Tractor Supply Company Reports Earnings Increase 29% for Full Year 2001
NASHVILLE, Tenn.--Jan. 22, 2002--Tractor Supply Company , the nation's largest retail farm and ranch store chain, today announced financial results for the fourth quarter and fiscal year ended December 29, 2001.Additionally, the Company provided guidance for the year 2002.
For the fourth quarter, the Company reported net sales of $220.4 million compared with $203.7 million last year. Net income for the quarter was $7.1 million compared with $5.7 million last year. Primary earnings per share for the quarter increased 23.1% to $0.80 compared with $0.65, while fully diluted earnings per share were $0.76 compared with $0.65. Same-store sales for the quarter increased 2.6%. The increase in same-store sales was primarily attributed to new merchandising programs and improved store operations, offset partially by milder weather compared to the prior year's quarter.
For the fiscal year, net sales were $849.8 million compared with $759.0 million, a 12% increase. Same-store sales for the full year increased 3.8% over last year. Gross margin improved 50 basis points to 26.9% of sales. Net income was $21.1 million compared with $16.4 million, a 29% increase. Primary earnings per share were $2.39 compared with $1.87, while fully diluted earnings per share were $2.33 compared with $1.87 reported in 2000.
The Company has reviewed its deferred tax liability requirements and has determined that it no longer has exposure for certain previously provided taxes. As a result, the tax provisions for the fourth quarter and full year have been reduced by $2.5 million, or $0.27 per diluted share. The quarterly and annual results cited above exclude this tax adjustment. Additionally, a one-time gain of approximately $2.1 million, or $0.24 per diluted share, from life insurance proceeds received in the second quarter of 2001 has been excluded from the annual results presented above. Including these adjustments, earnings per diluted share for the fourth quarter were $1.03 and for the full year $2.85. For a reconciliation of earnings per share see the Financial Tables that follow.
Joe Scarlett, Chairman and CEO of Tractor Supply Company said, "The record results for 2001 are impressive, especially given the general economic challenges in the second half of the year and the warmer weather patterns of the fourth quarter. The accelerated effort to build an improved team of store and district managers is producing solid results. The ability to achieve strong overall performance reflects our focus on managing the business efficiently and implementing operational improvements."
"We have made tremendous strides improving management of our inventory. We operated the entire year with a minimum 97% in-stock rate at stores on the 450 `driver items.' At the same time, average inventory per store during the year declined 9%. Our merchandising initiatives have generated the additional gross margins we planned and the lower inventory has reduced our borrowings and related interest expense. In addition, last year we successfully opened our planned 18 new stores, including three in the fourth quarter, and reduced total year-end inventories. "
After the close of fiscal year 2001, the United States Bankruptcy Court approved a transaction for the sale of certain assets of Quality Stores, Inc. Tractor Supply purchased the real property for 24 stores, the lease rights to 76 stores and the furniture and fixtures from 100 stores. Total consideration including estimated transaction costs was approximately $35 million. The Company intends to sell and leaseback 20 of the real properties and sell four properties with expected proceeds of approximately $23 million. The Company plans to open 87 of the locations as new Tractor Supply stores and to relocate existing Tractor Supply stores in nine other locations. Capital expenditures to convert the stores to the Tractor Supply format are expected to be $12 to $13 million and inventories for the converted stores are expected to total between $55 and $60 million. The Company believes that its cash flow from operations, borrowings available under its Senior Credit Facility and short-term trade credit will be sufficient to fund the expansion.
Transition team leader Jim Wright, President and COO, said "Our aggressive recruiting effort has already resulted in the hiring of ten of the best district managers from Quality Stores and we are in the process of hiring a large number of managers who will be the core of the new team. These will be Tractor Supply stores throughout----our layouts, our assortments, and our name. We will use fresh inventory from our vendor group and use many of the store fixtures we purchased on location. It's a tough goal, but the team and I are confident that we can get all the new stores open before July 1st and complete the store relocations during the third quarter."
In commenting on the transaction Cal Massmann, Senior Vice-President and CFO of Tractor Supply Company, said, "Retail acquisitions are frequently troubled by obsolete inventories, poor store locations, demoralized staff, and various other liabilities from the acquired business. We didn't buy any inventory, we chose only the best retail locations, we are hiring the best of the staff and are not assuming general obligations of the bankrupt company. We believe we have avoided the major pitfalls that plague many retail acquisitions. In addition, many of the new market locations were part of our near-term growth plan."
Mr. Scarlett added, "We originally planned 25 new stores in 2002 and now have added 87 more sites for a total of 112 new stores. I know this is an enormous challenge; I also know we have the team and the commitment to get the job done---on time and on budget. The investments we have made in building the team, in new systems and in expanded distribution capacity play a big part in making this mission possible. This year will be our biggest growth year ever with sales soaring past the billion-dollar mark for the first time. The `number one competitor' is gone. The entire organization is energized. The future looks very bright."
"While the economic challenges will continue into 2002, we are confident the products and service we provide will position Tractor Supply as the premiere destination in support of our customers' lifestyle needs. We anticipate net sales for 2002 to be approximately $1.1 billion, including approximately $150 million from the 87 new store locations, an overall increase of approximately 30%. We expect 2002 net income from our existing store base and previously planned 25 new stores to be in the $24.2 million and $25.2 million range, a 14.7% to 19.4% improvement. The 87 additional stores are expected to be slightly dilutive for the full year, with significant training and pre-opening costs in the first half resulting in an estimated incremental net loss in the $4.4 million to $4.8 million range, offset by estimated incremental net income in the $4.2 to $4.6 million range in the second half. The timing of the completion of improvements to the new locations may make a significant difference in the results of operations for the first half and full year. The first quarter loss is expected to be in the $0.60 and $0.65 range per diluted share with second quarter income expected to be in the $1.45 to $1.50 range per diluted share."
Mr. Scarlett, concluded, "Our financial performance has proven our strength as a niche retailer that provides differentiated products and good customer service at everyday low prices. This big growth spurt will broaden our geographic coverage, increase our market share and further demonstrate the success of our proven strategy. We look forward to strong performance in 2002."
At January 22, 2002, Tractor Supply Company operated 324 stores in 28 states focused on supplying products for the lifestyle needs of hobby and part-time farmers and ranchers. The Company also serves the maintenance needs of suburban customers, contractors and tradesmen. The Company's stores are located in rural communities and in the outlying towns in major metropolitan markets. The Company offers a comprehensive selection of merchandise for the health, care, growth and containment of equine, livestock and pets, a broad selection of agricultural products, and tools and hardware selected for our customers' needs. In addition, the Company sells light truck equipment, work clothing for both men and women and an extensive line of seasonal products including lawn and garden power equipment.
Tractor Supply Company will be hosting a conference call at 9am EST on January 23, 2002 to further discuss the quarterly and
annual results. The call will be simultaneously broadcast over the Internet on the Company's homepage at www.tractorsupplyco.com and can be accessed under the subheading "Investor Relations."
Footnotes:
| -- | All comparisons to prior periods are to the respective period of the prior fiscal year unless the context specifically indicates otherwise. |
| -- | 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. These statements include reference to certain factors, any one, or a combination, of which could materially affect the results of the Company's operations. These factors include general economic cycles affecting consumer spending, weather factors, operating factors affecting customer satisfaction, consumer debt levels, pricing and other competitive factors, the ability to identify suitable locations and negotiate favorable lease agreements on new and relocated stores, the timing and acceptance of new products in the stores, the mix of goods sold, the continued availability of favorable credit sources and other capital market conditions in general and the seasonality of the Company's business. 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 there can be no assurance that the actual 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. |
Results Of Operations
(in thousands, except per share amounts)
FOURTH QUARTER ENDED
Dec. 29, 2001 Dec. 30, 2000
(Unaudited)
% of % of
Sales Sales
Net sales $ 220,357 100.0% $ 203,736 100.0%
Cost of merchandise sold 159,873 72.5 147,635 72.5
Gross profit 60,484 27.5 56,101 27.5
Selling, general and
administrative expenses 45,560 20.7 41,789 20.5
Depreciation and amortization 2,900 1.3 2,672 1.3
Income from operations 12,024 5.5 11,640 5.7
Interest expense, net 891 0.4 2,050 1.0
Unusual item:
life insurance proceeds 0 0.0 0 0.0
Income before income taxes 11,133 5.1 9,590 4.7
Income tax provision 1,579 0.8 3,894 1.9
Net income $ 9,554 4.3% $ 5,696 2.8%
Net income per share-basic $ 1.08 $ .65
Net income per share-
assuming dilution $ 1.03 $ .65
Weighted average shares
outstanding (000's) 8,861 8,791
FISCAL YEAR ENDED
Dec. 29, 2001 Dec. 30, 2000
% of % of
Sales Sales
Net sales $ 849,799 100.0% $ 759,037 100.0%
Cost of merchandise sold 621,455 73.1 558,630 73.6
Gross profit 228,344 26.9 200,407 26.4
Selling, general and
administrative expenses 178,243 21.0 156,535 20.6
Depreciation and amortization 11,254 1.3 9,889 1.3
Income from operations 38,847 4.6 33,983 4.5
Interest expense, net 4,494 0.5 6,387 0.8
Unusual item:
life insurance proceeds 2,173 0.2 0 0.0
Income before income taxes 36,526 4.3 27,596 3.7
Income tax provision 10,752 1.3 11,206 1.5
Net income $ 25,774 3.0% $ 16,390 2.2%
Net income per share-basic $ 2.92 $ 1.87
Net income per share-
assuming dilution $ 2.85 $ 1.87
Weighted average shares
outstanding (000's) 8,824 8,782
Earnings Per Share
Fourth Quarter
Income Shares Amount
Basic earnings per share:
Net income as reported $ 9,554 8,861 $ 1.08
Unusual item: insurance proceeds
Adjustment of deferred taxes (2,500) 8,861 (0.28)
$ 7,054 8,861 $ 0.80
Diluted earnings per share:
Net income as reported $ 9,554 9,319 $ 1.03
Unusual item: insurance proceeds
Adjustment of deferred taxes (2,500) 9,319 (0.27)
$ 7,054 9,319 $ 0.76
Fiscal Year
Income Shares Amount
Basic earnings per share:
Net income as reported $25,774 8,824 $ 2.92
Unusual item: insurance proceeds (2,173) 8,824 (0.25)
Adjustment of deferred taxes (2,500) 8,824 (0.28)
$21,101 8,824 $ 2.39
Diluted earnings per share:
Net income as reported $25,774 9,041 $ 2.85
Unusual item: insurance proceeds (2,173) 9,041 (0.24)
Adjustment of deferred taxes (2,500) 9,041 (0.28)
$21,101 9,041 $ 2.33
Balance Sheets
(in thousands)
December 29, December 30,
2001 2000
ASSETS
Current assets:
Cash and cash equivalents $ 8,927 $ 9,145
Accounts receivable, net 6,516 7,683
Inventories 221,979 222,535
Prepaid expenses and
other current assets 14,540 7,870
Total current assets 251,962 247,233
Property and equipment, net 81,988 80,488
Other assets 3,630 4,575
TOTAL ASSETS $ 337,580 $ 332,296
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 80,974 $ 70,294
Accrued expenses 42,943 33,929
Current maturities of long-term debt 2,142 3,145
Current portion of
capital lease obligations 309 279
Income taxes currently payable 3,111 1,643
Deferred income taxes 174 4,212
Total current liabilities 129,653 113,502
Revolving credit loan 15,117 50,007
Other long-term debt 5,537 10,131
Capital lease obligations 2,503 2,812
Other long-term liabilities 4,376 808
Stockholders' equity:
Common stock 71 70
Additional paid-in capital 44,916 43,009
Retained earnings 137,731 111,957
Other comprehensive loss (2,324) 0
Total stockholders' equity 180,394 155,036
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 337,580 $ 332,296