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**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**x****      QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**For the quarterly period endedJune 27, 2010**

** **

**or**

 

**o****         TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**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.) |
|                                            |       |                |
| **11126 McCormick Road, Hunt Valley, Maryland** | ** ** | **21031**           |
| (Address of principal executive offices)        |       | (Zip Code)          |

** **

**(410) 229-1000**

(Registrant’s telephone number, including area code)

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.  Yes x  No o

 

Indicateby check mark whether the registrant submitted electronically and posted on itscorporate Website, if any, every Interactive Data File required to be submittedand posted pursuant to Rule 405 of Regulation S-T during the preceding 12months (or for such shorter period that the registrant was required to submitand post such files).  Yes o  No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 

| Large accelerated filer o | Accelerated filer o         |
|---------------------------|-----------------------------|
|                      |                        |
| Non-accelerated filer o   | Smaller reporting company x |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).  Yes o  No x

 

Thenumber of shares of the registrant’s Common Stock, $0.01 par value per share,outstanding as of July 30, 2010, was 7,395,291.

 

 

 

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**TESSCOTECHNOLOGIES INCORPORATED**

**Indexto Form 10-Q**

 
| **Part I**  | **FINANCIAL INFORMATION** |
|------------------|---------------------------|
|             |                      |   |
|             | Item 1.                   | Financial Statements. |
|             |                      |   |
|             | Item 2.                   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations. |
|             |                      |   |
|             | Item 3.                   | Quantitative  and Qualitative Disclosure About Market Risk. |
|             |                      |   |
|             | Item 4.                   | Controls and  Procedures. |
|             |                      |   |
| **Part II** | **OTHER INFORMATION**     |
|             |                      |   |
|             | Item 1.                   | Legal Proceedings. |
|             |                      |   |
|             | Item 1A.                  | Risk Factors. |
|             |                      |   |
|             | Item 2.                   | Unregistered  Sales of Equity Securities and Use of Proceeds. |
|             |                      |   |
|             | Item 3.                   | Defaults  Upon Senior Securities. |
|             |                      |   |
|             | Item 4.                   | (Removed and  Reserved) |
|             |                      |   |
|             | Item 5.                   | Other Information. |
|             |                      |   |
|             | Item 6.                   | Exhibits. |
|             |                      |   |
|             | Signatures                | ** ** |

 

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**PART I. FINANCIAL INFORMATION**

 

**Item 1. Financial Statements.**

 

**TESSCO TECHNOLOGIES INCORPORATED**

**Consolidated Balance Sheets**

 
| ** **                                        | ** ** | **June 27,********2010** | ** **  | **March 28,********2010** | ** ** |
|---------------------------------------------------|------------|-------------------------------|-------------|--------------------------------|------------|
| ** **                                        | ** ** | **(unaudited)**               | ** **  | ** **                     | ** ** |
| **ASSETS**                                        |       |                          |        |                           |       |
|                                              |       |                          |        |                           |       |
| Current assets:                                   |       |                          |        |                           |       |
| Cash and cash equivalents                         |       | $                             | 4,712,100   |                           | $          | 7,658,700 |   |
| Trade accounts receivable,  net                   |       | 66,328,300                    |        | 60,675,000                     |       |
| Product inventory, net                            |       | 52,890,300                    |        | 44,991,500                     |       |
| Deferred tax assets                               |       | 4,615,000                     |        | 4,615,000                      |       |
| Prepaid expenses and other  current assets        |       | 2,989,000                     |        | 1,597,000                      |       |
| Total current assets                              |       | 131,534,700                   |        | 119,537,200                    |       |
|                                              |       |                          |        |                           |       |
| Property and equipment, net                       |       | 20,905,500                    |        | 20,679,900                     |       |
| Goodwill, net                                     |       | 11,684,700                    |        | 9,017,700                      |       |
| Other long-term assets                            |       | 2,049,700                     |        | 2,111,900                      |       |
| Total assets                                      |       | $                             | 166,174,600 |                           | $          | 151,346,700 |   |
|                                              |       |                          |        |                           |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**    |       |                          |        |                           |       |
| Current liabilities:                              |       |                          |        |                           |       |
| Trade accounts payable                            |       | $                             | 76,916,800  |                           | $          | 59,548,900 |   |
| Payroll, benefits and taxes                       |       | 5,359,400                     |        | 8,974,200                      |       |
| Income and sales tax  liabilities                 |       | 2,655,700                     |        | 2,528,000                      |       |
| Accrued expenses and other  current liabilities   |       | 1,331,400                     |        | 1,312,900                      |       |
| Current portion of long-term  debt                |       | 381,000                       |        | 380,000                        |       |
| Total current liabilities                         |       | 86,644,300                    |        | 72,744,000                     |       |
|                                              |       |                          |        |                           |       |
| Deferred tax liabilities                          |       | 3,650,800                     |        | 3,650,800                      |       |
| Long-term debt, net of  current portion           |       | 3,193,800                     |        | 3,328,000                      |       |
| Other long-term liabilities                       |       | 1,540,800                     |        | 1,978,700                      |       |
| Total liabilities                                 |       | 95,029,700                    |        | 81,701,500                     |       |
|                                              |       |                          |        |                           |       |
| Commitments and  Contingencies                    |       |                          |        |                           |       |
|                                              |       |                          |        |                           |       |
| Shareholders’ equity:                        |       |                          |        |                           |       |
| Preferred stock                                   |       | —                        |        | —                         |       |
| Common stock                                      |       | 83,200                        |        | 81,500                         |       |
| Additional paid-in capital                        |       | 38,303,300                    |        | 36,937,700                     |       |
| Treasury stock                                    |       | (44,019,800                   | )           | (42,819,400                    | )          |
| Retained earnings                                 |       | 76,858,300                    |        | 75,543,000                     |       |
| Accumulated other  comprehensive loss, net of tax |       | (80,100                       | )           | (97,600                        | )          |
| Total shareholders’ equity                   |       | 71,144,900                    |        | 69,645,200                     |       |
| Total liabilities and  shareholders’ equity  |       | $                             | 166,174,600 |                           | $          | 151,346,700 |   |

 

Seeaccompanying notes.

 

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**TESSCO TECHNOLOGIES INCORPORATED**

**Unaudited Consolidated Statements of Income**

 
| ** **                                    | ** ** | **Three Months Ended** | ** **  |
|-----------------------------------------------|------------|------------------------|-------------|
| ** **                                    | ** ** | **June 27, 2010** | ** **  | **June 28, 2009** | ** ** |
| ** **                                    | ** ** | ** **             | ** **  | ** ** | ** ** |
| Revenues                                      |       | $                      | 141,952,600 |   | $ | 108,801,300 |   |
| Cost of goods sold                            |       | 109,602,800            |        | 79,785,700 |   |
| Gross Profit                                  |       | 32,349,800             |        | 29,015,600 |   |
| Selling, general and  administrative expenses |       | 28,911,700             |        | 25,761,400 |   |
| Income from operations                        |       | 3,438,100              |        | 3,254,200 |   |
| Interest expense, net                         |       | 77,800                 |        | 109,300 |   |
| Income before provision for  income taxes     |       | 3,360,300              |        | 3,144,900 |   |
| Provision for income taxes                    |       | 1,290,800              |        | 1,232,800 |   |
| Net income                                    |       | $                      | 2,069,500   |   | $ | 1,912,100 |   |
| Basic earnings per share                      |       | $                      | 0.27        |   | $ | 0.26 |   |
| Diluted earnings per share                    |       | $                      | 0.26        |   | $ | 0.25 |   |
|                                          |       |                   |        |   |   |
| Cash dividends declared per  common share     |       | $                      | 0.10        |   | $ | — |   |

 

Seeaccompanying notes.

 

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**TESSCO TECHNOLOGIES INCORPORATED**

**Unaudited Consolidated Statementsof Cash Flows**

 
| ** **                                                                                                       | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                                                       | ** ** | **June 27, 2010** | ** ** | **June 28, 2009** | ** ** |
|                                                                                                             |       |                   |       |   |   |
| Cash flows from operating  activities:                                                                           |       |                   |       |   |   |
| Net income                                                                                                       |       | $                      | 2,069,500  |   | $ | 1,912,100 |   |
| Adjustments to reconcile net  income to net cash (used in) provided by operating activities:                     |       |                   |       |   |   |
| Depreciation and  amortization                                                                                   |       | 1,013,600              |       | 1,040,900 |   |
| Non-cash stock compensation  expense                                                                             |       | 557,200                |       | 555,500 |   |
| Deferred income taxes and  other                                                                                 |       | (392,700               | )          | 242,000 |   |
| Change in trade accounts  receivable                                                                             |       | (5,653,300             | )          | (3,690,700 | ) |
| Change in product inventory                                                                                      |       | (7,898,800             | )          | (4,388,800 | ) |
| Change in prepaid expenses  and other current assets                                                             |       | (1,392,000             | )          | 4,600 |   |
| Change in trade accounts  payable                                                                                |       | 14,700,900             |       | 10,294,100 |   |
| Change in payroll, benefits  and taxes                                                                           |       | (3,614,800             | )          | (694,000 | ) |
| Change in income and sales  tax liabilities                                                                      |       | 127,700                |       | 1,385,000 |   |
| Change in accrued expenses  and other current liabilities                                                        |       | 80,400                 |       | (19,200 | ) |
| Net cash (used in) provided  by operating activities                                                             |       | (402,300               | )          | 6,641,500 |   |
|                                                                                                             |       |                   |       |   |   |
| Cash flows from investing  activities:                                                                           |       |                   |       |   |   |
| Purchases of property and  equipment                                                                             |       | (1,204,700             | )          | (292,000 | ) |
| Additional earn-out payments  on acquired businesses                                                             |       | —                 |       | (2,382,000 | ) |
| Net cash used in investing  activities                                                                           |       | (1,204,700             | )          | (2,674,000 | ) |
|                                                                                                             |       |                   |       |   |   |
| Cash flows from financing  activities:                                                                           |       |                   |       |   |   |
| Payments on long-term debt                                                                                       |       | (133,200               | )          | (94,400 | ) |
| Proceeds from debt issuance                                                                                      |       | —                 |       | 250,000 |   |
| Cash used for issuance of  stock split                                                                           |       | (3,400                 | )          | — |   |
| Cash dividends paid                                                                                              |       | (754,200               | )          | — |   |
| Purchases of treasury stock  and repurchases of stock from employees and directors for minimum tax  withholdings |       | (1,200,400             | )          | (101,800 | ) |
| Excess tax benefit (loss)  from stock-based compensation                                                         |       | 751,600                |       | (220,800 | ) |
| Net cash used in financing  activities                                                                           |       | (1,339,600             | )          | (167,000 | ) |
|                                                                                                             |       |                   |       |   |   |
| Net (decrease) increase in  cash and cash equivalents                                                            |       | (2,946,600             | )          | 3,800,500 |   |
|                                                                                                             |       |                   |       |   |   |
| Cash and cash equivalents,  beginning of period                                                                  |       | 7,658,700              |       | 599,800 |   |
|                                                                                                             |       |                   |       |   |   |
| Cash and cash equivalents,  end of period                                                                        |       | $                      | 4,712,100  |   | $ | 4,400,300 |   |

 

Seeaccompanying notes.

 

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**TESSCOTECHNOLOGIES INCORPORATED**

**Notesto Unaudited Consolidated Financial Statements**

**June 27,2010**

 

**Note 1. Description of Business and Basis ofPresentation**

 

TESSCO Technologies Incorporated, a Delawarecorporation (TESSCO, we, or the Company), architects better product and valuechain solutions, at lower costs, to support the construction, operation and useof mobility and data wireless systems. The Company provides marketing and salesservices, knowledge and supply chain management, product-solution delivery andcontrol systems utilizing extensive Internet and information technology.Approximately 98% of the Company’s sales are made to customers in the United States.The Company takes orders in several ways, including phone, fax, online andthrough electronic data interchange. Over 99% of the Company’s sales are madein United States Dollars.

 

In management’s opinion, the accompanying interimconsolidated financial statements of the Company include all adjustments,consisting only of normal, recurring adjustments, necessary for a fairpresentation of the Company’s financial position for the interim periodspresented. These statements are presented in accordance with the rules andregulations of the United States Securities and Exchange Commission (“SEC”).Certain information and footnote disclosures normally included in the Company’sannual financial statements have been omitted from these statements, aspermitted under the applicable rules and regulations. The results ofoperations presented in the accompanying interim consolidated financialstatements are not necessarily representative of operations for an entire year.The information included in this Form 10-Q should be read in conjunctionwith the consolidated financial statements and notes thereto included in theCompany’s Annual Report on Form 10-K for the fiscal year ended March 28,2010.

 

**Note 2. Recently Issued Accounting Pronouncements**

 

InJanuary 2010, the FASB issued updated accounting guidance related to fairvalue measurements and disclosures which requires a number of additionaldisclosures regarding fair value measurements, including the amount oftransfers between Levels 1 and 2 of the fair value hierarchy, the reasons fortransfers in or out of Level 3 of the fair value hierarchy and activity forrecurring Level 3 measures. In addition, the amendment clarifies certainexisting disclosure requirements related to the level at which fair valuedisclosures should be disaggregated and the requirement to provide disclosuresabout the valuation techniques and inputs used in determining the fair value ofassets or liabilities classified as Levels 2 or 3. The standard is effectivefor interim and annual reporting periods beginning after December 15,2009, except for the disclosures about purchases, sales, issuances andsettlements in the roll forward of activity in Level 3 fair value measurements,which is effective for fiscal years beginning after December 15, 2010 withearly adoption permitted. The adoption of the standard update did not have amaterial impact on the Company’s consolidated financial statements.

 

**Note 3. Stock Split Effected in the Form of aDividend**

 

OnMay 26, 2010, the Company issued a stock dividend in order to effect athree-for-two stock split of the Company’s common stock. All share and earningsper share numbers prior to the May 26, 2010 stock split (including withoutlimitation all share and share-related numbers included in Notes 4, 6 and 10below) have been retroactively restated to reflect the stock dividend for allperiods presented. The number of authorized shares remains at 15,000,000.

 

**Note 4. Stock Compensation**

 

The Company’s selling, general and administrativeexpenses for the fiscal quarters ended June 27, 2010 and June 28,2009 includes $557,200 and $555,500, respectively, of non-cash stockcompensation expense. Stock compensation expense is primarily related to ourPerformance Stock Unit (PSU) Program. In addition, the Company recorded anexcess tax benefit (loss) directly to shareholders’ equity of $751,600 and($220,800), primarily related to the PSUs which vested during the three monthsended June 27, 2010 and June 28, 2009, respectively.

 

**Performance Stock Units:**Thefollowing table summarizes the activity under the Company’s PSU program for thefirst three months of fiscal year 2011:

 

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| ** **                                                                         | ** ** | **Three Months Ended  June 27, 2010** | ** ** | **Weighted Average  Fair Value at Grant  Date** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|-------------------------------------------------|------------|
| Shares available for issue under outstanding PSUs,  non-vested beginning of period |       | 679,627                                    |       | $                                               | 6.75       |   |
| Granted                                                                            |       | 267,000                                    |       | 16.05                                           |       |
| Vested                                                                             |       | (238,163                                   | )          | 7.24                                            |       |
| Forfeited/cancelled                                                                |       | (12,375                                    | )          | 6.47                                            |       |
| Shares available for issue under outstanding PSUs,  non-vested end of period       |       | 696,089                                    |       | $                                               | 10.15      |   |

 

Ofthe 696,089 shares available for issuance under outstanding PSUs, but not yetvested as of June 27, 2010, 429,840 shares have been earned, and assumingthe respective participants remain employed by or associated with the Companyon these dates, these shares will vest and be issued ratably on or about May 1of 2011, 2012 and 2013.

 

ThePSUs cancelled during fiscal year 2011 primarily related to the fiscal year2010 grant of PSUs, which had a 1-year measurement period (fiscal year 2010).Of the PSUs cancelled, PSUs covering 10,500 shares were cancelled because theapplicable individual fiscal 2010 performance targets were not fully satisfiedfor certain non-director employee participants. In addition, 1,125 non-vestedshares related to the fiscal year 2010 grant of PSUs were forfeited and 750shares related to the fiscal year 2011 grant of PSUs were cancelled due to aparticipant no longer being employed by the Company. Per the provisions of theSecond Amended and Restated 1994 Stock and Incentive Plan (the “1994 Plan”),the shares related to these PSUs were added back to the 1994 Plan and becameavailable for future issuance.

 

Duringfiscal year 2011, the Compensation Committee of the Board of Directors, withthe concurrence of the full Board of Directors, granted additional PSUs toselect key individuals and directors, providing them with the opportunity toearn up to 267,000 additional shares of the Company’s common stock in theaggregate (of which 750 PSUs have since been cancelled due to a participant nolonger being employed by the Company), depending upon whether certain thresholdor goal earnings per share targets are met, subject to individual performancefor employees (independent directors are not subject to individual performancefactors). These PSUs have only one measurement year (fiscal year 2011), withany shares earned at the end of fiscal year 2011 to vest and be issued 25% on orabout May 1 of each of 2011, 2012, 2013 and 2014, provided that therespective participants remain employed by or associated with the Company oneach such date.

 

Ifthe maximum target of PSUs granted in fiscal year 2011 is assumed to be earned,total unrecognized compensation costs on these and all other earned butunvested PSU’s would be approximately $4.0 million as of June 27, 2010 andwould be expensed through fiscal year 2014.

 

**Stock Options:**In accordance with the FASB standard regarding stock compensation andshare-based payments, the fair value of the Company’s stock options has beendetermined using the Black-Scholes-Merton option pricing model, based uponfacts and assumptions existing at the date of grant. Outstanding stock optionshave exercise prices equal to the market price of the Company’s common stock onthe grant date.

 

The fair value of each option at the date of grantis amortized as compensation expense over the option service or vesting period.This occurs without regard to subsequent changes in stock price, volatility orinterest rates over time, provided that the option remains outstanding. As of June 27,2010, all outstanding stock options are fully vested. The following tablesummarizes the pertinent option information for outstanding options for thethree months ended June 27, 2010:

 
| ** **                                 | ** ** | **Shares** | ** ** | **Weighted Average  Exercise Price** | ** ** |
|--------------------------------------------|------------|------------|------------|--------------------------------------|------------|
| Outstanding, beginning of period           |       | 180,000    |       | $                                    | 5.26       |   |
| Granted                                    |       | —     |       | —                               |       |
| Exercised                                  |       | —     |       | —                               |       |
| Cancelled                                  |       | —     |       | —                               |       |
| Outstanding and exercisable, end of period |       | 180,000    |       | 5.26                                 |       |
|                                            |            |            |            |                                      |            |  |

 

**Restricted Stock:**In fiscal year 2007, the Company granted 225,000 shares of the Company’s commonstock to its Chairman and Chief Executive Officer as a restricted stock awardunder the 1994 Plan. These shares vest ratably over ten fiscal years based on service,beginning on the last day of fiscal year 2007 and ending on the last day offiscal year 2016, subject, however, to the terms applicable to the award,including terms providing for possible acceleration of vesting upon

 

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death, disability, change in control or certainother events. The weighted average fair value for these shares at the grantdate was $10.56. As of June 27, 2010, 135,000 shares remain unvested andthere was no activity related to these restricted shares during the first threemonths of fiscal year 2011. As of June 27, 2010, there was approximately$1.4 million of total unrecognized compensation costs related to this issuanceof restricted stock. Unrecognized compensation costs are expected to berecognized ratably over a period of approximately six years. Also in fiscalyear 2011, restricted stock units covering 22,500 shares were issued to variousnon-executive employees. These shares vest on the last day of fiscal year 2014,provided the employees are still employed by the Company on that date. Theweighted average fair value for these shares at the grant date was $16.13. Asof June 27, 2010, there was approximately $0.2 million of totalunrecognized compensation costs related to this issuance of restricted stock.Unrecognized compensation costs are expected to be recognized ratably over aperiod of approximately four years. No other shares of restricted stock arecurrently issued as awards under the 1994 Plan.

 

**Note 5. Fair Value of Financial Instruments**

 

TheCompany complies with the FASB standard regarding fair value measurement anddisclosure requirements for assets and liabilities carried at fair value.  Accordingly, assets and liabilities carriedat fair value are classified and disclosed in one of the following threecategories:

 

·                  Level 1: Quoted prices (unadjusted) in activemarkets for identical assets or liabilities.

·                  Level 2: Inputs other than quoted pricesincluded within Level 1 that are observable for the asset or liability, eitherdirectly or indirectly. These include quoted prices for similar assets orliabilities in active markets, and quoted prices for identical or similarassets or liabilities in markets that are not active.

·                  Level 3: Unobservable inputs for the asset orliability that reflect the reporting entity’s own assumptions about the inputsused in pricing the asset or liability.

 

Thefollowing table presents information about assets and liabilities recorded atfair value on the Company’s Consolidated Balance Sheet:

 
| ** **                               | ** ** | **Balance at  June 27, 2010** | ** ** | **Quoted Prices  in Active  Markets for  Identical Assets  (Level 1)** | ** ** | **Significant  Other  Observable  Inputs  (Level 2)** | ** ** | **Significant  Unobservable  Inputs  (Level 3)** | ** ** |
|------------------------------------------|------------|------------------------------------|------------|------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                               |       |                               |       |                                                                   |       |                                                  |       |                                             |       |
| **Liabilities:**                         |       |                               |       |                                                                   |       |                                                  |       |                                             |       |
| Interest rate swap agreement, net of tax |       | $                                  | 80,100     |                                                                   | $          | —                                                |       | $                                                | 80,100     |   | $ | — |   |
| Total liabilities at fair value          |       | $                                  | 80,100     |                                                                   | $          | —                                                |       | $                                                | 80,100     |   | $ | — |   |

 

On October 1, 2005, theCompany entered into a receive variable/pay fixed interest rate swap on a totalnotional amount of $4.2 million with Wachovia Bank, National Association toavoid the risks associated with fluctuating interest rates on the Company’sexisting term loan, which bears interest at a floating rate of LIBOR plus1.75%, and to eliminate the variability in the cash outflow for interestpayments. The interest rate swap agreement locks the interest rate for theoutstanding principal balance of the loan at 6.38% through June 30, 2011.The Company anticipates retaining at least some portion of the interest rateswap agreement whose notional amount outstanding amortizes down over the periodof the interest rate swap at a rate which matches the Company’s debt principlepayments throughout the period of the term loan. As such, no amount of the losson the agreement, currently recorded in other comprehensive income (loss), hasbeen, or is anticipated to be reclassified into earnings. There was no paymentdue or received at inception of the swap. No hedge ineffectiveness will berecognized as the interest rate swap’s provisions match the applicableprovisions of the term bank loan. This cash flow hedge qualified for hedgeaccounting using the short-cut method since the swap terms match the criticalterms of the hedged debt. The Company’s fair value of its interest rate swap isderived from valuation models commonly used for derivatives. Valuation modelsrequire a variety of inputs, including contractual terms, market fixed prices,inputs from forward price yield curves, notional quantities, measures ofvolatility and correlations of such inputs. The Company’s derivatives trade inliquid markets, and as such, model inputs can generally be verified and do notinvolve significant management judgment.

 

Thecarrying amounts of cash and cash equivalents, trade accounts receivable,product inventory, trade accounts payable, accrued expenses and other current liabilitiesapproximate their fair values as of June 27, 2010 and March 28, 2010due to their short term nature.

 

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Fairvalue of long-term debt, calculated using current interest rates and futureprincipal payments, as of June 27, 2010 and March 28, 2010 isestimated as follows:

 
| ** **                                                     | ** ** | **June 27, 2010** | ** ** | **March 28, 2010** | ** ** |
|----------------------------------------------------------------|------------|------------------------|------------|-------------------------|------------|
| ** **                                                     | ** ** | **Carrying  Amount**   | ** ** | **Fair  Value**         | ** ** | **Carrying  Amount** | ** ** | **Fair  Value** | ** ** |
| Note payable to a Bank                                         |       | $                      | 3,168,800  |                    | $          | 3,082,700 |   | $ | 3,225,000 |   | $ | 3,121,000 |   |
| Note payable to the Maryland Economic Development  Corporation |       | $                      | 182,700    |                    | $          | 178,400 |   | $ | 253,900 |   | $ | 248,100 |   |
| Note payable to Baltimore County                               |       | $                      | 223,300    |                    | $          | 196,523 |   | $ | 229,100 |   | $ | 201,900 |   |

 

**Note 6. Earnings Per Share**

 

Effective March 30, 2009, the Company compliedwith the FASB standard regarding the accounting for participating securities.The standard requires the Company to use the two-class method to calculateearnings per share. Under the two-class method, earnings per common share arecomputed by dividing the sum of the distributed earnings to common shareholdersand undistributed earnings allocated to common shareholders by the weightedaverage number of common shares outstanding for the period. In applying thetwo-class method, undistributed earnings are allocated to both common sharesand participating securities based on the weighted average shares outstandingduring the period.

 

The following table presents the calculation ofbasic and diluted earnings per common share:

 
| ** **                                                                 | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------------------------------|------------|------------------------|------------|
| **Amounts in thousands, expect per share amounts**                         | ** ** | **June 27, 2010** | ** ** | **June 28, 2009** | ** ** |
| Earnings per share —  Basic:                                          |       |                   |       |   |   |
| Net earnings                                                               |       | $                      | 2,069      |   | $ | 1,912 |   |
| Less: Distributed and  undistributed earnings allocated to nonvested stock |       | (36                    | )          | (41 | ) |
| Earnings available to  common shareholders — Basic                    |       | $                      | 2,033      |   | $ | 1,871 |   |
|                                                                       |       |                   |       |   |   |
| Weighted average common  shares outstanding — Basic                   |       | 7,587                  |       | 7,166 |   |
|                                                                       |       |                   |       |   |   |
| Earnings per common  share — Basic                                    |       | $                      | 0.27       |   | $ | 0.26 |   |
|                                                                       |       |                   |       |   |   |
| Earnings per share —  Diluted:                                        |       |                   |       |   |   |
| Net earnings                                                               |       | $                      | 2,069      |   | $ | 1,912 |   |
| Less: Distributed and  undistributed earnings allocated to nonvested stock |       | (35                    | )          | (40 | ) |
| Earnings available to  common shareholders — Diluted                  |       | $                      | 2,034      |   | $ | 1,872 |   |
|                                                                       |       |                   |       |   |   |
| Weighted average common  shares outstanding — Basic                   |       | 7,587                  |       | 7,166 |   |
| Effect of dilutive  options                                                |       | 372                    |       | 215 |   |
| Weighted average common  shares outstanding — Diluted                 |       | 7,959                  |       | 7,381 |   |
|                                                                       |       |                   |       |   |   |
| Earnings per common  share — Diluted                                  |       | $                      | 0.26       |   | $ | 0.25 |   |
|                                                                       |       |                   |       |   |   |
| Anti-dilutive equity awards  not included above                            |       | —                 |       | 67,500 |   |

 

**Note 7. Business Segments**

 

The Company evaluates revenue, gross profit andinventory in three business segments: (1) Network infrastructureproducts are used to build, repair and upgrade wireless telecommunications, computingand Internet networks. Products include base station antennas, cable andtransmission lines, fixed and mobile broadband equipment, wireless local area

 

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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 serviceoffering includes connector installation, custom jumper assembly, filterproduct tuning, site kitting, logistics integration and wireless networktraining. (2) Mobile devices and accessory products include cellular phoneand data device accessories such as replacement batteries, cases, speakers,mobile amplifiers, power supplies, headsets, mounts, car antennas, musicaccessories and data and memory cards as well as two-way radios and relatedaccessories. Retail merchandising displays, promotional programs, customizedorder fulfillment services and affinity-marketing programs, including providingoutsourced call centers and private label Internet sites, complement our mobiledevices and accessory product offering. (3) Installation, test andmaintenance products are used to install, tune, maintain and repair wirelesscommunications equipment. Products include sophisticated analysis equipment andvarious frequency-, voltage- and power-measuring devices, as well as anassortment of tools, hardware, GPS, safety and replacement and component partsand supplies required by service technicians. Within the mobile devices and accessories line of business, the Companysells to both commercial and consumer markets. The network infrastructure and installation,test and maintenance lines of business sell primarily to commercial markets.The Company also regularly reviews its results of operations in threecommercial customer categories and the consumer customer category, as describedfurther below:

 

·                  Commercial Public Carriers and Network Operators. Public carriers and network operators include systems operators thatare generally responsible for building and maintaining the infrastructuresystem and provide airtime service to individual subscribers.

 

·                  Commercial Resellers.Resellers include dealers and resellers that sell, install and/or servicecellular telephone, wirelessnetworking, broadband and two-way radio communications equipment primarily forthe enterprise market, and to a lesser extent, the consumer market. Theseresellers include local and national value-added resellers and retailers, aswell as sales and installation centers operated by cellular and pagingcarriers.

 

·                  Commercial Self-Maintained Users and Governments. Self-maintained user (SMU) and government customers include commercialentities such as major utilities and transportation companies, federal agenciesand state and local governments.

 

·                  Consumers. Consumers includecustomers that buy through any of our affinity partner relationships ordirectly from our consumer website, YourWirelessSource.comTM.

 

The Company measures segment performance based onsegment gross profit. The segment operations develop their product offering,pricing and strategies, which are collaborative with one another and thecentralized sales and marketing function. Therefore, the Company does notsegregate assets, other than inventory, for internal reporting, evaluatingperformance or allocating capital. In addition, the Company has allocated allgoodwill and indefinite lived intangible assets to the applicable segments (andreporting units within segments, where applicable) for purposes of its annualimpairment tests. The Company’s goodwill at June 27, 2010 relates toacquisitions within its Network Infrastructure line of business. Productdelivery revenue and certain cost of sales expenses have been allocated to eachsegment based on a percentage of revenues and/or gross profit, as applicable.

 

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Segmentactivity for the first quarter of fiscal years 2011 and 2010 is as follows:

 
| **(Amounts in thousands)**                   | ** ** | **Network  Infrastructure** | ** ** | **Mobile Devices  and Accessories** | ** ** | **Installation, Test  and Maintenance** | ** ** | **Total**  | ** ** |
|----------------------------------------------|------------|-----------------------------|------------|-------------------------------------|------------|-----------------------------------------|------------|------------|------------|
| **Fiscal Quarter ended  June 27, 2010** | ** ** | ** **                  | ** ** | ** **                          | ** ** | ** **                              | ** ** | ** ** | ** ** |
| Commercial revenues:                         |       |                        |       |                                |       |                                    |       |       |       |
| Public carriers and network operators        |       | $                           | 17,603     |                                | $          | 483                                     |       | $          | 3,624      |   | $ | 21,710 |   |
| Resellers                                    |       | 20,777                      |       | 67,997                              |       | 1,907                                   |       | 90,681     |       |
| SMUs and governments                         |       | 16,342                      |       | 4,779                               |       | 4,670                                   |       | 25,791     |       |
| Total commercial revenues                    |       | 54,722                      |       | 73,259                              |       | 10,201                                  |       | 138,182    |       |
| Consumer revenues                            |       | —                      |       | 3,771                               |       | —                                  |       | 3,771      |       |
| Total revenues                               |       | $                           | 54,722     |                                | $          | 77,030                                  |       | $          | 10,201     |   | $ | 141,953 |   |
|                                         |       |                        |       |                                |       |                                    |       |       |       |
| Commercial gross profit:                     |       |                        |       |                                |       |                                    |       |       |       |
| Public carriers and network operators        |       | $                           | 3,963      |                                | $          | 134                                     |       | $          | 801        |   | $ | 4,898 |   |
| Resellers                                    |       | 5,679                       |       | 12,780                              |       | 468                                     |       | 18,927     |       |
| SMUs and governments                         |       | 4,455                       |       | 1,254                               |       | 1,515                                   |       | 7,224      |       |
| Total commercial gross profit                |       | 14,097                      |       | 14,168                              |       | 2,784                                   |       | 31,049     |       |
| Consumer gross profit                        |       | —                      |       | 1,301                               |       | —                                  |       | 1,301      |       |
| Total gross profit                           |       | $                           | 14,097     |                                | $          | 15,469                                  |       | $          | 2,784      |   | $ | 32,350 |   |
|                                         |       |                        |       |                                |       |                                    |       |       |       |
| Selling, general and administrative expenses |       |                        |       |                                |       |                                    |       | 28,912     |       |
| Income from operations                       |       |                        |       |                                |       |                                    |       | 3,438      |       |
| Interest expense, net                        |       |                        |       |                                |       |                                    |       | 78         |       |
| Income before provision for income taxes     |       |                        |       |                                |       |                                    |       | 3,360      |       |
| Provision for income taxes                   |       |                        |       |                                |       |                                    |       | 1,291      |       |
| Net income                                   |       |                        |       |                                |       |                                    |       | $          | 2,069      |   |
|                                         |       |                        |       |                                |       |                                    |       |       |       |
| Product inventory                            |       | $                           | 26,914     |                                | $          | 23,049                                  |       | $          | 2,927      |   | $ | 52,890 |   |
|                                         |       |                        |       |                                |       |                                    |       |       |       |
| **Fiscal Quarter ended  June 28, 2009** |       |                        |       |                                |       |                                    |       |       |       |
| Commercial revenues:                         |       |                        |       |                                |       |                                    |       |       |       |
| Public carriers and network operators        |       | $                           | 10,550     |                                | $          | 467                                     |       | $          | 2,716      |   | $ | 13,733 |   |
| Resellers                                    |       | 16,791                      |       | 46,624                              |       | 1,881                                   |       | 65,296     |       |
| SMUs and governments                         |       | 12,448                      |       | 3,234                               |       | 10,859                                  |       | 26,541     |       |
| Total commercial revenues                    |       | 39,789                      |       | 50,325                              |       | 15,456                                  |       | 105,570    |       |
| Consumer revenues                            |       | —                      |       | 3,231                               |       | —                                  |       | 3,231      |       |
| Total revenues                               |       | $                           | 39,789     |                                | $          | 53,556                                  |       | $          | 15,456     |   | $ | 108,801 |   |
|                                         |       |                        |       |                                |       |                                    |       |       |       |
| Commercial gross profit:                     |       |                        |       |                                |       |                                    |       |       |       |
| Public carriers and network operators        |       | $                           | 2,679      |                                | $          | 122                                     |       | $          | 676        |   | $ | 3,477 |   |
| Resellers                                    |       | 4,912                       |       | 12,324                              |       | 470                                     |       | 17,706     |       |
| SMUs and governments                         |       | 3,572                       |       | 977                                 |       | 2,331                                   |       | 6,880      |       |
| Total commercial gross profit                |       | 11,163                      |       | 13,423                              |       | 3,477                                   |       | 28,063     |       |
| Consumer gross profit                        |       | —                      |       | 953                                 |       | —                                  |       | 953        |       |
| Total gross profit                           |       | $                           | 11,163     |                                | $          | 14,376                                  |       | $          | 3,477      |   | $ | 29,016 |   |
|                                         |       |                        |       |                                |       |                                    |       |       |       |
| Selling, general and administrative expenses |       |                        |       |                                |       |                                    |       | 25,762     |       |
| Income from operations                       |       |                        |       |                                |       |                                    |       | 3,254      |       |
| Interest expense, net                        |       |                        |       |                                |       |                                    |       | 109        |       |
| Income before provision for income taxes     |       |                        |       |                                |       |                                    |       | 3,145      |       |
| Provision for income taxes                   |       |                        |       |                                |       |                                    |       | 1,233      |       |
| Net income                                   |       |                        |       |                                |       |                                    |       | $          | 1,912      |   |
|                                         |       |                        |       |                                |       |                                    |       |       |       |
| Product inventory                            |       | $                           | 19,470     |                                | $          | 17,157                                  |       | $          | 4,302      |   | $ | 40,929 |   |

 

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**Note 8. Comprehensive Income**

 

Thecomponents of total comprehensive income were as follows:

 
| ** **                                         | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------|------------|------------------------|------------|
| ** **                                         | ** ** | **June 27, 2010** | ** ** | **June 28, 2009** | ** ** |
|                                               |       |                   |       |   |   |
| Net Income                                         |       | $                      | 2,069,500  |   | $ | 1,912,100 |   |
| Change in value of interest  rate swap, net of tax |       | 17,500                 |       | 16,800 |   |
| Total comprehensive income                         |       | $                      | 2,087,000  |   | $ | 1,928,900 |   |

 

**Note 9. Borrowings Under Revolving Credit Facility**

 

OnApril 28, 2010, the Company and its primary operating subsidiaries, asborrowers, executed and delivered a Fourth Modification Agreement (the “FourthAmendment”), with SunTrust Bank and Wachovia Bank, National Association,amending the Credit Agreement for the Company’s existing unsecured revolvingcredit facility.  Pursuant to the FourthAmendment, the amount of dividend payments allowed to be made by the Companyunder the Credit Facility was increased from $2.5 million to $5.0 million inany 12 month period, assuming continued compliance by the Company with theotherwise applicable terms of the Credit Agreement. Pursuant to the relevantdocuments, the financial covenants included in the Credit Agreement for theunsecured revolving credit facility are also applicable to the Company’sexisting Term Loan with the same lenders. Accordingly, the Fourth Amendmentalso has the effect of amending the financial covenants applicable to the TermLoan.

 

**Note 10. Stock Buyback**

 

OnApril 28, 2003, the Company’s Board of Directors approved a stock buybackprogram. As of June 27, 2010, the Board of Directors had authorized thepurchase of up to 3,593,350 shares of outstanding common stock under the stockbuyback program. Shares may be purchased from time to time in the open market,by block purchase, or through negotiated transactions, or possibly othertransactions managed by broker-dealers. No time limit has been set forcompletion or expiration of the program. As of June 27, 2010, the Companyhad purchased 3,502,887 shares under the stock buyback program forapproximately $30.7 million, or an average of $8.76 per share. Of the totalshares repurchased under the stock buyback program, no shares were repurchasedin the first three months of fiscal year 2011. As of June 27, 2010, 90,463shares remained available for repurchase under this program.

 

Inaddition to the shares repurchased in the stock buyback program discussedimmediately above, on July 1, 2008 the Company repurchased all 705,000shares of its common stock then held by Brightpoint, Inc. (“Brightpoint”)in a privately negotiated transaction. Pursuant to an agreement entered intobetween the Company and Brightpoint, the Company purchased Brightpoint’s shareholdings, comprising approximately 9% of the Company’s total then outstandingcommon stock, for $9.09 per share, or a total of $6,410,800. The price pershare was determined based on the seven trading day trailing average closingprice of the Company’s common stock on the NASDAQ Global Market determined asof the close of trading on June 30, 2008. The purchase price per shareapproximated the price of the Company’s common stock on the transaction date.The purchase was funded through available cash and borrowings under the Company’sunsecured revolving line of credit facility. This transaction was not madeunder, nor does it affect the number of shares available for repurchase under,the Company’s stock buyback program discussed above.

 

TheCompany also withholds shares from its employees and directors, at theirrequest, equal to the minimum federal and state tax withholdings related tovested performance stock units, stock option exercises and restricted stockawards. For the three months ended June 27, 2010 and June 28, 2009the allocated value of the shares withheld totaled $1,200,400 and $101,800,respectively.

 

**Note 11. Customer Concentration**

 

TheCompany’s future results could be negatively impacted by the loss of certaincustomer and/or vendor relationships. For the fiscal quarters ended June 27,2010 and June 28, 2009, sales of products to the Company’s top customerrelationship, AT&T Mobility, accounted for 25% and 22% of total revenues, respectively.

 

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**Note 12. Subsequent Events**

 

OnJuly 21, 2010, the Company declared a quarterly cash dividend of ten cents($0.10) per share of common stock, par value $0.01 per share, of the Company,payable on August 25, 2010, to shareholders of record as of August 11,2010. Any future declaration of dividends and the establishment of anycorresponding record and payment dates remains subject to further determinationfrom time to time by the Board of Directors.

 

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**Item 2. Management’s Discussionand Analysis of Financial Condition and Results of Operations.**

 

This commentary should be read in conjunctionwith the Management’s Discussion and Analysis of Financial Condition andResults of Operations from the Company’s Annual Report on Form 10-K forthe fiscal year ended March 28, 2010.

 

**BusinessOverview and Environment**

** **

TESSCO Technologies Incorporated (TESSCO, we,or the Company) architects better product and value chain solutions, at lowercosts, to support the construction, operation and use of mobility and datawireless systems. Although we sell products to customers in many countries,approximately 98% of our sales are made to customers in the United States. Wehave operations and office facilities in Hunt Valley, Maryland, Reno, Nevadaand San Antonio, Texas.

 

Ourfirst quarter revenues increased by 30.5% compared to the first quarter of lastyear. This increase was driven by growth in our network infrastructure andmobile devices and accessories commercial lines of business, partially offsetby a decline in our installation, test and maintenance commercial line ofbusiness. Gross profits also increased in our network infrastructure and mobiledevices and accessories commercial lines of business, and were partially offsetby a decline in our installation, test and maintenance commercial line ofbusiness. This overall increase in gross profit, partially offset by an increasein operating expenses to support our growth initiatives and increased ordervolume, resulted in a 8.2% increase in net income and a 4.0% increase indiluted earnings per share over the prior-year quarter.

 

Thecurrent global financial crisis — which has included, among other things,significant reductions in available capital and liquidity from banks and otherproviders of credit, substantial reductions and/or fluctuations in equity andcurrency values worldwide, significant decreases in consumer confidence andconsumer and business spending, rising unemployment and concerns that theworldwide economy may experience a prolonged recessionary period — maymaterially adversely affect our customers’ access to capital or willingness tospend capital on our products, and/or their levels of cash liquidity with whichto pay for our products. Our strong first quarter revenue growth was driven bya 5% growth in the average number of monthly buying customers and a 25%increase in the average dollars purchased for each buying customer compared tothe same period of fiscal year 2010. Accordingly, while we believe that theeconomy continues to show signs of improvement, but we also believe that ourcustomers are continuing to experience difficultly in the current economic environment.In addition, the current global financial crisis may materially adverselyaffect our suppliers’ access to capital and liquidity, which may in turnadversely impact their ability to maintain inventories, production levels,and/or product quality, or cause them to raise prices or lower productionlevels, or result in their ceasing operation. The impact of the crisis on ourliquidity is further discussed below under the heading “Liquidity and CapitalResources.”

 

The wireless communications distributionindustry is competitive and fragmented, and is comprised of several nationaldistributors. In addition, many manufacturers sell direct. Barriers to entryfor distributors are relatively low, particularly in the mobile devices andaccessories market, and the risk of new competitors entering the market ishigh. Consolidation of larger wireless carriers has and will most likelycontinue to impact our current and potential customer base. In addition, theagreements or arrangements with our customers or vendors looking to us forproduct and supply chain solutions are typically of limited duration and areterminable by either party upon several months, or otherwise short notice. Ourability to maintain these relationships is subject to competitive pressures andchallenges. The nature of our business is that, from time to time, weexperience the loss and changes in the business habits of significant customerand vendor relationships and may continue to do so in the future. We believe,however, that our strength in service, the breadth and depth of our productoffering, our information technology system, and our large customer base andpurchasing relationships with approximately 420 manufacturers, provide us witha significant competitive advantage over new entrants to the market.

 

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**Results ofOperations**

 

Thefollowing table summarizes the unaudited results of our operations for thefiscal quarters ended June 27, 2010 and June 28, 2009:

 
| ** **                                              | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------------|------------|------------------------|------------|
| **(Amounts  in thousands, except per share data)**      | ** ** | **June 27, 2010** | ** ** | **June 28, 2009** | ** ** | **$ Change** | ** ** | **% Change** | ** ** |
| Commercial  Revenues                                    |       |                   |       |   |   |   |   |   |   |
| Network  Infrastructure:                                |       |                   |       |   |   |   |   |   |   |
| Public  Carriers and Network Operators                  |       | $                      | 17,603     |   | $ | 10,550 |   | $ | 7,053 |   | 66.9 | % |
| Resellers                                               |       | 20,777                 |       | 16,791 |   | 3,986 |   | 23.7 | % |
| SMUs  and Governments                                   |       | 16,342                 |       | 12,448 |   | 3,894 |   | 31.3 | % |
| Total  Network Infrastructure                           |       | 54,722                 |       | 39,789 |   | 14,933 |   | 37.5 | % |
| Mobile  Devices and Accessories:                        |       |                   |       |   |   |   |   |   |   |
| Public  Carriers and Network Operators                  |       | 483                    |       | 467 |   | 16 |   | 3.4 | % |
| Resellers                                               |       | 67,997                 |       | 46,624 |   | 21,373 |   | 45.8 | % |
| SMUs  and Governments                                   |       | 4,779                  |       | 3,234 |   | 1,545 |   | 47.8 | % |
| Total  Mobile Devices and Accessories                   |       | 73,259                 |       | 50,325 |   | 22,934 |   | 45.6 | % |
| Installation,  Test and Maintenance:                    |       |                   |       |   |   |   |   |   |   |
| Public  Carriers and Network Operators                  |       | 3,624                  |       | 2,716 |   | 908 |   | 33.4 | % |
| Resellers                                               |       | 1,907                  |       | 1,881 |   | 26 |   | 1.4 | % |
| SMUs  and Governments                                   |       | 4,670                  |       | 10,859 |   | (6,189 | ) | (57.0 | )% |
| Total  Installation, Test and Maintenance               |       | 10,201                 |       | 15,456 |   | (5,255 | ) | (34.0 | )% |
| Total  Commercial Revenues                              |       | 138,182                |       | 105,570 |   | 32,612 |   | 30.9 | % |
| Consumer  Revenues - Mobile Devices and Accessories     |       | 3,771                  |       | 3,231 |   | 540 |   | 16.7 | % |
| Total  Revenues                                         |       | $                      | 141,953    |   | $ | 108,801 |   | $ | 33,152 |   | 30.5 | % |
|                                                    |       |                   |       |   |   |   |   |   |   |
| Commercial  Gross Profit                                |       |                   |       |   |   |   |   |   |   |
| Network  Infrastructure:                                |       |                   |       |   |   |   |   |   |   |
| Public  Carriers and Network Operators                  |       | $                      | 3,963      |   | $ | 2,679 |   | $ | 1,284 |   | 47.9 | % |
| Resellers                                               |       | 5,679                  |       | 4,912 |   | 767 |   | 15.6 | % |
| SMUs  and Governments                                   |       | 4,455                  |       | 3,572 |   | 883 |   | 24.7 | % |
| Total  Network Infrastructure                           |       | 14,097                 |       | 11,163 |   | 2,934 |   | 26.3 | % |
| Mobile  Devices and Accessories:                        |       |                   |       |   |   |   |   |   |   |
| Public  Carriers and Network Operators                  |       | 134                    |       | 122 |   | 12 |   | 9.8 | % |
| Resellers                                               |       | 12,780                 |       | 12,324 |   | 456 |   | 3.7 | % |
| SMUs  and Governments                                   |       | 1,254                  |       | 977 |   | 277 |   | 28.4 | % |
| Total  Mobile Devices and Accessories                   |       | 14,168                 |       | 13,423 |   | 745 |   | 5.6 | % |
| Installation,  Test and Maintenance:                    |       |                   |       |   |   |   |   |   |   |
| Public  Carriers and Network Operators                  |       | 801                    |       | 676 |   | 125 |   | 18.5 | % |
| Resellers                                               |       | 468                    |       | 470 |   | (2 | ) | (0.4 | )% |
| SMUs  and Governments                                   |       | 1,515                  |       | 2,331 |   | (816 | ) | (35.0 | )% |
| Total  Installation, Test and Maintenance               |       | 2,784                  |       | 3,477 |   | (693 | ) | (19.9 | )% |
| Total  Commercial Gross Profit                          |       | 31,049                 |       | 28,063 |   | 2,986 |   | 10.6 | % |
| Consumer  Gross Profit - Mobile Devices and Accessories |       | 1,301                  |       | 953 |   | 348 |   | 36.5 | % |
| Total  Gross Profit                                     |       | 32,350                 |       | 29,016 |   | 3,334 |   | 11.5 | % |
|                                                    |       |                   |       |   |   |   |   |   |   |
| Selling,  general and administrative expenses           |       | 28,912                 |       | 25,762 |   | 3,150 |   | 12.2 | % |
| Income  from operations                                 |       | 3,438                  |       | 3,254 |   | 184 |   | 5.7 | % |
| Interest  expense, net                                  |       | 78                     |       | 109 |   | (31 | ) | (28.4 | )% |
| Income  before provision for income taxes               |       | 3,360                  |       | 3,145 |   | 215 |   | 6.8 | % |
| Provision  for income taxes                             |       | 1,291                  |       | 1,233 |   | 58 |   | 4.7 | % |
| Net  income                                             |       | $                      | 2,069      |   | $ | 1,912 |   | $ | 157 |   | 8.2 | % |
| Diluted  earnings per share                             |       | $                      | 0.26       |   | $ | 0.25 |   | $ | 0.01 |   | 4.0 | % |

 

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**First Quarter of Fiscal Year 2011 Compared with FirstQuarter of Fiscal Year 2010**

 

**Revenues.**Revenues for the firstquarter of fiscal year 2011 increased 30.5% as compared with the first quarterof fiscal year 2010, primarily due to a 30.9% increase in commercial revenues,and to a much lesser extent, a 16.7% increase in consumer revenues. Salesincreased in our network infrastructure and mobile devices and accessorieslines of business, but were partially offset by decreased sales in ourinstallation, test and maintenance line of business.

 

Networkinfrastructure sales increased 37.5% as compared with the first quarter offiscal year 2010, as a result of higher sales of radio frequency propagationand site support products across all of our market categories. Sales ofbroadband products increased to resellers and self-maintained users, partiallyoffset by decreased sales to public carriers and network operators.

 

Salesin the mobile devices and accessories line of business increased 43.8% in thefirst quarter of fiscal year 2011, as compared with the same period last year.The increase was due to a 45.6% increase in commercial sales, and to a muchlesser extent, a 16.7% increase in consumer sales. The increase in commercialrevenues for mobile devices and accessories, which are sold primarily toresellers, was primarily due to increased sales to a large national tier-onecarrier, AT&T Mobility, as well as smaller resellers and users. Sales ofmobile devices and accessories to public carriers and network operators andSMUs and governments also increased.

 

Revenuesfrom our installation, test and maintenance line of business decreased 34.0%from the corresponding prior-year quarter, primarily due to a decline in salesof repair parts related to our major repair components relationship with Nokia.Sales of test equipment products decreased to self-maintained users, but werepartially offset by increased sales to public carriers and network operatorsand resellers. Sales of tools and supply products increased across all of ourmarket categories. As discussed in prior reports, as a result of the evolutionof our relationship with Nokia, sales of Nokia product pursuant to thisrelationship have become less material to our consolidated financial statements.Nokia has notified us of their intent to terminate our arrangement effectiveapproximately September 30, 2010. Accordingly, revenues and gross profitsfrom this relationship will cease on that date. During the first quarter offiscal year 2011, revenues from the Nokia relationship represented less than 1%of total consolidated revenues.

 

**Gross Profit.**Gross profit for the firstquarter of fiscal year 2011 increased 11.5% as compared with the first quarterof fiscal year 2010. Total commercial gross profit increased 10.6%, whileconsumer gross profit increased 36.5%. Gross profit margin decreased to 22.8%in the first quarter of fiscal year 2011 as compared to 26.7% the first quarterof fiscal year 2010. Gross profit margin in our network infrastructure segmentdecreased from 28.1% in the first quarter of fiscal year 2010 to 25.8% in thefirst quarter of fiscal year 2011. This decrease in gross profit margin was alargely a result of lower margin sales of products related to larger carrierbuilds during this quarter as compared with last year’s first quarter. Grossprofit margin in our mobile devices and accessories segment decreased to 20.1%in the first quarter of this fiscal year from 26.8% in the first quarter oflast fiscal year. This decrease was primarily attributable to the commercialgross profit margin in our mobile devices and accessories line of business,which decreased to 19.3% in the first quarter of fiscal year 2011 from 26.7%for the first quarter of fiscal year 2010, principally due to product mix and asignificant increase in sales to a large tier-one carrier, AT&T Mobility.Consumer gross profit margin in our mobile devices and accessories line ofbusiness increased to 34.5% in the first quarter of this fiscal year from 29.5%for the first quarter of last fiscal year. Gross profit margin in ourinstallation, test and maintenance line of business increased from 22.5% in thefirst quarter of fiscal year 2010 to 27.3% in the first quarter of fiscal year2011, primarily due to the large reduction in our Nokia relationship discussedabove. Generally, our gross margins by product within these segments have beensustained, except as noted above, and these variations are related to sales mixwithin the segment product offerings. We account for inventory at the lower of costor market, and as a result, write-offs/write-downs occur due to damage,deterioration, obsolescence, changes in prices and other causes.

 

Ourongoing ability to earn revenues and gross profits from customers and vendorslooking to us for product and supply chain solutions is dependent upon a numberof factors. The terms, and accordingly the factors, applicable to eachrelationship often differ. Among these factors are the strength of the customer’sor vendor’s business, the supply and demand for the product or service,including price stability, changing customer or vendor requirements, and ourability to support the customer or vendor and to continually demonstrate thatwe can improve the way they do business. In addition, the agreements orarrangements on which our customer and vendor relationships are based aretypically of limited duration, typically do not include any obligation inrespect of any specific product purchase or sale and are terminable by

 

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eitherparty upon several months or otherwise relatively short notice. The nature ofour business is that, from time to time, we experience the loss and changes inthe business habits of significant customer and vendor relationships and maycontinue to do so in the future. Our customer relationships could also beaffected by wireless carrier consolidation or the global financial crisis.

 

Astotal revenues and gross profits from larger customer and vendor relationships,including AT&T Mobility, increase, we occasionally experience and expect tocontinue to experience pricing pressures that may adversely affect futureresults. In an effort to mitigate the overall effect of these pressures and tomeet these consistent challenges, we are focused on our continuing efforts togrow revenues and gross profits from other customer and vendor relationships.

 

**Selling, General and Administrative Expenses.**Total selling,general and administrative expenses increased by 12.2% in the first quarter offiscal year 2011 as compared with the first quarter of fiscal year 2010.Selling, general and administrative expenses as a percentage of revenuesdecreased to 20.4% in the first quarter of fiscal year 2011 from 23.7% in thefirst quarter of fiscal year 2010 primarily as a result of a significantincrease in revenues partially offset by increased selling, general andadministrative expenses. The largest factors contributing to the increase intotal selling, general and administrative expenses were increased compensationand freight expenses during the first quarter of fiscal year 2011.

 

Compensationcosts primarily increased due to increased business generation and fulfillmentactivities as compared to last year’s first quarter as well as increasedvariable sales compensation based on increased gross profit. Total compensationcosts, including benefits and bonus expense, increased approximately $2.2million, or 15.0%, in the first quarter of fiscal year 2011 as compared to thefirst quarter of fiscal year 2010.

 

Freightexpense increased by approximately $635,000, or 20.4%, due to higher sales andincreased packages shipped in the first quarter of fiscal year 2011 as comparedto fiscal year 2010.

 

Wecontinually evaluate the credit worthiness of our existing customer receivableportfolio and provide an appropriate reserve based on this evaluation. We alsoevaluate the credit worthiness of prospective and current customers and makedecisions regarding extension of credit terms to such customers based on thisevaluation. Accordingly, we recorded a provision for bad debts of $194,300 and$556,000 for the first quarter ended June 27, 2010 and June 28, 2009,respectively. During the first quarter of fiscal year 2010, bad debt expensewas higher due to additional reserves needed largely related to the downturn inthe economy.

 

**Interest Expense, Net.** Net interest expensedecreased from $109,300 in the first quarter of fiscal year 2010 to $77,800 inthe first quarter of fiscal year 2011, primarily due to decreased averageborrowings on our revolving line of credit facility.

 

**Income Taxes, Net Income and Diluted Earnings per Share.**The effectivetax rate in the first quarter of fiscal year 2011 was 38.4% as compared with39.2% in the first quarter of fiscal year 2010. The decrease in the tax rate isprimarily attributable to changes in our state tax effective rate. As a resultof the factors discussed above, net income for the first quarter of fiscal year2011 increased 8.2% and diluted earnings per share increased 4.0% compared tothe corresponding prior-year quarter.

 

**Liquidity and Capital Resources**

 
| ** **                                            | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------------------------|------------|------------------------|------------|
| ** **                                            | ** ** | **June 27, 2010** | ** ** | **June 28, 2009** | ** ** |
| Cash flows (used in) provided by operating activities |       | $                      | (402,300   | ) | $ | 6,641,500 |   |
| Cash flows used in investing activities               |       | (1,204,700             | )          | (2,674,000 | ) |
| Cash flows used in financing activities               |       | (1,339,600             | )          | (167,000 | ) |
| Net (decrease) increase in cash and cash  equivalents |       | $                      | (2,946,600 | ) | $ | 3,800,500 |   |

 

Weused $402,300 of net cash in operating activities in the first three months offiscal year 2011 compared with an inflow of $6.6 million in the first threemonths of fiscal year 2010. In the first three months of fiscal year 2011, ourcash used in operating activities was primarily driven by a significantincrease in trade accounts receivable and inventory, as well as a decrease inpayro1l, benefits and tax accruals, partially offset by net income, net ofdepreciation and amortization and non-cash stock compensation expense, as wellas by a significant increase in accounts payable. The increase in tradeaccounts receivable is primarily due to the timing of sales and collections.The increased inventory levels are to improve our inventory availability for ourcustomers, especially in the public carrier and network operator market. Thedecrease in

 

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payroll,benefits and tax accruals is primarily due to the payment of fiscal year 2010bonus accruals in the first three months of fiscal year 2011.The increase inaccounts payable is largely due to the timing and credit terms of inventoryreceipts.

 

Capitalexpenditures of $1.2 million in the first three months of fiscal year 2011 wereup from expenditures of $0.3 million in the first three months of fiscal year2010. In both periods, capital expenditures primarily consisted of investmentsin information technology.

 

Additionalearn-out payments on acquired businesses relate to our 2006 acquisition ofTerraWave Solutions, Ltd. and its commonly owed affiliate GigaWaveTechnologies, Ltd. A final earn-out payment of $2.9 million was madeduring the second quarter of fiscal year 2011.

 

Netcash used in financing activities was $1.3 million in the first three months offiscal year 2011 compared with a net cash outflow from financing activities of$0.2 million for the first three months of fiscal year 2010. For the firstthree months of fiscal year 2011, our cash outflow from financing activitieswas primarily due to repurchases of stock from employees and directors forminimum tax withholdings related to equity compensation as well as cashdividends paid to shareholders, partially offset by the excess tax benefit fromstock-based compensation. For the first three months of fiscal year 2010, ourcash outflow from financing activities was primarily due to an excess tax lossfrom stock-based compensation as well as treasury stock transactions withemployees and directors for minimum tax withholdings related to equitycompensation, partially offset by borrowings on our Baltimore County EconomicDevelopment Revolving Loan Fund. During the first three months of fiscal years2011 and 2010, we did not repurchase any shares of our outstanding common stockpursuant to our stock buyback program. From the beginning of our stock buybackprogram (the first quarter of fiscal year 2004), through the end of the firstquarter of fiscal year 2011, a total of 3,502,887 shares have been purchasedunder this program for approximately $30.7 million, or an average price of$8.76 per share. The Board of Directors has authorized the purchase of up to3,593,350 shares in the aggregate pursuant to this program, and therefore,90,463 shares remained available to be purchased as of the end of the firstquarter of fiscal year 2011. We expect to fund future purchases, if any, fromworking capital and/or our revolving credit facility. No timetable has been setfor the completion or expiration of this program. On July 1, 2008,separate from, and in addition to, our stock buyback program, we repurchasedall 705,000 shares of our common stock then held by Brightpoint, Inc. (“Brightpoint”)in a privately negotiated transaction for a cost of approximately $6.4 million.See Note 10 to the unaudited consolidated financial statements for additionaldiscussion of the Brightpoint transaction.

 

Weare party to an unsecured revolving credit facility with SunTrust Bank andWachovia Bank, National Association, with interest payable monthly at the LIBORrate plus an applicable margin. Borrowing availability under this facility isdetermined in accordance with a borrowing base and the applicable creditagreement includes financial covenants, including a minimum tangible net worth,minimum cash flow coverage of debt service, and a maximum funded debt to EBITDAratio. These financial covenants also apply to the separate but related termloan secured by our Hunt Valley, Maryland facility discussed above. The termsapplicable to our revolving credit facility and term loan also limit ourability to engage in certain transactions or activities, including (but notlimited to) investments and acquisitions, sales of assets, payment ofdividends, issuance of additional debt and other matters. As of June 27,2010, we had a zero balance outstanding on our $35.0 million revolving creditfacility; therefore, we had $35.0 million available on our revolving line ofcredit facility subject to the limitations imposed by the borrowing base andour continued compliance with the other applicable terms, including thecovenants discussed above.

 

Thisrevolving credit facility has been amended several times since its inceptionand now allows us to repurchase up to $25.0 million of our common stock(measured forward to the present date from the date of inception of the CreditAgreement, May 31, 2007) and allows for the payment of up to $5.0 millionof dividends in any 12 month period. The financial covenants associated withthis credit facility and the related term loan have also been modified. SeeNote 9 to the unaudited consolidated financial statements for additionalinformation regarding this credit facility. As of June 27, 2010, we hadrepurchased an aggregate of $13.7 million of common stock since May 31,2007, leaving $11.3 million available for future repurchases, without theconsent of our lenders or a further amendment to the terms of the facility.

 

Pursuant to the relevant documents,the financial covenants included in the Credit Agreement for the unsecuredrevolving credit facility are also applicable to our existing Term Loan withthe same lenders, having an original principal amount of $5.5 million andsecured by our Hunt Valley, Maryland facility. Accordingly,

 

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these financial covenantmodifications also have the effect of amending the financial covenantsapplicable to the Term Loan. At June 27, 2010, the principal balance ofthis term loan was $3.2 million.

 

On March 31, 2009, weentered into a term loan with the Baltimore County Economic DevelopmentRevolving Loan Fund for an aggregate principal amount of $250,000. The termloan is payable in equal monthly installments of principal and interest of$2,300, with the balance due at maturity on April 1, 2019. The term loanbears interest at 2.00% per annum and is secured by a subordinate position onour Hunt Valley, Maryland facility. At June 27, 2010, the principalbalance of this term loan was approximately $223,300.

 

We are also party to anexisting note payable outstanding to the Maryland Economic DevelopmentCorporation, which is payable in equal quarterly installments of principal andinterest of $37,400, with the balance due at maturity on October 10, 2011.The note bears interest at 3.00% per annum and is secured by a subordinateposition on Company-owned real property location in Hunt Valley, Maryland. At June 27,2010, the principal balance of this note was approximately $182,700.

 

OnJuly 28, 2009, we announced that our Board of Directors determined tocommence a dividend program and declared an initial quarterly cash dividend of$0.067 per share of common stock, par value $0.01 per share, of the Company.Cash dividends were paid in the same per share amount on August 26, 2009, November 25,2009 and March 1, 2010. On June 2, 2010, we paid cash dividends often cents ($0.10) per share of common stock, par value $0.01 per share, of theCompany. On July 22, 2010, we announced a cash dividend of the sameamount, ten cents ($0.10) per share of common stock, par value $0.01 per share,of the Company, payable on August 25, 2010 to shareholders of record as ofAugust 11, 2010. Any future declaration of dividends and the establishmentof any corresponding record and payment dates remains subject to furtherdetermination from time to time by the Board of Directors.

 

Webelieve that our existing cash, payments from customers, and availability underour revolving credit facility will be sufficient to support our operations forat least the next twelve months. To minimize interest expense, our policy is touse excess available cash to pay down any balance on our revolving creditfacility. We expect to meet short-term and long-term liquidity needs throughoperating cash flow, supplemented by our revolving credit facility. In doingso, the balance on our revolving credit facility could increase depending onour working capital and other cash needs. If we were to undertake anacquisition or other major capital purchases that require funds in excess ofexisting sources of liquidity, we would look to sources of funding fromadditional credit facilities, debt and/or equity issuances. There can be noassurances that such additional future sources of funding would be available onterms acceptable to us, if at all. As of June 27, 2010, we do not have anymaterial capital expenditure commitments.

 

Inaddition, our liquidity could be negatively impacted by decreasing revenues andprofits resulting from a decrease in demand for our products or a reduction incapital expenditures by our customers, or by the weakened financial conditionsof our customers or suppliers, in each case as a result of the downturn in theglobal economy, among other facts.

 

**Recent Accounting Pronouncements**

 

InJanuary 2010, the FASB issued updated accounting guidance related to fairvalue measurements and disclosures which requires a number of additionaldisclosures regarding fair value measurements, including the amount oftransfers between Levels 1 and 2 of the fair value hierarchy, the reasons fortransfers in or out of Level 3 of the fair value hierarchy and activity forrecurring Level 3 measures. In addition, the amendment clarifies certainexisting disclosure requirements related to the level at which fair valuedisclosures should be disaggregated and the requirement to provide disclosuresabout the valuation techniques and inputs used in determining the fair value ofassets or liabilities classified as Levels 2 or 3. The standard is effectivefor interim and annual reporting periods beginning after December 15,2009, except for the disclosures about purchases, sales, issuances andsettlements in the roll forward of activity in Level 3 fair value measurements,which is effective for fiscal years beginning after December 15, 2010 withearly adoption permitted. The adoption of the standard update did not have amaterial impact on our consolidated financial statements.

 

**Critical Accounting Policies and Estimates**

 

Ourdiscussion and analysis of our financial condition and results of operationsare based on our unaudited consolidated financial statements, which have beenprepared in accordance with accounting principles generally accepted in theUnited

 

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States.The preparation of these financial statements requires us to make estimates andjudgments that affect the reported amount of assets, liabilities, revenues andexpenses and related disclosure of contingent assets and liabilities. Actualresults may differ from these estimates under different assumptions orconditions.

 

Fora detailed discussion on our critical accounting policies, please refer to ourAnnual Report on Form 10-K for the fiscal year ended March 28, 2010.

 

**Off-Balance Sheet Arrangements**

 

We have no material off-balance sheet arrangements.

 

**Forward-Looking Statements**

 

ThisReport may contain forward-looking statements. These forward-looking statementsmay generally be identified by the use of the words “may,” “will,” “expects,” “anticipates,”“believes,” “estimates,” and similar expressions, but the absence of these wordsor phrases does not necessarily mean that a statement is not forward looking.Forward looking statements involve a number of risks and uncertainties. Ouractual results may differ materially from those described in or contemplated byany such forward-looking statement for a variety of reasons, including thoserisks identified in our most recent Annual Report on Form 10-K and otherperiodic reports filed with the Securities and Exchange Commission, under theheading “Risk Factors” and otherwise. Consequently, the reader is cautioned toconsider all forward-looking statements in light of the risks to which they aresubject.

 

Weare not able to identify or control all circumstances that could occur in thefuture that may adversely affect our business and operating results. Withoutlimiting the risks that we describe in our periodic reports and elsewhere,among the risks that could lead to a materially adverse impact on our businessor operating results are the following: termination or non-renewal of limitedduration agreements or arrangements with our vendors and affinity partnerswhich are typically terminable by either party upon several months or otherwiserelatively short notice; loss of significant customers or relationships,including affinity relationships; loss of customers either directly orindirectly as a result of consolidation among large wireless service carriersand others within the wireless communications industry; the strength of ourcustomers’, vendors’ and affinity partners’ businesses; increasingly negativeor prolonged adverse economic conditions, including those adversely affectingconsumer confidence or consumer or business spending, or otherwise adverselyaffecting our vendors or customers, including their access to capital or liquidityor our customers’ demand for or ability to fund or pay for the purchase of ourproducts and services; our dependence on a relatively small number of suppliersand vendors, which could hamper our ability to maintain appropriate inventorylevels and meet customer demand; failure of our information technology systemor distribution system; technology changes in the wireless communicationsindustry, which could lead to significant inventory obsolescence and/or ourinability to offer key products that our customers demand; third-party freightcarrier interruption; increased competition from competitors, includingmanufacturers or national and regional distributors of the products we sell andthe absence of significant barriers to entry which could result in pricing andother pressures on profitability and market share; our inability to accesscapital and obtain or retain financing as and when needed; transitional andother risks associated with acquisitions of companies that we may undertake inan effort to expand our business; the possibility that, for unforeseen reasons,we may be delayed in entering into or performing, or may fail to enter into orperform, anticipated contracts or may otherwise be delayed in realizing or failto realize anticipated revenues or anticipated savings; our inability toprotect certain intellectual property, including systems and technologies onwhich we rely; and our inability to hire or retain for any reason our keyprofessionals, management and staff.

 

**Available Information**

 

OurInternet Website address is: www.tessco.com. We make available free of chargethrough our Website, our Annual Report on Form 10-K, quarterly reports on Form 10-Q,current reports on Form 8-K and amendments to those reports filed orfurnished pursuant to Section 13 or 15(d) of the Exchange Act as soonas reasonably practicable after such documents are electronically filed with,or furnished to, the Securities and Exchange Commission. Also available on ourWebsite is our Code of Business Conduct and Ethics.

 

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**Item 3. Quantitative and Qualitative Disclosures About Market Risk.**

 

NotApplicable.

 

**Item 4. Controls and Procedures.**

 

The Company’s management,with the participation of the Chief Executive Officer (CEO) and Chief FinancialOfficer (CFO), has evaluated the effectiveness of the Company’s disclosurecontrols and procedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended (ExchangeAct)) as of the end of the period covered by this quarterly report. A controlsystem, no matter how well designed and operated, can provide only reasonable,not absolute, assurance that the control system’s objectives will be met. Basedon the evaluation of these controls and procedures required by Rules 13a-15(b) or15d-15(b) of the Exchange Act, the Company’s management, including the CEOand CFO, have concluded that, as of the end of the period covered by thisquarterly report, the Company’s disclosure controls and procedures wereeffective to provide reasonable assurance that information required to bedisclosed by the Company in reports that it files or submits under the ExchangeAct is recorded, processed, summarized and reported within the time periodsspecified in the Securities and Exchange Commission’s rules and forms andto provide reasonable assurance that such information is accumulated andcommunicated to the Company’s management, including the Company’s CEO and CFO,as appropriate to allow timely decisions regarding required disclosure. Duringthe period covered by this quarterly report, there have been no changes to theCompany’s internal control over financial reporting that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

**PART II. OTHER INFORMATION**

 

**Item 1. Legal Proceedings.**

 

Lawsuitsand claims are filed against us from time to time in the ordinary course ofbusiness. We do not believe that any lawsuits or claims currently pendingagainst the Company, individually or in the aggregate, are material, or willhave a material adverse affect on our financial condition or results of operations.In addition, from time to time, we are also subject to review from federal andstate taxing authorities in order to validate the amounts of income, salesand/or use taxes which have been claimed and remitted. No federal, state andlocal income tax returns are currently under examination.

 

**Item 1A. Risk Factors.**

 

Therehave been no material changes from the risk factors as previously disclosed inthe Company’s Annual Report on Form 10-K for the fiscal year ended March 28,2010. Nevertheless, information that we have disclosed or will disclose fromtime to time in our public filings (including this Quarterly Report on Form 10-Qand other periodic reports filed under the Exchange Act) may provide additionaldata or information relative to our previously disclosed risk factors.

 

**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.**

** **
| **Period (1)**                             | ** ** | **Total  Number of  Shares  Purchased (3)** | ** ** | **Average  Price  Paid per  Share** | ** ** | **Total Number of  Shares Purchased  as Part of Publicly  Announced Plans  or Programs** | ** ** | **Maximum Number  of Shares that May  Yet Be Purchased  Under the Plans or  Programs (2)** | ** ** |
|-------------------------------------------------|------------|-------------------------------------------------------|------------|------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------|------------|
| March 29, 2010 through April 25, 2010 |       | 78,524                                                |       | $                                        | 15.29      |                                                                                                                             | —     |                                                                                                                                         | 90,463     |   |
| April 26, 2010 through May 30, 2010   |       | —                                                |       | N/A                                      |       | —                                                                                                                           |       | 90,463                                                                                                                                       |       |
| May 31, 2010 through June 27, 2010    |       | —                                                |       | N/A                                      |       | —                                                                                                                           |       | 90,463                                                                                                                                       |       |
| Total                                           |       | 78,524                                                |       | $                                        | 15.29      |                                                                                                                             | —     |                                                                                                                                         | 90,463     |   |

 

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(1)          Periods indicated are fiscalaccounting months for the first quarter of fiscal year 2011.

(2)          Amounts are as of the end ofthe fiscal accounting month or quarter, as applicable.

(3)          To the extent not alsoreflected under the column headed “Total number of shares purchased as part ofpublicly announced plans and programs,” total number of shares purchasedrepresents shares either withheld from or delivered to the Company by employeesor directors upon stock option exercises or in connection with PSU andrestricted stock awards, in order to pay related minimum tax liabilities.

 

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OnApril 28, 2003, our Board of Directors announced a stock buyback program.As of June 27, 2010, the Board of Directors has authorized the purchase ofup to 3,593,350 shares of outstanding common stock under the stock buybackprogram. During the first quarter of fiscal year 2011, the Company did notrepurchase any shares of its common stock pursuant to this program. As of June 27,2010, we had purchased an aggregate of 3,502,887 shares of our outstandingcommon stock pursuant to this program for approximately $30.7 million, or anaverage price of $8.76 per share. Accordingly, as of June 27, 2010, 90,463shares remained available for repurchase under this program. Shares may bepurchased from time to time under this program in the open market, by blockpurchase, or through negotiated transactions, or possibly other transactionsmanaged by broker-dealers. No timetable has been set for completion orexpiration of the program. On July 1, 2008, separate from, and in additionto, the stock buyback program, we repurchased all 705,000 shares of our commonstock then held by Brightpoint, Inc. (“Brightpoint”) in a privatelynegotiated transaction. See Note 10 to the unaudited consolidated financialstatements for additional discussion of the Brightpoint transaction. Ourrevolving credit facility and term loan with SunTrust Bank and Wachovia Bank,National Association, limit to $25 million the aggregate dollar value of sharesthat may be repurchased from May 31, 2007 forward. As of June 27,2010, we had the ability to purchase approximately $11.3 million in additionalshares of common stock without violating this covenant.

 

OnApril 28, 2010, the Company and its primary operating subsidiaries, asborrowers, executed and delivered a Fourth Modification Agreement (the “FourthAmendment”), with SunTrust Bank and Wachovia Bank, National Association,amending the Credit Agreement for the Company’s existing unsecured revolvingcredit facility.  Pursuant to the FourthAmendment, the amount of dividend payments allowed to be made by the Companyunder the Credit Facility was increased from $2.5 million to $5.0 million inany 12 month period, assuming continued compliance by the Company with theotherwise applicable terms of the Credit Agreement.

 

**Item 3. Defaults Upon Senior Securities.**

 

None.

 

**Item 4. (Removed and Reserved)**

 

**Item 5. Other Information.**

 

None.

 

**Item 6. Exhibits.**

 

(A)            EXHIBITS:

 
| 3.1    |   | Certificate  of Elimination of Series A Junior Participating Preferred Stock of the  Company, dated April 26, 2010. (incorporated by reference to  Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with  the Securities and Exchange Commission on April 26, 2010)                                                                                                                                                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2    |   | Fourth  Amended and Restated By-Laws of the Company. (incorporated by reference to  Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with  the Securities and Exchange Commission on April 26, 2010)                                                                                                                                                                                                                            |
| 4.1    |   | First  Amendment to Rights Agreement, dated as of April 26, 2010, between the  Company and Mellon Investor Services LLC, as rights agent. (incorporated by  reference to Exhibit 4.1 to the Company’s Current Report on  Form 8-K filed with the Securities and Exchange Commission on  April 26, 2010)                                                                                                                                 |
| 10.1   |   | Fourth  Modification Agreement, made effective April 28, 2010, to Credit  Agreement dated as of May 31, 2007, by and among the Company and its  primary operating subsidiaries as borrowers, and SunTrust Bank and Wachovia  Bank, National Association, as lenders. (incorporated by reference to  Exhibit 10.7.7 to the Company’s Annual Report on Form 10-K filed  with the Securities and Exchange Commission on May 27, 2010) |
| 31.1.1 |   | Rule 15d-14(a) Certification  of Robert B. Barnhill, Jr., Chief Executive Officer (filed herewith).                                                                                                                                                                                                                                                                                                                                               |
| 31.2.1 |   | Rule 15d-14(a) Certification  of David M. Young, Chief Financial Officer (filed herewith).                                                                                                                                                                                                                                                                                                                                                             |
| 32.1.1 |   | Section 1350  Certification of Robert B. Barnhill, Jr., Chief Executive Officer (filed  herewith).                                                                                                                                                                                                                                                                                                                                                     |
| 32.2.1 |   | Section 1350  Certification of David M. Young, Chief Financial Officer (filed herewith).                                                                                                                                                                                                                                                                                                                                                                    |

 

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**Signature**

 

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

 

 
|                             | TESSCO  TECHNOLOGIES INCORPORATED             |
|----------------------------------|-----------------------------------------------|
|                             |                                          |   |
|                             |                                          |   |
| Date: August 11,  2010 | By:                                           | /s/  David M. Young |
|                             | David  M. Young                               |
|                             | Chief  Financial Officer                      |
|                             | (principal  financial and accounting officer) |

 

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