SOURCE: Tractor Supply Company

Tractor Supply Company

October 22, 2014 16:01 ET

Tractor Supply Company Reports Third Quarter Results

Earnings per Share Increased 19.6% to $0.55; Sales Increased 12.6% to $1.36 Billion; Comparable Store Sales Increased 5.6%

BRENTWOOD, TN--(Marketwired - October 22, 2014) - Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retail store chain in the United States, today announced financial results for its third fiscal quarter ended September 27, 2014.

Third Quarter 2014 Results
Net sales increased 12.6% to $1.36 billion from $1.21 billion in the third quarter of 2013. Comparable store sales increased 5.6% versus a 7.5% increase in the prior year's third quarter. The increase in comparable store sales was broad based and driven by increases in both traffic and ticket. Comparable store transaction count increased 3.3% and average ticket increased 2.2%. Comparable store sales benefited from favorable weather conditions throughout the quarter, which in turn drove strong performance in consumable, usable and edible (C.U.E.) and seasonal products. Increases in comparable store sales and average ticket were partially offset by deflation, principally in livestock feed, bird feed, lubricants and fencing.

Gross profit increased 11.6% to $464.1 million from $415.7 million in the prior year's third quarter and gross margin rate decreased 30 basis points to 34.1% from 34.4% in the prior-year period. The decrease in gross margin rate resulted primarily from higher transportation costs and the mix of merchandise sold. The decrease in gross margin rate was partially offset by the favorable impact of our key gross margin enhancing initiatives and deflation.

Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased 8.9% to $342.1 million. As a percent of sales, SG&A expenses improved 80 basis points to 25.2% from 26.0% in the third quarter last year. The improvement was primarily attributable to the leverage of store operating costs and incentive compensation provided by the strong comparable store sales growth.

Net income increased 18.3% to $76.6 million from $64.8 million and diluted earnings per share increased 19.6% to $0.55 from $0.46 in the third quarter of the prior year.

The Company opened 30 new stores compared to 23 new store openings in the third quarter of 2013.

Greg Sandfort, President and Chief Executive Officer, stated, "We had a solid third quarter and are pleased with our results. Our sales growth was broad-based and well-balanced across our chain of stores and throughout the quarter. Once again, the team did a great job managing product assortments and inventory levels to address seasonal trends and external factors. This drove healthy comparable store sales increases in both traffic and ticket, which in turn led to strong increases in sales, operating margin and earnings. This represents our 26th consecutive quarter of positive comp transaction counts and is a confirmation of the needs-based nature of our customers and the merchandise we sell to them."

Nine Months Results
Net sales increased 10.1% to $4.13 billion from $3.75 billion in the first nine months of 2013. Comparable store sales increased 3.2% versus a 5.3% increase in the first nine months of 2013. Gross profit increased 10.7% to $1.41 billion from $1.27 billion and gross margin increased 20 basis points to 34.2% of sales from 34.0% of sales in the first nine months of 2013.

Selling, general and administrative expenses, including depreciation and amortization, increased 10.2% to $999.0 million, and remained flat as a percent of sales at 24.2%.

Net income increased 11.4% to $258.8 million from $232.4 million and net income per diluted share increased 12.8% to $1.85 from $1.64 for the first nine months of 2013.

The Company opened 85 new stores compared to 71 new store openings during the first nine months of 2013.

Company Outlook
The Company is raising its fiscal year 2014 sales and earnings per share outlook to the high end of the previously provided ranges of $5.62 billion to $5.70 billion in net sales, 2.5% to 4.0% in comparable store sales and $2.54 to $2.62 in diluted earnings per share. Capital expenditures in fiscal 2014, which include spending to support 102 to 106 new store openings and the opening of the Company's new Store Support Center, are now expected to range between $190 million to $200 million, compared to the previous range of $220 million to $230 million. The targeted range of new store openings in fiscal 2014 is unchanged from the Company's previous outlook.

Conference Call Information
Tractor Supply Company will be hosting a conference call at 5:00 p.m. Eastern Time today to discuss the quarterly results. The call will be broadcast simultaneously over the Internet on the Company's website at TractorSupply.com and can be accessed under the link "Investor Relations." The webcast will be archived shortly after the conference call concludes and will be available through November 5, 2014.

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.

About Tractor Supply Company
At September 27, 2014, Tractor Supply Company operated 1,361 stores in 48 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 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 and new store 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 customer data, ongoing and potential future legal or regulatory proceedings, management of our information systems, failure to secure or 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, 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.

(Financial tables to follow)

 
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
 
   THIRD QUARTER ENDED   NINE MONTHS ENDED  
   September 27, 2014   September 28, 2013   September 27, 2014   September 28, 2013  
                              
      % of      % of      % of      % of  
      Sales      Sales      Sales      Sales  
Net sales  $1,359,950  100.0 % $1,208,090  100.0 % $4,127,461  100.0 % $3,749,695  100.0 %
Cost of merchandise sold   895,881  65.9    792,424  65.6    2,716,641  65.8    2,475,798  66.0  
Gross profit   464,069  34.1    415,666  34.4    1,410,820  34.2    1,273,897  34.0  
                                  
Selling, general and administrative expenses   312,669  23.0    287,859  23.8    914,528  22.2    833,269  22.2  
Depreciation and amortization   29,387  2.2    26,137  2.2    84,521  2.0    73,056  2.0  
                                  
Operating income   122,013  8.9    101,670  8.4    411,771  10.0    367,572  9.8  
Interest expense, net   505  -    350  -    1,267  -    1,085  -  
                                  
Income before income taxes   121,508  8.9    101,320  8.4    410,504  10.0    366,487  9.8  
Income tax expense   44,905  3.3    36,553  3.0    151,681  3.7    134,134  3.6  
Net income  $76,603  5.6 % $64,767  5.4 % $258,823  6.3 % $232,353  6.2 %
                                  
Net income per share:                                 
 Basic  $0.56      $0.46      $1.87      $1.67     
 Diluted  $0.55      $0.46      $1.85      $1.64     
                                  
Weighted average shares outstanding:                                 
 Basic   137,367       139,524       138,293       139,304     
 Diluted   138,863       141,726       140,002       141,689     
                                  
Dividends declared per common share outstanding  $0.16      $0.13      $0.45      $0.36     
                         
                         
  
Condensed Consolidated Balance Sheets 
(Unaudited) 
(in thousands) 
  
   September 27, 2014   September 28, 2013  
ASSETS           
Current assets:           
 Cash and cash equivalents  $47,510   $45,988  
 Inventories   1,295,824    1,142,013  
 Prepaid expenses and other current assets   49,936    45,794  
 Deferred income taxes   33,317    19,823  
  Total current assets   1,426,587    1,253,618  
            
Property and equipment:           
 Land   73,424    72,225  
 Buildings and improvements   684,700    556,153  
 Furniture, fixtures and equipment   440,314    395,159  
 Computer software and hardware   158,480    141,986  
 Construction in progress   25,015    55,022  
    1,381,933    1,220,545  
 Accumulated depreciation and amortization   (675,132 )  (586,149 )
  Property and equipment, net   706,801    634,396  
            
Goodwill   10,258    10,258  
Deferred income taxes   24,929    5,283  
Other assets   20,123    15,751  
            
  Total assets  $2,188,698   $1,919,306  
            
LIABILITIES AND STOCKHOLDERS' EQUITY           
Current liabilities:           
 Accounts payable  $483,042   $403,521  
 Accrued employee compensation   19,530    28,398  
 Other accrued expenses   154,631    136,234  
 Current portion of capital lease obligations   125    39  
 Income taxes payable   19,014    2,323  
  Total current liabilities   676,342    570,515  
            
Revolving credit loan   150,000    40,000  
Capital lease obligations, less current maturities   3,048    1,214  
Deferred rent   78,356    76,914  
Other long-term liabilities   50,745    46,152  
  Total liabilities   958,491    734,795  
            
Stockholders' equity:           
 Common stock   1,337    1,326  
 Additional paid-in capital   483,804    429,144  
 Treasury stock   (1,082,970 )  (799,773 )
 Retained earnings   1,828,036    1,553,814  
  Total stockholders' equity   1,230,207    1,184,511  
            
  Total liabilities and stockholders' equity  $2,188,698   $1,919,306  
         
         
  
Condensed Consolidated Statements of Cash Flows 
(Unaudited) 
(in thousands) 
  
   NINE MONTHS ENDED  
   September 27, 2014   September 28, 2013  
Cash flows from operating activities:           
Net income  $258,823   $232,353  
Adjustments to reconcile net income to net cash provided by operating activities:           
 Depreciation and amortization   84,521    73,056  
 Loss (gain) on disposition of property and equipment   249    (170 )
 Stock compensation expense   12,114    10,349  
 Excess tax benefit of stock options exercised   (7,333 )  (31,626 )
 Deferred income taxes   (28,316 )  (3,485 )
 Change in assets and liabilities:           
  Inventories   (316,516 )  (233,897 )
  Prepaid expenses and other current assets   7,423    6,014  
  Accounts payable   166,555    83,129  
  Accrued employee compensation   (31,043 )  (20,002 )
  Other accrued expenses   (379 )  (12,982 )
  Income taxes payable   16,923    (9,410 )
  Other   4,543    5,281  
  Net cash provided by operating activities   167,564    98,610  
Cash flows from investing activities:           
 Capital expenditures   (125,425 )  (156,791 )
 Proceeds from sale of property and equipment   309    331  
 Decrease in restricted cash   -    8,400  
  Net cash used in investing activities   (125,116 )  (148,060 )
Cash flows from financing activities:           
 Borrowings under revolving credit agreement   260,000    175,000  
 Repayments under revolving credit agreement   (110,000 )  (135,000 )
 Excess tax benefit of stock options exercised   7,333    31,626  
 Principal payments under capital lease obligations   (57 )  (27 )
 Repurchase of shares to satisfy tax obligations   (4,766 )  (3,942 )
 Repurchase of common stock   (244,382 )  (90,601 )
 Net proceeds from issuance of common stock   16,461    30,024  
 Cash dividends paid to stockholders   (62,270 )  (50,272 )
  Net cash used in financing activities   (137,681 )  (43,192 )
Net decrease in cash and cash equivalents   (95,233 )  (92,642 )
Cash and cash equivalents at beginning of period   142,743    138,630  
Cash and cash equivalents at end of period  $47,510   $45,988  
            
Supplemental disclosures of cash flow information:           
Cash paid during the period for:           
 Interest  $546   $406  
 Income taxes   162,073    148,519  
            
Supplemental disclosures of non-cash activities:           
 Property acquired through capital lease  $1,988   $-  
 Non-cash accruals for construction in progress   7,654    11,798  
         
         
  
Selected Financial and Operating Information 
(Unaudited) 
  
   THIRD QUARTER ENDED   NINE MONTHS ENDED  
   September 27, 2014   September 28, 2013   September 27, 2014   September 28, 2013  
Sales Information:                     
Comparable store sales increase   5.6 %  7.5 %  3.2 %  5.3 %
New store sales (% of total sales)   6.3 %  5.1 %  6.3 %  5.2 %
Average transaction value  $43.75   $42.68   $44.20   $44.11  
                      
Comparable store average transaction value (decrease) increase   2.2 %  0.8 %  (0.1 )%  0.6 %
Comparable store average transaction count increase   3.3 %  6.7 %  3.3 %  4.6 %
Total selling square footage (000's)   21,821    19,983    21,821    19,983  
                      
Store Count Information:                     
Beginning of period   1,331    1,223    1,276    1,176  
 New stores opened   30    23    85    71  
 Stores closed   -    (1
)  -    (2 )
End of period   1,361    1,245    1,361    1,245  
                      
Pre-opening costs (000's)  $2,866   $2,385   $7,135   $5,743  
                      
Balance Sheet Information:                     
Average inventory per store (000's) (a)  $879.5   $848.4   $879.5   $848.4  
Inventory turns (annualized)   3.12    3.03    3.24    3.21  
Share repurchase program:                     
 Cost (000's)  $97,385   $21,297   $244,382   $90,601  
 Average purchase price per share  $61.86   $60.35   $64.36   $51.73  
                      
Capital Expenditures (millions):                     
New and relocated stores and stores not yet opened  $23.1   $21.6   $62.7   $51.5  
Existing stores   7.3    7.6    16.0    13.1  
Information technology   6.3    8.1    18.4    22.8  
Corporate and other   5.9    12.9    26.7    25.0  
Distribution center capacity and improvements   0.7    7.8    1.6    40.9  
Purchase of previously leased stores   -    0.2    -    3.5  
Total  $43.3   $58.2   $125.4   $156.8  
                 
(a)Assumes average inventory cost, excluding inventory in transit.
  
  

Contact Information

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

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