Tractor Supply Company Reports Fourth Quarter and Full Year 2015 Results
BRENTWOOD, TN -- (Marketwired) -- 01/27/16 -- Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retail store chain in the United States, today announced financial results for its fourth quarter and fiscal year ended December 26, 2015. Additionally, the Company provided its initial outlook for fiscal 2016.
Fourth Quarter Results
As previously reported in the Company's Business Update press release on January 12, 2016, net sales for the fourth quarter increased 3.9% to $1.65 billion from $1.58 billion in the prior year's fourth quarter. Comparable store sales decreased 1.4% for the quarter compared to the prior year's fourth quarter increase of 5.3%. Comparable store transaction counts increased by 0.6%, which represents the 31st
consecutive quarter of transaction count growth.
The same store sales decrease in the fourth quarter was primarily driven by weakness in the key cold-weather seasonal categories of heating (stoves and fuel) and insulated outerwear, particularly in the Northeast and Midwest regions. Sales were also impacted by softness in seasonal big ticket items such as snow blowers, log splitters and generators. The weakness in seasonal categories was partially offset by continued sales strength in year-round basic products such as livestock feed, pet food and hardware.
Gross profit increased 4.0% to $561.0 million from $539.6 million in the prior year's fourth quarter, and gross margin remained relatively flat to the prior year at 34.1%. Strong price and markdown management was offset by a higher sales mix of consumable, usable, and edible (C.U.E.) products, which carry below chain average gross margins.
Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased 7.1% to $387.7 million from $361.9 million in the prior year's fourth quarter. As a percent of net sales, SG&A expenses increased 80 basis points to 23.6%. The increase as a percentage of net sales was primarily attributable to the decline in comparable store sales and the incremental costs associated with the Company's new distribution facility in Casa Grande, Arizona. These increases were partially offset by lower year-over-year incentive compensation expense as a percentage of sales.
Net income decreased 0.3% to $111.7 million from $112.1 million and diluted earnings per share increased 1.2% to $0.82 from $0.81 in the fourth quarter of the prior year.
The Company opened 26 new stores and closed three stores, two of which were Del's stores, in the fourth quarter of 2015 compared to 22 new store openings and one store closure in the prior year's fourth quarter. In addition, the Company began shipping merchandise to stores from its new distribution facility in Casa Grande, Arizona in the fourth quarter.
Greg Sandfort, President and Chief Executive Officer, stated, "While our fourth quarter sales were below our expectations due principally to the record warm temperatures across most of the country, we effectively managed our markdown cadence and inventory flow throughout the period. As temperatures have normalized, sell-through of cold-weather seasonal items has improved. Further, we believe we have a solid plan in place to meet our customers' seasonal needs as we transition to the important spring selling season."
Mr. Sandfort continued, "We have a very loyal customer who continues to shop our stores for their everyday basic needs. We continue to take a long-term, balanced approach to managing and growing the business and believe we have the strategies and tools in place to meet our annual target of mid-teens earnings per share growth in 2016."
Fiscal 2015 Results
Net sales increased 9.0% to $6.23 billion from $5.71 billion in fiscal 2014. Comparable store sales increased 3.1% versus a 3.8% increase in fiscal 2014. Gross profit increased 9.9% to $2.14 billion from $1.95 billion, and gross margin increased 30 basis points to 34.4% of sales from 34.1% of sales in fiscal 2014.
Selling, general and administrative expenses, including depreciation and amortization, increased 9.7% to $1.49 billion and increased as a percent of sales to 24.0% compared to 23.8% for fiscal 2014.
Net income increased 10.7% to $410.4 million from $370.9 million and net income per diluted share increased 12.8% to $3.00 from $2.66 for fiscal 2014.
The Company opened 114 new stores and closed eight stores, five of which were Del's stores, in fiscal 2015 compared to 107 new store openings and one store closure during fiscal 2014.
Fiscal 2016 Outlook
The Company is providing the following guidance for the results of operations expected for fiscal 2016:
Net Sales $6.9 billion - $7.0 billion
Comparable Store Sales 3.5% - 5.0%
Net Income $455 million - $467 million
Earnings per Diluted Share $3.40 - $3.48
Capital Expenditures $230 million - $250 million
Included in this forecast are additional expenses related to the first year of operations for the new Casa Grande, Arizona distribution center and the continued transition of the Company's Del's stores to Tractor Supply stores. The forecast also considers the impact of the additional 53rd week in fiscal 2016. Anticipated capital expenditures include spending to support approximately 120 new store openings.
Conference Call Information
Tractor Supply Company will be hosting a conference call at 5:00 p.m. Eastern Time today to discuss the quarterly and full year results. The call will be broadcast simultaneously over the Internet on the Company's website at IR.TractorSupply.com.
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.
A replay of the webcast will also be available at IR.TractorSupply.com shortly after the conference call concludes.
About Tractor Supply Company
At December 26, 2015, Tractor Supply Company operated 1,488 stores in 49 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 heating, 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, marketing, merchandising and strategic initiatives and new store and distribution center 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 employee or customer data, ongoing and potential future legal or regulatory proceedings, management of our information systems, failure to 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)
FOURTH QUARTER ENDED
----------------------------------------
December 26, 2015 December 27, 2014
------------------- -------------------
% of % of
Sales Sales
------- -------
Net sales $ 1,646,610 100.0% $ 1,584,254 100.0%
Cost of merchandise sold 1,085,609 65.9 1,044,659 66.0
----------- ------- ----------- -------
Gross profit 561,001 34.1 539,595 34.0
Selling, general and
administrative expenses 354,888 21.6 331,780 20.9
Depreciation and amortization 32,825 2.0 30,114 1.9
----------- ------- ----------- -------
Operating income 173,288 10.5 177,701 11.2
Interest expense, net 411 - 618 -
----------- ------- ----------- -------
Income before income taxes 172,877 10.5 177,083 11.2
Income tax expense 61,165 3.7 65,021 4.1
----------- ------- ----------- -------
Net income $ 111,712 6.8% $ 112,062 7.1%
=========== ======= =========== =======
Net income per share:
Basic $ 0.83 $ 0.82
=========== ===========
Diluted $ 0.82 $ 0.81
=========== ===========
Weighted average shares
outstanding:
Basic 134,338 136,194
Diluted 135,506 137,733
Dividends declared per common
share outstanding $ 0.20 $ 0.16
=========== ===========
YEAR ENDED
----------------------------------------
December 26, 2015 December 27, 2014
------------------- -------------------
% of % of
Sales Sales
------- -------
Net sales $ 6,226,507 100.0% $ 5,711,715 100.0%
Cost of merchandise sold 4,083,333 65.6 3,761,300 65.9
----------- ------- ----------- -------
Gross profit 2,143,174 34.4 1,950,415 34.1
Selling, general and
administrative expenses 1,369,097 22.0 1,246,308 21.8
Depreciation and amortization 123,569 2.0 114,635 2.0
----------- ------- ----------- -------
Operating income 650,508 10.4 589,472 10.3
Interest expense, net 2,891 - 1,885 -
----------- ------- ----------- -------
Income before income taxes 647,617 10.4 587,587 10.3
Income tax expense 237,222 3.8 216,702 3.8
----------- ------- ----------- -------
Net income $ 410,395 6.6% $ 370,885 6.5%
=========== ======= =========== =======
Net income per share:
Basic $ 3.03 $ 2.69
=========== ===========
Diluted $ 3.00 $ 2.66
=========== ===========
Weighted average shares
outstanding:
Basic 135,582 137,769
Diluted 136,845 139,435
Dividends declared per common
share outstanding $ 0.76 $ 0.61
=========== ===========
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
December 26, December 27,
2015 2014
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 63,813 $ 51,134
Inventories 1,284,375 1,115,450
Prepaid expenses and other current assets 87,510 66,444
Income taxes receivable 3,763 -
Deferred income taxes 45,970 40,962
------------ ------------
Total current assets 1,485,431 1,273,990
Property and equipment:
Land 86,991 79,571
Buildings and improvements 814,802 698,462
Furniture, fixtures and equipment 523,383 453,692
Computer software and hardware 180,020 154,818
Construction in progress 38,720 30,803
------------ ------------
Property and equipment, gross 1,643,916 1,417,346
Accumulated depreciation and amortization (796,340) (696,346)
------------ ------------
Property and equipment, net 847,576 721,000
Goodwill 10,258 10,258
Deferred income taxes 9,224 8,782
Other assets 18,337 20,541
------------ ------------
Total assets $ 2,370,826 $ 2,034,571
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 427,249 $ 370,823
Accrued employee compensation 42,684 37,056
Other accrued expenses 195,024 182,565
Current portion of capital lease obligations 878 213
Income taxes payable 5,449 12,436
Revolving credit loan 150,000 -
------------ ------------
Total current liabilities 821,284 603,093
Capital lease obligations, less current
maturities 16,992 4,957
Deferred rent 84,793 79,807
Other long-term liabilities 54,463 53,153
------------ ------------
Total liabilities 977,532 741,010
------------ ------------
Stockholders' equity:
Common stock 1,352 1,342
Additional paid-in capital 596,131 510,997
Treasury stock (1,429,790) (1,137,085)
Retained earnings 2,225,601 1,918,307
------------ ------------
Total stockholders' equity 1,393,294 1,293,561
------------ ------------
Total liabilities and stockholders' equity $ 2,370,826 $ 2,034,571
============ ============
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
YEAR ENDED
--------------------------
December 26, December 27,
2015 2014
------------ ------------
Cash flows from operating activities:
Net income $ 410,395 $ 370,885
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 123,569 114,635
Loss on disposition of property and equipment 315 389
Share-based compensation expense 19,420 16,173
Excess tax benefit of stock options exercised (27,032) (18,850)
Deferred income taxes (5,450) (19,814)
Change in assets and liabilities:
Inventories (168,925) (136,142)
Prepaid expenses and other current assets (21,066) (9,085)
Accounts payable 56,426 54,336
Accrued employee compensation 5,628 (13,517)
Other accrued expenses 11,252 20,365
Income taxes 16,282 21,862
Other 8,366 7,941
------------ ------------
Net cash provided by operating activities 429,180 409,178
------------ ------------
Cash flows from investing activities:
Capital expenditures (236,496) (160,613)
Proceeds from sale of property and equipment 584 331
------------ ------------
Net cash used in investing activities (235,912) (160,282)
------------ ------------
Cash flows from financing activities:
Borrowings under revolving credit agreement 680,000 355,000
Repayments under revolving credit agreement (530,000) (355,000)
Excess tax benefit of stock options exercised 27,032 18,850
Principal payments under capital lease
obligations (507) (114)
Repurchase of shares to satisfy tax
obligations (2,997) (4,766)
Repurchase of common stock (292,705) (298,497)
Net proceeds from issuance of common stock 41,689 28,083
Cash dividends paid to stockholders (103,101) (84,061)
------------ ------------
Net cash used in financing activities (180,589) (340,505)
------------ ------------
Net change in cash and cash equivalents 12,679 (91,609)
Cash and cash equivalents at beginning of period 51,134 142,743
------------ ------------
Cash and cash equivalents at end of period $ 63,813 $ 51,134
============ ============
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 2,283 $ 906
Income taxes 226,968 213,637
Supplemental disclosures of non-cash activities:
Property and equipment acquired through
capital lease $ 13,207 $ 4,042
Non-cash accruals for construction in progress 16,050 14,843
Selected Financial and Operating Information
(Unaudited)
FOURTH QUARTER ENDED YEAR ENDED
----------------------- -----------------------
December December December December
26, 2015 27, 2014 26, 2015 27, 2014
---------- ---------- ---------- ----------
Sales Information:
--------------------------
Comparable store sales
increase (1.4)% 5.3% 3.1% 3.8%
New store sales (% of
total sales) 5.4% 5.9% 5.6% 6.2%
Average transaction value $ 45.86 $ 46.62 $ 44.87 $ 44.84
Comparable store average
transaction value
(decrease) increase (1.9)% 2.3% (0.2)% 0.6%
Comparable store average
transaction count
increase 0.6% 3.0% 3.3% 3.2%
Total selling square
footage (000's) 23,938 22,176 23,938 22,176
Store Count Information:
--------------------------
Beginning of period 1,465 1,361 1,382 1,276
New stores opened 26 22 114 107
Stores closed (3) (1) (8) (1)
---------- ---------- ---------- ----------
End of period 1,488 1,382 1,488 1,382
========== ========== ========== ==========
Pre-opening costs (000's) $ 1,986 $ 1,753 $ 9,571 $ 8,888
Balance Sheet Information:
--------------------------
Average inventory per
store (000's) (a) $ 820.1 $ 752.7 $ 820.1 $ 752.7
Inventory turns
(annualized) 3.23 3.50 3.23 3.32
Share repurchase program:
Cost (000's) $ 48,749 $ 54,115 $ 292,705 $ 298,497
Average purchase price
per share $ 86.34 $ 62.35 $ 85.70 $ 63.99
Capital Expenditures
(millions):
--------------------------
New and relocated stores
and stores not yet opened $ 29.8 $ 18.1 $ 96.7 $ 80.8
Distribution center
capacity and improvements 18.9 7.6 80.2 9.2
Information technology 15.0 4.3 35.8 22.7
Existing stores 9.3 4.0 23.1 20.0
Corporate and other - 1.2 0.7 27.9
---------- ---------- ---------- ----------
Total $ 73.0 $ 35.2 $ 236.5 $ 160.6
-------------------------- ========== ========== ========== ==========
(a) Assumes average inventory cost, excluding inventory in transit.
Anthony F. CrudeleChief Financial OfficerChristine SkoldVice President, Investor Relations(615) 440-4000Investors: John RouleauRachel SchacterICR Media: Alecia PulmanBrittany Rae FraserICR(203) 682-8200
Source: Tractor Supply Company