TESSCO
Annual Report 2017

Plain-text annual report

SHAREOWNERS S H A RE O W NE R S ANNUAL ANNUAL REPORT REPORT 2015 FY 2017 NASDAQ: TESS The Vital Link™ Connecting Partners with Customers Our increasingly connected world has made wireless a critical part of our everyday lives. It is the key component to the next evolution of technology, from connected homes to smart cities. TESSCO exists in the midst of this evolution as The Vital Link™ between our best-in-class manufacturer partners and our 10,000+ customers. We promote the innovations of our partners by combining them with the value-added services of our expert team and delivering them to the right customers, at the right time, in the right place. We understand the unique challenges facing our manufacturer partners and our customers, and we are dedicated to supporting the success of both, while delivering for you, our shareowners, as we collaborate towards the next generation of wireless. THOUSANDS OF CUSTOMERS VALUE ADD HUNDREDS OF MANUFACTURERS Dear Fellow Shareholder, After my first nine months leading TESSCO, I am very excited about our future. Our industry is experiencing rapid change. Many forecasts call for significant growth in the wireless infrastructure, Wi-Fi, and Internet of Things markets during the next few years. This acceleration, and the market expectation of on-demand access with anywhere, anytime connectivity, will benefit the entire wireless industry. More importantly for TESSCO, we are well positioned to capitalize on those market forces. We have enhanced our go-to-market strategy, focusing on increasing our market share, developing stronger and better relationships with our strategic customers and vendor partners, and improving our sales team regionalization plan. We have aligned our organization to ensure the right mix of talent and resources on our high-potential opportunities, while at the same time improving profitability. In addition, our goal is to be the industry leader in e-commerce capabilities, engaging with both customers and vendors to enhance user experience and productivity. These changes are resulting in a nimbler, more aggressive organization, poised to capitalize on the opportunities in our market. In fiscal 2017, for the first time in four years, we delivered annual topline growth. We took many steps to increase profitability and positioned TESSCO for improved performance in the future. We anticipate year-over-year earnings growth in fiscal 2018, driven by the combination of increased revenues, cost management initiatives, and strong operating leverage. We also believe that VentevTM, our innovative, proprietary brand, can continue to grow and become a larger percentage of revenues while improving gross margins. We are confident the steps we are taking this year will form a strong foundation for our future. We are executing on our initiatives, and this should set the stage for improved results in the coming years. With greater accountability and a strong sense of urgency, we are focused on achieving increased success and delivering greater shareholder value. As TESSCO’s new CEO, I would like to thank our customers, manufacturers, team members and you, our shareholders, for your continued support. Sincerely, Murray Wright President and Chief Executive Officer June 9, 2017 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10‑K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORTHE FISCAL YEAR ENDED March 26, 2017 ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM ______ TO ______ Commission file number 001-33938 TESSCO Technologies Incorporated(Exact name of registrant as specified in its charter) DELAWARE52-0729657(State or other jurisdiction of(I.R.S. Employerincorporation or organization)Identification No.) 11126 McCormick Road, Hunt Valley, Maryland21031(Address of principal executive offices)(Zip Code) Registrant’s telephone number, including area code (410) 229-1000 Securities registered pursuant to Section 12(b) of the Act: Title of each className of each exchange on which registeredCommon Stock, $0.01 par valueNASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Act). Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past90 days.Yes ☒ No ☐ Indicate by check mark whether the registrant submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submittedand posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not becontained, to the best of registrant's knowledge, in definitive proxy or other information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerginggrowth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 ofthe Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ (Do not check if a smaller reporting company)Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of Common Stock, $0.01 par value, held by non-affiliates of the registrant based on the closing sales price of the Common Stock as quotedon the NASDAQ Global Market as of September 25, 2016, was $75,368,521. The number of shares of the registrant's Common Stock, $0.01 par value, outstanding as of May 30, 2017, was 8,362,076. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the definitive Proxy Statement for the registrant’s 2017 Annual Meeting of Shareholders,scheduled to be held July 20, 2017, are incorporated by reference into Part III of this Annual Report on Form 10-K. Table of ContentsTABLE OF CONTENTS PART I PageItem 1. Business3Item 1A. Risk Factors12Item 1B. Unresolved Staff Comments23Item 2. Properties23Item 3. Legal Proceedings24Item 4. Mine Safety Disclosures24PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities25Item 6. Selected Financial Data28Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations29Item 7A. Quantitative and Qualitative Disclosures About Market Risk40Item 8. Financial Statements and Supplementary Data42Item 9. Changes in and Disagreements With Accountants on Accounting and FinancialDisclosure68Item 9A. Controls and Procedures68Item 9B. Other Information70PART III Item 10. Directors, Executive Officers and Corporate Governance70Item 11. Executive Compensation70Item 12. Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters70Item 13. Certain Relationships and Related Transactions, and Director Independence70Item 14. Principal Accounting Fees and Services70Part IV Item 15. Exhibits, Financial Statement Schedule70Schedule II: Valuation and Qualifying Accounts75Signatures 76 2 Table of Contents Part I Item 1. Business. General TESSCO Technologies Incorporated (TESSCO, we, or the Company) is a value-added technology distributor,manufacturer, and solutions provider. TESSCO was founded more than 30 years ago with a commitment to deliver industry-leading products, knowledge, solutions, and customer service; and we support customers in the public and private sector.TESSCO supplies more than 50,000 products from 450 of the industry’s top manufacturers in mobile communications, Wi-Fi,Internet of Things, wireless backhaul, and more. TESSCO is a single source for outstanding customer experience, expertknowledge, and complete end-to-end solutions for the wireless industry. Our customers include a diversified mix of carrier and public network operators, tower owners, program managers,contractors and integrators, private system operators (including railroads, utilities, mining operators and oil and gasoperators), federal, state and local governments, manufacturers, value-added resellers, retail carrier stores and theirindependent agents, as well as other local and national retailers. We currently serve an average of approximately 12,500 non-consumer customers per month. We provide our customers with products, services and support to help them build and maintain these primarysystems: ·Enhanced Cellular Coverage and Capacity·Wireless Base Station·In-Vehicle and Mobile Communications·Wi-Fi Networks·Site Survey Test and Maintenance·Wireless Backhaul·Machine to Machine Communications·Internet of Things·Mobile Devices and Accessories We offer products in these broad categories: base station infrastructure; network systems; mobile devices andaccessories; and installation; test and maintenance products. We source and develop our product offering from leadingmanufacturers throughout the world, and also offer products developed and manufactured under our own proprietary brands,including Ventev. Our operational platform allows customers and manufacturers the opportunity to streamline the supply chain processand lower total inventories and costs by providing guaranteed availability and complete, on-time delivery to the point ofuse. We began our “total source” operations in 1982, reincorporated as a Delaware corporation in 1987, and have beenlisted on the NASDAQ Market (currently, NASDAQ Global Select) (symbol: TESS), since 1994. We operate under ISO9001:2008 and TL 9000 registrations. For information regarding our website address and regarding material available free of charge through the website,see the information appearing under the heading “Available Information” included in Item 7 to this Annual Report on Form10-K for the fiscal year ended March 26, 2017. Customers We evaluate our business and customers as one segment. However, to provide investors with increased visibilityinto the markets we serve, we report revenue and gross profit by the following customer market units: (1) public carriers,contractors and program managers that are generally responsible for building and maintaining the infrastructure system3 ®Table of Contentsand provide airtime service to individual subscribers; (2) government system operators including federal agencies as well asstate and local governments that run wireless networks for their own use as well as the value added resellers who primarilyserve the government; (3) private system operators such as major utilities and transportation companies that run wirelessnetworks for their own use; (4) commercial dealers and resellers that sell, install and/or service cellular telephone, wirelessnetworking, broadband and two-way radio communications equipment primarily for the enterprise market; and (5) retailers,dealer agents and carriers. Public carriers, contractors and program managers are system operators that are generally responsible for buildingand maintaining the public infrastructure system and providing airtime service to individual subscribers, and accounted forapproximately 15% of our fiscal year 2017 revenues. Government system operators including federal agencies and state andlocal governments accounted for 7% of fiscal year 2017 revenues. Private system operators, including commercial entities,major utilities, transportation companies, manufacturers, and installation centers, accounted for 18% of fiscal year 2017revenues. Commercial dealers and resellers include dealers and resellers that sell, install and/or service cellular telephone,wireless networking, broadband and two-way radio communications equipment for the enterprise and consumer markets.These resellers include local and national value-added resellers and retailers, and accounted for 24% of fiscal year 2017revenues. Our retailers, independent dealer agents and carriers market accounted for 36% of fiscal year 2017 revenues. Our top ten customer relationships totaled 26% of our total revenue for fiscal year 2017, and no customerrelationship accounted for more than 10% of our total revenues. Approximately 98% of our sales have been made to customers in the United States during each of the past threefiscal years, although we currently sell to customers in over 100 countries. Due to our diverse product offering and our widecustomer base, our business is not significantly affected by seasonality in the aggregate. However, sales to our retailersgenerally peak in our second and third quarters in conjunction with significant handset launches and the winter holiday,season and decline significantly in our fourth quarter. Also, our base station infrastructure sales are typically affected byweather conditions in the United States, especially in our fourth quarter. For more detailed financial information regarding customer market and product category activity within our soleoperating segment for each of the past three fiscal years, see Note 10 to our Consolidated Financial Statements included inItem 8 to this Annual Report on Form 10-K for the fiscal year ended March 26, 2017. Products and Services We principally offer competitively priced, manufacturer brand-name products, ranging from simple hardware itemsto sophisticated test equipment, with per item prices ranging from less than $1 to over $50,000 and gross profit marginsranging from less than 5% to 99%. We offer products classified into our four business categories: base station infrastructure;network systems; installation, test and maintenance products; and mobile devices and accessories, which accounted forapproximately 39%, 17%, 6%, and 38% of fiscal year 2017 revenues, respectively. Base station infrastructure products areused to build, repair and upgrade wireless broadband systems. Products include base station antennas, cable and transmissionlines, small towers, lightning protection devices, connectors, power systems, enclosures, grounding, jumpers, miscellaneoushardware, and mobile antennas. Our base station infrastructure service offering includes connector installation, customjumper assembly, site kitting and logistics integration. Network systems products are used to build and upgrade public andprivate wireless broadband networks. Products include fixed and mobile broadband radio equipment, wireless networkingfiltering systems, distributed antenna systems, two-way radios and security and surveillance products. This product categoryalso includes training classes, technical support and engineering design services. Installation, test and maintenance productsare used to install, tune, and maintain wireless communications equipment. Products include sophisticated analysisequipment and various frequency-, voltage- and power-measuring devices, as well as an assortment of tools, hardware, GPS,safety and replacement and component parts and supplies required by service technicians. Mobile devices and accessoryproducts include cellular, smart phone and data device accessories such as power supplies, cases, screen protectors, speakers,mobile amplifier, bluetooth and corded headsets, mounts, car antennas, music accessories and data and memory cards. 4 Table of ContentsWhile we principally provide manufacturer brand-name products, a variety of products are developed, manufacturedand offered under TESSCO-owned brands including Ventev, Wireless Solutions, and TerraWave. The products we offerunder these brands generally consist of device accessory products that fall into the mobile device and accessory productcategory, as well as WLAN and network systems accessory products and remote monitoring and control solutions that fallinto the base station and network systems category. We have not incurred significant research and development expendituresin any of the last three fiscal years. Sales of proprietary products were 15% of our total sales in fiscal year 2017. Our products are sold as part of our integrated product and supply chain solutions. Our supply chain services for allproduct areas are grouped under Knowledge, Configuration, Delivery and Control. Knowledge solutions include the entiresuite of TESSCO knowledge tools that focus on educating the industry, including product highlights, showcases and/orcomparisons, with comprehensive specifications on the products, solutions and applications that are offered and reinforcedby engineering, sales and technical support. Configuration services are comprised of customized product solution kitting andassembly, logistics management and consumer and retail merchandising and marketing, allowing the products to bedelivered ready for immediate use, installation or resale. Our delivery system allows the customer to select speed of deliveryoptions, to specific delivery locations, designed to eliminate the customer’s need for staging and warehousing. Our servicesthat increase customer control include predetermined monthly pricing levels, the ability to monitor multi-site purchasingwith pre-approved, customized parameters indicating who is able to order how much of which specific products, orderdelivery tracking, product usage tracking, history reporting and alternative financing options. As part of our commitment to customer service, we typically allow most customers to return most products for anyreason, for credit, within 30 days of the date of purchase. Total returns and credits have been less than 3% of revenues in eachof the past three fiscal years. Revenues from sales of products purchased from our largest two vendors, Otter Products, LLC and CommScope Inc.,accounted for 11% and 10%, respectively, of total fiscal year 2017 revenues. Sales of products purchased from our ten largestvendors generated approximately 41% of our total fiscal year 2017 revenues. The amount of purchases we make from each of our approximately 450 vendors may significantly increase ordecrease over time. As the level of business changes, we may request, or be requested by our vendors, to adjust the terms ofour relationships. Therefore, our ability to purchase and re-sell products from each of our vendors depends on being able toreach and maintain agreements with these vendors on acceptable business terms. In addition, the agreements andarrangements on which most of our larger vendor relationships are based are typically of limited duration and terminable forany or no reason by either party upon notice of varying lengths, usually between several months or otherwise short notice. Generally, we believe that alternative sources of supply are available for many of the product types we carry, although wemay be unable, or find it more difficult, to source branded products from other than the manufacturer. The scope of products available for purchase from a given vendor may fluctuate, and is generally limited only bythe scope of the vendor’s catalog and available inventory. Therefore, we often source the same product type from multiplevendors, although in some instances branded products are available only from the manufacturer or a particular vendor, and insome instances, customers might favor one vendor or brand over another. The terms of the vendor contract typically apply toall products purchased from a particular vendor, whether or not the item is specifically identified in the contract. When negotiating with vendors, we seek the most favorable terms available under the circumstances. Our preferredterms include among others, terms that provide for product warranty and return rights, as well as product liability andintellectual property indemnification rights, in each case consistent with our preferred business methods and objectives. Wehave not been able, nor do we expect in the future to be able, to negotiate the inclusion of all our preferred terms, or ourpreferred language for those terms, in every vendor contract. The degree of our success in this regard is largely a function ofthe parties’ relative bargaining positions. 5 ÒÒ®Table of ContentsWe are dedicated to superior performance, quality and consistency of service in an effort to maintain and expandvendor relationships but there can be no assurance that we will continue to be successful in this regard in the future, or thatcompetitive pressures or other events beyond our control will not have a negative impact on our ability to maintain theserelationships or to continue to derive revenues from these relationships. Method of Operation We believe that we have developed a highly integrated, technologically advanced and efficient method ofoperation based on the following key tenets: ·Understanding and anticipating customers' needs and building solutions by cultivating lasting relationships;·Allowing customers to make the best decisions by delivering product knowledge, not just information, throughour knowledge tools, including The Wireless Journal and the TESSCO.com Solution and TransactionSystem;·Responding to what we refer to as "the moments of truth" by providing customers with sales, service andtechnical support, 24 hours a day, 7 days a week, 365 days a year;·Providing customers what they need, when and where they need it by delivering integrated product and supplychain solutions; and·Helping customers enhance their operations by providing real-time order tracking and performancemeasurement. We operate as a team of teams structured to enhance marketing innovation, customer focus and operationalexcellence. Market Development and Sales: In order to meet the needs of a dynamic and diverse marketplace, our sales and marketingactivities are organized on an end-market basis. Sales teams are focused on our customers: 1) public carriers, contractors, andprogram managers, 2) government system operators 3) private system operators, 4) commercial dealers and resellers, and 5)retailers, independent dealer agents and carriers. This organization allows for the development of unique product andsolution offerings to meet the needs of our diverse customer base. We attempt to understand and anticipate customers' needs and to build solutions by cultivating lastingrelationships. Our commercial customer database contains detailed information on approximately 216,000 existingcustomers, including the names of key personnel, past contacts, inquiries, and buying and credit histories. Additionally, wehave information on approximately 540,000 contacts that serve as potential new customers in our market. This extensivecustomer database enables us to identify and target potential customers and to market specific products to these targetedcustomers. Potential customers are identified through their responses to TESSCO.com, direct‑marketing materials,advertisements in trade journals and industry trade shows, as well as through referrals from other TESSCO customers andvendors. Customer relationship representatives pursue these customer inquiries through distribution of our Knowledge Toolsand through phone contact, electronic communications, and field visits. The information technology system tracks potentialcustomer identification from the initial marketing effort through the establishment and development of a purchasingrelationship. Once a customer relationship is established, we carefully analyze purchasing patterns and identify opportunitiesto encourage customers to make more frequent purchases of a broader array of products. Scheduled contacts are made to eachregularly purchasing customer for the purpose of information dissemination, order generation, database maintenance, and theoverall enhancement of the business relationship. The process is aimed at attracting prospects to TESSCO, converting theseprospects to buying customers, and ultimately migrating them to loyal, total-source monthly buyers. 6 ®®®Table of ContentsSolutions Development and Product Management: We actively monitor advances in technologies and industry trends, boththrough market research and continual customer and manufacturer interaction, and continue to enhance our product offeringas new wireless communications products and technologies are developed. To complement our broad product portfolio, weprovide technical expertise and consultation to assist our customers in understanding technology and choosing the rightproducts for their specific application. Our personnel, including those we refer to as “Solution Architects” offer applicationsengineering to market-specific applications such as DAS systems (Distributed Antennae Systems), wireless backhaul andfiber networks, custom integrated solutions for power systems, and site kitting and flexible custom network design servicesfor areas such as in-building coverage, tower design, and wireless video surveillance systems. In addition to determining the product offering, our Product and Solutions Development Teams provide thetechnical foundation for both customers and our personnel. Our product management software is continually updated to addnew products and additional technical information in response to manufacturer specification changes and customer inquiries.This system contains detailed information on each stock keeping unit offered, including full product descriptions, categoryclassifications, technical specifications, illustrations, product cost, pricing and delivery information, alternative andassociated products, and purchase and sales histories. This information is available on a real-time basis to all of our personnelfor product development, procurement, technical support, cataloging and marketing. Strategic Marketing – As a thought leader in the wireless industry, TESSCO’s marketing materials educate the industry andpromote our added value and services. Through WirelessNow, our retail focused industry publication, we offer productrecommendations, trend reports, and expert market analysis to help thousands of retail customers improve sell through, drivetraffic and sales, and maximize their revenue. Our weekly commercial email newsletter, The Wireless Update, keeps 90,000 ofour customers informed on the latest news in the industry, new products and solutions from our manufacturers, upcomingevents and training opportunities, and more. In addition, strategic marketing supports the organization through thedevelopment of compelling sales content, knowledge features, training programs, and other customer and manufacturerprograms that solve business challenges and increase the value TESSCO provides to the industry. TESSCO.com is our e-commerce site and the digital gateway to our comprehensive knowledge, products, andsolutions for wireless. In addition to access to our inventory of products for every solution, TESSCO.com features: ·Customer-specific home pages with customized presentations of relevant, market-specific content, tailored tologged-in users’ specific roles in wireless;·Powerful product and knowledge search capabilities enabled by advanced search engine logic;·Real-time product availability;·Customer-specific pricing based on a customer’s aggregated recent purchase history;·Easy ordering capabilities that allow for the construction and configuration of complete, end-to-end solutionthat can be converted to an order, or saved, copied, shared, uploaded and emailed;·A content library that enables the streamlined navigation of TESSCO’s knowledge content (articles, whitepapers, illustrations, videos, installation guides, product selection guides, or any other content featured onTESSCO.com);·A variety of customer service, financial and technical support pages, including account controls which includeall of the tools necessary to track and manage orders, update an account, find the right support, review savedorders, handle warranty claims, and explore TESSCO’s capabilities;·Order confirmation – specifying the contents, order status, delivery date, tracking number and total cost of anorder;·Order reservations, order status, back-order details and four-month order history; and·Manufacturer portal pages designed to showcase each manufacturer partner’s offer in a custom fashion. 7 ®Table of ContentsTESSCO.com empowers our customers to make better decisions by delivering product knowledge so they’re fullyinformed. This destination also enables our manufacturers to reach a broad and diverse customer base with their product offerand brand features. Customer Support and Order Entry: Our customer support teams are responsible for responding to what we refer to as "themoments of truth" by delivering sales and customer support services through an effective and efficient transaction system.We also continually monitor our customer service performance through report cards sent for each product delivery, customersurveys and regular interaction with customers. By combining our broad product offering with a commitment to superiorcustomer service, we seek to reduce a customer's overall procurement costs by enabling the customer to consolidate thenumber of suppliers from which it obtains products, while also reducing the customer's need to maintain high inventorylevels. Our information technology system provides detailed information on every customer account, including recentinquiries, buying and credit histories, separate buying locations within a customer account and contact diaries for keypersonnel, as well as detailed product information, including technical, product availability and pricing information. Theinformation technology system increases sales productivity by enabling any customer support representative to provide anycustomer with personalized service and also allows non-technical personnel to provide a high level of technical productinformation and order assistance. We believe that our commitment to providing prompt, friendly and efficient customer service before, during andafter the sale enables us to maximize sales, customer satisfaction and customer retention. The monthly average number ofnon-consumer customers increased from approximately 12,200 for fiscal year 2016 to approximately 12,500 in fiscal year2017. The average monthly purchase per customer decreased slightly from $3,700 in fiscal year 2016 to $3,600 in fiscal year2017. Procurement and Inventory Management: Our product management and purchasing system aims to provide customers with atotal source of broad and deep product availability, while maximizing the return on our inventory investment. We use our information technology system to monitor and manage our inventory. Historical sales results, salesprojections and information regarding vendor lead times are all used to determine appropriate inventory levels. Theinformation technology system also provides early warning reports regarding upcoming inventory requirements. As of March26, 2017 and March 27, 2016, we had an immaterial level of backlog orders. Most backlog orders as of March 26, 2017 areexpected to be filled within 90 days of fiscal year-end. For both the fiscal years ended March 26, 2017 and March 27, 2016,inventory write-offs were 0.7% of total purchases. In many cases, we are able to return slow-moving inventory to our vendorspursuant to stock rotation agreements. Inventory turns for fiscal years 2017 and 2016 were 7.2 and 6.6, respectively. Fulfillment and Distribution: Orders are received at our Timonium, Maryland, Reno, Nevada and San Antonio, Texascustomer sales support centers. As orders are received, customer representatives have access to technical information,alternative and complementary product selections, product availability and pricing information, as well as customerpurchasing and credit histories and recent inquiry summaries. An automated warehouse management system, which isintegrated with the product planning and procurement system, allows us to ensure inventory control, to minimize multipleproduct shipments to complete an order and to limit inventory duplication. Bar-coded labels are used on every product,allowing distribution center personnel to utilize radio frequency scanners to locate products, fill orders and update inventoryrecords in real-time, thus reducing overhead associated with the distribution functions. We contract with a variety of freightline and parcel transportation carrier partners to deliver orders to customers. Performance and Delivery Guarantee (PDG) charges are generally calculated on the basis of the weight of theproducts ordered and on the delivery service requested, rather than on distance to the customer. We believe that thisapproach emphasizes on-time delivery instead of shipment dates, enabling customers to minimize their inventories andreduce their overall procurement costs while guaranteeing date specific delivery, thereby encouraging them to make us theirtotal source supplier. 8 Table of ContentsInformation Technology: Our information technology system is critical to the success of our operations. We have madesubstantial investments in the development of this system, which integrates cataloging, marketing, sales, fulfillment,inventory control and purchasing, financial control and internal and external communications. The information technologysystem includes highly developed customer and product databases and is integrated with our Configuration, Fulfillment andDelivery system. The information contained in the system is available on a real-time basis to all of our employees as neededand is utilized in every area of our operations. We believe that we have been successful to date in pursuing a highly integrated, technologically advanced andefficient method of operations; however, disruption to our day-to-day operations, including failure of our informationtechnology or distribution systems, or freight carrier interruption, could impair our ability to receive and process orders or toship products in a timely and cost-efficient manner. Competition The wireless communications distribution industry is competitive and fragmented, and is comprised of distributorssuch as Brightstar, D&H, Superior Communications and VoiceComm in our retail market and Alliance Corporation, Anixter,Comstor, Graybar, Hutton Communication, KPGCo Logistics, Ingram Micro, Talley Communications, Tech Data, Site Pro 1,VAV Wireless, Westcon and Winncom in our other markets. In addition, many manufacturers sell and fulfill directly tocustomers. Barriers to entry for distributors are relatively low, particularly in the mobile devices and accessory market, andthe risk of new competitors entering the market is high. In addition, the agreements or arrangements with our customers orvendors looking to us for product and supply chain solutions are typically of limited duration and are often terminable byeither party upon several months or otherwise short notice. Accordingly, our ability to maintain these relationships is subjectto competitive pressures and challenges. Some of our current competitors have substantially greater capital resources andsales and distribution capabilities than we do. In response to competitive pressures from any of our current or futurecompetitors, we may be required to lower selling prices in order to maintain or increase market share, and such measurescould adversely affect our operating results. We believe, however, that our strength in service, the breadth and depth of ourproduct offering, our information technology system, our knowledge and expertise in wireless technologies and the wirelessmarketplace, and our large customer base and purchasing relationships with approximately 450 manufacturers, provide uswith a significant competitive advantage over new entrants to the market. Continuing changes in the wireless communications industry, including risks associated with conflictingtechnology, changes in technology, inventory obsolescence, and consolidation among wireless carriers, could adverselyaffect future operating results. We believe that the principal competitive factors in supplying products to the wireless communications industry arethe quality and consistency of customer service, particularly timely delivery of complete orders, breadth and quality ofproducts offered and total procurement costs to the customer. We believe that we compete favorably with respect to each ofthese factors. In particular, we believe we differentiate ourselves from our competitors based on the breadth of our productoffering, our ability to quickly provide products and supply chain solutions in response to customer demand andtechnological advances, our knowledge and expertise in wireless technologies and the wireless marketplace, the level of ourcustomer service and the reliability of our order fulfillment process. Intellectual Property We seek to protect our intellectual property through a combination of trademarks, service marks, confidentialityagreements, trade secret protection and, if and when appropriate, patent protection. Thus far, we have generally sought toprotect our intellectual property, including our product data and information, customer information and informationtechnology systems, through trademark filings and nondisclosure, confidentiality and trade secret agreements. We typicallyrequire our employees, consultants, and others having access to our intellectual property, to sign confidentiality andnondisclosure agreements. There can be no assurance that these confidentiality and nondisclosure agreements will behonored, or whether they can be fully enforced, or that other entities may not independently develop systems, technologiesor information similar to that on which we rely. 9 Table of ContentsTESSCO Communications Incorporated, a wholly-owned subsidiary of TESSCO Technologies Incorporated,maintains a number of registered trademarks and service marks in connection with our business activities, including: ASimple Way of Doing Business Better, LinkUPS, ORDERflow, Solutions That Make Wireless Work, TerraWaveSolutions, TESSCO, TESSCO Making Wireless Work, TESSCO Technologies, TESSCO.com, Ventev, The Vital Linkto a Wireless World, The Wireless Bulletin, The Wireless Guide, The Wireless Journal, Wireless Solutions, TheWireless Update, Your Total Source, Chargesync, and Your Virtual Inventory, among many others. Our general policy isto file for trademark and service mark protection for each of our trademarks and trade names and to enforce our rights againstany infringement. We currently hold one patent related to our online order entry system and three patents related to our Ventevproducts. We intend, if and when appropriate, to seek patent protection for any additional patentable technology. The abilityto obtain patent protection involves complex legal and factual questions. Others may obtain patent protection fortechnologies that are important to our business, and as a result, our business may be adversely affected. In response to patentsof others, we may need to license the right to use technology patented by others, or in the event that a license cannot beobtained, to design our systems around the patents of others. Environmental Regulation We are subject to various laws and governmental regulations concerning environmental matters and employeesafety and health in the United States. We are also subject to regulation by the Occupational Safety and HealthAdministration concerning employee safety and health matters. Compliance with these federal, state and local laws andregulations related to protection of the environment and employee safety and health has had no material effect on ourbusiness. There were no material capital expenditures for environmental projects in fiscal year 2017 and there are no materialexpenditures planned for such purposes in fiscal year 2018. Employees As of March 26, 2017, we had 772 full-time equivalent employees. Of our full-time equivalent employees, 393 wereengaged in customer and vendor service, marketing, sales and product management, 273 were engaged in fulfillment anddistribution operations and 106 were engaged in administration and technology systems services. No employees are coveredby collective bargaining agreements. We consider our employee relations to be excellent. 10 ®®®®®®®®®®®®®®®®®®®®Table of ContentsExecutive Officers Executive officers are appointed annually by the Board of Directors and, subject to the terms of any applicableemployment agreement, serve at the discretion of the Board of Directors. Information regarding our executive officers is asfollows: Name Age Position Murray Wright 60 President and ChiefExecutive Officer Murray Wright joined the Company in September2016. Mr. Wright served as Chief Executive Officerof Zones, Inc. from 2013 to 2015. At Tech DataCorporation, Mr. Wright served as Senior VicePresident, US Sales from 2006 to 2010 and asPresident, the Americas, from 2011 to 2013. Aric M. Spitulnik 45 Senior Vice President,Secretary, and ChiefFinancial Officer Aric Spitulnik joined the Company in 2000. Mr.Spitulnik was appointed Controller in 2005 andVice President in 2006. In 2012, he was appointedCorporate Secretary and in 2014, he was appointedSenior Vice President. Since October 2013, Mr.Spitulnik has served as the Company’s ChiefFinancial Officer. Douglas A. Rein 57 Senior Vice President ofPerformance Systems andOperations Douglas Rein joined the Company in July 1999 asSenior Vice President of Performance Systems andOperations. Previously, he was director ofoperations for Compaq Computer Corporation andvice president, distribution and logistics operationsfor Intelligent Electronics. Craig A. Oldham 47 Senior Vice President,Strategic Marketing Craig Oldham joined the Company in 2014 as VicePresident, Strategic Marketing. In 2015, Mr.Oldham was appointed to Senior VicePresident. Previously, Mr. Oldham served as VicePresident of Digital Engagement at the Red Crossfrom August 2010 to March 2014. Elizabeth S. Robinson 50 Senior Vice President,Retail Sales and ProductMarketing Elizabeth Robinson joined the Company in 1998. Ms. Robinson was appointed Director of Sales in2001, and Vice President in 2004. In 2011, she wasappointed Vice President of Mobile Devices andAccessories, and then for the Mobility Group in2016. In 2017, she was appointed Senior VicePresident, leading Retail Sales and ProductManagement. Charles W. Kriete 39 SVP, Commercial Sales,Product Marketing andSupply Chain Charles Kriete joined the company in January 2017.Mr. Kriete served as Chief Marketing Officer of KoreWireless Group in 2016 and was Chief RevenueOfficer of Wyless from 2013 to 2016. Previously heserved as Executive Vice President of TD Mobilityat Tech Data from 2010 to 2013. 11 Table of Contents Item 1A. Risk Factors. We are not able to identify or control all circumstances that could occur in the future that may adversely affect ourbusiness and operating results. The following are certain risk factors that could adversely affect our business, financialposition and results of operations. These risk factors and others described in this Annual Report on Form 10-K should beconsidered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-Kbecause these factors could cause the actual results and conditions to differ materially from those projected in the forward-looking statements. Additional risks and uncertainties that management is not aware of or focused on, or that managementcurrently deems immaterial may also adversely affect our business, financial position and results of operations. If ourbusiness, financial position and results of operations are adversely affected by any of these or other adverse events, our stockprice would also likely be adversely affected. RISKS RELATING TO OUR BUSINESS We face significant competition in the wireless communications distribution industry. The wireless communications distribution industry is competitive and fragmented, and is comprised of severalnational distributors, as well as numerous regional distributors. In addition, many manufacturers sell and fulfill directly tocustomers. Barriers to entry for distributors are relatively low, particularly in the mobile devices and accessory market, andthe risk of new competitors entering the market is high. Some of our current competitors have substantially greater capitalresources and sales and distribution capabilities than we do. In response to competitive pressures from any of our current orfuture competitors, we may be required to lower selling prices in order to maintain or increase market share, and suchmeasures could adversely affect our operating results. We are also seeing increased competition in the form of e-commercesites as consumers and business are increasingly looking to the internet to purchase goods. We offer no assurance that we will not lose market share, or that we will not be forced in the future to reduce ourprices in response to the actions of our competitors, thereby reducing our gross margins. Furthermore, to remain competitivewe may be forced to offer more credit or extended payment terms to our customers. This could increase our required capital,financing costs, and the amount of our bad debt expenses. We typically purchase and sell our products and services on the basis of individual sales or purchase orders, and even inthose cases where we have standing agreements or arrangements with our customers and vendors, those agreements andarrangements typically contain no purchase or sale obligations and are otherwise terminable by either party upon severalmonths or otherwise short notice. Our sales to customers and our purchases from vendors are largely governed by individual sales or purchase orders,so there is no guarantee of future business. In some cases, we have formal agreements or arrangements with significantcustomers or vendors, but they are largely administrative in nature and are terminable by either party upon several months orotherwise short notice, and they typically contain no purchase or sale obligations. Many of our customer and vendorcontracts contain “evergreen” clauses, although this too is largely a matter of administrative convenience, because thecontracts are nevertheless typically terminable on short notice, and because no purchase and sale obligation in any eventarises other than pursuant to an accepted purchase order. When negotiating with customers and vendors, we seek the mostfavorable terms available under the circumstances. Our preferred vendor terms include, among others, terms that provide forproduct warranty and return rights, as well as product liability and intellectual property indemnification rights, in each caseconsistent with our preferred business methods and objectives. We have not been able, nor do we expect in the future to beable to negotiate the inclusion of all our preferred terms, or our preferred language for those terms, in every contract. Thedegree of our success in this regard is largely a function of the parties’ relative bargaining positions. 12 Table of ContentsWhen unable to negotiate the inclusion of our preferred terms or preferred language in a particular vendor contract,we assess any increased risk presented, as well as mitigating factors, analyze our overall business objectives, and thenproceed accordingly. In some instances, we refuse the contract and seek other sources for the product, and in other instancesbusiness objectives and circumstances are determined to outweigh or mitigate any increased risk, or otherwise dictate that weproceed with the contract, notwithstanding. We consistently seek to manage contractual risks resulting from vendorcontracts not including our preferred terms or language. However, these risks persist, and even when we are successful innegotiating our preferred terms, performance of these terms is not assured. If our vendors or suppliers refuse to, or for any reason are unable to, supply products to us, in sufficient quantities tomeet demand, or at all, and if we are not able to procure those products from alternative sources, we may not be able tomaintain appropriate inventory levels to meet customer demand and our financial position and results of operations would beadversely affected. Similarly, if customers decide to purchase from other sources, instead of from us, or experience significantchanges in demand internally or from their own customer bases, become financially unstable, or are acquired by anothercompany, our ability to generate revenues from these customers may, or in some cases would, be significantly affected,resulting in an adverse effect on our financial position and results of operations. The loss or any change in the business habits of key customers or vendors, including vendors Otter Products LLC andCommScope Inc. may have a material adverse effect on our financial position and results of operations. Because our standing arrangements and agreements with our customers and vendors typically contain no purchaseor sale obligations and are terminable by either party upon several months or otherwise relatively short notice, we are subjectto significant risks associated with the loss or change at any time in the business habits and financial condition of keycustomers or vendors. We have experienced the loss and changes in the business habits of key customer and vendorrelationships in the past and expect to do so again in the future. It is the nature of our business. In fiscal year 2013, sales toour largest customer relationship, AT&T Mobility, accounted for approximately 30% of total revenues. Revenues from thisbusiness terminated in the fourth quarter of fiscal year 2013. Sales of products purchased from our largest two vendors, Otter Products, LLC (11%) and CommScope Inc. (10%),generated approximately 21% of our total revenues in fiscal year 2017, and sales from our largest ten vendors generatedapproximately 41% of fiscal year 2017 total revenues. As is the case with many of our vendor and customer relationships,our contractual arrangements with Otter Products, LLC and CommScope Inc. are terminable by either party upon severalmonths notice. If these contracts or our relationships with Otter Products, LLC or CommScope Inc. terminate for any reason,or if any of our other significant vendor relationships terminate for any reason, and we are not able to sell or procure asufficient supply of those products from alternative sources, or at all, our financial position and results of operations wouldbe adversely affected. Our vendors, including Otter Products, LLC and CommScope Inc., are subject to many if not all of thesame (or similar) risks and uncertainties to which we are subject, as well as other risks and uncertainties, and we compete withothers for their business. Accordingly, we are at a continual risk of loss of their business on account of a number of factorsand forces, many of which are largely beyond our control. In fiscal year 2017, no customer accounted for more than 10% of our total revenues. However, in the retail market,50% of our sales are made to five customers. Also, customer mix can change rapidly, and we may see changes in customerconcentrations in the future. If any of our significant customer relationships terminate for any reason, and we are not able toreplace those customers and associated revenues, our financial position and results of operations would be adversely affected. The loss of customer relationships and the corresponding reduction in the volume of product sales identified tothose relationships, can also affect our negotiating ability with vendors supplying those products. This can affect ourmargins in sales of those products to other customers. If we are unable to replace those products at favorable pricing andterms, or if we are unable to acquire those products from vendors or offer those products to our customers on favorable terms,our competitiveness may suffer and result in reduced revenues and profits. Like our vendors, our customers are subject tomany if not all of the same (or similar) risks and uncertainties to which we are subject, as well as other risks and uncertainties,and we compete with others for their business. Accordingly, we are at continual risk of loss of their business on account of anumber of factors and forces, many of which are largely beyond our control. 13 Table of ContentsThere can be no assurance that we will be successful in replacing any of our past, present or future vendor orcustomer relationships if and when lost, or that we will not suffer a substantial reduction in revenues as a result of loss of anysuch relationship. As such, vendor, customer, or revenue loss would adversely affect our financial position and results ofoperations. Changes in customer or product mix could cause our gross margin percentage to decline. We continually experience changes in customer and product mix that affects gross margin. Changes in customer andproduct mix result primarily from changes in customer demand, customer acquisitions, selling and marketing activities andcompetition. The growth in sales from the retail market over the past two fiscal years has had a negative impact on our overallmargins. Also, while sales from the public carrier market have declined significantly over the past two years, significantfuture growth in that market could have a negative impact on gross margins as these customers are larger and demand loweroverall pricing. Our business depends on the continued tendency of wireless equipment manufacturers and network operators to outsourceaspects of their business to us in the future. We provide functions such as distribution, inventory management, fulfillment, customized packaging, e-commercesolutions, and other outsourced services for many wireless manufacturers and network operators. Certain wireless equipmentmanufacturers and network operators have elected, and others may elect, to undertake these services internally. Additionally,our customer service levels, industry consolidation, competition, deregulation, technological changes or other developmentscould reduce the degree to which members of the global wireless industry rely on outsourced logistic services such as theservices we provide. Any significant change in the market for our outsourced services could have a material adverse effect onour business. Our outsourced services are generally provided under short-term contractual arrangements. The failure to obtainrenewals or otherwise maintain these agreements on terms, including price, consistent with our current terms could have anadverse effect on our business. We require substantial capital to operate, and the inability to obtain financing on favorable terms will adversely impactour business, financial position and results of operations. Our business requires substantial capital to operate and to finance accounts receivable and product inventory thatare not financed by trade creditors. We have historically relied upon cash generated from operations, revolving creditfacilities and trade credit from our vendors to satisfy our capital needs and finance growth. As the financial markets changeand new regulations come into effect, the cost of acquiring financing and the methods of financing may change. Changes inour credit rating or other market factors may increase our interest expense or other costs of capital, or capital may not beavailable to us on competitive terms to fund our working capital needs. Our existing secured revolving credit facilitycontains various financial and other covenants that may limit our ability to borrow or limit our flexibility in responding tobusiness conditions. The inability to maintain or when necessary obtain adequate sources of financing could have an adverseeffect on our business. Our existing secured revolving credit facility includes variable rate debt, thus exposing us to risk offluctuations in interest rates. Such fluctuations in interest rates could have an adverse effect on our business, financialposition and results of operations. We may in the future use interest rate swaps in an effort to achieve a desired proportion offixed and variable rate debt. We would utilize these derivative financial instruments to enhance our ability to manage risk,including interest rate exposures that exist as part of our ongoing business operations. However, our use of these instrumentsmay not effectively limit or eliminate our exposure to a decline in operating results due to changes in interest rates. Our ability to maintain and borrow under our revolving credit agreement could be constrained by the level of eligiblereceivables and by any failure to meet certain financial and other covenants in our revolving credit agreement. Our borrowing availability under our secured revolving credit facility is determined in part by a borrowing base andis limited to certain amounts of eligible accounts receivable. If the value of these accounts receivable were to decreasesignificantly, the amount available for borrowing under the facility would decrease and our ability to borrow under thefacility could be significantly impacted. Borrowing under the facility is also conditioned upon compliance with financialand other covenants included in the revolving credit agreement and a related guaranty and security agreement. Among14 Table of Contentsthese is a covenant to maintain a fixed charge coverage ratio at any time during which the borrowing availability is otherwiseless than $10 million. There are no assurances that we will be able to comply with all applicable covenants in theseagreements, and in the event that we do not, our ability to borrow under our secured revolving credit facility could be limitedor suspended, or could terminate. If we fail to meet our payment or other obligations under our secured revolving credit facility, our lenders could forecloseon, and acquire control of, a significant portion of our assets. Indebtedness under our secured revolving credit facility is secured by continuing first priority security interests inour inventory, accounts receivable, and deposit accounts, and on all documents, instruments, general intangibles, letter ofcredit rights, and chattel paper relating to inventory and accounts, and to all proceeds of the foregoing. If we fail to meet ourpayment or other obligations under our secured revolving credit facility, our lenders could foreclose on these assets, whichwould have a material adverse effect on our business, results of operations and financial condition. Compliance with regulations regarding the use of “conflict minerals” could limit the supply and increase the cost ofcertain of our products, and customers may seek other sources if we are unable to demonstrate to their satisfaction that ourproducts are conflict free. Increased focus on environmental protection and social responsibility initiatives led to the passage of Section 1502of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act"), and its implementingSEC regulations. The Dodd-Frank Act imposes supply chain diligence and disclosure requirements for certain manufacturersof products containing specific minerals that may originate in or near the Democratic Republic of the Congo (the "DRC") andfinance or benefit local armed groups. These "conflict minerals" are commonly found in certain of the products that weacquire from vendors and distribute to customers and are also found in certain products in our Ventev product line that wecontract to be manufactured by others or that we assemble. The implementation of these regulations may limit the sourcingand availability of some of the raw materials used in certain of these products. This in turn may affect our ability to obtainsufficient quantities of our products and may affect related pricing. Because we are considered a manufacturer of certain ofour Ventev products, we are subject to additional “conflict minerals” diligence and disclosure requirements with regard tothese products. Some of our customers may elect to disqualify us as a supplier if we are unable to verify that the products wesell to them are DRC conflict free. Weakness in the global economic environment may have significant effects on our customers and suppliers that couldresult in material adverse effects on our business, operating results, and stock price. Notwithstanding the slow economic recovery in the U.S., weakness in the global economic environment – which hasincluded, among other things, significant reductions in available capital and liquidity from banks and other providers ofcredit, substantial reductions and/or fluctuations in equity and currency values worldwide, significant decreases in consumerconfidence and consumer and business spending, high rates of unemployment and concerns that the worldwide economymay continue to experience significant challenges – may materially adversely affect our customers’ access to capital orwillingness to spend capital on our products, and/or their levels of cash liquidity with which to pay for our products. Inaddition, our suppliers’ access to capital and liquidity may continue to be affected, which may in turn adversely impact theirability 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 potential effects of the weakness in the global economic environment are difficult to forecast and mitigate. As aconsequence, our operating results for a particular period may be more difficult to predict. Any of the foregoing effects couldhave a material adverse effect on our results of operations and financial condition, and could adversely affect our stock price. We may be unable to successfully execute our merchandising and marketing strategic initiatives. We are focusing our sales and marketing efforts and initiatives to maximize sales. If we fail to successfully executethese initiatives, our business, financial position and results of operations could be adversely affected.15 ®®Table of Contents The telecommunications products marketplace is dynamic and challenging because of the continued introduction of newproducts and services. We must constantly introduce new products, services and product features to meet competitive pressures. We may beunable to timely change our existing merchandise sales mix in order to meet these competitive pressures, which may result inincreased inventory costs, inventory write-offs or loss of market share. Additionally, our inventory may also lose value due to price changes made by our significant vendors, in caseswhere our arrangements with these vendors do not provide for inventory price protection, or in cases that the vendor isunable or unwilling to provide these protections. Consolidation among wireless service carriers could result in the loss of significant customers. The wireless service carrier industry has experienced significant consolidation in recent years. If any of oursignificant customers or partners are acquired or consolidate with other carriers, or are otherwise involved in any significanttransaction that results in them ceasing to do business with us, or significantly reducing the level of business that they dowith us, our revenues from those customers could be affected, resulting in an adverse effect on our financial position andresults of operations. The failure of our information systems, or our inability to maintain or upgrade our information systems without incident ordelay, could have a material adverse effect on our business, financial position and results of operations. We are highly dependent upon our internal computer and telecommunication systems, many of which areproprietary, to operate our business. These systems support all aspects of our business operations, including inventory andorder management, shipping, receiving and accounting. Most of our information systems contain a number of internallydeveloped applications. In addition, these systems require continued maintenance and also require upgrading or replacementfrom time to time. There can be no assurance that our information systems will not fail or experience disruptions, that we willbe able to attract and retain qualified personnel necessary for the operation of such systems, that we will be able to expandand improve our information systems, that we will be able to convert to new systems efficiently as and when necessary, orthat we will be able to integrate new programs effectively with our existing programs. Any of such problems, or anysignificant damage or destruction of these systems, could have an adverse effect on our business, financial position andresults of operations. We depend heavily on e-commerce, and website security breaches or internet disruptions could have a material adverseeffect on our business, financial position and results of operations. We rely on the internet (including TESSCO.com) for a significant percentage of our orders and informationexchanges with our customers. The internet and individual websites have experienced a number of disruptions andslowdowns, some of which were caused by organized attacks. In addition, some websites have experienced securitybreakdowns. There can be no assurances that our website will not experience any material breakdowns, disruptions orbreaches in security. If we were to experience a security breakdown, disruption or breach that compromised sensitiveinformation, this could harm our relationship with our customers or suppliers. Disruption of our website or the internet ingeneral could impair our order processing or more generally prevent our customers and suppliers from accessing informationor placing orders. This could have an adverse effect on our business, financial position and results of operations. System security breaches or data protection breaches could adversely disrupt our business and harm our reputation,financial position and results of operations. We manage and store various proprietary information and sensitive or confidential data relating to our business. Inaddition, we routinely process, store and transmit large amounts of data, including sensitive and personally identifiableinformation. Breaches of our security measures or the accidental loss, inadvertent disclosure or unapproved dissemination ofproprietary information or sensitive or confidential data about us or our customers or vendors, including the potential16 ®Table of Contentsloss or disclosure of such information or data as a result of fraud, trickery or other forms of deception, could expose us, ourcustomers or the individuals affected to a risk of loss or misuse of this information, result in litigation and potential liabilityfor us, damage our brand and reputation or otherwise harm our business. In addition, the cost and operational consequencesof implementing further data protection measures could be significant. Such breaches, costs and consequences couldadversely affect our business, results of operations or cash flows. The inability to hire or retain certain key professionals, management and staff could adversely affect our business,financial condition and results of operations. The nature of our business includes (but is not limited to) a high volume of transactions, business complexity, widegeographical coverage, and broad scope of products, suppliers, and customers. In order to compete, we must attract, retainand motivate executives and other key employees, including those in managerial, technical, sales, marketing and supportpositions. Hiring and retaining qualified executives, information technology and business generation personnel are criticalto our business. The loss of any of the members of our senior management team, could have an adverse effect on ourbusiness, financial position and results of operations. In fiscal 2016 our Board of Directors announced a CEO succession plan and retained a third party search firm toassist it in these efforts. This led to the hiring in September 2016 of Murray Wright as our new CEO and President,succeeding in these positions our founder and long-time President and CEO, Robert B Barnhill, Jr. Mr. Barnhill continues toserve as our Executive Chairman and Chairman of the Board. Leadership transition may result in distraction and uncertaintyfor our current management team. In addition, there are transactional and transitional risks associated with the process of newleadership selection and engagement, and the transfer to and assumption of responsibilities by new leadership. To attract, retain and motivate qualified employees, we rely heavily on stock-based incentive awards such asPerformance Stock Units (PSUs), and sometimes stock options. If performance targets associated with PSUs are not met, or thevalue of such awards does not appreciate as measured by the performance of the price of our common stock and/or if ourother stock-based compensation, such as stock options, otherwise ceases to be viewed as a valuable benefit, our ability toattract, retain and motivate our employees could be adversely impacted, which could negatively affect our business, financialposition and results of operations and/or require us to increase the amount we spend on cash and other forms ofcompensation. Our ability to issue PSUs, stock options and other equity instruments is also limited by the provisions of andour available shares under our current and/or future stock incentive plans, which may be subject to shareholder approval. Wemay currently issue awards under our incentive plan only through July 21, 2021, and as of May 26, 2017, there were 567,450shares available for future awards. Therefore, our ability to offer stock-based incentive awards may be limited, which mayhave an adverse effect on our continued ability to attract and retain, and motivate, our employees, and, subsequently, on ourbusiness, financial position and results of operations. The damage or destruction of any of our principal distribution or administrative facilities could materially adverselyimpact our business, financial position and results of operations. If any of our distribution centers in Hunt Valley, Maryland or Reno, Nevada, were to be significantly damaged ordestroyed, we could suffer a loss of product inventory and our ability to conduct our business in the ordinary course could bematerially and adversely affected. Similarly, if our office locations in Maryland, Nevada or Texas were to be significantlydamaged or destroyed, our ability to conduct marketing, sales and other corporate activities in the ordinary course could beadversely affected. We depend on third parties to manufacture products that we distribute and, accordingly, rely on their quality controlprocedures. Product manufacturers typically provide limited warranties directly to the end consumer or to us, which wegenerally pass through to our customers. If a product we distribute for a manufacturer has quality or performance problems,our ability to provide products to our customers could be disrupted, which could adversely affect our operations. 17 Table of ContentsWe are subject to potential declines in inventory value. We are subject to the risk that the value of our inventory will decline as a result of price reductions by vendors ortechnological obsolescence or failure. It is the policy of many of our vendors to protect distributors from the loss in value ofinventory due to technological change or failure, or the vendors’ price reductions. Some vendors (including those whomanufacture our proprietary products), however, may be unwilling or unable to pay us for price protection claims or productsreturned to them under purchase agreements. No assurance can be given that such practices to protect distributors like us willcontinue, that unforeseen new product developments, product failure or product obsolescence will not adversely affect us, orthat we will be able to successfully manage our existing and future inventories. Our future operating results depend on our ability to purchase a sufficient amount of finished goods and bulk inventory tomeet the demands of our customers. Our ability to meet customers' demands depends, in part, on our ability to obtain timely and adequate delivery ofinventory from our suppliers. We have experienced shortages in the past that have negatively impacted our operations.Although we work closely with our suppliers to avoid these types of shortages, there can be no assurances that we will notencounter these problems in the future. Furthermore, certain of our products or components are available only from a singlesource or limited sources. We may not be able to diversify sources in a timely manner. A reduction or interruption in suppliesor a significant increase in the price of supplies could have a negative impact on our results of operations or financialcondition. If our business does not perform well, or if we otherwise experience a decline in the fair values of a portion or all of ourbusiness, we may be required to recognize impairments of our intangible or other long-lived assets, which could adverselyaffect our results of operations or financial condition. Goodwill and indefinite lived intangible assets are initially recorded at fair value and are not amortized, but arereviewed for impairment at least annually or more frequently if impairment indicators are present. In assessing the recoverability of goodwill and indefinite lived intangible assets, we make estimates andassumptions about sales, operating margin, growth rates and discount rates based on our budgets, business plans, economicprojections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors andmanagement’s judgment in applying these factors. We first perform a qualitative analysis to determine if it is more likelythan not that goodwill or indefinite lived intangible assets are impaired. This analysis includes assumptions and estimatesrelated to macroeconomic, industry and company specific events and trends. In the event that we find it is more likely thannot that an impairment has occurred a quantitative analysis is performed. Goodwill and indefinite lived asset valuations arecalculated using an income approach based on the present value of future cash flows of each reporting unit. We could berequired to evaluate the recoverability of goodwill and indefinite lived assets prior to the annual assessment if we experiencedisruptions to the business, unexpected significant declines in operating results, divestiture of a significant component of ourbusiness or sustained market capitalization declines. These types of events and the resulting analyses could result ingoodwill and indefinite lived asset impairment charges in the future. Impairment charges could substantially affect ourfinancial results in the periods of such charges. In addition, impairment charges would negatively impact our financial ratiosand could limit our ability to obtain financing in the future. As of March 26, 2017, we had $12.5 million of goodwill andindefinite lived intangible assets, which represented approximately 7.2% of total assets. Deferred income tax represents the tax effect of the differences between the book and tax bases of assets andliabilities. Deferred tax assets are assessed periodically by management to determine if they are realizable. Factors inmanagement’s determination include the performance of the business, projections of future taxable income, and thefeasibility of ongoing tax planning strategies. If based on available information, it is more likely than not that the deferredincome tax asset will not be realized then a valuation allowance must be established with a corresponding charge to netincome. Such charges could have an adverse effect on our results of operations or financial condition. Our future results of operations may be impacted by prolonged weakness in the economic environment which mayresult in an impairment of any goodwill recorded and/or other long lived assets or the recording of a valuation allowance onour deferred tax assets, which could adversely affect our results of operations or financial condition.18 Table of Contents We primarily rely on trademark filings and confidentiality agreements to protect our intellectual property rights. In an effort to protect our intellectual property, including our product data, customer information and informationtechnology systems, through trademark filings and nondisclosure, confidentiality and trade secret agreements, we typicallyrequire our employees, consultants and others having access to this information or our technology to execute confidentialityand non-disclosure agreements. These agreements, however, may not provide us with adequate protection against improperuse or disclosure of confidential information, and these agreements may be breached. A breach of confidentiality couldadversely affect our business. In addition, in some situations, these agreements may conflict with, or be subject to, the rightsof third parties with whom our employees, consultants and others have previous employment or consulting relationships.Also, others may independently develop substantially equivalent proprietary information and techniques or otherwise gainaccess to our trade secrets. Adequate remedies may not exist in the event of unauthorized use or disclosure of our confidentialinformation. The disclosure of our proprietary information or trade secrets could impair our competitive position and couldhave an adverse effect on our business, financial condition and results of operations. Others may obtain patent protection fortechnologies that are important to our business, and as a result, our business, financial position and results of operations maybe adversely affected. In response to patents of others, we may need to license the rights to use the technology patented byothers, or in the event that a license cannot be obtained, design our systems around the patents of others. There can be noassurances as to our ability to obtain any such licenses or to design around the patents of others, and our inability to do socould have an adverse effect on our business, financial position and results of operations. We offer credit to our customers and, therefore, are subject to significant credit risk. We sell our products to a large and diverse customer base. We finance a significant portion of such sales throughtrade credit, typically by providing 30-day payment terms. As a result, our business could be adversely affected in the eventof a deterioration of the financial condition of our customers, resulting in the customers’ inability to repay us. This risk mayincrease if there is a general economic downturn affecting a large number of our customers and in the event our customers donot adequately manage their business or properly disclose their financial condition. Also, several of our larger customers,including tier 1 carrier customers, require greater than 30-day payment terms which could increase our credit risk anddecrease our operating cash flow. We may explore additional growth through acquisitions. As part of our growth strategy, we may continue to pursue the acquisition of companies that either complement orexpand our existing business. As a result, we regularly evaluate potential acquisition opportunities, which may be material insize and scope. In addition to those risks to which our business and the acquired businesses are generally subject to, theacquisition of these businesses gives rise to transactional and transitional risks, and the risk that the anticipated benefits willnot be realized. Risks associated with the foreign suppliers from whom our products are sourced could adversely affect our financialperformance. The products we sell are sourced from a wide variety of domestic and international suppliers. Global sourcing ofmany of the products we sell is an important factor in our financial performance. Since the onset of the weakness in the globaleconomic environment in 2008, certain of our suppliers, particularly those in the far-east, have experienced financialdifficulties and we believe it is possible that a limited number of suppliers may either cease operations or require increasedprices in order to fulfill their obligations. Changes in our relationships with suppliers or increases in the costs of purchasedraw materials, component parts or finished goods could result in delays, inefficiencies or our inability to market products. Inaddition, our profit margins would decrease if prices of purchased raw materials, component parts, or finished goods increaseand we are unable to pass on those increases to our customers. 19 Table of ContentsWe rely on independent shipping companies to deliver inventory to us and to ship products to customers. We rely on arrangements with independent shipping companies, for the delivery of our products from vendors andto customers. The failure or inability of these shipping companies to deliver products, or the unavailability of their shippingservices, even temporarily, could have a material adverse effect on our business. We may also be adversely affected by anincrease in freight surcharges due to rising fuel costs and added security. This could adversely impact our selling, general andadministrative expenses or lead to price increases to our customers which could decrease customer demand for our products. Changes in accounting rules could have a material adverse impact on our results of operations. We prepare our financial statements in conformity with accounting principles generally accepted in the UnitedStates. These accounting principles are subject to interpretation by the Financial Accounting Standards Board, the PublicCompany Accounting Oversight Board, the United States Securities and Exchange Commission (SEC), the AmericanInstitute of Certified Public Accountants and various other bodies formed to interpret and create appropriate accountingpolicies. A change in these policies or a new interpretation of an existing policy could have a significant effect on ourreported results and may affect our reporting of transactions. Changes in income tax and other regulatory legislation. We operate in compliance with applicable laws and regulations and make plans for our structure and operationsbased upon existing laws and anticipated future changes in the law. When new legislation is enacted with minimal advancenotice, or when new interpretations or applications of existing laws are made, we may need to implement changes in ourpolicies or structure. We are susceptible to unanticipated changes in legislation, especially relating to income and othertaxes, import/export laws, hazardous materials and other laws related to trade, accounting and business activities. Suchchanges in legislation may have an adverse effect on our business. We may be subject to litigation. We may be subject to legal claims or regulatory matters involving stockholder, consumer, antitrust, intellectualproperty and other issues. Litigation is subject to inherent uncertainties, and unfavorable rulings could occur. Anunfavorable ruling could include monetary damages or other adverse effects. Were an unfavorable ruling to occur, thereexists the possibility of a material adverse impact on our business, financial position and results of operations for the periodin which the ruling occurred or future periods. We may incur product liability claims which could be costly and could harm our reputation. The sale of our products subjects us to the risk of product liability claims. We have also been increasing our focuson sales of our proprietary Ventev® products and on providing an increased level of support services, including product andnetwork designs, which also subjects us to risk of product liability and performance claim risk. We seek to allocate productliability risk to our vendors where available, but may not be successful in doing so. We currently maintain product liabilityinsurance, but our product liability insurance coverage is subject to various coverage exclusions and limits and may not beobtainable in the future on terms acceptable to us, or at all. We do not know whether claims against us with respect to ourproducts and services, if any, would be successfully defended or whether we might be successful in allocating that risk toothers, or whether our insurance would be sufficient to cover liabilities resulting from such claims. Any claims successfullybrought against us could adversely affect our financial condition, and if substantial and relating to our products or industrygenerally, could adversely affect our business as a whole. 20 Table of ContentsOur expanding offering of private labeled products may have a negative impact on our relationship with our manufacturerpartners. Our product offering includes a growing number of our own proprietary products, which represented approximately15% of our sales in fiscal year 2017. Our proprietary products often compete with other manufacturers' branded items that weoffer. A manufacturer may choose to not sell its products to us, or may substantially increase the price of products to us, inresponse to the competition created by the sales of our proprietary branded products. Either could have an adverse effect onour business and financial performance. Claims that our products infringe the proprietary rights of others could harm our business and cause us to incur significantcosts. Our industry has increasingly been subject to patent and other intellectual property rights litigation. We expect thistrend to continue and accelerate and expect that we may be required to defend against this type of litigation, not onlyasserted against our own intellectual property rights, but also against the intellectual property of products which we havepurchased for resale. Further, we may be obligated to indemnify and defend our customers if the products or services wesupply to them are alleged to infringe a third party’s intellectual property rights. While we may be able to seekindemnification from our suppliers to protect our customers and us from such claims, there is no assurance that we will besuccessful in negotiating contractual terms with our suppliers to provide for such indemnification, or that we will otherwisebe successful in obtaining such indemnification or that we will be protected from such claims. We may also be prohibitedfrom marketing products, could be forced to market products without desirable features, or could incur substantial costs todefend legal actions, including where third parties claim that we or vendors who may or may not have indemnified us areinfringing upon their intellectual property rights. In recent years, individuals and groups have begun purchasing intellectualproperty assets for the sole purpose of making claims of infringement and attempting to extract settlements from targetcompanies. Even if we believe that such infringement claims are without merit, the claims can be time-consuming and costlyto defend and divert management’s attention and resources away from our business. Claims of intellectual propertyinfringement may require us to enter into costly settlements or pay costly damage awards, or face a temporary or permanentinjunction prohibiting us from marketing or selling certain products or services, which could affect our ability to competeeffectively. If an infringement claim is successful, we may be required to pay damages or seek royalty or licensearrangements, which may not be available on commercially reasonable terms. Even if we have an agreement that indemnifiesus against such costs, the indemnifying party may be unable or unwilling to uphold its contractual obligations to us.We may be adversely affected by future laws or regulations. We are subject to various U.S. Federal, state and local, and non-U.S. laws and regulations. We cannot predict thesubstance or impact of pending or future legislation or regulations, or the application thereof. The introduction of new lawsor regulations or changes in existing laws or regulations, or the interpretations thereof, could increase the cost of doingbusiness for us or our customers or vendors or restrict our actions and adversely affect our financial condition, operatingresults and cash flows. For example, annual disclosure and reporting requirements relating to the SEC’s conflict minerals rulerequire us to perform a reasonable country of origin inquiry and conduct further due diligence measures on our supply chain.There are costs and uncertainties associated with complying with these disclosure requirements, including for diligence todetermine the sources of conflict minerals that we may find to be used in our products.21 Table of ContentsRISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK A significant portion of our voting stock is controlled by our executive officers, directors and beneficial owners of 5% ormore of our common stock. Our executive officers, directors and beneficial owners of 5% or more of our common stock and their affiliates, in theaggregate, beneficially owned approximately 63% of our outstanding common stock as of March 26, 2017. Robert B.Barnhill, Jr., our Executive Chairman and Chairman of the Board, beneficially owned approximately 22% of our outstandingcommon stock as of March 26, 2017. Should these shareholders decide to act together, they would have the ability tosignificantly influence all matters requiring shareholder approval, including the election of directors and any significantcorporate transaction requiring shareholder approval. We may not be able to continue to pay dividends on our common stock in the future, which could impair the value of ourcommon stock. We have paid a quarterly dividend on our common stock since the second quarter of fiscal year 2010. Anyfuture declaration of dividends remains subject to further determination from time to time by our Board of Directors. Ourability to pay dividends in the future will depend on our financial results, liquidity and financial condition. Under Delawarelaw, dividends to shareholders may be made only from the surplus of a company, or, in certain situations, from the net profitsfor the current fiscal year or the fiscal year before which the dividend is declared. Our secured revolving credit facilityrestricts our ability to pay cash dividends upon a default, and when our borrowing availability is below $12.5 million, or incertain more limited circumstances $10 million, and contains other financial covenants and ratios that could restrict futuredividend payments. There is no assurance that we will be able to pay dividends in the future, or if we are able to, that ourBoard of Directors will continue to declare dividends in the future, at current rates or at all. If we discontinue or reduce theamount or frequency of dividends, the value of our common stock may be impaired. Our quarterly financial results may fluctuate, which could lead to volatility in our stock price. Our revenue and operating results have fluctuated from quarter to quarter in the past and may continue to do so inthe future. As a result, you should not rely on quarter-to-quarter comparisons of our operating results as an indication of ourfuture performance. Fluctuations in our revenue and operating results could negatively affect the trading price of our stock.In addition, our revenue and results of operations may, in the future, be below the expectations of analysts and investors,which could cause our stock price to decline. Factors that are likely to cause our revenue and operating results to fluctuateinclude the risk factors discussed throughout this section. Without approval of our Board of Directors, it may be difficult for a third party to acquire control of the Company. Thiscould affect the price of our common stock. Certain provisions of our certificate of incorporation and bylaws, including advance notice bylaws, certainarrangements to which we are party, and applicable provisions of the Delaware General Corporation Law (DGCL) may eachmake it more difficult for or may prevent a third party from acquiring control of us or changing our Board of Directors andmanagement. We are afforded the protections of Section 203 of the DGCL, which will prevent us from engaging in a businesscombination with a person who acquires at least 15% of our common stock for a period of three years from the date suchperson acquired such common stock, unless Board of Director or shareholder approval were obtained. Some believe that theprovisions described above, as well as any resulting delay or prevention of a change of control transaction or changes in ourBoard of Directors or management, could deter potential acquirers or prevent the completion of a transaction in which ourshareholders could receive a substantial premium over the then current market price for their shares. We, on the other hand,believe that these provisions serve to protect our shareholders against abusive takeover tactics, to preserve and maximize thevalue of the Company for all shareholders, and to better ensure that each shareholder will be treated fairly in the event of anunsolicited offer to acquire the Company. 22 Table of ContentsPotential uncertainty resulting from unsolicited acquisition proposals and related matters may adversely affect ourbusiness. In the past we have received, and in the future we may receive, unsolicited proposals to acquire our company or ourassets. For example, in September 2010, the Board of Directors received an unsolicited non-binding proposal for theacquisition of all of our stock. The review and consideration of acquisition proposals and related matters could require theexpenditure of significant management time and personnel resources. Such proposals may also create uncertainty for ouremployees, customers and vendors. Any such uncertainty could make it more difficult for us to retain key employees and hirenew talent, and could cause our customers and vendors to not enter into new arrangements with us or to terminate existingarrangements. Additionally, we and members of our board of directors could be subject to future lawsuits related tounsolicited proposals to acquire us. Any such future lawsuits could become time consuming and expensive. Our quarterly operating results are subject to significant fluctuation. Our operating results have fluctuated from quarter to quarter in the past, and we expect that they will continue to doso in the future. Our earnings may not continue to grow at rates similar to the growth rates achieved in recent years and mayfall short of either a prior fiscal period or investors’ expectations. Most of our operating expenses, such as compensationexpenses, do not vary directly with the amount of sales and are difficult to adjust in the short term. As a result, if sales in aparticular quarter are below expectations for that quarter, we may not proportionately reduce operating expenses for thatquarter, and therefore such a sales shortfall would have a disproportionate effect on our net income for the quarter. Item 1B. Unresolved Staff Comments. None. Item 2. Properties. Our corporate headquarters and primary distribution center, known as the Global Logistics Center (GLC), is locatedin a Company-owned 184,000 square-foot facility north of Baltimore, in Hunt Valley, Maryland. Our sales, marketing and administrative offices are located in 102,200 square feet of leased office space near theGLC, in Timonium Maryland. The monthly rent payments range from $169,400 to $185,100 throughout the remaining leaseterm, which expires on December 31, 2020. In addition, we lease 66,000 square feet of office and warehouse space adjacent to the GLC in Hunt Valley,Maryland. The monthly rent for this facility ranges from $35,700 to $39,300 throughout the remaining lease term, whichexpires on July 31, 2020, subject to our annual option to terminate. Additional sales and marketing offices are located in 13,100 square feet of leased office space in San Antonio,Texas. Monthly rent payments range from $16,400 to $16,900 and the lease expires October 31, 2018. West coast sales and fulfillment are facilitated by our Company-owned 115,000 square-foot Americas Sales &Logistics Center (ALC) located in Reno, Nevada. The ALC is used to configure and fulfill product and supply chainsolutions, provide disaster backup for the GLC, and allow for future growth of staffing and increased fulfillment capabilities. While we anticipate the need for additional space, we believe our existing facilities are generally adequate for ourcurrent requirements and that suitable additional space will be available as needed to accommodate future expansion of ouroperations. 23 Table of Contents Item 3. Legal Proceedings. Lawsuits and claims are filed against us from time to time in the ordinary course of business. We do not believe thatany lawsuits or claims currently pending against the Company, individually or in the aggregate, are material, or will have amaterial adverse effect on our financial condition or results of operations. In addition, from time to time, we are also subjectto review from federal and state taxing authorities in order to validate the amounts of income, sales and/or use taxes whichhave been claimed and remitted. No federal, state and local tax returns are currently under examination. As we are routinely audited by state taxing authorities, we have estimated exposure and established reserves for ourestimated sales tax audit liability. Item 4. Mine Safety Disclosures Not applicable. 24 Table of Contents Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities. Our common stock has been publicly traded since September 28, 1994, on the NASDAQ Market (currently NASDAQGlobal Select), under the symbol "TESS." The quarterly range of prices per share during fiscal years 2016 and 2017 are asfollows: Dividends High Low Declared Fiscal Year 2016 First Quarter $27.56 $17.94 $0.20 Second Quarter 27.25 19.20 0.20 Third Quarter 24.39 17.75 0.20 Fourth Quarter 20.49 14.96 0.20 Fiscal Year 2017 First Quarter $18.18 $12.05 $0.20 Second Quarter 14.86 12.25 0.20 Third Quarter 13.55 9.75 0.20 Fourth Quarter 15.50 12.50 0.20 As of May 30, 2017, the number of shareholders of record of the Company was 160. We estimate that the number ofbeneficial owners as of that date was approximately 2,483. On July 28, 2009, we announced that our Board of Directors decided to commence a dividend program and we havesince declared dividends on a quarterly basis. Any future declaration of dividends and the establishment of anycorresponding record and payment dates remains subject to further determination from time to time by the Board of Directors.Additional information with respect to the quarterly dividends declared in fiscal years 2017 and 2016 is contained in ourSelected Financial Data. The declaration and payment of future dividends will depend on many factors, including, but notlimited to, our earnings, financial condition, business development needs and regulatory considerations, and is at thediscretion of our Board of Directors. Our revolving credit facility may limit the amount of cash dividends that we may paybased on financial covenants and ratios that may restrict the future payment of dividends. On April 23, 2014, the Board of Directors expanded the Company’s then existing stock buyback program andauthorized the purchase on a non-accelerated basis of up to $10.0 million of the Company’s stock over a 24-month period,which ended in April 2016. No shares were purchased during fiscal year 2016 or fiscal year 2017 and the stock buybackprogram has now expired. We also withhold shares from our employees and directors from time to time to facilitate employees’ minimumfederal and state tax withholdings related to vested performance stock units, restricted stock and exercised stock options. Forfiscal years 2017 and 2016 the total value of shares withheld for taxes were $192,400 and $937,300, respectively. Our secured revolving credit facility with SunTrust Bank restricts our ability to pay dividends and to repurchase our shares,either upon a default or when our borrowing availability is below $12.5 million, or in certain more limited circumstances $10million, and also limits to $2.0 million the aggregate dollar value of shares that may be withheld or repurchased inconnection with satisfaction of tax withholding obligations related to vested equity grants during any 12 month period. Thisrevolving credit facility also contains other financial covenants and ratios that could restrict dividends and repurchases. AtMarch 26, 2017 we had the ability to withhold repurchase $1.8 million in additional shares of our common stock duringfiscal 2018, without violating this covenant. 25 Table of ContentsThe information required by Item 201(d) of Regulation S-K, pursuant to paragraph (a) of Item 5 of Form 10-K, isincorporated by reference to the information set forth under the caption “Equity Compensation Plan Information” in theCompany’s Proxy Statement for the 2017 Annual Meeting of Shareholders, which is anticipated to be filed pursuant toRegulation 14A no later than one hundred twenty (120) days following the end of the fiscal year reported on. 26 Table of ContentsStock Performance Graph The graph set forth below shows the value of an investment of $100 on April 1, 2012 in each of the Company’sCommon Stock, the Russell 2000 Index and a peer group for the period of April 1, 2012 to March 26, 2017. The graphassumes that all dividends, if any, were reinvested. 4/1/2012 3/31/2013 3/30/2014 3/29/2015 3/27/2016 3/26/2017 TESSCO TechnologiesIncorporated $100.00 $90.92 $151.16 $112.64 $79.19 $73.64 Russell 2000 100.00 116.30 142.63 155.62 137.34 174.88 Peer Group 100.00 102.09 121.55 113.66 112.88 126.47 – The Peer Group consists of the following: Ingram Micro Inc., W.W. Grainger, Inc., Anixter International Inc., ScanSource, Inc., InfoSonicsCorporation, and Tech Data Corp.27 (1)(1)Table of ContentsThe peer group was selected based on a review of publicly available information about these companies and theCompany’s determination that they are engaged in business similar to that of the Company. Item 6. Selected Financial Data. Fiscal Years Ended March 26, 2017 March 27, 2016 March 29, 2015 March 30, 2014 March 31, 2013 STATEMENT OF INCOME DATA Revenues $533,295,100 $530,682,100 $549,619,000 $560,086,600 $752,565,000 Cost of goods sold 421,527,300 418,716,200 431,980,500 433,728,700 620,328,800 Gross profit 111,767,800 111,965,900 117,638,500 126,357,900 132,236,200 Selling, general andadministrative expenses 108,416,300 102,932,300 102,686,700 99,868,000 103,017,600 Restructuring charge 806,600 — 573,400 — — Operating expenses 109,222,900 102,932,300 103,260,100 99,868,000 103,017,600 Income from operations 2,544,900 9,033,600 14,378,400 26,489,900 29,218,600 Interest, net 58,600 161,300 167,300 177,700 224,200 Income before provision forincome taxes 2,486,300 8,872,300 14,211,100 26,312,200 28,994,400 Provision for income taxes 1,041,200 3,531,800 5,576,800 10,063,100 11,200,500 Net income $1,445,100 $5,340,500 $8,634,300 $16,249,100 $17,793,900 Diluted earnings per share $0.17 $0.65 $1.04 $1.94 $2.15 Cash dividends declared percommon share $0.80 $0.80 $0.80 $0.74 $1.47 Percentage of Revenues Revenues 100.0% 100.0% 100.0% 100.0% 100.0%Cost of goods sold 79.0 78.9 78.6 77.4 82.4 Gross profit 21.0 21.1 21.4 22.6 17.6 Selling, general andadministrative expenses 20.3 19.4 18.7 17.8 13.7 Restructuring charge 0.2 — 0.1 — — Operating expenses 20.5 19.4 18.8 17.8 13.7 Income from operations 0.5 1.7 2.6 4.7 3.9 Interest, net — — — — — Income before provision forincome taxes 0.5 1.7 2.6 4.7 3.9 Provision for income taxes 0.2 0.7 1.0 1.8 1.5 Net income 0.3% 1.0% 1.6% 2.9% 2.4% Fiscal Years Ended March 26,2017 March 27,2016 March 29,2015 March 30, 2014 March 31, 2013 SELECTED OPERATING DATA Average non-consumer buyers per month 12,500 12,200 12,400 12,700 13,000 Return on assets 0.8% 3.0% 4.6% 8.5% 9.0% Return on equity 1.3% 4.7% 7.6% 14.9% 18.1% 28 (1)(2)Table of Contents As of Fiscal Years Ended March 26, 2017 March 27, 2016 March 29, 2015 March 30, 2014 March 31, 2013 BALANCE SHEET DATA Working capital $77,194,500 $82,523,600 $82,220,900 $88,090,400 $76,551,700 Total assets 173,980,500 169,416,000 186,240,600 186,960,300 194,300,000 Short-term debt 26,500 251,100 250,700 250,200 249,700 Long-term debt 29,800 1,706,500 1,957,500 2,208,200 2,458,300 Shareholders' equity 108,016,300 112,527,300 113,142,100 114,828,100 102,802,600 (1)Net income divided by the average total assets. (2)Net income divided by the average total equity. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. This Management’s Discussion and Analysis of Results of Operations and Financial Condition (MD&A) should beread in conjunction with the other sections of this Annual Report on Form 10-K, including Part I, “Item 1: Business,” Part II,“Item 6: Selected Financial Data,” and Part II, “Item 8: Financial Statements and Supplementary Data.” The various sectionsof this MD&A contain a number of forward-looking statements, all of which are based on our current expectations and couldbe affected by the uncertainties and risk factors described throughout this filing, including Part I, “Item 1A: Risk Factors.”Our actual results may differ materially from those described in any such forward-looking statement. Business Overview and Environment TESSCO Technologies Incorporated (TESSCO, we, or the Company) architects and delivers innovative product andvalue chain solutions to support wireless systems. Although we sell products to customers in over 100 countries,approximately 98% of our sales are to customers in the United States. We have operations and office facilities in Timoniumand Hunt Valley, Maryland, Reno, Nevada and San Antonio, Texas. We evaluate our business and customer base as one operating segment. This segment includes the followingmarkets: (1) public carriers, contractors, and program managers that are generally responsible for building and maintainingthe infrastructure system and provide airtime service to individual subscribers; (2) government system operators includingfederal agencies and state and local governments that run wireless networks for their own use; (3) private system operatorsincluding commercial entities such as major utilities and transportation companies that run wireless networks for their ownuse; (4) commercial dealers and resellers that sell, install and/or service cellular telephone, wireless networking, broadbandand two-way radio communications equipment primarily for the enterprise market; and (5) retailers, independent dealeragents and carriers. We offer a wide range of products that are classified into four business categories: base station infrastructure;network systems; installation, test and maintenance; and mobile devices and accessories. Base infrastructure products areused to build, repair and upgrade wireless telecommunications. Sales of traditional base station infrastructure products, suchas base station radios, cable and transmission lines and antennas are in part dependent on capital spending in the wirelesscommunications industry. Network systems products are used to build and upgrade computing and internet networks. Wehave also been growing our offering of wireless broadband, network equipment, security and surveillance products, which arenot as dependent on the overall capital spending of the industry. Installation, test and maintenance products are used toinstall, tune, and maintain wireless communications equipment. This category is made up of sophisticated analysisequipment and various frequency-, voltage- and power-measuring devices, replacement parts and components as well as anassortment of tools, hardware and supplies required by service technicians. Mobile devices and accessory products includecellular phone and data device accessories. Our customers generally have the ability to purchase from any of our productcategories. 29 Table of ContentsThe wireless communications distribution industry is competitive and fragmented, and is comprised of severalnational distributors. In addition, many manufacturers sell direct. Barriers to entry for distributors are relatively low,particularly in the mobile devices and accessory market, and the risk of new competitors entering the market is high.Consolidation of larger wireless carriers has and will most likely continue to impact our current and potential customer base.In addition, the agreements or arrangements with our customers or vendors looking to us for product and supply chainsolutions are typically of limited duration and are terminable by either party upon several months or otherwise short notice.Our ability to maintain these relationships is subject to competitive pressures and challenges. We believe, however, that ourstrength in service, the breadth and depth of our product offering, our information technology system, our large customerbase and our purchasing relationships with approximately 450 manufacturers provide us with a significant competitiveadvantage over new entrants to the market. Results of Operations The following tables summarize the results of our operations for fiscal years 2017, 2016 and 2015: (Dollars in thousands, except per share data) 2016 to 2017 2015 to 2016 2017 2016 $ Change % Change 2015 $ Change % Change Market Revenues Public Carriers, Contractors & ProgramManagers $82,015 $89,171 $(7,156) (8.0)% $127,426 $(38,255) (30.0)%Government System Operators 36,676 33,009 3,667 11.1% 31,495 1,514 4.8%Private System Operators 93,869 85,563 8,306 9.7% 86,725 (1,162) (1.3)%Commercial Dealers & Resellers 126,326 129,986 (3,660) (2.8)% 134,195 (4,209) (3.1)%Retailers, Independent Dealer Agents &Carriers 194,409 192,953 1,456 0.8% 169,778 23,175 13.7%Total Revenues $533,295 $530,682 $2,613 0.5% $549,619 $(18,937) (3.4)% 2016 to 2017 2015 to 2016 2017 2016 $ Change % Change 2015 $ Change % Change Market Gross Profit Public Carriers, Contractors & ProgramManagers $13,707 $15,155 $(1,448) (9.6)% $20,915 $(5,760) (27.5)%Government System Operators 8,235 7,713 522 6.8% 7,535 178 2.4%Private System Operators 21,648 20,601 1,047 5.1% 20,866 (265) (1.3)%Commercial Dealers & Resellers 34,289 33,781 508 1.5% 34,948 (1,167) (3.3)%Retailers, Independent Dealer Agents &Carriers 33,889 34,716 (827) (2.4)% 33,375 1,341 4.0%Total Gross Profit 111,768 111,966 (198) (0.2)% 117,639 (5,673) (4.8)% Selling, general and administrative expenses 108,416 102,932 5,484 5.3% 102,687 245 0.2%Restructuring Charge 807 — 807 — 573 (573) (100.0) Operating Expenses 109,223 102,932 6,291 6.1% 103,260 (328) (0.3)%Income from operations 2,545 9,034 (6,489) (71.8)% 14,378 (5,344) (37.2)%Interest, net 59 161 (102) (63.6)% 167 (6) (3.6)%Income before provision for income taxes 2,486 8,873 (6,387) (72.0)% 14,211 (5,338) (37.6)%Provision for income taxes 1,041 3,532 (2,491) (70.5)% 5,577 (2,045) (36.7)%Net income $1,445 $5,341 (3,896) (72.9)% $8,634 (3,293) (38.1)% Diluted earnings per share $0.17 $0.65 $(0.48) (73.8)% $1.04 (0.39) (37.5)% Fiscal Year 2017 Compared to Fiscal Year 2016 Revenues. Revenue for fiscal year 2017 increased slightly by 0.5% as compared to fiscal year 2016. Revenue fromour government system operators market increased by 11.1% for fiscal year 2017 as compared to fiscal year 2016. We havecontinued to invest in this market, which has led to an increase in government contracts, especially with our state and localgovernment customers. Revenues within our private system operators market increased by 9.7% for fiscal year 2017 ascompared to fiscal year 2016, primarily due to an increase in sales to our utility customers. Revenue from the public carriers,contractors and program managers market, and the commercial dealers and resellers market, decreased by 8.0% and 2.8%,respectively, due to a dramatic slowdown in the purchases by our cellular carrier customers and the general contractors andintegrators doing work on their behalf, beginning in the third quarter of fiscal 2015. During the second half30 Table of Contentsof fiscal 2017, we saw improved year-over-year quarterly sales in the carrier markets as purchases increased from keycontractors and integrators. Revenue in the second half of fiscal 2017 increased 23.0% in the public system operators,contractors and program managers market as compared to the same period of fiscal 2016 as a result of these increasedpurchases. Gross Profit. Gross profit was essentially flat with a 0.2% decrease in fiscal year 2017 compared to fiscal year 2016.This decrease was primarily driven by a 9.6% decrease in our public carriers, contractors, and program managers market and a2.4% decrease in our retailers, independent dealer agents and carriers market for fiscal year 2017 as compared to fiscal year2016. This decrease was almost fully offset by increases in gross profit of our government system operators market and ourprivate system operators market of 6.8% and 5.1%, respectively. Overall gross profit margin decreased slightly to 21.0% infiscal year 2017, compared to 21.1% in fiscal year 2016, primarily due to changes in customer and product mix. Our ongoing ability to earn revenues and gross profits from customers and vendors looking to us for product andsupply chain solutions is dependent upon a number of factors. The terms, and accordingly the factors, applicable to eachrelationship often differ. Among these factors are the strength of the customer’s or vendor’s business, the supply and demandfor the product or service, including price stability, changing customer or vendor requirements, and our ability to support thecustomer or vendor and to continually demonstrate that we can improve the way they do business. In addition, theagreements or arrangements on which our customer and vendor relationships are based are typically of limited duration,typically do not include any obligation in respect of any specific product purchase or sale and are terminable by either partyupon several months or otherwise short notice. Our customer relationships could also be affected by wireless carrierconsolidation or global financial crisis. We account for inventory at the lower of cost or market, and as a result write-offs/write-downs occur due to damage,deterioration, obsolescence, changes in prices and other causes. These expenses have been less than 1% of overall purchasesfor each of the last three fiscal years. Selling, General, Administrative and Restructuring Expenses. Total selling, general, administrative andrestructuring expenses increased 6.1% during fiscal year 2017 as compared to fiscal year 2016. Total selling, general,administrative and restructuring expenses as a percentage of revenues increased slightly from 19.4% in fiscal year 2016 to20.5% in fiscal year 2017. The following are descriptions of changes in significant components of selling, general,administrative and restructuring expenses: ·Marketing expenses increased by $1.4 million, or 16.7%, in fiscal year 2017 as compared to fiscal year 2016,primarily due to direct marketing costs associated with improved design and content of our TESSCO.comwebsite and increased market development funds associated with sales to our retail customers.·Compensation and benefits expense increased by $4.2 million, or 6.8%, in fiscal year 2017 as compared tofiscal year 2016 primarily related to higher business generation across all markets and operations compensationcosts to support the increase in retail sales volume. Additionally, we incurred $0.8 million in onetime severancecosts in relation to a restructuring of our sales and product teams.·Performance bonus expense (including both cash and equity plans) increased by $1.1 million in fiscal year2017 as compared to fiscal year 2016. This increase is primarily related to bonuses paid to our former andcurrent CEO related to the transition that occurred during this fiscal year.·During the fourth quarter of fiscal year 2016, we received the results of a software license audit conducted by amajor software provider. After significant negotiations, we settled the audit for $1.5 million, which was accruedin the fourth quarter of fiscal year 2016 and was paid in the first quarter of fiscal year 2017. The ongoing annualcost from the results of this audit is minimal. We continually evaluate the credit worthiness of our existing customer receivable portfolio and provide anappropriate reserve based on this evaluation. We also evaluate the credit worthiness of prospective and current customers andmake decisions regarding extension of credit terms to such customers based on this evaluation. Accordingly, we recorded aprovision for bad debts of $674,200 and $637,100 for fiscal year 2017 and fiscal year 2016, respectively.31 Table of Contents Interest, Net. Net interest expense decreased, from $161,300 in fiscal year 2016 to $58,600 in fiscal year 2017. Thedecrease is primarily related to the extinguishment of our term loan and lower borrowing levels on our secured revolvingcredit facility. Refer to Note 6 through 8 for additional information on our borrowings. Income Taxes, Net Income and Diluted Earnings Per Share. The effective tax rates in fiscal year 2017 and 2016were 41.9% and 39.8%, respectively. The increased rate is primarily a result of lower pre-tax income which increases theimpact of non-deductible tax differences. As a result of the factors discussed above, net income and diluted earnings pershare for fiscal year 2017 decreased 72.9% and 73.8%, respectively, compared with fiscal year 2016. Fiscal Year 2016 Compared to Fiscal Year 2015 Revenues. Revenues for fiscal year 2016 decreased 3.4% as compared to fiscal year 2015. Revenue from the publiccarriers, contractors and program managers market decreased by 30.0% due to a dramatic slowdown in purchases by ourcellular carrier customers, primarily the two largest U.S. carriers and the general contractors and integrators doing work ontheir behalf. We believe this slowdown relates to many factors, including increased carrier competition, excess inventory inthe channel, reduction in building of macro tower sites and increased concerns over costs. This slowdown also partiallyaffected our commercial dealers and resellers market which decreased by 3.1%. Revenue within the government systemoperators market increased by 4.8% for fiscal year 2016 as compared to fiscal year 2015. This growth within the governmentsystem operators market in fiscal year 2016 was due to our continued investment in this market, which has led to moregovernment contracts and deeper relationships with our customers. Revenues in our retail, independent dealer agent andcarriers market increased 13.7%, and was largely driven by new customer sales of Otterbox and Ventev® products. Revenuesfrom the private system operators market decreased 1.3%. Gross Profit. Gross profit decreased 4.8% in fiscal year 2016 compared to fiscal year 2015. This decrease wasprimarily driven by a 27.5% decrease in our public carriers, contractors, and program managers market, and to a much lesserextent by a 3.3% decrease in our commercial dealers and resellers market and a 1.3% decrease in our private system operatorsmarket. These declines were partially offset by increases in our retail, independent dealer agents and carriers market of 4.0%and in our government system operators market of 2.4%. Overall gross profit margin decreased slightly to 21.1% in fiscalyear 2016, compared to 21.4% in fiscal year 2015, primarily due to changes in customer and product mix. The largest driverof the reduced gross margin was in the retail market due to a higher percentage of sales of lower margin products andincreased customer consolidation which provides our customers with larger purchasing power. We account for inventory at the lower of cost or market, and as a result, write-offs/write-downs occur due to damage,deterioration, obsolescence, changes in prices and other causes. These expenses have been less than 1% of overall purchasesfor each of the last three fiscal years. Selling, General, Administrative and Restructuring Expenses. Total selling, general, administrative andrestructuring expenses were relatively flat during fiscal year 2016 as compared to fiscal year 2015. Total selling, general,administrative and restructuring expenses as a percentage of revenues increased slightly from 18.8% in fiscal year 2015 to19.4% in fiscal year 2016. The following are descriptions of changes in significant components of selling, general,administrative and restructuring expenses: ·Marketing expenses increased by $2.1 million, or 25.5%, in fiscal year 2016 as compared to fiscal year 2015,primarily due to direct marketing costs associated with improved design and content of our TESSCO.comwebsite and increased market development funds associated with the increase in sales to our retail customers.·Compensation and benefits expense decreased by $1.1 million, or 1.7%, in fiscal year 2016 as compared tofiscal year 2015.·Pay for performance bonus expense (including both cash and equity plans) decreased by $1.0 million in fiscalyear 2016 as compared to fiscal year 2015. Our bonus programs are all based on annual performance targets.The relationship between targeted performance and actual performance led to lower bonus accruals in fiscalyear 2016 than in fiscal year 2015.32 Table of Contents·During the fourth quarter of fiscal year 2016, we received the results of a software license audit conducted by amajor software provider. After significant negotiations, we settled the audit for $1.5 million, which we accruedin the fourth quarter of fiscal year 2016 and paid in the first quarter of fiscal year 2017. The ongoing annualcost from the results of this audit is minimal. We continually evaluate the credit worthiness of our existing customer receivable portfolio and provide anappropriate reserve based on this evaluation. We also evaluate the credit worthiness of prospective and current customers andmake decisions regarding extension of credit terms to such customers based on this evaluation. Accordingly, we recorded aprovision for bad debts of $637,100 and $943,300 for fiscal year 2016 and fiscal year 2015, respectively. Interest, Net. Net interest expense was essentially flat, at $167,300 in fiscal year 2015 and $161,300 in fiscal year2016. Income Taxes, Net Income and Diluted Earnings Per Share. The effective tax rates in fiscal year 2016 and 2015were 39.8% and 39.2%, respectively. As a result of the factors discussed above, net income and diluted earnings per share forfiscal year 2016 decreased 38.1% and 37.5%, respectively, compared with fiscal year 2015. Liquidity and Capital Resources In summary, our cash flows were as follows: 2017 2016 2015 Cash flow provided by operating activities $3,051,270 $20,141,100 $11,079,800 Cash flow used in investing activities (2,563,000) (3,513,800) (2,947,600) Cash flow used in financing activities (8,830,970) (7,268,500) (12,076,100) Net decrease in cash and cash equivalents $(8,342,700) $9,358,800 $(3,943,900) We generated $3.1 million of net cash from operating activities during fiscal year 2017. This inflow was driven bynet income (net of depreciation and amortization and non-cash stock compensation expense), an increase in accountspayable and a decrease in prepaid expenses and other current assets partially offset by an increase in accounts receivable andproduct inventory. Accounts receivable increased due to higher sales in the fourth quarter of fiscal 2017 as compared to thefourth quarter of fiscal 2016. Inventory and accounts payable increased as a result of strategic purchases combined with ageneral increase in base station infrastructure inventory for our public system operators, contractors, and program managersmarket. Additionally, our inventory levels for certain Ventev product lines have also increased. The reduction in prepaidexpenses and other assets as well as the decrease in accrued expense and other liabilities are both primarily related to a towerowner customer whose inventory we have held on its behalf since fiscal year 2015. Because we held the inventory on thetower owner’s behalf, the cost of these goods was recorded in prepaid expenses and other current assets, and we were unableto recognize the revenue and related cost of goods sold associated with the transaction until the product physicallyships. During fiscal year 2017, the customer took possession of most of the remaining inventory and therefore the deferredrevenue and cost of goods sold were partially recognized. We generated $20.1 million of net cash from operating activities during fiscal year 2016. This inflow was driven bynet income (net of depreciation and amortization and non-cash stock compensation expense), a decrease in accountsreceivable and product inventory, and a decrease in prepaid expenses and other current assets, partially offset by a decreasein trade accounts payable and accrued expense and other current liabilities. The decrease in accounts receivable wasprimarily related to better collections in the fourth quarter of fiscal year 2016 as compared to the fourth quarter of fiscal year2015. The decrease in inventory was primarily due an effort to reduce overall inventory levels while maintaining highservice levels. The reduction in prepaid expenses and other assets as well as the decrease in accrued expense and otherliabilities are both primarily related to a tower owner customer mentioned above. During fiscal year 2016, the customer tookpossession of the majority of this inventory and therefore the deferred revenue and cost of goods sold were partiallyrecognized. 33 ®Table of ContentsWe generated $11.1 million of net cash from operating activities during fiscal year 2015. This inflow was driven bynet income (net of depreciation and amortization and non-cash stock compensation expense), a decrease in accountsreceivable, and an increase in accrued expenses and other current liabilities, partially offset by an increase in productinventory, prepaid expenses and other current assets. The decrease in accounts receivable was primarily related to lower salesvolume in the fourth quarter of fiscal year 2015 as compared to the fourth quarter of fiscal year 2014. The increase ininventory was primarily due to a $7.0 million increase in mobile device accessories inventory related to iPhone 6 products,the purchase of Apple connectors for our Ventev charging solutions and increased inventory from key suppliers. Inventoryrelated to our base station infrastructure product remained relatively flat. Capital expenditures of $2.6 million in fiscal year 2017 were down from $3.5 million in fiscal year 2016 and $2.9million in fiscal year 2015. Fiscal year 2017, 2016 and 2015 capital expenditures were largely comprised of investments ininformation technology of $2.4 million, $3.1 million, and $2.6 million, respectively. Cash flows used in financing activities were primarily related to cash dividends paid to shareholders and purchasesof stock from employees and directors for minimum tax withholdings related to equity compensation, partially offset by theexcess tax benefit from stock-based compensation and proceeds from issuance of stock. The significant increase in cash usedin financing activities during fiscal year 2015 was due to the purchase of shares under our expanded stock buyback program,as discussed below. On April 23, 2014, our Board of Directors expanded our then existing stock buyback program and authorized thepurchase on a non-accelerated basis of up to $10.0 million of the Company’s stock over a 24-month period, ending in April2016. Our Board of Directors believes that the repurchase of our shares, when appropriate, is an excellent use of funds toenhance long-term shareholder value. Purchases were funded from working capital and/or our revolving credit facility. Sharescould be purchased from time to time in the open market, by block purchase, or through negotiated transactions, or othertransactions managed by broker-dealers. During fiscal year 2015, we purchased 157,954 shares under the expanded stockbuyback program for approximately $4.6 million, or an average cost of $29.17 per share. No shares were repurchased duringfiscal years 2017 or 2016. The stock buyback program expired in April 2016. We also withhold shares from our employees and directors, at their request, equal to the minimum federal and statetax withholdings related to vested equity grants. For fiscal years 2017 and 2016 this totaled $192,400 and $937,300,respectively. Our revolving credit facility with SunTrust Bank limits to $2.0 million the aggregate dollar value of shares thatmay be withheld or repurchased in connection with satisfaction of these tax withholding obligations during any 12 monthperiod. At March 26, 2017 we had the ability to withhold repurchase $1.8 million in additional shares of our common stockduring fiscal 2018, without violating this covenant. We are party to a senior asset based revolving credit facility with SunTrust Bank with interest payable monthlygenerally at the Eurodollar rate plus an applicable margin. Borrowing availability under this facility is determined inaccordance with a borrowing base, and the applicable credit agreement includes financial covenants, including a fixedcharge coverage ratio that must be maintained at any time during which the borrowing availability is less than $10 million.The terms applicable to our revolving credit facility also limit our ability to engage in certain transactions or activities,including (but not limited to) investments and acquisitions, sales of assets, payment of dividends, issuance of additional debtand other matters. As of March 26, 2017 we had no balance outstanding on our $35.0 million revolving credit facility;therefore, we had $35.0 million available on our revolving line of credit facility, subject to the limitations imposed by theborrowing base and our continued compliance with the other applicable terms, including the covenants discussed above. Theterm of the credit facility is 5 years, ending June 23, 2021. Our secured revolving credit facility with SunTrust Bank restricts our ability to pay dividends and to repurchase ourshares, either upon a default or when our borrowing availability is below $12.5 million, or in certain more limitedcircumstances $10 million, and also limits to $2.0 million the aggregate dollar value of shares that may be withheld orrepurchased in connection with satisfaction of tax withholding obligations related to vested equity grants during any 12month period. This revolving credit facility also contains other financial covenants and ratios that could restrict dividendsand repurchases. As noted above, March 26, 2017, we had no balance outstanding on our $35.0 million revolving creditfacility. 34 ®Table of Contents At the end of fiscal year 2017, we were in compliance with the financial covenants applicable under our revolvingcredit facility with SunTrust Bank. On March 31, 2009, we entered into a term loan with the Baltimore County Economic Development RevolvingLoan Fund for an aggregate principal amount of $250,000. The term loan is payable in equal monthly installments ofprincipal and interest of $2,300, with the balance due at maturity on April 1, 2019. The term loan bears interest at 2.00% perannum and is secured by a subordinate position on our Hunt Valley, Maryland facility. At March 26, 2017, the principalbalance of this term loan was approximately $56,300. Working capital (current assets less current liabilities) decreased slightly to $77.2 million as of March 26, 2017,from $82.5 million as of March 27, 2016. Shareholders' equity decreased to $108.0 million as of March 26, 2017, from$112.5 million as of March 27, 2016, primarily due to fiscal year 2017 net income being more than offset by cash dividendspaid. We believe that our existing cash, payments from customers, and availability under our revolving credit facility(including any amendment or replacement thereof), or if needed, financing we believe would be available to us from othersources, will be sufficient to support our operations for at least the next twelve months. We expect to meet short-termliquidity needs through cash on our balance sheet and operating cash flow, supplemented by our revolving credit facility;and we expect to meet long term liquidity needs through these same resources. If we were to undertake an acquisition or othermajor capital purchases that require funds in excess of its existing sources of liquidity, we would look to sources of fundingfrom additional credit facilities, debt and/or equity issuances. There can be no assurances that such additional future sourcesof funding, either to fund an acquisition or major capital purchase, or to support our cash flow needs in the event of thetermination of our existing revolving credit facility before it can be replaced with an asset based facility, would be availableon terms acceptable to us, if at all. In addition, our liquidity could be negatively impacted by decreasing revenues and profits resulting from a decreasein demand for our products or a reduction in capital expenditures by our customers, or by the weakened financial conditionsof our customers or suppliers, in each case as a result of the downturn in the global economy, among other factors. 35 Table of ContentsContractual Obligations The following tables reflect a summary of our contractual cash obligations and other commercial commitments as of March26, 2017: Payment Due by Fiscal Year Less Than More Than Total 1 Year Years 1-3 Years 4-5 5 Years Long-Term Debt Obligations $56,300 $26,500 $29,800 $ — $ — Revolving credit facility 372,600 87,500 175,000 110,100 — Lease Obligations 10,158,200 2,910,900 5,439,400 1,807,900 — Interest payments 1,200 900 300 — — Other Long-Term Liabilities 1,087,500 — 150,000 150,000 787,500 Tax contingency reserves 462,100 — — — — Total contractual cash obligations $12,137,900 $3,025,800 $5,794,500 $2,068,000 $787,500 (1)We are subject to a 0.25% fee on the unused portion of our revolving credit facility.(2)Interest payments include amounts owed on notes payable at their stated contractual rate(3)Other Long-Term Liabilities reflected on the Consolidated Balance Sheet include amounts owed under a SupplementalExecutive Retirement Plan.(4)We are unable to make a reasonably reliable estimate of the period of the cash settlement with the respective taxingauthorities for the $0.5 million balance of our tax contingency reserves, net of federal tax benefits. See further discussionin Note 13—"Income Taxes" to the consolidated financial statements set forth elsewhere herein. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of our operations are based on our consolidatedfinancial statements, which have been prepared in accordance with accounting principles generally accepted in the UnitedStates. The preparation of these financial statements requires us to make estimates and judgments that affect the reportedamount of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Actual resultsmay differ from these estimates under different assumptions or conditions. We have identified the policies below as critical to our business operations and the understanding of our results ofoperations: Revenue Recognition. We record revenues when 1) persuasive evidence of an arrangement exists, 2) delivery hasoccurred or services have been rendered, 3) our price to the buyer is fixed or determinable, and 4) collectability is reasonablyassured. Our revenue recognition policy includes evidence of arrangements for significant revenue transactions througheither receipt of a customer purchase order or a web-based order. We record revenues when risk of loss has passed to thecustomer. In most cases, shipments are made using FOB shipping terms. For a portion of our sales, we use FOB destinationterms and record the revenue when the product is received by the customer. Our prices are always fixed at the time of sale.Historically, there have not been any material concessions provided to or by customers, future discounts, or other incentivessubsequent to a sale. We sell under normal commercial terms and, therefore, we only record revenues on transactions wherecollectability is reasonably assured. Because a large portion of our sales transactions meet the conditions set forth in the Financial Accounting StandardsBoard (“FASB”) Accounting Standards Codification (“ASC”) on revenue recognition, we recognize revenues from salestransactions containing sales returns provisions at the time of the sale. These conditions require that 1) our price besubstantially fixed or determinable at the date of sale, 2) the buyer is obligated to pay us, and such obligation is notcontingent on their resale of the product, 3) the buyer’s obligation to us does not change in the event of theft or physicaldestruction or damage of the product, 4) the buyer has economic substance apart from us, 5) we do not have significantobligations for future performance to directly bring about resale of the product by the buyer, and 6) the amount of future36 (1)(2)(3)(4)Table of Contentsreturns can be reasonably estimated. Because our normal terms and conditions of sale are consistent with conditions 1-5above, and we are able to perform condition 6, we make a reasonable estimate of product returns in sales transactions andaccrue a sales return reserve based on this estimate. Our current and potential customers are continuing to look for ways to reduce their inventories and lower their totalcosts, including distribution, order taking and fulfillment costs, while still providing their customers excellent service. Someof these companies have turned to us to implement supply chain solutions, including purchasing inventory, assisting indemand forecasting, configuring, packaging, kitting and delivering products and managing customer and vendor relations,from order taking through cash collections. In performing these solutions, we assume varying levels of involvement in thetransactions and varying levels of credit and inventory risk. As our offerings continually evolve to meet the needs of ourcustomers, we constantly evaluate our revenue accounting based on the guidance set forth in accounting standards generallyaccepted in the United States. When applying this guidance in accordance with the FASB standard regarding revenuerecognition for principal-agent considerations, we look at the following indicators: whether we are the primary obligor in thetransaction; whether we have general inventory risk; whether we have latitude in establishing price; the extent to which wechange the product or perform part of the service; whether we have responsibility for supplier selection; whether we areinvolved in the determination of product and service specifications; whether we have physical inventory risk; whether wehave credit risk; and whether the amount we earn is fixed. Each of our customer relationships is independently evaluatedbased on the above guidance and revenues are recorded on the appropriate basis. Based on a review of the factors above, inthe majority of our sales relationships, we have concluded that we are the principal in the transaction and we record revenuesbased upon the gross amounts earned and booked. However, we do have certain relationships where we are not the principaland we record revenues on a net fee basis, regardless of amounts billed (less than 1% of our total revenues for fiscal year2017). Allowance for Doubtful Accounts. We use estimates to determine the amount of the allowance for doubtful accountsnecessary to reduce accounts receivable and unbilled receivables to their expected net realizable value. We estimate theamount of the required allowance by reviewing the status of past-due receivables and analyzing historical bad debt trends.Actual collection experience has not varied significantly from estimates, due primarily to credit policies, collectionexperience and our stability as it relates to our current customer base. Typical payments from commercial customers are due30 days from the date of the invoice. We charge-off receivables deemed to be uncollectible to the allowance for doubtfulaccounts. Accounts receivable balances are not collateralized. Inventory Reserves. We establish inventory reserves for excess and obsolete inventory. We regularly reviewinventory to evaluate continued demand and identify any obsolete or excess quantities of inventory. We record a provisionfor the difference between excess and obsolete inventory and its estimated realizable value. Estimated realizable value isbased on anticipated future product demand, market conditions and liquidation values. Actual results differing from theseprojections could have a material effect on our results of operations. Impairment of Long-Lived and Indefinite-Lived Assets. Our Consolidated Balance Sheet as of March 26, 2017,includes goodwill of approximately $11.7 million and other indefinite lived intangible assets of $0.8 million. We performannual impairment tests for goodwill and other indefinite lived assets on the first day of our fourth quarter. We alsoperiodically evaluate our long-lived assets for potential impairment indicators. The goodwill and intangible assetsimpairment test involves an initial qualitative analysis to determine if it is more likely than not that an intangible asset’s fairvalue is less than its carrying amount. If qualitative factors suggest a possible impairment the company then performs anadditional two-step approach. Our judgments regarding the existence of impairment indicators are based on estimated futurecash flows, market conditions, operational performance and legal factors. The key assumptions used to determine the fairvalue of our goodwill reporting units include (a) a cash flow period; (b) a terminal value based on a growth rate; and (c) adiscount rate, which is based on our weighted average cost of capital adjusted for risks associated with our operations. Basedon the Company’s qualitative assessment for fiscal year 2017, we have concluded that it is not more likely than not that thecarrying value of our sole reporting unit with goodwill or intangible assets is above the fair value of the related reportingunit. As a result, no quantitative testing was deemed necessary for fiscal year 2017. Future events, such as significantchanges in cash flow assumptions, could cause us to conclude that impairment indicators exist and that the net book value ofgoodwill, long-lived assets or intangible assets are impaired. We will continue to monitor our market capitalization as apotential impairment indicator considering overall market conditions and specific industry events. Had37 Table of Contentsthe determination been made that the goodwill and other indefinite lived intangible assets were impaired, the value of theseassets would have been reduced by an amount up to $12.5 million, resulting in a corresponding charge to operations. The methods of assessing fair value for reporting units with goodwill as well as for indefinite lived assets requiresignificant judgments to be made by management, including future revenues, expenses, cash flows and discount rates.Changes in such estimates or the application of alternative assumptions could produce significantly different results. Income Taxes. We recognize deferred tax assets and liabilities based on the differences between the financialstatement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets forrecoverability. This review is based on historical taxable income, projected future taxable income and the expected timing ofthe reversals of existing temporary differences. Based on this review, we have not established a valuation allowance becauseour deferred tax assets are more likely than not realizable. If we are unable to generate sufficient taxable income, or if there isa material change in the actual effective tax rates or time period within which the underlying temporary differences becometaxable or deductible, we could be required to establish a valuation allowance against all or a significant portion of ourdeferred tax assets that are not more likely than not realizable, resulting in a substantial increase in our effective tax rate anda material adverse impact on our operating results. We account for income taxes under the FASB’s ASC on accounting for uncertainty in income taxes recognized in anenterprise’s financial statements. This standard prescribes a recognition threshold and measurement attribute for the financialstatement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also providesguidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure andtransition. As of March 26, 2017, we had total net unrecognized tax benefits of approximately $462,100, all of which, ifrecognized, would favorably affect the effective income tax rate in future periods. Stock-Based Compensation. We record stock-based compensation in accordance with the FASB standard regardingstock compensation and share-based payments, which requires us to include in our calculation of periodic stockcompensation expense an estimate of future forfeitures. The standard also requires stock awards granted or modified after theadoption of the standard that include both performance conditions and graded vesting to be amortized by an acceleratedmethod rather than the straight-line method. Off-Balance Sheet Arrangements We have no material off-balance sheet arrangements. Recent Accounting Pronouncements In August 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-15, Classification of Certain CashReceipts and Cash Payments. The new standard will change the classification of certain cash payments and receipts withinthe cash flow statement. Specifically, payments for debt prepayment or debt extinguishment costs, including third-partycosts, premiums paid, and other fees paid to lenders that are directly related to the debt prepayment or debt extinguishment,excluding accrued interest, will now be classified as financing activities. Previously, these payments were classified asoperating expenses. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods withinfiscal years beginning after December 15, 2019, with early adoption permitted, and will be applied retrospectively. TheCompany does not expect that the adoption of this new standard will have a material impact on its Consolidated FinancialStatements. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. This ASU requires lessees torecognize most leases on their balance sheets related to the rights and obligations created by those leases. The ASU alsorequires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arisingfrom leases. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within thosefiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this new standardwill have on its Consolidated Financial Statements. 38 Table of ContentsIn March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation – Stock Compensation.The new standard will modify several aspects of the accounting and reporting for employee share-based payments and relatedtax accounting impacts, including the presentation in the statements of operations and cash flows of certain tax benefits ordeficiencies and employee tax withholdings, as well as the accounting for award forfeitures over the vesting period. The newstandard is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. Earlyadoption is permitted. Under this new standard, all excess tax benefits and tax deficiencies related to employee share basedpayments should be recognized as income tax expense or benefit in the income statement. The standard also requires thatthese excess tax benefits be classified as an operating cash flow. The Company had no excess tax benefit from stock basedcompensation in fiscal year 2017. In fiscal year 2016, the company had an excess tax benefit from stock based compensationof $0.4 million. The company has elected to take the prospective method of adoption and is currently evaluating the impactthe adoption of this new standard will have on its disclosures; however, we do not expect the adoption of this standard tohave a material impact on retained earnings. In July 2015, the FASB issued Accounting Standards Update (ASU) 2015-11, Simplifying the Measurement ofInventory, which changes the measurement principle for inventory for entities using first-in, first-out (FIFO) or average costfrom the lower of cost or market to lower of cost and net realizable value. This standard defines net realizable value asestimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, andtransportation. The guidance is effective for reporting periods beginning after December 15, 2016 and interim periods withinthose fiscal years with early adoption permitted. This standard should be applied prospectively and had no effect on theCompany’s Financial Statements or related disclosures. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205 40), which provides guidance in GAAP about management’s responsibility to evaluatewhether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnotedisclosures. This amendment should reduce diversity in the timing and content of footnote disclosures. This ASU is effectivefor the annual and interim reporting periods of beginning after December 15, 2016, and was adopted by the Company duringfiscal 2017. The Company has evaluated our financial position including and found that there were no conditions or events,considered in the aggregate, that raised substantial doubt about the Company’s ability to continue as a going concern withinone year after the date that the financial statements are issued. Therefore, the adoption of this new standard had no effect onthe Company’s Financial Statements or related disclosures. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers.This guidance will supersede Topic 605, Revenue Recognition, in addition to other industry specific guidance, onceeffective. The new standard requires a company to recognize revenue in a manner that depicts the transfer of promised goodsor services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchangefor those goods and services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers:Deferral of the Effective Date, as a revision to ASU 2014-09, which revised the effective date to fiscal years, and interimperiods within those years, beginning after December 15, 2017. Early adoption is permitted but not prior to periodsbeginning after December 15, 2016 (i.e. the original adoption date per ASU 2014-09). In March 2016, the FASB issued ASU2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations, which clarifies certain aspects ofthe principal-versus-agent guidance, including how an entity should identify the unit of accounting for the principal versusagent evaluation and how it should apply the control principle to certain types of arrangements, such as service transactions.The amendments also reframe the indicators to focus on evidence that an entity is acting as a principal rather than as anagent. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers: Identifying PerformanceObligations and Licensing, which clarifies how an entity should evaluate the nature of its promise in granting a license ofintellectual property, which will determine whether it recognizes revenue over time or at a point in time. The amendmentsalso clarify when a promised good or service is separately identifiable (i.e., distinct within the context of the contract) andallow entities to disregard items that are immaterial in the context of a contract. We continue to assess the impact this newstandard may have on our ongoing financial reporting. We have identified our revenue streams both by contract and producttype and are assessing each for potential impacts. For the revenue streams we have assessed, we do not anticipate a materialimpact in the timing or amount of revenue recognized. We may be required to adjust our accounting for our returns reserve.However, our returns have historically been less than 3% of revenue, and as such, we do not expect this to have a materialimpact on our Financial Statements. Based on this ongoing assessment, we intend to adopt the standard on a modifiedretrospective basis on April 1, 2018, the first day of fiscal 2019.39 Table of ContentsForward‑Looking Statements This Report may contain forward-looking statements. These forward-looking statements may generally be identifiedby the use of the words “may,” “will,” “expects,” “anticipates,” “believes,” “estimates,” and similar expressions, but theabsence of these words or phrases does not necessarily mean that a statement is not forward looking. Forward lookingstatements involve a number of risks and uncertainties. Our actual results may differ materially from those described in orcontemplated by any such forward-looking statement for a variety of reasons, including those risks identified in our mostrecent Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission, under theheading “Risk Factors” and otherwise. Consequently, the reader is cautioned to consider all forward-looking statements inlight of the risks to which they are subject. We are not able to identify or control all circumstances that could occur in the future that may adversely affect ourbusiness and operating results. Without limiting the risks that we describe in our periodic reports and elsewhere, among therisks that could lead to a materially adverse impact on our business or operating results are the following: termination or non-renewal of limited duration agreements or arrangements with our vendors and affinity partners which are typically terminableby either party upon several months or otherwise relatively short notice; loss of significant customers or relationships,including affinity relationships; loss of customers either directly or indirectly as a result of consolidation among largewireless service carriers and others within the wireless communications industry; the strength of our customers’, vendors’ andaffinity partners’ businesses; increasingly negative or prolonged adverse economic conditions, including those adverselyaffecting consumer confidence or consumer or business spending, or otherwise adversely affecting our vendors or customers,including their access to capital or liquidity or our customers’ demand for our ability to fund or pay for the purchase of ourproducts and services; our dependence on a relatively small number of suppliers and vendors, which could hamper ourability to maintain appropriate inventory levels and meet customer demand; failure of our information technology system ordistribution system; technology changes in the wireless communications industry, or technological failures, which couldlead to significant inventory obsolescence and/or our inability to offer key products that our customers demand; third-partyfreight carrier interruption; increased competition from competitors, including manufacturers or national and regionaldistributors of the products we sell and the absence of significant barriers to entry which could result in pricing and otherpressures on profitability and market share; our relative bargaining power and inability to negotiate favorable terms with ourvendors and customers; our inability to access capital and obtain or retain financing as and when needed; transitional andother risks associated with acquisitions of companies that we may undertake in an effort to expand our business; thepossibility that, for unforeseen reasons, we may be delayed in entering into or performing, or may fail to enter into or perform,anticipated contracts or may otherwise be delayed in realizing or fail to realize anticipated revenues or anticipated savings;our inability to protect certain intellectual property, including systems and technologies on which we rely; claims against usfor breach of the intellectual property rights of third parties; product liability claims; and our inability to hire or retain forany reason our key professionals, management and staff. Available Information Our internet web site address is: www.tessco.com. We make available free of charge through our website, our AnnualReport 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 soon as reasonably practicable after such documents areelectronically filed with, or furnished to, the Securities and Exchange Commission. Also available on our website is our Codeof Business Conduct and Ethics. We have not incorporated herein by reference the information on our website, and it shouldnot be considered a part of this filing. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk: We are exposed to an immaterial level of market risk from changes in interest rates. We have from time to timepreviously used interest rate swap agreements to modify variable rate obligations to fixed rate obligations, thereby reducingour exposure to interest rate fluctuations. We had no variable rate debt obligations as of March 26, 2017. Based on March 26,2017 borrowing levels, a 1.0% increase or decrease in current market interest rates would have no effect on our statement ofincome.40 Table of Contents Foreign Currency Exchange Rate Risk: We are exposed to an immaterial level of market risk from changes in foreign currency rates. Almost all of our salesare made in U.S. Dollars so we have an immaterial amount of foreign currency risk. Those sales not made in U.S. Dollars aremade in Canadian Dollars. 41 Table of Contents Item 8. Financial Statements and Supplementary Data. TESSCO TECHNOLOGIES INCORPORATED AND SUBSIDIARIESConsolidated Balance Sheets March 26, March 27, 2017 2016 ASSETS Current assets: Cash and cash equivalents $8,540,100 $16,882,800 Trade accounts receivable, net of allowance for doubtful accounts of $782,200 and$841,400, respectively 64,778,900 58,315,700 Product inventory, net 63,984,300 53,903,900 Prepaid expenses and other current assets 3,864,100 5,917,100 Total current assets 141,167,400 135,019,500 Property and equipment, net 18,089,100 19,895,400 Goodwill, net 11,677,700 11,684,700 Other long-term assets 3,046,300 2,816,400 Total assets $173,980,500 $169,416,000 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Trade accounts payable $53,581,400 $41,986,000 Payroll, benefits and taxes 6,772,100 4,927,900 Income and sales tax liabilities 1,364,700 1,456,800 Accrued expenses and other current liabilities 2,228,200 3,874,100 Revolving line of credit — — Current portion of long-term debt 26,500 251,100 Total current liabilities 63,972,900 52,495,900 Deferred tax liabilities 386,800 379,400 Long-term debt, net of current portion 29,800 1,706,500 Other long-term liabilities 1,574,700 2,306,900 Total liabilities 65,964,200 56,888,700 Shareholders’ equity: Preferred stock, $0.01 par value, 500,000 shares authorized and no shares issued andoutstanding — — Common stock $0.01 par value, 15,000,000 shares authorized, 14,048,392 sharesissued and 8,337,669 shares outstanding as of March 26, 2017, and 13,970,394shares issued and 8,272,124 shares outstanding as of March 27, 2016 98,400 97,600 Additional paid-in capital 59,006,000 58,113,800 Treasury stock, at cost, 5,710,723 shares as of March 26, 2017 and 5,698,270 sharesas of March 27, 2016 (57,437,600) (57,245,200) Retained earnings 106,349,500 111,561,100 Total shareholders’ equity 108,016,300 112,527,300 Total liabilities and shareholders’ equity $173,980,500 $169,416,000 The accompanying Notes to the Consolidated Financial Statements are an integral part of these consolidated statements. 42 Table of ContentsTESSCO TECHNOLOGIES INCORPORATED AND SUBSIDIARIESConsolidated Statements of Income Fiscal Years Ended March 26, 2017 March 27, 2016 March 29, 2015 Revenues $533,295,100 $530,682,100 $549,619,000Cost of goods sold 421,527,300 418,716,200 431,980,500Gross profit 111,767,800 111,965,900 117,638,500Selling, general and administrative expenses 108,416,300 102,932,300 102,686,700Restructuring Charge 806,600 — 573,400Income from operations 2,544,900 9,033,600 14,378,400Interest expense, net 58,600 161,300 167,300Income before provision for income taxes 2,486,300 8,872,300 14,211,100Provision for income taxes 1,041,200 3,531,800 5,576,800Net income $1,445,100 $5,340,500 $8,634,300Basic earnings per share $0.17 $0.65 $1.05Diluted earnings per share $0.17 $0.65 $1.04Basic weighted-average common shares outstanding 8,312,731 8,220,023 8,171,235Effect of dilutive options 27,686 — 101,571Diluted weighted-average common shares outstanding 8,340,417 8,220,023 8,272,806Cash dividends declared per common share $0.80 $0.80 $0.80 The accompanying Notes to these Consolidated Financial Statements are an integral part of these consolidated statements. 43 Table of ContentsTESSCO TECHNOLOGIES INCORPORATED AND SUBSIDIARIESConsolidated Statements of Changes in Shareholders' Equity Common Stock Additional Total Paid-in Treasury Retained Shareholders’ Shares Amount Capital Stock Earnings Equity Balance at March 30, 2014 8,180,484 94,200 53,987,700 (50,084,600) 110,830,800 114,828,100 Proceeds from issuance of stock 19,425 200 540,000 — — 540,200 Treasury stock purchases (211,033) — — (6,223,300) — (6,223,300) Non-cash stock compensation expense 170,716 1,700 1,159,600 — — 1,161,300 Excess tax benefit from stock-based compensation — — 830,300 — — 830,300 Cash dividends paid — — — — (6,628,800) (6,628,800) Net income — — — — 8,634,300 8,634,300 Balance at March 29, 2015 8,159,592 96,100 56,517,600 (56,307,900) 112,836,300 113,142,100 Proceeds from issuance of stock 25,067 300 487,000 — — 487,300 Treasury stock purchases (40,623) — (937,300) — (937,300) Non-cash stock compensation expense 128,088 1,200 727,800 — — 729,000 Excess tax benefit from stock-based compensation — — 381,400 — — 381,400 Cash dividends paid — — — — (6,615,700) (6,615,700) Net income — — — — 5,340,500 5,340,500 Balance at March 27, 2016 8,272,124 97,600 58,113,800 (57,245,200) 111,561,100 112,527,300 Proceeds from issuance of stock 37,432 400 458,200 — — 458,600 Treasury stock purchases (12,453) — (192,400) — (192,400) Non-cash stock compensation expense 40,566 400 434,000 — — 434,400 Excess tax benefit from stock-based compensation — — — — — Cash dividends paid — — — — (6,656,700) (6,656,700) Net income — — — — 1,445,100 1,445,100 Balance at March 26, 2017 8,337,669 $98,400 $59,006,000 $(57,437,600) $106,349,500 $108,016,300 The accompanying Notes to these Consolidated Financial Statements are an integral part of these consolidated statements. 44 Table of ContentsTESSCO TECHNOLOGIES INCORPORATED AND SUBSIDIARIESConsolidated Statements of Cash Flows Year Ended March 26, 2017 March 27, 2016 March 29, 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,445,100 $5,340,500 $8,634,300Adjustments to reconcile net income to net cash provided byoperating activities: Depreciation and amortization 4,238,900 4,730,000 4,583,600Loss (gain) on sale of property and equipment 114,500 — (3,000)Non-cash stock-based compensation expense 434,400 729,000 1,161,300Deferred income taxes and other (788,600) (47,700) 1,347,200Change in trade accounts receivable (6,388,200) 1,256,400 7,923,600Change in product inventory (10,080,400) 18,459,700 (10,407,900)Change in prepaid expenses and other current assets 2,053,000 4,951,800 (8,532,300)Change in trade accounts payable 11,595,400 (9,818,200) 1,047,300Change in payroll, benefits and taxes 1,844,200 (604,000) (2,138,200)Change in income and sales tax liabilities (107,730) (375,600) (645,300)Change in accrued expenses and other current liabilities (1,309,300) (4,480,800) 8,109,200Net cash provided by operating activities 3,051,270 20,141,100 11,079,800 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (2,563,000) (3,513,800) (2,950,600)Proceeds from sale of property and equipment — — 3,000Net cash used in investing activities (2,563,000) (3,513,800) (2,947,600) CASH FLOWS FROM FINANCING ACTIVITIES Payments of debt issuance costs (218,200) — —Payments on long-term debt (1,901,300) (250,600) (250,200)Proceeds from issuance of common stock 137,630 153,700 195,900Cash dividends paid (6,656,700) (6,615,700) (6,628,800)Purchases of treasury stock and repurchases of common stock fromemployees and directors for minimum tax withholdings (192,400) (937,300) (6,223,300)Excess tax benefit from stock-based compensation — 381,400 830,300Net cash used in financing activities (8,830,970) (7,268,500) (12,076,100) Net (decrease) increase in cash and cash equivalents (8,342,700) 9,358,800 (3,943,900) CASH AND CASH EQUIVALENTS, beginning of period 16,882,800 7,524,000 11,467,900 CASH AND CASH EQUIVALENTS, end of period $8,540,100 $16,882,800 $7,524,000 The accompanying Notes to the Consolidated Financial Statements are an integral part of these consolidated statements. 45 Table of ContentsNote 1. Organization TESSCO Technologies Incorporated, a Delaware corporation (TESSCO, we, or the Company), architects and deliversinnovative product and value chain solutions to support wireless systems. The Company provides marketing and salesservices, knowledge and supply chain management, product-solution delivery and control systems utilizing extensiveinternet 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 and through electronic data interchange. Almost allof the Company’s sales are made in United States Dollars. Note 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.Intercompany accounts and transactions have been eliminated in consolidation. Fiscal Year The Company's fiscal year is the 52 or 53 weeks ending on the Sunday falling on or between March 26 and April 1to allow the financial year to better reflect the Company's natural weekly accounting and business cycle. The fiscal yearsended March 26, 2017, March 27, 2016, and March 29, 2015 each contain 52 weeks. Cash and Cash Equivalents Cash and cash equivalents include cash and highly liquid investments with an original maturity of 90 days or less. Allowance for Doubtful Accounts The Company uses estimates to determine the amount of the allowance for doubtful accounts necessary to reduceaccounts receivable to their expected net realizable value. The Company estimates the amount of the required allowance byreviewing the status of past-due receivables and analyzing historical bad debt trends and current economic conditions.Actual collection experience has not varied significantly from estimates, due primarily to consistent credit policies,collection experience, as well as the Company’s stability as it relates to its current customer base. Typical payments from alarge majority of commercial customers are due 30 days from the date of the invoice. The Company charges-off receivablesdeemed to be uncollectible to the allowance for doubtful accounts. Accounts receivable balances are not collateralized. Product Inventory Product inventory, consisting primarily of finished goods, is stated at the lower of cost or market, cost beingdetermined on the first-in, first-out (“FIFO”) method and includes certain charges directly and indirectly incurred in bringingproduct inventories to the point of sale. Inventory is written down for estimated obsolescence equal to the difference betweenthe cost of inventory and the estimated market value, based upon specifically known inventory-related risks (such astechnological obsolescence and the nature of vendor terms surrounding price protection and product returns), andassumptions about future demand. At March 26, 2017 and March 27, 2016, the Company had a reserve for excess and/orobsolete inventory of $6,360,600 and $6,071,100, respectively. 46 Table of ContentsProperty and Equipment Property and equipment is stated at cost. Depreciation is recorded using the straight-line method over the estimateduseful lives of the assets as follows: Useful lives Information technology equipment and software 1-5yearsConfiguration, Fulfillment and Delivery technology system 7yearsFurniture, telephone system, equipment and tooling 3-10yearsBuilding, building improvements and leasehold improvements 2-40years The Company capitalizes computer software costs incurred in connection with developing or obtaining computersoftware for internal use when both the preliminary project stage is completed and when management authorizes andcommits to funding the project and it is probable that the project will be completed. Development and acquisition costs arecapitalized when the software project is either for the development of new software, to increase the life of existing software orto add significantly to the functionality of existing software. Capitalization ceases when the software project is substantiallycomplete and ready for its intended use. Leasehold improvements are amortized over the shorter of their useful lives or the remaining lease term. Impairment of Long-Lived Assets Long-lived assets, including amortizable intangible assets, are reviewed for impairment whenever events or changesin circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. These eventsor changes in circumstances may include a significant deterioration of operating results, changes in business plans, orchanges in anticipated future cash flows. If an impairment indicator is present, the Company evaluates recoverability by acomparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets.Assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cashflows generated by other asset groups. If future undiscounted cash flows are less than the carrying value of the asset group,the Company calculates the fair value of the asset group. If the assets are impaired, the impairment recognized is measured bythe amount by which the carrying amount exceeds the fair value of the assets. Fair value is generally determined by estimatesof discounted cash flows. The discount rate used in any estimate of discounted cash flows would be the rate required for asimilar investment of like risk. There were no impairment charges in fiscal years 2017, 2016, or 2015. Assets to be disposed of are reported at the lower of carrying value or fair values, less estimated costs of disposal. Goodwill and Other Intangible Assets Goodwill represents the future economic benefits arising from other assets acquired in a business combination thatare not individually identified and separately recognized. Goodwill amounts and indefinite lived intangible assets are notamortized, but rather are tested for impairment at least annually or whenever an impairment indicator is identified. TheCompany performs its annual impairment test on the first day of its fourth quarter. Intangible assets that are not considered tohave an indefinite useful life are amortized over their useful life of 4 to 6 years using the straight-line method. Intangibleassets other than goodwill are recorded within other long-term assets in the Company’s Consolidated Balance Sheets. Thegoodwill impairment test involves an initial qualitative analysis to determine if it is more likely than not that an intangibleasset’s fair value is less than its carrying amount. If qualitative factors suggest a possible impairment, the Company thenperforms an additional two-step approach. Under the first step, the Company determines the fair value of each reporting unitto which goodwill has been assigned. The Company then compares the fair value of each reporting unit to its carrying value,including goodwill. The Company estimates the fair value of each reporting unit using various valuation techniques, withthe primary technique being a discounted cash flow or income approach, under which the Company estimates the presentvalue of the reporting unit’s future cash flows. Key assumptions used to determine the present value of a reporting unit’sfuture cash flows include (a) a cash flow period; (b) a terminal value based on a growth rate; and (c) a discount rate,47 Table of Contentswhich is based on the Company’s weighted average cost of capital adjusted for risks associated with our operations. If the fairvalue exceeds the carrying value, no impairment loss is recognized. If the carrying value exceeds the fair value, the goodwillof the reporting unit is considered potentially impaired and the second step is completed in order to measure the impairmentloss. Under the second step, the Company calculates the implied fair value of goodwill by deducting the fair value of alltangible and intangible net assets, including any unrecognized intangible assets, of the reporting unit from the fair value ofthe reporting unit as determined in the first step. The Company then compares the implied fair value of goodwill to thecarrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, the Companyrecognizes an impairment loss equal to the difference. The indefinite lived intangible asset impairment test involves an initial qualitative analysis to determine if it ismore likely than not that an intangible asset’s fair value is less than its carrying amount. If qualitative factors suggest apossible impairment, the Company then determines the fair value of the intangible asset. If the fair value of the intangibleasset is less than its carrying value, an impairment loss is recognized for an amount equal to the difference. The intangibleasset is then carried at its new fair value. Fair value is determined using estimates of discounted cash flows. These estimates ofdiscounted cash flows will likely change over time as impairment tests are performed. Estimates of fair value are alsoadversely affected by increases in interest rates and the applicable discount rate. Based on the Company’s qualitative and/or quantitative impairment testing performed, the Company did notrecognize an impairment loss on goodwill or other indefinite lived intangible assets in fiscal years 2017, 2016, or 2015. The methods of assessing fair value for our reporting unit with goodwill as well as for indefinite lived assets requiresignificant judgments to be made by management, including future revenues, expenses, cash flows and discount rates.Changes in such estimates or the application of alternative assumptions could produce significantly different results. Revenue Recognition The Company records revenues when 1) persuasive evidence of an arrangement exists, 2) delivery has occurred orservices have been rendered, 3) price to the buyer is fixed or determinable, and 4) collectability is reasonably assured. TheCompany’s revenue recognition policy includes evidence of arrangements for significant revenue transactions through eitherreceipt of a customer purchase order or a web-based order. The Company records revenues when risk of loss has passed to thecustomer. In most cases, shipments are made using FOB shipping terms. FOB destination terms are used for a portion of sales,and revenue for these sales is recorded when the product is received by the customer. Prices are always fixed at the time ofsale. Historically, there have not been any material concessions provided to or by customers, future discounts provided bythe company, or other incentives subsequent to a sale. The Company sells under normal commercial terms and, therefore,only records sales on transactions where collectability is reasonably assured. The Company recognizes revenues net of salestax. Because the Company’s sales transactions meet the conditions set forth in the Financial Accounting StandardsBoard’s (“FASB”) Accounting Standards Codification (“ASC”) No. 605 and/or 606, it recognizes revenues from salestransactions containing sales returns provisions at the time of the sale. These conditions require that 1) the price besubstantially fixed or determinable at the date of sale, 2) the buyer is obligated to pay, and the payment is not contingent ontheir resale of the product, 3) the buyer’s obligation to the Company does not change in the event of theft or physicaldestruction or damage of the product, 4) the buyer has economic substance apart from the Company, 5) the Company doesnot have significant obligations for future performance to directly bring about resale of the product by the buyer, and 6) theamount of future returns can be reasonably estimated. Because the Company’s normal terms and conditions of sale areconsistent with conditions 1-5 above, and the Company is able to perform condition 6, it makes a reasonable estimate ofproduct returns in sales transactions and accrues a sales return reserve based on this estimate. Certain companies have turned to TESSCO to implement supply chain solutions, including purchasing inventory,assisting in demand forecasting, configuring, packaging, kitting and delivering products and managing customer and vendorrelations, from order taking through cash collections. In performing these solutions, the Company assumes varying levels ofinvolvement in the transactions and varying levels of credit and inventory risk. As the Company’s solutions offeringscontinually evolve to meet the needs of its customers, the Company constantly evaluates its revenue accounting based onthe guidance set forth in accounting standards generally accepted in the United States. When applying this48 Table of Contentsguidance in accordance with the ASC No. 605-45, the Company looks at the following indicators: whether it is the primaryobligor in the transaction; whether it has general inventory risk; whether it has latitude in establishing price; the extent towhich it changes the product or performs part of the service; whether it has discretion in supplier selection; whether it isinvolved in the determination of product and service specifications; whether it has physical inventory risk; whether it hascredit risk; and whether the amount it earns is fixed. Each of the Company’s customer relationships is independentlyevaluated based on the above guidance and revenues are recorded on the appropriate basis. Based on a review of the factorsabove, in the majority of the Company’s sales relationships, the Company has concluded that it is the principal in thetransaction and records revenues based upon the gross amounts earned and booked. However, the Company does haverelationships where it is not the principal and records revenues on a net fee basis, regardless of amounts billed (less than 1%of total revenues for fiscal year 2017). If applying this revenue recognition guidance resulted in recording revenues on adifferent basis from which the Company has previously concluded, or if the factors above change significantly, revenuescould increase or decrease; however, gross profit and net income would remain constant. Service revenue associated with training and other services is recognized when the training or work is complete andthe four criteria discussed above have been met. Service revenues have represented less than 1% of total revenues for fiscalyears 2017, 2016 and 2015. Other than sales relating to the Company’s private brands, we offer no product warranties in excess of originalequipment manufacturers’ warranties. The Company’s warranty expense is estimated and accrued at the time of sale.Warranty expense was immaterial for fiscal years 2017, 2016, and 2015. Vendor Programs Funds received from vendors for price protection, product rebates and marketing/promotion are recorded as areduction in cost of goods sold in accordance with ASC 605-50-45: Customer’s Characterization of Certain ConsiderationsReceived from a Vendor. Shipping and Handling Costs Shipping costs incurred to ship products from our distribution centers to our customers’ sites are included in selling,general and administrative expenses in the Consolidated Statements of Income and totaled $14,179,700, $13,642,700, and$13,700,000 for fiscal years 2017, 2016, and 2015, respectively. Stock Compensation Awards Granted to Team Members The Company records stock compensation expense for awards in accordance with ASC No. 718, which requires theCompany to include in its calculation of periodic stock compensation expense an estimate of future forfeitures. The standardalso requires stock awards granted or modified after the adoption of the standard that include both performance conditionsand graded vesting based on service to the Company to be amortized by an accelerated method rather than the straight-linemethod. Income Taxes The Company accounts for income taxes under the asset and liability method in accordance with ASC No. 740.Under this method, deferred income tax assets and liabilities arise from differences between the tax basis of assets orliabilities and their reported amounts in the financial statements. Deferred tax balances are determined by using the enactedtax rate to be in effect when the taxes are paid or refunds received. A valuation allowance related to deferred tax assets isrecorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In accordance with ASC No. 740, the Company recognizes a provision for tax uncertainties in its financialstatements. See Note 13 for further discussion of the standard and its impact on the Company’s consolidated financialstatements. 49 Table of ContentsUse of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP)requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. On an ongoing basis, the Company reviews and evaluates its estimates andassumptions, including but not limited to, those that relate to tax reserves, stock-based compensation, accounts receivablereserves, inventory reserves and future cash flows associated with impairment testing for goodwill and other long-livedassets. Actual results could significantly differ from those estimates. Impact of Recently Issued Accounting Standards In August 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-15, Classification of Certain CashReceipts and Cash Payments. The new standard will change the classification of certain cash payments and receipts withinthe cash flow statement. Specifically, payments for debt prepayment or debt extinguishment costs, including third-partycosts, premiums paid, and other fees paid to lenders that are directly related to the debt prepayment or debt extinguishment,excluding accrued interest, will now be classified as financing activities. Previously, these payments were classified asoperating expenses. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods withinfiscal years beginning after December 15, 2019, with early adoption permitted, and will be applied retrospectively. TheCompany does not expect that the adoption of this new standard will have a material impact on its Consolidated FinancialStatements. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. This ASU requires lessees torecognize most leases on their balance sheets related to the rights and obligations created by those leases. The ASU alsorequires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arisingfrom leases. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within thosefiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this new standardwill have on its Consolidated Financial Statements. In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation – Stock Compensation.The new standard will modify several aspects of the accounting and reporting for employee share-based payments and relatedtax accounting impacts, including the presentation in the statements of operations and cash flows of certain tax benefits ordeficiencies and employee tax withholdings, as well as the accounting for award forfeitures over the vesting period. The newstandard is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. Earlyadoption is permitted. Under this new standard, all excess tax benefits and tax deficiencies related to employee share basedpayments should be recognized as income tax expense or benefit in the income statement. The standard also requires thatthese excess tax benefits be classified as an operating cash flow. The Company had no excess tax benefit from stock basedcompensation in fiscal year 2017. In fiscal year 2016, the company had an excess tax benefit from stock based compensationof $0.4 million. The company has elected to take the prospective method of adoption and is currently evaluating the impactthe adoption of this new standard will have on its disclosures; however, the company does not expect the adoption of thisstandard to have a material impact on retained earnings. In July 2015, the FASB issued Accounting Standards Update (ASU) 2015-11, Simplifying the Measurement ofInventory, which changes the measurement principle for inventory for entities using first-in, first-out (FIFO) or average costfrom the lower of cost or market to lower of cost and net realizable value. This standard defines net realizable value asestimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, andtransportation. The guidance is effective for reporting periods beginning after December 15, 2016 and interim periods withinthose fiscal years with early adoption permitted. This standard should be applied prospectively and had no effect on theCompany’s Financial Statements or related disclosures. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205 40), which provides guidance in GAAP about management’s responsibility to evaluatewhether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnotedisclosures. This amendment should reduce diversity in the timing and content of footnote disclosures. This ASU50 Table of Contentsis effective for annual and interim reporting periods of beginning after December 15, 2016 and was adopted by the Companyduring fiscal 2017. The Company has evaluated our financial position including and found that there were no conditions orevents, considered in the aggregate, that raised substantial doubt about the Company’s ability to continue as a going concernwithin one year after the date that the financial statements are issued. Therefore, the adoption of this new standard had noeffect on the Company’s Financial Statements or related disclosures. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers.This guidance will supersede Topic 605, Revenue Recognition, in addition to other industry specific guidance, onceeffective. The new standard requires a company to recognize revenue in a manner that depicts the transfer of promised goodsor services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchangefor those goods and services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers:Deferral of the Effective Date, as a revision to ASU 2014-09, which revised the effective date to fiscal years, and interimperiods within those years, beginning after December 15, 2017. Early adoption is permitted but not prior to periodsbeginning after December 15, 2016 (i.e. the original adoption date per ASU 2014-09). In March 2016, the FASB issued ASU2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations, which clarifies certain aspects ofthe principal-versus-agent guidance, including how an entity should identify the unit of accounting for the principal versusagent evaluation and how it should apply the control principle to certain types of arrangements, such as service transactions.The amendments also reframe the indicators to focus on evidence that an entity is acting as a principal rather than as anagent. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers: Identifying PerformanceObligations and Licensing, which clarifies how an entity should evaluate the nature of its promise in granting a license ofintellectual property, which will determine whether it recognizes revenue over time or at a point in time. The amendmentsalso clarify when a promised good or service is separately identifiable (i.e., distinct within the context of the contract) andallow entities to disregard items that are immaterial in the context of a contract. We continue to assess the impact this newstandard may have on our ongoing financial reporting. We have identified our revenue streams both by contract and producttype and are assessing each for potential impacts. For the revenue streams we have assessed, we do not anticipate a materialimpact in the timing or amount of revenue recognized. We may be required to adjust our accounting for our returns reserve.However, our returns have historically been less than 3% of revenue, and as such, we do not expect this to have a materialimpact on the Company’s Financial Statements. Based on this ongoing assessment, the company intends to adopt thestandard on a modified retrospective basis on April 1, 2018, the first day of fiscal 2019. Note 3. Property and Equipment All of the Company’s property and equipment is located in the United States and is summarized as follows: 2017 2016 Land $4,740,800 $4,740,800 Building, building improvements and leaseholdimprovements 20,704,100 21,437,200 Information technology equipment and computersoftware 29,957,200 28,856,300 Furniture, telephone system, equipment and tooling 7,006,900 7,732,600 62,409,000 62,766,900 Less accumulated depreciation and amortization (44,319,900) (42,871,500) Property and equipment, net $18,089,100 $19,895,400 Depreciation and amortization of property and equipment was $4,238,900, $4,730,000, and $4,583,600 for fiscalyears 2017, 2016 and 2015, respectively. Capitalized internally developed computer software, net of accumulated amortization, as of March 26, 2017 andMarch 27, 2016 was $2,427,800 and $2,212,400, respectively. Amortization expense of capitalized internally developedcomputer software was $1,355,000, $1,194,200, and $797,800 for fiscal years 2017, 2016, and 2015. 51 Table of ContentsNote 4. Goodwill and Other Intangible Assets Other intangible assets, which are included in other long-term assets on the accompanying Consolidated BalanceSheets as of March 26, 2017 and March 27, 2016, consists of indefinite lived intangible assets in the amount of $795,400. AtMarch 26, 2017 and March 27, 2016, amortizable intangible assets were fully amortized. There were no material changes inthe carrying amount of goodwill for the fiscal years ended March 26, 2017 and March 27, 2016. Note 5. Accrued expenses and other current liabilities Accrued expenses and other current liabilities consisted of the following: March 26, 2017 March 27, 2016 Deferred Revenue $635,100 $2,136,600 Other Accrued Expenses 1,593,100 1,737,500 Total Accrued Expenses $2,228,200 $3,874,100 Note 6. Borrowings Under Revolving Credit Facility On June 24, 2016, the Company and its primary operating subsidiaries entered into a Credit Agreement (the “CreditAgreement”) with SunTrust Bank, as Administrative Agent. The Credit Agreement provides for a senior asset based securedrevolving credit facility of up to $35 million (the “Revolving Credit Facility”), and replaces the Company’s previouslyexisting $35 million unsecured revolving credit facility with both SunTrust Bank and Wells Fargo Bank, NationalAssociation, which had no outstanding principal balance at the time of replacement. The new Revolving Credit Facilitymatures in five years, on June 24, 2021, and includes a $5.0 million sublimit for the issuance of standby letters of credit and a$10.0 million sublimit for swing line loans. The Credit Agreement also includes a provision permitting the Company, subjectto certain conditions and approval of the Lenders, to increase the aggregate amount of the commitments under the RevolvingCredit Facility to up to $50 million, through optional increased commitments from existing Lenders or new commitmentsfrom additional lenders, although no Lender is obligated to increase its commitment. Borrowing availability is determined inpart in accordance with a borrowing base, which is generally 85% of eligible receivables minus reserves. The CreditAgreement also contains financial covenants, including a fixed charge coverage ratio that must be maintained at any timeduring which the borrowing availability is otherwise less than $10 million. The Credit Agreement also may limit our abilityto engage in specified transactions or activities, including (but not limited to) investments and acquisitions, sales of assets,payment of dividends, issuance of additional debt and other matters. Borrowings initially accrue interest from the applicable borrowing date, generally the Eurodollar rate plus anapplicable margin ranging from 1.5% to 1.75%. Under certain circumstances, the applicable interest rate is subject to changefrom the Eurodollar rate plus the applicable margin to the base rate plus the applicable margin. Interest expense on thisrevolving credit facility for fiscal year 2017 totaled $45,500. Average borrowings under this revolving credit facility totaled$2,118,500, and maximum borrowings totaled $13,473,200 for fiscal year 2017, respectively. In addition to the interestcharged on borrowings, the Company is subject to a 0.25% fee on the unused portion of the revolving credit facility. Borrowings under the Revolving Credit Facility may be used for working capital and other general corporatepurposes, and as further provided in, and subject to the applicable terms of, the Credit Agreement. As of March 26, 2017, wehad a zero balance on the Revolving Credit Facility; therefore, we had $35 million available, subject to the borrowing baselimitation and compliance with the other applicable terms of the Credit Agreement including the covenants referencedabove. Pursuant to a related Guaranty and Security Agreement, by and among the Company, the other borrowers under theCredit Agreement and other subsidiaries of the Company (collectively, the “Loan Parties”), and SunTrust Bank, asAdministrative Agent, the Loan Parties’ obligations, which include the obligations under the Credit Agreement, areguaranteed by the Loan Parties not otherwise borrowers, and secured by continuing first priority security interests in theCompany’s and the other Loan Parties’ (including both borrowers and guarantors) inventory, accounts receivable, anddeposit accounts, and on all documents, instruments, general intangibles, letter of credit rights, and chattel paper, in eachcase to the extent relating to inventory and accounts, and to all proceeds of the foregoing. The security interests are granted52 Table of Contentsin favor of the Administrative Agent, for the benefit of the Lenders party to the Credit Agreement from time to time. Theobligations secured also include certain other obligations of the Loan Parties to the Lenders and their affiliates arising fromtime to time, relating to swaps, hedges and cash management and other bank products. The Company was in compliance with the terms and financial covenants applicable to the revolving credit facilityat the end of fiscal year 2017. On May 31, 2007, pursuant to a Credit Agreement, the Company established a revolving credit facility with bothWells Fargo Bank, National Association and SunTrust Bank. The facility has since been replaced with the credit facilitymentioned above. The facility was unsecured and provided for monthly payments of interest accruing at a rate of LIBOR plusan applicable margin. The terms of the revolving credit facility required the Company to meet certain financial covenantsand ratios and contained other limitations, including certain restrictions on dividend payments. The facility provided for monthly payments of interest accruing at a rate of LIBOR plus an applicable marginranging from 1.50% to 2.50%. The weighted average interest rate on borrowings under the Company’s revolving creditfacilities was 1.69% and 1.65% for fiscal years 2016 and 2015, respectively. Interest expense on this revolving credit facilityfor fiscal years 2016 and 2015 totaled $59,000 and $78,200, respectively. Average borrowings under this revolving creditfacility totaled $3,454,500 and $4,672,300 and maximum borrowings totaled $12,301,100 and $17,331,900 for fiscal years2016 and 2015, respectively. As of March 27, 2016, the Company had no outstanding balance on its revolving credit facility. Therefore, theCompany had $35.0 million available on its revolving line of credit facility as of March 27, 2016, subject to the applicableborrowing base limitations and compliance with the other applicable terms. The Company was in compliance with the terms and financial covenants applicable to this prior revolving creditfacility at the end of fiscal years 2016 and 2015. Note 7. Extinguishment of Debt Simultaneously with entering into the senior asset based Revolving Credit Facility described in Note 6, in June2016 the Company terminated its previously existing $35 million unsecured revolving credit facility with SunTrust Bankand Wells Fargo Bank, National Association, which had no outstanding principal balance at the time of termination. At the same time, the Company also repaid in full its obligations under its Term Loan in the original principalamount of $4.5 million from Wells Fargo Bank, National Association and SunTrust Bank. The Term Loan was secured by afirst position deed of trust encumbering Company-owned real property in Hunt Valley, Maryland and had an outstandingprincipal balance of $1.9 million at the time of repayment. Note 8. Long-Term Debt On June 30, 2004, the Company refinanced its then existing indebtedness through a term loan with an originalprincipal amount of $4.5 million, payable in monthly installments of principal and interest with the balance due at the initialmaturity date, June 30, 2011. On October 7, 2015, the Company entered into an agreement with Wells Fargo Bank, NationalAssociation, and SunTrust Bank, to extend the maturity date of the existing term loan to October 1, 2020. As discussed inNote 7 this loan was repaid in full during the first quarter of fiscal 2017. The interest rate on this term loan was LIBOR plus2.00%. The note was secured by a first position deed of trust encumbering Company-owned real property in Hunt Valley,Maryland. The balance of this note at March 27, 2016 was $1,875,000. The weighted average interest rate on borrowingsunder this note was 2.40%, 2.21%, and 2.19% for fiscal years 2017, 2016, and 2015, respectively. Interest expense under thisnote was $11,000, $43,900, and $48,400 for fiscal years 2017, 2016, and 2015, respectively. 53 Table of ContentsOn March 31, 2009, the Company entered into a term loan with the Baltimore County Economic DevelopmentRevolving Loan Fund for an aggregate principal amount of $250,000. At March 26, 2017 and March 27, 2016, the principalbalance of this term loan was $56,300 and $82,600, respectively. The term loan is payable in equal monthly installments ofprincipal and interest of $2,300, with the balance due at maturity on April 1, 2019. The term loan bears interest at 2.00% perannum. Interest expense under this note was $1,300, $2,000, and $2,400 for fiscal years 2017, 2016, and 2015, respectively.The term loan is secured by a subordinate position on Company-owned real property located in Hunt Valley, Maryland. As of March 26, 2017, scheduled annual maturities of long-term debt are as follows: Fiscal year: 2018 $26,700 2019 27,300 2020 2,300 2021 — 2022 — Thereafter — $56,300 Note 9. Commitments and Contingencies The Company is committed to making rental payments under non-cancelable operating leases covering variousfacilities and equipment. Rent expense for fiscal years 2017, 2016 and 2015 totaled $3,047,500, $3,035,600, and$2,970,300, respectively. The Company leases office space in Timonium, Maryland, where the Company’s sales, marketing andadministrative offices are located. This space is nearby to the Company’s Global Logistics Center in Hunt Valley, Maryland.The Agreement of Lease expires on December 31, 2020. Monthly rent payments now range from $169,400 to $185,100through the remaining lease term. The Company also leases office and warehouse space in Hunt Valley, Maryland, adjacent to the Company’s GlobalLogistics Center, expiring on July 31, 2020; however, the Company has an ongoing annual option to terminate the lease.The monthly rental fee ranges from $35,700 to $39,300 through the remaining lease term. Additional sales and marketing offices are located in additional leased office space in San Antonio, Texas. Thisspace is leased pursuant to a lease agreement expiring on October 31, 2018. Monthly rent payments range from $16,400 to$16,900 through the remaining lease term. The Company’s minimum future obligations as of March 26, 2017 under existing operating leases are as follows: Fiscal year: 2018 $2,910,900 2019 2,761,500 2020 2,677,900 2021 1,807,900 2022 — Thereafter — $10,158,200 Lawsuits and claims are filed against the Company from time to time in the ordinary course of business. TheCompany does not believe that any lawsuits or claims pending against the Company, individually or in the aggregate, arematerial, or will have a material adverse effect on the Company’s financial condition or results of operations. In addition,from time to time, the Company is also subject to review from federal and state taxing authorities in order to validate the54 Table of Contentsamounts of income, sales and/or use taxes which have been claimed and remitted. No federal, state and local tax returns arecurrently under examination. As the Company is routinely audited by state taxing authorities, the Company has estimated exposure andestablished reserves for its estimated sales tax audit liability. Note 10. Operating Segment The Company evaluates its business as one segment, as the chief operating decision maker reviews results as oneunit. However, to provide investors with increased visibility into the markets it serves, the Company also reports revenue andgross profit by the following customer markets: (1) public carriers, contractors and program managers that are generallyresponsible for building and maintaining the infrastructure system and provide airtime service to individual subscribers; (2)government system operators including federal agencies and state and local governments that run wireless networks for theirown use; (3) private system operators including commercial entities such as major utilities and transportation companies thatrun wireless networks for their own use; (4) commercial dealers and resellers that sell, install and/or service cellulartelephone, wireless networking, broadband and two-way radio communications equipment primarily for the enterprisemarket; and (5) retailers, independent dealer agents and carriers. Beginning in the third quarter of fiscal year 2015, theCompany began reporting private system operators and government system operators as two separate markets. All priorperiods have been restated to reflect this change. The Company evaluates revenue, gross profit and net profit contribution, and income before provision for incometaxes in the aggregate. Net profit contribution is defined as gross profit less any expenses that can be directly attributed. Thisincludes sales, product management, purchasing, credit and collections and distribution team expenses, plus freight out andinternal and external marketing costs. Corporate support expenses include administrative costs – finance, human resources,information technology, operating facility occupancy expenses, depreciation, amortization and interest, plus the company-wide pay on performance bonus expense. Certain cost of sales and other applicable expenses have been allocated to each market based on a percentage ofrevenues and/or gross profit, where appropriate.Market activity for the fiscal years ended 2017, 2016 and 2015 is as follows (in thousands): March 26,2017 March 27,2016 March 29,2015 Revenues Public Carriers, Contractors & Program Managers $82,015 $89,171 $127,426 Government System Operators 36,676 33,009 31,495 Private System Operators 93,869 85,563 86,725 Commercial Dealers & Resellers 126,326 129,986 134,195 Retailer, Independent Dealer Agents & Carriers 194,409 192,953 169,778 Total revenues $533,295 $530,682 $549,619 Gross Profit Public Carriers, Contractors & Program Managers $13,707 $15,155 $20,915 Government System Operators 8,235 7,713 7,535 Private System Operators 21,648 20,601 20,866 Commercial Dealers & Resellers 34,289 33,781 34,948 Retailer, Independent Dealer Agents & Carriers 33,889 34,716 33,375 Total gross profit $111,768 $111,966 $117,639 55 Table of ContentsThe Company also reviews revenue and gross profit by its four product categories: ·Base station infrastructure products are used to build, repair and upgrade wireless telecommunications. Productsinclude base station antennas, cable and transmission lines, small towers, lightning protection devices,connectors, power systems, miscellaneous hardware, and mobile antennas. Our base station infrastructureservice offering includes connector installation, custom jumper assembly, site kitting and logistics integration. ·Network systems products are used to build and upgrade computing and internet networks. Products includefixed and mobile broadband equipment, wireless networking, filtering systems, distributed antenna systems,two-way radios and security and surveillance products. This product category also includes training classes,technical support and engineering design services. ·Installation, test and maintenance products are used to install, tune, and maintain wireless communicationsequipment. Products include sophisticated analysis equipment and various frequency-, voltage- and power-measuring devices, as well as an assortment of tools, hardware, GPS, safety and replacement and componentparts and supplies required by service technicians. ·Mobile devices and accessory products include cellular phone and data device accessories such as replacementbatteries, cases, speakers, mobile amplifiers, power supplies, headsets, mounts, car antennas, music accessoriesand data and memory cards. Retail merchandising displays, promotional programs, customized order fulfillmentservices and affinity-marketing programs, including private label internet sites, complement our mobile devicesand accessory product offering. Supplemental revenue and gross profit information by product category for the fiscal years 2017, 2016 and 2015 areas follows (in thousands): March 26, 2017 March 27, 2016 March 29, 2015 Revenues Base station infrastructure $209,869 $206,604 $224,135 Network systems 87,222 83,480 96,399 Installation, test and maintenance 31,851 34,936 41,790 Mobile device accessories 204,353 205,662 187,295 Total revenues $533,295 $530,682 $549,619 Gross Profit Base station infrastructure 54,280 51,610 55,732 Network systems 11,897 12,893 13,549 Installation, test and maintenance 5,921 6,607 8,351 Mobile device accessories 39,670 40,856 40,007 Total gross profit $111,768 $111,966 $117,639 Note 11. Restructuring Charge In the fourth quarter of fiscal year 2017, in an effort to streamline the organization, the Company took actions torestructure costs, resulting in a $0.8 million pre-tax charge, which is included in our Consolidated Statements of Income forfiscal year 2017. The restructuring charge primarily consists of severance-related expenses associated with a reduction inheadcount paid in the fourth quarter of fiscal year 2017 through the first quarter of fiscal year 2018. 56 Table of ContentsIn the fourth quarter of fiscal year 2015, recognizing the ongoing challenging conditions caused by the carrierspending slowdown, the Company took actions to restructure, resulting in a $0.6 million pre-tax charge, which is included inour Consolidated Statements of Income for fiscal year 2015. The restructuring charge primarily consists of severance-relatedexpenses associated with a reduction in headcount paid in the fourth quarter of fiscal year 2015 through the first quarterfiscal year 2016. Note 12. Stock Buyback On April 23, 2014, the Board of Directors expanded the Company’s then existing stock buyback program andauthorized the purchase on a non-accelerated basis of up to $10.0 million of the Company’s stock over a 24-month period,ending in April 2016. Shares may be purchased from time to time in the open market, by block purchase, or throughnegotiated transactions, or possibly other transactions managed by broker-dealers. During fiscal year 2015, the Companypurchased 157,954 shares under the expanded stock buyback program for approximately $4.6 million, or an average cost of$29.17 per share. No shares were repurchased under the program in fiscal years 2017 and 2016. The stock buyback programexpired in April 2016. The Company also withholds shares from its employees and directors, at their request, equal to the minimum federaland state tax withholdings related to vested performance stock units, stock option exercises and restricted stock awards. Forfiscal years 2017, 2016, and 2015 the total value of shares withheld for taxes was $192,400, $937,300, and $1,612,900,respectively. Note 13. Income Taxes A reconciliation of the difference between the provision for income taxes computed at statutory rates and theprovision for income taxes provided in the consolidated statements of income is as follows: 2017 2016 2015 Statutory federal rate 34.0% 34.0% 34.2%State taxes, net of federal benefit 4.6 4.5 4.1 Non-deductible expenses 5.4 2.1 0.9 Other (2.1) (0.8) — Effective rate 41.9% 39.8% 39.2% The provision for income taxes was comprised of the following: 2017 2016 2015 Federal: Current $1,083,600 $2,350,000 $3,035,400 Deferred (69,100) 763,100 1,964,800 State: Current 53,100 345,100 398,500 Deferred (26,400) 73,600 178,100 Provision for income taxes $1,041,200 $3,531,800 $5,576,800 57 Table of ContentsTotal net deferred tax assets as of March 26, 2017 and March 27, 2016, and the sources of the differences betweenfinancial accounting and tax basis of the Company's assets and liabilities which give rise to the deferred tax assets andliabilities, are as follows: 2017 2016 Net deferred tax assets (liabilities): Deferred compensation $142,600 $357,500 Accrued vacation 566,900 534,200 Deferred rent 208,900 459,100 Allowance for doubtful accounts 259,300 266,300 Inventory reserves 2,338,800 2,264,500 Sales tax reserves 366,000 366,500 Other assets 800,000 475,200 Restricted Stock — — Tax contingency reserve 215,800 247,600 Depreciation and amortization (3,659,100) (3,646,200) Other liabilities (461,600) (374,100) Accrued compensation (286,300) (577,600) Prepaid expenses (878,100) (752,400) Net Deferred Tax Liability $(386,800) $(379,400) The Company has reviewed its deferred tax assets realization and has determined that no valuation allowance isrequired as of March 26, 2017 or March 27, 2016. As of March 26, 2017, the Company had gross unrecognized tax benefit of $204,500 ($147,800 net of federalbenefit). As of March 27, 2016, the Company had gross unrecognized tax benefits of $290,400 ($188,800 net of federalbenefit). The Company’s accounting policy with respect to interest and penalties related to tax uncertainties is to classifythese amounts as income taxes. The total amount of interest and penalties related to tax uncertainties recognized in theconsolidated statement of income for fiscal year 2017 was a benefit of $10,000 (net of federal expense) and the cumulativeamount included as a liability in the consolidated balance sheet as of March 26, 2017 was $314,296 (net of federal benefit).The total amount of interest and penalties related to tax uncertainties recognized in the consolidated statement of income forfiscal year 2016 was an expense of $16,600 (net of federal benefit) and the cumulative amount included in the consolidatedbalance sheet as of March 27, 2016 was $399,800 (net of federal benefit). The total amount of interest and penalties related totax uncertainties recognized in the consolidated statement of income for fiscal year 2015 was a benefit of $31,600 (net offederal expense). As of March 26, 2017, the total net amount of unrecognized tax benefits, inclusive of indirect tax benefits anddeferred tax benefits was $147,800 and associated penalties and interest were $314,300. The net amount of $462,100, ifrecognized, would affect the effective tax rate. A reconciliation of the changes in the gross balance of unrecognized tax benefit amounts, net of interest, is asfollows: 2017 2016 2015 Beginning balance of unrecognized tax benefit $290,400 $394,400 $1,665,000 Decrease due to reclassification to income tax payable — — (1,189,000) Increase related to prior period tax positions — — — Increases related to current period tax positions 3,100 3,800 10,600 Reductions as a result of a lapse in the applicable statute of limitations (89,000) (107,800) (92,200) Ending balance of unrecognized tax benefits $204,500 $290,400 $394,400 58 Table of ContentsThe Company files income tax returns in U.S. federal, state and local jurisdictions. Certain income tax returns forfiscal years 2012 through 2016 remain open to examination by U.S. federal, state and local tax authorities. No federal, stateand local income tax returns are currently under examination. Note 14. Retirement Plans The Company has a 401(k) plan that covers all eligible employees. Contributions to the plan can be made byemployees and the Company may make matching contributions at its discretion. Expense related to this matchingcontribution was $621,600, $635,500, and $524,200 during fiscal years 2017, 2016, and 2015, respectively. As of March 26,2017 plan assets included 145,205 shares of common stock of the Company. The Company maintains a Supplemental Executive Retirement Plan for Robert B. Barnhill, Jr., our ExecutiveChairman and Chairman of the Board. This plan is funded through life insurance policies for which the Company is the solebeneficiary. The cash surrender value of the life insurance policies and the net present value of the benefit obligation ofapproximately $2,128,200 and $883,400, respectively, as of March 26, 2017 and $1,966,400 and $966,400, respectively, asof March 27, 2016, are included in other long-term assets and other long-term liabilities, respectively, in the accompanyingConsolidated Balance Sheets. Note 15. Earnings Per Share The Company calculates earnings per share considering ASC No. 260 in regards to accounting for participatingsecurities, which requires the Company to use the two-class method to calculate earnings per share. Under the two-classmethod, earnings per common share are computed by dividing the sum of the distributed earnings to common shareholdersand undistributed earnings allocated to common shareholders by the weighted average number of common sharesoutstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common sharesand participating securities based on the weighted average shares outstanding during the period. 59 Table of ContentsThe following table presents the calculation of basic and diluted earnings per common share: Amounts in thousands, except per shareamounts Amounts in thousands, except per share amounts 2017 2016 2015 Earnings per share – Basic: Net earnings $1,445 $5,341 $8,634 Less: Distributed and undistributed earnings allocated to nonvested stock — (15) (47) Earnings available to common shareholders – Basic $1,445 $5,326 $8,587 Weighted average common shares outstanding – Basic 8,313 8,220 8,171 Earnings per common share – Basic $0.17 $0.65 $1.05 Earnings per share – Diluted: Net earnings $1,445 $5,341 $8,634 Less: Distributed and undistributed earnings allocated to nonvested stock — (1) (19) Earnings available to common shareholders – Diluted $1,445 $5,340 $8,615 Weighted average common shares outstanding – Basic 8,313 8,220 8,171 Effect of dilutive options 27 — 102 Weighted average common shares outstanding – Diluted 8,340 8,220 8,273 Earnings per common share – Diluted $0.17 $0.65 $1.04 Anti-dilutive equity awards not included above 60 100 — There were no stock options with respect to shares of common stock outstanding as of March 29, 2015. At March 26,2017, and March 27, 2016 stock options with respect to 420,000 and 100,000 shares of common stock were outstanding,respectively. The anti-dilutive stock options outstanding at March 26, 2017 and March 27, 2016 total 60,000 and 100,000,respectively. There were no anti-dilutive Performance Stock Units or Restricted Stock outstanding as of March 26, 2017,March 27, 2016 or March 29, 2015. Note 16. Stock‑Based Compensation The Company’s selling, general and administrative expenses for the fiscal years ended March 26, 2017, March 27,2016, and March 29, 2015 includes $434,400, $729,000, and $1,161,300, respectively, of stock compensation expense.Provision for income taxes for the fiscal years ended March 26, 2017, March 27, 2016, and March 29, 2015 includes$181,900, $290,100, and $441,300, respectively, of income tax benefits related to our stock-based compensationarrangements. Stock compensation expense is primarily related to our Performance Stock Unit Program as described below. On July 26, 2016, subsequent to the end of the Company’s first quarter of fiscal 2016, the Company’s shareholdersapproved the Third Amended and Restated 1994 Stock and Incentive Plan (the Third 1994 Plan), which amended andrestated the Company’s Second Amended and Restated 1994 Stock and Incentive Plan, as previously amended (the Second1994 Plan), in its entirety. We sometimes refer to the Second 1994 Plan as amended by and together with the Third Plan, asthe 1994 Plan. The material amendments to the 1994 Plan reflected by the Amended and Restated Third 1994 Plan are asfollows: ·Extension of Plan Term. The date through which awards may be granted was extended to July 21, 2021. Priorto this extension, the Second 1994 Plan was scheduled to expire on July 21, 2016.60 Table of Contents ·Increase in Aggregate Share Limit. The Third 1994 Plan increases the number of shares available for awards by650,000 shares. The 1994 Plan had previously limited the aggregate number of shares of the Company’scommon stock that may have been delivered pursuant to all awards granted under the Second 1994 Plan to3,553,125 shares. The Third 1994 Plan increases the number of shares available for awards to 4,203,125 shares. ·Elimination of Liberal Share Recycling. The Third 1994 Plan, at Section 5(a)(iii), now prohibits liberal sharerecycling in respect of shares tendered by participants in payment of the exercise price for awards, or for payrolltax withholding obligations, and provides that such tendered shares shall not be available for purposes of theThird 1994 Plan. Although the 1994 Plan could have been construed to permit it, the Company has nothistorically included such tendered shares as shares available for awards under the 1994 Plan. As of March 26, 2017, 567,450 shares were available for issue in respect of future awards under the 1994 Plan.Subsequent to the Company’s 2017 fiscal year end, on May 10, 2017, based on fiscal year 2017 results, 162,500 sharesrelated to Performance Stock Units (PSUs) were canceled, and as a result, these shares were made available for future grants.On May 10, 2017, additional PSUs and restricted stock awards were made providing recipients with the opportunity to earnup to an aggregate of 76,000 and 18,000 additional shares, respectively of the Company’s common stock. Also, on April 12,2017, the Compensation Committee of the Board of Directors with concurrence of the full Board of Directors, granted stockoptions to select key employees to purchase an aggregate of 190,000 shares of the Company’s common stock. The disclosurebelow for stock options includes these grants. Accordingly, as of May 30, 2017, an aggregate of 445,950 shares wereavailable for issue pursuant to future awards. No additional awards can be made under the 1994 Plan after July 21, 2021, without or unless made subject toshareholder approval of an extension of the plan term. Stock Options, restricted stock and PSU awards have historically beengranted as awards under the 1994 Plan. Shares which are subject to outstanding PSU or other awards under the 1994 Plan, andwhich are not earned, are returned to the 1994 Plan and become available for future issuance in accordance with andotherwise subject to the terms of the 1994 Plan. Performance Stock Units: The Company’s equity-based compensation philosophy has been generally focused ongranting performance-based and time-vested stock grants, although over the last two fiscal years stock option grants havealso been made to senior management. Under a program established by the Board of Directors, Performance Stock Units(PSUs) have been granted under the 1994 Plan to selected employees. Each PSU entitles the participant to earn TESSCOcommon stock, but only after earnings per share and, for non-director employee participants, individual performance targetsare met over a defined performance cycle. Performance cycles, which are fixed for each grant at the date of grant, are one year.Once earned, shares vest and are issued over a specified period of time determined at the time of the grant, provided that theparticipant remains employed by or associated with the Company at the time of share issuance. Earnings per share targets,which take into account the earnings impact of this program, are set by the Board of Directors in advance for the completeperformance cycle at levels designed to grow shareholder value. If actual performance does not reach the minimum annual orthreshold targets, no shares are issued. In accordance with ASC No. 718, the Company records compensation expense on itsPSUs over the service period, based on the number of shares management estimates will ultimately be issued. Accordingly,the Company determines the periodic financial statement compensation expense based upon the stock price at the PSU grantdate, net of the present value of dividends expected to be paid on TESSCO common stock before the PSU vests,management’s projections of future EPS performance over the performance cycle, and the resulting amount of estimated shareissuances, net of estimated forfeitures. The Company’s estimated forfeiture rate is approximately 0% which is estimatedprimarily based on historical experience and expectations of future forfeitures. 61 Table of ContentsThe following table summarizes the activity under the Company’s PSU program for fiscal years 2017, 2016 and2015: 2017 2016 2015 Weighted Weighted Weighted Average Fair Average Fair Average Fair Shares Value at Grant Shares Value at Grant Shares Value at Grant Unvested shares available for issue underoutstanding PSUs, beginning of period 138,925 $21.46 203,841 $20.65 317,127 $15.96 PSU’s Granted 207,000 10.77 103,000 22.15 91,000 29.28 PSU’s Vested (27,671) 19.40 (87,648) 13.88 (125,347) 14.44 PSU’s Forfeited/Cancelled (148,154) 18.72 (80,268) 28.57 (78,939) 21.61 Unvested shares available for issue underoutstanding PSUs, end of period 170,100 $11.17 138,925 $21.46 203,841 $20.65 As of March 26, 2017, the applicable performance targets were not met in relation to fiscal year 2017 PSUs. Therefore, therewas no unrecognized compensation cost, as of March 26, 2017 related to PSUs earned. Total fair value of shares vestedduring fiscal years 2017, 2016 and 2015 was $628,200, $2,543,000 and $4,364,500, respectively. Of the 148,154 PSUs canceled during fiscal year 2017, 103,000 related to the fiscal year 2016 grant of PSUs andwere canceled in May 2016. The PSUs were canceled because the applicable fiscal year 2016 performance targets were notfully satisfied. The remaining 45,154 PSUs were forfeited due to employee departures during fiscal year 2017. Per theprovisions of the 1994 Plan, the shares related to these forfeited and canceled PSUs were added back to the 1994 Plan andbecame available for future issuance. Of the PSUs outstanding at the end of fiscal year 2017 covering 170,100 non-vested shares, PSUs covering 162,500shares were subsequently canceled in May 2017, based on fiscal year 2017 performance. These PSUs were canceled becausefiscal year 2017 earnings per share did not fully reach the target performance set forth in the PSU award agreements. Theremaining 7,600 shares covered by PSUs outstanding at the end of fiscal year 2017 were earned based on previous yearperformance, but were not yet vested as of March 26, 2017. Assuming the respective participants remain employed by, oraffiliated with, these shares will vest on or about May 1 of 2018. Subsequent to the Company’s 2017 fiscal year end, on May 10, 2017, the Compensation Committee, with theconcurrence of the full Board of Directors, granted additional PSUs to selected key employees, providing them with theopportunity to earn up to 76,000 additional shares of the Company’s common stock in the aggregate, depending uponwhether certain threshold or goal earnings per share targets are met and individual performance metrics are satisfied in fiscalyear 2018. These PSUs have only one measurement year (fiscal year 2018), with any shares earned at the end of fiscal year2018 to vest 25% on or about each of May 1 of 2018, 2019, 2020 and 2021. Pursuant to the typical PSU award agreement,however, performance metrics are deemed met upon the occurrence of a change in control, and shares earned are issued earlierupon the occurrence of a change in control, or death or disability of the participant, or upon termination of the participant’semployment without cause or by the participant for good reason, as those terms are defined in the agreement. Restricted Stock/Restricted Stock Units: During the second quarter of fiscal year 2007, the Company granted225,000 shares of the Company’s common stock to its Chairman and Chief Executive Officer as a restricted stock awardunder the 1994 Plan. These shares vested ratably over ten fiscal years based on service, beginning on the last day of fiscalyear 2007 and ending on the last day of fiscal year 2016. The weighted average fair value for these shares at the grant datewas $10.56. On March 27, 2016, 22,500 shares of restricted stock were released and vested. As of March 26, 2017, there wereno remaining unvested shares related to restricted stock. On May 8, 2014, the Compensation Committee, with the concurrence of the full Board of Directors, granted anaggregate of 10,000 RSU awards to non-employee directors of the Company. These awards provide for the issuance of sharesof the Company’s common stock in accordance with a vesting schedule. These awards have vested or will vest, and shareshave been or will be issued, 25% on or about each of May 1 of 2015, 2016, 2017 and 2018, provided that the62 Table of Contentsparticipant remains associated with the Company (or meets other criteria as prescribed in the agreement) on each such date.As of March 26, 2017, there was approximately $0.1 million of total unrecognized compensation costs related to theseawards. Unrecognized compensation costs related to these awards are expected to be recognized ratably over a period ofapproximately one years. On May 11, 2015, the Compensation Committee, with the concurrence of the full Board of Directors, granted anaggregate of 10,000 RSU awards to non-employee directors of the Company. These awards provide for the issuance of sharesof the Company’s common stock in accordance with a vesting schedule. These awards have vested or will vest, and shareshave been or will be issued 25% on or about each of May 1 of 2016, 2017, 2018 and 2019, provided that the participantremains associated with the Company (or meets other criteria as prescribed in the agreement) on each such date. As of March26, 2017, there was approximately $0.1 million of total unrecognized compensation costs related to these awards.Unrecognized compensation costs related to these awards are expected to be recognized ratably over a period ofapproximately two years. On May 11, 2016, the Compensation Committee, with the concurrence of the full Board of Directors, granted anaggregate of 10,000 RSU awards to non-employee directors of the Company. These awards provide for the issuance of theshares of the Company’s common stock in accordance with a vesting schedule. These awards have vested or will vest, andshares have been or will be issued 25% on or about each of May 1 of 2017, 2018, 2019 and 2020, provided that theparticipant remains associated with the Company (or meets other criteria as prescribed in the agreement) on each such date.As of March 26, 2017, there was approximately $0.1 million of total unrecognized compensation costs related to theseawards. Unrecognized compensation costs related to these awards are expected to be recognized ratably over a period ofapproximately three years. Subsequent to the Company’s 2017 fiscal year end, on May 10, 2017, the Compensation Committee, with theconcurrence of the full Board of Directors, granted an aggregate of 18,000 RSU awards to non-employee directors of theCompany. These awards provide for the issuance of shares of the Company’s common stock in accordance with a vestingschedule. These awards will vest and shares will be issued 25% on or about each of May 1 of 2017, 2018, 2019 and 2020,provided that the participant remains associated with the Company (or meets other criteria as prescribed in the agreement) oneach such date. Compensation expense on restricted stock is measured using the grant date price, net of the present value ofdividends expected to be paid on TESSCO common stock before the RSU award vests. Stock Options: The grant date value of the Company’s stock options has been determined using the Black-Scholes-Merton pricing model, based upon facts and assumptions existing at the date of grant. Stock options granted have exerciseprices equal to the market price of the Company’s stock on the grant date. The stock options vest 25% after one year and then1/36 per month for the following three years. During fiscal 2017, stock options for 90,000 shares were forfeited due toemployee departure during fiscal year 2017. The value of each option at the date of grant is amortized as compensation expense over the service period. Thisoccurs without regard to subsequent changes in stock price, volatility or interest rates over time, provided the option remainsoutstanding. The following tables summarize the pertinent information for outstanding options. 2017 2016 Weighted Weighted Average Fair Average Fair Shares Value at Grant Shares Value at GrantUnvested shares available for issue under outstanding options,beginning of period 100,000 $3.43 — —Options Granted 410,000 1.85 100,000 —Options Vested (25,000) 3.55 — —Option’s Forfeited/Cancelled (90,000) 2.64 — —Unvested shares available for issue under outstanding Options, end ofperiod 395,000 $1.96 100,000 $ — 63 Table of Contents March 26, 2017GrantYear OptionsGranted OptionExercisePrice OptionsOutstanding OptionsExercisable2017 410,000 $12.57 360,000 -2016 100,000 $22.42 60,000 25,000Total 510,000 420,000 25,000 Grant Year Expected StockPrice Volatility Risk-Free Interestrate ExpectedDividend Yield AverageExpectedTerm Resulting BlackScholes Value2017 32.85% 1.32% 6.30% 4.0 $1.852016 26.40% 1.67% 3.50% 4.0 $3.43 As of March 26, 2017, there was approximately $0.7 million of total unrecognized compensation costs related tothese awards. Unrecognized compensation costs related to these awards are expected to be recognized ratably over a periodof approximately three years. No options were exercised during fiscal 2017, 2016, or 2015. Team Member Stock Purchase Plan: The Company has a Team Member Stock Purchase Plan that permits eligibleemployees to purchase up to an aggregate of 450,000 shares of the Company's common stock at 85% of the lower of themarket price on the first day of a six-month period or the market price on the last day of that same six-month period.Expenses incurred for the Team Member Stock Purchase Plan during the fiscal years ended March 26, 2017, March 27, 2016,and March 29, 2015 were $137,800, $48,900, and $67,300, respectively. During the fiscal years ended March 26, 2017,March 27, 2016, and March 29, 2015, 12,901, 9,113, and 8,547 shares were sold to employees under this plan, having aweighted average market value of $10.68, $16.86, and $22.93, respectively. Note 17. Fair Value Disclosure Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:·Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.·Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, andquoted prices for identical or similar assets or liabilities in markets that are not active.·Level 3: Unobservable inputs for the asset or liability that reflect the reporting entity’s own assumptions aboutthe inputs used in pricing the asset or liability. As of March 26, 2017 and March 27, 2016, the Company has no assets or liabilities recorded at fair value. The carrying amounts of cash and cash equivalents, trade accounts receivable, product inventory, trade accountspayable, accrued expenses, our term loan, life insurance policies and other current liabilities approximate their fair values asof March 26, 2017 and March 27, 2016 due to their short term nature. 64 Table of ContentsFair value of long term debt is calculated using current market interest rates, which we consider to be a Level 2 inputas described in the fair value accounting guidance on fair value measurements, and future principle payments, as of March26, 2017 and March 27, 2016 is estimated as follows: 2017 2016 Carrying Fair Carrying Fair Amount Value Amount Value Note payable to Baltimore County $56,300 $54,229 $82,600 $78,700 Note 18. Supplemental Cash Flow Information Cash paid for income taxes net of refunds, for fiscal years 2017, 2016, and 2015 totaled $55,600, $1,979,800, and$4,914,000, respectively. Cash paid for interest during fiscal years 2017, 2016, and 2015 totaled $60,600, $180,300, and$174,600, respectively. No interest was capitalized during fiscal years 2017 and 2016. Interest of $3,400 was capitalizedduring fiscal year 2015. Note 19. Concentration of Risk Sales to customers and purchases from vendors are largely governed by individual sales or purchase orders, so thereis no guarantee of future business. In some cases, the Company has more formal agreements with significant customers orvendors, but they are largely administrative in nature and are terminable by either party upon several months or otherwiseshort notice and they typically contain no obligation to make purchases from TESSCO. In the event a significant customerdecides to make its purchases from another source, experiences a significant change in demand internally or from its owncustomer base, becomes financially unstable, or is acquired by another company, the Company’s ability to generate revenuesfrom these customers may be significantly affected, resulting in an adverse effect on its financial position and results ofoperations. The Company is dependent on third-party equipment manufacturers, distributors and dealers for all of its supply ofwireless communications equipment. For fiscal years 2017, 2016, and 2015, sales of products purchased from the Company'stop ten vendors accounted for 41%, 42%, and 41% of total revenues, respectively. In fiscal year 2017, sales of productpurchased from the Company’s largest vendor, Otter Products LLC, accounted for approximately 11% of total revenues andsales of product purchased from CommScope Inc. accounted for approximately 10%. In fiscal year 2016, sales of productpurchased from the Company’s largest vendor, Otter Products LLC, accounted for approximately 15% of total revenues andsales of product purchased from CommScope Inc. accounted for approximately 11%. In fiscal year 2015, sales of productpurchased from the Company’s largest vendor, CommScope Inc., accounted for approximately 14% of revenue. TheCompany is dependent on the ability of its vendors to provide products on a timely basis and on favorable pricing terms. TheCompany believes that alternative sources of supply are available for many of the product types it carries, but not for allproducts offered by the Company. The loss of certain principal suppliers, including Otter Products LLC and CommScopeInc., or of other suppliers whose products may be difficult to source on comparable terms elsewhere, or the loss of one or moreof certain ongoing affinity relationships, would have a material adverse effect on the Company. As noted, the Company's future results could also be negatively impacted by the loss of certain customers, and/orvendor relationships. For fiscal years 2017, 2016, and 2015, sales of products to the Company's top ten customerrelationships accounted for 26%, 22%, and 20% of total revenues, respectively. No customer accounted for more than 10% oftotal revenues in fiscal year 2017, 2016, and 2015. 65 Table of ContentsNote 20. Quarterly Results of Operations (Unaudited) Summarized quarterly financial data for the fiscal years ended March 26, 2017 and March 27, 2016 is presented inthe table below: Fiscal Year 2017 Quarters Ended Fiscal Year 2016 Quarters Ended March 26, December 25, September 25, June 26, March 27, December 27, September 27, June 28, 2017 2016 2016 2016 2016 2015 2015 2015 Revenues $122,602,900 $147,198,400 $134,633,800 $128,860,000 $114,154,100 $139,510,700 $142,353,300 $134,664,000 Cost of goodssold 96,665,300 117,229,800 105,878,200 101,754,000 91,135,200 110,057,300 111,841,600 105,682,100 Gross profit 25,937,600 29,968,600 28,755,600 27,106,000 23,018,900 29,453,400 30,511,700 28,981,900 Selling, generalandadministrativeexpenses 26,890,400 27,860,700 26,709,500 26,955,700 26,202,100 24,742,400 25,865,400 26,122,400 Restructuringcharges 806,600 — — — — — — — Operatingexpenses 27,697,000 27,860,700 26,709,500 26,955,700 26,202,100 24,742,400 25,865,400 26,122,400 (Loss) incomefrom operations (1,759,400) 2,107,900 2,046,100 150,300 (3,183,200) 4,711,000 4,646,300 2,859,500 Interest, net (7,100) 37,100 17,200 11,400 12,400 55,500 47,100 46,300 (Loss) incomebeforeprovision forincome taxes (1,752,300) 2,070,800 2,028,900 138,900 (3,195,600) 4,655,500 4,599,200 2,813,200 Provision forincome taxes (895,000) 843,100 1,034,700 58,400 (1,205,800) 1,768,800 1,850,900 1,117,900 Net (loss)income $(857,300) $1,227,700 $994,200 $80,500 $(1,989,800) $2,886,700 $2,748,300 $1,695,300 Diluted (loss)earnings pershare $(0.10) $0.15 $0.12 $0.01 $(0.24) $0.35 $0.33 $0.20 Cash dividendsdeclared percommon share $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 $0.20 66 Table of ContentsReport of Independent Registered Public Accounting Firm The Board of Directors and Shareholders ofTESSCO Technologies Incorporated We have audited the accompanying consolidated balance sheets of TESSCO Technologies Incorporated and subsidiaries asof March 26, 2017 and March 27, 2016, and the related consolidated statements of income, shareholders' equity and cashflows for each of the three fiscal years in the period ended March 26, 2017. Our audits also included the financial statementschedule listed in the Index at Item 15(b). These financial statements and schedule are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financialposition of TESSCO Technologies Incorporated and subsidiaries at March 26, 2017 and March 27, 2016, and theconsolidated results of their operations and their cash flows for each of the three fiscal years in the period ended March 26,2017, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statementschedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all materialrespects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),TESSCO Technologies Incorporated and subsidiaries’ internal control over financial reporting as of March 26, 2017, basedon criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (2013 framework) and our report dated June 7, 2017 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Baltimore, MarylandJune 7, 2017 67 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A. Controls and Procedures. Disclosure Controls and Procedures We maintain a system of disclosure controls and procedures that is designed to provide reasonable assurance thatinformation, which is required to be disclosed by the Company in the reports that it files or submits under the Securities andExchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in therules and forms of the Securities and Exchange Commission, and is accumulated and communicated to management in atimely manner. Our chief executive officer and chief financial officer have evaluated our disclosure controls and proceduresas of the end of the period covered by this annual report, and have concluded that our disclosure controls and procedures areeffective at the reasonable assurance level. Internal Control over Financial Reporting Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reportingas defined in Rule 13(a)-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our system of internalcontrol is designed to provide reasonable assurance to management and the Board of Directors regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations andmay not prevent or detect misstatements. Therefore, internal control systems determined to be effective can only providereasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may be inadequate because of changes in conditions, or thedegree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our Chairman and Chief ExecutiveOfficer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on theframework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of theTreadway Commission. This evaluation included review of the documentation of controls, evaluation of the designeffectiveness of controls, testing of the operating effectiveness of controls, and the conclusion of this evaluation. Based onthis evaluation, management concluded that our internal control over financial reporting was effective as of March 26, 2017. The effectiveness of our internal control over financial reporting as of March 26, 2017 has been audited by Ernst &Young LLP, an independent registered public accounting firm, as stated in their report which is included within this Item 9Aof Part II of this Annual Report on Form 10-K. Changes in Internal Control over Financial Reporting There has not been any change in our internal control over financial reporting during the fourth quarter of fiscal year2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 68 Table of ContentsReport of Independent Registered Public Accounting Firm The Board of Directors and Shareholders ofTESSCO Technologies Incorporated We have audited TESSCO Technologies Incorporated and subsidiaries’ internal control over financial reporting as of March26, 2017, based on criteria established in Internal Control—Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (2013 framework) (the COSO criteria). TESSCO Technologies Incorporated andsubsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for itsassessment of the effectiveness of internal control over financial reporting included in the accompanying Management’sAnnual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’sinternal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effectiveinternal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing andevaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for ouropinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and thatreceipts and expenditures of the company are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, TESSCO Technologies Incorporated and subsidiaries maintained, in all material respects, effective internalcontrol over financial reporting as of March 26, 2017, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),the consolidated balance sheets of TESSCO Technologies Incorporated and subsidiaries as of March 26, 2017 and March 27,2016, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the threefiscal years in the period ended March 26, 2017 of TESSCO Technologies Incorporated and subsidiaries and our report datedJune 07, 2017 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Baltimore, MarylandJune 07, 2017 69 Table of Contents Item 9B. Other Information. None. Part III Items 10, 11, 12, 13 and 14. The information with respect to the identity and business experience of executive officers of the Company asrequired to be included in Item 10 to this Form 10-K is set forth in Part I of this Form 10-K. The information otherwiserequired by Items 10 through 14 will be contained in a definitive proxy statement for our Annual Meeting of Shareholders,which we anticipate will be filed no later than 120 days after the end of our fiscal year pursuant to Regulation 14A, andaccordingly, these items have been omitted in accordance with General Instruction G (3) to Form 10-K. Part IV Item 15. Exhibits and Financial Statement Schedules. (a)The following documents are filed as part of this report: 1.The following consolidated financial statements are included in Item 8 of this report: Consolidated Balance Sheets as of March 26, 2017 and March 27, 2016Consolidated Statements of Income for the fiscal years ended March 26, 2017, March 27, 2016 and March 29, 2015Consolidated Statements of Changes in Shareholders' Equity for the fiscal years ended March 26, 2017, March 27,2016 and March 29, 2015Consolidated Statements of Cash Flows for the fiscal years ended March 26, 2017, March 27, 2016 and March 29,2015Notes to Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm 2.The following financial statement schedules are required to be filed by Item 8 and paragraph (b) of this Item 15included herewith: Schedule IIValuation and Qualifying Accounts Schedules not listed above have been omitted because the information required to be set forth therein is notapplicable.70 Table of Contents 3.Exhibits 3.1.1Amended and Restated Certificate of Incorporation of the Company filed with the Secretary of State of Delawareon September 29, 1993 (incorporated by reference to Exhibit 3.1.1 to the Company's Registration Statement onForm S‑1 (No. 33‑81834)).3.1.2Certificate of Retirement of the Company filed with the Secretary of State of Delaware on January 13, 1994(incorporated by reference to Exhibit 3.1.2 to the Company's Registration Statement on Form S‑1 (No.33‑81834)).3.1.3Certificate of Amendment to Certificate of Incorporation of the Company filed with the Secretary of State ofDelaware on July 20, 1994 (incorporated by reference to Exhibit 3.1.3 to the Company's Registration Statementon Form S‑1 (No. 33‑81834)).3.1.4Certificate of Amendment to Certificate of Incorporation of the Company filed with the Secretary of State ofDelaware on September 6, 1996 (incorporated by reference to Exhibit 3.1.4 to the Company's Annual Report onForm 10‑K filed for the fiscal year ended March 28, 1997).3.1.5Certificate of Correction filed with the Secretary of State of Delaware on February 7, 2007 to Certificate ofAmendment to Certificate of Incorporation of the Company filed with the Secretary of State of Delaware onSeptember 6, 1996 (incorporated by reference to Exhibit 3.1.5 to the Company’s Quarterly Report on Form 10-Qfiled for the fiscal quarter ended December 24, 2006).3.2.1Sixth Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to theCompany’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 28,2011).3.2.2First Amendment to Sixth Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission onJuly 22, 2011).3.2.3Second Amendment to Sixth Amended and Restated Bylaws of the Company (incorporated by reference toExhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commissionon March 29, 2016)10.1.1Amended and Restated Employment Agreement, dated March 26, 2016, with Robert B. Barnhill, Jr.(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with theSecurities and Exchange Commission on March 31, 2016).10.2.1Team Member Stock Purchase Plan (incorporated by reference to Appendix No. 2 to the Company's DefinitiveProxy Statement filed with the Securities and Exchange Commission on July 15, 1999).10.2.2Form of Restricted Stock Award (incorporated herein by reference to Exhibit 10.3 to the Company’s QuarterlyReport on Form 10-Q filed for the fiscal quarter ended June 26, 2011).10.2.3Form of Restricted Stock Unit Award (incorporated herein by reference to Exhibit 10.1 to the Company’sCurrent Report on Form 8-K, filed with the Securities and Exchange Commission on July 30, 2013).10.2.4Form of Stock Option (incorporated herein by reference to Exhibit 10.1.1 to the Company’s Quarterly Report onForm 10-Q filed for the fiscal quarter ended September 27, 2015).10.3.1Form of TESSCO Technologies Incorporated Performance Share Unit Agreement – Officers and Employees(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed for the fiscalquarter ended June 27, 2004).10.3.2Form of TESSCO Technologies Incorporated Performance Share Unit Agreement – Non Employee Directors(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed for the fiscalquarter ended June 27, 2004).10.3.3TESSCO Technologies Incorporated Third Amended and Restated 1994 Stock and Incentive Plan (incorporatedby reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities andExchange Commission on June 27, 2016).10.4.1Agreement of Lease by and between Atrium Building, LLC and TESSCO Technologies Incorporated(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed for the fiscalquarter ended September 28, 2003).71 Table of Contents10.4.2Third Amendment to Agreement of Lease by and between Atrium Building, LLC and TESSCO TechnologiesIncorporated (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filedwith the Securities and Exchange Commission on February 18, 2011).10.5.1Credit Agreement, dated June 30, 2004, by and among the Company and affiliates, and Wells Fargo Bank,National Association (as successor to Wachovia Bank, National Association), SunTrust Bank and the lendersparty thereto from time to time (Term Loan) (incorporated by reference to Exhibit 10.2 to the Company’sQuarterly Report on Form 10-Q filed for the fiscal quarter ended September 26, 2004).10.5.2Joinder, Assumption, Ratification and Modification Agreement, dated as of August 29, 2006, by and among theCompany, various affiliates of the Company and Wells Fargo Bank, National Association (as successor toWachovia Bank, National Association) and SunTrust Bank, as lenders (Term Loan) (incorporated by reference toExhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed for the fiscal quarter ended September 24,2006).10.5.3Second Amendment, dated as of May 31, 2007, by and among the Company, various affiliates of the Companyand Wells Fargo Bank, National Association (as successor to Wachovia Bank, National Association) andSunTrust Bank, as lenders (Term Loan) (incorporated by reference to Exhibit 10.3 to the Company’s CurrentReport on Form 8-K, filed with the Securities and Exchange Commission on June 6, 2007).10.5.4Joinder, Assumption and Third Amendment, dated as of May 20, 2011, by and among the Company, variousaffiliates of the Company and Wells Fargo Bank, National Association (as successor to Wachovia Bank,National Association) and SunTrust Bank, as lenders (Term Loan) (incorporated by reference to Exhibit 10.7.4to the Company’s Annual Report on Form 10-K filed for the fiscal year ended March 27, 2011).10.5.5Fourth Modification Agreement, dated as of October 7, 2015, by and among the Company and certainsubsidiaries, as borrowers and guarantor, as applicable, Wells Fargo Bank, National Association, as lender andAdministrative Agent, and SunTrust Bank, as lender and Arrangement Agent (Term Loan) (incorporated byreference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and ExchangeCommission on October 13, 2015).10.5.6Term Note of Company and affiliates, dated June 30, 2004, payable to Wells Fargo Bank, National Association(as successor to Wachovia Bank, National Association) and SunTrust Bank (Term Loan) (incorporated byreference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed for the fiscal quarter endedSeptember 26, 2004).10.5.7Guaranty Agreement, dated June 30, 2004, of TESSCO Incorporated, to and for the benefit of Wells Fargo Bank,National Association (as successor to Wachovia Bank, National Association), as agent (Term Loan)(incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed for the fiscalquarter ended September 26, 2004).10.5.8Credit Agreement, dated as of May 31, 2007, by and among the Company and its primary operating subsidiariesas borrowers, and SunTrust Bank and Wells Fargo Bank, National Association (as successor to Wachovia Bank,National Association), as lenders (Revolving Line of Credit Facility) (incorporated by reference to Exhibit 10.1to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 6,2007).10.5.9First Modification Agreement, made effective as of June 30, 2008, to Credit Agreement dated as of May 31,2007, by and among the Company and its primary operating subsidiaries as borrowers, and SunTrust Bank andWells Fargo Bank, National Association (as successor to Wachovia Bank, National Association), as lenders(Revolving Line of Credit Facility) (incorporated herein by reference to Exhibit 10.2 to the Company’s CurrentReport on Form 8-K, filed with the Securities and Exchange Commission on July 7, 2008).10.5.10Second Modification Agreement, made effective as of November 26, 2008, to Credit Agreement dated as of May31, 2007, by and among the Company and its primary operating subsidiaries as borrowers, and SunTrust Bankand Wells Fargo Bank, National Association (as successor to Wachovia Bank, National Association), as lenders(Revolving Line of Credit Facility) (incorporated herein by reference to Exhibit 10.1 to the Company’s CurrentReport on Form 8-K, filed with the Securities and Exchange Commission on December 3, 2008).10.5.11Third Modification Agreement, made effective July 22, 2009, to Credit Agreement dated as of May 31, 2007, byand among the Company and its primary operating subsidiaries as borrowers, and SunTrust Bank and WellsFargo Bank, National Association (as successor to Wachovia Bank, National Association), as lenders(Revolving Line of Credit Facility) (incorporated by reference to Exhibit 10.1 to the Company’s QuarterlyReport on Form 10-Q filed for the fiscal quarter ended June 28, 2009).72 Table of Contents10.5.12Fourth 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 WellsFargo Bank, National Association (as successor to Wachovia Bank, National Association), as lenders(Revolving Line of Credit Facility) (incorporated by reference to Exhibit 10.7.7 to the Company’s AnnualReport on Form 10-K filed for the fiscal year ended March 28, 2010).10.5.13Joinder, Assumption, and Fifth Modification Agreement, made effective May 20, 2011, to Credit Agreementdated as of May 31, 2007, by and among the Company and its primary operating subsidiaries as borrowers, andSunTrust Bank and Wells Fargo Bank, National Association (as successor to Wachovia Bank, NationalAssociation), as lenders (Revolving Line of Credit Facility) (incorporated by reference to Exhibit 10.7.12 to theCompany’s Annual Report on Form 10-K filed for the fiscal year ended March 27, 2011).10.5.14Sixth Modification Agreement, made effective December 30, 2011, to Credit Agreement dated as of May 31,2007, by an among the Company and its primary operating subsidiaries as borrowers, and SunTrust Bank andWells Fargo Bank, National Association (as successor to Wachovia Bank, National Association), as lenders(Revolving Line of Credit Facility) (incorporated by reference to Exhibit 10.1 to the Company’s Current Reporton Form 8-K, filed with the Securities and Exchange Commission on January 5, 2012).10.5.15Seventh Modification Agreement, made effective November 30, 2012, to Credit Agreement dated as of May 31,2007, by and among the Company and certain subsidiaries, as borrowers, and SunTrust and Wells Fargo Bank,National Association, as lenders (Revolving Line of Credit Facility) (incorporated by reference to Exhibit 10.1to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission onDecember 3, 2012).10.5.16Eighth Modification Agreement, made effective December 21, 2012, to Credit Agreement dated as of May 31,2007, by and among the Company and certain subsidiaries, as borrowers, and SunTrust Bank and Wells FargoBank, national Association, as lenders (Revolving Line of Credit Facility) (incorporated by reference to Exhibit10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission onDecember 26, 2012).10.5.17Ninth Modification Agreement, made effective October 16, 2013, to Credit Agreement dated as of May 31,2007, by and among the Company and certain subsidiaries, as borrowers, and SunTrust Bank and Wells FargoBank, National Association, as lenders (Revolving Line of Credit Facility) (incorporated by reference to Exhibit10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission onOctober 18, 2013).10.5.18Tenth Modification Agreement, made effective September 24, 2015, to Credit Agreement dated as of May 31,2007, by and among the Company and certain subsidiaries, as borrowers, and SunTrust Bank and Wells FargoBank, National Association, as lenders (Revolving Line of Credit Facility) (incorporated by reference to Exhibit10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission onSeptember 28, 2015).10.5.19Revolving Credit Note of Company and its primary operating subsidiaries, dated as of May 31, 2007, payable toSunTrust Bank and Wells Fargo Bank, National Association (as successor to Wachovia Bank, NationalAssociation), as lenders (Revolving Line of Credit Facility) (incorporated by reference to Exhibit 10.2 to theCompany’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 6, 2007).10.5.20Credit Agreement dated as of June 24, 2016, among TESSCO Technologies Incorporated, the additionalborrowers party thereto, the Lenders party thereto, and SunTrust Bank, as administrative agent, swingline lenderand an issuing bank (incorporated by reference to Exhibit 10.1 to the Company’s Current report on Form 8-K,filed with the Securities and Exchange Commission on June 24, 2016).10.5.21Guaranty and Security Agreement dated as of June 24, 2016, among TESSCO Technologies Incorporated and itssubsidiaries, the Lenders party thereto, and SunTrust Bank, as administrative agent (incorporated by reference toExhibit 10.2 to the Company’s Current report on Form 8-K, filed with the Securities and Exchange Commissionon June 24, 2016).10.6.1Supplemental Executive Retirement Plan, between the Company and Robert B. Barnhill, Jr., (originally filed asExhibit C to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 (No. 33-81834)) (incorporatedby reference to Exhibit 10.9.1 to the Company’s Annual Report on Form 10-K filed for the fiscal year endedMarch 29, 2009).73 Table of Contents10.6.2Amendment No. 1 to Supplemental Executive Retirement Plan, dated as of December 31, 2008 (incorporated byreference to Exhibit 10.9.2 to the Company’s Annual Report on Form 10-K filed for the fiscal year ended March29, 2009).10.7.1Form of Severance and Restrictive Covenant Agreement entered into between the Company and Douglas A.Rein (incorporated by reference to Exhibit 10.10.1 to the Company's Annual Report on Form 10-K filed for thefiscal year ended March 29, 2009).10.7.2Severance and Restrictive Covenant Agreement, dated May 27, 2014, and entered into between the Companyand Aric Spitulnik (incorporated by reference to Exhibit 10.8.2 to the Company’s Annual Report on Form 10-Kfiled for the fiscal year ended March 30, 2014).10.7.3Form of Severance and Restrictive Covenant Agreement entered into between the Company and each of CraigA. Oldham and Steven K. Tom (incorporated by reference to exhibit 10.4.1 to the Company’s Quarterly Reporton Form 10-Q filed for the fiscal quarter ended June 26, 2016).10.7.4Form of Performance Stock Unit Agreement – Officers and Employees (incorporated by reference to exhibit10.4.1 to the Company’s Quarterly Report on Form 10-Q filed for the fiscal quarter ended June 26, 2016).10.7.5Employment Agreement, dated as of August 29, 2016, by and between the Company and Murray Wright(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with theSecurities and Exchange Commission on September 1, 2016).10.7.6Form of Stock Option to Murray Wright (incorporated by reference to Exhibit 10.1 to the Company’s CurrentReport on Form 8-K, filed with the Securities and Exchange Commission on September 1, 2016).11.1.1*Statement re: Computation of Per Share Earnings.21.1.1*Subsidiaries of the Company.23.1.1*Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.31.1.1*Rule 15d-14(a) Certification of Murray Wright, Chief Executive Officer.31.2.1*Rule 15d-14(a) Certification of Aric Spitulnik, Chief Financial Officer.32.1.1*Section 1350 Certification of Murray Wright, Chief Executive Officer.32.2.1*Section 1350 Certification of Aric Spitulnik, Chief Financial Officer.101.1*The following financial information from TESSCO Technologies Incorporated’s Annual Report on Form 10-Kfor the year ended March 26, 2017 formatted in XBRL: (i) Consolidated Statement of Income for the yearsended March 26, 2017, March 27, 2016 and March 29, 2015; (ii) Consolidated Balance Sheet at March 26,2017 and March 27, 2016; (iii) Consolidated Statement of Cash Flows for the years March 26, 2017 and March27, 2016; and (iv) Notes to Consolidated Financial Statements. *Filed herewith 74 Table of ContentsSchedule II: Valuation and Qualifying Accounts For the fiscal years ended: 2017 2016 2015 Allowance for doubtful accounts: Balance, beginning of period $841,400 $661,900 $1,080,300 Provision for bad debts 674,200 637,100 943,300 Write-offs and other adjustments (733,400) (457,600) (1,361,700) Balance, end of period $782,200 $841,400 $661,900 2017 2016 2015 Inventory Reserve: Balance, beginning of period $6,071,100 $5,780,600 $4,086,100 Inventory reserve expense 3,193,200 3,412,000 4,303,000 Write-offs and other adjustments (2,903,700) (3,121,500) (2,608,500) Balance, end of period $6,360,600 $6,071,100 $5,780,600 75 Table of Contents Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TESSCO Technologies Incorporated By: /s/ Murray Wright Murray Wright, President and Chief Executive Officer June 7, 2017 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Murray Wright President and Chief Executive Officer (principal executive officer) June 7, 2017Murray Wright /s/ Aric Spitulnik Senior Vice President, Chief Financial Officer, and CorporateSecretary (principal financial and accounting officer) June 7, 2017Aric Spitulnik /s/ Robert B. Barnhill, Jr. Chairman of the Board June 7, 2017Robert B. Barnhill, Jr. /s/ Jay G. Baitler Director June 7, 2017Jay G. Baitler /s/ John D. Beletic Director June 7, 2017John D. Beletic /s/ Benn R. Konsynski Director June 7, 2017Benn R. Konsynski /s/ Dennis J. Shaughnessy Director June 7, 2017Dennis J. Shaughnessy /s/ Morton F. Zifferer Director June 7, 2017Morton F. Zifferer 76 Exhibit 11.1.1 Statement re: Computation of Per Share Earnings The information required by this Exhibit is set forth in Note 15 to the Consolidated Financial Statements of theCompany contained in Item 8 of this Report. Exhibit 21.1.1 Subsidiaries of the Registrant Subsidiary State of IncorporationTESSCO Incorporated DelawareWireless Solutions Incorporated MarylandTESSCO Service Solutions, Inc. DelawareTESSCO Communications Incorporated DelawareTESSCO Financial Corporation DelawareTESSCO Business Services, LLC DelawareTESSCO Integrated Solutions, LLC DelawareGW Service Solutions, Inc. DelawareTCPM, Inc. Delaware  Exhibit 23.1.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements of TESSCOTechnologies Incorporated of our reports dated June 7, 2017, with respect to the consolidated financialstatements and schedule of TESSCO Technologies Incorporated, and the effectiveness of internal controlover financial reporting of TESSCO Technologies Incorporated, included in this Annual Report (Form 10-K) of TESSCO Technologies Incorporated for the year ended March 26, 2017: Registration Statements on Form S-8: Name RegistrationNumber Date Filed1994 Stock and Incentive Plan 33-87178 December 7,1994Team Member Stock Purchase Plan 333-95249 January 24, 2000Amended and Restated 1994 Stock and Incentive Plan 333-118177 August 12, 2004Second Amended and Restated 1994 Stock and IncentivePlan 333-158758 April 24, 2009Second Amended and Restated 1994 Stock and IncentivePlan 333-179819 February 29, 2012Third Amended and Restated 1994 Stock and IncentivePlan 333-214457 November 4,2016 /s/ ERNST & YOUNG LLP Baltimore, MarylandJune 7, 2017 1Exhibit 31.1.1 CERTIFICATION I, Murray Wright, certify that:1. I have reviewed this annual report on Form 10-K for the period ended March 26,2017 of TESSCO Technologies Incorporated;2. Based on my knowledge, this report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading with respect to the periodcovered by this report;3. Based on my knowledge, the financial statements, and other financial informationincluded in this report, fairly present in all material respects the financial condition, results of operationsand cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:a) Designed such disclosure controls and procedures, or caused suchdisclosure controls and procedures to be designed under our supervision, to ensure that materialinformation relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;b) Designed such internal control over financial reporting, or caused suchinternal control over financial reporting to be designed under our supervision, to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c) Evaluated the effectiveness of the registrant’s disclosure controls andprocedures and presented in this report our conclusions about the effectiveness of the disclosurecontrols and procedures, as of the end of the period covered by this report based on such evaluation;andd) Disclosed in this report any change in the registrant’s internal control overfinancial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourthfiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our mostrecent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalentfunctions):a) All significant deficiencies and material weaknesses in the design oroperation of internal control over financial reporting which are reasonably likely to adversely affect theregistrant’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or otheremployees who have a significant role in the registrant’s internal control over financial reporting. Date:June 7, 2017By:/s/ Murray Wright Murray Wright President and Chief Executive Officer Exhibit 31.2.1 CERTIFICATION I, Aric Spitulnik, certify that:1. I have reviewed this annual report on Form 10-K for the period ended March 26,2017 of TESSCO Technologies Incorporated;2. Based on my knowledge, this report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading with respect to the periodcovered by this report;3. Based on my knowledge, the financial statements, and other financial informationincluded in this report, fairly present in all material respects the financial condition, results of operationsand cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:a) Designed such disclosure controls and procedures, or caused suchdisclosure controls and procedures to be designed under our supervision, to ensure that materialinformation relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;b) Designed such internal control over financial reporting, or caused suchinternal control over financial reporting to be designed under our supervision, to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c) Evaluated the effectiveness of the registrant’s disclosure controls andprocedures and presented in this report our conclusions about the effectiveness of the disclosurecontrols and procedures, as of the end of the period covered by this report based on such evaluation;andd) Disclosed in this report any change in the registrant’s internal control overfinancial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourthfiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our mostrecent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalentfunctions):a) All significant deficiencies and material weaknesses in the design oroperation of internal control over financial reporting which are reasonably likely to adversely affect theregistrant’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or otheremployees who have a significant role in the registrant’s internal control over financial reporting. Date:June 7, 2017By:/s/ Aric Spitulnik Aric Spitulnik Senior Vice President, Corporate Secretary and Chief Financial Officer Exhibit 32.1.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THESARBANES-OXLEY ACT OF 2002 I, Murray Wright, Jr., Chief Executive Officer of TESSCO Technologies Incorporated(the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.Section 1350, that:1. The Annual Report on Form 10-K of the Company for the year ended March 26,2017 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities ExchangeAct of 1934 (15 U.S.C. 78m); and2. The information contained in the Report fairly presents, in all material respects, thefinancial condition and results of operations of the Company. Date:June 7, 2017By:/s/ Murray Wright Murray Wright The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, asamended, and is not to be incorporated by reference into any filing of the Company, whether madebefore or after the date hereof, regardless of any general incorporation language in such filing. Exhibit 32.2.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THESARBANES-OXLEY ACT OF 2002 I, Aric Spitulnik, Chief Financial Officer of TESSCO Technologies Incorporated (the“Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section1350, that:1. The Annual Report on Form 10-K of the Company for the year ended March 26,2017 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities ExchangeAct of 1934 (15 U.S.C. 78m); and2. The information contained in the Report fairly presents, in all material respects, thefinancial condition and results of operations of the Company. Date:June 7, 2017By:/s/ Aric Spitulnik Aric Spitulnik The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, asamended, and is not to be incorporated by reference into any filing of the Company, whether madebefore or after the date hereof, regardless of any general incorporation language in such filing. Leadership Directors Robert B. Barnhill, Jr. Chairman and Executive Chairman of TESSCO Technologies Incorporated Jay G. Baitler Former Executive Vice President of Staples, Inc., Contract Division John D. Beletic Partner, Oak Capital Partners Benn R. Konsynski, Ph.D. George S. Craft Professor of Business Administration for Information Systems and Operations Management at the Goizueta Business School of Emory University Dennis J. Shaughnessy Retired Chairman of the Board of FTI Consulting Inc. Murray Wright President and Chief Executive Officer of TESSCO Technologies Incorporated Morton F. Zifferer, Jr. Chairman and CEO of New Standard Corporation, a metal products manufacturer Murray Wright President and Chief Executive Officer Charles W. Kriete Senior Vice President of Commercial Sales and Product Marketing Craig A. Oldham Senior Vice President of Strategic Marketing Douglas A. Rein Senior Vice President of Performance Systems and Operations Elizabeth S. Robinson Senior Vice President of Retail Sales and Product Marketing Aric M. Spitulnik Senior Vice President and Chief Financial Officer James R. Gaarder Vice President Gary Ger Vice President Jeffrey A. Kaufman Vice President Cynthia L. King Vice President Steven E. Lehukey Vice President Jeffrey K. Lime Vice President William A. Moten Vice President Marika Patto Vice President Nicholas J. Salatin o Vice President Jeffrey L. Shockey Vice President Matthew Simmons Vice President Mary Beth Smith Vice President Charles Stone Vice President David Strauss Vice President Shareowner Information Annual Meeting The Annual Meeting of Shareowners of TESSCO Technologies Incorporated is scheduled to be held at 9:00 a.m., Thursday, July 27, 2017 at: TESSCO Technologies Incorporated 375 West Padonia Road Timonium, MD 21093 Investor Relations Analysts, investors and shareowners seeking additional information about TESSCO Technologies Incorporated are invited to contact: Sharon Merrill 77 Franklin Street Boston, MA 02110 Telephone: 617.542.5300 Facsimile: 617.423.7272 Internet: www.investors.com Aric M. Spitulnik 375 West Padonia Road Timonium, MD 21093 Telephone: 410.229.1419 Facsimile: 410.229.1669 Email: spitulnik@tessco.com Exchange Commission is available without charge on the SEC website, www.sec.gov, or upon request to the address above. TESSCO on NASDAQ TESSCO’s common stock trades on the NASDAQ Global Market under the symbol TESS. Transfer Agent & Registrar Wells Fargo Shareowner Services P.O. Box 64874 Saint Paul, MN 55164 Corporate Counsel Ballard Spahr LLP Baltimore, MD Independent Public Accounting Firm Ernst & Young LLP Baltimore, MD Corporate Governance The highest ethical standards have always been integral to TESSCO’s culture and business success. Guided by the “TESSCO Way,”each director, officer and team member is expected to observe the highest standards of ethical behavior in the performance of his or her duties for the Company. The Company’s Code of Business Conduct and Ethics can be found in the Investors section of our website, www.tessco.com. From a corporate governance perspective, our seven member Board of Directors includes five independent directors. The four standing committees of the Board of Directors are comprised of independent directors with the exception of Mr. Barnhill, who is a member of the Action-Equal Opportunity Employer M/F/D/V. Forward-Looking Statements This Annual Report contains a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of “may,” “will,” “believes,” “should,” “expects,” “anticipates,” “estimates,” “our relative bargaining power and inability to negotiate favorable terms with our vendors and customers”; “claims against us for breach of intellectual property rights of third parties” and “product liability claims” and similar expressions. Our future results of operations and other forward-looking statements contained in this report involve a number of risks and uncertainties. For a variety of reasons, actual results may differ materially from those described in any such forward-looking statement. Consequently, the reader is cautioned to consider all forward-looking statements in light of the risks to which they are subject. We are not able to identify or control all circumstances that could occur in the future that may adversely affect our business and operating results. In addition to risk elsewhere discussed in our Annual Report on Form 10-K for the fiscal year ended March 26, 2017, included among the risks that could lead to a materially adverse impact on our business or operating results are the termination or non-renewal of limited duration agreements or arrangements with our vendors and affinity partners which are typically terminable by either party upon several months or otherwise relatively short notice; loss of significant customers or relationships, including affinity relationships; loss of customers either directly or indirectly as a result of consolidation among large wireless service carriers and others within the wireless communications industry; the strength of our customers’, vendors’ and affinity partners’ businesses; increasingly negative or prolonged adverse economic conditions, including those adversely affecting consumer confidence or consumer or business spending, or otherwise adversely affecting our vendors or customers, including their access to capital or liquidity or our customers’ demand for or our ability to fund or pay for the purchase of our products and services; our dependence on a relatively small number of suppliers and vendors, which could hamper our ability to maintain appropriate inventory levels and meet customer demand; failure of our information technology system or distribution system; technology changes in the wireless communications industry, which could lead to significant inventory obsolescence and/or our inability to offer key products that our customers demand; third-party freight carrier interruption; increased competition from competitors, including manufacturers or national and regional distributors of the products we sell and the absence of significant barriers to entry which could result in pricing and other pressures on profitability and market share; our relative bargaining power and inability to negotiate favorable terms with our vendors and customers; our inability to access capital and obtain or retain financing as and when needed; transitional and other risks associated with acquisitions of companies that we may undertake in an 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 or perform, anticipated contracts or may otherwise be delayed in realizing or fail to realize anticipated revenues or anticipated savings; our inability to protect certain intellectual property, including systems and technologies on which we rely; claims against us for breach of the intellectual property rights of third parties; product liability claims; and our inability to hire or retain for any reason our key professionals, management and staff. 

Continue reading text version or see original annual report in PDF format above