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| 8-K - FORM 8-K TRACTOR SUPPLY COMPANY - TRACTOR SUPPLY CO /DE/ | q420138k.htm |
www.TractorSupply.com
TRACTOR SUPPLY COMPANY REPORTS
FOURTH QUARTER AND FULL YEAR 2013 RESULTS
~ Fourth Quarter Earnings per Share Increased 23.6% to $0.68 ~
~ Fourth Quarter Sales Increased to $1.42 Billion and Comparable Store Sales Increased 3.5% ~
~ Full Year Earnings per Share Increased 22.1% to $2.32 ~
Brentwood, Tennessee, January 29, 2014 - Tractor Supply Company (NASDAQ: TSCO), the largest retail farm and ranch store chain in the United States, today announced financial results for its fourth quarter and fiscal year ended December 28, 2013. Additionally, the Company provided its initial outlook for fiscal 2014.
Fourth Quarter Results
Net sales increased 10.0% to $1.42 billion from $1.29 billion in the prior year’s fourth quarter. Comparable store sales increased 3.5% versus a 4.7% increase in the prior year period. The increase in comparable store sales was driven by continued strong results in key consumable, usable and edible (C.U.E.) products, principally animal- and pet-related merchandise. Seasonal items, predominantly heating and insulated outerwear, also performed well due to the cold weather in the latter part of the quarter.
Gross profit increased 13.0% to $479.7 million from $424.6 million in the prior year’s fourth quarter. As a percent of sales, gross margin increased 90 basis points to 33.9% from 33.0% in the prior year period. Gross margin improvement was the result of strong inventory and markdown management, solid retail price management in C.U.E. products and a mix shift to higher margin seasonal product, such as insulated outerwear and footwear. Additionally, the Company was cycling strong sales of lower-margin emergency response products as a result of Hurricane Sandy in the prior year.
Selling, general and administrative expenses, including depreciation and amortization, increased to 23.5% of sales compared to 23.3% of sales in the prior year’s fourth quarter. The increase as a percent of sales was primarily attributable to costs related to the relocated Southeast distribution center and a new corporate data center.
Net income for the quarter was $95.9 million, or $0.68 per diluted share, compared to net income of $79.5 million, or $0.55 per diluted share, in the fourth quarter of the prior year. All references to per share amounts reflect a two-for-one stock split that was effective September 26, 2013.
The Company opened 31 new stores in the fourth quarter of 2013 compared to 25 new store openings in the prior year’s fourth quarter.
Greg Sandfort, President and Chief Executive Officer, stated, “We are very pleased with our strong fourth quarter and full-year results. The fourth quarter marked our 17th consecutive quarter of positive comparable store sales and our 23rd consecutive quarter of positive comparable transaction counts. In recent years, we have grown our business effectively despite challenging economic environments and volatile weather trends. We believe our results are a function of the balanced approach we take to run our business, through managing sales, margins, expenses and capital investments.
Mr. Sandfort continued, “We are proud of our many achievements over the past year, which included the celebration of the Company’s 75th anniversary; our first store openings in Arizona, Nevada and Wyoming; the relocation of our Southeast distribution center; and the Company’s recent addition to the S&P 500 Index. Looking ahead, we believe
we are well-positioned to continue executing our strategic sales- and margin-enhancing initiatives and investing in the business to drive long-term sustainable growth and shareholder value.”
Full Year Results
Net sales increased 10.7% to $5.16 billion from $4.66 billion in fiscal 2012. Comparable store sales increased 4.8% versus a 5.3% increase in fiscal 2012. Gross profit increased 12.0% to $1.75 billion from $1.57 billion and gross margin increased 40 basis points to 34.0% of sales from 33.6% of sales for fiscal 2012.
Selling, general and administrative expenses, including depreciation and amortization, increased 9.7% to $1.24 billion, and improved as a percent of sales to 24.0% compared to 24.2% for fiscal 2012.
Net income increased 18.7% to $328.2 million from $276.5 million and net income per diluted share increased 22.1% to $2.32 from $1.90 for fiscal 2012. All references to per share amounts reflect a two-for-one stock split that was effective September 26, 2013.
During fiscal 2013, the Company opened 102 new stores and closed two stores compared to 93 new store openings and two store closures during fiscal 2012.
Fiscal 2014 Outlook
The Company anticipates net sales for fiscal 2014 will range between $5.62 billion and $5.70 billion, with comparable store sales expected to increase 2.5% to 4.0%. The Company projects fiscal 2014 full year net income to range from $2.54 to $2.62 per diluted share. For the full year, the Company expects capital expenditures to range between $240 million and $250 million, including spending to support 102 to 106 new store openings and construction of the new Store Support Center to open in 2014.
Conference Call Information
Tractor Supply Company will be hosting a conference call at 5:00 p.m. Eastern Time today to discuss the quarterly 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 12, 2014.
About Tractor Supply Company
At December 28, 2013, Tractor Supply Company operated 1,276 stores in 48 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 small animal products, including items necessary for their health, care, growth and containment; (2) hardware, truck, towing and tool products; (3) seasonal products, including lawn and garden items, power equipment, gifts and toys; (4) maintenance products for agricultural and rural use; and (5) work/recreational clothing and footwear.
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, 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, 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, failure 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 and 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 28, 2013 | December 29, 2012 | December 28, 2013 | December 29, 2012 | ||||||||||||||||||||||||
% of | % of | % of | % of | ||||||||||||||||||||||||
Sales | Sales | Sales | Sales | ||||||||||||||||||||||||
Net sales | $ | 1,415,089 | 100.0 | % | $ | 1,286,166 | 100.0 | % | $ | 5,164,784 | 100.0 | % | $ | 4,664,120 | 100.0 | % | |||||||||||
Cost of merchandise sold | 935,377 | 66.1 | 861,544 | 67.0 | 3,411,175 | 66.0 | 3,098,066 | 66.4 | |||||||||||||||||||
Gross profit | 479,712 | 33.9 | 424,622 | 33.0 | 1,753,609 | 34.0 | 1,566,054 | 33.6 | |||||||||||||||||||
Selling, general and administrative expenses | 305,665 | 21.6 | 277,251 | 21.5 | 1,138,934 | 22.1 | 1,040,287 | 22.3 | |||||||||||||||||||
Depreciation and amortization | 26,969 | 1.9 | 22,595 | 1.8 | 100,025 | 1.9 | 88,975 | 1.9 | |||||||||||||||||||
Operating income | 147,078 | 10.4 | 124,776 | 9.7 | 514,650 | 10.0 | 436,792 | 9.4 | |||||||||||||||||||
Interest (income) expense, net | (528 | ) | — | 200 | — | 557 | — | 1,055 | — | ||||||||||||||||||
Income before income taxes | 147,606 | 10.4 | 124,576 | 9.7 | 514,093 | 10.0 | 435,737 | 9.4 | |||||||||||||||||||
Income tax expense | 51,725 | 3.6 | 45,089 | 3.5 | 185,859 | 3.6 | 159,280 | 3.4 | |||||||||||||||||||
Net income | $ | 95,881 | 6.8 | % | $ | 79,487 | 6.2 | % | $ | 328,234 | 6.4 | % | $ | 276,457 | 6.0 | % | |||||||||||
Net income per share: | |||||||||||||||||||||||||||
Basic (a) | $ | 0.69 | $ | 0.57 | $ | 2.35 | $ | 1.94 | |||||||||||||||||||
Diluted (a) | $ | 0.68 | $ | 0.55 | $ | 2.32 | $ | 1.90 | |||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||||||
Basic (a) | 139,749 | 140,436 | 139,415 | 142,184 | |||||||||||||||||||||||
Diluted (a) | 141,829 | 143,466 | 141,723 | 145,514 | |||||||||||||||||||||||
Dividends declared per common share outstanding (a) | $ | 0.13 | $ | 0.10 | $ | 0.49 | $ | 0.36 | |||||||||||||||||||
(a) Share and per share amounts reflect a two-for-one stock split that was effective September 26, 2013.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
December 28, 2013 | December 29, 2012 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 142,743 | $ | 138,630 | |||
Restricted cash | — | 8,400 | |||||
Inventories | 979,308 | 908,116 | |||||
Prepaid expenses and other current assets | 57,359 | 51,808 | |||||
Deferred income taxes | 29,838 | 23,098 | |||||
Total current assets | 1,209,248 | 1,130,052 | |||||
Property and equipment: | |||||||
Land | 73,350 | 61,522 | |||||
Buildings and improvements | 581,938 | 511,188 | |||||
Furniture, fixtures and equipment | 408,021 | 350,224 | |||||
Computer software and hardware | 140,222 | 109,121 | |||||
Construction in progress | 65,312 | 37,122 | |||||
1,268,843 | 1,069,177 | ||||||
Accumulated depreciation and amortization | (603,911 | ) | (519,179 | ) | |||
Property and equipment, net | 664,932 | 549,998 | |||||
Goodwill | 10,258 | 10,258 | |||||
Deferred income taxes | 92 | — | |||||
Other assets | 18,861 | 16,500 | |||||
Total assets | $ | 1,903,391 | $ | 1,706,808 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 316,487 | $ | 320,392 | |||
Accrued employee compensation | 50,573 | 48,400 | |||||
Other accrued expenses | 155,615 | 148,316 | |||||
Current portion of capital lease obligations | 42 | 38 | |||||
Income taxes payable | 9,424 | 43,359 | |||||
Total current liabilities | 532,141 | 560,505 | |||||
Capital lease obligations, less current maturities | 1,200 | 1,242 | |||||
Deferred income taxes | — | 1,477 | |||||
Deferred rent | 76,930 | 76,236 | |||||
Other long-term liabilities | 46,226 | 42,374 | |||||
Total liabilities | 656,497 | 681,834 | |||||
Stockholders’ equity: | |||||||
Common stock | 1,331 | 1,307 | |||||
Additional paid-in capital | 452,668 | 361,106 | |||||
Treasury stock | (838,588 | ) | (709,172 | ) | |||
Retained earnings | 1,631,483 | 1,371,733 | |||||
Total stockholders’ equity | 1,246,894 | 1,024,974 | |||||
Total liabilities and stockholders’ equity | $ | 1,903,391 | $ | 1,706,808 | |||
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
YEAR ENDED | ||||||||
December 28, 2013 | December 29, 2012 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 328,234 | $ | 276,457 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 100,025 | 88,975 | ||||||
Loss on disposition of property and equipment | 35 | 76 | ||||||
Stock compensation expense | 13,893 | 17,641 | ||||||
Excess tax benefit of stock options exercised | (43,517 | ) | (25,836 | ) | ||||
Deferred income taxes | (8,309 | ) | (26,581 | ) | ||||
Change in assets and liabilities: | ||||||||
Inventories | (71,192 | ) | (77,297 | ) | ||||
Prepaid expenses and other current assets | (5,551 | ) | (80 | ) | ||||
Accounts payable | (3,905 | ) | 53,983 | |||||
Accrued employee compensation | 2,173 | 139 | ||||||
Other accrued expenses | 9,938 | 8,828 | ||||||
Income taxes payable | 9,582 | 57,321 | ||||||
Other | 2,275 | 4,676 | ||||||
Net cash provided by operating activities | 333,681 | 378,302 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (218,200 | ) | (152,924 | ) | ||||
Proceeds from sale of property and equipment | 477 | 379 | ||||||
Decrease in restricted cash | 8,400 | 13,470 | ||||||
Net cash used in investing activities | (209,323 | ) | (139,075 | ) | ||||
Cash flows from financing activities: | ||||||||
Borrowings under revolving credit agreement | 185,000 | — | ||||||
Repayments under revolving credit agreement | (185,000 | ) | — | |||||
Excess tax benefit of stock options exercised | 43,517 | 25,836 | ||||||
Principal payments under capital lease obligations | (38 | ) | (37 | ) | ||||
Repurchase of shares to satisfy tax obligations | (4,142 | ) | (6,821 | ) | ||||
Repurchase of common stock | (129,416 | ) | (271,799 | ) | ||||
Net proceeds from issuance of common stock | 38,318 | 26,577 | ||||||
Cash dividends paid to stockholders | (68,484 | ) | (51,318 | ) | ||||
Net cash used in financing activities | (120,245 | ) | (277,562 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 4,113 | (38,335 | ) | |||||
Cash and cash equivalents at beginning of period | 138,630 | 176,965 | ||||||
Cash and cash equivalents at end of period | $ | 142,743 | $ | 138,630 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 780 | $ | 1,219 | ||||
Income taxes | 188,003 | 128,306 | ||||||
Non-cash accruals for construction in progress | 8,258 | 10,897 | * | |||||
* The Company changed the presentation of the prior period non-cash accruals for construction in progress to conform to the presentation used in the current period. | ||||||||
Selected Financial and Operating Information
(Unaudited)
FOURTH QUARTER ENDED | YEAR ENDED | |||||||||||
December 28, 2013 | December 29, 2012 | December 28, 2013 | December 29, 2012 | |||||||||
Sales Information: | ||||||||||||
Comparable store sales increase | 3.5 | % | 4.7 | % | 4.8 | % | 5.3 | % | ||||
New store sales (% of total sales) | 6.0 | % | 5.9 | % | 5.4 | % | 5.9 | % | ||||
Average transaction value | $45.50 | $46.12 | $44.48 | $44.40 | ||||||||
Comparable store average transaction value (decrease) increase | (1.5 | )% | 1.8 | % | 0.0 | % | 2.0 | % | ||||
Comparable store average transaction count increase | 5.1 | % | 2.7 | % | 4.7 | % | 3.0 | % | ||||
Total selling square footage (000’s) | 20,470 | 18,893 | 20,470 | 18,893 | ||||||||
Store Count Information: | ||||||||||||
Beginning of period | 1,245 | 1,151 | 1,176 | 1,085 | ||||||||
New stores opened | 31 | 25 | 102 | 93 | ||||||||
Stores closed | — | — | (2) | (2) | ||||||||
End of period | 1,276 | 1,176 | 1,276 | 1,176 | ||||||||
Pre-opening costs (000’s) | $2,013 | $1,721 | $7,756 | $7,124 | ||||||||
Balance Sheet Information: | ||||||||||||
Average inventory per store (000’s) (a) | $723.5 | $727.4 | $723.5 | $727.4 | ||||||||
Inventory turns (annualized) | 3.52 | 3.57 | 3.29 | 3.28 | ||||||||
Share repurchase program: | ||||||||||||
Cost (000’s) | $38,816 | $107,959 | $129,416 | $271,799 | ||||||||
Average purchase price per share (b) | $72.52 | $44.44 | $56.59 | $44.47 | ||||||||
Capital Expenditures (millions): | ||||||||||||
New and relocated stores and stores not yet opened | $17.6 | $16.7 | $69.1 | $60.4 | ||||||||
Corporate and other | 15.7 | 2.2 | 40.7 | 13.8 | ||||||||
Information technology | 7.0 | 7.8 | 29.8 | 28.2 | ||||||||
Distribution center capacity and improvements | 4.0 | 6.0 | 44.9 | 16.4 | ||||||||
Existing stores | 9.2 | 7.0 | 22.3 | 22.2 | ||||||||
Purchase of previously leased stores | 7.9 | 2.0 | 11.4 | 11.9 | ||||||||
Total | $61.4 | $41.7 | $218.2 | $152.9 | ||||||||
(a) Assumes average inventory cost, excluding inventory in transit.
(b) Per share amounts reflect a two-for-one stock split that was effective September 26, 2013.