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Section 1: 8-K (FORM 8-K TRACTOR SUPPLY COMPANY)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
 
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


 Date of Report (Date of Earliest Event Reported): April 26, 2018

  393192092_tscologoa20.jpg
Tractor Supply Company
__________________________________________
(Exact name of registrant as specified in its charter)
 
 
Delaware
000-23314
13-3139732
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
 
 
5401 Virginia Way, Brentwood, Tennessee
 
37027
(Address of principal executive offices)
 
(Zip Code)
 
Registrant's telephone number, including area code:
(615) 440-4000

Not Applicable
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 
 
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 ((§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] 





Item 2.02 Results of Operations and Financial Condition.
 
On April 26, 2018, Tractor Supply Company (the "Company") issued a press release reporting its results of operations for the first fiscal quarter ended March 31, 2018.
 
A copy of the press release is furnished herewith as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.
 
(d) Exhibits:
 
This exhibit is furnished pursuant to Item 2.02 hereof and should not be deemed to be "filed" under the Securities Exchange Act of 1934.
 
 

 
 
 
 





SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
Tractor Supply Company
 
 
 
 
April 26, 2018
 
By:
/s/ Kurt D. Barton
 
 
 
 
 
 
 
Name: Kurt D. Barton
 
 
 
Title: Senior Vice President - Chief Financial Officer and Treasurer
 

 
 
 
 
 





EXHIBIT INDEX
 
 
 
 
Exhibit No.
 
Description
 
 
 
99.1
 






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Section 2: EX-99.1 (EXHIBIT 99.1 - PRESS RELEASE DATED APRIL 26, 2018)

Exhibit


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www.TractorSupply.com


TRACTOR SUPPLY COMPANY REPORTS FIRST QUARTER 2018 FINANCIAL RESULTS
Net Sales Increased 7.6%; Comparable Store Sales Increased 3.7%
Diluted Earnings Per Share of $0.57
$191 Million of Capital Returned to Shareholders in the Quarter
Company Confirms 2018 Financial Guidance


Brentwood, TN, April 26, 2018 - Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retail store chain in the United States, today reported financial results for its first quarter ended March 31, 2018.

“For the first quarter, we are pleased with our overall performance and how effectively we managed our business. We generated solid increases in both comparable store sales and gross margin, despite a delay in the spring selling season in many of our markets. As we enter the second quarter, we believe we are well-positioned to capitalize on the spring selling season. Looking to the balance of 2018, we remain excited about the opportunities ahead of us as we continue to execute our ONETractor strategy, which we believe will contribute to sustainable long-term growth for our shareholders,” said Greg Sandfort, Tractor Supply’s Chief Executive Officer.

First Quarter Results
Net sales for the first quarter 2018 increased 7.6% to $1.68 billion from $1.56 billion in the first quarter of 2017. Comparable store sales increased 3.7% compared to a decrease of 2.2% in the prior year’s first quarter. The comparable store sales results included increases in comparable transaction count and average ticket of 3.2% and 0.5%, respectively. The comparable store sales growth in the quarter was broad based across all geographic regions. The increase in comparable store sales was primarily driven by strength in everyday merchandise, including consumable, usable and edible products, along with strong demand for winter seasonal categories. These increases were offset by lower sales of spring and summer seasonal products.

Gross profit increased 8.8% to $563.6 million from $518.2 million in the prior year’s first quarter, and gross margin increased 36 basis points to 33.5% from 33.1% in the prior year’s first quarter. The increase in gross margin was primarily driven by strong sell-through of winter seasonal categories, partially offset by an increase in transportation costs from higher carrier rates and diesel fuel costs.
 
Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased 11.2% to $468.9 million from $421.8 million in the prior year’s first quarter. As a percent of net sales, SG&A expenses increased 89 basis points to 27.9% from 27.0% in the first quarter of 2017. The increase in SG&A as a percent of net sales was primarily attributable to investments in team member wages at both the stores and distribution centers, higher store level costs due to increased utility and maintenance expenses from colder temperatures and investments in infrastructure to support the Company’s strategic long-term growth initiatives. The Company estimates that approximately 25 basis points of the increase in SG&A as a percent of net sales were attributable to items that are discrete to the first quarter.

The effective income tax rate was 20.9% compared to 35.6% in the prior year’s first quarter. The decrease in the effective income tax rate was primarily related to the U.S. Tax Cuts and Jobs Act that was signed into law in December 2017. In addition, the realization of discrete federal and state tax credits further reduced income taxes by approximately 200 basis points in the first quarter of 2018.

Net income increased 18.4% to $71.4 million in the first quarter of 2018 from $60.3 million in the prior year’s first quarter and diluted earnings per share increased 24.0% to $0.57 from $0.46 in the first quarter of 2017.





The Company opened 15 new Tractor Supply stores and four Petsense stores in the first quarter of 2018 compared to 24 new Tractor Supply store openings and nine Petsense store openings (including the conversion of the two Hometown Pet stores) in the prior year’s first quarter.

Fiscal 2018 Outlook
Given the seasonality of the business and the impact weather can have on the timing of sales and profitability between quarters, the Company continues to believe the business is more accurately assessed by the halves and not the quarters. Based on year-to-date performance, the Company confirms the following financial guidance for fiscal 2018:

Net Sales
$7.69 billion - $7.77 billion
Comparable Store Sales
+2.0% - +3.0%
Net Income
$490 million - $515 million
Earnings per Diluted Share
$3.95 - $4.15

Conference Call Information
Tractor Supply Company will hold a conference call today, Thursday, April 26, 2018 at 9:00 a.m. CT / 10:00 a.m. ET, hosted by Greg Sandfort, Chief Executive Officer; Steve Barbarick, President and Chief Merchandising Officer; and Kurt Barton, Chief Financial Officer. The call will be webcast live 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 webcast.

A replay of the webcast will also be available at IR.TractorSupply.com shortly after the conference call concludes.

About Tractor Supply Company
Tractor Supply Company (NASDAQ: TSCO) is in its 80th year of operation and, since being founded in 1938, has grown to become the largest rural lifestyle retailer in the United States. With about 28,000 team members, more than 1,700 stores in 49 states and an e-commerce website, Tractor Supply is passionate about serving its unique niche, as a one-stop shop for recreational farmers, ranchers and all those who enjoy living the rural lifestyle. Tractor Supply offers an extensive mix of products necessary to care for home, land, pets and animals with a focus on product localization, exclusive brands and legendary customer service that addresses the needs of the Out Here lifestyle. The Company leverages its physical store assets with digital capabilities to offer customers the convenience of purchasing products they need anytime, anywhere and any way they choose at the everyday prices they deserve. At March 31, 2018, the Company operated 1,700 Tractor Supply stores in 49 states and an e-commerce website at www.TractorSupply.com.

Tractor Supply Company also owns and operates Petsense, a small-box pet specialty supply retailer focused on meeting the needs of pet owners, primarily in small and mid-size communities, and offering a variety of pet products and services. At March 31, 2018, the Company operated 172 Petsense stores in 27 states. For more information on Petsense, visit www.petsense.com.






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, including, but not limited to, net income and comparable store sales, capital expenditures, the amount of share repurchases, marketing, merchandising and strategic initiatives and new store and distribution center openings and expenses 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, national, regional and local economic conditions affecting consumer spending, the timing and acceptance of new products in the stores, the timing and mix of goods sold, weather conditions, the seasonal nature of the business, transportation costs, including but not limited to, carrier rates and fuel costs, 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, including but not limited to, increases in wages, and execute 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 the business, competition, including competition from online retailers, 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 the Company’s 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, including expected effects of the Tax Cuts and Jobs Act, and results of examination by taxing authorities, the imposition of tariffs on imported products or the disallowance of tax deductions on imported products, 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)

 
FIRST QUARTER ENDED
 
March 31, 2018
 
April 1, 2017
 
 
 
% of
 
 
 
% of
 
 
 
Sales
 
 
 
Sales
Net sales
$
1,682,901

 
100.0
%
 
$
1,564,078

 
100.0
%
Cost of merchandise sold
1,119,252

 
66.5

 
1,045,875

 
66.9

Gross profit
563,649

 
33.5

 
518,203

 
33.1

 
 
 
 
 
 
 
 
Selling, general and administrative expenses
426,113

 
25.3

 
382,114

 
24.4

Depreciation and amortization
42,787

 
2.6

 
39,727

 
2.5

 
 
 
 
 
 
 
 
Operating income
94,749

 
5.6

 
96,362

 
6.2

Interest expense, net
4,468

 
0.3

 
2,777

 
0.2

 
 
 
 
 
 
 
 
Income before income taxes
90,281

 
5.3

 
93,585

 
6.0

Income tax expense
18,848

 
1.1

 
33,274

 
2.1

Net income
$
71,433

 
4.2
%
 
$
60,311

 
3.9
%
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.57

 
 
 
$
0.46

 
 
Diluted
$
0.57

 
 
 
$
0.46

 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
124,477

 
 
 
130,276

 
 
Diluted
125,174

 
 
 
131,090

 
 
 
 
 
 
 
 
 
 
Dividends declared per common share outstanding
$
0.27

 
 
 
$
0.24

 
 
























Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands)

 
FIRST QUARTER ENDED
 
March 31, 2018
 
April 1, 2017
Net income
$
71,433

 
$
60,311

 
 
 
 
Other comprehensive income:
 
 
 
Change in fair value of interest rate swaps, net of taxes
1,832

 
281

Total other comprehensive income
1,832

 
281

Total comprehensive income
$
73,265

 
$
60,592








Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)

 
March 31, 2018
 
April 1, 2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
132,398

 
$
72,701

Inventories
1,760,065

 
1,657,761

Prepaid expenses and other current assets
86,815

 
86,459

Income taxes receivable
4,815

 
7,339

Total current assets
1,984,093

 
1,824,260

 
 
 
 
Property and equipment:
 
 
 
Land
99,336

 
96,535

Buildings and improvements
1,055,487

 
975,155

Furniture, fixtures and equipment
611,504

 
578,352

Computer software and hardware
273,104

 
231,091

Construction in progress
98,595

 
26,067

Property and equipment, gross
2,138,026

 
1,907,200

Accumulated depreciation and amortization
(1,087,627
)
 
(950,163
)
Property and equipment, net
1,050,399

 
957,037

 
 
 
 
Goodwill and other intangible assets
124,492

 
125,717

Deferred income taxes
18,585

 
46,829

Other assets
30,218

 
22,559

Total assets
$
3,207,787

 
$
2,976,402

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
732,524

 
$
563,525

Accrued employee compensation
23,274

 
21,049

Other accrued expenses
200,053

 
187,247

Current portion of long-term debt
25,000

 
12,500

Current portion of capital lease obligations
3,545

 
1,356

Income taxes payable
29,539

 
31,407

Total current liabilities
1,013,935

 
817,084

 
 
 
 
Long-term debt
679,565

 
598,919

Capital lease obligations, less current maturities
31,717

 
25,525

Deferred rent
106,542

 
101,001

Other long-term liabilities
62,783

 
54,375

Total liabilities
1,894,542

 
1,596,904

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock
1,364

 
1,361

Additional paid-in capital
728,588

 
683,012

Treasury stock
(2,288,364
)
 
(1,876,045
)
Accumulated other comprehensive income
5,190

 
1,673

Retained earnings
2,866,467

 
2,569,497

Total stockholders’ equity
1,313,245

 
1,379,498

Total liabilities and stockholders’ equity
$
3,207,787

 
$
2,976,402







Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
Three Months Ended
 
March 31, 2018
 
April 1, 2017
Cash flows from operating activities:
 
 
 
Net income
$
71,433

 
$
60,311

Adjustments to reconcile net income to net cash used in operating activities:
 

 
 
Depreciation and amortization
42,787

 
39,727

Loss on disposition of property and equipment
94

 
179

Share-based compensation expense
8,567

 
7,557

Deferred income taxes
(91
)
 
(1,611
)
Change in assets and liabilities:
 

 
 

Inventories
(306,857
)
 
(288,105
)
Prepaid expenses and other current assets
1,437

 
4,098

Accounts payable
155,956

 
44,003

Accrued employee compensation
(8,399
)
 
(4,197
)
Other accrued expenses
(5,226
)
 
(28,144
)
Income taxes
18,712

 
22,266

Other
(276
)
 
2,258

Net cash used in operating activities
(21,863
)
 
(141,658
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(45,144
)
 
(34,883
)
Proceeds from sale of property and equipment
13

 
28

Net cash used in investing activities
(45,131
)
 
(34,855
)
Cash flows from financing activities:
 
 
 
Borrowings under debt facilities
375,000

 
475,000

Repayments under debt facilities
(96,250
)
 
(137,500
)
Debt issuance costs
(346
)
 

Principal payments under capital lease obligations
(900
)
 
(332
)
Repurchase of shares to satisfy tax obligations
(569
)
 
(653
)
Repurchase of common stock
(157,463
)
 
(114,547
)
Net proceeds from issuance of common stock
4,363

 
4,593

Cash dividends paid to stockholders
(33,591
)
 
(31,263
)
Net cash provided by financing activities
90,244

 
195,298

Net change in cash and cash equivalents
23,250

 
18,785

Cash and cash equivalents at beginning of period
109,148

 
53,916

Cash and cash equivalents at end of period
$
132,398

 
$
72,701

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest                                                                        
$
2,534

 
$
2,125

Income taxes
789

 
12,739

 
 
 
 
Supplemental disclosures of non-cash activities:
 
 
 
Property and equipment acquired through capital lease
$

 
$

Non-cash accruals for construction in progress
12,270

 
12,044






Selected Financial and Operating Information (a) 
(Unaudited)
 
 
FIRST QUARTER ENDED
 
 
March 31, 2018
 
April 1, 2017
Sales Information:
 
 
 
 
Comparable store sales increase (decrease)
 
3.7
%
 
(2.2
)%
New store sales (% of total sales)
 
4.0
%
 
6.6
 %
Average transaction value
 
$42.65
 
$42.46
Comparable store average transaction value increase (decrease)
 
0.5
%
 
(0.9
)%
Comparable store average transaction count increase (decrease)
 
3.2
%
 
(1.4
)%
Total selling square footage (000’s)
 
28,502
 
26,920
Exclusive brands (% of total sales)
 
32.7
%
 
32.5
 %
Imports (% of total sales)
 
11.8
%
 
11.7
 %
 
 
 
 
 
Store Count Information:
 
 
 
 
Tractor Supply
 
 
 
 
Beginning of period
 
1,685
 
1,595
New stores opened
 
15
 
24
Stores closed
 

 
(2)
End of period
 
1,700
 
1,617
Petsense
 
 
 
 
Beginning of period
 
168
 
143
New stores opened
 
4
 
9
Stores closed
 

 

End of period
 
172
 
152
Consolidated end of period
 
1,872
 
1,769
 
 
 
 
 
Pre-opening costs (000’s)
 
$1,667
 
$2,604
 
 
 
 
 
Balance Sheet Information:
 
 
 
 
Average inventory per store (000’s) (b)
 
$891.5
 
$882.5
Inventory turns (annualized)
 
2.89
 
2.86
Share repurchase program:
 
 
 
 
Cost (000’s)
 
$157,463
 
$114,547
Average purchase price per share
 
$66.53
 
$71.76
 
 
 
 
 
Capital Expenditures (in millions):
 
 
 
 
Information technology
 
$17.8
 
$8.2
Distribution center capacity and improvements
 
12.4
 
1.0
New and relocated stores and stores not yet opened
 
10.5
 
17.1
Existing stores
 
4.3
 
8.6
Corporate and other
 
0.1
 

Total
 
$45.1
 
$34.9

(a) Beginning in the fourth quarter ended December 31, 2016, selected financial and operating information includes the consolidation of Petsense unless otherwise noted. Petsense stores are not considered comparable stores until 12 months after the date of acquisition.  
(b) Assumes average inventory cost, excluding inventory in transit.  





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