~ 2008 Net Sales Increase 11.3% and Same-Store Sales Increase 1.4% ~
~ Company To Restate First Three Quarters of 2008 Due To LIFO Provision Calculation ~
~ Issues Outlook For 2009 Revenue and EPS Growth ~
~ To Hold Conference Call At
Fiscal Year 2008 and 2009 Outlook
The Company estimates fourth quarter 2008 net sales to be
The Company anticipates net sales for fiscal 2009 will be approximately
"We believe our operating performance represented one of the strongest periods ever for the Company, especially in light of the very difficult consumer environment,"
The Company's preliminary results are unaudited and remain subject to the completion of the Company's year-end closing, audit and reporting processes. The Company anticipates completing its year-end close on normal course and plans to report financial results on
LIFO Provision Details
The Company uses the LIFO (Last-In, First-Out) method to value its year-end inventory for financial reporting and tax purposes and, as a result, receives a substantial tax deferral benefit. The actual LIFO valuation is dependent upon end-of-year inventories, specifically the quantity and mix of product, and the inflation rates for the various product categories. The Company records an estimated non-cash LIFO provision each quarter and adjusts the LIFO provision to the actual calculation at year-end.
The Company developed a new LIFO projection model at the beginning of 2008, but the model had an error that did not properly calculate the inflation index used to project the full-year LIFO provision. As such, the Company will restate its financial results for the first three quarters of 2008 to reflect the corrected LIFO provision.
While there has been little variance to the forecasted LIFO provision in prior years, a convergence of factors resulted in a substantially higher-than-expected LIFO provision for 2008. These factors included significant inflation, a change in the product mix, and aggressively moving through clearance inventory, which resulted in the replacement of lower-cost merchandise with new, higher-cost product.
Mr. Wright concluded, "Our Company and board of directors are committed to reporting financial results accurately while maintaining a high standard of internal controls and procedures. As soon as we identified the magnitude of the LIFO provision, management and the board's audit committee worked closely with outside consultants to assess the computations. We have confirmed the misstatement in each of the first three quarters of 2008 occurred solely from the error in the projection model. Since the misstatement was related only to the quarterly estimation process, the issue has been rectified and management anticipates reporting that the control weakness has been remediated as of year-end."
At the end of this release, the Company has provided financial tables for the first three quarters of fiscal 2008 to show the Company's results as reported and as restated for each interim period. Additionally, the Company has provided another financial table at the end of this release detailing the LIFO impact on the financial results for each of the last three fiscal years and the most recent guidance for 2008 and 2009 for comparison purposes only.
Conference Call Information
The Company will be hosting a conference call at
The Company plans to release its fourth quarter and full year results as previously planned after the market close on
About Tractor Supply Company
As of
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures, which exclude the LIFO provision. We believe the inclusion of non-GAAP financial measures in this press release helps investors gain a meaningful understanding of operating results, and is consistent with how management measures and forecasts the Company's performance, especially when comparing such results to prior periods or forecasts. These non-GAAP measures also allow investors, analysts and other interested parties to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments and to provide an additional measure of performance. The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. Reconciliations of the non-GAAP financial measures used in this press release to the most directly comparable GAAP financial measures are set forth in the text of, and the accompanying exhibit to, this press release.
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 the preliminary results for the quarter and fiscal year ended
(Financial tables to follow)
Attachment A Page 1 of 3 Restatement of Interim LIFO Costs The following table summarizes the impact of the understatement in the allocation of estimated annual LIFO costs, along with a corresponding reduction in related income taxes, on the consolidated financial statements of each of the previously reported interim periods of fiscal 2008: Impact of As Restatement Originally Increase As Reported (decrease) Restated -------- ---------- -------- First Quarter Ended March 29, 2008: Consolidated Income Statement For the Three Months Ended: Cost of merchandise sold $399,304 $1,388 $400,692 Gross margin $176,904 $(1,388) $175,516 Operating loss $(653) $(1,388) $(2,041) Loss before income taxes $(1,876) $(1,388) $(3,264) Income tax benefit $(724) $(536) $(1,260) Net loss $(1,152) $(852) $(2,004) Net loss per share: Basic $(0.03) $(0.02) $(0.05) ======= ======= ======= Diluted $(0.03) $(0.02) $(0.05) ======= ======= ======= Consolidated Balance Sheet: Inventory $747,531 $(1,388) $746,143 Total current assets $807,979 $(1,388) $806,591 Total assets $1,188,071 $(1,388) $1,186,683 Deferred tax liabilities $1,133 $(536) $597 Total current liabilities $460,910 $(536) $460,374 Total liabilities $622,448 $(536) $621,912 Retained earnings $562,591 $(852) $561,739 Stockholders' equity $565,623 $(852) $564,771 Total liabilities and stockholders' equity $1,188,071 $(1,388) $1,186,683
Attachment A Page 2 of 3 Impact of As Restatement Originally Increase As Reported (decrease) Restated -------- ---------- -------- Second Quarter Ended June 28, 2008: Consolidated Income Statement for the Three Months Ended: Cost of merchandise sold $618,850 $5,968 $624,818 Gross margin $279,477 $(5,968) $273,509 Operating income $77,126 $(5,968) $71,158 Income before income taxes $76,553 $(5,968) $70,585 Income tax expense $29,535 $(2,302) $27,233 Net income $47,018 $(3,666) $43,352 Net income per share: Basic $1.26 $(0.09) $1.17 ===== ======= ===== Diluted $1.24 $(0.09) $1.15 ===== ======= ===== Consolidated Income Statement for the Six Months Ended: Cost of merchandise sold $1,018,154 $7,356 $1,025,510 Gross margin $456,381 $(7,356) $449,025 Operating income $76,473 $(7,356) $69,117 Income before income taxes $74,677 $(7,356) $67,321 Income tax expense $28,811 $(2,838) $25,973 Net income $45,866 $(4,518) $41,348 Net income per share: Basic $1.23 $(0.12) $1.11 ===== ======= ===== Diluted $1.21 $(0.12) $1.09 ===== ======= ===== Consolidated Balance Sheet: Inventory $683,317 $(7,356) $675,961 Deferred income taxes $-- $238 $238 Total current assets $785,233 $(7,118) $778,115 Total assets $1,176,319 $(7,118) $1,169,201 Deferred tax liabilities $2,600 $(2,600) $-- Total current liabilities $524,073 $(2,600) $521,473 Total liabilities $584,629 $(2,600) $582,029 Retained earnings $609,609 $(4,518) $605,091 Stockholders' equity $591,690 $(4,518) $587,172 Total liabilities and stockholders' equity $1,176,319 $(7,118) $1,169,201
Attachment A Page 3 of 3 Impact of As Restatement Originally Increase As Reported (decrease) Restated -------- ---------- -------- Third Quarter Ended September 27, 2008: Consolidated Income Statement for the Three Months Ended: Cost of merchandise sold $509,312 $6,410 $515,722 Gross margin $224,606 $(6,410) $218,196 Operating income $32,487 $(6,410) $26,077 Income before income taxes $32,556 $(6,410) $26,146 Income tax expense $12,795 $(2,519) $10,276 Net income $19,761 $(3,891) $15,870 Net income per share: Basic $0.54 $(0.10) $0.44 ===== ======= ===== Diluted $0.53 $(0.10) $0.43 ===== ======= ===== Consolidated Income Statement for the Nine Months Ended: Cost of merchandise sold $1,527,466 $13,766 $1,541,232 Gross margin $680,987 $(13,766) $667,221 Operating income $108,960 $(13,766) $95,194 Income before income taxes $107,233 $(13,766) $93,467 Income tax expense $41,606 $(5,357) $36,249 Net income $65,627 $(8,409) $57,218 Net income per share: Basic $1.77 $(0.23) $1.54 ===== ======= ===== Diluted $1.74 $(0.22) $1.52 ===== ======= ===== Consolidated Balance Sheet: Inventory $716,806 $(13,766) $703,040 Deferred income taxes $-- $2,923 $2,923 Total current assets $773,893 $(10,843) $763,050 Total assets $1,165,002 $(10,843) $1,154,159 Deferred tax liabilities $2,434 $(2,434) $-- Total current liabilities $478,032 $(2,434) $475,598 Total liabilities $564,238 $(2,434) $561,804 Retained earnings $629,370 $(8,409) $620,961 Stockholders' equity $600,764 $(8,409) $592,355 Total liabilities and stockholders' equity $1,165,002 $(10,843) $1,154,159
Attachment B Summary of Historical and Projected Earnings With and Without LIFO Provision (unaudited) (in millions, except per share amounts) The following table provides earnings for the last three fiscal years and the most recent guidance for 2008 and 2009 and, in each case, adjusted to eliminate the LIFO provision, net of tax: 2008 2008 Guidance at Q3 Year-End Conference 2009 Actual Estimate Call Estimate --------------- ---------- ----------- ---------- Low High Low High Low High 2005 2006 2007 End End End End End End ---- ---- ---- --- ---- --- ---- --- ---- 1. Net income $85.7 $91.0 $96.2 $81.4 $82.0 $93.5 $95.7 $95.0 $101.0 2. LIFO provision, net of tax 2.9 3.8 3.3 26.3 26.3 7.2 7.2 9.6 9.6 3. Net income without LIFO $88.6 $94.8 $99.5 $107.7 $108.3 $100.7 $102.9 $104.6 $110.6 Diluted net income per share: 4. Net income $2.09 $2.22 $2.40 $2.17 $2.19 $2.49 $2.55 $2.58 $2.74 5. LIFO provision, net of tax 0.07 0.09 0.08 0.70 0.70 0.19 0.19 0.26 0.26 6. Net income without LIFO $2.16 $2.31 $2.48 $2.87 $2.89 $2.68 $2.74 $2.84 $3.00 ---------- The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. However, we believe that non-GAAP reporting, giving effect to the adjustments shown in the reconciliation above, provides meaningful information and therefore we use it to supplement our GAAP guidance. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments shown in the above reconciliations and to provide an additional measure of performance.
SOURCE Tractor Supply Company