Exhibit 99.1
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TRACTOR SUPPLY COMPANY REPORTS FOURTH QUARTER AND
FULL YEAR RESULTS
~ Q4 SAME STORE SALES INCREASE 9.6% ~
~ FULL YEAR SAME STORE SALES INCREASE 7.0% ~
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Nashville, Tennessee, January 20, 2004 - Tractor Supply Company (NASDAQ: TSCO),
the largest retail farm and ranch store chain in the United States, today
announced financial results for the fourth quarter and twelve months ended
December 27, 2003. Additionally, the Company provided its current outlook for
fiscal 2004.
FOURTH QUARTER
Net sales increased 18.5% to $388.5 million for the quarter compared with $327.9
million last year. Same-store sales increased 9.6%, versus last year's increase
of 6.2%, reflecting strong sales of livestock and pet products, continued growth
in hardware and tool categories, as well as growth in seasonal demand for winter
and heating products. Gross margin improved 10 basis points to 31.5%, as a
result of mix and improved product costing. Selling, general and administrative
expenses, as a percent of sales, improved 100 basis points to 22.8% primarily as
a result of operating leverage.
Net income increased 32.7% to $16.9 million, or $0.41 per diluted share,
compared to net income of $12.7 million, or $0.32 per diluted share, in the
fourth quarter of 2002. All references to per share amounts reflect a
two-for-one stock split that was effective on August 22, 2003.
During the quarter, the Company opened two new stores, relocated six existing
stores and closed one store. This compares to two new store openings and three
relocations in the prior year period.
FULL YEAR
Net sales increased 21.7% to $1,472.9 million for the full year compared with
$1,210.0 million in 2002. Same-store sales increased 7.0% following a 9.6%
same-store sales increase in the year ago period. Year-over-year, gross margin
contracted 40 basis points to 30.5%. This decline reflects a return to more
normal vendor funding in comparison to 2002 when vendors provided additional
marketing support related to the Company's significant store expansion. Selling,
general and administrative expenses, as a percent of sales, were 22.6% compared
to 24.2% in 2002. Due to the above factors, income from operations increased to
6.6% of sales from 5.3% of sales last year.
Net income increased 50.0% to $56.5 million, or $1.40 per diluted share.
Excluding a $1.9 million cumulative effect of a previously disclosed change in
accounting principle in the first quarter of 2003, net income was $58.4 million,
or $1.45 per diluted share. This performance compares to net income of $37.7
million, or $0.96 per diluted share, in 2002.
The Company opened a total of 31 new stores in 2003 compared to 113 stores in
the prior year period, when it substantially expanded the store base largely due
to the purchase of property and lease rights from Quality Stores, Inc.
Additionally, the Company relocated 18 existing stores in 2003 compared to 16
relocations in the prior year period.
Joe Scarlett, Chairman and Chief Executive Officer stated, "We have just
concluded another very solid year. Sales and profit growth, along with nearly
all the other key financial measures, show consistent and steady improvement. Of
particular note, sales at both new and existing stores remained above plan,
Exhibit 99.1
showing particular strength in the fourth quarter with solid performance across
all regions and all major product categories. Moreover, in 2003 we recorded our
third consecutive year of solid same-store sales increases, growing 7.0% on top
of a very strong 9.6% in 2002.
"Growth of this magnitude and consistency is the result of a stellar total team
effort to manage well-run stores, create strong merchandise programs and provide
outstanding store support while also implementing operational improvements. For
example, we continue to improve and build the logistics and distribution network
to assure that our supply chain fulfills our customers' needs. In Waco, Texas,
we relocated from three separate old warehouses into a modern distribution
center. In addition, a new distribution center in Georgia started shipments this
month and more distribution capacity is in the 2004 plans. These additions
together with our new store expansion and relocation program will result in an
estimated total of nearly $80 million in capital expenditures in 2004, which we
expect to fund solely from internally generated cash."
OUTLOOK FOR FISCAL 2004
Based on current visibility, the Company anticipates 2004 annual net sales will
be in the $1,670 million to $1,690 million range, an increase of 13% to 15% over
fiscal 2003. The Company expects 2004 net income will range between $68.0
million and $69.3 million before an estimated $2.0 million after-tax charge for
the relocation of its store support center.
Mr. Scarlett concluded, "We remain very optimistic about 2004. Our consistently
strong results continue to demonstrate the attractiveness of our market niche as
well as the growing recognition and popularity of our unique retail concept,
extensive and distinctive merchandise selection, and premier customer service.
Most importantly, we are focused on managing the Company for long-term
shareholder value and are confident that we are well positioned for the future."
ADOPTION OF NEW ACCOUNTING PROVISION (EITF NO. 02-16)
In the first quarter of 2003, the Company adopted the new accounting guidance
for vendor allowances, Emerging Issues Task Force ("EITF") Issue No. 02-16,
"Accounting by a Customer (Including a Reseller) for Certain Consideration
Received from a Vendor." EITF No. 02-16 provides guidance for when retailers
should recognize consideration given by a vendor to a retailer in connection
with the sale of the vendor's products or to promote sales of the vendor's
products by the retailer. To facilitate year-over-year comparisons, the Company
has presented the comparative results discussed above and the financial
schedules included at the end of this release as if this required change in
accounting had been applied prior to the earliest period presented.
CONFERENCE CALL
Tractor Supply Company will host a conference call at 9:00 a.m. Eastern Time
tomorrow, January 21, 2004, to discuss the fourth quarter and fiscal year
results. The call will be simultaneously broadcast over the Internet on the
Company's website at www.myTSCstore.com and can be accessed under the subheading
"Investor Relations."
ABOUT TRACTOR SUPPLY COMPANY
At December 27, 2003, Tractor Supply Company operated 463 stores in 30 states,
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) livestock and
pet products, including
Exhibit 99.1
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.
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Footnotes:
o All comparisons to prior periods are to the respective period of the
prior fiscal year unless the context specifically indicates otherwise.
All earnings per share comparison amounts reflect a two-for-one stock
split that was distributed in August 2003.
o The 2002 results are presented on a pro forma basis, as if the change
in accounting principle had occurred prior to the earliest period
presented, as previously reported in Form 8-K, dated April 15, 2003.
o As with any business, all phases of the Company's operations are
subject to influences outside its control. The information set forth in
this release contains certain forward-looking statements, including
information regarding our projected results of operations. These
statements are subject to numerous risks, uncertainties and other
factors, any one, or a combination, of which could materially affect
the results of the Company's operations and cause actual results to
differ materially from those expressed in any forward looking
statements. These factors include general economic cycles affecting
consumer spending, weather factors, operating factors affecting
customer satisfaction, consumer debt levels, pricing and other
competitive factors, the ability to attract, train and retain qualified
employees, the ability to 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 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 there can be no
assurance that the actual 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)
Exhibit 99.1
RESULTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOURTH QUARTER ENDED FISCAL YEAR ENDED
------------------------------------ --------------------------------------
DEC. 27, 2003 DEC. 28, 2002 DEC. 27, 2003 DEC. 28, 2002
---------------- ---------------- ----------------- ------------------
(PRO FORMA)(1) (PRO FORMA)(1)
(UNAUDITED) (UNAUDITED)
% of % of % of % of
Sales Sales Sales Sales
----- ----- ----- -----
Net sales $388,530 100.0% $327,917 100.0% $1,472,885 100.0% $1,209,990 100.0%
Cost of merchandise sold 265,952 68.5 224,937 68.6 1,023,985 69.5 836,095 69.1
-------- ----- -------- ----- ---------- ----- ---------- -----
Gross margin 122,578 31.5 102,980 31.4 448,900 30.5 373,895 30.9
Selling, general and
administrative expenses 88,646 22.8 77,944 23.8 332,215 22.6 293,689 24.2
Depreciation and amortization 5,389 1.4 4,350 1.3 19,758 1.3 16,457 1.4
-------- ----- -------- ----- --------- ----- ---------- -----
Income from operations 28,543 7.3 20,686 6.3 96,927 6.6 63,749 5.3
Interest expense, net 688 0.2 1,235 0.4 3,444 0.2 4,707 0.4
-------- ----- -------- ----- --------- ----- ---------- -----
Income before income taxes and
cumulative effect of accounting
change 27,855 7.1 19,451 5.9 93,483 6.4 59,042 4.9
Income tax provision 10,995 2.8 6,745 2.0 35,094 2.4 21,352 1.8
-------- ----- -------- ----- --------- ----- ---------- -----
Net income before cumulative
effect of accounting change $ 16,860 4.3% $ 12,706 3.9% $ 58,389 4.0% $ 37,690 3.1%
Cumulative effect of accounting
change, net of tax -- -- -- -- 1,888 0.1 -- --
-------- ----- -------- ----- --------- ----- ---------- -----
Net income $ 16,860 4.3% $ 12,706 3.9% $ 56,501 3.9% $ 37,690 3.1%
======== ===== ======== ====== ========= ===== ========== =====
Net income per share, before
cumulative effect of accounting change:
Basic $ 0.45 $ 0.35 $ 1.57 $ 1.04
Diluted $ 0.41 $ 0.32 $ 1.45 $ 0.96
Net income per share, including
cumulative effect of accounting change:
Basic $ 0.45 $ 0.35 $ 1.52 $ 1.04
Diluted $ 0.41 $ 0.32 $ 1.40 $ 0.96
Weighted average shares
outstanding (000's):
Basic 37,342 36,395 37,076 36,111
Diluted 40,696 39,932 40,271 39,277
(1) The operating results for the quarter and fiscal year ended December 28,
2002 are presented on a pro forma basis, as if the change in accounting
principle had occurred prior to the earliest period presented.
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The results of operations for fiscal 2002 include certain expenses which
management has isolated for presentation below; the segregation of these items
provides a more comparable analysis of financial results among periods; and
while these items do not meet the definition of unusual or infrequent, they are,
nevertheless, items that management believes should not be interpreted or
assumed to be a result of recurring operations. A summary of 2002 diluted
earnings per share (in thousands, except per share amounts) follows:
FOURTH QUARTER ENDED FISCAL YEAR ENDED
DEC. 28, 2002 DEC. 28, 2002
--------------------------- --------------------------
(UNAUDITED) (UNAUDITED)
NET PER SHARE NET PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------- ------ ------- ------- ------ ------
Net income - as reported $17,633 39,932 $ 0.44 $38,770 39,277 $ 0.99
Non-recurring store expansion costs (net of taxes) -- 39,932 -- 6,666 39,277 0.17
Change in accounting for vendor funds (net of taxes) (4,927) 39,932 (0.12) (1,080) 39,277 (0.03)
------- ------ ------- ------- ------ ------
$12,706 39,932 $ 0.32 $44,356 39,277 $ 1.13
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(more)
Exhibit 99.1
BALANCE SHEET
(IN THOUSANDS)
DEC. 27, DEC. 28,
2003 2002
-----------------------------------
(PRO FORMA)(1)
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 19,980 $ 13,773
Accounts receivable, net -- 102
Inventories 324,518 286,200
Prepaid expenses and other current assets 27,725 17,579
Assets held for sale 3,636 3,779
Deferred income taxes 7,467 7,784
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Total current assets 383,326 329,217
Property and equipment, net 148,591 123,545
Other assets 4,292 3,104
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TOTAL ASSETS $ 536,209 $ 455,866
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 131,564 $ 114,851
Accrued employee compensation 12,716 14,892
Accrued expenses 59,470 51,410
Current maturities of long-term debt -- 2,142
Current portion of capital lease obligations 339 340
Income taxes currently payable 1,738 1,936
Other current liabilities -- 1,699
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Total current liabilities 205,827 187,270
Revolving credit loan 19,403 33,542
Other long-term debt -- 3,395
Capital lease obligations 1,807 2,163
Deferred income taxes 8,879 1,584
Other long-term liabilities 4,909 1,952
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Total liabilities 240,825 229,906
---------- ----------
Stockholders' equity:
Common stock 299 292
Additional paid-in capital 62,083 52,028
Retained earnings 233,002 174,613
Accumulated other comprehensive loss -- (973)
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Total stockholders' equity 295,384 225,960
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 536,209 $ 455,866
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(1) The financial position as of December 28, 2002 has been presented on a
pro forma basis, as if the change in accounting principle had occurred
prior to the earliest date presented.
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(more)
Exhibit 99.1
CHANGE IN ACCOUNTING METHOD
IMPLEMENTATION OF EITF 02-16:
ACCOUNTING BY A CUSTOMER (INCLUDING A RESELLER) FOR
CASH CONSIDERATION RECEIVED FROM A VENDOR
In March 2003, the Emerging Issues Task Force reached a final consensus on Issue
No. 02-16 ("EITF 02-16"), "Accounting by a Customer (including a Reseller) for
Certain Consideration Received from a Vendor." This issue involves the
accounting and income statement classification for consideration given by a
vendor to a retailer in connection with the sale of the vendor's products or for
the promotion of sales of the vendor's products. The EITF concluded that such
consideration received from vendors should be reflected as a decrease in prices
paid for inventory and recognized in cost of sales as the related inventory is
sold, unless specific criteria are met qualifying the consideration for
treatment as reimbursement of specific, identifiable incremental costs. Prior to
adopting this pronouncement, the Company classified all vendor-provided funds as
a reduction in selling, general and administrative expenses. Upon adoption at
the beginning of fiscal 2003, funds received from vendors are recognized as a
reduction of cost of sales as the related inventory is sold.
Following is a summary of operations for the quarter and fiscal year ended
December 28, 2002 as originally reported and as if the adoption of EITF 02-16
had occurred prior to 2002:
FOURTH QUARTER ENDED FISCAL YEAR ENDED
------------------------------------ --------------------------------------
DEC. 28, 2002 DEC. 28, 2002 DEC. 28, 2002 DEC. 28, 2002
---------------- ---------------- ----------------- ------------------
(AS REPORTED) (PRO FORMA) (AS REPORTED) (PRO FORMA)
(UNAUDITED) (UNAUDITED)
% of % of % of % of
Sales Sales Sales Sales
----- ----- ----- -----
Net sales $327,917 100.0% $327,917 100.0% $1,209,990 100.0% $1,209,990 100.0%
Cost of merchandise sold 230,119 70.2 224,937 68.6 867,803 71.7 836,095 69.1
-------- ----- -------- ----- ---------- ----- ---------- -----
Gross margin 97,798 29.8 102,980 31.4 342,187 28.3 373,895 30.9
Selling, general and
administrative expenses 65,044 19.8 77,944 23.8 260,290 21.5 293,689 24.2
Depreciation and amortization 4,350 1.3 4,350 1.3 16,457 1.4 16,457 1.4
-------- ----- -------- ----- ---------- ----- ---------- -----
Income from operations 28,404 8.7 20,686 6.3 65,440 5.4 63,749 5.3
Interest expense, net 1,235 0.4 1,235 0.4 4,707 0.4 4,707 0.4
-------- ----- -------- ----- ---------- ----- ---------- -----
Income before income taxes 27,169 8.3 19,451 5.9 60,733 5.0 59,042 4.9
Income tax provision 9,536 2.9 6,745 2.0 21,963 1.8 21,352 1.8
-------- ----- -------- ----- ---------- ----- ---------- -----
Net income $ 17,633 5.4% $ 12,706 3.9% $ 38,770 3.2% $ 37,690 3.1%
======== ===== ======== ===== ========== ===== ========== =====
Net income per share:
Basic $ 0.48 $ 0.35 $ 1.07 $ 1.04
Diluted $ 0.44 $ 0.32 $ 0.99 $ 0.96
Weighted average shares
outstanding (000's):
Basic 36,395 36,395 $ 36,111 $ 36,111
Diluted 39,932 39,932 $ 39,277 $ 39,277
Exhibit 99.1
Following is a balance sheet presentation at December 28, 2002 as originally
reported and as if the adoption of EITF 02-16 had occurred prior to 2002:
BALANCE SHEET
(IN THOUSANDS)
DECEMBER 28, DECEMBER 28,
2002 2002
----------------------------------
(AS REPORTED) (PRO FORMA)
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 13,773 $ 13,773
Accounts receivable, net 102 102
Inventories 289,253 286,200
Prepaid expenses and other current assets 17,579 17,579
Assets held for sale 3,779 3,779
Deferred income taxes 7,784 7,784
---------- ----------
Total current assets 332,270 329,217
Property and equipment, net 123,545 123,545
Other assets 3,104 3,104
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TOTAL ASSETS $ 458,919 $ 455,866
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 114,851 $ 114,851
Accrued employee compensation 14,892 14,892
Accrued expenses 51,410 51,410
Current maturities of long-term debt 2,142 2,142
Current portion of capital lease obligations 340 340
Income taxes currently payable 3,101 1,936
Other current liabilities 1,699 1,699
---------- ----------
Total current liabilities 188,435 187,270
Revolving credit loan 33,542 33,542
Other long-term debt 3,395 3,395
Capital lease obligations 2,163 2,163
Deferred income taxes 1,584 1,584
Other long-term liabilities 1,952 1,952
---------- ----------
Total liabilities 231,071 229,906
---------- ----------
Stockholders' equity:
Common stock 146 146
Additional paid-in capital 52,174 52,174
Retained earnings 176,501 174,613
Accumulated other comprehensive loss (973) (973)
---------- ----------
Total stockholders' equity 227,848 225,960
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 458,919 $ 455,866
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