<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1996
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-23314
TRACTOR SUPPLY COMPANY
- - -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3139732
- - ---------------------------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
320 Plus Park Boulevard, Nashville, Tennessee 37217
- - --------------------------------------------------- ------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (615) 366-4600
-------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at July 27, 1996
- - ------------------------------------- --------------------------------
Common Stock, $.008 par value 8,718,000
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TRACTOR SUPPLY COMPANY
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I. Financial Information:
Item 1. Financial Statements:
Balance Sheets -
June 29, 1996 and December 30, 1995 3
Statements of Income -
For the Fiscal Three and Six Months Ended
June 29, 1996 and July 1, 1995 4
Statements of Cash Flows -
For the Fiscal Six Months Ended
June 29, 1996 and July 1, 1995 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 8
Part II. Other Information:
Item 4. Submission of Matters to a Vote of Security-Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRACTOR SUPPLY COMPANY
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 29, DECEMBER 30,
1996 1995
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................................... $ 15,521 $ 5,087
Accounts receivable, net ........................................ 4,314 3,730
Inventories ..................................................... 130,538 112,700
Prepaid expenses ................................................ 3,870 5,017
-------- --------
Total current assets..................................... 154,243 126,534
-------- --------
Land ............................................................. 9,132 10,975
Buildings and improvements ....................................... 38,955 36,481
Machinery and equipment .......................................... 15,222 13,377
-------- --------
63,309 60,833
Accumulated depreciation and amortization ........................ (17,203) (15,763)
-------- --------
Property and equipment, net ..................................... 46,106 45,070
-------- --------
Deferred income taxes ............................................ 1,526 1,526
Other assets ..................................................... 1,074 999
-------- --------
Total assets............................................. $202,949 $174,129
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................ $ 64,748 $ 36,525
Accrued expenses ................................................ 13,183 11,637
Current maturities of long-term debt ............................ 600 600
Current portion of capital lease obligations .................... 966 966
Income taxes currently payable .................................. 2,587 2,716
Deferred income taxes ........................................... 10,240 10,240
-------- --------
Total current liabilities................................ 92,324 62,684
-------- --------
Revolving credit loan ............................................ 10,000 15,093
Other long-term debt ............................................. 6,287 6,579
Capital lease obligations ........................................ 3,763 4,186
Other long-term liabilities ...................................... 942 856
Excess of fair value of assets acquired over cost less accumulated
amortization of $2,425 and $2,335, respectively ................. 1,165 1,255
Redeemable preferred stock ....................................... 1,763 3,525
Stockholders' equity:
Common stock, 9,500,000 shares authorized; $.008 par value;
8,718,000 shares issued and outstanding in 1996 and 1995 ....... 70 70
Additional paid in capital ...................................... 41,685 41,685
Retained earnings ............................................... 44,950 38,196
-------- --------
Total stockholders' equity ..................................... 86,705 79,951
-------- --------
Total liabilities and stockholders' equity .............. $202,949 $174,129
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE> 4
TRACTOR SUPPLY COMPANY
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- ------------------
JUNE 29, JULY 1, JUNE 29, JULY 1,
1996 1995 1996 1995
--------- --------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales ..................................... $146,717 $123,618 $227,874 $195,118
Cost of merchandise sold ...................... 108,920 92,087 169,515 145,781
-------- -------- -------- --------
Gross margin ................................ 37,797 31,531 58,359 49,337
Selling, general and administrative expenses .. 23,247 19,044 44,010 36,341
Depreciation and amortization ................. 852 604 1,589 1,168
-------- -------- -------- --------
Income from operations ...................... 13,698 11,883 12,760 11,828
Interest expense, net ......................... 566 250 1,235 605
-------- -------- -------- --------
Income before income taxes .................. 13,132 11,633 11,525 11,223
Income tax provision .......................... 5,264 4,656 4,621 4,492
-------- -------- -------- --------
Net income .................................. $ 7,868 $ 6,977 $ 6,904 $ 6,731
======== -------- ======== ========
Net income per share ........................ $ .90 $ .79 $ .78 $ .75
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
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TRACTOR SUPPLY COMPANY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL SIX MONTHS ENDED
----------------------------------
JUNE 29, JULY 1,
1996 1995
---------- -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................... $ 6,904 $ 6,731
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization expense .................. 1,589 1,168
Gain on sale of property and equipment ................. (181) (206)
Change in assets and liabilities:
Accounts receivable ................................... (584) (1,507)
Inventories ........................................... (17,838) (22,329)
Prepaid expenses ...................................... 1,147 (1,709)
Accounts payable ...................................... 28,223 18,265
Accrued expenses ...................................... 1,546 (1,124)
Income taxes currently payable ........................ (129) (57)
Other ................................................. (304) 508
------- --------
Net cash provided by (used in) operating activities ....... 20,373 (260)
------- --------
Cash flows from investing activities:
Capital expenditures .................................... (3,533) (3,586)
Proceeds from sale of property and equipment ............ 1,314 372
------- --------
Net cash used in investing activities ..................... (2,219) (3,214)
------- --------
Cash flows from financing activities:
Net borrowings (repayments) under revolving credit loan . (5,093) --
Principal payments under capital lease obligations ...... (423) (403)
Repayment of long-term debt ............................. (292) (263)
Payment of preferred stock dividends .................... (150) (247)
Repurchase of preferred stock ........................... (1,762) (2,350)
------- --------
Net cash used in financing activities ..................... (7,720) (3,263)
------- --------
Net increase (decrease) in cash and cash equivalents ...... 10,434 (6,737)
Cash and cash equivalents at beginning of period .......... 5,087 13,999
------- --------
Cash and cash equivalents at end of period ................ $ 15,521 $ 7,262
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ................................................. $ 1,346 $ 726
Income taxes ............................................. 4,748 4,479
</TABLE>
The accompanying notes are an integral part of this statement.
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TRACTOR SUPPLY COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
The accompanying interim financial statements have been prepared without
audit, and certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, although the Company believes that
the disclosures herein are adequate to make the information presented not
misleading. These statements should be read in conjunction with the Company's
annual report on Form 10-K for the fiscal year ended December 30, 1995. The
results of operations for the fiscal three and six month periods are not
necessarily indicative of results for the full fiscal year.
In the opinion of management, the accompanying interim financial
statements contain all adjustments (consisting only of normal recurring
accruals) necessary for a fair statement of the Company's financial position as
of June 29, 1996 and its results of operations for the fiscal three and six
month periods ended June 29, 1996 and July 1, 1995 and its cash flows for the
fiscal six month periods ended June 29, 1996 and July 1, 1995.
Inventories
The accompanying unaudited financial statements have been prepared without
full physical inventories. The value of the Company's inventories was
determined using the lower of last-in, first-out (LIFO) cost or market. If the
first-in, first-out (FIFO) method of accounting for inventory had been used,
inventories would have been approximately $6,202,000 and $5,593,000 higher than
reported at June 29, 1996 and December 30, 1995, respectively. Since LIFO
costs can only be determined at the end of each fiscal year when inflation
rates and inventory levels are finalized, estimates of LIFO inventory costs are
used for interim financial reporting.
Net Income Per Share
Net income per share for the Company for the fiscal three and six month
periods ended June 29, 1996 and July 1, 1995 is calculated based on the
weighted average number of shares of common stock outstanding of 8,718,000 for
each of the fiscal three and six month periods, after giving effect to
preferred stock dividends of $55,722 and $126,222 for the fiscal three and six
month periods ended June 29, 1996, respectively, and $98,000 and $216,000 for
the fiscal three and six month periods ended July 1, 1995, respectively.
NOTE 2 - SEASONALITY:
The Company's business is highly seasonal, with a significant portion of
its sales and a majority of its income generated in the second fiscal quarter.
The Company typically operates at a loss in the first fiscal quarter.
NOTE 3 - PREFERRED STOCK REPURCHASE:
On May 24, 1996, the Company repurchased 1,762 shares of the Series B
Preferred Stock at a total repurchase price of approximately $1,771,000
(including accrued dividends totaling approximately $9,000).
NOTE 4 - SUBSEQUENT EVENT:
In July 1996, the Company entered into an amendment (the "First
Amendment") to its revolving credit agreement with The First National Bank of
Boston, as agent and for itself, and First American National Bank (the "Credit
Agreement") whereby the Company (i) increased the maximum total commitments
available under the Credit Agreement from $30 million to $45 million and (ii)
extended the expiration date of the Credit Agreement from August 31, 1997 to
August 31, 1999 (the date upon which any remaining borrowings must be repaid).
There were no changes to any of the other material terms and conditions of the
Credit Agreement as a result of the First Amendment.
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<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following describes material changes in results of operations for the
fiscal three and six months ended June 29, 1996 and July 1, 1995, and
significant developments affecting the financial condition of the Company since
the end of the fiscal year, December 30, 1995, and should be read in conjunction
with the Company's annual report on Form 10-K for the fiscal year ended December
30, 1995.
RESULTS OF OPERATIONS
The Fiscal Three Months (Second Quarter) and Six Months Ended June 29, 1996 and
July 1, 1995
Net sales increased 18.7% to $146.7 million for the second quarter of
fiscal 1996 from $123.6 million for the second quarter of fiscal 1995. Net
sales rose 16.8% to $227.9 million for the first six months of fiscal 1996 from
$195.1 million for the first six months of fiscal 1995. The sales increases
resulted primarily from new and relocated stores as comparable store sales
(excluding relocations, using all stores open at least one year) increased 2.6%
for the second quarter of fiscal 1996 and .9% for the first six months of fiscal
1996 over the corresponding periods in the prior fiscal year. The Company
opened 19 new retail farm stores (six in the second quarter of fiscal 1996) and
relocated three stores during the first six months of fiscal 1996. The Company
opened 12 new retail farm stores (six in the second quarter of fiscal 1995) and
relocated one store during the first six months of fiscal 1995. Comparable
store sales for the second quarter of fiscal 1996 were adversely impacted by
unfavorable weather conditions, primarily the late spring weather throughout
most of the country, which unfavorably impacted sales in the month of April, and
the drought conditions in Texas, which unfavorably impacted sales throughout the
quarter. At June 29, 1996, the Company operated 203 retail farm stores (in 24
states) versus 177 stores (in 22 states) at July 1, 1995.
The gross margin rate increased .3 percentage points to 25.8% of sales for
the second quarter of fiscal 1996 and .3 percentage points to 25.6% of sales for
the first six months of fiscal 1996 over the corresponding periods in the prior
fiscal year. The gross margin rate increase resulted primarily from the
positive mix effect of sales of lower margin spring seasonal merchandise
representing a smaller portion of total sales than in the corresponding periods
a year ago.
As a percentage of sales, selling, general and administrative ("SG&A")
expenses increased .4 percentage points to 15.8% of sales for the second
quarter of fiscal 1996 and increased .7 percentage points to 19.3% of sales for
the first six months of fiscal 1996 primarily due to costs associated with new
and relocated stores as well as from the leverage loss resulting from the soft
comparable store sales performance. On an absolute basis, SG&A expenses
increased 22.1% to $23.2 million for the second quarter of fiscal 1996 and
increased 21.1% to $44.0 million for the first six months of fiscal 1996. The
increased dollar amounts were primarily attributable to costs associated with
new store openings and relocations (new and relocated stores have considerably
higher occupancy costs, primarily rent, than existing stores). Depreciation
and amortization expense increased 41.1% and 36.0% over the prior year for the
second quarter and the first six months of fiscal 1996, respectively, due
mainly to costs associated with new and relocated stores. Net interest expense
increased 126.4% to $.6 million in the second quarter of fiscal 1996 and
increased 104.1% to $1.2 million in the first six months of fiscal 1996
primarily due to additional borrowings required to support the new store
growth.
The Company's effective tax rate increased slightly to 40.1% for the
second quarter and first six months of fiscal 1996, compared to 40.0% for the
second quarter and first six months of fiscal 1995.
As a result of the foregoing factors, net income for the second quarter of
fiscal 1996 increased 12.8% to $7.9 million from $7.0 million for the second
quarter of fiscal 1995. Net income for the first six months of fiscal 1996
increased 2.6% to $6.9 million from $6.7 million for the first six months of
fiscal 1995. As a percentage of sales, net income decreased .2 percentage
points to 5.4% of sales for the second quarter of fiscal 1996 from 5.6% of
sales for the second quarter of fiscal 1995 and decreased .4 percentage points
to 3.0% of sales for the first six months of fiscal 1996 from 3.4% of sales for
the first six months of fiscal 1995.
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LIQUIDITY AND CAPITAL RESOURCES
In addition to normal operating expenses, the Company's primary ongoing
cash requirements are those necessary for the Company's expansion, remodeling
and relocation programs, including inventory purchases and capital expenditures.
The Company's primary ongoing sources of liquidity are funds provided from
operations, commitments available under its revolving credit agreement and
short-term trade credit.
In July 1996, the Company entered into an amendment (the "First Amendment")
to its revolving credit agreement with The First National Bank of Boston, as
agent and for itself, and First American National Bank (the "Credit Agreement")
whereby the Company (i) increased the maximum total commitments available under
the Credit Agreement from $30 million to $45 million and (ii) extended the
expiration date of the Credit Agreement from August 31, 1997 to August 31, 1999
(the date upon which any remaining borrowings must be repaid). There were no
changes to any of the other material terms and conditions of the Credit
Agreement as a result of the First Amendment.
The Company's inventory and accounts payable levels typically build in the
first and again in the third fiscal quarters in anticipation of the spring and
fall selling seasons. At June 29, 1996, the Company's inventories had increased
$17.8 million to $130.5 million from $112.7 million at December 30, 1995. This
increase resulted primarily from additional inventory for new stores. Short-term
trade credit, which represents a source of financing for inventory, increased
$28.2 million to $64.7 million at June 29, 1996 from $36.5 million at December
30, 1995. Trade credit arises from the Company's vendors granting extended
payment terms for inventory purchases. Payment terms vary from 30 days to 180
days depending on the inventory product.
At June 29, 1996, the Company had working capital of $61.9 million, which
represented a $2.0 million decrease from December 30, 1995. This decrease
resulted primarily from accounts payable increasing at a faster rate than
inventories as well as from an increase in accrued expenses (mainly due to
timing of payments) and a decrease in prepaid expenses (mainly due to new and
relocated stores), largely offset by an increase in cash and cash equivalents
and an increase in accounts receivable (mainly due to sales increases).
Operations provided net cash of $20.4 million and used net cash of $.3
million in the first six months of fiscal 1996 and 1995, respectively. The
increase in net cash provided in the first six months of fiscal 1996 resulted
primarily from accounts payable increasing at a faster rate than inventories in
the first six months of fiscal 1996 compared to inventories increasing at a
faster rate than accounts payable in the first six months of fiscal 1995, as
well as from the timing of certain prepaid expenses and accrued expenses
compared to the prior year.
Cash used in investing activities of $2.2 million for the first six months
of fiscal 1996 represented a $1.0 million decrease from cash used in the first
six months of fiscal 1995 of $3.2 million. The decrease in net cash used in
investing activities was primarily due to increased proceeds from the sale of
property and equipment, principally excess vacant properties, during the first
six months of fiscal 1996 compared to fiscal 1995.
Financing activities in the first six months of fiscal 1996 used $7.7
million in cash which represented a $4.5 million increase in net cash used over
the $3.3 million in net cash used in the first six months of fiscal 1995. This
increase in net cash used resulted primarily from net repayments of borrowings
under the Credit Agreement totalling approximately $5.1 million during the first
six months of fiscal 1996 compared to no net repayments in the first six months
of fiscal 1995, partially offset by the repurchase of fewer shares of preferred
stock in the first six months of fiscal 1996 compared to the first six months of
fiscal 1995.
The Company believes that its cash flow from operations, borrowings
available under its Credit Agreement and short-term trade credit will be
sufficient to fund the Company's operations and its growth and expansion plans
for the next several years.
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<PAGE> 9
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) The Company's Annual Meeting of Stockholders was held on April 25,
1996 at the Company's corporate headquarters in Nashville, Tennessee.
(b) The stockholders elected for three-year terms all Class II
directors nominated for election (Thomas J. Hennesy, III, Joseph D.
Maxwell and Joseph M. Rogers) as set forth in the proxy statement dated
March 22, 1996. The following table sets forth certain information
concerning each other director of the Company whose term of office as a
director continued after the meeting:
<TABLE>
<CAPTION>
Current Term as
Name Director Expires
---- ----------------
<S> <C>
Joseph H. Scarlett, Jr. 1997
Gerald E. Newkirk 1997
S. P. Braud 1997
Thomas O. Flood 1998
Douglas J. Tigert 1998
</TABLE>
(c) (1) The stockholders elected three Class II directors for
three-year terms ending at the 1999 Annual Meeting of Stockholders.
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Thomas J. Hennesy, III 7,788,977 32,710
Joseph D. Maxwell 7,788,977 32,710
Joseph M. Rogers 7,787,936 33,751
</TABLE>
(c) (2) The stockholders ratified the reappointment of Price
Waterhouse LLP as independent certified public accountants of the
Company for the fiscal year ending December 28, 1996.
<TABLE>
<CAPTION>
For Against Abstain Non-Vote
--- ------- ------- --------
<S> <C> <C> <C>
7,813,305 2,000 6,382 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule (SEC Use Only)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during the
fiscal quarter ended June 29, 1996.
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SIGNATURE
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 thereunto duly authorized.
TRACTOR SUPPLY COMPANY
Date: August 2, 1996 By: /s/ Thomas O. Flood
-------------------------------------
Thomas O. Flood
Senior Vice President -
Administration and
Finance, Treasurer and
Chief Financial Officer
(Duly Authorized Officer &
Principal Financial Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TRACTOR SUPPLY COMPANY FOR THE 6 MONTHS ENDED
JUNE 29, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-29-1995
<PERIOD-END> JUN-29-1996
<CASH> 15,521
<SECURITIES> 0
<RECEIVABLES> 4,364
<ALLOWANCES> 0
<INVENTORY> 130,538
<CURRENT-ASSETS> 154,243
<PP&E> 63,309
<DEPRECIATION> 17,203
<TOTAL-ASSETS> 202,949
<CURRENT-LIABILITIES> 92,324
<BONDS> 20,050
1,763
0
<COMMON> 70
<OTHER-SE> 86,635
<TOTAL-LIABILITY-AND-EQUITY> 202,949
<SALES> 227,874
<TOTAL-REVENUES> 227,874
<CGS> 169,515
<TOTAL-COSTS> 169,515
<OTHER-EXPENSES> 45,599
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,235
<INCOME-PRETAX> 11,525
<INCOME-TAX> 4,621
<INCOME-CONTINUING> 6,904
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,904
<EPS-PRIMARY> .78
<EPS-DILUTED> .78
</TABLE>
