SOURCE: Tractor Supply Company

Tractor Supply Company

October 21, 2015 16:01 ET

Tractor Supply Company Reports Third Quarter Results

Earnings per Share Increased 16.4% to $0.64; Sales Increased 8.5% and Comparable Store Sales Increased 2.9%; Net Income Increased 14.0%

BRENTWOOD, TN--(Marketwired - October 21, 2015) - Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retail store chain in the United States, today announced financial results for its third quarter ended September 26, 2015.

Third Quarter Results
Net sales increased 8.5% to $1.48 billion from $1.36 billion in the prior year's third quarter. Comparable store average transaction counts increased for the 30th consecutive quarter. Comparable store sales increased 2.9% from the prior year's third quarter driven by strong performance in consumable, usable and edible (C.U.E.) products, principally in the pet and animal categories, and increased sales in certain spring and summer categories such as trailers and fencing. The strong sales results in these categories were partially offset by softness in the fall seasonal sales cycle later in the quarter due to warmer weather in the north.

Gross profit increased 10.4% to $512.2 million from $464.1 million in the prior year's third quarter. As a percent of sales, gross margin increased 60 basis points to 34.7%. The increase in gross margin resulted from strong price and markdown management, as well as lower fuel costs, which more than offset the stem mile increase from the Company's western store expansion.

Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased 9.1% to $373.0 million compared to prior year's third quarter. As a percent of sales, SG&A expenses increased 10 bps to 25.3%. This increase was mainly related to deleverage in rent and other occupancy costs at the stores and incremental costs associated with two new mixing centers and a new distribution facility in Casa Grande, Arizona.

Net income increased 14.0% to $87.3 million from $76.6 million and diluted earnings per share increased 16.4% to $0.64 from $0.55 in the third quarter of the prior year.

The Company opened 30 new stores and closed three stores, two of which were Del's stores, in the third quarter of 2015 compared to 30 new store openings and no store closures in the prior year's third quarter.

Greg Sandfort, President and Chief Executive Officer, stated, "Overall, we are pleased with our third quarter results, particularly with our performance in C.U.E. products. The past two years of strong spring and summer sales presented us with a challenging quarter, but once again, our team did a great job of positioning the assortments to take advantage of the extended season. The warmer temperatures in early fall did impact late third quarter sales; however, we believe we have the appropriate assortments and marketing plans in place to meet our customers' needs as the winter season progresses."

First Nine Months Results
Net sales increased 11.0% to $4.58 billion from $4.13 billion in the first nine months of 2014. Comparable store sales increased 4.7% versus a 3.2% increase in the first nine months of 2014. Gross profit increased 12.1% to $1.58 billion from $1.41 billion and gross margin increased 30 basis points to 34.5% of sales from 34.2% of sales in the first nine months of 2014.

Selling, general and administrative expenses, including depreciation and amortization, increased 10.6% to $1.10 billion, and decreased as a percent of sales to 24.1% compared to 24.2% for the first nine months of 2014.

Net income increased 15.4% to $298.7 million from $258.8 million and net income per diluted share increased 17.8% to $2.18 from $1.85 for the first nine months of 2014.

The Company opened 88 new stores and closed five stores, three of which were Del's stores, in the first nine months of 2015 compared to 85 new store openings and no store closures during the first nine months of 2014.

Fiscal 2015 Outlook
Based upon third quarter results, the Company is tightening its fiscal 2015 guidance ranges as follows:

     
   Updated  Previous
Net Sales  $6.28 billion - $6.33 billion  $6.25 billion - $6.33 billion
Comparable Store Sales  4.0% - $4.5%  3.5% - 4.5%
Net Income  $413 million - $420 million  $412 million - $422 million
Earnings per Diluted Share  $3.02 - $3.08  $3.00 - $3.08
     

The Company continues to expect capital expenditures to be consistent with the prior quarter guidance ranging between $220 million and $230 million. Capital expenditures include spending to support approximately 114 new store openings and construction of a new Southwest distribution center in Casa Grande, Arizona which began receiving product in October 2015 and will begin shipping to stores in late 2015.

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 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 September 26, 2015, Tractor Supply Company operated 1,465 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, 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 26, 2015   September 27, 2014   September 26, 2015   September 27, 2014  
                              
      % of      % of      % of      % of  
      Sales      Sales      Sales      Sales  
Net sales  $1,475,645  100.0 % $1,359,950  100.0 % $4,579,897  100.0 % $4,127,461  100.0 %
Cost of merchandise sold   963,397  65.3    895,881  65.9    2,997,724  65.5    2,716,641  65.8  
Gross profit   512,248  34.7    464,069  34.1    1,582,173  34.5    1,410,820  34.2  
                                  
Selling, general and administrative expenses   342,891  23.2    312,669  23.0    1,014,209  22.1    914,528  22.2  
Depreciation and amortization   30,149  2.1    29,387  2.2    90,744  2.0    84,521  2.0  
                                  
Operating income   139,208  9.4    122,013  8.9    477,220  10.4    411,771  10.0  
Interest expense, net   782  -    505  -    2,480  -    1,267  -  
                                  
Income before income taxes   138,426  9.4    121,508  8.9    474,740  10.4    410,504  10.0  
Income tax expense   51,114  3.5    44,905  3.3    176,057  3.9    151,681  3.7  
Net income  $87,312  5.9 % $76,603  5.6 % $298,683  6.5 % $258,823  6.3 %
                                  
Net income per share:                                 
 Basic  $0.64      $0.56      $2.20      $1.87     
 Diluted  $0.64      $0.55      $2.18      $1.85     
                                  
Weighted average shares outstanding:                                 
 Basic   135,525       137,367       135,997       138,293     
 Diluted   136,741       138,863       137,292       140,002     
                                  
Dividends declared per common share outstanding  $0.20      $0.16      $0.56      $0.45     
  
  
Condensed Consolidated Balance Sheets 
(Unaudited) 
(in thousands) 
      
  September 26, 2015   September 27, 2014  
ASSETS          
Current assets:          
 Cash and cash equivalents $51,352   $47,510  
 Inventories  1,414,562    1,295,824  
 Prepaid expenses and other current assets  64,822    49,936  
 Deferred income taxes  42,628    33,317  
  Total current assets  1,573,364    1,426,587  
           
Property and equipment:          
 Land  86,197    73,424  
 Buildings and improvements  750,170    684,700  
 Furniture, fixtures and equipment  489,088    440,314  
 Computer software and hardware  172,443    158,480  
 Construction in progress  85,531    25,015  
   1,583,429    1,381,933  
 Accumulated depreciation and amortization  (774,772 )  (675,132 )
  Property and equipment, net  808,657    706,801  
           
Goodwill  10,258    10,258  
Deferred income taxes  29,915    24,929  
Other assets  18,392    20,123  
           
  Total assets $2,440,586   $2,188,698  
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
 Accounts payable $527,143   $483,042  
 Accrued employee compensation  27,449    19,530  
 Other accrued expenses  192,335    154,631  
 Current portion of capital lease obligations  540    125  
 Income taxes payable  18,255    19,014  
  Total current liabilities  765,722    676,342  
           
Revolving credit loan  190,000    150,000  
Capital lease obligations, less current maturities  10,746    3,048  
Deferred rent  82,905    78,356  
Other long-term liabilities  53,953    50,745  
  Total liabilities  1,103,326    958,491  
           
Stockholders' equity:          
 Common stock  1,351    1,337  
 Additional paid-in capital  576,175    483,804  
 Treasury stock  (1,381,041 )  (1,082,970 )
 Retained earnings  2,140,775    1,828,036  
  Total stockholders' equity  1,337,260    1,230,207  
           
  Total liabilities and stockholders' equity $2,440,586   $2,188,698  
  
  
Condensed Consolidated Statements of Cash Flows 
(Unaudited) 
(in thousands) 
    
   NINE MONTHS ENDED  
   September 26, 2015    September 27, 2014  
Cash flows from operating activities:            
Net income  $298,683    $258,823  
Adjustments to reconcile net income to net cash provided by operating activities:            
 Depreciation and amortization   90,744     84,521  
 Loss on disposition of property and equipment   115     249  
 Share-based compensation expense   14,837     12,114  
 Excess tax benefit of stock options exercised   (16,994 )   (7,333 )
 Deferred income taxes   (22,799 )   (28,316 )
 Change in assets and liabilities:            
  Inventories   (299,112 )   (316,516 )
  Prepaid expenses and other current assets   1,622     7,423  
  Accounts payable   156,320     166,555  
  Accrued employee compensation   (9,607 )   (31,043 )
  Other accrued expenses   882     (379 )
  Income taxes payable   22,813     16,923  
  Other   5,950     4,543  
  Net cash provided by operating activities   243,454     167,564  
Cash flows from investing activities:            
 Capital expenditures   (163,468 )   (125,425 )
 Proceeds from sale of property and equipment   371     309  
  Net cash used in investing activities   (163,097 )   (125,116 )
Cash flows from financing activities:            
 Borrowings under revolving credit agreement   525,000     260,000  
 Repayments under revolving credit agreement   (335,000 )   (110,000 )
 Excess tax benefit of stock options exercised   16,994     7,333  
 Principal payments under capital lease obligations   (318 )   (57 )
 Repurchase of shares to satisfy tax obligations   (2,998 )   (4,766 )
 Repurchase of common stock   (243,956 )   (244,382 )
 Net proceeds from issuance of common stock   36,354     16,461  
 Cash dividends paid to stockholders   (76,215 )   (62,270 )
  Net cash used in financing activities   (80,139 )   (137,681 )
Net change in cash and cash equivalents   218     (95,233 )
Cash and cash equivalents at beginning of period   51,134     142,743  
Cash and cash equivalents at end of period  $51,352    $47,510  
             
Supplemental disclosures of cash flow information:            
Cash paid during the period for:            
 Interest  $1,694    $546  
 Income taxes   175,485     162,073  
             
Supplemental disclosures of non-cash activities:            
 Property and equipment acquired through capital lease  $6,434    $1,988  
 Non-cash accruals for construction in progress   23,731     7,654  
  
  
Selected Financial and Operating Information 
(Unaudited) 
       
    THIRD QUARTER ENDED    NINE MONTHS ENDED  
    September 26, 2015    September 27, 2014    September 26, 2015    September 27, 2014  
Sales Information:                         
Comparable store sales increase    2.9 %   5.6 %   4.7 %   3.2 %
New store sales (% of total sales)    5.3 %   6.3 %   5.7 %   6.3 %
Average transaction value   $43.48    $43.75    $44.53    $44.20  
                          
Comparable store average transaction value (decrease) increase    (0.9 )%   2.2 %   0.5 %   (0.1 )%
Comparable store average transaction count increase    3.8 %   3.3 %   4.3 %   3.3 %
Total selling square footage (000's)    23,538     21,821     23,538     21,821  
                          
Store Count Information:                         
Beginning of period    1,438     1,331     1,382     1,276  
 New stores opened    30     30     88     85  
 Stores closed    (3 )   -     (5 )   -  
End of period    1,465     1,361     1,465     1,361  
                          
Pre-opening costs (000's)   $3,027    $2,866    $7,585    $7,135  
                          
Balance Sheet Information:                         
Average inventory per store (000's) (a)   $893.7    $879.5    $893.7    $879.5  
Inventory turns (annualized)    3.04     3.12     3.23     3.24  
Share repurchase program:                         
 Cost (000's)   $119,416    $97,385    $243,956    $244,382  
 Average purchase price per share   $86.61    $61.86    $85.57    $64.36  
                          
Capital Expenditures (millions):                         
New and relocated stores and stores not yet opened   $30.2    $23.1    $66.9    $62.7  
Distribution center capacity and improvements    21.1     0.7     61.3     1.6  
Information technology    8.7     6.3     20.8     18.4  
Existing stores    6.4     7.3     13.8     16.0  
Corporate and other    0.1     5.9     0.7     26.7  
Total   $66.5    $43.3    $163.5    $125.4  
(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