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| 8-K - FORM 8-K TRACTOR SUPPLY COMPANY - TRACTOR SUPPLY CO /DE/ | q420148k.htm |
www.TractorSupply.com
TRACTOR SUPPLY COMPANY REPORTS
FOURTH QUARTER AND FULL YEAR 2014 RESULTS
Fourth Quarter Earnings per Share Increased 19.1% to $0.81
Fourth Quarter Sales Increased 12.0% to $1.58 Billion and Comparable Store Sales Increased 5.3%
Full Year Earnings per Share Increased 14.7% to $2.66
Brentwood, Tennessee, January 28, 2015 - Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retail store chain in the United States, today announced financial results for its fourth quarter and fiscal year ended December 27, 2014. Additionally, the Company provided its initial outlook for fiscal 2015.
Fourth Quarter 2014 Results
Net sales increased 12.0% to $1.58 billion from $1.42 billion in the fourth quarter of 2013. Comparable store sales increased 5.3% versus a 3.5% increase in the prior year’s fourth quarter. The increase in comparable store sales was broad based and driven by increases in both traffic and ticket. Comparable store transaction count increased 3.0% and average ticket increased 2.3%. The increase in comparable store sales was driven by a strong winter seasonal business, solid performance in consumable, usable and edible (C.U.E.) products and an increase in sales of big ticket items. In addition, hardline products such as fencing, truck accessories and tools also performed well.
Gross profit increased 12.5% to $539.6 million from $479.7 million in the prior year’s fourth quarter and gross margin rate increased 10 basis points to 34.0% from 33.9% in the prior-year period. The improvement in gross margin rate resulted primarily from price management as the favorable, colder weather early in the quarter created strong demand for winter goods, resulting in fewer seasonal markdowns. This was partially offset by higher transportation costs primarily due to our continued western store expansion.
Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased 8.8% to $361.9 million. As a percent of sales, SG&A expenses improved 70 basis points to 22.8% from 23.5% in the fourth quarter last year. The improvement as a percent of sales was primarily attributable to the leverage of store operating costs provided by the strong comparable store sales growth and lower year-over-year incentive compensation expense.
Net income increased 16.9% to $112.1 million from $95.9 million and diluted earnings per share increased 19.1% to $0.81 from $0.68 in the fourth quarter of the prior year.
The Company opened 22 new stores and closed one store in the fourth quarter of 2014 compared to 31 new store openings and no store closures in the prior year’s fourth quarter.
Greg Sandfort, President and Chief Executive Officer, stated, “Across the board, we had a strong fourth quarter and are pleased with our results. Sales growth was broad-based across all of our major product categories and geographic regions and was well balanced between both traffic and ticket. The fourth quarter was our 27th consecutive quarter of positive comparable store transaction counts. The team did an excellent job of managing product assortments, inventory, and pricing levels to capitalize on early consumer buying trends and drove both sales and margin growth in the quarter. It is my belief that our fourth quarter and full year results reflect our ability to effectively manage seasonal inventory investments, pricing and sell-through during seasonal changes and weather variations.”
Full Year Results
Net sales increased 10.6% to $5.71 billion from $5.16 billion in fiscal 2013. Comparable store sales increased 3.8% versus a 4.8% increase in fiscal 2013. Gross profit increased 11.2% to $1.95 billion from $1.75 billion and gross margin increased 10 basis points to 34.1% of sales from 34.0% of sales in fiscal 2013.
Selling, general and administrative expenses, including depreciation and amortization, increased 9.8% to $1.36 billion, and improved as a percent of sales to 23.8% compared to 24.0% for fiscal 2013.
Net income increased 13.0% to $370.9 million from $328.2 million and net income per diluted share increased 14.7% to $2.66 from $2.32 for fiscal 2013.
The Company opened 107 new stores and closed one store during fiscal 2014 compared to 102 new store openings and two store closures during fiscal 2013.
Company Outlook
The Company anticipates net sales for fiscal 2015 will range between $6.2 billion and $6.3 billion, with comparable store sales expected to increase 2.5% to 4.0%. The Company projects fiscal 2015 full year net income to range from $2.95 to $3.05 per diluted share. For the full year, the Company expects capital expenditures to range between $240 million and $250 million, including spending to support 110 to 115 new store openings and construction of a new Southwest distribution center in Casa Grande, Arizona to open in fiscal 2015.
Conference Call Information
Tractor Supply Company will be hosting a conference call at 5:00 p.m. Eastern Time today to discuss the quarterly 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 11, 2015.
Please allow extra time prior to the call to visit the site and download the streaming media software required to listen to the Internet broadcast.
About Tractor Supply Company
At December 27, 2014, Tractor Supply Company operated 1,382 stores in 49 states. The Company’s stores are focused on supplying the lifestyle needs of recreational farmers and ranchers and others who enjoy the rural lifestyle, as well as tradesmen and small businesses. Stores are located primarily in towns outlying major metropolitan markets and in rural communities. The Company offers the following comprehensive selection of merchandise: (1) equine, livestock, pet and small animal products, including items necessary for their health, care, growth and containment; (2) hardware, truck, towing and tool products; (3) seasonal products, including heating, lawn and garden items, power equipment, gifts and toys; (4) work/recreational clothing and footwear; and (5) maintenance products for agricultural and rural use.
Forward Looking Statements
As with any business, all phases of the Company’s operations are subject to influences outside its control. This information contains certain forward-looking statements, including statements regarding sales and earnings growth, estimated results of operations, capital expenditures and new store openings in future periods. These forward-looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the finalization of the Company’s quarterly financial and accounting procedures, and may be affected by certain risks and uncertainties, any one, or a combination, of which could materially affect the results of the Company’s operations. These factors include, without limitation, general economic conditions affecting consumer spending, the timing and acceptance of new products in the stores, the timing and mix of goods sold, purchase price volatility (including inflationary and deflationary pressures), the ability to increase sales at existing stores, the ability to manage growth and identify suitable locations, failure of an acquisition to produce anticipated results, the ability to successfully manage expenses and execute our key gross margin enhancing initiatives, the availability of favorable credit sources, capital market conditions in general, the ability to open new stores in the manner and number currently contemplated, the impact of new stores on our business, competition, weather conditions, the seasonal nature of our business, effective merchandising initiatives and marketing emphasis, the ability to retain vendors, reliance on foreign suppliers, the ability to attract, train and retain qualified employees, product liability and other claims, changes in federal, state or local regulations, potential judgments, fines, legal fees and other costs, breach of information systems or theft of customer data, ongoing and potential future legal or regulatory proceedings, management of our information systems, failure to secure or develop and implement new technologies, the failure of customer-facing technology systems, business disruption including from the implementation of supply chain technologies, effective tax rate changes and results of examination by taxing authorities, the ability to maintain an effective system of internal control over financial reporting, changes in accounting standards, assumptions and estimates. Forward-looking statements made by or on behalf of the Company are based on knowledge of its business and the environment in which it operates, but because of the factors listed above, actual results could differ materially from those reflected by any forward-looking statements. Consequently, all of the forward-looking statements made are qualified by these cautionary statements and those contained in the Company’s Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. There can be no assurance that the results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business and operations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
(Financial tables to follow)
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
FOURTH QUARTER ENDED | YEAR ENDED | ||||||||||||||||||||||||||
December 27, 2014 | December 28, 2013 | December 27, 2014 | December 28, 2013 | ||||||||||||||||||||||||
% of | % of | % of | % of | ||||||||||||||||||||||||
Sales | Sales | Sales | Sales | ||||||||||||||||||||||||
Net sales | $ | 1,584,254 | 100.0 | % | $ | 1,415,089 | 100.0 | % | $ | 5,711,715 | 100.0 | % | $ | 5,164,784 | 100.0 | % | |||||||||||
Cost of merchandise sold | 1,044,659 | 66.0 | 935,377 | 66.1 | 3,761,300 | 65.9 | 3,411,175 | 66.0 | |||||||||||||||||||
Gross profit | 539,595 | 34.0 | 479,712 | 33.9 | 1,950,415 | 34.1 | 1,753,609 | 34.0 | |||||||||||||||||||
Selling, general and administrative expenses | 331,780 | 20.9 | 305,665 | 21.6 | 1,246,308 | 21.8 | 1,138,934 | 22.1 | |||||||||||||||||||
Depreciation and amortization | 30,114 | 1.9 | 26,969 | 1.9 | 114,635 | 2.0 | 100,025 | 1.9 | |||||||||||||||||||
Operating income | 177,701 | 11.2 | 147,078 | 10.4 | 589,472 | 10.3 | 514,650 | 10.0 | |||||||||||||||||||
Interest expense, net | 618 | — | (528 | ) | — | 1,885 | — | 557 | — | ||||||||||||||||||
Income before income taxes | 177,083 | 11.2 | 147,606 | 10.4 | 587,587 | 10.3 | 514,093 | 10.0 | |||||||||||||||||||
Income tax expense | 65,021 | 4.1 | 51,725 | 3.6 | 216,702 | 3.8 | 185,859 | 3.6 | |||||||||||||||||||
Net income | $ | 112,062 | 7.1 | % | $ | 95,881 | 6.8 | % | $ | 370,885 | 6.5 | % | $ | 328,234 | 6.4 | % | |||||||||||
Net income per share: | |||||||||||||||||||||||||||
Basic | $ | 0.82 | $ | 0.69 | $ | 2.69 | $ | 2.35 | |||||||||||||||||||
Diluted | $ | 0.81 | $ | 0.68 | $ | 2.66 | $ | 2.32 | |||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||||||
Basic | 136,194 | 139,749 | 137,769 | 139,415 | |||||||||||||||||||||||
Diluted | 137,733 | 141,829 | 139,435 | 141,723 | |||||||||||||||||||||||
Dividends declared per common share outstanding | $ | 0.16 | $ | 0.13 | $ | 0.61 | $ | 0.49 | |||||||||||||||||||
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
December 27, 2014 | December 28, 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 51,134 | $ | 142,743 | |||
Inventories | 1,115,450 | 979,308 | |||||
Prepaid expenses and other current assets | 66,444 | 57,359 | |||||
Deferred income taxes | 40,962 | 29,838 | |||||
Total current assets | 1,273,990 | 1,209,248 | |||||
Property and equipment: | |||||||
Land | 79,571 | 73,350 | |||||
Buildings and improvements | 698,462 | 581,938 | |||||
Furniture, fixtures and equipment | 453,692 | 408,021 | |||||
Computer software and hardware | 154,818 | 140,222 | |||||
Construction in progress | 30,803 | 65,312 | |||||
1,417,346 | 1,268,843 | ||||||
Accumulated depreciation and amortization | (696,346 | ) | (603,911 | ) | |||
Property and equipment, net | 721,000 | 664,932 | |||||
Goodwill | 10,258 | 10,258 | |||||
Deferred income taxes | 8,782 | 92 | |||||
Other assets | 20,541 | 18,861 | |||||
Total assets | $ | 2,034,571 | $ | 1,903,391 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 370,823 | $ | 316,487 | |||
Accrued employee compensation | 37,056 | 50,573 | |||||
Other accrued expenses | 182,565 | 155,615 | |||||
Current portion of capital lease obligations | 213 | 42 | |||||
Income taxes payable | 12,436 | 9,424 | |||||
Total current liabilities | 603,093 | 532,141 | |||||
Capital lease obligations, less current maturities | 4,957 | 1,200 | |||||
Deferred rent | 79,807 | 76,930 | |||||
Other long-term liabilities | 53,153 | 46,226 | |||||
Total liabilities | 741,010 | 656,497 | |||||
Stockholders’ equity: | |||||||
Common stock | 1,342 | 1,331 | |||||
Additional paid-in capital | 510,997 | 452,668 | |||||
Treasury stock | (1,137,085 | ) | (838,588 | ) | |||
Retained earnings | 1,918,307 | 1,631,483 | |||||
Total stockholders’ equity | 1,293,561 | 1,246,894 | |||||
Total liabilities and stockholders’ equity | $ | 2,034,571 | $ | 1,903,391 | |||
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
YEAR ENDED | |||||||
December 27, 2014 | December 28, 2013 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 370,885 | $ | 328,234 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 114,635 | 100,025 | |||||
Loss on disposition of property and equipment | 389 | 35 | |||||
Stock compensation expense | 16,173 | 13,893 | |||||
Excess tax benefit of stock options exercised | (18,850 | ) | (43,517 | ) | |||
Deferred income taxes | (19,814 | ) | (8,309 | ) | |||
Change in assets and liabilities: | |||||||
Inventories | (136,142 | ) | (71,192 | ) | |||
Prepaid expenses and other current assets | (9,085 | ) | (5,551 | ) | |||
Accounts payable | 54,336 | (3,905 | ) | ||||
Accrued employee compensation | (13,517 | ) | 2,173 | ||||
Other accrued expenses | 20,365 | 9,938 | |||||
Income taxes payable | 21,862 | 9,582 | |||||
Other | 7,941 | 2,275 | |||||
Net cash provided by operating activities | 409,178 | 333,681 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (160,613 | ) | (218,200 | ) | |||
Proceeds from sale of property and equipment | 331 | 477 | |||||
Decrease in restricted cash | — | 8,400 | |||||
Net cash used in investing activities | (160,282 | ) | (209,323 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings under revolving credit agreement | 355,000 | 185,000 | |||||
Repayments under revolving credit agreement | (355,000 | ) | (185,000 | ) | |||
Excess tax benefit of stock options exercised | 18,850 | 43,517 | |||||
Principal payments under capital lease obligations | (114 | ) | (38 | ) | |||
Repurchase of shares to satisfy tax obligations | (4,766 | ) | (4,142 | ) | |||
Repurchase of common stock | (298,497 | ) | (129,416 | ) | |||
Net proceeds from issuance of common stock | 28,083 | 38,318 | |||||
Cash dividends paid to stockholders | (84,061 | ) | (68,484 | ) | |||
Net cash used in financing activities | (340,505 | ) | (120,245 | ) | |||
Net (decrease) increase in cash and cash equivalents | (91,609 | ) | 4,113 | ||||
Cash and cash equivalents at beginning of period | 142,743 | 138,630 | |||||
Cash and cash equivalents at end of period | $ | 51,134 | $ | 142,743 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | 906 | $ | 780 | |||
Income taxes | 213,637 | 188,003 | |||||
Supplemental disclosures of non-cash activities: | |||||||
Property acquired through capital lease | $ | 4,042 | $ | — | |||
Non-cash accruals for construction in progress | 14,843 | 8,258 | |||||
Selected Financial and Operating Information
(Unaudited)
FOURTH QUARTER ENDED | YEAR ENDED | |||||||
December 27, 2014 | December 28, 2013 | December 27, 2014 | December 28, 2013 | |||||
Sales Information: | ||||||||
Comparable store sales increase | 5.3% | 3.5% | 3.8% | 4.8% | ||||
New store sales (% of total sales) | 5.9% | 6.0% | 6.2% | 5.4% | ||||
Average transaction value | $46.62 | $45.50 | $44.84 | $44.48 | ||||
Comparable store average transaction value increase (decrease) | 2.3% | (1.5)% | 0.6% | 0.0% | ||||
Comparable store average transaction count increase | 3.0% | 5.1% | 3.2% | 4.7% | ||||
Total selling square footage (000’s) | 22,176 | 20,470 | 22,176 | 20,470 | ||||
Store Count Information: | ||||||||
Beginning of period | 1,361 | 1,245 | 1,276 | 1,176 | ||||
New stores opened | 22 | 31 | 107 | 102 | ||||
Stores closed | (1) | — | (1) | (2) | ||||
End of period | 1,382 | 1,276 | 1,382 | 1,276 | ||||
Pre-opening costs (000’s) | $1,753 | $2,013 | $8,888 | $7,756 | ||||
Balance Sheet Information: | ||||||||
Average inventory per store (000’s) (a) | $752.7 | $723.5 | $752.7 | $723.5 | ||||
Inventory turns (annualized) | 3.50 | 3.52 | 3.32 | 3.29 | ||||
Share repurchase program: | ||||||||
Cost (000’s) | $54,115 | $38,816 | $298,497 | $129,416 | ||||
Average purchase price per share | $62.35 | $72.52 | $63.99 | $56.59 | ||||
Capital Expenditures (millions): | ||||||||
New and relocated stores and stores not yet opened | $18.1 | $17.6 | $80.8 | $69.1 | ||||
Distribution center capacity and improvements | 7.6 | 4.0 | 9.2 | 44.9 | ||||
Information technology | 4.3 | 7.0 | 22.7 | 29.8 | ||||
Existing stores | 4.0 | 9.2 | 20.0 | 22.3 | ||||
Corporate and other | 1.2 | 15.7 | 27.9 | 40.7 | ||||
Purchase of previously leased stores | — | 7.9 | — | 11.4 | ||||
Total | $35.2 | $61.4 | $160.6 | $218.2 | ||||
(a) Assumes average inventory cost, excluding inventory in transit.