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#Thanks, <UNK>, and good afternoon, everyone
I want to take a minute to thank <UNK> for allowing me to be part of the best team in retail as well as thank all of our dedicated team members that are truly the heart and soul of Tractor Supply and have made the past 11 years the best of my career
We will be completing the transition at the end of February, so hopefully I will see many of you before then
But I wanted to thank the investment community and our many analysts that have supported the company and me over the years
Your insights and professionalism have made us a better company, and I'm very fortunate to have had the opportunity to interact with all of you
Now back to business at hand
For the quarter, ended December 31, 2016, on a consolidated year-over-year basis comparable store sales increased 3.1%
Net sales increased 16.4%, to $1.92 billion
Net income increased 10.6% to $123.6 million, and EPS increased 14.6% to $0.94 per diluted share
Demand for our core everyday basic items remained steady throughout the quarter
However, demand was limited for winter-related products during the months of October and November due to a warm start to the quarter combined with an unseasonably warm winter last year, which limited early season urgency
When cold weather arrived, the consumer responded positively and we saw a lift in seasonal sales
As a result, sales were the strongest in the month of December, as cold weather drove sales of winter seasonal merchandise such as heating fuel, insulated outerwear and power equipment
We managed the warmer than normal months of October and November by taking advantage of an extended summer selling season, most significantly in parts of the Southeast and Texas, where we maintained a full assortment of summer-related products in response to continued customer demand for seasonal products
As <UNK> mentioned, we experienced strong demand for many of our basic everyday items in both hardline-related areas and C
such as livestock and pet category, which generated mid-single-digit comparable chain-wide sales
These benefits were partially offset by softness in categories such as safes, footwear, gift and decor
Comparable store sales were positive across all regions
The strongest performance was in the Southeast and West
The performance of the Southeast region was broad-based and also benefited from the sale of emergency response products related to Hurricane <UNK>
We continue to see strength in the Western region, as we expand our store base and gain market awareness and share
Comp transaction count increased for the 35th consecutive quarter, gaining 4% on top of a 0.6% increase last year
Comparable transactions were driven by continued strength of our C
items such as pet and animal food as well as heating consumables
Average comp ticket decreased by approximately 90 basis points compared to last year's decline of 190 basis points
Deflation and big ticket sales decline were the two primary drivers of this quarter's average ticket decrease
Deflation was slightly higher than we anticipated at approximately 60 basis points, driven principally by livestock feed, bird feed and lubricant categories
Comparable sales of big ticket items were down low-single digits year-over-year
Because of the warm start to the quarter, sales of cold weather-related big ticket products such as log splitters and stoves were down
These are items that tend to be purchased earlier in the season and can be influenced by the weather
As a reminder, the fourth quarter included an extra sales week as part of the company's 53-week calendar in 2016. The 53rd week also included one additional comparable store sales day in the quarter
We estimate that that additional comp day added approximately 60 basis points to same-store sales in the fourth quarter
The additional week represented 6.2 percentage points of the overall 16.4% sales increase for the quarter and provided an estimated $0.055 benefit to diluted earnings per share
Petsense store sales are not reflected in same-store sales as those stores will fall into the store base beginning with the fourth quarter of 2017. Now turning to gross margin, which decreased 35 basis points to 33.7% compared to no change in the prior year
The merchandise team continue to proactively manage both sales and gross margin during a challenging sales environment
We were sharper on price to drive traffic and create value for the consumer
In certain holiday and discretionary products, we accelerated markdowns earlier to ensure that we ended the season in a clean inventory position
The mix of merchandise negatively impacted gross margin by an estimated 13 basis points
This was driven by the strong sales in C
products specifically animal and pet food, bird feed and heating fuel which are below chain average margin categories along with softness in higher margin categories such as footwear, gifts and decor
Freight was generally flat the prior year
Lower diesel prices along with lower import costs were offset by higher inbound transportation costs and a greater mix of freight intensive categories
For the quarter, SG&A including depreciation and amortization was flat as a percent of sales to 23.6%
SG&A was impacted by several factors
We benefited from strong expense control from our cost saving programs along with leverage from the solid comparable store sales growth
We are very pleased with our expense management during the quarter which resulted in leverage of store occupancy, medical and related payroll cost, as well as other store and Store Support Center costs
We continued to benefit from our LED lighting retrofit initiative resulting in lower utility and related maintenance costs
As part of our focus on enhancing the customer experience, we allocated more payroll hours to our stores and invested in additional marketing throughout the quarter
And, therefore, we experienced deleverage in both of these expense categories
Additionally, the impact of consolidating the Petsense operations along with onetime charge related to the acquisition of Petsense resulted in an incremental 40 basis points to SG&A in the quarter
Incentive compensation did not have a material impact on SG&A in the fourth quarter
Total consolidated SG&A expense grew 16.5% from the prior year
We estimate the 53rd week added approximately 5.9% to the year-over-year SG&A growth for the quarter
Exclusive of the 53rd week, the onetime acquisition and integration cost of about $2.4 million and the Petsense SG&A expenses, SG&A grew only 6.7% over the prior year
Our effective income tax rate for the quarter was 36% compared to 35.4% last year
The increase in the rate is principally due to timing of federal and state tax credits in the prior year
Turning to the balance sheet, at the end of the year, we had a cash balance of $53.9 million and $274 million outstanding debt compared to cash balance of $63.8 million and $150 million outstanding debt at the end of last year
During the fourth quarter, under our stock repurchase program, we acquired 1.7 million shares for $116 million
Also during the fourth quarter, we acquired Petsense for $145.7 million, funded through cash-on-hand and revolver debt
Average inventory levels per store for Tractor Supply stores decreased 2.9%
We managed our inventory well in the quarter and are comfortable with our seasonal inventory as we move into 2017. Capital expenditures for the year were $226 million compared to $236.5 million last year
We opened up 21 stores and closed one Del's store in the fourth quarter
For the year, we opened 113 stores and closed six Del's stores
The decrease in capital expenditures relates to cycling of the construction of our Southwest distribution center last year, offset in part by a greater mix of retrofit locations for new stores which generally require renovation capital and incremental capital to fund our LED lighting retrofit project
So, now, I'd like to turn the call over to <UNK> to discuss our initial outlook for 2017.
Thank you
Thank you
