TSCO - Tractor Supply Company (TSCO)

[jmhollen]

Tractor Supply Company Reports Record Third Quarter Sales and Earnings ~ Same-Store Sales Increase 7.7% ~ ~ Ahead of Expectations, Net Income More than Triples to $7.8 million and Earnings Per Share Increase 200% to $0.39

NASHVILLE, Tenn., Oct 14, 2002 /PRNewswire-FirstCall via COMTEX/ -- Tractor
Supply Company (Nasdaq: TSCO), the largest retail farm and ranch store chain in
the United States, today announced financial results for its third quarter and
nine months ended September 28, 2002.

For the third quarter, net sales increased 48.5% to a record $296.2 million
compared with $199.4 million last year. Same-store sales for the quarter
increased 7.7%, driven mainly by new merchandising programs, special promotions,
and improved execution. Primarily as a result of greater leverage from
same-store sales performance, selling, general and administrative expenses
decreased 90 basis points to 22.3% of sales. Gross margin increased 130 basis
points to 28.4%, reflecting improved product costs and changes in the sales mix.

Net income for the third quarter increased 222% to $7.8 million compared with
$2.4 million last year. Earnings per diluted share increased 200% to $0.39
compared with $0.13 last year. References to per share amounts reflect a
two-for-one stock split that was effective on August 2, 2002.

For the first nine months of the year, net sales increased 40.1% to a record
$882.1 million compared with $629.4 million last year. Same-store sales for the
nine-month period increased 10.7%. Gross margin improved 100 basis points to
27.7% from 26.7% in the prior year period. Net income for the first nine months,
including $6.7 million in after-tax expenses associated with pre-opening and
transition costs related to the acquisition of certain assets from Quality
Stores, Inc., increased 30.3% to $21.1 million compared with $16.2 million last
year. Earnings per diluted share increased 18.7% to $1.08 compared with $0.91
last year.

Not included in the fiscal 2001 nine-month results presented above is a one-time
gain of approximately $2.1 million, or $0.12 per diluted share, relating to life
insurance proceeds.

During the third quarter, the Company opened a total of five new stores compared
to four in the prior year period. The Company also relocated nine stores.
Year-to-date, the Company opened a total of 111 new stores and relocated 12,
compared with 15 new store openings last year. As previously announced, 87 of
the new stores as well as 9 store relocations resulted from the acquisition of
certain assets from Quality Stores, Inc.

The transition of these locations to Tractor Supply Company stores is now
complete. For the upcoming fourth quarter, the Company is planning two
additional new store openings and four relocations.

Commenting on the Company's performance, Joe Scarlett, Chairman and Chief
Executive Officer stated, "The strong third quarter results, which exceeded both
our expectations and analysts' estimates, demonstrate the continued strength and
success of our business model. Despite difficult conditions, sales at both new
and existing stores have been above plan, reflecting our steady market share
gains as well as the results of innovative merchandising strategies and special
promotions.

"In addition to our ability to drive the top line, we continue to manage the
business efficiently and are executing operating improvements across the board.
For instance, we are carefully controlling our cost structure and have achieved
gross margin expansion as planned. In addition, our average inventory levels are
healthy, with a 2.3% decrease in average inventory per store compared to last
year despite increased levels of import goods. Finally, our vendor partners
continue to provide strong support, helping us sustain an excellent in-stock
position across the entire chain."

With respect to the remainder of the year, although there is a degree of caution
due to current economic conditions and the lack of cold weather so far this
fall, the Company remains optimistic about its anticipated performance. For the
fourth quarter, the Company expects net sales to range between approximately
$310 million and $320 million and net income to range between approximately
$12.9 million and $13.3 million. For the full year, in line with previously
provided top line guidance, the Company expects net sales to range between
approximately $1,192 million and $1,202 million, an increase of 40% to 41%. Net
income is now expected to range between approximately $34.0 million and $34.4
million, a 32% to 34% improvement. These estimates place expected full year
diluted earnings per share between $1.71 and $1.73.

Looking ahead to 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. Current
plans call for opening approximately 25 stores next year, with continued
significant investment in the refurbishment and relocations of existing stores.
Despite sustained economic uncertainty, the Company currently remains
comfortable with the previously provided guidance for next year. The Company
continues to expect annual sales of $1.35 billion to $1.38 billion and
preliminary profit expectations place diluted earnings per share in the $2.00 to
$2.13 range.

Mr. Scarlett concluded, "Fiscal 2002 has been an important transition year for
the Company and, as we move towards its conclusion, our entire team remains
focused on even further enhancing our position as a premiere retail destination.
Although the overall economic environment remains clouded, our optimism is based
on continuing improvements in all aspects of our business model and the "basic
needs" components of our product offering. Additionally, we see significant
opportunity in new and existing markets to grow at a balanced and responsible
pace. We will continue to manage 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 continued solid financial
performance."

At September 28, 2002, Tractor Supply Company operated 431 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 to 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 9 am Eastern Time on
October 15, 2002 to further discuss the quarterly results. The call will be
simultaneously broadcast over the Internet on the Company's homepage at
http://www.myTSCstore.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 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.

Results of Operations
(in thousands, except per share amounts)
THIRD QUARTER ENDED
Sept. 28, 2002 Sept. 29, 2001
(Unaudited)
% of % of
Sales Sales
Net sales $296,215 100.0% $199,435 100.0%
Cost of merchandise
Sold 212,196 71.6 145,463 72.9
Gross margin 84,019 28.4 53,972 27.1
Selling, general and
administrative
expenses 66,150 22.3 46,223 23.2
Depreciation and
amortization 4,557 1.6 2,816 1.4
Income from
operations 13,312 4.5 4,933 2.5
Interest expense, net 1,257 .4 1,021 .5
Unusual item: life
insurance proceeds -- -- -- --
Income before income
taxes 12,055 4.1 3,912 2.0
Income tax provision 4,254 1.4 1,487 .8
Net income $7,801 2.7% $2,425 1.2%
Net income per share --
basic $0.43 $0.14
Net income per share --
assuming dilution $0.39 $0.13
Weighted average shares
outstanding (000's) 19,774 18,102
NINE MONTHS ENDED
Sept. 28, 2002 Sept. 29, 2001
(Unaudited)
% of % of
Sales Sales
Net sales $882,073 100.0% $629,442 100.0%
Cost of merchandise
sold 637,684 72.3 461,582 73.3
Gross margin 244,389 27.7 167,860 26.7
Selling, general and
administrative
expenses 195,246 22.1 132,683 21.1
Depreciation and
amortization 12,107 1.4 8,354 1.3
Income from
operations 37,036 4.2 26,823 4.3
Interest expense, net 3,472 .4 3,603 .6
Unusual item: life
insurance proceeds -- -- 2,173 .3
Income before income
taxes 33,564 3.8 25,393 4.0
Income tax provision 12,427 1.4 9,173 1.4
Net income 21,137 2.4% $16,220 2.6%
Net income per share --
basic $1.17 $0.92
Net income per share --
assuming dilution $1.08 $0.91
Weighted average shares
outstanding (000's) 19,551 17,851
Balance Sheets
(in thousands)
September 28, September 29,
2002 2001
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $14,256 $14,069
Accounts receivable, net 4,394 4,500
Inventories 333,388 253,238
Prepaid expenses and other current assets 9,096 9,815
Assets held for sale 4,261 --
Total current assets 365,395 281,622
Property and equipment, net 122,978 81,265
Other assets 5,407 2,720
TOTAL ASSETS $493,780 $365,607
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $133,838 $95,865
Accrued expenses 52,738 33,181
Current maturities of long-term debt 2,142 2,142
Current portion of capital lease obligations 309 279
Income taxes currently payable 9,483 8,522
Deferred income taxes 174 4,212
Total current liabilities 198,684 144,201
Revolving credit loan 76,965 39,000
Other long-term debt 3,930 6,072
Capital lease obligations 2,271 2,603
Other long-term liabilities 3,975 4,726
Stockholders' equity:
Common stock 145 140
Additional paid-in capital 50,095 43,257
Retained earnings 158,868 128,177
Accumulated other comprehensive loss (1,153) (2,569)
Total stockholders' equity 207,955 169,005
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $493,780 $365,607

SOURCE Tractor Supply Company

CONTACT: Calvin B. Massmann, Chief Financial Officer, Tractor Supply
Company, [phone]; or Investors - Cara O'Brien, Priya Akhoury, or Athan
Dounis, or Press - Laura Novak or Stephanie Sampiere, all of FD Morgen-Walke,
[phone], for Tractor Supply Company
URL: http://www.myTSCstore.com