TRACTOR SUPPLY COMPANY BRENTWOOD, Tenn., July 23, 2014 /PRNewswire/ -- Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retail store chain in the United States, today announced financial results for its second fiscal quarter ended June 28, 2014.
Second Quarter Results
Net sales for the second quarter of 2014 increased 8.8% to $1.58 billion from $1.46 billion in the second quarter of 2013. Comparable store sales increased 1.9% versus a 7.2% increase in the prior year's second quarter. Comparable store sales were driven by continued strength of consumable, usable and edible products (C.U.E.) and solid traffic counts. This was partially offset by deflation, continued softness in our safe category and weaker than expected sales of certain seasonal products primarily in the Northern regions. As the quarter progressed, sales trends accelerated and weather became less of a factor. The softness in sales was principally in the first half of the quarter with the second half being consistent with the Company's expectations.
Gross profit increased 8.8% to $550.5 million from $506.1 million in the prior year's second quarter. As a percent of sales, gross margin was flat to prior year quarter at 34.8% as increased transportation costs, mix of products, and the impact of slightly more sales-driving promotions offset the favorable impact of our key gross margin enhancing initiatives and the impact of deflation.
Selling, general and administrative expenses, including depreciation and amortization, increased to 21.5% of sales compared to 21.2% of sales in the prior year's second quarter. The increase as a percent of sales was primarily attributable to lower comparable store sales and higher employee benefit expenses, partially offset by lower incentive compensation expense.
Net income for the quarter increased 8.0% to $133.4 million from $123.6 million and diluted earnings per share increased 9.2% to $0.95 from $0.87 in the second quarter of the prior year.
The Company opened 23 new stores in the second quarter compared to 26 new store openings in the prior year's second quarter.
Greg Sandfort, President and Chief Executive Officer, stated, "Sales in our everyday core C.U.E. offerings were strong throughout the second quarter. However, unseasonably cool weather in the early part of the quarter negatively impacted sales of spring seasonal merchandise. As the weather improved midway through the quarter, sales of spring seasonal products improved and have continued to meet our expectations in July. I am proud of how our team responded resulting in our 25(th) consecutive quarter of increased comparable transaction count. Despite some of the early headwinds, we successfully delivered positive comparable store sales in each month of the quarter while minimizing the impact to merchandise margins. We ended the quarter in great shape from an inventory position and a go-forward merchandise perspective, and feel good about our ability to continue driving sales and earnings growth in the back half of the year."
First Six Months Results
Net sales increased 8.9% to $2.77 billion from $2.54 billion in the first six months of 2013. Comparable store sales increased 2.0% versus a 4.2% increase in the first six months of 2013. Gross profit increased 10.3% to $946.8 million from $858.2 million and gross margin increased 40 basis points to 34.2% of sales from 33.8% of sales in the first six months of 2013.
Selling, general and administrative expenses, including depreciation and amortization, increased 10.9% to $657.0 million, and increased as a percent of sales to 23.7% compared to 23.4% for the first six months of 2013.
Net income increased 8.7% to $182.2 million from $167.6 million and net income per diluted share increased 10.2% to $1.30 from $1.18 for the first six months of 2013.
The Company opened 55 new stores in the first six months of 2014 compared to 48 new store openings during the first six months of 2013.
Company Outlook
Based upon the second quarter results, the Company anticipates its fiscal year 2014 results will be at the low end of the previously provided ranges of $5.62 billion to $5.70 billion in net sales, 2.5% to 4.0% in comparable store sales and $2.54 to $2.62 in diluted earnings per share. For the full year, the Company now expects capital expenditures to range between $220 million and $230 million compared to its previous guidance of $240 million to $250 million, including spending to support 102 to 106 new store openings and completion of the new Store Support Center.
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 August 6, 2014.
Please allow extra time prior to the call to visit the site and download the streaming media software required to listen to the Internet broadcast.
About Tractor Supply Company
At June 28, 2014, Tractor Supply Company operated 1,331 stores in 48 states. The Company's stores are focused on supplying the lifestyle needs of recreational farmers and ranchers and others who enjoy the rural lifestyle, as well as tradesmen and small businesses. Stores are located primarily in towns outlying major metropolitan markets and in rural communities. The Company offers the following comprehensive selection of merchandise: (1) equine, livestock, 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) work/recreational clothing and footwear; and (5) maintenance products for agricultural and rural use.
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 sales and earnings growth, 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, failure of an acquisition to produce anticipated results, 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, the ability 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, 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)
---------------------------------------
SECOND QUARTER ENDED SIX MONTHS ENDED
-------------------- ----------------
June 28, 2014 June 29, 2013 June 28, 2014 June 29, 2013
------------- ------------- ------------- -------------
% of % of % of % of
Sales Sales Sales Sales
----- ----- ----- -----
Net sales $1,583,831 100.0% $1,455,767 100.0% $2,767,511 100.0% $2,541,605 100.0%
Cost of merchandise sold 1,033,299 65.2 949,627 65.2 1,820,760 65.8 1,683,374 66.2
--------- ---- ------- ---- --------- ---- --------- ----
Gross profit 550,532 34.8 506,140 34.8 946,751 34.2 858,231 33.8
Selling, general and 311,589 19.7 283,941 19.5 601,859 21.7 545,410 21.5
administrative expenses
Depreciation and amortization 27,914 1.8 24,220 1.7 55,134 2.0 46,919 1.9
------ --- ------ --- ------ --- ------ ---
Operating income 211,029 13.3 197,979 13.6 289,758 10.5 265,902 10.4
Interest expense, net 308 - 556 - 762 - 735 -
--- --- --- --- --- --- --- ---
Income before income 210,721 13.3 197,423 13.6 288,996 10.5 265,167 10.4
taxes
Income tax expense 77,310 4.9 73,843 5.1 106,776 3.9 97,581 3.8
------ --- ------ --- ------- --- ------ ---
Net income $133,411 8.4% $123,580 8.5% $182,220 6.6% $167,586 6.6%
======== === ======== === ======== === ======== ===
Net income per share:
Basic $0.96 $0.89 $1.31 $1.21
===== ===== ===== =====
Diluted $0.95 $0.87 $1.30 $1.18
===== ===== ===== =====
Weighted average shares outstanding:
Basic 138,394 139,344 138,756 139,074
Diluted 140,110 141,580 140,571 141,550
Dividends declared per common share
outstanding $0.16 $0.13 $0.29 $0.23
===== ===== ===== =====
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
-------------
June 28, 2014 June 29, 2013
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $55,965 $55,698
Inventories 1,154,585 1,082,861
Prepaid expenses and other
current assets 48,120 52,676
Deferred income taxes 25,515 14,446
------ ------
Total current assets 1,284,185 1,205,681
Property and equipment:
Land 75,843 65,290
Buildings and improvements 607,030 531,142
Furniture, fixtures and
equipment 427,024 371,565
Computer software and hardware 156,674 132,875
Construction in progress 84,049 74,393
------ ------
1,350,620 1,175,265
Accumulated depreciation and
amortization (657,233) (563,789)
-------- --------
Property and equipment, net 693,387 611,476
Goodwill 10,258 10,258
Deferred income taxes 17,395 2,646
Other assets 20,303 16,363
------ ------
Total assets $2,025,528 $1,846,424
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $390,170 $360,811
Accrued employee compensation 21,158 26,783
Other accrued expenses 144,360 138,417
Current portion of capital
lease obligations 125 39
Income taxes payable 73,174 53,482
Total current liabilities 628,987 579,532
Capital lease obligations,
less current maturities 3,078 1,224
Deferred rent 77,864 76,474
Other long-term liabilities 49,674 45,447
------ ------
Total liabilities 759,603 702,677
------- -------
Stockholders' equity:
Common stock 1,335 1,322
Additional paid-in capital 476,742 413,695
Treasury stock (985,585) (778,476)
Retained earnings 1,773,433 1,507,206
--------- ---------
Total stockholders' equity 1,265,925 1,143,747
--------- ---------
Total liabilities and
stockholders' equity $2,025,528 $1,846,424
========== ==========
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
-------------
SIX MONTHS ENDED
----------------
June 28, 2014 June 29, 2013
------------- -------------
Cash flows from operating activities:
Net income $182,220 $167,586
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 55,134 46,919
Gain on disposition of property and equipment (68) (178)
Stock compensation expense 8,118 6,934
Excess tax benefit of stock options exercised (4,171) (24,804)
Deferred income taxes (12,980) 4,529
Change in assets and liabilities:
Inventories (175,277) (174,745)
Prepaid expenses and other current assets 9,239 (868)
Accounts payable 73,683 40,419
Accrued employee compensation (29,415) (21,617)
Other accrued expenses (10,742) (19,639)
Income taxes payable 67,921 34,927
Other 2,842 3,360
----- -----
Net cash provided by operating activities 166,504 62,823
------- ------
Cash flows from investing activities:
Capital expenditures (82,114) (98,626)
Proceeds from sale of property and equipment 166 235
Decrease in restricted cash - 8,400
--- -----
Net cash used in investing activities (81,948) (89,991)
------- -------
Cash flows from financing activities:
Borrowings under revolving credit agreement 110,000 135,000
Repayments under revolving credit agreement (110,000) (135,000)
Excess tax benefit of stock options exercised 4,171 24,804
Principal payments under capital lease obligations (27) (17)
Repurchase of shares to satisfy tax obligations (1,211) (3,942)
Repurchase of common stock (146,997) (69,304)
Net proceeds from issuance of common stock 13,000 24,808
Cash dividends paid to stockholders (40,270) (32,113)
------- -------
Net cash used in financing activities (171,334) (55,764)
-------- -------
Net decrease in cash and cash equivalents (86,778) (82,932)
Cash and cash equivalents at beginning of period 142,743 138,630
------- -------
Cash and cash equivalents at end of period $55,965 $55,698
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $360 $276
Income taxes 51,306 59,003
Supplemental disclosures of non-cash activities:
Property acquired through capital lease $1,988 $ -
Non-cash accruals for construction in progress 7,745 20,637
Selected Financial and Operating Information
(Unaudited)
----------
SECOND QUARTER ENDED SIX MONTHS ENDED
-------------------- ----------------
June 28, 2014 June 29, 2013 June 28, 2014 June 29, 2013
------------- ------------- ------------- -------------
Sales Information:
------------------
Comparable store sales increase 1.9% 7.2% 2.0% 4.2%
New store sales (% of total sales) 6.3% 5.0% 6.3% 5.3%
Average transaction value $46.79 $46.81 $44.42 $44.82
Comparable store average transaction value (decrease) increase (0.3)% 2.3% (1.2)% 0.6%
Comparable store average transaction count increase 2.3% 4.8% 3.2% 3.6%
Total selling square footage (000's) 21,346 19,602 21,346 19,602
Store Count Information:
------------------------
Beginning of period 1,308 1,197 1,276 1,176
New stores opened 23 26 55 48
Stores closed - - - (1)
--- --- --- ---
End of period 1,331 1,223 1,331 1,223
===== ===== ===== =====
Pre-opening costs (000's) $1,998 $1,835 $4,268 $3,358
Balance Sheet Information:
--------------------------
Average inventory per store (000's) (a) $802.4 $830.3 $802.4 $830.3
Inventory turns (annualized) 3.55 3.52 3.33 3.30
Share repurchase program:
Cost (000's) $62,542 $19,441 $146,997 $69,304
Average purchase price per share $65.09 $54.97 $66.13 $49.55
Capital Expenditures (millions):
--------------------------------
New and relocated stores and stores not yet opened $19.6 $17.6 $39.6 $29.9
Corporate and other 10.7 11.1 20.8 12.1
Information technology 5.6 3.7 12.1 14.7
Existing stores 4.3 3.2 8.7 5.5
Distribution center capacity and improvements - 13.7 0.9 33.1
Purchase of previously leased stores - - - 3.3
--- --- --- ---
Total $40.2 $49.3 $82.1 $98.6
----- ===== ===== ===== =====
((a) )Assumes average inventory cost, excluding inventory in transit.
SOURCE Tractor Supply Company
