EXHIBIT 99.1
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TRACTOR SUPPLY COMPANY REPORTS THIRD QUARTER RESULTS
~ SAME-STORE SALES INCREASE 10% ~
~ COMPANY UPDATES FULL YEAR GUIDANCE ~
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Brentwood, Tennessee, October 11, 2004 - Tractor Supply Company (NASDAQ: TSCO),
the largest retail farm and ranch store chain in the United States, today
announced the financial results for its third fiscal quarter and nine months
ended September 25, 2004.
THIRD QUARTER RESULTS
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Net sales for the quarter increased 18.0% to $426.4 million from $361.2 million
last year. Same-store sales increased 10.1% versus last year's 13.7% gain.
Higher selling prices for steel, feed, and petroleum-based products contributed
3.4% of the same-store sales increase. The Company's same-store sales were
positive in all regions. Stores impacted by hurricanes averaged a 36% increase
while northern tier stores, where temperatures were warmer than expected,
averaged a 4% increase.
Gross margin increased 9.5% to $119.6 million. Gross margin was 28.0% compared
to 30.2% for the comparable quarter in 2003. Gross margin was negatively
impacted by several factors, including: (i) a sales mix shift towards lower
margin hurricane-related products and promotional items and lower than expected
sales of higher margin fall/winter products, (ii) the impact of higher steel and
other commodity costs, (iii) higher than anticipated freight costs, and (iv) an
adverse swing in the LIFO reserve due to higher product costs.
Selling, general and administrative expenses were 23.6% of sales versus 23.3% of
sales last year. SG&A in 2004 includes a $2.9 million pre-tax expense incurred
in the third quarter of 2004 related to consolidating and relocating the store
support center. Additionally, incremental store payroll and travel expenses
related to reset activity, a charge due to the pending bankruptcy of an
insurance carrier, uninsured hurricane losses, and increased legal expenses
totaling approximately $3.4 million were included in SG&A expenses for the
quarter.
In line with the Company's revised outlook issued on September 29, 2004, net
income for the quarter, including a $1.9 million after-tax charge for the store
support center relocation, was $8.0 million, or $0.19 per diluted share,
compared to $12.1 million, or $0.30 per diluted share, for the comparable
quarter in 2003. Excluding the aforementioned charge, net income was $9.9
million, or $0.23 per diluted share.
During the third quarter, the Company opened 17 stores including 13 new and four
relocated stores compared to four new and seven relocated stores in the third
quarter of 2003.
NINE MONTH RESULTS
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For the first nine months of fiscal 2004, net sales increased 18.3% to $1,282.9
million and same-store sales increased 10.7% versus last year's 6.0% gain. Gross
margin in the first nine months decreased 50 basis points to 29.6%. Selling,
general and administrative expenses increased 30 basis points to 22.8% of sales,
including the costs for the store support center relocation.
Net income for the first nine months of fiscal 2004 was $43.1 million, or $1.03
per diluted share, compared to net income of $39.6 million, or $0.99 per diluted
share, in the prior year period. The results of fiscal 2004 included
approximately $1.9 million in after-tax costs related to the consolidation and
relocation of the store support center. The results of fiscal 2003 included an
after-tax charge of $1.9 million related to the adoption of new accounting
guidance for vendor allowances.
During the first nine months, the Company opened a total of 38 new stores and
relocated 13 stores, compared to 29 new store openings in the prior year period
with 12 store relocations.
EXHIBIT 99.1
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Jim Wright, President and Chief Executive Officer of Tractor Supply Company,
stated, "While weather and certain other outside factors contributed to third
quarter results that were below our initial expectations, there are specific
areas where our execution should have been sharper, such as the roll out of our
store reset program and the management of our pricing strategy, and we have
taken action to address these issues.
"That said, our year-to-date results are strong, with both our top and bottom
lines showing improvement over last year. These results reflect consumers'
continued satisfaction with our unique product offering and commitment to
customer service."
FISCAL 2004 OUTLOOK
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The Company now expects full year net sales to range between approximately
$1,723 and $1,733 million, an increase of 17.0% to 17.7% over fiscal 2003.
Including the estimated $1.9 million after-tax charge, full year net income is
expected to range between approximately $63.7 and $64.4 million, or $1.52 to
$1.54 per diluted share. This compares to $58.4 million, or $1.45 per diluted
share, in fiscal 2003. The results of fiscal 2003 included an after-tax charge
of $1.9 million, or $0.04 per diluted share, related to the adoption of new
accounting guidance. Excluding the $1.9 million after-tax charge for the
consolidation and relocation of the Company's store support center, full year
net income is expected to range between approximately $65.6 and $66.3 million,
or $1.57 to $1.59 per diluted share.
For the fourth quarter of 2004, the Company currently anticipates net sales in
the $440 to $450 million range and net income between $20.6 and $21.3 million,
or $0.49 to $0.51 per diluted share. This compares to 2003 fourth quarter net
income of $16.9 million, or $0.41 per diluted share. During the balance of
fiscal 2004, the Company plans approximately 14 additional new store openings
and approximately eight store relocations.
"We have implemented several initiatives over the past few years that have
proven successful in their ability to drive profitable growth over the long
term. While we hit some `road blocks' in the third quarter, we are pleased with
our overall progress," concluded Mr. Wright. "Going forward, we intend to strike
a better balance between top line growth and margin by refining our promotional
plan, revising our pricing strategy according to changes in merchandise and
other operating costs, and implementing new programs more efficiently. That
said, our outlook is based upon achieving improvement in these areas while
continuing our progress on a number of new programs. We remain confident that
with the strategies we have in place our Company is on the right track to drive
long term shareholder value."
At September 25, 2004, Tractor Supply Company operated 500 stores in 32 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) 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.
Tractor Supply Company will be hosting a conference call at 9 a.m. Eastern Time
on October 12, 2004 to further discuss the quarterly results. The call will be
simultaneously broadcast over the Internet on the Company's homepage at
WWW.MYTSCSTORE.COM and can be accessed under the subheading "INVESTOR
RELATIONS."
EXHIBIT 99.1
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FOOTNOTES:
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o ALL COMPARISONS TO PRIOR PERIODS ARE TO THE RESPECTIVE PERIOD OF THE
PRIOR FISCAL YEAR UNLESS THE CONTEXT SPECIFICALLY INDICATES OTHERWISE.
o THE 2003 RESULTS OF OPERATIONS AND FINANCIAL POSITION ARE PRESENTED AS
IF THE TWO-FOR-ONE STOCK SPLIT EFFECTIVE IN AUGUST 2003 HAD OCCURRED
PRIOR TO THE BEGINNING OF THE RELATED PERIOD.
o 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 STATEMENTS INCLUDE
REFERENCE TO CERTAIN FACTORS, 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, 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
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RESULTS OF OPERATIONS
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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THIRD QUARTER ENDED NINE MONTHS ENDED
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SEPT. 25, 2004 SEPT. 27, 2003 SEPT. 25, 2004 SEPT. 27, 2003
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(UNAUDITED) (UNAUDITED)
% of % of % of % of
SALES SALES SALES SALES
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Net sales $ 426,384 100.0% $ 361,204 100.0% $ 1,282,857 100.0% $ 1,084,355 100.0%
Cost of merchandise sold 306,808 72.0 251,971 69.8 903,569 70.4 758,033 69.9
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Gross margin 119,576 28.0 109,233 30.2 379,288 29.6 326,322 30.1
Selling, general and
administrative expenses 100,647 23.6 84,075 23.3 292,144 22.8 243,569 22.5
Depreciation and amortization 6,269 1.5 5,165 1.4 18,186 1.4 14,369 1.3
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Income from operations 12,660 2.9 19,993 5.5 68,958 5.4 68,384 6.3
Interest expense, net 171 -- 805 0.2 742 0.1 2,756 0.2
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Income before income taxes and
cumulative effect of accounting
change 12,489 2.9 19,188 5.3 68,216 5.3 65,628 6.1
Income tax provision 4,537 1.0 7,059 1.9 25,067 1.9 24,099 2.2
----------- ------- ----------- ------- ----------- ------- ----------- -------
Net income before cumulative
effect of accounting change ... 7,952 1.9 12,129 3.4 43,149 3.4 41,529 3.9
Cumulative effect of accounting
change, net of tax -- -- -- -- -- -- (1,888) 0.2
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Net income $ 7,952 1.9% $ 12,129 3.4% $ 43,149 3.4% $ 39,641 3.7%
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Net income per share, before
cumulative effect of accounting change:
Basic $ 0.21$ 0.33$ 1.13$ 1.12
Diluted $ 0.19$ 0.30$ 1.03$ 1.03
Net income per share, including
cumulative effect of accounting change:
Basic $ 0.21$ 0.33$ 1.13$ 1.07
Diluted $ 0.19$ 0.30$ 1.03$ 0.99
Weighted average shares
outstanding (000's):
Basic 38,259 37,262 38,100 36,986
Diluted 41,731 40,553 41,757 40,190
(more)
EXHIBIT 99.1
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BALANCE SHEET
(IN THOUSANDS)
SEPT. 25, SEPT. 27,
2004 2003
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(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 23,488 $ 30,903
Inventories 435,007 374,849
Prepaid expenses and other current assets 36,771 22,025
Assets held for sale 2,877 2,611
Deferred income taxes 5,850 7,294
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Total current assets 503,993 437,682
Property and equipment, net 184,256 147,381
Other assets 5,945 4,323
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TOTAL ASSETS $ 694,194 $ 589,386
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 199,264 $ 195,599
Accrued expenses 84,421 60,218
Current maturities of long-term debt -- 2,142
Current portion of capital lease obligations 532 343
Income taxes currently payable -- 122
Other current liabilities -- 197
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Total current liabilities 284,217 258,621
Revolving credit loan 44,153 43,209
Other long-term debt -- 1,788
Capital lease obligations 1,852 1,893
Deferred income taxes 2,916 1,584
Other long-term liabilities 8,008 5,066
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Total liabilities 341,146 312,161
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Stockholders' equity:
Common stock 306 298
Additional paid-in capital 76,591 60,909
Retained earnings 276,151 216,142
Accumulated other comprehensive loss -- (124)
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Total stockholders' equity 353,048 277,225
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 694,194 $ 589,386
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