	91,125	$	48,886	$	140,011	$	80,641	$	41,962	$	122,603	13.0%	16.5%	14.2%

Market Gross Profit	Commercial		Retail		Total		Commercial		Retail		Total		Commercial	Retail	Total
Public Carriers, Contractors & Program Managers	$	4,128	$	-	$	4,128	$	3,384	$	-	$	3,384	22.0%	-	22.0%
Government System Operators		2,004		-		2,004		2,160		-		2,160	(7.2%)	-	(7.2%)
Private System Operators		4,607		-		4,607		3,992		-		3,992	15.4%	-	15.4%
Commercial Dealers & Resellers		8,961		-		8,961		8,312		-		8,312	7.8%	-	7.8%
Retailer, Independent Dealer Agents & Carriers		-		9,467		9,467		-		8,090		8,090	-	17.0%	17.0%
Total gross profit	$	19,700	$	9,467	$	29,167	$	17,848	$	8,090	$	25,938	10.4%	17.0%	12.4%
% of revenues		21.6%		19.4%		20.8%		22.1%		19.3%		21.2%

TESSCO Technologies Incorporated

Supplemental Results Summary (in thousands) (Unaudited)


	Three Months Ended		Three Months Ended		Growth Rates Compared
	June 25, 2017		March 26, 2017		to Prior Period
Revenues
Base station infrastructure	$	59,070	$	52,779	11.9	%
Network systems		23,837		22,089	7.9	%
Installation, test and maintenance		6,993		6,582	6.2	%
Mobile device accessories		50,111		41,153	21.8	%
Total revenues	$	140,011	$	122,603	14.2	%

Gross Profit
Base station infrastructure	$	14,057	$	13,542	3.8	%
Network systems		3,829		2,392	60.1	%
Installation, test and maintenance		1,419		1,383	2.6	%
Mobile device accessories		9,862		8,621	14.4	%
Total gross profit	$	29,167	$	25,938	12.4	%