EX-99.1 3 g82072exv99w1.txt PRESS RELEASE EXHIBIT 99.1 ------------------------------------------------------------------------------- TRACTOR SUPPLY COMPANY REPORTS FIRST QUARTER RESULTS ~COMPANY ACHIEVES POSITIVE EARNINGS IN SEASONALLY SLOW FIRST QUARTER, AHEAD OF ~EXPECTATIONS NET SALES INCREASE 41% TO $273.8 MILLION~ ~COMPANY ADOPTS NEW ACCOUNTING PROVISION (EITF NO. 02-16)~ ------------------------------------------------------------------------------- Nashville, Tennessee, April 15, 2003 - Tractor Supply Company (NASDAQ: TSCO), the largest retail farm and ranch store chain in the United States, today announced the adoption of new accounting guidance for vendor allowances and the financial results for its first quarter ended March 29, 2003. Adoption of New Accounting Provision (EITF No. 02-16) The Company has adopted the new accounting guidance for vendor allowances, Emerging Issues Task Force ("EITF") Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor." EITF No. 02-16 provides guidance for when retailers should recognize consideration given by a vendor to a retailer in connection with the sale of the vendor's products or to promote sales of the vendor's products by the retailer. A brief discussion of this accounting method and related financial schedules are included as supplements to this press release. To facilitate year-over-year comparisons, the Company has also presented its comparative results discussed below and the financial schedules included at the end of this release as if this required change in accounting had been applied prior to fiscal 2001. First Quarter Results Net income for the fiscal 2003 first quarter was $0.1 million, or breakeven per diluted share, compared to a net loss of $4.0 million, or $0.22 per diluted share in the prior year period. Excluding a $1.9 million cumulative effect of a change in accounting principle, fiscal 2003 first quarter net income was $2.0 million, or $0.10 per diluted share. These results compare to a fiscal 2002 first quarter net loss of $0.1 million, or $0.01 per diluted share, which excludes non-recurring incremental pre-opening, transition, training, relocation and store closing expenses related to the Company's purchase of real property and lease rights from Quality Stores, Inc. All references to per share amounts reflect a two-for-one stock split that was distributed in August 2002. For the quarter, net sales increased 41.3% to $273.8 million compared with $193.8 million last year. Same-store sales increased 3.9%, largely due to favorable weather conditions, versus last year's first quarter increase of 13.4%, which was driven mostly by market share gains in certain markets and improved in-store execution. Importantly, the Company continues to improve its merchandising programs and in-store execution initiatives. Gross margin in the first quarter increased 40 basis points to 29.5%, reflecting improved product costs and changes in the sales mix. Primarily as a result of controlled spending and greater leverage from increased sales, selling, general and administrative expenses decreased 390 basis points to 26.4% of sales. Excluding the effect of the fiscal 2002 incremental store expansion costs referred to above, such expenses decreased 70 basis points. During the first quarter, the Company opened a total of 12 new stores compared to 15 in the prior year period. The Company also relocated two stores. As of March 29, 2003, the Company had a total of 445 stores versus 339 as of March 30, 2002. During the balance of fiscal 2003, the Company plans 20 to 23 additional new store openings and approximately 14 store relocations. Commenting on the Company's performance, Joe Scarlett, Chairman and Chief Executive Officer stated, "The strong first quarter results, which exceeded both our expectations and analysts' estimates, demonstrate the continued strength and success of our business model. With favorable weather conditions, sales at both new and existing stores have been above plan, reflecting the success of our first quarter 'get ready' execution. "In addition to driving the top line, we continue to manage the business efficiently and are making additional operating improvements. We are carefully controlling our cost structure and have achieved operating income EXHIBIT 99.1 improvement as planned. Of particular note, our vendor partners continue to provide strong support, helping us sustain an excellent in-stock position across the entire chain." Company Outlook Looking ahead to the balance of fiscal 2003, the Company will remain focused on continued profit enhancement through gross margin improvement as well as expense leverage consistent with maximizing the long-term performance of all stores. Despite sustained economic uncertainty, the Company currently remains comfortable with the previously provided guidance for fiscal 2003. For the second quarter, the Company expects net sales to range between approximately $452 million and $457 million and net income to range between approximately $27.9 million and $28.3 million. For the full year, in line with previously provided top line guidance, the Company expects net sales to range between approximately $1,390 million and $1,415 million, an increase of 14.9% to 16.9%. Net income, including the cumulative effect of the accounting change, is expected to range between approximately $52.5 million and $53.5 million, a 35% to 38% improvement. Mr. Scarlett concluded, "Our basic strategy remains focused on enhancing our position as a premiere retail destination. We are confident we can further improve all aspects of our business model and the `basic needs' components of our product offering. We continue to see significant opportunity in new and existing markets to grow at a balanced and responsible pace. We remain committed to managing the Company for long-term shareholder value and, with both compelling prospects and a strong financial foundation, we are confident that the Company is positioned for sustained solid financial performance." At March 29, 2003, Tractor Supply Company operated 445 stores in 30 states, 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) livestock and pet products, including everything necessary for their health, care, growth and containment; (2) maintenance products for agricultural and rural use; (3) hardware and tool products; (4) seasonal products, including lawn and garden power equipment; (5) truck, trailer and towing products; and (6) work clothing for the entire family. Tractor Supply Company will be hosting a conference call at 9am Eastern Time on April 16, 2003 to further discuss the quarterly results. The call will be simultaneously broadcast over the Internet on the Company's homepage at www.myTSCstore.com and can be accessed under the subheading "Investor Relations." EXHIBIT 99.1 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 attract, train and retain qualified employees, 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, 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. 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) EXHIBIT 99.1 RESULTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FIRST QUARTER ENDED MARCH 29, 2003 MARCH 30, 2002 ----------------------- ----------------------- (PRO FORMA) (1) (UNAUDITED) % % of Sales of Sales Net sales $ 273,760 100.0% $ 193,810 100.0% Cost of merchandise sold 192,963 70.5 137,346 70.9 --------- ----- --------- ----- Gross margin 80,797 29.5 56,464 29.1 Selling, general and administrative expenses 72,138 26.4 58,753 30.3 Depreciation and amortization 4,454 1.6 3,093 1.6 --------- ----- --------- ----- Income (loss) from operations 4,205 1.5 (5,382) (2.8) Interest expense, net 1,010 0.4 1,067 .6 --------- ----- --------- ----- Income (loss) before income taxes and cumulative effect of accounting change 3,195 1.1 (6,449) (3.4) Income tax expense (benefit) 1,182 0.4 (2,451) (1.3) --------- ----- --------- ----- Net income (loss) before cumulative effect of accounting change $ 2,013 0.7 $ (3,998) (2.1) Cumulative effect of accounting change, net of tax (1,888) 0.7 -- 0.0 --------- ----- --------- ----- Net income (loss) $ 125 0.0% $ (3,998) (2.1)% ========= ===== ========= ===== Net income (loss) per share, before cumulative effect of accounting change: Basic $ 0.11 $ (0.22) ========= ========= Diluted $ 0.10 $ (0.22) ========= ========= Net income (loss) per share, including cumulative effect of accounting change: Basic $ 0.01 $ (0.22) ========= ========= Diluted $ 0.01 $ (0.22) ========= ========= Weighted average shares outstanding (000's): Basic 18,308 17,892 Diluted 19,858 19,078
(1) The operating results for the quarter ended March 30, 2002 are presented on a pro forma basis, as if the change in accounting principle had occurred prior to the earliest period presented. -------------------------------------------------------------------------------- A reconciliation of net loss and loss per share for the first quarter 2002 follows (in thousands, except per share amounts):
PER SHARE INCOME SHARES AMOUNT ------ ------ ---------- (UNAUDITED) Net loss - as reported $ (4,010) 17,892 $ (0.22) Non-recurring store expansion costs (net of taxes) 3,866 17,892 0.21 Change in accounting for vendor funds (net of taxes) 12 17,892 -- -------- ------- -------- $ (132) 17,892 $ (0.01) ======== ======= ========
BALANCE SHEET (IN THOUSANDS)
MARCH 29, MARCH 30, 2003 2002 -------------------------------- (PRO FORMA)(1) (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 25,226 $ 14,766 Accounts receivable, net -- 2,360 Inventories 366,811 286,247 Prepaid expenses and other current assets 24,773 24,291 Assets held for sale 3,774 2,730 Deferred income taxes 7,581 -- ---------- ---------- Total current assets 428,165 330,394 Property and equipment, net 125,945 110,915 Deferred income taxes -- 2,549 Other assets 3,096 1,827 ---------- ---------- TOTAL ASSETS $ 557,206 $ 445,685 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 208,539 $ 160,108 Accrued expenses 50,314 35,037 Current maturities of long-term debt 2,142 2,142 Current portion of capital lease obligations 340 309 Deferred income taxes -- 174 Unrealized loss on interest rate swap 1,136 -- ---------- ---------- Total current liabilities 262,471 197,770 Revolving credit loan 55,000 58,000 Other long-term debt 2,859 5,001 Capital lease obligations 2,078 2,426 Unrealized loss on interest rate swap -- 1,843 Deferred income taxes 1,584 -- Other long-term liabilities 2,262 1,829 Stockholders' equity: Common stock 147 144 Additional paid-in capital 54,793 46,863 Retained earnings 176,625 132,901 Accumulated other comprehensive loss (613) (1,092) ---------- ----------- Total stockholders' equity 230,952 178,816 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 557,206 $ 445,685 ========== ==========
(1) The financial position as of March 30, 2002 has been presented on a pro forma basis, as if the change in accounting principle had occurred prior to the earliest date presented. CHANGE IN ACCOUNTING METHOD IMPLEMENTATION OF EITF 02-16: ACCOUNTING BY A CUSTOMER (INCLUDING A RESELLER) FOR CASH CONSIDERATION RECEIVED FROM A VENDOR In March 2003, the Emerging Issues Task Force reached a final consensus on Issue No. 02-16 ("EITF 02-16"), "Accounting by a Customer (including a Reseller) for Certain Consideration Received from a Vendor." This issue involves the accounting and income statement classification for consideration given by a vendor to a retailer in connection with the sale of the vendor's products or for the promotion of sales of the vendor's products. The EITF concluded that such consideration received from vendors should be reflected as a decrease in prices paid for inventory and recognized in cost of sales as the related inventory is sold, unless specific criteria are met qualifying the consideration for treatment as reimbursement of specific, identifiable incremental costs. Prior to adopting this pronouncement, the Company classified all vendor-provided funds as a reduction in selling, general and administrative expenses. Upon adoption at the beginning of fiscal 2003, funds received from vendors are recognized as a reduction of cost of sales as the related inventory is sold. Following is a summary of operations for the quarters ended March 30, 2002 as originally presented and as if the adoption of EITF 02-16 had occurred prior to 2002:
FIRST QUARTER ENDED -------------------------------------------------------------------- MARCH 30, 2002 MARCH 30, 2002 ------------------------------ ------------------------------ (AS REPORTED) (PRO FORMA) (UNAUDITED) % of % of Sales Sales ------------ ----------- Net sales $ 193,810 100.0% $ 193,810 100.0% Cost of merchandise sold 141,831 73.2 137,346 70.9 --------- ------------ --------- --------- Gross margin 51,979 26.8 56,464 29.1 Selling, general and administrative expenses 54,287 28.0 58,753 30.3 Depreciation and amortization 3,093 1.6 3,093 1.6 --------- ------------ --------- --------- Income (loss) from operations (5,401) (2.8) (5,382) (2.8) Interest expense, net 1,067 0.6 1,067 0.6 --------- ------------ --------- --------- Loss before income taxes (6,468) (3.4) (6,449) (3.4) Income tax benefit (2,458) (1.3) (2,451) (1.3) --------- ------------ --------- --------- Net loss $ (4,010) (2.1)% $ (3,998) (2.1)% ========= ============ ========= ========= Net loss per share - basic $ (0.22) $ (0.22) ========= ========== Net loss per share - assuming dilution $ (0.22) $ (0.22) ========= ========== Weighted average shares outstanding (000's): Basic 17,892 17,892 Diluted 19,078 19,078
Following is a summary of operations for each of the quarters in fiscal 2002 and 2001 as if the adoption of EITF 02-16 had occurred prior to 2001:
FIRST SECOND THIRD FOURTH 2002 - PRO FORMA QUARTER QUARTER QUARTER QUARTER TOTAL Net sales $ 193,810 $392,048 $296,215 $327,917 $1,209,990 Gross margin 56,464 119,566 94,885 102,980 373,895 Selling, general and administrative expenses 58,753 84,610 72,382 77,944 293,689 Income (loss) from operations (5,382) 30,499 17,946 20,686 63,749 Net income (loss) (3,998) 18,223 10,759 12,706 37,690 Net income (loss) per share - basic $ (0.22) $ 1.01 $ 0.59 $ 0.70 $ 2.09 Net income (loss) per share - assuming dilution $ (0.22) $ 0.93 $ 0.54 $ 0.64 $ 1.92 FIRST SECOND THIRD FOURTH 2002 - AS REPORTED QUARTER QUARTER QUARTER QUARTER TOTAL Net sales $ 193,810 $392,048 $296,215 $327,917 $1,209,990 Gross margin 51,979 108,391 84,019 97,798 342,187 Selling, general and administrative expenses 54,287 74,809 66,150 65,044 260,290 Income (loss) from operations (5,401) 29,125 13,312 28,404 65,440 Net income (loss) (4,010) 17,346 7,801 17,633 38,770 Net income (loss) per share - basic $ (0.22) $ 0.96 $ 0.43 $ 0.97 $ 2.15 Net income (loss) per share - assuming dilution $ (0.22) $ 0.88 $ 0.39 $ 0.88 $ 1.97 PERCENT TO SALES: FIRST SECOND THIRD FOURTH 2002 - PRO FORMA QUARTER QUARTER QUARTER QUARTER TOTAL Net sales ................................... 100.0% 100.0% 100.0% 100.0% 100.0% Gross margin ................................ 29.1% 30.5% 32.0% 31.4% 30.9% Selling, general and administrative expenses .............................. 30.3% 21.6% 24.4% 23.8% 24.3% Income (loss) from operations ............... (2.8)% 7.8% 6.1% 6.3% 5.3% Net income (loss) ........................... (2.1)% 4.6% 3.6% 3.9% 3.1% FIRST SECOND THIRD FOURTH 2002 - AS REPORTED QUARTER QUARTER QUARTER QUARTER TOTAL Net sales ................................... 100.0% 100.0% 100.0% 100.0% 100.0% Gross margin ................................ 26.8% 27.6% 28.4% 29.8% 28.3% Selling, general and administrative expenses .............................. 28.0% 19.1% 22.3% 19.8% 21.5% Income (loss) from operations ............... (2.8)% 7.4% 4.5% 8.7% 5.4% Net income (loss) ........................... (2.1)% 4.4% 2.6% 5.4% 3.2%
FIRST SECOND THIRD FOURTH 2001 - PRO FORMA QUARTER QUARTER QUARTER QUARTER TOTAL Net sales $162,517$ 267,490 $199,435 $220,357 $ 849,799 Gross margin 42,987 78,333 58,417 67,626 247,363 Selling, general and administrative expenses 44,368 51,930 48,981 52,050 197,329 Income (loss) from operations (4,088) 23,572 6,620 12,676 38,780 Net income (loss) (3,399) 15,716 3,461 9,954 25,732 Net income (loss) per share - basic $ (0.19) $ 0.89 $ 0.20 $ 0.56 $ 1.46 Net income (loss) per share - assuming dilution $ (0.19) $ 0.88 $ 0.19 $ 0.53 $ 1.42 FIRST SECOND THIRD FOURTH 2001 - AS REPORTED QUARTER QUARTER QUARTER QUARTER TOTAL Net sales $ 162,517 $267,490 $199,435 $ 220,357 $ 849,799 Gross margin 42,095 71,793 53,972 60,484 228,344 Selling, general and administrative expenses 40,953 45,507 46,223 45,560 178,243 Income (loss) from operations (1,565) 23,455 4,933 12,024 38,847 Net income (loss) (1,849) 15,644 2,425 9,554 25,774 Net income (loss) per share - basic $ (0.11) $ 0.89 $ 0.14 $ 0.54 $ 1.46 Net income (loss) per share - assuming dilution $ (0.11) $ 0.88 $ 0.13 $ 0.51 $ 1.43 PERCENT TO SALES: FIRST SECOND THIRD FOURTH 2001 - PRO FORMA QUARTER QUARTER QUARTER QUARTER TOTAL Net sales................................ 100.0% 100.0% 100.0% 100.0% 100.0% Gross margin............................. 26.5% 29.3% 29.3% 30.7% 29.1% Selling, general and administrative expenses........................... 27.3% 19.4% 24.6% 23.6% 23.2% Income (loss) from operations............ (2.5)% 8.8% 3.3% 5.8% 4.6% Net income (loss)........................ (2.1)% 5.9% 1.7% 4.5 3.0% FIRST SECOND THIRD FOURTH 2001 - AS REPORTED QUARTER QUARTER QUARTER QUARTER TOTAL Net sales................................ 100.0% 100.0% 100.0% 100.0% 100.0% Gross margin............................. 25.9% 26.8% 27.1% 27.4% 26.9% Selling, general and administrative expenses........................... 25.2% 17.0% 23.2% 20.7% 21.0% Income (loss) from operations............ (1.0)% 8.8% 2.5% 5.5% 4.6% Net income (loss) (1.1)% 5.8% 1.2% 4.3 3.0%