<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 March 29, 1997
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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
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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 April 26, 1997
- --------------------------------------------- -----------------------------
Common Stock, $.008 par value 8,719,119
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TRACTOR SUPPLY COMPANY
INDEX
<TABLE>
<CAPTION>
Page No.
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Part I. Financial Information:
Item 1. Financial Statements:
Balance Sheets -
March 29, 1997 and December 28, 1996 3
Statements of Income -
For the Fiscal Three Months Ended
March 29, 1997 and March 30, 1996 4
Statements of Cash Flows -
For the Fiscal Three Months Ended
March 29, 1997 and March 30, 1996 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 9
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRACTOR SUPPLY COMPANY
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 28,
1997 1996
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(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 7,933 $ 12,948
Accounts receivable, net........................................................ 6,869 4,930
Inventories..................................................................... 158,532 124,082
Prepaid expenses................................................................ 2,101 1,657
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Total current assets..................................................... 175,435 143,617
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Land.............................................................................. 10,035 10,178
Buildings and improvements........................................................ 42,048 40,114
Machinery and equipment........................................................... 19,058 18,117
----------- -----------
71,141 68,409
Accumulated depreciation and amortization......................................... (19,985) (18,883)
----------- -----------
Property and equipment, net..................................................... 51,156 49,526
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Deferred income taxes............................................................. 1,064 1,064
Other assets...................................................................... 1,395 1,375
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Total assets............................................................. $ 229,050 $ 195,582
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................ $ 75,716 $ 47,591
Accrued expenses................................................................ 16,177 15,973
Current maturities of long-term debt............................................ 665 665
Current portion of capital lease obligations.................................... 1,007 1,020
Income taxes currently payable.................................................. 699 2,897
Deferred income taxes........................................................... 9,517 9,517
----------- -----------
Total current liabilities................................................ 103,781 77,663
----------- -----------
Revolving credit loan............................................................. 20,654 12,000
Other long-term debt.............................................................. 5,754 5,914
Capital lease obligations......................................................... 3,022 3,252
Other long-term liabilities....................................................... 986 949
Excess of fair value of assets acquired over cost less accumulated
amortization of $2,560 and $2,515, respectively................................. 1,030 1,075
Redeemable preferred stock........................................................ 1,763 1,763
Stockholders' equity:
Common stock, 9,500,000 shares authorized; $.008 par value; 8,719,119
and 8,718,000 shares issued and outstanding in 1997 and 1996, respectively..... 70 70
Additional paid in capital...................................................... 41,705 41,685
Retained earnings............................................................... 50,285 51,211
----------- -----------
Total stockholders' equity.................................................... 92,060 92,966
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Total liabilities and stockholders' equity............................... $ 229,050 $ 195,582
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
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TRACTOR SUPPLY COMPANY
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FISCAL THREE MONTHS ENDED
---------------------------------
MARCH 29, MARCH 30,
1997 1996
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(UNAUDITED)
<S> <C> <C>
Net sales.............................................................. $ 96,409 $ 81,157
Cost of merchandise sold............................................... 72,256 60,595
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Gross margin...................................................... 24,153 20,562
Selling, general and administrative expenses........................... 24,089 20,763
Depreciation and amortization.......................................... 1,028 737
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Loss from operations.............................................. (964) (938)
Interest expense, net.................................................. 580 669
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Loss before income taxes.......................................... (1,544) (1,607)
Income tax benefit..................................................... (618) (643)
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Net loss.......................................................... $ (926) $ (964)
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Net loss per share................................................ $ (.11) $ (.12)
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</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 THREE MONTHS ENDED
---------------------------------
MARCH 29, MARCH 30,
1997 1996
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(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss ..................................................................... $ (926) $ (964)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense .................................... 1,028 737
Loss (gain) on sale of property and equipment ............................ (82) 72
Change in assets and liabilities:
Accounts receivable .................................................... (1,939) (158)
Inventories ............................................................ (34,450) (31,420)
Prepaid expenses ....................................................... (444) (253)
Accounts payable ....................................................... 28,125 31,391
Accrued expenses ....................................................... 204 (719)
Income taxes currently payable ......................................... (2,198) (2,095)
Other .................................................................. (1) (240)
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Net cash used in operating activities .......................................... (10,683) (3,649)
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Cash flows from investing activities:
Capital expenditures ....................................................... (2,742) (1,912)
Proceeds from sale of property and equipment ............................... 139 998
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Net cash used in investing activities .......................................... (2,603) (914)
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Cash flows from financing activities:
Net borrowings under revolving credit loan ................................. 8,654 6,393
Principal payments under capital lease obligations ......................... (243) (212)
Repayment of long-term debt ................................................ (160) (144)
Proceeds from issuance of common stock ..................................... 20 --
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Net cash provided by financing activities ...................................... 8,271 6,037
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Net increase (decrease) in cash and cash equivalents ........................... (5,015) 1,474
Cash and cash equivalents at beginning of period ............................... 12,948 5,087
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Cash and cash equivalents at end of period ..................................... $ 7,933 $ 6,561
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ..................................................................... $ 483 $ 625
Income taxes ................................................................. 1,580 1,452
</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 28, 1996. The
results of operations for the fiscal three 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 March 29, 1997
and its results of operations and its cash flows for the fiscal three month
periods ended March 29, 1997 and March 30, 1996.
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 $6,412,000 and $6,163,000 higher than reported at
March 29, 1997 and December 28, 1996, 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 Loss Per Share
Net loss per share for the Company for the fiscal three month periods ended
March 29, 1997 and March 30, 1996 is calculated based on the weighted average
number of shares of common stock outstanding for the fiscal three month periods
of 8,719,119 and 8,718,000, respectively, after giving effect to undeclared
preferred stock dividends of $35,259 and $70,500, 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis describes certain factors affecting
Tractor Supply Company's (the "Company") results of operations for the fiscal
three months ended March 29, 1997 and March 30, 1996, and significant
developments affecting financial condition since the end of the fiscal year,
December 28, 1996, and should be read in conjunction with the Company's annual
report on Form 10-K for the fiscal year ended December 28, 1996. The following
discussion and analysis also contains certain historical and forward-looking
information. The forward-looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 ("the Act").
All statements, other than statements of historical facts, which address
activities, events or developments that the Company expects or anticipates will
or may occur in the future, including such things as future capital expenditures
(including the amount and nature thereof), business strategy, expansion and
growth of the Company's business operations and other such matters are
forward-looking statements. To take advantage of the safe harbor provided by the
Act, the Company is identifying certain factors that could cause actual results
to differ materially from those expressed in any forward-looking statements,
whether oral or written, made by or on behalf of the Company.
All phases of the Company's operations are subject to influences outside its
control. Any one, or a combination, of these factors 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 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 and other capital market conditions and the seasonality
of the Company's business. Forward-looking statements made by or on behalf of
the Company are based on a 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.
RESULTS OF OPERATIONS
The Fiscal Three Months (First Quarter) Ended March 29, 1997 and March 30, 1996
Net sales increased 18.8% to $96.4 million for the first quarter of fiscal 1997
from $81.2 million for the first quarter of fiscal 1996. This increase was
primarily attributable to new and relocated stores, as comparable store sales
(excluding relocations, using all stores open at least one year) increased 6.1%
for the first quarter of fiscal 1997. The Company opened eleven new retail farm
stores during the first quarter of fiscal 1997. The Company opened thirteen new
retail farm stores and relocated three stores during the first quarter of fiscal
1996. Comparable store sales for the first quarter of fiscal 1997 benefited,
particularly in late March, from favorable spring weather conditions that moved
into several regions of the country in which the Company operates (comparable
store sales increased in excess of 30% for the last twelve days of fiscal
March). The Company continued to experience favorable comparable store sales
increases during the first twenty days of fiscal April (comparable store sales
increased in excess of 6% despite the brief period of unseasonably cold weather
in mid-April). Additionally, early indications regarding two of the Company's
major initiatives in 1997 to rejuvenate the merchandise mix (a completely
revamped equine product line and a significantly enhanced power equipment
product assortment) are favorable. Finally, sales from the Company's new stores
continue to outperform the existing store base.
The gross margin rate decreased .2 percentage points to 25.1% of sales in the
first quarter of fiscal 1997 from 25.3% of sales in the first quarter of fiscal
1996, primarily due to the adverse mix effect of increased sales of lower margin
spring seasonal merchandise as well as from higher shrinkage expense. Despite
the slight erosion in the first quarter's gross margin rate, however, the
Company believes that its gross margin rate for the fiscal year will be at or
slightly above last year's level.
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As a percent of sales, selling, general and administrative expenses decreased .6
percentage points to 25.0% of sales in the first quarter of fiscal 1997 from
25.6% of sales in the first quarter of fiscal 1996 primarily due to the
Company's on-going efforts to control increases in operating expenses, the
timing of costs attributable to new and relocated stores (the Company opened two
fewer new stores and relocated three fewer existing stores than during the first
quarter of fiscal 1996), and the efficiencies associated with increased sales in
the period without a corresponding increase in overhead costs. Selling, general
and administrative expenses increased 16.0% to $24.1 million in the first
quarter of fiscal 1997 from $20.8 million in the first quarter of fiscal 1996.
The increased dollar amount was primarily attributable to costs associated with
new store openings (new stores have considerably higher occupancy costs,
primarily rent, than the existing store base). Depreciation and amortization
expense of $1.0 million for the first quarter of fiscal 1997 was up 39.5% over
the first quarter of fiscal 1996, also mainly due to costs associated with new
and relocated stores. Net interest expense decreased 13.3% to $.6 million in the
first quarter of fiscal 1997 from $.7 million in the first quarter of fiscal
1996 primarily due to less borrowings being required to support the new store
growth.
The Company's effective tax rate remained at 40.0% in the first quarter of
fiscal 1997, consistent with the first quarter of fiscal 1996.
As a result of the foregoing factors, net loss decreased $.1 million to a $.9
million net loss in the first quarter of fiscal 1997 from a net loss of $1.0
million in the first quarter of fiscal 1996. As a percent of sales, net loss
decreased .2 percentage points to (1.0)% of sales in the first quarter of fiscal
1997 from (1.2)% of sales in the first quarter of fiscal 1996.
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 (the
"Credit Agreement") and short-term trade credit.
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 March 29, 1997, the Company's inventories had increased
$34.4 million to $158.5 million from $124.1 million at December 28, 1996. This
increase resulted primarily from additional inventory for new stores as well as
planned inventory increases in seasonal product lines. Short-term trade credit,
which represents a source of financing for inventory, increased $28.1 million to
$75.7 million at March 29, 1997 from $47.6 million at December 28, 1996. 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 March 29, 1997, the Company had working capital of $71.7 million, which
represented a $5.7 million increase from December 28, 1996. This increase
resulted primarily from an increase in inventories without a corresponding
increase in accounts payable as well as from an increase in trade accounts
receivable (mainly due to sales increases) and a decrease in income taxes
payable (mainly due to timing of payments), partially offset by a decrease in
cash and cash equivalents.
Operations used net cash of $10.7 million and $3.6 million in the first quarter
of fiscal 1997 and 1996, respectively. The increase in net cash used in the
first quarter of fiscal 1997 resulted primarily from inventories increasing at a
faster rate than accounts payable as compared to the first quarter of fiscal
1996, as well as from an increase in trade accounts receivable during the first
quarter of fiscal 1997, partially offset by the timing of payments for accrued
expenses.
Cash used in investing activities of $2.6 million for the first quarter of
fiscal 1997 represented a $1.7 million increase over cash used in the first
quarter of fiscal 1996 of $.9 million. The increase in cash used for capital
expenditures during the first quarter of fiscal 1997 compared to the prior year
(eleven new stores were opened during the first quarter of fiscal 1997 compared
with thirteen new store openings and three relocations during the first quarter
of fiscal 1996) was further impacted by decreased proceeds from the sale of
property and equipment, principally excess vacant properties, during the first
quarter of fiscal 1997 compared to the first quarter of fiscal 1996.
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Financing activities in the first quarter of fiscal 1997 provided $8.3 million
in cash which represented a $2.3 million increase in net cash provided over the
$6.0 million in net cash provided in the first quarter of fiscal 1996. This
increase in net cash provided resulted primarily from net short-term borrowings
of approximately $8.7 million during the first quarter of fiscal 1997 compared
to net borrowings of approximately $6.4 million in the first quarter of fiscal
1996.
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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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 FINANCIAL DATA SCHEDULE (FOR 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 March 29, 1997.
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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: May 2, 1997 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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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TRACTOR SUPPLY CO. FOR THE 3 MONTHS ENDED MARCH 29,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-29-1997
<CASH> 7,933
<SECURITIES> 0
<RECEIVABLES> 6,919
<ALLOWANCES> 0
<INVENTORY> 158,532
<CURRENT-ASSETS> 175,435
<PP&E> 71,141
<DEPRECIATION> 19,985
<TOTAL-ASSETS> 229,050
<CURRENT-LIABILITIES> 103,781
<BONDS> 29,430
1,763
0
<COMMON> 70
<OTHER-SE> 91,990
<TOTAL-LIABILITY-AND-EQUITY> 229,050
<SALES> 96,409
<TOTAL-REVENUES> 96,409
<CGS> 72,256
<TOTAL-COSTS> 72,256
<OTHER-EXPENSES> 25,117
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 580
<INCOME-PRETAX> (1,544)
<INCOME-TAX> (618)
<INCOME-CONTINUING> (926)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (926)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
