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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): July 25, 2019

  398884849_tscologoa25.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 July 25, 2019, Tractor Supply Company (the "Company") issued a press release reporting its results of operations for the second fiscal quarter ended June 29, 2019. Additionally, the Company updated its guidance for the results of operations expected for the full fiscal year ending December 28, 2019.

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
 
 
 
 
July 25, 2019
 
By:
/s/ Kurt D. Barton
 
 
 
 
 
 
 
Name: Kurt D. Barton
 
 
 
Title: Executive 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 JULY 25, 2019)

Exhibit


398884849_tscologoa25.jpg
www.TractorSupply.com

TRACTOR SUPPLY COMPANY REPORTS SECOND QUARTER 2019 FINANCIAL RESULTS
Net Sales Increased 6.3%; Comparable Store Sales Increased 3.2%
Diluted Earnings Per Share Increased 6.5% to $1.80
$414 Million of Capital Returned to Shareholders Year to Date Through Share Repurchases and Quarterly Cash Dividends
Company Updates 2019 Financial Guidance, Including Raising the Midpoint of Its Earnings Per Share Guidance Range for Fiscal 2019


Brentwood, TN, July 25, 2019 - Tractor Supply Company (NASDAQ: TSCO), the largest rural lifestyle retailer in the United States, today reported financial results for its second quarter ended June 29, 2019.

“For both the second quarter and first half of 2019, the Tractor Supply team delivered a very solid performance. For the quarter, comparable store sales growth of 3.2% was driven by improvements in our average ticket and positive comparable transaction counts, along with growth across all geographies. The team managed the business effectively to capture demand, and given our solid performance year to date and our expectations for the remainder of this year, we are raising the low end of our EPS guidance range by $0.05. We now expect EPS to be in the range of $4.65 to $4.75. We continue to demonstrate progress on our ONETractor strategy and remain committed to creating sustainable long-term shareholder value,” said Greg Sandfort, Tractor Supply’s Chief Executive Officer.

Second Quarter 2019 Results
Net sales for the second quarter 2019 increased 6.3% to $2.35 billion from $2.21 billion in the second quarter of 2018. Comparable store sales for the second quarter 2019 increased 3.2% driven by comparable average ticket and transaction count of 2.2% and 1.0%, respectively. All geographic regions of the Company had positive comparable store sales growth. The increase in comparable store sales was primarily driven by strength in everyday merchandise, including consumable, usable and edible products, along with solid demand for spring and summer seasonal categories.

Gross profit increased 6.7% to $820.7 million from $769.4 million in the second quarter of 2018, and gross margin increased 11 basis points to 34.9% from 34.8% in the prior year’s second quarter. The increase in gross margin was driven by product mix, along with the strength of the Company’s price management program. Freight expense did not have a significant impact on the quarter.

Selling, general and administrative (SG&A) expenses, including depreciation and amortization, increased 7.5% to $533.2 million from $496.0 million in the second quarter of 2018. As a percent of net sales, SG&A expenses increased 24 basis points to 22.7% from 22.4% in the prior year’s second quarter. The increase in SG&A as a percent of net sales was primarily attributable to incremental costs associated with a new distribution facility in Frankfort, N.Y., and, to a lesser extent, investment in store team member wages. These SG&A increases were partially offset by leverage in occupancy and other costs from the increase in comparable store sales.

The effective income tax rate was 22.4% compared to 22.8% in the prior year’s second quarter.

Net income increased 5.8% to $219.2 million from $207.3 million in the second quarter of 2018, and diluted earnings per share increased 6.5% to $1.80 from $1.69 in the prior year’s second quarter.

During the second quarter of 2019, the Company opened 15 new Tractor Supply stores and one new Petsense store.






First Six Months of Fiscal 2019 Results
Net sales for the first six months of 2019 increased 7.2% to $4.18 billion from $3.90 billion in the first six months of 2018. Comparable store sales increased 4.0% as compared to an increase of 4.7% in the first six months of 2018.

Gross profit increased 7.7% to $1.44 billion from $1.33 billion in the first six months of 2018 and gross margin increased to 34.4% from 34.2% in the first six months of 2018.

SG&A expenses, including depreciation and amortization, increased 8.3% to $1.04 billion from $964.9 million in the first six months of 2018. As a percent of sales, SG&A expenses increased to 25.0% from 24.8% in the first six months of 2018.

The effective income tax rate was 22.3% in the first six months of both 2019 and 2018.

Net income increased 6.2% to $296.0 million from $278.7 million in the first six months of 2018, and diluted earnings per share increased 8.0% to $2.43 from $2.25 in the first six months of 2018.

Year to date through the second quarter, the Company repurchased approximately 3.5 million shares of its common stock for $334.2 million and paid quarterly cash dividends totaling $79.7 million.

During the first six months of 2019, the Company opened 25 new Tractor Supply stores and two new Petsense stores.

Fiscal 2019 Outlook
Based on year-to-date performance, the Company is providing the following updated guidance for the expected results of operations in fiscal 2019:
 
Updated
Previous
Net Sales
$8.40 billion - $8.46 billion
$8.31 billion - $8.46 billion
Comparable Store Sales
+3.0% - +4.0%
+2.0% - +4.0%
Operating Margin Rate
8.9% - 9.0%
8.9% - 9.0%
Net Income
 $562 million - $575 million
 $555 million - $575 million
Earnings per Diluted Share
$4.65 - $4.75
$4.60 - $4.75

The Company continues to forecast capital expenditures in the range of $225 million to $250 million for fiscal 2019. For fiscal 2019, the Company reiterates its plans to open 80 new Tractor Supply stores and 10 to 15 new Petsense locations.

Conference Call Information
Tractor Supply Company will hold a conference call today, Thursday, July 25, 2019 at 9:00 a.m. CT / 10:00 a.m. ET, hosted by Greg Sandfort, Chief Executive Officer; Steve Barbarick, President and Chief Operating 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), the largest rural lifestyle retailer in the United States, has been passionate about serving its unique niche, as a one-stop shop for recreational farmers, ranchers and all those who enjoy living the rural lifestyle, for more than 80 years. 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. With nearly 30,000 team members, 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 low prices they deserve. At June 29, 2019, the Company operated 1,790 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 June 29, 2019, the Company operated 177 Petsense stores in 26 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, operating margins, net income and comparable store sales, and capital expenditures. Other factors affecting future results include 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)

 
SECOND QUARTER ENDED
 
SIX MONTHS ENDED
 
June 29, 2019
 
June 30, 2018
 
June 29, 2019
 
June 30, 2018
 
 
 
% of
 
 
 
% of
 
 
 
% of
 
 
 
% of
 
 
 
Sales
 
 
 
Sales
 
 
 
Sales
 
 
 
Sales
Net sales
$
2,353,782

 
100.00
%
 
$
2,213,249

 
100.00
%
 
$
4,176,002

 
100.00
%
 
$
3,896,150

 
100.00
%
Cost of merchandise sold
1,533,037

 
65.13

 
1,443,835

 
65.24

 
2,740,273

 
65.62

 
2,563,087

 
65.79

Gross profit
820,745

 
34.87

 
769,414

 
34.76

 
1,435,729

 
34.38

 
1,333,063

 
34.21

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
484,190

 
20.57

 
452,346

 
20.44

 
949,999

 
22.75

 
878,459

 
22.55

Depreciation and amortization
48,998

 
2.08

 
43,610

 
1.97

 
94,765

 
2.27

 
86,397

 
2.22

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
287,557

 
12.22

 
273,458

 
12.35

 
390,965

 
9.36

 
368,207

 
9.44

Interest expense, net
5,176

 
0.22

 
4,978

 
0.22

 
10,106

 
0.24

 
9,446

 
0.24

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
282,381

 
12.00

 
268,480

 
12.13

 
380,859

 
9.12

 
358,761

 
9.20

Income tax expense
63,171

 
2.69

 
61,191

 
2.76

 
84,817

 
2.03

 
80,039

 
2.05

Net income
$
219,210

 
9.31
%
 
$
207,289

 
9.37
%
 
$
296,042

 
7.09
%
 
$
278,722

 
7.15
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
1.82

 
 
 
$
1.70

 
 
 
$
2.45

 
 
 
$
2.26

 
 
Diluted
$
1.80

 
 
 
$
1.69

 
 
 
$
2.43

 
 
 
$
2.25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
120,371

 
 
 
122,100

 
 
 
120,791

 
 
 
123,288

 
 
Diluted
121,508

 
 
 
122,775

 
 
 
121,830

 
 
 
123,975

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share outstanding
$
0.35

 
 
 
$
0.31

 
 
 
$
0.66

 
 
 
$
0.58

 
 

















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

 
SECOND QUARTER ENDED
 
SIX MONTHS ENDED
 
June 29, 2019
 
June 30, 2018
 
June 29, 2019
 
June 30, 2018
Net income
$
219,210

 
$
207,289

 
$
296,042

 
$
278,722

 
 
 
 
 
 
 
 
Other comprehensive (loss)/income:
 
 
 
 
 
 
 
Change in fair value of interest rate swaps,
   net of taxes
(2,185
)
 
552

 
(3,649
)
 
2,384

Total other comprehensive (loss)/income
(2,185
)
 
552

 
(3,649
)
 
2,384

Total comprehensive income
$
217,025

 
$
207,841

 
$
292,393

 
$
281,106






Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)

 
June 29, 2019
 
June 30, 2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
104,018

 
$
69,954

Inventories
1,733,150

 
1,632,280

Prepaid expenses and other current assets
95,051

 
103,379

Income taxes receivable
5,589

 
5,115

Total current assets
1,937,808

 
1,810,728

 
 
 
 
Property and equipment, net
1,135,310

 
1,081,543

Operating lease right-of-use assets
2,091,439

 

Goodwill and other intangible assets
124,492

 
124,492

Deferred income taxes

 
20,741

Other assets
23,670

 
29,902

Total assets
$
5,312,719

 
$
3,067,406

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
681,529

 
$
649,665

Accrued employee compensation
26,932

 
22,758

Other accrued expenses
222,919

 
205,352

Current portion of long-term debt
22,500

 
25,000

Current portion of finance lease liabilities
3,717

 
3,714

Current portion of operating lease liabilities
264,707

 

Income taxes payable
49,082

 
34,997

Total current liabilities
1,271,386

 
941,486

 
 
 
 
Long-term debt
466,290

 
516,410

Finance lease liabilities, less current portion
27,394

 
30,639

Operating lease liabilities, less current portion
1,928,367

 

Deferred income taxes
3,592

 

Deferred rent

 
107,827

Other long-term liabilities
70,748

 
65,002

Total liabilities
3,767,777

 
1,661,364

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock
1,386

 
1,366

Additional paid-in capital
928,094

 
746,410

Treasury stock
(2,814,912
)
 
(2,383,446
)
Accumulated other comprehensive income
882

 
5,742

Retained earnings
3,429,492

 
3,035,970

Total stockholders’ equity
1,544,942

 
1,406,042

Total liabilities and stockholders’ equity
$
5,312,719

 
$
3,067,406






Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
SIX MONTHS ENDED
 
June 29, 2019
 
June 30, 2018
Cash flows from operating activities:
 
 
 
Net income
$
296,042

 
$
278,722

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 
Depreciation and amortization
94,765

 
86,397

(Gain) / loss on disposition of property and equipment
(309
)
 
623

Share-based compensation expense
18,400

 
16,409

Deferred income taxes
10,199

 
(2,247
)
Change in assets and liabilities:
 

 
 

Inventories
(143,608
)
 
(179,072
)
Prepaid expenses and other current assets
19,396

 
(15,127
)
Accounts payable
61,548

 
73,097

Accrued employee compensation
(27,114
)
 
(8,915
)
Other accrued expenses
(21,856
)
 
(3,884
)
Income taxes
45,836

 
23,870

Other
(4,425
)
 
4,141

Net cash provided by operating activities
348,874

 
274,014

Cash flows from investing activities:
 
 
 
Capital expenditures
(83,540
)
 
(116,695
)
Proceeds from sale of property and equipment
611

 
288

Net cash used in investing activities
(82,929
)
 
(116,407
)
Cash flows from financing activities:
 
 
 
Borrowings under debt facilities
567,000

 
673,000

Repayments under debt facilities
(485,750
)
 
(557,500
)
Debt issuance costs

 
(346
)
Principal payments under finance lease liabilities
(1,805
)
 
(1,809
)
Repurchase of shares to satisfy tax obligations
(3,139
)
 
(569
)
Repurchase of common stock
(334,235
)
 
(252,545
)
Net proceeds from issuance of common stock
89,431

 
14,345

Cash dividends paid to stockholders
(79,728
)
 
(71,377
)
Net cash used in financing activities
(248,226
)
 
(196,801
)
Net change in cash and cash equivalents
17,719

 
(39,194
)
Cash and cash equivalents at beginning of period
86,299

 
109,148

Cash and cash equivalents at end of period
$
104,018

 
$
69,954

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest                                                                        
$
10,006

 
$
6,337

Income taxes
27,196

 
58,949

 
 
 
 
Supplemental disclosures of non-cash activities:
 
 
 
Non-cash accruals for construction in progress
$
15,360

 
$
16,227

Operating lease assets and liabilities recognized upon adoption of ASC 842
2,084,880

 

Increase of operating lease assets and liabilities from new or modified leases
133,044

 






Selected Financial and Operating Information
(Unaudited)
 
 
SECOND QUARTER ENDED
 
SIX MONTHS ENDED
 
 
June 29, 2019
 
June 30, 2018
 
June 29, 2019
 
June 30, 2018
Sales Information:
 
 
 
 
 
 
 
 
Comparable store sales increase
 
3.2
%
 
5.6
%
 
4.0
%
 
4.7
%
New store sales (% of total sales)
 
3.0
%
 
3.9
%
 
3.1
%
 
3.9
%
Average transaction value
 
$49.32
 
$48.23
 
$46.85
 
$45.65
Comparable store average transaction value increase
 
2.2
%
 
3.7
%
 
2.6
%
 
2.2
%
Comparable store average transaction count increase
 
1.0
%
 
1.8
%
 
1.3
%
 
2.4
%
Total selling square footage (000’s)
 
29,974
 
28,916
 
29,974
 
28,916
Exclusive brands (% of total sales)
 
30.0
%
 
30.4
%
 
31.2
%
 
31.4
%
Imports (% of total sales)
 
11.2
%
 
11.8
%
 
11.5
%
 
11.8
%
 
 
 
 
 
 
 
 
 
Store Count Information:
 
 
 
 
 
 
 
 
Tractor Supply
 
 
 
 
 
 
 
 
Beginning of period
 
1,775
 
1,700
 
1,765
 
1,685
New stores opened
 
15
 
25
 
25
 
40
Stores closed
 

 

 

 

End of period
 
1,790
 
1,725
 
1,790
 
1,725
Petsense
 
 
 
 
 
 
 
 
Beginning of period
 
176
 
172
 
175
 
168
New stores opened
 
1
 
3
 
2
 
7
Stores closed
 

 
(1
)
 

 
(1
)
End of period
 
177
 
174
 
177
 
174
Consolidated end of period
 
1,967
 
1,899
 
1,967
 
1,899
 
 
 
 
 
 
 
 
 
Pre-opening costs (000’s)
 
$1,701
 
$2,541
 
$2,644
 
$4,208
 
 
 
 
 
 
 
 
 
Balance Sheet Information:
 
 
 
 
 
 
 
 
Average inventory per store (000’s) (a)
 
$826.0
 
$798.1
 
$826.0
 
$798.1
Inventory turns (annualized)
 
3.45
 
3.49
 
3.22
 
3.23
Share repurchase program:
 
 
 
 
 
 
 
 
Cost (000’s)
 
$178,916
 
$95,082
 
$334,235
 
$252,545
Average purchase price per share
 
$103.27
 
$64.37
 
$96.69
 
$65.70
 
 
 
 
 
 
 
 
 
Capital Expenditures (in millions):
 
 
 
 
 
 
 
 
Information technology
 
$25.9
 
$20.7
 
$35.6
 
$38.5
New and relocated stores and stores not yet opened
 
15.0
 
22.3
 
22.3
 
32.8
Distribution center capacity and improvements
 
7.6
 
21.4
 
11.8
 
33.8
Existing stores
 
5.5
 
7.2
 
13.0
 
11.5
Corporate and other
 
0.7
 

 
0.8
 
0.1
Total
 
$54.7
 
$71.6
 
$83.5
 
$116.7

(a) Assumes average inventory cost, excluding inventory in transit.  


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