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TESSCO Technologies Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: May 27, 2010 05:17PM
TESSCO Technologies Inc. (TESS) filed Annual Report for the period ended 2010-03-28. Tessco Technologies Inc. has a market cap of $126.7 million; its shares were traded at around $26.39 with a P/E ratio of 14.8 and P/S ratio of 0.2. The dividend yield of Tessco Technologies Inc. stocks is 2.2%. Tessco Technologies Inc. had an annual average earning growth of 6.2% over the past 10 years.TESS is in the portfolios of Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.
Highlight of Business Operations:
We principally offer competitively priced, manufacturer brand-name products, ranging from simple hardware items to sophisticated test equipment, with per item prices ranging from less than $1 to $75,000 and gross profit margins ranging from less than 5% to over 95%. We offer products classified into our three business segments: network infrastructure, mobile devices and accessories, and installation, test and maintenance products, which accounted for approximately 35%, 55% and 10% of fiscal year 2010 revenues, respectively. Network infrastructure products are used to build, repair and upgrade wireless telecommunications, computing and Internet networks. Products include base station antennas, cable and transmission lines, fixed and mobile broadband equipment, wireless local area network (WLAN) products, wireless networking, filtering systems, small towers, lightning protection devices, connectors, security and surveillance products, power systems and miscellaneous hardware. Our network infrastructure service offering includes connector installation, custom jumper assembly, filter product tuning, site kitting, logistics integration and wireless network training. Mobile devices and accessory products include cellular phone and data device accessories such as replacement batteries, cases, speakers, mobile amplifiers, power supplies, headsets, mounts, car antennas, music accessories and data and memory cards as well as two-way radios and related accessories. Retail merchandising displays, promotional programs, customized order fulfillment services and affinity-marketing programs, including providing outsourced call centers and private label Internet sites, complement our mobile devices and accessory product offering. Installation, test and maintenance products are used to install, tune, maintain and repair wireless communications equipment. Products include sophisticated analysis equipment and various frequency-, voltage- and power-measuring devices, as well as an assortment of tools, hardware, GPS, safety and replacement and component parts and supplies required by service technicians. For more detailed financial information regarding our business segments for each of the past three fiscal years, see Note 10 to the Consolidated Financial Statements included in Item 8 to this Annual Report on Form 10-K for the fiscal year ended March 28, 2010.
As of March 28, 2010, we offered products purchased from approximately 420 manufacturers. A substantial portion of our inventory purchases are concentrated with a small number of vendors. In fiscal year 2010, sales of products purchased from our top ten vendors generated approximately 40% of our total revenues. There were no vendors whose products sold by us accounted for 10% of more of our total revenues in fiscal year 2010. Although we do not maintain long-term supply contracts with our vendors, we believe that, for other than those products purchased by us as part of our relationship with Nokia Inc. (Nokia) as described below, alternative sources of supply are available for many of the product types we carry. The agreements and arrangements on which most of our larger vendor and customer relationships are based are of limited duration and terminable by either party upon several months or otherwise short notice.
Our customer base consists of commercial customers and consumers, which accounted for approximately 97% and 3%, respectively, of fiscal year 2010 revenues. Commercial customers share the characteristic that they are organizations that design, install, operate, repair or sell some type of wireless communications system and/or products. We categorize our commercial customers into three different categories: 1) public carriers and network operators, 2) resellers and 3) self-maintained users (SMUs) and governments, which accounted for approximately 13%, 64% and 20%, respectively, of fiscal year 2010 revenues.
Our largest customer relationship, AT&T Mobility, a top tier cellular carrier purchasing phone accessories, accounted for approximately 30% of our revenues during fiscal year 2010. Our next nine largest customer relationships accounted for 10% of our total revenues during fiscal year 2010, and therefore, our top ten customer relationships totaled 40% of our total revenues.
We use our information technology system to monitor and manage our inventory. Historical sales results, sales projections and information regarding vendor lead times are all used to determine appropriate inventory levels. The information technology system also provides early warning reports regarding upcoming inventory requirements. As of March 28, 2010 and March 29, 2009, we had an immaterial level of backlog orders. Most backlog orders as of March 28, 2010, are expected to be filled within 90 days of fiscal year-end. For the fiscal years ended March 28, 2010 and March 29, 2009, inventory write-offs, excluding purchases from vendors for whom we hold goods on consignment, were 0.6% and 0.7% of total purchases, respectively. In many cases, we have been able to return slow-moving inventory to our vendors pursuant to stock rotation agreements. Inventory turns for fiscal years 2010 and 2009 were 9.8 and 8.4, respectively. This increase is largely due to higher overall sales in fiscal year 2010, including higher sales to our large tier one carrier customer, as compared to fiscal year 2009.
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