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Tractor Supply Company Reports Fourth Quarter and Full Year 2012 Results

January 30, 2013

BRENTWOOD, Tenn., Jan. 30, 2013 /PRNewswire/ — Tractor Supply Company (NASDAQ: TSCO), the largest retail farm and ranch store chain in the United States, today announced financial results for its fourth fiscal quarter and fiscal year ended December 29, 2012. Additionally, the Company provided a current outlook for fiscal 2013.

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

Fourth Quarter Results
Net sales increased to $1.29 billion, or 3.7% over the prior year’s 14-week period (10.8% adjusted for the extra sales week in the prior year’s fourth quarter as part of the Company’s 53-week calendar in fiscal 2011). Same-store sales increased 4.7% compared to a strong 7.6% increase in the prior-year period (7.1% in the prior-year period adjusted for the one-week calendar shift in the prior year due to the Company’s 53-week calendar in fiscal 2011). 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. Same-store sales for the four quarters and full year of fiscal 2011, adjusted for the one-week calendar shift, are presented in the attached table of Selected Financial and Operating Information.

As a percent of sales, gross margin improved to 33.0% from 32.5% in the prior year’s fourth quarter. Gross margin dollars increased to $424.6 million from $403.2 million in the prior year’s 14-week fourth quarter. Gross margin rate continues to benefit from key margin-driving initiatives, including strategic sourcing, inventory and markdown management and price optimization. The higher gross margin rate in the fourth quarter of 2012 also reflects, in part, the impact in 2011 of a one-time charge related to the discontinuation of a product line from several hundred stores. These increases in gross margin rate were partially offset by the continued mix shift to lower-margin, freight-intensive C.U.E. products.

Selling, general and administrative expenses, including depreciation and amortization, improved to 23.3% of sales compared to 23.5% of sales in the prior year’s fourth quarter. This improvement was achieved despite the leverage gained in 2011 from the extra sales week. The improvement as a percent of sales was primarily attributable to expense control related to store operating costs and lower year-over-year incentive compensation expense. The reduction as a percent of sales also reflects, in part, the impact in 2011 of a one-time charge to write down certain e-commerce assets.

Net income for the quarter was $79.5 million, or $1.11 per diluted share, compared to net income of $70.5 million, or $0.96 per diluted share, in the fourth quarter of the prior year. As stated in the prior year, the Company estimates that the 53rd week in fiscal 2011 represented a benefit of approximately $0.09 per diluted share in the prior year’s fourth quarter results.

The Company opened 25 new stores in the fourth quarter of 2012 compared to 31 new store openings in the prior year’s fourth quarter.

Greg Sandfort, President and Chief Executive Officer, stated, “Our fourth quarter performance demonstrates the underlying strength we have built in our business, while we continue to drive improved profitability through our strategic initiatives. Our core C.U.E. categories again posted solid increases above last year in both sales and units, and our ability to plan, prepare, execute and react quickly to the trends we are seeing in our business allowed us to deliver our 19(th) consecutive quarter of year-over-year transaction count increases. Our team executed exceptionally well, delivering a strong same-store sales gain of 4.7% on top of last year’s strong 7.6% comp increase, managing through less than ideal weather conditions for sales of cold weather products and despite less benefit from inflation than last year. We are also delighted with our ability to once again generate double-digit EPS growth during the fourth quarter on top of a strong double-digit increase last year.”

Full Year Results
Net sales increased to $4.66 billion, or 10.2% over the prior year’s 53-week period (11.6% adjusted for the extra sales week in fiscal 2011 as part of the Company’s 53-week calendar). Same-store sales increased 5.3% compared to an 8.2% increase in fiscal 2011 (8.3% in the prior-year period adjusted for the one-week calendar shift in the prior year due to the Company’s 53-week calendar in fiscal 2011). As a percent of sales, gross margin improved to 33.6% from 33.2% in the prior year. Gross margin dollars increased to $1.57 billion from $1.41 billion in the prior year’s 53-week period.

Selling, general and administrative expenses, including depreciation and amortization, improved to 24.2% of sales compared to 24.9% of sales in fiscal 2011.

For fiscal 2012, net income was $276.5 million, or $3.80 per diluted share, compared to net income of $222.7 million, or $3.01 per diluted share, for fiscal 2011. As stated in the prior year, the Company estimates that the 53rd week in fiscal 2011 represented a benefit of approximately $0.09 per diluted share.

The Company opened 93 new stores and closed two stores during fiscal 2012 compared to 85 new store openings and one store closure during fiscal 2011.

Fiscal 2013 Outlook
The Company anticipates net sales for fiscal 2013 will range between $5.07 billion and $5.17 billion, with same-store sales expected to increase 3% to 5%. The Company projects fiscal 2013 full year net income to range from $4.32 to $4.40 per diluted share. This projection includes estimated costs of $0.06 to $0.07 per diluted share associated with the relocation of its Southeast distribution center and its corporate data center. For the full year, the Company expects capital expenditures to range between $240 million and $250 million including spending to support 100 to 105 new store openings and construction of the Company’s Southeast distribution center expected to open in 2013 and new Store Support Center expected to open in 2014.

Mr. Sandfort concluded, “The strength and flexibility of Tractor Supply Company’s business model is exemplified by our ability to manage through a wide array of variables. Today, we are agile and able to respond more quickly to our customers’ changing needs, creating opportunities in our business. As we manage the controllables, we will continue to test and improve our assortments and the in-store experience. We continue to focus on new product innovation and expansion of existing categories, while providing our customers with compelling values every day. We have been rewarded in these efforts with increasing customer loyalty and growing market share. Looking ahead, we believe our ability to better anticipate and meet our customers’ needs will continue to provide sales momentum for Tractor Supply.”

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 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 February 13, 2013.

About Tractor Supply Company
At December 29, 2012, Tractor Supply Company operated 1,176 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, 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 year-end 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.

(Financial tables to follow)

                                                                                Condensed Consolidated Statements of Income
                                                                                                (Unaudited)
                                                                                 (in thousands, except per share amounts)

                                                                                                    ---
                                                                                              Fourth Quarter Ended                                                                    Year Ended
                                                                                              --------------------                                                                    ----------
                                                                       December 29, 2012                                 December 31, 2011                         December 29, 2012                     December 31, 2011
                                                                       -----------------                                 -----------------                         -----------------                     -----------------
                                                                           (13 weeks)                                        (14 weeks)                                (52 weeks)                           (53 weeks)
                                                                       ---------                                    ---------                            ---------                             ---------
                                                                                      % of                                            % of                                    % of                               % of
                                                                                     Sales                                           Sales                                   Sales                               Sales
                                                                                     -----                                           -----                                   -----                               -----
    Net sales                                               $1,286,166              100.0%                 $1,240,028               100.0%           $4,664,120               100.0%          $4,232,743          100.0%
    Cost of merchandise sold                        861,544                 67.0                  836,862                   67.5           3,098,066                   66.4          2,825,871              66.8
                                                    -------                 ----                  -------                   ----           ---------                   ----          ---------              ----
    Gross margin                                    424,622                 33.0                  403,166                   32.5           1,566,054                   33.6          1,406,872              33.2

    Selling, general and                            277,251                 21.5                  267,959                   21.6           1,040,287                   22.3           973,822              23.0
    administrative expenses

    Depreciation and amortization                    22,595                  1.8                   23,662                    1.9             88,975                    1.9            80,347               1.9
                                                     ------                  ---                   ------                    ---             ------                    ---            ------               ---

    Operating income                                124,776                  9.7                  111,545                    9.0            436,792                    9.4           352,703               8.3
    Interest expense, net                               200                    -                    1,036                    0.1              1,055                      -             2,087                 -
                                                        ---                  ---                    -----                    ---              -----                    ---             -----               ---

    Income before income taxes                      124,576                  9.7                  110,509                    8.9            435,737                    9.4           350,616               8.3
    Income tax expense                               45,089                  3.5                   39,997                    3.2            159,280                    3.4           127,876               3.0
                                                     ------                  ---                   ------                    ---            -------                    ---           -------               ---
    Net income                                                 $79,487                6.2%                    $70,512                 5.7%             $276,457                 6.0%            $222,740            5.3%
                                                               =======                ===                     =======                 ===              ========                 ===             ========            ===

    Net income per share:
    Basic                                                        $1.13                                          $0.99                                     $3.89                                    $3.10
                                                                 =====                                          =====                                     =====                                    =====
    Diluted                                                      $1.11                                          $0.96                                     $3.80                                    $3.01
                                                                 =====                                          =====                                     =====                                    =====

    Weighted average shares outstanding:
    Basic                                                       70,218                                         71,190                                    71,092                                   71,777
    Diluted                                                     71,733                                         73,256                                    72,757                                   73,921

    Dividends declared per common share outstanding              $0.20                                          $0.12                                     $0.72                                    $0.43
                                                                 =====                                          =====                                     =====                                    =====

                                                  Condensed Consolidated Balance Sheets
                                                               (Unaudited)
                                                              (in thousands)

                                                                   ---
                                                             December 29, 2012              December 31, 2011
                                                             -----------------              -----------------
                                      ASSETS
    Current assets:
    Cash and cash equivalents                                                      $138,630                        $176,965
    Restricted cash                                                      8,400                            21,870
    Inventories                                                        908,116                           830,819
    Prepaid expenses and other current
     assets                                                             51,808                            51,728
    Deferred income taxes                                               23,098                             8,867
                                                                        ------                             -----
    Total current assets                                             1,130,052                         1,090,249

    Property and equipment:
    Land                                                                61,522                            36,962
    Buildings and improvements                                         511,188                           459,703
    Furniture, fixtures and equipment                                  350,224                           312,708
    Computer software and hardware                                     109,121                           107,753
    Construction in progress                                            37,122                            19,309
                                                                        ------                            ------
                                                                     1,069,177                           936,435
    Accumulated depreciation and
     amortization                                                     (519,179)                        (455,580)
                                                                      --------                          --------
    Property and equipment, net                                        549,998                           480,855

    Goodwill                                                            10,258                            10,258
    Other assets                                                        16,500                            13,470
                                                                        ------                            ------

    Total assets                                                                 $1,706,808                      $1,594,832
                                                                                 ==========                      ==========

                       LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Accounts payable                                                               $320,392                        $266,409
    Accrued employee compensation                                       48,400                            48,261
    Other accrued expenses                                             148,316                           134,048
    Current portion of capital lease
     obligations                                                            38                                33
    Income taxes payable                                                43,359                            11,874
    Total current liabilities                                          560,505                           460,625

    Capital lease obligations, less current
     maturities                                                          1,242                             1,284
    Deferred income taxes                                                1,477                            13,827
    Deferred rent                                                       76,236                            75,731
    Other long-term liabilities                                         42,374                            35,075
                                                                        ------                            ------
    Total liabilities                                                  681,834                           586,542
                                                                       -------                           -------

    Stockholders' equity:
    Common stock                                                           654                               643
    Additional paid-in capital                                         361,759                           298,426
    Treasury stock                                                    (709,172)                        (437,373)
    Retained earnings                                                1,371,733                         1,146,594
                                                                     ---------                         ---------
    Total stockholders' equity                                       1,024,974                         1,008,290
                                                                     ---------                         ---------

    Total liabilities and stockholders'
     equity                                                                      $1,706,808                      $1,594,832
                                                                                 ==========                      ==========

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

                                                                                                            ---
                                                                                                                                                  For the Fiscal Year Ended
                                                                                                                                                  -------------------------
                                                                                                                                      December 29, 2012                 December 31, 2011
                                                                                                                                      -----------------                 -----------------
                                                                                                                                         (52 weeks)                         (53 weeks)
                                                                                                                                          ---------                       ---------
    Cash flows from operating activities:
    Net income                                                                                                                                             $276,457                         $222,740
    Adjustments to reconcile net income to net cash provided by operating activities:
    Depreciation and amortization                                                                                                                88,975                             80,347
    Loss on disposition of property and equipment                                                                                                    76                                955
    Stock compensation expense                                                                                                                   17,641                             15,041
    Excess tax benefit of stock options exercised                                                                                               (25,836)                           (17,435)
    Deferred income taxes                                                                                                                       (26,581)                             1,856
    Change in assets and liabilities:
    Inventories                                                                                                                                 (77,297)                           (94,299)
    Prepaid expenses and other current assets                                                                                                       (80)                           (17,783)
    Accounts payable                                                                                                                             53,983                             19,021
    Accrued employee compensation                                                                                                                   139                             13,685
    Other accrued expenses                                                                                                                        8,828                              6,312
    Income taxes payable                                                                                                                         57,321                             21,040
    Other                                                                                                                                         4,676                              2,664
                                                                                                                                                  -----                              -----
    Net cash provided by operating activities                                                                                                   378,302                            254,144
                                                                                                                                                -------                            -------
    Cash flows from investing activities:
    Capital expenditures                                                                                                                       (152,924)                         (166,156)
    Proceeds from sale of property and equipment                                                                                                    379                                752
    Decrease (increase) in restricted cash                                                                                                       13,470                            (21,870)
    Proceeds from sale of short-term investments                                                                                                      -                             15,913
                                                                                                                                                    ---                             ------
    Net cash used in investing activities                                                                                                      (139,075)                         (171,361)
                                                                                                                                               --------                           --------
    Cash flows from financing activities:
    Excess tax benefit of stock options exercised                                                                                                25,836                             17,435
    Principal payments under capital lease obligations                                                                                              (37)                               (90)
    Restricted stock units withheld to satisfy tax obligations                                                                                   (6,821)                            (1,115)
    Repurchase of common stock                                                                                                                 (271,799)                         (179,997)
    Net proceeds from issuance of common stock                                                                                                   26,577                             31,460
    Cash dividends paid to stockholders                                                                                                         (51,318)                           (30,850)
                                                                                                                                                -------                            -------
    Net cash used in financing activities                                                                                                      (277,562)                         (163,157)
                                                                                                                                               --------                           --------
    Net decrease in cash and cash equivalents                                                                                                   (38,335)                           (80,374)
    Cash and cash equivalents at beginning of period                                                                                            176,965                            257,339
                                                                                                                                                -------                            -------
    Cash and cash equivalents at end of period                                                                                                             $138,630                         $176,965
                                                                                                                                                           ========                         ========

    Supplemental disclosures of cash flow information:
    Cash paid during the period for:
    Interest                                                                                                                                                 $1,219                             $614
    Income taxes                                                                                                                                128,306                            103,630

    Non-cash accruals for construction in progress                                                                                               (5,440)                              (350)

                                                                                                  Selected Financial and Operating Information
                                                                                                                   (Unaudited)

                                                                                                                       ---
                                                                   Fourth Quarter Ended                                                        Year Ended
                                                                   --------------------                                                        ----------
                                            December 29, 2012             December 31,            December 31,            December 29, 2012        December 31, 2011             December 31,
                                                                               2011                   2011                                                                         2011
                                            -----------------            -------------           -------------            -----------------          -----------------          -------------
                                                (13 weeks)                 (14 weeks)             (13 weeks)                  (52 weeks)               (53 weeks)                 (52 weeks)
                                                ---------                  ---------              ---------                   ---------              ---------                 ---------
                                                                          (originally            (adjusted for                                       (originally             (adjusted for
                                                                            reported)           week shift) (a)                                       reported)              week shift)(a)
    Sales Information:
    ------------------
    Same-store sales increase                             4.7%                             7.6%                                         7.1%                     5.3%                         8.2%             8.3%
    New store sales (% of total sales)                    5.9%                             5.7%                                         5.7%                     5.9%                         5.6%             5.6%
    Average transaction value                                    $46.12                                           $45.20                                      $45.16                               $44.40           $43.33 $43.37

    Same-store average transaction value                  1.8%                             3.8%                                         3.5%                     2.0%                         3.1%             3.1%
    increase
    Same-store average transaction count                  2.7%                             3.6%                                         3.5%                     3.0%                         5.0%             5.0%
    increase
    Total selling square footage (000's)               18,893                           17,506                                                       18,893                           17,506

    Store Count Information:
    ------------------------
    Beginning of period                                 1,151                            1,054                                                        1,085                            1,001
    New stores opened                                      25                               31                                                           93                               85
    Stores closed                                           -                                -                                                           (2)                              (1)
                                                          ---                              ---                                                          ---                              ---
    End of period                                       1,176                            1,085                                                        1,176                            1,085
                                                        =====                            =====                                                        =====                            =====

    Pre-opening costs (000's)                                    $1,721                                           $1,744                                                              $7,124                $7,334

    Balance Sheet Information:
    --------------------------
    Average inventory per store (000's) (b)                      $727.4                                           $723.4                                                              $727.4                $723.4
    Inventory turns (annualized)                         3.57                             3.49                                                         3.28                             3.23
    Share repurchase program:
         Cost (000's)                                          $107,959                                           $7,905                                                            $271,799              $179,997
         Average purchase price per share                        $88.89                                           $69.22                                               88.94                        58.52

    Capital Expenditures (millions):
    --------------------------------
    New and relocated stores and stores not                       $16.7                                            $17.7                                                               $60.4                 $44.9
    yet opened
    Information technology                                7.8                              3.8                                                         28.2                             12.3
    Existing stores                                       7.0                              5.6                                                         22.2                             18.7
    Distribution center capacity and                      6.0                             12.0                                                         16.4                             56.3
     improvements
    Corporate and other                                   2.2                              1.6                                                         13.8                              1.8
    Purchase of previously leased and self                2.0                             18.2                                                         11.9                             32.2
    developed stores

    Total                                                         $41.7                                            $58.9                                                              $152.9                $166.2
                                                                  =====                                            =====                                                              ======                ======
                                                        2011 SAME-STORE SALES: ORIGINALLY REPORTED AND ADJUSTED FOR WEEK SHIFT (a)
                                                        -------------------------------------------------------------------------
                                                                                       (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) 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.

    (b) Assumes average inventory
     cost, excluding inventory in
     transit.

SOURCE Tractor Supply Company


Source: PR Newswire