Tractor Supply Company Reports Third Quarter 2009 Results
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BRENTWOOD, Tenn., Oct. 21 /PRNewswire-FirstCall/ -- Tractor Supply Company (Nasdaq: TSCO), the largest retail farm and ranch store chain in the United States, today announced financial results for its third fiscal quarter ended September 26, 2009.
Third Quarter Results
The Company's net sales for the third quarter of 2009 increased 1.9% to $747.7 million from $733.9 million in the prior year's third quarter. Same-store sales decreased 5.1% compared with a 6.2% increase in the prior year's third quarter. This same-store sales decline resulted primarily from softness in sales of seasonal big-ticket items and difficult comparisons due to strong sales of hurricane-related merchandise and seasonal heating products in the prior year's quarter. This decline was partially offset by continued strong sales in core consumable, usable and edible categories, including animal and pet-related products as well as repair and replacement parts.
Gross margin increased 12.8% to $246.0 million, or 32.9% of sales, compared to $218.2 million, or 29.8% of sales, in the prior year's third quarter. The improvement in gross margin percentage resulted primarily from a decrease in the LIFO charge, lower fuel costs, and effective markdown management.
Selling, general and administrative expenses, including depreciation and amortization, increased 9.4% to $210.2 million, or 28.1% of sales, compared to $192.1 million, or 26.2% of sales, in the prior year's third quarter. The increase as a percent of sales was primarily attributable to the deleveraging related to the same-store sales decrease.
The Company's effective income tax rate decreased to 37.8% compared to 39.3% in the prior year's third quarter, largely due to certain federal tax credits and the estimated favorable impact of other permanent tax differences on the revised full year taxable income.
Net income for the quarter increased 38.5% to $22.0 million, or $0.60 per diluted share, compared to $15.9 million, or $0.43 per diluted share, in the prior year's third quarter.
The Company opened 17 new stores in the quarter compared to 20 new stores in the prior year's third quarter.
Jim Wright, Chairman and Chief Executive Officer, stated, "We are pleased that we were able to improve gross margin and deliver earnings results that exceeded expectations. As previously reported, our team managed expenses, inventories and markdowns efficiently through consistent execution. Our core consumable, usable and edible categories continued to drive footsteps to the store and we achieved positive transaction count comps for the sixth consecutive quarter. We continue to maintain disciplined expense control without sacrificing our in-store shopping experience or customer service levels."
Nine Month Results
For the first nine months of 2009, net sales increased 6.2% to $2.34 billion. Same-store sales decreased 1.7% compared to an increase of 1.5% in the first nine months of 2008. Gross margin increased 12.3% to $749.3 million in comparison to the first nine months of 2008. As a percent of sales, gross margin was higher at 32.0% compared to 30.2% of sales for the first nine months of 2008.
Selling, general and administrative expenses, including depreciation and amortization, were 26.6% of sales compared to 25.9% of sales for the first nine months of 2008.
Net income was $77.2 million, or $2.11 per diluted share, compared to net income of $57.2 million, or $1.52 per diluted share, for the first nine months of 2008.
During the first nine months of 2009, the Company opened 58 new stores, relocated two stores and closed one store, compared to 70 new store openings and no relocations or closures during the first nine months of 2008.
Company Outlook
As reported in the Company's recent business update release, for fiscal 2009, the Company anticipates net sales to range from $3.17 billion to $3.20 billion, same-store sales for the year are expected to decrease approximately 1.0% to 2.0%, and net income to range from $2.88 to $2.98 per diluted share.
Mr. Wright concluded, "Since early 2008, we have been executing strategies to proactively address a challenging macro environment. Our well-aligned team has refined our merchandise strategy, controlled expenses tightly, managed our balance sheet prudently, and expanded our store base. While our near-term outlook is balanced between our strong year-to-date performance and the level of uncertainty about consumer spending in the marketplace, we are proud that our business has grown and improved throughout the recession. For the winter and holiday selling season, we anticipate that our customers will continue to be cautious but compelled to purchase products that meet their everyday rural lifestyle needs as well as practical and value-driven gift items."
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 simultaneously webcast over the Internet on the Company's homepage at TractorSupply.com and can be accessed under the link "Investor Relations." The webcast will be archived shortly after the conference call concludes through November 4, 2009.
About Tractor Supply Company
As of September 26, 2009, Tractor Supply Company operated 912 stores in 44 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 animal products, including items 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 and towing products; and (6) work/recreational clothing and footwear for the entire family.
Forward Looking Statements:
As with any business, all phases of the Company's operations are subject to influences outside its control. This press release contains certain forward-looking statements, including statements regarding estimated results of operations 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 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 and negotiate favorable lease agreements on new and relocated stores, the availability of favorable credit sources, capital market conditions in general, failure to open new stores in the manner 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, potential legal proceedings, management of our information systems, effective tax rate changes and results of examination by taxing authorities, and the ability to maintain an effective system of internal control over financial reporting. 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.
Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share amounts)
THIRD QUARTER ENDED
-------------------
September 26, September 27,
2009 2008
-------------- --------------
$747,730 100.0% $733,918 100.0%
Net sales
Cost of merchandise sold 501,692 67.1 515,722 70.2
------- ---- ------- ----
Gross margin 246,038 32.9 218,196 29.8
Selling, general and
administrative expenses 193,820 25.9 176,774 24.1
Depreciation and amortization 16,421 2.2 15,345 2.1
------ --- ------ ---
Income from operations 35,797 4.8 26,077 3.6
Interest (income) expense,
net 461 0.1 (69) 0.0
--- --- ---- ---
Income before income taxes 35,336 4.7 26,146 3.6
Income tax expense 13,357 1.8 10,276 1.4
------ --- ------ ---
Net income 21,979 2.9% 15,870 2.2%
====== ==== ====== ====
Net income per share:
Basic $0.61 $0.44
===== =====
Diluted $0.60 $0.43
===== =====
Weighted average shares
outstanding (000's):
Basic 36,034 36,429
Diluted 36,711 37,074
NINE MONTHS ENDED
-----------------
September 26, September 27,
2009 2008
--------------- ---------------
$2,344,405 100.0% $2,208,453 100.0%
Net sales
Cost of merchandise sold 1,595,133 68.0 1,541,232 69.8
--------- ---- --------- ----
Gross margin 749,272 32.0 667,221 30.2
Selling, general and
administrative expenses 575,239 24.5 527,302 23.9
Depreciation and amortization 48,757 2.1 44,725 2.0
------ --- ------ ---
Income from operations 125,276 5.4 95,194 4.3
Interest (income) expense,
net 1,139 0.1 1,727 0.1
----- --- ----- ---
Income before income taxes 124,137 5.3 93,467 4.2
Income tax expense 46,924 2.0 36,249 1.6
------ --- ------ ---
Net income 77,213 3.3% 57,218 2.6%
====== ==== ====== ====
Net income per share:
Basic $2.15 $1.54
===== =====
Diluted $2.11 $1.52
===== =====
Weighted average shares
outstanding (000's):
Basic 35,954 37,045
Diluted 36,590 37,677
Consolidated Balance Sheets
(Unaudited)
(in thousands)
September September
26, 27,
2009 2008 *
---- ------
ASSETS
Current assets:
Cash and cash equivalents $94,871 $16,356
Inventories 703,989 703,040
Prepaid expenses and other current
assets 40,433 40,731
Deferred income taxes 11,361 2,923
------ -----
Total current assets 850,654 763,050
Property and equipment, net 362,741 357,270
Goodwill 10,258 10,258
Deferred income taxes 13,185 17,398
Other assets 5,259 6,183
----- -----
TOTAL ASSETS $1,242,097 $1,154,159
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $356,822 $366,138
Accrued expenses 119,417 107,953
Current portion of capital lease
obligations 414 545
Income taxes currently payable -- 962
--- ---
Total current liabilities 476,653 475,598
Revolving credit loan -- 23,138
Capital lease obligations 1,534 1,960
Straight line rent liability 44,042 36,281
Other long-term liabilities 26,327 24,827
------ ------
Total liabilities 548,556 561,804
------- -------
Stockholders' equity:
Common stock 330 327
Additional paid-in capital 185,015 163,616
Treasury stock (214,690) (192,549)
Retained earnings 722,886 620,961
------- -------
Total stockholders' equity 693,541 592,355
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,242,097 $1,154,159
========== ==========
* Cash and cash equivalents and prepaid expenses and other
current assets have been reclassified to conform to the
current period presentation.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
NINE MONTHS ENDED
-----------------
September 26, September 27,
2009 2008 *
---- ------
Cash flows from operating
activities:
Net income $77,213 $57,218
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 48,757 44,725
Loss (gain) on sale of property and
equipment 165 (62)
Stock compensation expense 9,159 9,192
Deferred income taxes (9,143) (3,352)
Change in assets and liabilities:
Inventories (100,554) (67,052)
Prepaid expenses and other current
assets 3,029 1,730
Accounts payable 69,994 107,792
Accrued expenses 5,952 (7,648)
Income taxes currently payable (1,554) (4,100)
Other 8,006 5,455
----- -----
Net cash provided by operating
activities 111,024 143,898
------- -------
Cash flows from investing
activities:
Capital expenditures (49,435) (68,828)
Proceeds from sale of property and
equipment 44 250
-- ---
Net cash used in investing
activities (49,391) (68,578)
-------- --------
Cash flows from financing activities:
Borrowings under revolving credit
agreement 274,033 517,382
Repayments under revolving credit
agreement (274,033) (549,244)
Tax benefit of stock options
exercised 2,924 413
Principal payments under capital
lease obligations (399) (693)
Repurchase of common stock (10,775) (42,500)
Net proceeds from issuance of
common stock 4,499 2,498
----- -----
Net cash used in financing activities (3,751) (72,144)
------- --------
Net increase in cash and equivalents 57,882 3,176
Cash and cash equivalents at
beginning of period 36,989 13,180
------ ------
Cash and cash equivalents at end of
period $94,871 $16,356
======= =======
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest $776 $2,788
Income taxes 53,312 43,023
* Reclassified to conform to the current period presentation.
Selected Financial and Operating Information
THIRD QUARTER ENDED NINE MONTHS ENDED
------------------- -----------------
September September September September
26, 2009 27, 2008 26, 2009 27, 2008
-------- -------- -------- --------
Sales Information:
------------------
Same-store sales
increase (decrease) (5.1)% 6.2% (1.7)% 1.5%
Non-comp sales (%
of total sales) 6.8% 8.7% 7.4% 9.0%
Average
transaction value $40.14 $44.59 $42.00 $44.79
Comp average
transaction value
increase (decrease) (10.4)% 5.2% (6.7)% 1.7%
Comp average
transaction count
increase (decrease) 5.9% 0.9% 5.4% (0.2)%
Store Count Information:
------------------------
Beginning of period 895 814 855 764
New stores opened 17 20 58 70
Stores closed/sold -- -- (1) --
--- --- --- ---
End of period 912 834 912 834
=== === === ===
Relocated stores 1 -- 2 --
Pre-opening costs
(000's) $1,873 $2,057 $6,246 $6,991
LIFO charge
(000's) (a) 1,896 10,565 8,433 22,507
Balance Sheet Information:
--------------------------
Average inventory per
store (000's) (b) $820.1 $861.4 $820.1 $861.4
Inventory turns
(annualized) 2.70 2.74 2.82 2.75
Financed inventory (b) 44.9% 48.4% 44.9% 48.4%
Treasury shares:
Shares purchased
(000's) 19 465 321 1,280
Cost (000's) $915 $14,691 $10,775 $42,499
(a) 2009 LIFO charge is based on a projected annual provision
of $11.6 million for fiscal 2009.
(b) Assumes average inventory cost, excluding inventory in transit.
Supplemental LIFO Information
(Unaudited)
(in thousands, except per share amounts)
Third Quarter Ended Nine Months Ended
------------------- -----------------
September September September September
26, 2009 27, 2008 26, 2009 27, 2008
--------- --------- --------- ---------
LIFO provision, pre tax $1,896 $10,565 $8,433 $22,507
Net income $21,979 $15,870 $77,213 $57,218
LIFO provision, net of tax 1,179 6,413 5,245 13,779
----- ----- ----- ------
Net income without LIFO $23,158 $22,283 $82,458 $70,997
======= ======= ======= =======
Earnings Per Diluted Share:
Net income $0.60 $0.43 $2.11 $1.52
LIFO provision, net of tax 0.03 0.17 0.14 0.36
---- ---- ---- ----
Net income without LIFO $0.63 $0.60 $2.25 $1.88
===== ===== ===== =====
The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. However, we believe that non-GAAP reporting, giving effect to the adjustments shown in the reconciliation above, provides meaningful information and therefore we use it to supplement our GAAP guidance. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the above reconciliations and to provide an additional measure of performance.
SOURCE Tractor Supply Company
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