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Tractor Supply Company Reports Second Quarter Results

July 25, 2012

BRENTWOOD, Tenn., July 25, 2012 /PRNewswire/ — Tractor Supply Company (NASDAQ: TSCO), the largest retail farm and ranch store chain in the United States, today announced financial results for its second fiscal quarter ended June 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120604/MM18615LOGO)

Second Quarter Results
Net sales increased 9.6% to $1.29 billion from $1.18 billion in the prior year’s second quarter. Same-store sales increased 3.2% compared to a 4.6% increase in the prior-year period. The same-store sales increase was driven primarily by continued strong results in key consumable, usable and edible (C.U.E.) products, principally animal- and pet-related merchandise. The Company estimates that approximately $38 million of sales were pulled forward into the first quarter from the second quarter as a result of early spring weather, which is at the high end of the previously communicated range.

Each quarter of fiscal 2012 starts one week later than the same quarter of fiscal 2011 due to the Company’s 2011 fiscal year having 53 weeks versus the normal 52 weeks. Adjusting for the one-week calendar shift, same-store sales for the second quarter of 2011 increased 7.1%. Same-store sales for the four quarters and full year of 2011, adjusted for the one-week calendar shift, are presented in the attached table of Selected Financial and Operating Information.

Gross margin dollars increased 12.2% to $451.5 million from $402.5 million in the prior year’s second quarter. As a percent of sales, gross margin increased to 34.9% from 34.1% in the prior year. The increase in gross margin as a percent of sales was primarily driven by the favorable impact of a lower percent of sales mix of low margin, big ticket seasonal and emergency response products.

Selling, general and administrative expenses, including depreciation and amortization, improved slightly to 21.8% of sales compared to 21.9% of sales in the prior year’s second quarter. The improvement as a percent of sales was primarily attributable to expense control with respect to store personnel and other operating costs.

Net income for the quarter was $106.6 million, or $1.45 per diluted share, compared to net income of $91.2 million, or $1.23 per diluted share, in the second quarter of the prior year.

The Company opened 18 new stores compared to 16 new store openings in the prior year’s second quarter.

Jim Wright, Chairman and Chief Executive Officer, stated, “We are pleased with our ability to generate double-digit EPS growth during the second quarter, while operating in a stagnant economy and navigating weather shifts and unfavorable drought conditions. The pull-forward of spring category demand into the first quarter from the second quarter was at the high end of our previously communicated range, while all core C.U.E. businesses posted solid increases above last year. Our operating performance and 17th consecutive quarter of comp transaction count increases are testaments to the stability we have built in our business and continue to demonstrate the progress we are making on many of our key initiatives. We remain committed to our strategy of providing exceptional value to our customers, while we continue to evolve our assortments and the in-store experience.”

First Six Months Results
Net sales increased 14.8% to $2.31 billion from $2.01 billion in the first six months of 2011. Same-store sales increased 6.7% compared to a 7.0% increase in the first six months of 2011. Gross margin dollars increased 16.0% to $784.3 million, or 33.9% of sales, compared to $676.1 million, or 33.6% of sales, in the first six months of 2011.

Selling, general and administrative expenses, including depreciation and amortization, increased 9.3% to $550.0 million, but improved as a percent of sales to 23.8% compared to 25.0% for the first six months of 2011.

Net income was $146.9 million, or $2.00 per diluted share, compared to net income of $109.5 million, or $1.47 per diluted share, for the first six months of 2011.

The Company opened 51 new stores and closed one store in the first six months of 2012 compared to 42 new store openings during the first six months of 2011.

Company Outlook
Net sales for the full-year 2012 are now expected to range between $4.58 billion and $4.65 billion compared to the Company’s previously expected range of $4.61 billion to $4.68 billion. Same-store sales for the year are now expected to increase 3.5% to 5.0% compared to the prior expectation for an increase of 4.0% to 5.5%. Based on stronger than expected net income per diluted share for the second quarter, the Company now anticipates net income per diluted share for the full-year 2012 will range between $3.58 and $3.66, compared to its previous guidance of $3.52 to $3.60.

Mr. Wright concluded, “Our second quarter performance shows the underlying strength of our core businesses, as well as our ability to manage through and respond to a wide array of variables. Our team is actively managing the product assortment to meet customer needs in the affected markets as the drought continues to spread and intensify. As demonstrated in the past, we have the ability to effectively react to seasonal variances. Looking to the second half of 2012, we remain energized about the opportunities we see ahead and will continue to build on the progress we have made in the areas of inventory management, merchandise allocation and regionalization. We have built a stable and differentiated business that serves a unique niche in the retail marketplace.”

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 homepage 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 August 8, 2012.

About Tractor Supply Company
At June 30, 2012, Tractor Supply Company operated 1,135 stores in 45 states. The Company’s stores are focused on supplying the lifestyle needs of recreational farmers and ranchers. The Company also serves the maintenance needs of those who enjoy the rural lifestyle, as well as tradesmen and small businesses. Stores are located in towns outlying major metropolitan markets and in rural communities. The Company offers the following comprehensive selection of merchandise: (1) equine, 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) maintenance products for agricultural and rural use; and (5) work/recreational clothing and footwear.

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 estimated results of operations 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 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, the ability to manage expenses, the availability of favorable credit sources, capital market conditions in general, failure 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 privacy, 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 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)
                                                                                                                ---------------------------------------

                                                Second Quarter Ended                                             Six Months Ended
                                                --------------------                                             ----------------
                                June 30, 2012                           June 25, 2011                      June 30, 2012                             June 25, 2011
                                -------------                           -------------                      -------------                             -------------

                                             % of                                 % of                             % of                                   % of
                                             Sales                                Sales                            Sales                                  Sales
                                             -----                                -----                            -----                                  -----
    Net sales                    $1,291,899                      100.0%                         $1,178,363                    100.0%                               $2,312,316     100.0%              $2,014,939   100.0%
    Cost of merchandise
     sold               840,438                          65.1                     775,866                    65.9                     1,528,055                          66.1 1,338,836          66.4
                        -------                          ----                     -------                    ----                     ---------                          ---- ---------          ----
    Gross margin        451,461                          34.9                     402,497                    34.1                       784,261                          33.9   676,103          33.6

    Selling, general
     and administrative
     expenses           259,184                          20.1                     239,405                    20.3                       505,852                          21.9   465,980          23.1
    Depreciation and
     amortization        22,433                           1.7                      18,829                     1.6                        44,172                           1.9    37,094           1.9
                         ------                           ---                      ------                     ---                        ------                           ---    ------           ---

    Income from
     operations         169,844                          13.1                     144,263                    12.2                       234,237                          10.1   173,029           8.6
    Interest expense,
     net                     31                                     -                      217                                  -                             614                  -           460                 -
                            ---                                   ---                      ---                                ---                             ---                ---           ---               ---

    Income before
     income taxes       169,813                          13.1                     144,046                    12.2                       233,623                          10.1   172,569           8.6
    Income tax expense   63,192                           4.8                      52,886                     4.5                        86,674                           3.7    63,074           3.2
                                                          ---                                                                            ------                           ---
    Net income                     $106,621                        8.3%                            $91,160                      7.7%                                 $146,949       6.4%                $109,495     5.4%
                                   ========                        ===                             =======                      ===                                  ========       ===                 ========     ===

    Net income per
     share:
    Basic                             $1.48                                               $1.27                                                    $2.05                                 $1.51
                                      =====                                               =====                                                    =====                                 =====
    Diluted                           $1.45                                               $1.23                                                    $2.00                                 $1.47
                                      =====                                               =====                                                    =====                                 =====

    Weighted average
     shares outstanding
     (000's):
    Basic                71,814                                           72,007                                    71,704                                             72,368
    Diluted              73,488                                           74,180                                    73,491                                             74,566

    Dividends declared
     per common share
     outstanding                      $0.20                                               $0.12                                                    $0.32                                 $0.19
                                      =====                                               =====                                                    =====                                 =====


                                               Condensed Consolidated Balance Sheets
                                                            (Unaudited)
                                                           (in thousands)
                                                           -------------

                                                       June 30, 2012                    June 25, 2011
                                                       -------------                    -------------
                                 ASSETS
    Current assets:
    Cash and cash equivalents                                            $179,100                          $185,517
    Restricted cash                                            8,800                             21,870
    Inventories                                              946,934                            875,483
    Prepaid expenses and other current
     assets                                                   56,331                             46,363
    Deferred income taxes                                      7,084                                  -
                                                               -----                                ---
    Total current assets                                   1,198,249                          1,129,233

    Property and equipment:
    Land                                                      41,821                             31,146
    Buildings and improvements                               492,379                            395,700
    Furniture, fixtures and equipment                        330,562                            275,832
    Computer software and hardware                           117,521                            103,541
    Construction in progress                                  16,024                             47,278
                                                              ------                             ------
                                                             998,307                            853,497
    Accumulated depreciation and
     amortization                                           (497,278)                         (421,883)
                                                            --------                           --------
    Property and equipment, net                              501,029                            431,614

    Goodwill                                                  10,258                             10,258
    Other assets                                              12,876                             11,758
                                                              ------                             ------

    Total assets                                                       $1,722,412                        $1,582,863
                                                                       ==========                        ==========

                  LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Accounts payable                                                     $314,757                          $351,763
    Accrued employee compensation                             29,325                             19,317
    Other accrued expenses                                   126,445                            114,879
    Current portion of capital lease
     obligations                                                  35                                 33
    Income taxes payable                                      64,160                             42,431
    Deferred income taxes                                          -                              7,348
                                                                 ---                              -----
    Total current liabilities                                534,722                            535,771

    Capital lease obligations, less
     current maturities                                        1,263                              1,300
    Deferred income taxes                                      6,157                                124
    Deferred rent                                             76,667                             72,301
    Other long-term liabilities                               36,464                             32,672
                                                              ------                             ------
    Total liabilities                                        655,273                            642,168
                                                             -------                            -------

    Stockholders' equity:
    Common stock                                                 652                                639
    Additional paid-in capital                               335,899                            269,864
    Treasury stock                                          (539,909)                         (380,249)
    Retained earnings                                      1,270,497                          1,050,441
                                                           ---------                          ---------
    Total stockholders' equity                             1,067,139                            940,695
                                                           ---------                            -------

    Total liabilities and
     stockholders' equity                                              $1,722,412                        $1,582,863
                                                                       ==========                        ==========

                                        Condensed Consolidated Statements of Cash Flows
                                                          (Unaudited)
                                                         (in thousands)
                                                         -------------

                                                                       For the Fiscal
                                                                      Six Months Ended
                                                                      ----------------
                                                       June 30, 2012                  June 25, 2011
                                                       -------------                  -------------
    Cash flows from operating activities:
    Net income                                                           $146,949                          $109,495
    Adjustments to reconcile net income to net cash
     provided by operating activities:
    Depreciation and amortization                             44,172                             37,094
    Loss on disposition of property
     and equipment                                               146                                569
    Stock compensation expense                                 9,309                              6,989
    Excess tax benefit of stock
     options exercised                                       (16,497)                            (8,897)
    Deferred income taxes                                     (5,887)                             4,368
    Change in assets and liabilities:
    Inventories                                             (116,115)                         (138,963)
    Prepaid expenses and other current
     assets                                                   (4,603)                           (12,418)
    Accounts payable                                          48,348                            104,375
    Accrued employee compensation                            (18,936)                           (15,259)
    Other accrued expenses                                    (6,422)                           (11,931)
    Income taxes payable                                      68,783                             43,059
    Other                                                      2,923                             (1,120)
                                                               -----                             ------

    Net cash provided by operating
     activities                                              152,170                            117,361
                                                             -------                            -------

    Cash flows from investing activities:
    Capital expenditures                                     (65,566)                           (74,084)
    Proceeds from sale of property and
     equipment                                                     -                                138
    Decrease (increase) in restricted
     cash                                                     13,070                            (21,870)
    Proceeds from sale of short-term
     investments                                                   -                             15,913
                                                                 ---                             ------

    Net cash used in investing
     activities                                              (52,496)                           (79,903)
                                                             -------                            -------

    Cash flows from financing activities:
    Excess tax benefit of stock
     options exercised                                        16,497                              8,897
    Principal payments under capital
     lease obligations                                           (19)                               (74)
    Restricted stock units withheld to
     satisfy tax obligations                                  (6,581)                              (981)
    Repurchase of common stock                              (102,536)                         (122,873)
    Net proceeds from issuance of
     common stock                                             18,146                             19,509
    Cash dividends paid to
     stockholders                                            (23,046)                           (13,758)
                                                             -------                            -------

    Net cash used in financing
     activities                                              (97,539)                         (109,280)
                                                             -------                           --------

    Net increase (decrease) in cash
     and cash equivalents                                      2,135                            (71,822)

    Cash and cash equivalents at
     beginning of period                                     176,965                            257,339
                                                             -------                            -------

    Cash and cash equivalents at end
     of period                                                           $179,100                          $185,517
                                                                         ========                          ========

    Supplemental disclosures of cash flow information:
    Cash paid during the period for:
    Interest                                                                  $86                              $214
    Income taxes                                              22,616                             14,596

    Non-cash accruals for
     construction in progress                                  1,181                                576

                                                                                                      Selected Financial and Operating Information
                                                                                                                      (Unaudited)
                                                                                                                       ----------

                                             THIRTEEN WEEKS ENDED                                                     TWENTY-SIX WEEKS ENDED
                                             --------------------                                                     ----------------------
                        June 30, 2012           June 25, 2011             July 2, 2011           June 30, 2012                 June 25, 2011        July 2, 2011
                        -------------           -------------             ------------           -------------                 -------------        ------------
                                                 (originally              (adjusted for                                          (originally        (adjusted for
                                                   reported)             week shift) (b)                                          reported)        week shift) (b)
    Sales Information:
    ------------------
    Total sales
     increase                     9.6%                             10.6%                                  13.2%                           14.8%                    13.4%            13.7%
    Same-store sales
     increase                     3.2%                              4.6%                                   7.1%                            6.7%                     7.0%             7.3%
    Non-comp sales (%
     of total sales)              6.0%                              5.4%                                   5.3%                            5.9%                     5.6%             5.6%

    Average transaction
     value                              $45.70                                            $45.64                                        $45.58                           $44.49           $42.90 $43.12
    Comp average
     transaction value
     increase                     0.1%                              1.5%                                   2.6%                            3.0%                     1.6%             1.8%
    Comp average
     transaction count
     increase                     2.9%                              3.1%                                   4.5%                            3.4%                     5.3%             5.4%

    Store Count
     Information:
    -------------
    Beginning of period         1,117                             1,027                                                         1,085                      1,001
    New stores opened              18                                16                                                            51                         42
    Stores closed                   -                                 -                                                            (1)                         -
    End of period               1,135                             1,043                                                         1,135                      1,043
                                =====                             =====                                                         =====                      =====

    Pre-opening costs
     (000's)                            $1,549                                            $1,470                                                          $3,613                  $3,932

    Balance Sheet
     Information:
    -------------
    Average inventory
     per store (000's)
     (a)                                $793.1                                            $795.5                                                          $793.1                  $795.5
    Inventory turns
     (annualized)                3.42                              3.48                                                          3.27                       3.18
    Share repurchase
     program:
    Cost (000's)                       $98,394                                           $69,727                                                        $102,536                $122,873
    Average purchase
     price per share                    $88.96                                            $60.90                                                          $88.34                  $56.98
                                                                     2011 SAME-STORE SALES: ORIGINALLY REPORTED AND ADJUSTED FOR WEEK SHIFT(b)
                                                                     ------------------------------------------------------------------------
                                                                                                    (unaudited)
                                                                                                    ----------
                                                          FISCAL 2011
                                                          -----------

                                     First Quarter                         Second Quarter                          Third Quarter                         Fourth Quarter       Full Year
                                     -------------                         --------------                          -------------                         --------------       ---------

    Same-
     store
     sales
     increase
     (originally
     reported)                                     10.7%                                   4.6%                                  11.5%                                   7.6%           8.2%
    Same-
     store
     sales
     increase
     (adjusted
     for week
     shift)                                         7.6%                                   7.1%                                  11.9%                                   7.1%           8.3%
    Impact of
     week
     shift                                        (3.1%)                                   2.5%                                   0.4%                                 (0.5%)           0.1%
                                                  =====                                    ===                                    ===                                  =====            ===

    (a) Assumes average inventory cost, excluding inventory in transit.
    (b) Due to the 53-week fiscal 2011, each quarter of fiscal 2012 starts one week later than the same quarter of fiscal 2011.  The chart above presents same-store sales
     for 2011 as originally reported and as adjusted to represent the same 13-week period as the 2012 fiscal quarters.  The adjusted 13-week periods end on April 2, 2011,
     July 2, 2011, October 1, 2011 and December 31, 2011, respectively.

SOURCE Tractor Supply Company


Source: PR Newswire