EX-99.1 2 q22013earningsrelease.htm PRESS RELEASE DATED JULY 24, 2013 Q2 2013 Earnings Release


www.TractorSupply.com

TRACTOR SUPPLY COMPANY REPORTS SECOND QUARTER RESULTS
~ Earnings per Share Increased 20.7% to $1.75 vs. $1.45 ~
~ Raises Full Year 2013 EPS Guidance ~
~ Sales Increased 12.7% to $1.46 Billion and Same-Store Sales Improved 7.2% ~

Brentwood, Tennessee, July 24, 2013 - Tractor Supply Company (NASDAQ: TSCO), the largest retail farm and ranch store chain in the United States, today announced financial results for its second fiscal quarter ended June 29, 2013.

Second Quarter Results
Net sales increased 12.7% to $1.46 billion from $1.29 billion in the prior year’s second quarter. Same-store sales increased 7.2% compared to a 3.2% increase in the prior-year period. The same-store sales increase was broad-based and driven by continued strong results in key consumable, usable and edible (C.U.E.) products and seasonal merchandise.

Gross margin dollars increased to $506.1 million from $451.5 million in the prior year’s second quarter. As a percent of sales, gross margin decreased slightly to 34.8% from 34.9% in the prior year. The decrease in gross margin as a percent of sales resulted primarily from the continued mix shift to lower-margin C.U.E. products, as well as increased transportation costs. These decreases were partially offset by the favorable impact from key margin-enhancing initiatives.

Selling, general and administrative expenses, including depreciation and amortization, improved to 21.2% of sales compared to 21.8% of sales in the prior year’s second quarter. The improvement as a percent of sales was primarily attributable to strong same-store sales growth and expense control with respect to store operating costs, as well as lower year-over-year incentive compensation expense as a percent of sales.

Net income for the quarter was $123.6 million, or $1.75 per diluted share, compared to net income of $106.6 million, or $1.45 per diluted share, in the second quarter of the prior year.

The Company opened 26 new stores in the second quarter of 2013 compared to 18 new store openings in the prior year’s second quarter.

Greg Sandfort, President and Chief Executive Officer, stated, “We anticipated a late start to spring this year, and entered the second quarter well-positioned to take advantage of the seasonal shift. As a result, we delivered a solid increase in store traffic, strong same-store sales growth across geographic regions and double-digit EPS growth. Despite the seasonal change, our team managed the business effectively and continued to do a great job serving our customers, with C.U.E. categories posting solid increases in both sales and units and contributing to our 21st consecutive quarter of year-over-year same-store transaction count increases.”





First Six Months Results
Net sales increased 9.9% to $2.54 billion from $2.31 billion in the first six months of 2012. Same-store sales increased 4.2% compared to a 6.7% increase in the first six months of 2012. Gross margin dollars grew 9.4% to $858.2 million, or 33.8% of sales, compared to $784.3 million, or 33.9% of sales, in the first six months of 2012.
 
Selling, general and administrative expenses, including depreciation and amortization, were $592.3 million, an increase of 7.7%, but improved as a percent of sales to 23.4% compared to 23.8% for the first six months of 2012.
 
Net income was $167.6 million, or $2.37 per diluted share, compared to net income of $146.9 million, or $2.00 per diluted share, for the first six months of 2012.
 
The Company opened 48 new stores in the first six months of 2013 compared to 51 new store openings during the first six months of 2012.

Company Outlook
Net sales for the full-year 2013 are now expected to range between $5.10 billion and $5.17 billion compared to the Company's previously expected range of $5.07 billion to $5.17 billion. Same-store sales for the year are now expected to increase 4% to 5% compared to the prior expectation for an increase of 3% to 5%. Based on stronger than expected net income per diluted share for the first half of the year, the Company now anticipates net income per diluted share for the full-year 2013 will range between $4.36 and $4.44, compared to its previous guidance of $4.32 and $4.40. This projection includes estimated costs of $0.06 to $0.07 per diluted share associated with the relocation of the Company’s Southeast distribution center and its corporate data center.

Mr. Sandfort concluded, “Our performance in the first half of 2013 again demonstrated the continued strength of our core businesses, as well as our ability to manage through seasonal variances. We place great rigor into better understanding and serving our customers’ evolving needs, while seeking to introduce new customers to the Tractor Supply brand. We believe our Company has a great opportunity ahead of us to grow the business, while continuing to deliver value to our shareholders.”

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 7, 2013.

About Tractor Supply Company
At June 29, 2013, Tractor Supply Company operated 1,223 stores in 46 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 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 manage expenses, 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 privacy, 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)

 
SECOND QUARTER ENDED
 
SIX MONTHS ENDED
 
June 29, 2013
 
June 30, 2012
 
June 29, 2013
 
June 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of
 
 
 
% of
 
 
 
% of
 
 
 
% of
 
 
 
Sales
 
 
 
Sales
 
 
 
Sales
 
 
 
Sales
Net sales
$
1,455,767

 
100.0
%
 
$
1,291,899

 
100.0
%
 
$
2,541,605

 
100.0
%
 
$
2,312,316

 
100.0
%
Cost of merchandise sold
949,627

 
65.2

 
840,438

 
65.1

 
1,683,374

 
66.2

 
1,528,055

 
66.1

Gross margin
506,140

 
34.8

 
451,461

 
34.9

 
858,231

 
33.8

 
784,261

 
33.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
283,941

 
19.5

 
259,184

 
20.1

 
545,410

 
21.5

 
505,852

 
21.9

Depreciation and amortization
24,220

 
1.7

 
22,433

 
1.7

 
46,919

 
1.9

 
44,172

 
1.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
197,979

 
13.6

 
169,844

 
13.1

 
265,902

 
10.4

 
234,237

 
10.1

Interest expense, net
556

 
—

 
31

 
—

 
735

 
—

 
614

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
197,423

 
13.6

 
169,813

 
13.1

 
265,167

 
10.4

 
233,623

 
10.1

Income tax expense
73,843

 
5.1

 
63,192

 
4.8

 
97,581

 
3.8

 
86,674

 
3.7

Net income
$
123,580

 
8.5
%
 
$
106,621

 
8.3
%
 
$
167,586

 
6.6
%
 
$
146,949

 
6.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
1.77

 
 
 
$
1.48

 
 
 
$
2.41

 
 
 
$
2.05

 
 
Diluted
$
1.75

 
 
 
$
1.45

 
 
 
$
2.37

 
 
 
$
2.00

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
69,672

 
 
 
71,814

 
 
 
69,537

 
 
 
71,704

 
 
Diluted
70,790

 
 
 
73,488

 
 
 
70,775

 
 
 
73,491

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share outstanding
$
0.26

 
 
 
$
0.20

 
 
 
$
0.46

 
 
 
$
0.32

 
 









Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)

 
June 29, 2013

 
June 30, 2012

ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
55,698

 
$
179,100

Restricted cash
—

 
8,800

Inventories
1,082,861

 
946,934

Prepaid expenses and other current assets
52,676

 
56,331

Deferred income taxes
14,446

 
7,084

Total current assets
1,205,681

 
1,198,249

 
 
 
 
Property and equipment:
 
 
 
Land
65,290

 
41,821

Buildings and improvements
531,142

 
492,379

Furniture, fixtures and equipment
371,565

 
330,562

Computer software and hardware
132,875

 
117,521

Construction in progress
74,393

 
16,024

 
1,175,265

 
998,307

Accumulated depreciation and amortization
(563,789
)
 
(497,278
)
Property and equipment, net
611,476

 
501,029

 
 
 
 
Goodwill
10,258

 
10,258

Deferred income taxes
2,646

 
—

Other assets
16,363

 
12,876

 
 
 
 
Total assets
$
1,846,424

 
$
1,722,412

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
360,811

 
$
314,757

Accrued employee compensation
26,783

 
29,325

Other accrued expenses
138,417

 
126,445

Current portion of capital lease obligations
39

 
35

Income taxes payable
53,482

 
64,160

Total current liabilities
579,532

 
534,722

 
 
 
 
Capital lease obligations, less current maturities
1,224

 
1,263

Deferred income taxes
—

 
6,157

Deferred rent
76,474

 
76,667

Other long-term liabilities
45,447

 
36,464

Total liabilities
702,677

 
655,273

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock
661

 
652

Additional paid-in capital
414,356

 
335,899

Treasury stock
(778,476
)
 
(539,909
)
Retained earnings
1,507,206

 
1,270,497

Total stockholders’ equity
1,143,747

 
1,067,139

 
 
 
 
Total liabilities and stockholders’ equity
$
1,846,424

 
$
1,722,412







Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
SIX MONTHS ENDED
 
June 29, 2013
 
June 30, 2012
Cash flows from operating activities:
 
 
 
Net income
$
167,586

 
$
146,949

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 
Depreciation and amortization
46,919

 
44,172

(Gain) loss on disposition of property and equipment
(178
)
 
146

Stock compensation expense
6,934

 
9,309

Excess tax benefit of stock options exercised
(24,804
)
 
(16,497
)
Deferred income taxes
4,529

 
(5,887
)
Change in assets and liabilities:
 

 
 

Inventories
(174,745
)
 
(116,115
)
Prepaid expenses and other current assets
(868
)
 
(4,603
)
Accounts payable
40,419

 
48,348

Accrued employee compensation
(21,617
)
 
(18,936
)
Other accrued expenses
(19,639
)
 
(6,422
)
Income taxes payable
34,927

 
68,783

Other
3,360

 
2,923

Net cash provided by operating activities
62,823

 
152,170

Cash flows from investing activities:
 
 
 
Capital expenditures
(98,626
)
 
(65,566
)
Proceeds from sale of property and equipment
235

 
—

Decrease in restricted cash
8,400

 
13,070

Net cash used in investing activities
(89,991
)
 
(52,496
)
Cash flows from financing activities:
 
 
 
Borrowings under revolving credit agreement
135,000

 
—

Repayments under revolving credit agreement
(135,000
)
 
—

Excess tax benefit of stock options exercised
24,804

 
16,497

Principal payments under capital lease obligations
(17
)
 
(19
)
Repurchase of shares to satisfy tax obligations
(3,942
)
 
(6,581
)
Repurchase of common stock
(69,304
)
 
(102,536
)
Net proceeds from issuance of common stock
24,808

 
18,146

Cash dividends paid to stockholders
(32,113
)
 
(23,046
)
Net cash used in financing activities
(55,764
)
 
(97,539
)
Net (decrease) increase in cash and cash equivalents
(82,932
)
 
2,135

Cash and cash equivalents at beginning of period
138,630

 
176,965

Cash and cash equivalents at end of period
$
55,698

 
$
179,100

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest                                                                        
$
276

 
$
86

Income taxes
59,003

 
22,616

Non-cash accruals for construction in progress
20,637

 
1,181






Selected Financial and Operating Information
(Unaudited)

 
 
SECOND QUARTER ENDED
 
SIX MONTHS ENDED
 
 
June 29, 2013

 
June 30, 2012

 
June 29, 2013

 
June 30, 2012

Sales Information:
 
 
 
 
 
 
 
 
Same-store sales increase
 
7.2
%
 
3.2
%
 
4.2
%
 
6.7
%
New store sales (% of total sales)
 
5.0
%
 
6.0
%
 
5.3
%
 
5.9
%
Average transaction value
 
$46.81
 
$45.70
 
$44.82
 
$44.49
 
 
 
 
 
 
 
 
 
Same-store average transaction value increase
 
2.3
%
 
0.1
%
 
0.6
%
 
3.0
%
Same-store average transaction count increase
 
4.8
%
 
2.9
%
 
3.6
%
 
3.4
%
Total selling square footage (000’s)
 
19,602
 
18,265
 
19,602
 
18,265
 
 
 
 
 
 
 
 
 
Store Count Information:
 
 
 
 
 
 
 
 
Beginning of period
 
1,197
 
1,117
 
1,176
 
1,085
New stores opened
 
26
 
18
 
48
 
51
Stores closed
 
—
 
—
 
(1)
 
(1)
End of period
 
1,223
 
1,135
 
1,223
 
1,135
 
 
 
 
 
 
 
 
 
Pre-opening costs (000’s)
 
$1,835

 
$1,549
 
$3,358
 
$3,613
 
 
 
 
 
 
 
 
 
Balance Sheet Information:
 
 
 
 
 
 
 
 
Average inventory per store (000’s) (a)
 
$830.3

 
$793.1
 
$830.3
 
$793.1
Inventory turns (annualized)
 
3.52

 
3.42
 
3.30

 
3.27
Share repurchase program:
 
 
 
 
 
 
 
 
Cost (000’s)
 
$19,441

 
$98,394
 
$69,304
 
$102,536
Average purchase price per share
 
$109.94

 
$88.96
 
$99.10
 
$88.34
 
 
 
 
 
 
 
 
 
Capital Expenditures (millions):
 
 
 
 
 
 
 
 
New and relocated stores and stores not yet opened
 
$17.6
 
$12.8
 
$29.9
 
$31.0
Distribution center capacity and improvements
 
13.7
 
2.2
 
33.1
 
3.0
Corporate and other
 
11.1
 
0.3
 
12.1
 
0.4
Information technology
 
3.7
 
6.6
 
14.7
 
13.1
Existing stores
 
3.2
 
4.9
 
5.5
 
7.9
Purchase of previously leased stores
 
0.0
 
7.0
 
3.3
 
10.2
Total
 
$49.3
 
$33.8
 
$98.6
 
$65.6

(a) Assumes average inventory cost, excluding inventory in transit.