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| 8-K - FORM 8-K TRACTOR SUPPLY COMPANY - TRACTOR SUPPLY CO /DE/ | a8-kq32012earningsrelease.htm |
www.TractorSupply.com
TRACTOR SUPPLY COMPANY REPORTS THIRD QUARTER RESULTS
~ Earnings per Share Increased 19.0% to $0.69 vs. $0.58 ~
~ Raises Full Year 2012 EPS Guidance ~
~ Sales Increased 9.0% to $1.07 Billion and Same-Store Sales Increased 2.9% ~
Brentwood, Tennessee, October 24, 2012 - Tractor Supply Company (NASDAQ: TSCO), the largest retail farm and ranch store chain in the United States, today announced financial results for its third fiscal quarter ended September 29, 2012.
Third Quarter Results
Net sales increased 9.0% to $1.07 billion from $977.8 million in the prior year's third quarter. Same-store sales increased 2.9% compared to a very strong 11.5% 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.
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 third quarter of 2011 increased 11.9%. 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 9.0% to $357.2 million from $327.6 million in the prior year's third quarter. As a percent of sales, gross margin was flat to last year, at 33.5% in the current and prior year's third quarters. Gross margin rate was favorably impacted by sales mix, as the Company sold a reduced percentage of low margin, big ticket products than in the previous year. The Company continues to benefit from key margin-driving initiatives, including strategic sourcing and price optimization. These gross margin improvements were offset by increased transportation costs related to increased imports of seasonal goods and the negative impact of the mix shift to freight-intensive C.U.E. products.
Selling, general and administrative expenses, including depreciation and amortization, improved to 26.2% of sales compared to 26.5% of sales in the prior year's third quarter. The improvement as a percent of sales was primarily attributable to lower year-over-year incentive compensation expense and expense control related to other store personnel costs.
Net income for the quarter was $50.0 million, or $0.69 per diluted share, compared to net income of $42.7 million, or $0.58 per diluted share, in the third quarter of the prior year.
The Company opened 17 new stores and closed one store in the third quarter of 2012 compared to 12 new store openings and one store closure in the prior year's third quarter.
Jim Wright, Chairman and Chief Executive Officer, stated, “We are delighted with our ability to once again generate double-digit EPS growth during the third quarter, with our team executing exceptionally well through less than ideal weather conditions. We are pleased with our same store sales gain in light of last year's very strong 11.5% comp increase and moderate inflation this year. Our core C.U.E. businesses posted solid increases above last year. Additionally, we demonstrated our ability to recognize and react quickly to the regional weather trends that developed through the quarter. As a testament to the progress we are making on our key initiatives and the stability we have built in our business, we achieved our 18th consecutive quarter of comp transaction count increases.”
First Nine Months Results
Net sales increased 12.9% to $3.38 billion from $2.99 billion in the first nine months of 2011. Same-store sales increased 5.5% compared to an 8.5% increase in the first nine months of 2011. Gross margin dollars increased 13.7% to $1.14 billion, or 33.8% of sales, compared to $1.00 billion, or 33.5% of sales, in the first nine months of 2011.
Selling, general and administrative expenses, including depreciation and amortization, increased 8.8% to $829.4 million, but improved as a percent of sales to 24.6% compared to 25.5% for the first nine months of 2011.
Net income was $197.0 million, or $2.69 per diluted share, compared to net income of $152.2 million, or $2.05 per diluted share, for the first nine months of 2011.
The Company opened 68 new stores and closed two stores in the first nine months of 2012 compared to 54 new store openings and one store closure during the first nine months of 2011.
Company Outlook
Net sales for the full-year 2012 are now expected to range between $4.61 billion and $4.65 billion compared to the Company's previously expected range of $4.58 billion and $4.65 billion. Same-store sales for the year are now expected to increase 4.0% to 5.0% compared to the prior expectation for an increase of 3.5% to 5.0%. Based on stronger than expected net income per diluted share for the third quarter, the Company now anticipates net income per diluted share for the full-year 2012 will range between $3.63 and $3.69, compared to its previous guidance of $3.58 and $3.66.
Mr. Wright continued, “Our third quarter performance highlights the underlying strength of our core businesses. We continue to demonstrate our ability to successfully navigate through a wide array of variables as we focus on managing the controllable. We continue to evolve our assortments and the in-store experience to provide customers with compelling values every day, with the right products in the right regions at the right time.”
Mr. Wright concluded, “As recently announced, I will be assuming the role of Executive Chairman by the end of the year, at which point, Greg Sandfort will take on the role of Chief Executive Officer in addition to his current role as President. The succession planning process has been underway for some time and we are executing a smooth and effective transition. Tractor Supply is strongly positioned competitively, operationally and financially, and we remain energized about the opportunities ahead.”
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 November 7, 2012.
About Tractor Supply Company
At September 29, 2012, Tractor Supply Company operated 1,151 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.
(Financial tables to follow)
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
Third Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||||
September 29, 2012 | September 24, 2011 | September 29, 2012 | September 24, 2011 | ||||||||||||||||||||||||
% of | % of | % of | % of | ||||||||||||||||||||||||
Sales | Sales | Sales | Sales | ||||||||||||||||||||||||
Net sales | $ | 1,065,638 | 100.0 | % | $ | 977,776 | 100.0 | % | $ | 3,377,954 | 100.0 | % | $ | 2,992,715 | 100.0 | % | |||||||||||
Cost of merchandise sold | 708,467 | 66.5 | 650,173 | 66.5 | 2,236,522 | 66.2 | 1,989,009 | 66.5 | |||||||||||||||||||
Gross margin | 357,171 | 33.5 | 327,603 | 33.5 | 1,141,432 | 33.8 | 1,003,706 | 33.5 | |||||||||||||||||||
Selling, general and administrative expenses | 257,184 | 24.1 | 239,883 | 24.5 | 763,036 | 22.6 | 705,863 | 23.6 | |||||||||||||||||||
Depreciation and amortization | 22,208 | 2.1 | 19,591 | 2.0 | 66,380 | 2.0 | 56,685 | 1.9 | |||||||||||||||||||
Operating income | 77,779 | 7.3 | 68,129 | 7.0 | 312,016 | 9.2 | 241,158 | 8.0 | |||||||||||||||||||
Interest expense, net | 241 | — | 591 | 0.1 | 855 | — | 1,051 | — | |||||||||||||||||||
Income before income taxes | 77,538 | 7.3 | 67,538 | 6.9 | 311,161 | 9.2 | 240,107 | 8.0 | |||||||||||||||||||
Income tax expense | 27,517 | 2.6 | 24,805 | 2.5 | 114,191 | 3.4 | 87,879 | 2.9 | |||||||||||||||||||
Net income | $ | 50,021 | 4.7 | % | $ | 42,733 | 4.4 | % | $ | 196,970 | 5.8 | % | $ | 152,228 | 5.1 | % | |||||||||||
Net income per share: | |||||||||||||||||||||||||||
Basic | $ | 0.71 | $ | 0.60 | $ | 2.76 | $ | 2.11 | |||||||||||||||||||
Diluted | $ | 0.69 | $ | 0.58 | $ | 2.69 | $ | 2.05 | |||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||||||
Basic | 70,741 | 71,226 | 71,383 | 71,988 | |||||||||||||||||||||||
Diluted | 72,313 | 73,343 | 73,098 | 74,158 | |||||||||||||||||||||||
Dividends declared per common share outstanding | $ | 0.20 | $ | 0.12 | $ | 0.52 | $ | 0.31 | |||||||||||||||||||
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
September 29, 2012 | September 24, 2011 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 70,185 | $ | 96,590 | |||
Restricted cash | 8,400 | 21,870 | |||||
Inventories | 1,020,140 | 913,738 | |||||
Prepaid expenses and other current assets | 50,892 | 40,198 | |||||
Deferred income taxes | 12,307 | — | |||||
Total current assets | 1,161,924 | 1,072,396 | |||||
Property and equipment: | |||||||
Land | 51,665 | 32,627 | |||||
Buildings and improvements | 499,695 | 433,382 | |||||
Furniture, fixtures and equipment | 340,285 | 286,148 | |||||
Computer software and hardware | 112,523 | 108,940 | |||||
Construction in progress | 33,000 | 27,856 | |||||
1,037,168 | 888,953 | ||||||
Accumulated depreciation and amortization | (508,169 | ) | (438,504 | ) | |||
Property and equipment, net | 528,999 | 450,449 | |||||
Goodwill | 10,258 | 10,258 | |||||
Deferred income taxes | — | 2,112 | |||||
Other assets | 15,122 | 12,635 | |||||
Total assets | $ | 1,716,303 | $ | 1,547,850 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 362,059 | $ | 340,208 | |||
Accrued employee compensation | 29,221 | 36,823 | |||||
Other accrued expenses | 125,884 | 119,588 | |||||
Current portion of capital lease obligations | 35 | 32 | |||||
Income taxes payable | 24,834 | 2,850 | |||||
Deferred income taxes | — | 3,314 | |||||
Total current liabilities | 542,033 | 502,815 | |||||
Capital lease obligations, less current maturities | 1,255 | 1,292 | |||||
Deferred income taxes | 2,478 | — | |||||
Deferred rent | 77,414 | 73,091 | |||||
Other long-term liabilities | 38,910 | 33,747 | |||||
Total liabilities | 662,090 | 610,945 | |||||
Stockholders' equity: | |||||||
Common stock | 652 | 641 | |||||
Additional paid-in capital | 348,446 | 281,101 | |||||
Treasury stock | (601,213 | ) | (429,469 | ) | |||
Retained earnings | 1,306,328 | 1,084,632 | |||||
Total stockholders’ equity | 1,054,213 | 936,905 | |||||
Total liabilities and stockholders’ equity | $ | 1,716,303 | $ | 1,547,850 | |||
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
For the Fiscal Nine Months Ended | |||||||
September 29, 2012 | September 24, 2011 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 196,970 | $ | 152,228 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 66,380 | 56,685 | |||||
(Gain) loss on disposition of property and equipment | (65 | ) | 187 | ||||
Stock compensation expense | 14,051 | 10,693 | |||||
Excess tax benefit of stock options exercised | (19,738 | ) | (11,902 | ) | |||
Deferred income taxes | (14,789 | ) | (1,902 | ) | |||
Change in assets and liabilities: | |||||||
Inventories | (189,321 | ) | (177,218 | ) | |||
Prepaid expenses and other current assets | 836 | (6,253 | ) | ||||
Accounts payable | 95,650 | 92,820 | |||||
Accrued employee compensation | (19,040 | ) | 2,247 | ||||
Other accrued expenses | (11,613 | ) | (12,561 | ) | |||
Income taxes payable | 32,698 | 6,483 | |||||
Other | 3,822 | (175 | ) | ||||
Net cash provided by operating activities | 155,841 | 111,332 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (111,176 | ) | (107,326 | ) | |||
Proceeds from sale of property and equipment | 321 | 721 | |||||
Decrease (increase) in restricted cash | 13,470 | (21,870 | ) | ||||
Proceeds from sale of short-term investments | — | 15,913 | |||||
Net cash used in investing activities | (97,385 | ) | (112,562 | ) | |||
Cash flows from financing activities: | |||||||
Excess tax benefit of stock options exercised | 19,738 | 11,902 | |||||
Principal payments under capital lease obligations | (27 | ) | (83 | ) | |||
Restricted stock units withheld to satisfy tax obligations | (6,581 | ) | (981 | ) | |||
Repurchase of common stock | (163,840 | ) | (172,093 | ) | |||
Net proceeds from issuance of common stock | 22,710 | 24,036 | |||||
Cash dividends paid to stockholders | (37,236 | ) | (22,300 | ) | |||
Net cash used in financing activities | (165,236 | ) | (159,519 | ) | |||
Net decrease in cash and cash equivalents | (106,780 | ) | (160,749 | ) | |||
Cash and cash equivalents at beginning of period | 176,965 | 257,339 | |||||
Cash and cash equivalents at end of period | $ | 70,185 | $ | 96,590 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 1,143 | $ | 565 | |||
Income taxes | 95,577 | 81,942 | |||||
Non-cash accruals for construction in progress | (3,449 | ) | (4,763 | ) | |||
Selected Financial and Operating Information
(Unaudited)
THIRTEEN WEEKS ENDED | THIRTY-NINE WEEKS ENDED | ||||||||||||||||||||||
Sept. 29, 2012 | Sept. 24, 2011 | Oct. 1, 2011 | Sept. 29, 2012 | Sept. 24, 2011 | Oct. 1, 2011 | ||||||||||||||||||
(originally reported) | (adjusted for week shift) (b) | (originally reported) | (adjusted for week shift) (b) | ||||||||||||||||||||
Sales Information: | |||||||||||||||||||||||
Total sales increase | 9.0 | % | 17.9 | % | 18.3 | % | 12.9 | % | 14.9 | % | 15.2 | % | |||||||||||
Same-store sales increase | 2.9 | % | 11.5 | % | 11.9 | % | 5.5 | % | 8.5 | % | 8.8 | % | |||||||||||
Non-comp sales (% of total sales) | 6.0 | % | 5.4 | % | 5.5 | % | 5.9 | % | 5.6 | % | 5.6 | % | |||||||||||
Average transaction value | $ | 42.32 | $ | 41.99 | $ | 42.18 | $ | 43.78 | $ | 42.60 | $ | 42.81 | |||||||||||
Comp average transaction value increase | 0.2 | % | 5.3 | % | 5.6 | % | 2.1 | % | 2.8 | % | 3.0 | % | |||||||||||
Comp average transaction count increase | 2.6 | % | 5.9 | % | 5.9 | % | 3.1 | % | 5.5 | % | 5.6 | % | |||||||||||
Store Count Information: | |||||||||||||||||||||||
Beginning of period | 1,135 | 1,043 | 1,085 | 1,001 | |||||||||||||||||||
New stores opened | 17 | 12 | 68 | 54 | |||||||||||||||||||
Stores closed | (1 | ) | (1 | ) | (2 | ) | (1 | ) | |||||||||||||||
End of period | 1,151 | 1,054 | 1,151 | 1,054 | |||||||||||||||||||
Pre-opening costs (000's) | $ | 1,791 | $ | 1,658 | $ | 5,403 | $ | 5,590 | |||||||||||||||
Balance Sheet Information: | |||||||||||||||||||||||
Average inventory per store (000's) (a) | $ | 825.5 | $ | 808.9 | $ | 825.5 | $ | 808.9 | |||||||||||||||
Inventory turns (annualized) | 3.02 | 3.03 | 3.18 | 3.13 | |||||||||||||||||||
Share repurchase program: | |||||||||||||||||||||||
Cost (000's) | $ | 61,304 | $ | 49,206 | $ | 163,840 | $ | 172,093 | |||||||||||||||
Average purchase price per share | $ | 90.06 | $ | 61.12 | $ | 88.98 | $ | 58.11 | |||||||||||||||
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. | |||||||||