Tractor Supply Company Reports Fourth Quarter and Full Year 2012 Results ~ Fourth Quarter Sales Increased to $1.29 Billion and Same-Store Sales Increased 4.7% ~~ Fourth Quarter Earnings per Share Increased 15.6% to $1.11 ~~ Full Year Earnings per Share Increased 26.2% to $3.80 PR Newswire BRENTWOOD, Tenn., Jan. 30, 2013 BRENTWOOD, Tenn., Jan. 30, 2013 /PRNewswire/ --Tractor Supply Company (NASDAQ: TSCO), the largest retail farm and ranch store chain in the United States, today announced financial results for its fourth fiscal quarter and fiscal year ended December 29, 2012. Additionally, the Company provided a current outlook for fiscal 2013. (Logo: http://photos.prnewswire.com/prnh/20120604/MM18615LOGO ) Fourth Quarter Results Net sales increased to $1.29 billion, or 3.7% over the prior year's 14-week period (10.8% adjusted for the extra sales week in the prior year's fourth quarter as part of the Company's 53-week calendar in fiscal 2011). Same-store sales increased 4.7% compared to a strong 7.6% increase in the prior-year period (7.1% in the prior-year period adjusted for the one-week calendar shift in the prior year due to the Company's 53-week calendar in fiscal 2011). The same-store sales increase was driven primarily by continued strong results in key consumable, usable and edible (C.U.E.) products, principally animal- and pet-related merchandise. Same-store sales for the four quarters and full year of fiscal 2011, adjusted for the one-week calendar shift, are presented in the attached table of Selected Financial and Operating Information. As a percent of sales, gross margin improved to 33.0% from 32.5% in the prior year's fourth quarter. Gross margin dollars increased to $424.6 million from $403.2 million in the prior year's 14-week fourth quarter. Gross margin rate continues to benefit from key margin-driving initiatives, including strategic sourcing, inventory and markdown management and price optimization. The higher gross margin rate in the fourth quarter of 2012 also reflects, in part, the impact in 2011 of a one-time charge related to the discontinuation of a product line from several hundred stores. These increases in gross margin rate were partially offset by the continued mix shift to lower-margin, freight-intensive C.U.E. products. Selling, general and administrative expenses, including depreciation and amortization, improved to 23.3% of sales compared to 23.5% of sales in the prior year's fourth quarter. This improvement was achieved despite the leverage gained in 2011 from the extra sales week. The improvement as a percent of sales was primarily attributable to expense control related to store operating costs and lower year-over-year incentive compensation expense. The reduction as a percent of sales also reflects, in part, the impact in 2011 of a one-time charge to write down certain e-commerce assets. Net income for the quarter was $79.5 million, or $1.11 per diluted share, compared to net income of $70.5 million, or $0.96 per diluted share, in the fourth quarter of the prior year. As stated in the prior year, the Company estimates that the 53rd week in fiscal 2011 represented a benefit of approximately $0.09 per diluted share in the prior year's fourth quarter results. The Company opened 25 new stores in the fourth quarter of 2012 compared to 31 new store openings in the prior year's fourth quarter. Greg Sandfort, President and Chief Executive Officer, stated, "Our fourth quarter performance demonstrates the underlying strength we have built in our business, while we continue to drive improved profitability through our strategic initiatives. Our core C.U.E. categories again posted solid increases above last year in both sales and units, and our ability to plan, prepare, execute and react quickly to the trends we are seeing in our business allowed us to deliver our 19^th consecutive quarter of year-over-year transaction count increases. Our team executed exceptionally well, delivering a strong same-store sales gain of 4.7% on top of last year's strong 7.6% comp increase, managing through less than ideal weather conditions for sales of cold weather products and despite less benefit from inflation than last year. We are also delighted with our ability to once again generate double-digit EPS growth during the fourth quarter on top of a strong double-digit increase last year." Full Year Results Net sales increased to $4.66 billion, or 10.2% over the prior year's 53-week period (11.6% adjusted for the extra sales week in fiscal 2011 as part of the Company's 53-week calendar). Same-store sales increased 5.3% compared to an 8.2% increase in fiscal 2011 (8.3% in the prior-year period adjusted for the one-week calendar shift in the prior year due to the Company's 53-week calendar in fiscal 2011). As a percent of sales, gross margin improved to 33.6% from 33.2% in the prior year. Gross margin dollars increased to $1.57 billion from $1.41 billion in the prior year's 53-week period. Selling, general and administrative expenses, including depreciation and amortization, improved to 24.2% of sales compared to 24.9% of sales in fiscal 2011. For fiscal 2012, net income was $276.5 million, or $3.80 per diluted share, compared to net income of $222.7 million, or $3.01 per diluted share, for fiscal 2011. As stated in the prior year, the Company estimates that the 53rd week in fiscal 2011 represented a benefit of approximately $0.09 per diluted share. The Company opened 93 new stores and closed two stores during fiscal 2012 compared to 85 new store openings and one store closure during fiscal 2011. Fiscal 2013 Outlook The Company anticipates net sales for fiscal 2013 will range between $5.07 billion and $5.17 billion, with same-store sales expected to increase 3% to 5%. The Company projects fiscal 2013 full year net income to range from $4.32 to $4.40 per diluted share. This projection includes estimated costs of $0.06 to $0.07 per diluted share associated with the relocation of its Southeast distribution center and its corporate data center. For the full year, the Company expects capital expenditures to range between $240 million and $250 million including spending to support 100 to 105 new store openings and construction of the Company's Southeast distribution center expected to open in 2013 and new Store Support Center expected to open in 2014. Mr. Sandfort concluded, "The strength and flexibility of Tractor Supply Company's business model is exemplified by our ability to manage through a wide array of variables. Today, we are agile and able to respond more quickly to our customers' changing needs, creating opportunities in our business. As we manage the controllables, we will continue to test and improve our assortments and the in-store experience. We continue to focus on new product innovation and expansion of existing categories, while providing our customers with compelling values every day. We have been rewarded in these efforts with increasing customer loyalty and growing market share. Looking ahead, we believe our ability to better anticipate and meet our customers' needs will continue to provide sales momentum for Tractor Supply." 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 TractorSupply.comand 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 13, 2013. About Tractor Supply Company At December 29, 2012, Tractor Supply Company operated 1,176 stores in 45 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 year-end 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) Fourth Quarter Ended Year Ended December 29, 2012 December 31, 2011 December 29, 2012 December 31, 2011 (13 weeks) (14 weeks) (52 weeks) (53 weeks) % of % of % of % of Sales Sales Sales Sales Net sales $ 1,286,166 100.0 % $ 1,240,028 100.0 % $ 4,664,120 100.0 % $ 4,232,743 100.0 % Cost of merchandise 861,544 67.0 836,862 67.5 3,098,066 66.4 2,825,871 66.8 sold Gross margin 424,622 33.0 403,166 32.5 1,566,054 33.6 1,406,872 33.2 Selling, general and 277,251 21.5 267,959 21.6 1,040,287 22.3 973,822 23.0 administrative expenses Depreciation and 22,595 1.8 23,662 1.9 88,975 1.9 80,347 1.9 amortization Operating 124,776 9.7 111,545 9.0 436,792 9.4 352,703 8.3 income Interest 200 — 1,036 0.1 1,055 — 2,087 — expense, net Income before 124,576 9.7 110,509 8.9 435,737 9.4 350,616 8.3 income taxes Income tax 45,089 3.5 39,997 3.2 159,280 3.4 127,876 3.0 expense Net income $ 79,487 6.2 % $ 70,512 5.7 % $ 276,457 6.0 % $ 222,740 5.3 % Net income per share: Basic $ 1.13 $ 0.99 $ 3.89 $ 3.10 Diluted $ 1.11 $ 0.96 $ 3.80 $ 3.01 Weighted average shares outstanding: Basic 70,218 71,190 71,092 71,777 Diluted 71,733 73,256 72,757 73,921 Dividends declared per $ 0.20 $ 0.12 $ 0.72 $ 0.43 common share outstanding Condensed Consolidated Balance Sheets (Unaudited) (in thousands) December29, 2012 December31, 2011 ASSETS Current assets: Cash and cash equivalents $ 138,630 $ 176,965 Restricted cash 8,400 21,870 Inventories 908,116 830,819 Prepaid expenses and other current assets 51,808 51,728 Deferred income taxes 23,098 8,867 Total current assets 1,130,052 1,090,249 Property and equipment: Land 61,522 36,962 Buildings and improvements 511,188 459,703 Furniture, fixtures and equipment 350,224 312,708 Computer software and hardware 109,121 107,753 Construction in progress 37,122 19,309 1,069,177 936,435 Accumulated depreciation and amortization (519,179) (455,580) Property and equipment, net 549,998 480,855 Goodwill 10,258 10,258 Other assets 16,500 13,470 Total assets $ 1,706,808 $ 1,594,832 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 320,392 $ 266,409 Accrued employee compensation 48,400 48,261 Other accrued expenses 148,316 134,048 Current portion of capital lease 38 33 obligations Income taxes payable 43,359 11,874 Total current liabilities 560,505 460,625 Capital lease obligations, less current 1,242 1,284 maturities Deferred income taxes 1,477 13,827 Deferred rent 76,236 75,731 Other long-term liabilities 42,374 35,075 Total liabilities 681,834 586,542 Stockholders' equity: Common stock 654 643 Additional paid-in capital 361,759 298,426 Treasury stock (709,172) (437,373) Retained earnings 1,371,733 1,146,594 Total stockholders' equity 1,024,974 1,008,290 Total liabilities and stockholders' $ 1,706,808 $ 1,594,832 equity Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) For the Fiscal Year Ended December29, 2012 December31, 2011 (52 weeks) (53 weeks) Cash flows from operating activities: Net income $ 276,457 $ 222,740 Adjustments to reconcile net income to net cash provided by operatingactivities: Depreciation and amortization 88,975 80,347 Loss on disposition of property and 76 955 equipment Stock compensation expense 17,641 15,041 Excess tax benefit of stock options (25,836) (17,435) exercised Deferred income taxes (26,581) 1,856 Change in assets and liabilities: Inventories (77,297) (94,299) Prepaid expenses and other current assets (80) (17,783) Accounts payable 53,983 19,021 Accrued employee compensation 139 13,685 Other accrued expenses 8,828 6,312 Income taxes payable 57,321 21,040 Other 4,676 2,664 Net cash provided by operating activities 378,302 254,144 Cash flows from investing activities: Capital expenditures (152,924) (166,156) Proceeds from sale of property and 379 752 equipment Decrease (increase) in restricted cash 13,470 (21,870) Proceeds from sale of short-term — 15,913 investments Net cash used in investing activities (139,075) (171,361) Cash flows from financing activities: Excess tax benefit of stock options 25,836 17,435 exercised Principal payments under capital lease (37) (90) obligations Restricted stock units withheld to (6,821) (1,115) satisfy tax obligations Repurchase of common stock (271,799) (179,997) Net proceeds from issuance of common 26,577 31,460 stock Cash dividends paid to stockholders (51,318) (30,850) Net cash used in financing activities (277,562) (163,157) Net decrease in cash and cash equivalents (38,335) (80,374) Cash and cash equivalents at beginning of 176,965 257,339 period Cash and cash equivalents at end of $ 138,630 $ 176,965 period Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 1,219 $ 614 Income taxes 128,306 103,630 Non-cash accruals for construction in (5,440) (350) progress Selected Financial and Operating Information (Unaudited) Fourth Quarter Ended Year Ended December December December December December December 29, 2012 31, 2011 31, 2011 29, 2012 31, 2011 31, 2011 (13 weeks) (14 weeks) (13 (52 weeks) (53 weeks) (52 weeks) weeks) (adjusted (adjusted (originally for week (originally for week reported) shift) ^ reported) shift) ^ (a) ^(a) Sales Information: Same-store sales 4.7 % 7.6 % 7.1 % 5.3 % 8.2 % 8.3 % increase New store sales (% of 5.9 % 5.7 % 5.7 % 5.9 % 5.6 % 5.6 % total sales) Average transaction $ 46.12 $ 45.20 $ 45.16 $ 44.40 $ 43.33 $ 43.37 value Same-store average transaction 1.8 % 3.8 % 3.5 % 2.0 % 3.1 % 3.1 % value increase Same-store average transaction 2.7 % 3.6 % 3.5 % 3.0 % 5.0 % 5.0 % count increase Total selling square 18,893 17,506 18,893 17,506 footage (000's) Store Count Information: Beginning of 1,151 1,054 1,085 1,001 period New stores 25 31 93 85 opened Stores closed — — (2) (1) End of period 1,176 1,085 1,176 1,085 Pre-opening $ 1,721 $ 1,744 $ 7,124 $ 7,334 costs (000's) Balance Sheet Information: Average inventory per $ 727.4 $ 723.4 $ 727.4 $ 723.4 store (000's) ^(b) Inventory turns 3.57 3.49 3.28 3.23 (annualized) Share repurchase program: Cost $ 107,959 $ 7,905 $ 271,799 $ 179,997 (000's) Average purchase $ 88.89 $ 69.22 88.94 58.52 price per share Capital Expenditures (millions): New and relocated stores and $ 16.7 $ 17.7 $ 60.4 $ 44.9 stores not yet opened Information 7.8 3.8 28.2 12.3 technology Existing 7.0 5.6 22.2 18.7 stores Distribution center capacity and 6.0 12.0 16.4 56.3 improvements Corporate and 2.2 1.6 13.8 1.8 other Purchase of previously leased and self 2.0 18.2 11.9 32.2 developed stores Total $ 41.7 $ 58.9 $ 152.9 $ 166.2 2011 SAME-STORE SALES: ORIGINALLY REPORTED AND ADJUSTED FOR WEEK SHIFT ^(a) (unaudited) FISCAL 2011 First Second Third Fourth Full Quarter Quarter Quarter Quarter Year Same-store sales increase (originally 10.7% 4.6% 11.5% 7.6% 8.2% reported) Same-store sales increase (adjusted for 7.6% 7.1% 11.9% 7.1% 8.3% week shift) Impact of week shift (3.1%) 2.5% 0.4% (0.5%) 0.1% ^(a) Due to the 53-week fiscal 2011, each quarter of fiscal 2012 starts one week later than the same quarter of fiscal 2011. The chart above presents same-store sales for 2011 as originally reported and as adjusted to represent the same 13-week period as the 2012 fiscal quarters. The adjusted 13-week periods end on April 2, 2011, July 2, 2011, October 1, 2011 and December 31, 2011, respectively. ^(b) Assumes average inventory cost, excluding inventory in transit. SOURCE Tractor Supply Company Website: http://www.TractorSupply.com Contact: Anthony F. Crudele, Chief Financial Officer, or Randy Guiler, Director, Investor Relations, +1-615-440-4000; or Investors and Media: Jennifer Milan, or Daniel Haykin, FTI Consulting, +1-212-850-5600
Tractor Supply Company Reports Fourth Quarter and Full Year 2012 Results
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