SOURCE: Tractor Supply Company

Tractor Supply Company

April 20, 2016 16:01 ET

Tractor Supply Company Reports First Quarter Results

Earnings per Share Increased 19.0% to $0.50; Sales Increased 10.2% to $1.47 Billion; Comparable Store Sales Increased 4.9%

BRENTWOOD, TN--(Marketwired - April 20, 2016) - Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retail store chain in the United States, today announced financial results for its first quarter ended March 26, 2016.

First Quarter Results
Net sales increased 10.2% to $1.47 billion from $1.33 billion in the prior year's first quarter. Comparable store sales increased 4.9% compared to a 5.7% increase in the prior year period. The increase in comparable store sales was driven by an increase in both traffic and ticket, with comparable store transaction count increasing 4.2% and average ticket increasing 0.7%. Sales were broad-based, with all of our major product categories and geographic regions generating positive comparable store sales. Solid performance in consumable, usable and edible (C.U.E.) products, specifically pet and livestock consumables benefited sales. Seasonal products including lawn and garden, riding lawn mowers and fencing also performed very well, driven in part by early spring weather in the first quarter of 2016.

Gross profit increased 11.2% to $494.4 million from $444.6 million in the prior year's first quarter, and gross margin improved to 33.7% compared to 33.4% in the prior year period. The increase in gross margin was driven primarily by improved merchandise margin, which was partially offset by increased transportation costs. The improvement in merchandise margin resulted principally from our key margin initiatives of price management, imports and exclusive brands as well as cost negotiations and vendor support programs. 

Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased 9.8% to $386.2 million from $351.8 million in the prior year period. As a percent of net sales, SG&A decreased by 10 basis points to 26.3%. SG&A benefited from the strong comparable store sales increase and effective expense control and payroll management.

Net income increased 16.6% to $67.7 million from $58.0 million and diluted earnings per share increased 19.0% to $0.50 from $0.42 in the first quarter of the prior year.

The Company opened 36 new stores and closed three stores, all of which were Del's stores, in the first quarter of 2016 compared to 41 new store openings and one store closure in the prior year period.

Greg Sandfort, President and Chief Executive Officer, stated, "We are pleased with our results and execution in the first quarter. Comparable store sales increased 4.9% and were balanced across product categories and regions. We know the seasons and weather can influence the timing of when our customers buy certain products, but we also know it is our job to manage the business accordingly. Once again, the team did an excellent job and we believe our first quarter results demonstrate the resiliency of our business model."

Mr. Sandfort continued, "Although we are off to a solid start in the first quarter, we recognize the importance of the spring selling season to our first half performance. We believe we have the inventory, people and processes in place to continue to meet the needs of our customers and drive our business."

Fiscal 2016 Outlook
The Company is reiterating the following guidance for the results of operations expected for fiscal 2016: 

 
Net Sales $6.9 billion - $7.0 billion
Comparable Store Sales 3.5% - 5.0%
Net Income $455 million - $467 million
Earnings per Diluted Share $3.40 - $3.48
Capital   Expenditures $230 million - $250 million
   

Included in this forecast are additional expenses related to the first year of operations for the new Casa Grande, Arizona distribution center and the continued transition of the Company's Del's stores to Tractor Supply stores. The forecast also considers the impact of the additional 53rd week in fiscal 2016. Anticipated capital expenditures include spending to support 115 - 120 new store openings.

Conference Call Information
Tractor Supply Company will be hosting a conference call at 5:00 p.m. Eastern Time today to discuss the quarterly and full year results. The call will be broadcast simultaneously over the Internet on the Company's website at IR.TractorSupply.com.

Please allow extra time prior to the call to visit the site and download the streaming media software required to listen to the Internet broadcast.

A replay of the webcast will also be available at IR.TractorSupply.com shortly after the conference call concludes.

About Tractor Supply Company
At March 26, 2016, Tractor Supply Company operated 1,521 stores in 49 states. The Company's stores are focused on supplying the lifestyle needs of recreational farmers and ranchers and others who enjoy the rural lifestyle, as well as tradesmen and small businesses. Stores are located primarily in towns outlying major metropolitan markets and in rural communities. The Company offers the following comprehensive selection of merchandise: (1) equine, livestock, pet and small animal products, including items necessary for their health, care, growth and containment; (2) hardware, truck, towing and tool products; (3) seasonal products, including heating, lawn and garden items, power equipment, gifts and toys; (4) work/recreational clothing and footwear; and (5) maintenance products for agricultural and rural use.

Forward Looking Statements
As with any business, all phases of the Company's operations are subject to influences outside its control. This information contains certain forward-looking statements, including statements regarding sales and earnings growth, estimated results of operations, capital expenditures, marketing, merchandising and strategic initiatives and new store and distribution center openings in future periods. These forward-looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the finalization of the Company's quarterly financial and accounting procedures, and may be affected by certain risks and uncertainties, any one, or a combination, of which could materially affect the results of the Company's operations. These factors include, without limitation, general economic conditions affecting consumer spending, the timing and acceptance of new products in the stores, the timing and mix of goods sold, purchase price volatility (including inflationary and deflationary pressures), the ability to increase sales at existing stores, the ability to manage growth and identify suitable locations, failure of an acquisition to produce anticipated results, the ability to successfully manage expenses and execute our key gross margin enhancing initiatives, the availability of favorable credit sources, capital market conditions in general, the ability to open new stores in the manner and number currently contemplated, the impact of new stores on our business, competition, weather conditions, the seasonal nature of our business, effective merchandising initiatives and marketing emphasis, the ability to retain vendors, reliance on foreign suppliers, the ability to attract, train and retain qualified employees, product liability and other claims, changes in federal, state or local regulations, potential judgments, fines, legal fees and other costs, breach of information systems or theft of employee or customer data, ongoing and potential future legal or regulatory proceedings, management of our information systems, failure to develop and implement new technologies, the failure of customer-facing technology systems, business disruption including from the implementation of supply chain technologies, effective tax rate changes and results of examination by taxing authorities, the ability to maintain an effective system of internal control over financial reporting, and changes in accounting standards, assumptions and estimates. Forward-looking statements made by or on behalf of the Company are based on knowledge of its business and the environment in which it operates, but because of the factors listed above, actual results could differ materially from those reflected by any forward-looking statements. Consequently, all of the forward-looking statements made are qualified by these cautionary statements and those contained in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. There can be no assurance that the results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business and operations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
 
    FIRST QUARTER ENDED
    March 26, 2016   March 28, 2015
                 
        % of       % of
        Sales       Sales
Net sales   $ 1,467,797   100.0 %   $ 1,331,352   100.0 %
Cost of merchandise sold     973,353   66.3       886,747   66.6  
Gross profit     494,444   33.7       444,605   33.4  
                         
Selling, general and administrative expenses     352,672   24.0       321,476   24.1  
Depreciation and amortization     33,577   2.3       30,282   2.3  
                         
Operating income     108,195   7.4       92,847   7.0  
Interest expense, net     1,125   0.1       866   0.1  
                         
Income before income taxes     107,070   7.3       91,981   6.9  
Income tax expense     39,402   2.7       33,941   2.5  
Net income   $ 67,668   4.6 %   $ 58,040   4.4 %
                         
Net income per share:                        
  Basic   $ 0.51         $ 0.43      
  Diluted   $ 0.50         $ 0.42      
                         
Weighted average shares outstanding:                        
  Basic     133,630           136,347      
  Diluted     134,709           137,735      
                         
Dividends declared per common share outstanding   $ 0.20         $ 0.16      
                         
                         
                         
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
    March 26, 2016     March 28, 2015  
ASSETS            
Current assets:            
  Cash and cash equivalents   $ 74,501     $ 57,133  
  Inventories     1,470,691       1,370,965  
  Prepaid expenses and other current assets     80,858       64,967  
    Total current assets     1,626,050       1,493,065  
                 
Property and equipment:                
  Land     87,005       80,705  
  Buildings and improvements     838,336       713,132  
  Furniture, fixtures and equipment     534,335       466,663  
  Computer software and hardware     187,477       161,884  
  Construction in progress     37,137       52,523  
    Property and equipment, gross     1,684,290       1,474,907  
  Accumulated depreciation and amortization     (828,789 )     (725,155 )
    Property and equipment, net     855,501       749,752  
                 
Goodwill     10,258       10,258  
Deferred income taxes     55,798       49,385  
Other assets     16,921       19,550  
                 
    Total assets   $ 2,564,528     $ 2,322,010  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 582,745     $ 585,551  
  Accrued employee compensation     10,994       9,483  
  Other accrued expenses     178,747       180,829  
  Current portion of long-term debt     10,000       -  
  Current portion of capital lease obligations     1,081       441  
  Income taxes payable     29,830       28,684  
    Total current liabilities     813,397       804,988  
                 
Long-term debt     238,641       60,000  
Capital lease obligations, less current maturities     21,761       8,761  
Deferred rent     86,960       80,946  
Other long-term liabilities     51,066       52,437  
    Total liabilities     1,211,825       1,007,132  
                 
Stockholders' equity:                
  Common stock     1,354       1,347  
  Additional paid-in capital     613,686       544,042  
  Treasury stock     (1,528,892 )     (1,185,030 )
  Retained earnings     2,266,555       1,954,519  
    Total stockholders' equity     1,352,703       1,314,878  
                 
    Total liabilities and stockholders' equity   $ 2,564,528     $ 2,322,010  
                     
                     
                     
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
    Three Months Ended  
    March 26, 2016     March 28, 2015  
Cash flows from operating activities:            
Net income   $ 67,668     $ 58,040  
Adjustments to reconcile net income to net cash provided by operating activities:                
  Depreciation and amortization     33,577       30,282  
  Loss on disposition of property and equipment     80       (47 )
  Share-based compensation expense     5,269       4,999  
  Excess tax benefit of stock options exercised     (3,090 )     (8,181 )
  Deferred income taxes     (604 )     359  
  Change in assets and liabilities:                
    Inventories     (186,316 )     (255,515 )
    Prepaid expenses and other current assets     6,652       1,477  
    Accounts payable     155,496       214,728  
    Accrued employee compensation     (31,690 )     (27,573 )
    Other accrued expenses     (15,879 )     (8,074 )
    Income taxes     31,234       24,429  
    Other     157       1,389  
    Net cash provided by operating activities     62,554       36,313  
Cash flows from investing activities:                
  Capital expenditures     (36,732 )     (48,767 )
  Proceeds from sale of property and equipment     20       265  
    Net cash used in investing activities     (36,712 )     (48,502 )
Cash flows from financing activities:                
  Borrowings under senior credit facility     475,000       110,000  
  Repayments under senior credit facility     (375,000 )     (50,000 )
  Debt issuance costs     (1,380 )     -  
  Excess tax benefit of stock options exercised     3,090       8,181  
  Principal payments under capital lease obligations     (246 )     (90 )
  Repurchase of shares to satisfy tax obligations     (843 )     (1,078 )
  Repurchase of common stock     (99,102 )     (47,945 )
  Net proceeds from issuance of common stock     10,041       20,948  
  Cash dividends paid to stockholders     (26,714 )     (21,828 )
    Net cash (used in) provided by financing activities     (15,154 )     18,188  
Net change in cash and cash equivalents     10,688       5,999  
Cash and cash equivalents at beginning of period     63,813       51,134  
Cash and cash equivalents at end of period   $ 74,501     $ 57,133  
                 
Supplemental disclosures of cash flow information:                
Cash paid during the period for:                
  Interest   $ 791     $ 464  
  Income taxes     8,642       8,979  
                 
Supplemental disclosures of non-cash activities:                
  Property and equipment acquired through capital lease   $ 5,218     $ 4,122  
  Non-cash accruals for construction in progress     15,652       21,181  
                   
                   
                   
Selected Financial and Operating Information
(Unaudited)
    FIRST QUARTER ENDED  
    March 26, 2016     March 28, 2015  
Sales Information:            
Comparable store sales increase     4.9 %     5.7 %
New store sales (% of total sales)     5.3 %     6.2 %
Average transaction value   $ 42.48     $ 42.08  
                 
Comparable store average transaction value increase     0.7 %     0.8 %
Comparable store average transaction count increase     4.2 %     4.8 %
Total selling square footage (000's)     24,498       22,810  
Exclusive brands (% of total sales)     31.7 %     32.2 %
Imports (% of total sales)     12.3 %     11.5 %
                 
Store Count Information:                
Beginning of period     1,488       1,382  
  New stores opened     36       41  
  Stores closed     (3 )     (1 )
End of period     1,521       1,422  
                 
Pre-opening costs (000's)   $ 2,511     $ 2,767  
                 
Balance Sheet Information:                
Average inventory per store (000's) (a)   $ 914.0     $ 905.5  
Inventory turns (annualized)     2.94       3.02  
Share repurchase program:                
  Cost (000's)   $ 99,102     $ 47,945  
  Average purchase price per share   $ 83.70     $ 80.42  
                 
Capital Expenditures (millions):                
New and relocated stores and stores not yet opened   $ 22.5     $ 20.7  
Information technology     6.8       6.5  
Existing stores     4.4       2.7  
Distribution center capacity and improvements     3.0       18.4  
Corporate and other     -       0.5  
Total   $ 36.7     $ 48.8  
(a) Assumes average inventory cost, excluding inventory in transit.
 

Contact Information

  • Anthony F. Crudele
    Chief Financial Officer
    Christine Skold
    Vice President, Investor Relations
    (615) 440-4000

    Investors:
    John Rouleau/Rachel Schacter
    ICR 
    Media:
    Alecia Pulman/Brittany Rae Fraser
    ICR
    (203) 682-8200