TRACTOR SUPPLY COMPANY REPORTS RECORD FOURTH QUARTER AND FULL YEAR 2007 RESULTS ~ Fourth Quarter Same-Store Sales Increase 3.8% ~ ~ Fourth Quarter Earnings per Share of $0.77 vs. $0.72 ~ ~ Full Year Earnings per Share of $2.40 vs. $2.22 ~
Brentwood, Tennessee, January 30, 2008 – 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 full fiscal year ended December 29, 2007. Additionally, the Company provided its current outlook for fiscal 2008.
Fourth Quarter Results Net sales increased 14.8% to $723.3 million from $629.9 million in the prior year’s fourth quarter. Same-store sales increased 3.8% compared with a 0.5% gain in the prior year’s fourth quarter. Same-store sales growth was primarily driven by core lifestyle merchandise, including animal health and pet supplies, as well as many winter-related merchandise categories, including footwear, snow removal, heating and related wood burning and cutting products.
Gross margin increased 15.0% to $235.5 million, or 32.6% of sales, compared to 32.5% in the prior year’s fourth quarter. The improvement in gross margin resulted primarily from enhanced product sourcing.
Selling, general and administrative expenses, including depreciation and amortization, increased to 25.6% of sales compared to 24.8% for the fourth quarter last year. The increase as a percent of sales was primarily attributable to occupancy and payroll expenses relating to new stores, which generally have higher costs in relation to sales volume than the chain average.
Net income for the quarter was $30.0 million, or $0.77 per diluted share, compared to net income of $29.5 million, or $0.72 per diluted share, in the fourth quarter of the prior year. During the fourth quarter of 2007, the Company repurchased 1.35 million shares of its stock for $55.1 million as part of its previously announced $200 million share repurchase program.
The Company opened 26 new stores and relocated one store in the quarter compared to 18 new store openings in the prior year’s fourth quarter.
Jim Wright, Chairman, President and Chief Executive Officer, stated, “By focusing on the everyday needs of our customers, we continued to drive double-digit sales growth as well as higher customer traffic and average ticket in a challenging retail environment. At the same time, we efficiently managed our inventory and generated a slight gross margin improvement. Our solid performance demonstrates the power of our business model, our unique niche and our demonstrated capacity to fulfill the product needs of the expanding number of customers living ‘out here.’ I am proud of the energy and passion our support and store teams displayed as they executed our plans and served our customers.”
Full Year Results For fiscal 2007, net sales increased 14.1% to $2.70 billion from $2.37 billion and same-store sales increased 3.4% compared to 1.6% for fiscal 2006. Gross margin in the fiscal year increased 14.3% to $852.7 million compared to $746.1 million in 2006. As a percent of sales, gross margin was consistent at 31.5% for fiscal 2007 and 2006.
Selling, general and administrative expenses, including depreciation and amortization, as a percent of sales increased to 25.6% in 2007 compared to 25.2% last year. The increase in expense as a percent of sales was due largely to occupancy and payroll expenses relating to new stores, which generally have higher costs in relation to sales volume than the chain average.
Net income for fiscal 2007 was $96.2 million, or $2.40 per diluted share, compared to net income of $91.0 million, or $2.22 per diluted share, for fiscal 2006. During 2007, the Company repurchased 3.2 million shares of its stock for $150.0 million as part of its previously announced $200 million share repurchase program.
During fiscal 2007, the Company opened 89 new stores, relocated 12 stores, and sold its only Del’s store located in Canada, compared to 82 new store openings, 15 relocations, and one store closure for fiscal 2006.
Mr. Wright continued, “While there were many economic issues affecting consumers’ buying patterns throughout the year, I am delighted with our solid top-line growth and achievements in 2007. We worked diligently throughout the year to optimize each period, anticipate and adjust to consumer sentiment and product trends while concurrently investing in the people and infrastructure to support our future. We launched our e-commerce platform, reset key categories in our merchandise mix, and expanded our geographic footprint and store base.”
Fiscal 2008 Outlook The Company anticipates net sales for fiscal 2008 will be approximately $3.01 billion to $3.08 billion, with an expected same-store sales increase of approximately 1.0% to 3.0%. For the full year, the Company expects approximately 95 to 100 new store openings (including eight to 10 Del’s stores).
The Company projects full year net earnings to range from $2.54 to $2.62 per diluted share.
Mr. Wright concluded, “In 2008, we plan to continue growing our business by maintaining the store expansion pace, refining the merchandise selection and expanding our e-commerce offering. In addition, we will also focus on implementing new merchandise initiatives, refining our customer relationship management strategy, and improving efficiency throughTractor Value System, which is our lean enterprise excellence initiative. By executing on these 2008 priorities and advancing toward our long-term goals, we are confident that our strategy will provide for continued sales and earnings growth.”
Conference Call Information Tractor Supply Company will be hosting a conference call at 5:00 p.m. Eastern Time today to discuss the financial results. The call will be simultaneously broadcast over the Internet on the Company’s homepage atTractorSupply.comand can be accessed under the subheading “Investor Relations.”
About Tractor Supply Company At December 29, 2007, Tractor Supply Company operated 764 stores in 43 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, animal and pet products, including everything necessary for their health, care, growth and containment; (2) maintenance products for agricultural and rural use; (3) hardware and tool products; (4) seasonal products, including lawn and garden power equipment; (5) truck, trailer and towing products; and (6) work clothing for the entire family.
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 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 general economic cycles affecting consumer spending, weather factors, operating factors affecting customer satisfaction, consumer debt levels, inflation, pricing and other competitive factors, the ability to attract, train and retain qualified employees, the ability to manage growth and identify suitable locations and negotiate favorable lease agreements on new and relocated stores, the timing and acceptance of new products in the stores, the mix of goods sold, the continued availability of favorable credit sources, capital market conditions in general, the ability to increase sales at existing stores, the ability to retain vendors, reliance on foreign suppliers, management of its information systems and the seasonality of the Company’s business. 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)
1
Consolidated Statements of Income (Unaudited) (in thousands, except per share amounts)
FOURTH QUARTER ENDED
FISCAL YEAR ENDED
December 29, 2007
December 30, 2006*
December 29, 2007
December 30, 2006*
% of
% of
% of
% of
Sales
Sales
Sales
Sales
Net sales
$
723,252
100.0
%
$
629,899
100.0
%
$
2,703,212
100.0
%
$
2,369,612
100.0
%
Cost of merchandise sold
487,795
67.4
425,174
67.5
1,850,504
68.5
1,623,466
68.5
Gross profit
235,457
32.6
204,725
32.5
852,708
31.5
746,146
31.5
Selling, general and administrative expenses
171,379
23.7
145,108
23.0
641,603
23.7
555,834
23.5
Depreciation and amortization
13,794
1.9
11,372
1.8
51,064
1.9
42,292
1.8
Income from operations
50,284
7.0
48,245
7.7
160,041
5.9
148,020
6.2
Interest expense, net
1,991
0.3
749
0.1
5,037
0.2
2,688
0.1
Income before income taxes
48,293
6.7
47,496
7.6
155,004
5.7
145,332
6.1
Income tax provision
18,276
2.5
17,999
2.9
58,763
2.1
54,324
2.3
Net income
$
30,017
4.2
%
$
29,497
4.7
%
$
96,241
3.6
%
$
91,008
3.8
%
Net income per share:
Basic
$
0.79
$
0.73
$
2.45
$
2.27
Diluted
$
0.77
$
0.72
$
2.40
$
2.22
Weighted average shares outstanding (000’s):
Basic
38,064
40,267
39,220
40,016
Diluted
38,783
41,118
40,100
41,060
*
Reclassified to conform to the current period presentation.
2
Consolidated Balance Sheets (Unaudited) (in thousands)
December 29, 2007
December 30, 2006*
ASSETS
Current assets:
Cash and cash equivalents
$
13,700
$
26,393
Inventories
635,988
594,851
Prepaid expenses and other current assets
41,959
37,007
Deferred income taxes
277
11,360
Total current assets
691,924
669,611
Property and equipment, net
332,928
301,604
Goodwill
10,258
10,288
Deferred income taxes
16,692
10,779
Other assets
6,169
5,976
TOTAL ASSETS
$
1,057,971
$
998,258
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
258,346
$
229,171
Accrued expenses
115,601
111,721
Current portion of capital lease obligations
847
1,065
Income taxes currently payable
5,062
11,550
Total current liabilities
379,856
353,507
Revolving credit loan
55,000
—
Capital lease obligations
2,351
2,808
Other long-term liabilities
55,427
43,039
Total liabilities
492,634
399,354
Stockholders’ equity:
Common stock
326
322
Additional paid-in capital
151,317
129,249
Treasury stock
(150,049
)
—
Foreign currency translation adjustments
—
(22
)
Retained earnings
563,743
469,355
Total stockholders’ equity
565,337
598,904
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
1,057,971
$
998,258
* Cash, inventory and accounts payable balances have been reclassified to conform to the current period
presentation.
3
Consolidated Statements of Cash Flows (Unaudited) (in thousands)
FISCAL YEAR ENDED
December 29, 2007
December 30, 2006*
Cash flows from operating activities:
Net income
$
96,241
$
91,008
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
51,064
42,292
Gain on disposition of property and equipment
30
(1,606
)
Stock compensation expense
10,620
9,664
Deferred income taxes
5,170
(3,530
)
Change in assets and liabilities, net of acquisition:
Inventories
(41,137
)
(134,100
)
Prepaid expenses and other current assets
(4,557
)
57
Accounts payable
29,175
55,393
Accrued expenses
4,339
8,757
Income taxes currently payable
(6,488
)
10,129
Other
10,564
9,486
Net cash provided by operating activities
155,021
87,550
Cash flows from investing activities:
Capital expenditures
(83,547
)
(88,894
)
Proceeds from sale of property and equipment
974
8,810
Other
—
(746
)
Net cash used in investing activities
(82,573
)
(80,830
)
Cash flows from financing activities:
Borrowings under revolving credit agreement
1,050,931
394,404
Repayments under revolving credit agreement
(995,931
)
(402,616
)
Tax benefit of stock options exercised
3,149
9,456
Principal payments under capital lease obligations
(675
)
(1,228
)
Repurchase of common stock
(150,049
)
—
Net proceeds from issuance of common stock
7,434
10,073
Net cash provided by (used in) financing activities
(85,141
)
10,089
Net increase (decrease) in cash
(12,693
)
16,809
Cash and cash equivalents at beginning of year
26,393
9,584
Cash and cash equivalents at end of year
$
13,700
$
26,393
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest
$
3,953
$
2,822
Income taxes
54,939
36,898
Supplemental disclosure of non-cash activities:
Equipment acquired through capital leases
$
439
$
1,671
* Reclassified to conform to the current period presentation.
4
Selected Financial and Operating Information
FOURTH QUARTER ENDED
FISCAL YEAR ENDED
December 29, 2007
December 30, 2006
December 29, 2007
December 30, 2006
(Unaudited)
(Unaudited)
Sales Information:
Same-store sales increase
3.8
%
0.5
%
3.4
%
1.6
%
Non-comp sales (% of total sales)
11.7
%
13.8
%
11.5
%
15.4
%
Average transaction value
$
43.54
$
42.62
$
43.60
$
43.12
Comp average transaction/value increase (decrease)
1.0
%
0.2
%
(0.1
)%
0.8
%
Comp average transaction count increase
2.7
%
0.3
%
3.5
%
0.7
%
Store Count Information:
Beginning of period
738
658
676
595
New stores opened
26
18
89
82
Stores closed/sold
—
—
(1
)
(1
)
End of year
764
676
764
676
Relocated stores
1
—
12
15
Pre-opening costs (000’s)
$
2,685
$
2,186
$
9,396
$
9,434
Balance Sheet Information:
Average inventory per store (000’s) (a)
$
826.7
$
871.9
$
826.7
$
871.9
Inventory turns
2.70
2.64
2.60
2.67
Financed inventory (a)
38.3
%
37.3
%
38.3
%
37.3
%
Treasury shares:
Shares purchased (000’s)
1,352
—
3,216
—
Cost (000’s)
$
55,125
—
$
150,049
—
(a) Assumes average inventory cost, excluding inventory in transit
5
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