TRACTOR SUPPLY COMPANY REPORTS RECORD
FOURTH QUARTER AND FULL YEAR 2009 RESULTS
~ Earnings per Share of $1.04 for Fourth Quarter and $3.15 for Full Year ~
~ Fourth Quarter Sales Increase 7.9% and Same-Store Sales Increase 0.7% ~
Brentwood, Tennessee, January 27, 2010 – Tractor Supply Company (NASDAQ: TSCO), the largest retail farm and ranch store chain in the United States, today announced record financial results for its fourth fiscal quarter and fiscal year ended December 26, 2009. Additionally, the Company provided its current outlook for fiscal 2010.
Fourth Quarter Results
For fourth quarter 2009, net sales increased 7.9% to $862.5 million from $799.5 million and same-store sales increased 0.7% compared to a 1.3% increase for the prior year’s fourth quarter. The Company continued to experience solid sales performance in core consumable categories, including animal and pet-related products, as well as key seasonal products.
Gross margin increased 16.6% to $285.7 million, or 33.1% of sales, compared to $245.0 million, or 30.7% of sales, in the prior year’s fourth quarter. The increase in gross margin percentage resulted primarily from a substantial decrease in the LIFO provision and lower transportation costs.
Selling, general and administrative expenses, including depreciation and amortization, increased 10.6% to $226.3 million, or 26.2% of sales, compared to $204.7 million, or 25.6% of sales, in the prior year’s fourth quarter. This increase as a percent of sales was primarily attributable to the deleveraging related to the lower same-store sales increase and higher occupancy costs, partially offset by reduced marketing costs.
The Company’s effective income tax rate decreased to 35.0% compared to 38.2% in the prior year’s fourth quarter. This reduction in the tax rate resulted from the favorable impact of certain federal tax credits and a lower percentage of permanent tax differences relative to income before taxes.
For fourth quarter 2009, net income increased 54.8% to $38.3 million from $24.7 million and earnings per share increased 55.2% to $1.04 per diluted share from $0.67 per diluted share in the fourth quarter of the prior year.
The Company opened 18 new stores in the quarter compared to 21 new store openings and one relocation in the prior year’s fourth quarter.
Jim Wright, Chairman and Chief Executive Officer, stated, “We are delighted that we achieved stronger-than-expected financial results for the year based on our fourth quarter performance. Our team worked closely together to deliver compelling value to our customers for their everyday basic needs. For the ninth consecutive quarter, we have reduced year-over-year inventory levels per store while maintaining outstanding in-stock levels and improving inventory turns. Throughout the year, the resiliency of our business model was demonstrated as we continued differentiating our company in the market and executing our retail strategy.”
Full Year Results
For fiscal 2009, net sales increased 6.6% to $3.21 billion from $3.01 billion and same-store sales decreased 1.1% compared to a 1.4% increase for fiscal 2008.
Gross margin increased 13.4% to $1,035.0 million, or 32.3% of sales, compared to $912.3 million, or 30.3% of sales, in 2008. The increase in gross margin resulted primarily from a substantial decrease in the LIFO provision and lower transportation costs.
Selling, general and administrative expenses, including depreciation and amortization, increased 9.5% to $850.3 million, or 26.5% of sales, compared to $776.7 million, or 25.8% of sales, in 2008. This increase as a percent to sales was primarily attributable to the deleveraging related to the same-store sales decrease and higher occupancy costs, partially offset by reduced marketing costs.
The Company’s effective income tax rate decreased to 36.9% compared to 38.6% in the prior year. This reduction in the tax rate resulted from the favorable impact of certain federal tax credits and a lower percentage of permanent tax differences relative to income before taxes.
For fiscal 2009, net income increased 40.9% to $115.5 million from $81.9 million and earnings per share increased 43.8% to $3.15 per diluted share from $2.19 per diluted share for fiscal 2008.
During fiscal 2009, the Company opened 76 new stores, closed one store and relocated two stores. This compares to 91 new store openings and one relocated store in fiscal 2008.
Fiscal 2010 Outlook
The Company anticipates net sales for fiscal 2010 will be approximately $3.42 billion to $3.48 billion, with same-store sales expected to increase approximately 0.5% to 2.5%. The Company projects 2010 full year net earnings to range from $3.30 to $3.42 per diluted share. Exclusive of the LIFO provision, the Company projects full year net earnings to range from $3.50 to $3.62 per diluted share.
For the full year, the Company expects approximately 70 to 80 new store openings.
Mr. Wright concluded, “We expect the retail environment to remain challenging and we will maintain a relentless focus on serving our customers and managing our business proactively this year. We have a solid capital structure, with a very strong balance sheet and no long-term debt. As a result of our strategies and financial strength, we are well positioned to achieve top- and bottom-line growth while continuing to deliver strong cash flows in 2010.”
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 webcast over the Internet on the Company’s homepage atTractorSupply.com and can be accessed under the subheading “Investor Relations.” The webcast will be archived shortly after the conference call concludes through February 10, 2010.
About Tractor Supply Company
At December 26, 2009, Tractor Supply Company operated 930 stores in 44 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 animal products, including items 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 and towing products; and (6) work/recreational clothing and footwear 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 press release 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 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 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 and negotiate favorable lease agreements on new and relocated stores, the availability of favorable credit sources, capital market conditions in general, failure to open new stores in the manner 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, potential legal proceedings, management of our information systems, effective tax rate changes and results of examination by taxing authorities, and the ability to maintain an effective system of internal control over financial reporting. 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)
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Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
| FOURTH QUARTER ENDED | FISCAL YEAR ENDED | |||||||||||||||||||||||||||||||
| December 26, 2009 | December 27, 2008 | December 26, 2009 | December 27, 2008 | |||||||||||||||||||||||||||||
| Net sales | $ | 862,532 | 100.0 | % | $ | 799,496 | 100.0 | % | $ | 3,206,937 | 100.0 | % | $ | 3,007,949 | 100.0 | % | ||||||||||||||||
| Cost of merchandise sold | 576,847 | 66.9 | 554,456 | 69.3 | 2,171,980 | 67.7 | 2,095,688 | 69.7 | ||||||||||||||||||||||||
| Gross margin | 285,685 | 33.1 | 245,040 | 30.7 | 1,034,957 | 32.3 | 912,261 | 30.3 | ||||||||||||||||||||||||
| Selling, general and administrative expenses | 208,827 | 24.2 | 188,659 | 23.6 | 784,066 | 24.4 | 715,961 | 23.8 | ||||||||||||||||||||||||
| Depreciation and amortization | 17,501 | 2.0 | 16,006 | 2.0 | 66,258 | 2.1 | 60,731 | 2.0 | ||||||||||||||||||||||||
| Income from operations | 59,357 | 6.9 | 40,375 | 5.1 | 184,633 | 5.8 | 135,569 | 4.5 | ||||||||||||||||||||||||
| Interest expense, net | 505 | 0.1 | 406 | 0.1 | 1,644 | 0.1 | 2,133 | 0.1 | ||||||||||||||||||||||||
| Income before income taxes | 58,852 | 6.8 | 39,969 | 5.0 | 182,989 | 5.7 | 133,436 | 4.4 | ||||||||||||||||||||||||
| Income tax expense | 20,599 | 2.4 | 15,257 | 1.9 | 67,523 | 2.1 | 51,506 | 1.7 | ||||||||||||||||||||||||
| Net income | $ | 38,253 | 4.4 | % | $ | 24,712 | 3.1 | % | $ | 115,466 | 3.6 | % | $ | 81,930 | 2.7 | % | ||||||||||||||||
| Net income per share: | ||||||||||||||||||||||||||||||||
| Basic | $ | 1.06 | $ | 0.68 | $ | 3.21 | $ | 2.22 | ||||||||||||||||||||||||
| Diluted | $ | 1.04 | $ | 0.67 | $ | 3.15 | $ | 2.19 | ||||||||||||||||||||||||
| Weighted average shares outstanding (000’s): | ||||||||||||||||||||||||||||||||
| Basic | 36,090 | 36,185 | 35,990 | 36,830 | ||||||||||||||||||||||||||||
| Diluted | 36,815 | 36,824 | 36,649 | 37,464 | ||||||||||||||||||||||||||||
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Consolidated Balance Sheets
(Unaudited)
(in thousands)
| December 26, | December 27, | |||||||
| 2009 | 2008 * | |||||||
ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 172,851 | $ | 36,989 | ||||
| Inventories | 601,249 | 603,435 | ||||||
| Prepaid expenses and other current assets | 42,320 | 41,902 | ||||||
| Deferred income taxes | 17,909 | 1,676 | ||||||
| Total current assets | 834,329 | 684,002 | ||||||
| Property and equipment, net | 370,245 | 362,033 | ||||||
| Goodwill | 10,258 | 10,258 | ||||||
| Deferred income taxes | 11,091 | 13,727 | ||||||
| Other assets | 4,922 | 5,977 | ||||||
| TOTAL ASSETS | $ | 1,230,845 | $ | 1,075,997 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 273,208 | $ | 286,828 | ||||
| Accrued expenses | 137,375 | 113,465 | ||||||
| Current portion of capital lease obligations | 392 | 550 | ||||||
| Income taxes currently payable | 7,605 | — | ||||||
| Total current liabilities | 418,580 | 400,843 | ||||||
| Revolving credit loan | — | — | ||||||
| Capital lease obligations | 1,407 | 1,797 | ||||||
| Straight line rent liability | 45,515 | 38,016 | ||||||
| Other long-term liabilities | 32,140 | 25,211 | ||||||
| Total liabilities | 497,642 | 465,867 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock | 330 | 327 | ||||||
| Additional paid-in capital | 190,938 | 168,045 | ||||||
| Treasury stock | (219,204 | ) | (203,915 | ) | ||||
| Retained earnings | 761,139 | 645,673 | ||||||
| Total stockholders’ equity | 733,203 | 610,130 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,230,845 | $ | 1,075,997 | ||||
| * Cash and cash equivalents and prepaid expenses and other current assets have been reclassified to | ||||||||
| conform to the current period presentation. | ||||||||
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Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
| FISCAL YEAR ENDED | ||||||||
| December 26, | December 27, | |||||||
| 2009 | 2008 * | |||||||
Cash flows from operating activities: | ||||||||
| Net income | $ | 115,466 | $ | 81,930 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 66,258 | 60,731 | ||||||
| Loss (gain) on disposition of property and equipment | 213 | (425 | ) | |||||
| Stock compensation expense | 12,130 | 12,257 | ||||||
| Deferred income taxes | (13,597 | ) | 1,566 | |||||
| Change in assets and liabilities: | ||||||||
| Inventories | 2,186 | 32,553 | ||||||
| Prepaid expenses and other current assets | (409 | ) | 1,007 | |||||
| Accounts payable | (13,620 | ) | 28,482 | |||||
| Accrued expenses | 23,910 | (2,136 | ) | |||||
| Income taxes currently payable | 7,605 | (5,928 | ) | |||||
| Other | 15,175 | 7,689 | ||||||
| Net cash provided by operating activities | 215,317 | 217,726 | ||||||
Cash flows from investing activities: | ||||||||
| Capital expenditures | (73,974 | ) | (91,759 | ) | ||||
| Proceeds from sale of property and equipment | 97 | 3,324 | ||||||
| Net cash used in investing activities | (73,877 | ) | (88,435 | ) | ||||
Cash flows from financing activities: | ||||||||
| Borrowings under revolving credit agreement | 274,033 | 853,903 | ||||||
| Repayments under revolving credit agreement | (274,033 | ) | (908,903 | ) | ||||
| Tax benefit of stock options exercised | 4,281 | 1,085 | ||||||
| Principal payments under capital lease obligations | (548 | ) | (851 | ) | ||||
| Repurchase of common stock | (15,289 | ) | (53,866 | ) | ||||
| Net proceeds from issuance of common stock | 5,978 | 3,150 | ||||||
| Net cash used in financing activities | (5,578 | ) | (105,482 | ) | ||||
Net increase in cash and equivalents | 135,862 | 23,809 | ||||||
| Cash and cash equivalents at beginning of year | 36,989 | 13,180 | ||||||
| Cash and cash equivalents at end of year | $ | 172,851 | $ | 36,989 | ||||
Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | 838 | $ | 3,890 | ||||
| Income taxes | 66,888 | 55,476 | ||||||
| * Reclassified to conform to the current period presentation. | ||||||||
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Selected Financial and Operating Information
| FOURTH QUARTER ENDED | FISCAL YEAR ENDED | |||||||||||||||
| December 26, 2009 | December 27, 2008 | December 26, 2009 | December 27, 2008 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
Sales Information: | ||||||||||||||||
| Same-store sales increase (decrease) | 0.7 | % | 1.3 | % | (1.1 | )% | 1.4 | % | ||||||||
| Non-comp sales (% of total sales) | 6.6 | % | 8.2 | % | 7.2 | % | 8.9 | % | ||||||||
| Average transaction value | $ | 42.24 | $ | 43.90 | $ | 42.06 | $ | 44.55 | ||||||||
| Comp average transaction/value increase (decrease) | (4.1 | )% | 0.3 | % | (6.0 | )% | 1.3 | % | ||||||||
| Comp average transaction count increase | 5.1 | % | 1.0 | % | 5.3 | % | 0.1 | % | ||||||||
Store Count Information: | ||||||||||||||||
| Beginning of period | 912 | 834 | 855 | 764 | ||||||||||||
| New stores opened | 18 | 21 | 76 | 91 | ||||||||||||
| Stores closed/sold | — | — | (1 | ) | — | |||||||||||
| End of year | 930 | 855 | 930 | 855 | ||||||||||||
| Relocated stores | — | 1 | 2 | 1 | ||||||||||||
| Pre-opening costs (000’s) | $ | 1,209 | $ | 1,720 | $ | 7,455 | $ | 8,712 | ||||||||
Balance Sheet Information: | ||||||||||||||||
Average inventory per store (000’s) (a) | $ | 706.5 | $ | 759.0 | $ | 706.5 | $ | 759.0 | ||||||||
| Inventory turns | 3.02 | 2.89 | 2.88 | 2.79 | ||||||||||||
Financed inventory (a) | 39.1 | % | 43.0 | % | 39.1 | % | 43.0 | % | ||||||||
| Treasury shares: | ||||||||||||||||
| Shares purchased (000’s) | 98 | 318 | 419 | 1,598 | ||||||||||||
| Cost (000’s) | $ | 4,515 | $ | 11,367 | $ | 15,289 | $ | 53,866 | ||||||||
| (a) Assumes average inventory cost, excluding inventory in transit. | ||||||||||||||||
5
Supplemental LIFO Information
(Unaudited)
(in thousands, except per share amounts)
| Fourth Quarter Ended | Fiscal Year Ended | |||||||||||||||
| December 26, | December 27, | December 26, | December 27, | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| LIFO provision, pre tax | $ | (1,501 | ) | $ | 20,288 | $ | 6,932 | $ | 42,795 | |||||||
| Net income | $ | 38,253 | $ | 24,712 | $ | 115,466 | $ | 81,930 | ||||||||
| LIFO provision, net of tax | (976 | ) | 12,544 | 4,374 | 26,291 | |||||||||||
| Net income without LIFO | $ | 37,277 | $ | 37,256 | $ | 119,840 | $ | 108,221 | ||||||||
| Earnings Per Diluted Share: | ||||||||||||||||
| Net income | $ | 1.04 | $ | 0.67 | $ | 3.15 | $ | 2.19 | ||||||||
| LIFO provision, net of tax | (0.03 | ) | 0.34 | 0.12 | 0.70 | |||||||||||
| Net income without LIFO | $ | 1.01 | $ | 1.01 | $ | 3.27 | $ | 2.89 | ||||||||
The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. However, we believe that non-GAAP reporting, giving effect to the adjustments shown in the reconciliation above, provides meaningful information and therefore we use it to supplement our GAAP guidance. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the above reconciliations and to provide an additional measure of performance.
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