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"WHETHER YOU'VE GOT
Tractor Supply and the Rural Revolution
ONE ACRE OR 1,000"
[GRAPH]
[LOGO]
2000 ANNUAL REPORT
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COMPANY PROFILE
SINCE ITS FOUNDING as a mail order tractor parts business in 1938, Tractor
Supply Company has grown to be one of the largest operators of retail farm
stores in the United States. The Company is dedicated to meeting the maintenance
needs of anyone owning from one acre to a thousand. The Company's customer base
includes hobby, part-time and full-time farmers and ranchers, as well as rural
customers, contractors and tradesmen - anyone who is actively engaged in today's
rural lifestyle. At the close of fiscal 2000, the Company operated 305 retail
farm stores in 28 states. Tractor Supply Company stores typically range in size
from 12,000 to 14,000 square feet of inside space and utilize at least as many
square feet of outside selling space. An average store displays a comprehensive
selection of over 12,000 different products including farm maintenance products
(fencing, tractor parts and accessories, agricultural spraying equipment and
tillage parts); animal and pet products (specialty feeds, supplements,
medicines, veterinary supplies and livestock feeders); general maintenance
products (air compressors, welders, generators, pumps, plumbing and tools); lawn
and garden products (riding mowers, tillers and fertilizers); light truck
equipment; and work clothing. The stores are located in rural communities and in
the outlying areas of large cities where the rural lifestyle is a significant
factor in the local economy. The Company employs approximately 4,000 people.
Tractor Supply Company has been a public company since February 1994. Its stock
is traded on The Nasdaq National Market under the symbol "TSCO."
NUMBER OF STORES BY STATE
(at Year-End)
[MAP]
TEXAS 59 ILLINOIS 10 NEBRASKA 6 MISSISSIPPI 1
OHIO 37 IOWA 9 MINNESOTA 5 MONTANA 1
TENNESSEE 28 VIRGINIA 9 PENNSYLVANIA 5 NEW YORK 1
MICHIGAN 22 KANSAS 8 SOUTH DAKOTA 4 WISCONSIN 1
INDIANA 19 SOUTH CAROLINA 8 ALABAMA 3 --------------------
NORTH CAROLINA 19 NORTH DAKOTA 7 OKLAHOMA 3 TOTAL 305
KENTUCKY 14 ARKANSAS 6 MARYLAND 2
FLORIDA 11 MISSOURI 6 GEORGIA 1
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TRACTOR SUPPLY COMPANY FINANCIAL HIGHLIGHTS
(in thousands, except where noted)
FISCAL YEAR PERCENT
---------------------- INCREASE
2000 1999(*) (DECREASE)
- ----------------------------------------------------------------------------------------
OPERATING RESULTS:
Net sales $759,037 $688,082 10.3%
Income before income taxes 27,596 30,111 (8.4)
Net income 16,390 17,874 (8.3)
Net income per share - basic ($) 1.87 2.04 (8.3)
Net income per share - assuming dilution ($) 1.87 2.02 (7.4)
FINANCIAL POSITION:
Total assets 332,296 302,630 9.8
Cash and short-term investments 9,145 6,991 30.8
Stockholders' equity 155,036 138,305 12.1
Long-term debt to equity (%) 40.6 39.5 2.8
STATISTICS:
Number of stores (#) 305 273 11.7
Square footage at year-end 3,905 3,448 13.3
Average sales per store 2,603 2,682 (2.9)
Net sales per square foot ($) 204 214 (4.7)
- ----------------------------------------------------------------------------------------
[GRAPH] [GRAPH]
As with any business, all phases of the Company's operations are subject to
influences outside its control. This report 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 highly qualified associates, 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 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.
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TO OUR SHAREHOLDERS, CUSTOMERS AND ASSOCIATES,
[PHOTO]
STRENGTHENING OUR LEADERSHIP. Tractor Supply Company achieved record sales and
opened a record 35 new stores in 2000. We successfully entered the Florida
market with a ten-store simultaneous grand opening at mid-year and those stores
continue to perform exceptionally well. The new distribution centers in
Pendleton, Indiana and Waco, Texas are efficiently supporting the majority of
our stores. In addition, the new systems installed in 1999 are getting the job
done. We missed our same store sales growth and earnings targets in the year
2000, but finished the year with a strong 4.6% fourth quarter improvement in
same store sales. We are particularly proud of the fourth quarter improvement
considering the challenge of overcoming the Y2K related sales comparisons from
1999 and the impact of the tight labor market at the store level.
Three senior management additions were made in 2000 that substantially
strengthened our leadership team:
- CAL MASSMANN, CHIEF FINANCIAL OFFICER, JOINED US EARLY IN THE
YEAR AND IS MAKING SUBSTANTIAL CONTRIBUTIONS IN FINANCE AND
INFORMATION TECHNOLOGY.
- STAN RUTA, PROMOTED TO SENIOR VICE PRESIDENT-STORE OPERATIONS
AT MID-YEAR, HAS SET CLEAR, LOGICAL, CONSISTENT DIRECTION FOR
OUR STORES.
- JIM WRIGHT, PRESIDENT AND CHIEF OPERATING OFFICER, JOINED US
LATE IN THE YEAR, HAS LEARNED QUICKLY, AND IS NOW AN ACTIVE
AND AGGRESSIVE BUSINESS LEADER.
[PHOTO]
The investments in distribution capacity, operating systems and the
Florida market have positioned us for growth and will continue to contribute to
our ongoing success. We are now clearly focused on basic execution throughout
the organization. Here are the key business drivers for 2001:
- IMPROVING SAME STORE SALES - THIS IS JOB NUMBER ONE FOR
EVERYONE. AGGRESSIVE PLANS ARE IN PLACE TO DRIVE SAME STORE
SALES INCREASES IN 2001.
- STRENGTHENING THE MIDDLE MANAGEMENT TEAM - EXTRAORDINARY STEPS
ARE IN PLACE TO RECRUIT AND TRAIN NEW MANAGERS, WHICH WILL
HAVE A BROAD, LONG-RANGE POSITIVE IMPACT ON OUR EFFECTIVENESS.
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- ACCELERATING CHANGES IN PRODUCT ASSORTMENTS - WE WILL BE MORE
DIFFERENTIATED IN KEY CATEGORIES AND PRODUCTS WHILE MORE
DOMINANT IN OUR CORE MOWER, LAWN TRACTOR AND ACCESSORIES
BUSINESS. WE ARE MEETING THE CHANGING NEEDS OF OUR UNIQUE
CUSTOMERS.
- MANAGING THE INVENTORY EFFICIENTLY - INVENTORY TURN CAN BE
IMPROVED; TARGETS ARE SET AND RESULTS ARE EXPECTED.
- SIMPLIFYING EVERYTHING - WE HAVE A "FULL COURT PRESS" TO
ELIMINATE THE UNNECESSARY EVERYWHERE.
- EXPANDING THE STORE BASE - WE PLAN TO OPEN 25 NEW STORES - ALL
IN FILL-IN MARKETS - AND RELOCATE OR RENOVATE 6 TO 11 OLDER,
PROFIT-PRODUCING LOCATIONS TO BETTER SERVE CUSTOMERS.
Tractor Supply Company has a strong organization, a committed team and
a very special niche in the retail market place. Last year, Yankelovich Partners
was engaged to perform a major research project. This and other data tell us
that our customer base has broadened and our niche is valid. There are more than
300 additional market opportunities for new stores east of the Rocky Mountains.
Tractor Supply Company has a bright future with huge growth opportunities in
both existing and new markets.
[PHOTO]
We are a solid, strong, missions and values driven organization. We
know our customer very well, we understand the products they want, and we have a
clear grasp of the farm and ranch store market niche. Our organization has a
winning attitude.
The two of us have become strong partners in the last several months.
We both have a clear, aggressive and unified vision for the Tractor Supply
Company of the future. We believe that there are simply no limits.
/s/ Joe Scarlett /s/ Jim Wright
Joe Scarlett Jim Wright
Chairman of the Board and President and
Chief Executive Officer Chief Operating Officer
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POWER EQUIPMENT SUCCESS
[PHOTO]
THE TRACTOR YOU NEED.
THE ACCESSORIES YOU NEED.
THE TEAM YOU NEED.
In establishing merchandise strategies for the year 2000, we recognized
that riding mowers, lawn tractors and their accessories offered a significant
opportunity for future increased sales and customer diversification. The concept
of taking care of "one acre or a thousand" is perfectly suited to this power
equipment category. So the rallying cry for the Company in Spring 2000 became...
"Riders! Riders! Riders!"
A broad array of power equipment is carried by Tractor Supply and sold
under the well-respected Huskee(TM) brand. The exclusive Huskee(TM) line
includes riders, lawn tractors, tillers, push mowers, string trimmers, log
splitters and accessories. The Huskee(TM) line-up is merchandised in a center
island position in the store and provides excellent visibility to our customer.
The power equipment promotion was anchored by two promotional themes.
The first was "The Yard Assault Squad." This group consisted of specially
trained store associates who were ready, willing and able to answer customer
questions and determine needs. The horsepower and cut width
THE RURAL REVOLUTION
AFTER DECADES OF DECLINE, THE RURAL POPULATIONS ARE
GROWING AT THE FASTEST RATE IN TWENTY YEARS.
Tractor Supply is the clear leader in supporting this lifestyle niche.
[PHOTO]
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[PHOTO]
for any size lawn or terrain was made readily available to customers through
pre-campaign training. Special hats and uniform insignia designated the "Squad"
members in each store. An entire advertising campaign that included national
television, circulars and radio was built around this special team of store
associates. The other promotional theme was "George has got himself a new
cuttin' horse." Television commercials, radio and life-size store cutouts
featured George Strait working a big 20-horsepower Huskee(TM) lawn tractor.
Overall sales success exceeded expectation. Riding mower volume
increased to position Tractor Supply as one of the largest sellers of riders and
lawn tractors in the country. This was accomplished at a time when other
retailers were reported to have experienced flat or declining sales in the
category.
Plans for 2001 call for continuing this aggressive power equipment
program, which not only produces significant sales volume but further
diversifies the Tractor Supply customer base, giving us access to
non-agricultural customers.
THE RURAL REVOLUTION
IN THE PAST SIX YEARS, THE PERCENTAGE OF ADULTS NAMING GARDENING AS A FAVORITE
ACTIVITY HAS INCREASED 44%.
Tractor Supply specializes in garden and lawn care with a full selection of
tools, seed, fertilizer, sprays and sprayers, lawn and garden tractors, tillers
and walk behind mowers.
[PHOTO]
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FLORIDA INTRODUCTION
FLORIDA IS JUST ANOTHER PLACE WHERE PEOPLE ARE OUT EVERYDAY GETTING A JOB DONE.
June 24, 2000 dawned warm and clear in central Florida. For thousands
of people it was another day to get a job done. But something occurred on that
Saturday that made their lives easier and more convenient.
[PHOTO]
Ten Tractor Supply Company stores opened simultaneously, which was the
largest grand opening event in the Company's history. While many other retailers
would have shied away from such aggressive action, we at Tractor Supply saw it
as a major opportunity.
[PHOTO]
By concentrating the opening dates, we were able, for the first time in
our history, to use broad based media to support not only our store openings but
also a new market entry. Spot television featuring Tractor Supply's legendary
spokesperson, George Strait, aired in four Florida television markets. National
cable reinforced the fact that "if you live in Florida and have a job to do,
your life just got
[GRAPH]
THE RURAL REVOLUTION
TODAY, OVER $5.3 BILLION IS SPENT ANNUALLY BY HOBBY FARMERS.
Tractor Supply Company offers a diverse selection of merchandise
to support the fast growing hobby and part-time segments.
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a little easier" because of new Tractor Supply Company stores.
The openings produced numerous successes for the Company. Opening
period sales for all ten stores were significantly above expectations for the
first two months. Sales continued strong throughout the first six months with
average store sales above Company averages. These successes were, in part,
driven by a new merchandise mix and store set uniquely structured for the
Florida markets.
[PHOTO]
The introduction to the Florida market provided the opportunity to
measure the impact of spot market television in support of new stores. Pre- and
post-opening market research validated the impact of the opening campaigns with
significant increases in brand awareness, total advertising awareness and, most
importantly, a high degree of satisfaction with the total Tractor Supply
shopping experience.
[PHOTO]
The entire Florida program provided new learning which is being
utilized today. The origins of this success were unique in that a special
"travel team" was selected from a number of Company departments and sent to
Florida with clean slates and no rules. This group was asked to brainstorm each
and every aspect of the launch. New store sets, media usage, and merchandise
plans all evolved from this "travel team" task approach. It was not only a sales
success but it was a concept success as well. We met new challenges with fresh
and creative ideas. This kind of initiative will help power our growth in the
future. Today, features of the new Florida set are being deployed in all new
stores.
THE RURAL REVOLUTION
TODAY, TRUCKS ACCOUNT FOR 48% OF PERSONAL TRANSPORTATION
OWNERSHIP AND 20% OF PICKUP OWNERS HAVE A TOOLBOX ON THEIR TRUCK.
Tractor Supply offers a full line of truck and trailer supplies and is, on a
per-store basis, the largest seller of truck toolboxes in America.
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CUSTOMER INSIGHT
[PHOTO]
UNDERSTANDING AND SERVING A NEW LIFESTYLE NICHE.
A significant transformation is taking place in America relative to
where people choose to live and the lifestyles they pursue. People are electing
to move away from urban areas and constrictive subdivisions to new outer urban
areas. Towns that had once been small satellite communities surrounding major
cities are now becoming major centers of population and commerce that serve an
increasing number of people who are seeking a "place in the country." The call
of land and a more rewarding lifestyle are what we now refer to as the "rural
revolution." To gain clearer insight into this new consumer environment, we
engaged the respected research firm of Yankelovich Partners, Inc. to provide an
in-depth profile of our current customer base and give insights into their
future wants and needs.
Only 8% of the Tractor Supply customer base classified themselves as
full-time farmers while 47% stated they were part-time or hobby farmers. Of
these, almost 60% said they farm for the unique lifestyle and not for the
income.
The clear implication for Tractor Supply is that we are a specialty
retailer serving a lifestyle niche. As a reflection of this lifestyle
preference, Tractor Supply sales have responded accordingly. In the past three
years,
THE RURAL REVOLUTION
TODAY, 1.8 MILLION AMERICANS OWN 6.9 MILLION HORSES MAKING A $112 BILLION IMPACT
ON THE GNP.
Tractor Supply provides feed, tack, grooming aids, vet supplies, stalls, feed
tubs and buckets and hundreds of other items key to horse ownership.
[PHOTO]
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those merchandise categories driven by the "rural revolution" have seen the most
dramatic increases, such as animal care, tools, gardening, feed, truck and
trailer and apparel.
With the growth of these "rural revolution" categories has come a shift
in customer gender mix. Today, more and more women are shopping at Tractor
Supply. They come to us for apparel, pet food, horse supplies and tack, vet
supplies, gardening items and big ticket purchases such as lawn tractors. Our
national advertising campaign has included George Strait assuring women "There's
a lot in those Tractor Supply stores for you, too. So just kick those guys aside
and walk right in."
The "rural revolution" has opened up a whole new world of equine
ownership that becomes increasingly popular every day. Today, almost 30% of all
Tractor Supply customers own a horse. Among part-time farmers, this number
reaches 44%. With horse ownership comes repeat customer visits for feed, vet and
barn supplies.
[GRAPH]
Vehicle choice among our customers also reflects the new lifestyle
choice. Pickup truck ownership by our customers is twice the national average.
Our merchandise positions in truck, trailer, toolbox and aftermarket automotive
products are other reasons to expect an increase in frequency of visit in the
future.
The "rural revolution" is not just a term to describe a Tractor Supply
business trend. It is a real and powerful shift in American culture. One that is
readily evident and growing. One that we are uniquely positioned to serve.
THE RURAL REVOLUTION
AMERICA'S DOG POPULATION IS UP 18% SINCE 1996 TO A TOTAL OF 62.4 MILLION.
Tractor Supply offers a full pet and animal care center featuring leading
national brands of feeds for dogs, cats, birds, horses and other livestock.
In addition, pet owners find vet and grooming supplies, pens, cages, housing
and training material.
[PHOTO]
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FIVE YEARS SELECTED FINANCIAL AND OPERATING HIGHLIGHTS
FISCAL YEAR ENDED
------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
DECEMBER 30, JANUARY 1, DECEMBER 26, DECEMBER 27, DECEMBER 28,
2000 2000(*) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS:
Net Sales $ 759,037 $ 688,082 $ 600,677 $ 509,052 $ 449,029
Gross margin 200,407 181,251 154,638 131,542 116,651
Selling, general and
administrative expenses 156,535 139,725 120,734 104,661 88,827
Depreciation and amortization 9,889 7,311 5,342 4,509 3,385
----------------------------------------------------------------------------
Income from operations 33,983 34,215 28,562 22,372 24,439
Interest expense, net 6,387 4,104 3,270 2,439 2,358
----------------------------------------------------------------------------
Income before income taxes 27,596 30,111 25,292 19,933 22,081
Income tax provision 11,206 12,237 10,492 8,172 8,845
----------------------------------------------------------------------------
Net income $ 16,390 $ 17,874 $ 14,800 $ 11,761 $ 13,236
============================================================================
Net income applicable to
common stockholders $ 16,390 $ 17,874 $ 14,800 $ 11,705 $ 13,039
============================================================================
Net income per share - basic (a) $ 1.87 $ 2.04 $ 1.69 $ 1.34 $ 1.50
============================================================================
Net income per share - diluted (a) $ 1.87 $ 2.02 $ 1.68 $ 1.34 $ 1.49
============================================================================
OPERATING DATA:
Gross margin 26.4% 26.3% 25.7% 25.8% 26.0%
Selling, general and
administrative expenses 20.6% 20.3% 20.1% 20.5% 19.8%
Income from operations 4.5% 5.0% 4.7% 4.4% 5.4%
Net income 2.2% 2.6% 2.5% 2.3% 2.9%
Number of stores:
Beginning of year 273 243 228 208 185
New stores 35 31 15 22 23
Closed stores (3) (1) -- (2) --
----------------------------------------------------------------------------
End of year 305 273 243 228 208
============================================================================
Number of relocated stores 1 1 1 1 4
Number of remodeled stores (b) -- -- -- -- --
Total selling square footage
at period end (c) 3,904,958 3,448,347 3,014,196 2,806,864 2,543,575
Average sales per store
(in thousands) (d) $ 2,603 $ 2,682 $ 2,542 $ 2,300 $ 2,238
Net sales per square foot
of selling space $ 204 $ 214 $ 206 $ 187 $ 184
Comparable store sales increase (e) .4% 4.4% 10.9% 3.1% 2.5%
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital $ 133,731 $ 117,306 $ 95,530 $ 82,869 $ 65,954
Total assets 332,296 302,630 264,649 224,080 195,582
Long-term debt, less current portion (f) 62,950 54,683 37,132 31,134 21,166
Redeemable preferred stock -- -- -- -- 1,763
Stockholders' equity 155,036 138,305 119,976 104,889 92,966
(*)53-week fiscal year
(a) Basic net income per share is calculated based on the weighted average
number of common shares outstanding applied to net income applicable to
common stockholders. Diluted net income per share is calculated using
the "if converted" method for convertible securities and the treasury
stock method for options and warrants as prescribed by APB 15.
(b) Includes remodelings costing more than $150,000.
(c) Total selling square footage includes normal selling space and excludes
office, stockroom, receiving space and outside selling space.
(d) Average sales per store is calculated based on the weighted average
number of days open in the applicable period.
(e) Comparable store sales increases are calculated on a 52-week basis,
excluding relocations, using all stores open at least one year.
(f) Long-term debt includes borrowings under the Company's principal
revolving credit agreements, term loan agreements and amounts
outstanding under its capital lease obligations, excluding the current
portions of each.
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TRACTOR SUPPLY COMPANY
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 three
fiscal years ended December 30, 2000 and its liquidity and capital resources.
This discussion should be read in conjunction with the financial statements and
notes thereto included elsewhere in this Annual Report. 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 attract, train and retain highly-qualified associates,
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 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.
The Company's fiscal year ends on the Saturday closest to December 31. Fiscal
years 2000 and 1998 consist of 52 weeks, while fiscal year 1999 consists of 53
weeks.
OVERVIEW
Since its founding as a mail order tractor parts business in 1938, the Company
has grown to be one of the largest operators of retail farm stores in the United
States. The Company supplies the daily farming and maintenance needs of its
target customers: hobby, part-time and full-time farmers and ranchers, as well
as rural customers, contractors and tradesmen. The Company's stores typically
range in size from 12,000 to 14,000 square feet of inside selling space and
utilize at least as many square feet of outside selling space. An average store
displays a comprehensive selection of over 12,000 different products including
farm maintenance products (fencing, tractor parts and accessories, agricultural
spraying equipment and tillage parts); animal and pet products (specialty feeds,
supplements, medicines, veterinary supplies and livestock feeders); general
maintenance products (air compressors, welders, generators, pumps, plumbing and
tools); lawn and garden products (riding mowers, tillers and fertilizers); light
truck equipment; and work clothing. The stores are located in rural communities
and in the outlying areas of large cities where farming is a significant factor
in the local economy. The Company does not sell large tractors, combines, bulk
chemicals or bulk fertilizers.
Over the past seven fiscal years since the Company's initial public offering in
February 1994 (the "Offering"), the Company has opened 159 new retail farm
stores: 13 in fiscal 1994, 20 in fiscal 1995, 23 in fiscal 1996, 22 in fiscal
1997, 15 in fiscal 1998, 31 in fiscal 1999, and 35 in fiscal 2000. These new
stores have increased the Company's market presence in the Southwest, primarily
in Texas, and in the Southeast, primarily in Tennessee, Kentucky, North Carolina
and Florida. This expansion brings the Company's total store count to 305 (in 28
states) as of December 30, 2000. The Company plans to open 25 stores in fiscal
2001, approximately 11 of which are scheduled to open in the first quarter of
fiscal 2001, 25 in fiscal 2002 and additional stores thereafter. In total over
the past seven fiscal years since the Offering, the Company has opened,
relocated or remodeled 182 stores.
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TRACTOR SUPPLY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Between fiscal year 1994 and fiscal year 2000, net sales increased from $330.0
million to $759.0 million and net income increased from $11.3 million to $16.4
million, reflecting a six-year compound annual growth rate of 14.9% and 6.5%,
respectively. The Company generated these growth rates primarily from increases
in comparable store sales and through new store openings and relocations of
existing stores. Comparable stores sales increased .4%, 4.4% and 10.9% in fiscal
2000, 1999 and 1998, respectively. Since 1994, the 137 new or relocated stores
that have been open more than one year have generated average net sales that are
approximately 15.4% per annum greater than those of existing stores.
SEASONALITY AND WEATHER
The Company's business is highly seasonal. Historically, the Company's sales and
profits have been the highest in the second and fourth fiscal quarters of each
year due to the farming industry's planting and harvesting seasons and the sale
of seasonal products. The Company has typically operated at a net loss in the
first fiscal quarter of each year. Unseasonable weather, excessive rain,
drought, and early or late frosts may also affect the Company's sales. The
Company believes, however, that the impact of adverse weather conditions is
somewhat mitigated by the geographic dispersion of its stores.
The Company experiences a buildup of inventory and accounts payable during its
first fiscal quarter each year for purchases of seasonal product in anticipation
of the April through June selling season and again during its third fiscal
quarter in anticipation of the October through December selling season.
The Company's unaudited quarterly operating results for each fiscal quarter of
2000 and 1999 are shown below (dollars in thousands, except per share amounts):
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
- -------------------------------------------------------------------------------------------------
2000
Net sales $ 147,482 $232,341 $175,478 $203,736 $759,037
Gross margin 37,604 61,585 45,117 56,101 200,407
Income (loss) from operations (338) 19,062 3,619 11,640 33,983
Net income (loss) (975) 10,546 1,123 5,696 16,390
Net income (loss) per share - basic (.11) 1.20 .13 .65 1.87
Net income (loss) per share -
assuming dilution (.11) 1.20 .13 .65 1.87
1999
Net sales $ 125,647 $214,124 $160,214 $188,097 $688,082
Gross margin 32,192 55,519 41,623 51,917 181,251
Income (loss) from operations (1,131) 17,811 5,624 11,911 34,215
Net income (loss) (1,140) 10,125 2,647 6,242 17,874
Net income (loss) per share - basic (.13) 1.16 .30 .71 2.04
Net income (loss) per share -
assuming dilution (.13) 1.14 .30 .71 2.02
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TRACTOR SUPPLY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items in the
Company's Statements of Income expressed as a percentage of net sales:
FISCAL YEAR ENDED
-------------------------------------------------------------------------
DECEMBER 30, JANUARY 1, DECEMBER 26, DECEMBER 27, DECEMBER 28,
2000 2000 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of merchandise sold 73.6 73.7 74.3 74.2 74.0
----------------------------------------------------------------------
Gross margin 26.4 26.3 25.7 25.8 26.0
Selling, general and
administrative expenses 20.6 20.3 20.1 20.5 19.8
Depreciation and amortization 1.3 1.0 0.9 0.9 0.8
----------------------------------------------------------------------
Income from operations 4.5 5.0 4.7 4.4 5.4
Interest expense, net .8 .6 0.5 0.5 0.5
----------------------------------------------------------------------
Income before income taxes 3.7 4.4 4.2 3.9 4.9
Income tax provision 1.5 1.8 1.7 1.6 2.0
----------------------------------------------------------------------
Net income 2.2% 2.6% 2.5% 2.3% 2.9%
======================================================================
FISCAL 2000 COMPARED TO FISCAL 1999
Net sales increased 10.3% to $759.0 million in fiscal 2000 from $688.1 million
in fiscal 1999. This increase resulted primarily from new store openings and
relocations, and, to a lesser extent, a comparable store sales increase of .4%
(calculated on a 52-week basis, excluding relocations, using all stores open at
least one year), while impacted by the inclusion of an additional week of
operations in fiscal 1999 (due to the Company's fiscal year-end policy).
Comparable store sales performance was significantly affected by the sale of
generators and other Y2K-related products in fiscal 1999. The Company
substantially mitigated this impact through the successful promotion of special
purchase merchandise selected for the maintenance needs of core customers. Also,
the Company benefited from favorable cold weather in November and December which
prompted improved sales of winter workwear and heating products. Excluding the
effect of generator and other Y2K-related sales, comparable store sales
increased 2.9% over fiscal 1999. The Company opened 35 new stores, closed 3
stores and relocated one store in fiscal 2000. The Company opened 31 new stores,
closed one store and relocated one store in fiscal 1999. At December 30, 2000,
the Company operated 305 retail farm stores versus 273 stores at the end of the
prior fiscal year.
In fiscal 2001, the Company plans to upgrade and improve its existing stores
including the relocation of 3 to 6 stores and major remodeling of 3 to 5 stores.
The Company expects to open 25 new stores in fiscal 2001.
The gross margin rate increased .1 percentage point to 26.4% of sales in fiscal
2000 from 26.3% in fiscal 1999. In 1999, the Company experienced a significant
change in the year-end mix of certain inventory items and achieved lower
purchase costs for other inventory items. These factors contributed to a
reduction in the expected LIFO provision and had the effect of increasing the
1999 gross margin rate by .3 percentage point. Exclusive of the favorable LIFO
effect in 1999, the year 2000 gross margin improvement of .4% resulted from a
reduction in product costs achieved through detailed product line reviews as
well as improved product assortments accomplished through significant
remerchandising efforts.
13
16
TRACTOR SUPPLY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
As a percent of sales, selling, general and administrative expenses increased .3
percentage point to 20.6% for fiscal 2000 from 20.3% for fiscal 1999. On an
absolute basis, selling, general and administrative expenses increased 12.0% to
$156.5 million for fiscal 2000 from $139.7 million in fiscal 1999. The increase
in expenses on a percentage-of-sales basis is primarily a result of costs
associated with new stores as well as the leverage loss attributable to the
lower than anticipated comparable store sales performance. The increase in
absolute dollars is primarily due to costs associated with new store openings
(new stores have considerably higher occupancy costs, primarily rent, than the
existing store base), as well as increased costs associated with the Company's
expanded infrastructure (primarily larger distribution facilities and store
support service capacity). These increases were offset, to some extent, by lower
incentive accruals, one less week of operating expenses (fiscal 2000 reflects 52
weeks of operations compared to fiscal 1999 which is comprised of 53 weeks) and
a non-recurring expense of approximately $1 million in fiscal 1999 relating to
the Company's relocation of two of its distribution centers.
During fiscal 2000, the Company continued its major media advertising program
which includes a national television campaign featuring a celebrity
spokesperson, significantly expanded use of radio promotions and increased print
advertising. This program is partially funded each year through the support of
the Company's vendor partners.
Depreciation and amortization expense increased 35.3% over the prior year due
mainly to costs associated with new and relocated stores and increased
investment in infrastructure (mainly the merchandise and warehouse management
system).
Net interest expense increased 55.6% in fiscal 2000 from fiscal 1999. The
increase in interest expense reflects additional borrowings under the senior
credit facility to fund the Company's growth and expansion plans, resulting in a
higher average outstanding debt balance in fiscal 2000 compared to fiscal 1999.
The Company's effective tax rate remained unchanged at 40.6% for both fiscal
2000 and fiscal 1999.
As a result of the foregoing factors, net income decreased 8.3% to $16.4 million
in fiscal 2000 from $17.9 million in fiscal 1999. As a percent of sales, net
income decreased .4 percentage point to 2.2% of sales in fiscal 2000 from 2.6%
of sales in fiscal 1999.
FISCAL 1999 COMPARED TO FISCAL 1998
Net sales increased 14.6% to $688.1 million in fiscal 1999 from $600.7 million
in fiscal 1998. This increase resulted primarily from new store openings and
relocations, and, to a lesser extent, a comparable store sales increase of 4.4%
(calculated on a 52-week basis, excluding relocations, using all stores open at
least one year) and an additional week of operations (due to the Company's
fiscal year-end). Comparable store sales for fiscal 1999 benefited from the
"remerchandising" of the remaining approximately 60% of the inside of all
stores, consisting of the entire "left-side" of the store (including tools,
hardware, plumbing, electrical, paint, truck accessories, towing accessories and
lubricant departments) and portions of the center aisle (mainly electrical
fencing) and "agricultural sections" (including tractor parts and the equine
department) as well as the new and more aggressive marketing programs. The
Company opened 31 new stores, closed one store and relocated one store in fiscal
1999. The Company opened 15 new stores and relocated one store during fiscal
1998. At January 1, 2000, the Company operated 273 retail farm stores versus 243
stores at the end of the prior fiscal year.
The gross margin rate increased .6 percentage point to 26.3% of sales in fiscal
1999 from 25.7% in fiscal 1998. This increase is primarily due to
remerchandising efforts and better product assortments, as well as lower costs
from increased buying leverage through vendor consolidation. Also, in 1999, the
Company experienced a significant change in the year-end mix of certain
inventory items and achieved a lower purchase cost for other inventory items.
These factors contributed to a reduction in the expected LIFO provision and had
the effect of increasing the gross margin rate by .3 percentage point.
14
17
TRACTOR SUPPLY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
As a percent of sales, selling, general and administrative expenses increased
.2 percentage point to 20.3% for fiscal 1999 from 20.1% for fiscal 1998. On an
absolute basis, selling, general and administrative expenses increased 15.7% to
$139.7 million for fiscal 1999 from $120.7 million in fiscal 1998. The increase
in expenses on a percentage-of-sales basis is primarily as a result of costs
associated with new stores, the incremental costs of certain planned
infrastructure investments as well as the leverage loss attributable to the
lower than anticipated comparable store sales performance. The increase in
absolute dollars is primarily due to costs associated with new store openings
(new stores have considerably higher occupancy costs, primarily rent, than the
existing store base), as well as an additional week of operating expenses
(fiscal 1999 reflects 53 weeks of operations compared to fiscal 1998 which is
comprised of 52 weeks) and a non-recurring expense of approximately $1 million
relating to the Company's relocation of two of its distribution centers.
During fiscal 1998, the Company began an annual major media advertising program
which includes a national television campaign featuring a celebrity
spokesperson, significantly expanded use of radio promotions and increased
print advertising. This program is partially funded each year through the
support of the Company's vendor partners.
Depreciation and amortization expense increased 36.9% over the prior year due
mainly to costs associated with new and relocated stores and increased
investment in infrastructure (mainly the merchandise and warehouse management
system).
Net interest expense increased 25.5% in fiscal 1999 from fiscal 1998. The
increase in interest expense reflects additional borrowings under the credit
agreement to fund the Company's growth and expansion plans, resulting in a
higher average outstanding debt balance in fiscal 1999 compared to fiscal 1998.
The Company's effective tax rate decreased .9 percentage point to 40.6% in
fiscal 1999 from 41.5% in fiscal 1998 primarily due to a lower effective state
income tax rate in fiscal 1999.
As a result of the foregoing factors, net income increased 20.8% to $17.9
million in fiscal 1999 from $14.8 million in fiscal 1998. As a percent of
sales, net income increased .1 percentage point to 2.6% of sales in fiscal 1999
from 2.5% of sales in fiscal 1998.
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 credit agreements 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 December 30, 2000, the Company's inventories had increased $15.2 million to
$222.5 million from $207.3 million at January 1, 2000. This increase was
primarily attributable to additional inventory for new stores and planned
inventory increases in seasonal product lines, offset, to some extent, by
improvements in inventory management achieved through an enhanced replenishment
system (a 3.8% reduction in average inventory per store compared to January 1,
2000). Short-term trade credit, which represents a source of financing for
inventory, increased $10.5 million to $70.3 million at December 30, 2000 from
$59.8 million at January 1, 2000. 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.
15
18
TRACTOR SUPPLY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
At December 30, 2000, the Company had working capital of $133.7 million, which
represented a $16.4 million increase from January 1, 2000. This increase
resulted primarily from an increase in inventory (attributable mainly to the
factors described above) without a corresponding increase in accounts payable,
an increase in prepaid expenses (mainly construction-in-progress costs
pertaining to planned sale/leaseback transactions respecting certain 2000 and
2001 new stores), an increase in cash and cash equivalents, a decrease in
income taxes payable and a decrease in current deferred income taxes. At
January 1, 2000, the Company had working capital of $117.3 million, which
represented a $21.8 million increase from December 26, 1998. This increase
resulted primarily from an increase in inventory (primarily attributable to
additional inventory for new stores, planned inventory increases in seasonal
product lines, as well as unplanned inventory increases in certain basic goods
and other seasonal product lines) without a corresponding increase in accounts
payable, offset, in part, by an increase in accrued expenses (mainly
incremental costs relating to new stores) and a decrease in cash and cash
equivalents.
In November 2000, the Company entered into a three-year unsecured senior
revolving credit facility with Bank of America, N.A., as agent for a lender
group, (the "Senior Credit Facility") whereby the Company may borrow up to $125
million. This credit facility was used to refinance all outstanding
indebtedness under the existing revolving credit agreement. (The Company
amended its then existing credit agreement in March 1998 and again in November
1999 to increase the maximum total commitments to $60 million and $75 million,
respectively.). At December 30, 2000, the Company had $50.0 million of
borrowings outstanding under the Senior Credit Facility. The Company expects to
continue borrowing amounts under the Senior Credit Facility from time to time
to fund its growth and expansion programs and as a source of seasonal working
capital.
In June 1998, the Company entered into a new unsecured loan agreement (the
"Loan Agreement") and term note (the "Term Note") pursuant to which the Company
borrowed $15 million. In November 2000, in connection with the closing of the
Senior Credit Facility, the Company amended the Loan Agreement and Term Note.
The terms of the agreement were amended to provide that the existing
indebtedness would both mature and bear interest under the same provision as
that in the Senior Credit Facility and the restrictive covenants would be
modified to be the same as those in the Senior Credit Facility.
Operations provided net cash of $10.2 million in fiscal 2000, used net cash of
$7.7 million in fiscal 1999 and provided net cash of $15.5 million in fiscal
1998. The generation of cash in fiscal 2000 resulted primarily from net income
offset, in part, by inventories increasing at a faster rate than accounts
payable compared to the prior year. The cash used in fiscal 1999 resulted
primarily from inventories increasing at a faster rate than accounts payable
compared to the prior year, offset, in part, by an increase in net income and
an increase in accrued expenses (mainly incremental costs relating to new
stores).
Cash used in investing activities of $16.7 million, $19.6 million and $14.3
million for fiscal 2000, 1999 and 1998, respectively, resulted primarily from
capital expenditures for new, relocated and remodeled stores and for new
merchandise and warehouse management systems (in 1998 and, to a lesser extent,
in 1999), partially offset by proceeds from the sale of certain properties
(primarily land and buildings).
Financing activities in fiscal 2000 provided $8.7 million in cash which
represented a $7.4 million decrease from the $16.1 million in cash provided in
fiscal 1999. This decrease resulted primarily from net borrowings of $11.9
million under the revolving credit agreement in fiscal 2000 compared to net
borrowings of approximately $19.1 million in fiscal 1999. Financing activities
in fiscal 1999 provided $16.1 million in cash which represented a $7.6 million
increase over the $8.5 million in cash provided in fiscal 1998. This increase
resulted primarily from borrowings of $19.1 million under the revolving credit
agreement in fiscal 1999 compared to net repayments of approximately $4.4
million in 1998 and borrowings of $15.0 million under the Loan Agreement in
fiscal 1998 offset, in part, by scheduled repayments under the Term Note,
long-term debt and capital lease obligations totaling approximately $3.5
million in fiscal 1999 versus approximately $2.4 million in fiscal 1998.
The Company's capital additions were $17.4 million, $20.4 million and $14.5
million in fiscal 2000, 1999 and 1998, respectively. The majority of the capital
additions were for store fixtures, equipment and leasehold improvements for new
stores and remodeling of existing stores as well as the merchandise and
warehouse management systems. The Company expects that its capital expenditures
for fiscal 2001 will be approximately $17.0 million to $19.0 million,
consisting primarily of leasehold improvements and, to a lesser extent,
fixtures and equipment, assuming successful
16
19
TRACTOR SUPPLY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
implementation of its growth strategy through approximately 25 planned new
store openings, three to six relocations and three to five remodels. However,
the Company cannot predict with certainty the amount of such expenditures
because such new stores may be constructed, leased or acquired from others. The
estimated cash required to open a new store is approximately $.8 to $1.0
million, the majority of which is for the initial acquisition of inventory and
capital expenditures, principally leasehold improvements, fixtures and
equipment, and the balance of which is for store opening expenses.
The Company believes that its cash flow from operations, borrowings available
under the Senior Credit Facility and short-term trade credit will be sufficient
to fund the Company's operations and its capital expenditure plans, including
store openings and renovations, over the next several years.
Although the Company cannot accurately determine the precise effect of
inflation on its operations, it does not believe its sales or results of
operations have been materially affected by inflation. The Company has been
successful, in many cases, in reducing or mitigating the effects of inflation
principally by taking advantage of vendor incentive programs, economies of
scale from increased volume of purchases and selective buying from the most
competitive vendors without sacrificing quality.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of
the Effective Date of FASB Statement No. 133," which deferred implementation of
SFAS 133 by one year. Consequently, SFAS 133 will be effective for all fiscal
quarters of fiscal years beginning after June 15, 2000.
SFAS 133 requires all derivatives to be carried on the balance sheet at fair
value. Changes in the fair value of derivatives must be recognized in the
Company's Statements of Income when they occur; however, there is an exception
for derivatives that qualify as hedges as defined by SFAS 133. If a derivative
qualifies as a hedge, a company can elect to use "hedge accounting" to
eliminate or reduce the income statement volatility that would arise from
reporting changes in a derivative's fair value. Adoption of SFAS 133 is not
expected to materially impact the Company's reported financial results.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Tractor Supply Company
In our opinion, the accompanying balance sheets and the related statements of
income, of changes in stockholders' equity and of cash flows present fairly, in
all material respects, the financial position of Tractor Supply Company at
December 30, 2000 and January 1, 2000, and the results of its operations and its
cash flows for each of the three years in the period ended December 30, 2000,
in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Nashville, Tennessee
January 24, 2001
17
20
TRACTOR SUPPLY COMPANY STATEMENTS OF INCOME
(in thousands, except per share amounts)
FOR THE FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 30, JANUARY 1, DECEMBER 26,
2000 2000 1998
- ---------------------------------------------------------------------------------------------
Net sales $759,037 $688,082 $600,677
Cost of merchandise sold 558,630 506,831 446,039
-------------------------------------------
Gross profit 200,407 181,251 154,638
Selling, general and administrative expenses 156,535 139,725 120,734
Depreciation and amortization 9,889 7,311 5,342
-------------------------------------------
Income from operations 33,983 34,215 28,562
Interest expense, net 6,387 4,104 3,270
-------------------------------------------
Income before income taxes 27,596 30,111 25,292
Income tax provision 11,206 12,237 10,492
-------------------------------------------
Net income $ 16,390 $ 17,874 $ 14,800
===========================================
Net income per share - basic $ 1.87 $ 2.04 $ 1.69
===========================================
Net income per share - assuming dilution $ 1.87 $ 2.02 $ 1.68
===========================================
The accompanying notes are an integral part of this statement
18
21
TRACTOR SUPPLY COMPANY BALANCE SHEETS
(in thousands, except share amounts)
FOR THE FISCAL YEAR ENDED
----------------------------
DECEMBER 30, JANUARY 1,
2000 2000
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 9,145 $ 6,991
Accounts receivable, net 7,683 6,765
Inventories 222,535 207,325
Prepaid expenses 7,870 4,845
----------------------------
Total current assets 247,233 225,926
----------------------------
Land 6,449 6,449
Buildings and improvements 67,985 58,135
Machinery and equipment 49,304 39,885
Construction in progress 1,605 4,514
----------------------------
125,343 108,983
Accumulated depreciation and amortization (44,855) (35,270)
----------------------------
Property and equipment, net 80,488 73,713
----------------------------
Deferred income taxes 1,112 999
Other assets 3,463 1,992
----------------------------
Total assets $ 332,296 $ 302,630
============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 70,294 $ 59,764
Accrued expenses 33,929 34,037
Current maturities of long-term debt 3,145 3,048
Current portion of capital lease obligations 279 279
Income taxes currently payable 1,643 4,135
Deferred income taxes 4,212 7,357
----------------------------
Total current liabilities 113,502 108,620
----------------------------
Revolving credit loan 50,007 38,126
Term loan 7,679 9,821
Other long-term debt 2,452 3,456
Capital lease obligations 2,812 3,280
Other long-term liabilities 453 487
Excess of fair value of assets acquired over cost less accumulated
amortization of $3,235 and $3,055, respectively 355 535
Commitments (Note 5)
Stockholders' equity:
Common stock, 100,000,000 shares authorized; $.008 par value;
8,792,527 and 8,769,106 shares issued and outstanding in 2000
and 1999, respectively 70 70
Additional paid-in capital 43,009 42,668
Retained earnings 111,957 95,567
----------------------------
Total stockholders' equity 155,036 138,305
----------------------------
Total liabilities and stockholders' equity $ 332,296 $ 302,630
============================
The accompanying notes are an integral part of this statement.
19
22
TRACTOR SUPPLY COMPANY STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
- ----------------------------------------------------------------------------------------------------------------------
Stockholders' equity at December 27, 1997 $ 70 $ 41,926 $ 62,893 $ 104,889
Issuance of common stock under employee
stock purchase plan (16,887 shares) 287 287
Net income 14,800 14,800
-----------------------------------------------------
Stockholders' equity at December 26, 1998 70 42,213 77,693 119,976
Issuance of common stock under employee
stock purchase plan (13,752 shares) 298 298
Exercise of stock options (7,249 shares) 157 157
Net income 17,874 17,874
-----------------------------------------------------
Stockholders' equity at January 1, 2000 70 42,668 95,567 138,305
Issuance of common stock under employee
stock purchase plan (23,421 shares) 341 341
Net income 16,390 16,390
-----------------------------------------------------
Stockholders' equity at December 30, 2000 $ 70 $ 43,009 $ 111,957 $ 155,036
=====================================================
The accompanying notes are an integral part of this statement.
20
23
TRACTOR SUPPLY COMPANY STATEMENTS OF CASH FLOWS
(in thousands)
FOR THE FISCAL YEAR ENDED
--------------------------------------------
DECEMBER 30, JANUARY 1, DECEMBER 26,
2000 2000 1998
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 16,390 $ 17,874 $ 14,800
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 9,889 7,311 5,342
Loss (gain) on disposition of property and equipment (241) (104) 1,353
Deferred income taxes (3,258) (180) (1,816)
Change in assets and liabilities:
Accounts receivable (918) (1,187) (398)
Inventory (15,210) (35,576) (20,000)
Prepaid expenses (3,025) 1,456 (2,100)
Accounts payable 10,530 (1,136) 8,192
Accrued expenses (108) 4,427 8,422
Income taxes currently payable (2,492) 1 1,824
Other (1,384) (605) (131)
---------------------------------------------
Net cash provided by (used in) operating activities 10,173 (7,719) 15,488
---------------------------------------------
Cash flows from investing activities:
Capital expenditures (17,358) (20,368) (14,505)
Proceeds from sale of property and equipment 634 816 233
---------------------------------------------
Net cash used in investing activities (16,724) (19,552) (14,272)
---------------------------------------------
Cash flows from financing activities:
Net borrowings (repayment) under revolving credit agreement 11,881 19,126 (4,419)
Borrowings under term loan agreement -- -- 15,000
Repayments under term loan agreement (2,142) (1,965) (893)
Principal payments under capital lease obligations (468) (560) (731)
Repayments of long-term debt (907) (995) (736)
Net proceeds from issuance of common stock 341 455 287
---------------------------------------------
Net cash provided by financing activities 8,705 16,061 8,508
---------------------------------------------
Net increase (decrease) in cash 2,154 (11,210) 9,724
Cash and cash equivalents at beginning of year 6,991 18,201 8,477
---------------------------------------------
Cash and cash equivalents at end of year $ 9,145 $ 6,991 $ 18,201
=============================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (NOTE 1):
Cash paid during the year for:
Interest $ 6,423 $ 4,026 $ 3,231
Income taxes 16,324 12,937 10,310
Non-cash investing and financing activities:
Capital lease-buildings -- 1,581 --
21
24
TRACTOR SUPPLY COMPANY NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS
Tractor Supply Company is a specialty retailer which supplies the daily farm and
ranch maintenance needs of its target customers: hobby, part-time and full-time
farmers and ranchers, as well as suburban customers, contractors and tradesmen.
The Company, which was founded in 1938, operated 305 retail farm stores in 28
states as of December 30, 2000.
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to December 31. Fiscal
years 2000 and 1998 consist of 52 weeks, while fiscal year 1999 consists of 53
weeks.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles inherently requires estimates and assumptions by
management that affect the reported amounts of assets and liabilities, revenues
and expenses and related disclosures. Actual results could differ from those
estimates.
REVENUE RECOGNITION
The Company recognizes revenue at the time of customer purchase.
CASH FLOWS
The Company considers temporary cash investments, with an original maturity of
three months or less, to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has cash and cash equivalents, short-term trade receivables and
payables and long-term debt instruments, including capital leases. The carrying
values of cash and cash equivalents, trade receivables and trade payables equal
current fair value. The terms of the Company's revolving credit agreement and
term loan agreement include variable interest rates, which approximate current
market rates. The Company's fixed rate debt has an approximate current value of
$3.6 million, bearing interest at 10.32% which is above current rates available;
however, the related debt agreement includes certain pre-payment penalties which
make refinancing uneconomical (Notes 2, 3 and 4).
INTEREST RATE SWAP AGREEMENT
The Company has entered into an interest rate swap agreement as a means of
managing its interest rate exposure. This agreement has the effect of converting
certain of the Company's variable rate obligations to fixed rate obligations.
Net amounts paid or received are reflected as adjustments to interest expense.
The fair value of the swap agreement is not recognized in the financial
statements, since it is accounted for as a hedge.
INVENTORIES
Inventories, which consist primarily of farm maintenance and animal and pet
products, general maintenance products, lawn and garden products, light truck
equipment and work clothing are stated at cost, which is less than market value,
with cost being determined on the last-in, first-out (LIFO) method. If the
first-in, first-out (FIFO) method of accounting for inventory had been used,
inventories would have been approximately $5,056,000 and $4,680,000 higher than
reported at December 30, 2000 and January 1, 2000, respectively.
FREIGHT COSTS
The Company incurs various types of transportation and delivery costs in
connection with inventory purchases and distribution. Such costs are included as
a component of the overall cost of merchandise when sold.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets for impairment when circumstances indicate
the carrying amount of an asset may not be recoverable. An impairment is
recognized to the extent the sum of undiscounted estimated future cash flows
expected to result from the use of the asset is less than the carrying value.
Accordingly, when the Company commits to relocate or close a store, the
estimated unrecoverable costs are charged to operating expenses. Such costs
include the estimated loss on the sale of land and buildings, the book value of
abandoned fixtures, equipment and leasehold improvements, and a provision for
the present value of future lease obligations, less estimated sub-lease income.
22
25
TRACTOR SUPPLY COMPANY NOTES TO FINANCIAL STATEMENTS
PROPERTY AND EQUIPMENT
The Company owns the land and buildings for 69 of its stores. Property and
equipment are carried at cost. Depreciation is computed using the straight-line
method over the estimated useful lives of the respective assets. The Company's
buildings, furniture, fixtures and equipment are depreciated using the
straight-line method over the estimated useful lives of the assets. Improvements
to leased premises are amortized using the straight-line method over the life of
the lease or the useful life of the improvement, whichever is shorter. The
Company's property and equipment is depreciated using the following estimated
useful lives:
Life
-----------
Buildings 30-35 years
Leasehold improvements 5-15 years
Furniture fixture and equipment 5-10 years
Computer software 3-5 years
STORE OPENING COSTS
Non-capital expenditures incurred in connection with opening new stores are
expensed as incurred.
ADVERTISING COSTS
Advertising costs consist of expenses incurred in connection with newspaper
circulars, television and radio, as well as newspaper advertisements and other
promotions. Expenses incurred are charged to operations at the time the related
advertising first takes place. Advertising expenses exclusive of vendor-provided
funding for fiscal 2000, 1999 and 1998 were approximately $8,063,000,
$8,806,000, and, $9,239,000, respectively.
INCOME TAXES
The Company accounts for income taxes using the liability method, whereby
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to be recovered or settled.
EXCESS OF FAIR VALUE OF ASSETS ACQUIRED OVER COST
On December 26, 1982, the Company began operations with the acquisition of
certain assets and assumption of certain obligations. The unallocated excess of
fair value of assets acquired over cost was approximately $3,590,000 and is
being amortized over 20 years on a straight-line basis.
STOCK-BASED COMPENSATION PLANS
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation," encourages the use of a fair-value-based method
of accounting. As allowed by SFAS 123, the Company has elected to account for
its stock-based compensation plans under the intrinsic value-based method of
accounting prescribed by Accounting Principles Board Opinion No. 25
("APB No. 25"), "Accounting for Stock Issued to Employees." Under APB No. 25,
compensation expense would be recorded on the date of grant if the current
market price of the underlying stock exceeded the exercise price. The Company
has adopted the disclosure requirements of SFAS 123.
NET INCOME PER SHARE
Statement of Financial Accounting Standards No. 128 - Earnings per Share
("SFAS 128") requires companies with complex capital structures that have
publicly held common stock or common stock equivalents to present both basic and
diluted earning per share ("EPS") on the face of the income statement. As
provided by SFAS 128, basic EPS is calculated as income available to common
stockholders divided by the weighted average number of shares outstanding during
the period. Diluted EPS is calculated using the "if converted" method for
convertible securities and the treasury stock method for options and warrants as
prescribed by APB 15 (Note 8).
23
26
TRACTOR SUPPLY COMPANY NOTES TO FINANCIAL STATEMENTS
NOTE 2 - REVOLVING CREDIT AGREEMENT:
In November 2000, the Company entered into a three-year unsecured senior
revolving credit facility with Bank of America, N.A., as agent for a lender
group, (the "Senior Credit Facility") whereby the Company may borrow up to $125
million. This credit facility was used to refinance all outstanding indebtedness
under the existing revolving credit agreement. All borrowings under the Senior
Credit Facility bear interest, at the Company's option at either the base rate
of the agent (9.50% at December 30, 2000) or the LIBOR rate (6.40% at December
30, 2000) plus an additional amount ranging from .75% to 1.5%, adjusted
quarterly based on Company performance (1.25% at December 30, 2000) per annum.
The Company is also required to pay, quarterly in arrears, a commitment fee
ranging from .20% to .35% per annum, adjusted quarterly based on Company
performance, on the average daily unused portion of the credit line. There are
no compensating balance requirements associated with the Credit Facility.
The Senior Credit Facility contains certain restrictions regarding additional
indebtedness; capital expenditures; business operations; guarantees;
investments; mergers, consolidations and sales of assets; transactions with
subsidiaries or affiliates; and liens. In addition, the Company must comply with
certain quarterly restrictions (based on a rolling four-quarters basis)
regarding net worth, leverage ratio, fixed charge coverage and current ratio
requirements. The Company was in compliance with all covenants at December 30,
2000.
In November 1999, the Company entered into an amendment (the "Third Amendment")
to its revolving credit agreement, whereby the Company (i) increased the maximum
total commitments available thereunder from $60 million to $75 million. There
were no changes to any of the other material terms and conditions of the
revolving credit agreement as a result of the Third Amendment.
In March 1998, the Company entered into an amendment (the "Second Amendment") to
its revolving credit agreement whereby the Company (i) increased the maximum
total commitments available thereunder from $45 million to $60 million and
(ii) extended the expiration date of the revolving credit agreement from
August 31, 1999 to August 31, 2002 (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 revolving credit agreement as a result of the Second
Amendment, provided, however, that the financial covenants must be tested
quarterly as of the end of each fiscal quarter, based on a rolling four-quarters
basis, rather than at the end of each fiscal year.
NOTE 3 - TERM LOAN AGREEMENT:
In June 1998, the Company entered into a new loan agreement (the "Loan
Agreement") and term note (the "Term Note") pursuant to which the Company
borrowed $15 million. The Term Note bears interest at the rate of 6.75% per
annum until its maturity in June 2005. The Term Note requires monthly payments
equal to $178,572, plus accrued interest, through June 2005. There are no
compensating balance requirements associated with the Loan Agreement. The Loan
Agreement is unsecured. In November 2000, in connection with the closing of the
Senior Credit Facility, the Company amended the Loan Agreement and Term Note.
The terms of the agreement were amended to provide that the existing
indebtedness would both mature and bear interest under the same provision as
that in the Senior Credit Facility and the restrictive covenants would be
modified to be the same as those in the Senior Credit Facility (Note 2). The
Company was in compliance with all covenants at December 30, 2000.
NOTE 4 - OTHER LONG-TERM DEBT:
Other long-term debt consists of the following (in thousands):
DECEMBER 30, JANUARY 1,
2000 2000
- ------------------------------------------------------------------------------
Mortgage Notes $ 3,456 $ 4,361
Less: current maturities (1,004) (905)
------- -------
$ 2,452 $ 3,456
======= =======
24
27
TRACTOR SUPPLY COMPANY NOTES TO FINANCIAL STATEMENTS
In April 1988, the Company issued notes (the "Mortgage Notes") pursuant to a
Note Agreement which was amended in April 1991, February 1992 and July 1993 (the
"Mortgage Loan Agreement"). The Mortgage Notes bear interest at a minimum 10.32%
rate until their maturity in January 2004. The Mortgage Notes require monthly
payments, including interest, of approximately $109,000 through January 2004.
The Mortgage Loan Agreement is secured by first mortgages on certain of the
Company's existing properties. The Mortgage Loan Agreement contains certain
restrictions regarding sales of assets, mergers, consolidations, investments,
sales or discounting of receivables, operating leases and, unless the Company
satisfies certain net income, indebtedness and tangible net worth tests, cash
dividends on and redemptions of capital stock. In addition, the Company must
comply with certain restrictions regarding tangible net worth, working capital,
funded debt, ratios of indebtedness to capitalization, FIFO inventory to current
debt, interest coverage, fixed charge coverage, earnings coverage and current
ratio requirements. The Company was in compliance with all covenants at
December 30, 2000.
The combined aggregate maturities of the Mortgage Notes are as follows (in
thousands):
2001 $1,004
2002 1,111
2003 1,232
2004 109
NOTE 5 - LEASES:
The Company leases office, warehouse/distribution and retail space,
transportation equipment and other equipment under various noncancelable
operating leases. The leases have varying terms and expire at various dates
through October 2017. The store leases typically have initial terms of between
10 and 15 years, with one to three renewal periods of five years each,
exercisable at the Company's option. Generally, most of the leases require the
Company to pay taxes, insurance and maintenance costs.
Total rent expense for fiscal 2000, 1999 and 1998 was approximately $31,620,000,
$25,453,000, and $22,811,000, respectively.
Future minimum payments, by year and in the aggregate, under leases with initial
or remaining terms of one year or more consist of the following (in thousands):
CAPITAL OPERATING
LEASES LEASES
- ----------------------------------------------------------------------------------------------
2001 $ 581 $ 29,433
2002 581 26,627
2003 579 25,380
2004 536 23,888
2005 497 22,998
Thereafter 3,857 120,420
-----------------------------
Total minimum lease payments 6,631 $ 248,746
Amount representing interest (3,540) =========
-------
Present values of net minimum lease payments 3,091
Less: current portion (279)
-------
Long-term capital lease obligations $ 2,812
=======
25
28
TRACTOR SUPPLY COMPANY NOTES TO FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES:
The provision for income taxes consists of the following (in thousands):
2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------
Current tax expense:
Federal $ 11,200 $ 9,774 $ 10,111
State 3,264 2,643 2,197
--------------------------------------------------
Total current 14,464 12,417 12,308
--------------------------------------------------
Deferred tax expense:
Federal (2,337) (172) (1,671)
State (921) (8) (145)
--------------------------------------------------
Total deferred (3,258) (180) (1,816)
--------------------------------------------------
Total provision $ 11,206 $ 12,237 $ 10,492
==================================================
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows (in thousands):
DECEMBER 30, JANUARY 1,
2000 2000
- --------------------------------------------------------------------------------------------------------------------
Current tax assets:
Inventory valuation $ 4,288 $ 5,647
Other 2,779 2,081
----------------------------
7,067 7,728
----------------------------
Current tax liabilities:
Inventory basis difference 10,565 14,230
Other 714 855
----------------------------
11,279 15,085
----------------------------
Net current tax liabilities $ 4,212 $ 7,357
============================
Non-current tax assets:
Capital lease obligation basis difference $ 1,368 $ 1,338
Fixed assets basis difference 170 274
Other 2,317 1,907
----------------------------
3,855 3,519
----------------------------
Non-current tax liabilities:
Depreciation 1,868 1,569
Capital lease assets basis difference 875 951
----------------------------
2,743 2,520
----------------------------
Net non-current tax assets $ 1,112 $ 999
============================
26
29
TRACTOR SUPPLY COMPANY NOTES TO FINANCIAL STATEMENTS
A reconciliation of the provision for income taxes to the amounts computed at
the federal statutory rate is as follows (in thousands):
2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------
Tax provision at statutory rate $ 9,659 $ 10,539 $ 8,852
Tax effect of:
State income taxes, net of federal tax benefit 1,577 1,721 1,432
Amortization of negative goodwill (73) (63) (63)
Other 43 40 271
-------------------------------------------
$ 11,206 $ 12,237 $ 10,492
===========================================
NOTE 7 - CAPITAL STOCK:
The authorized capital stock of the Company consists of common stock and
preferred stock. In April 1997, the stockholders of the Company approved an
amendment to the Company's Restated Certificate of Incorporation, as amended, to
increase the number of authorized shares of Common Stock from 9,500,000 shares
to 100,000,000 shares. The Company is also authorized to issue 40,000 shares of
Preferred Stock, with such designations, rights and preferences as may be
determined from time to time by the Board of Directors.
27
30
TRACTOR SUPPLY COMPANY NOTES TO FINANCIAL STATEMENTS
NOTE 8 - NET INCOME PER SHARE:
Net income per share is calculated as follows (in thousands, except per share
amounts):
2000
--------------------------------------
PER SHARE
INCOME SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
Basic net income per share:
Net income $ 16,390 8,782 $ 1.87
Dilutive stock options outstanding 0
--------------------------------------
Diluted net income per share $ 16,390 8,782 $ 1.87
======================================
1999
--------------------------------------
PER SHARE
INCOME SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
Basic net income per share:
Net income $ 17,874 8,761 $ 2.04
Dilutive stock options outstanding 75
--------------------------------------
Diluted net income per share $ 17,874 8,836 $ 2.02
======================================
1998
--------------------------------------
PER SHARE
INCOME SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
Basic net income per share:
Net income $ 14,800 8,742 $ 1.69
Dilutive stock options outstanding 68
--------------------------------------
Diluted net income per share $ 14,800 8,810 $ 1.68
======================================
NOTE 9 - RELATED PARTY TRANSACTIONS:
In 1986, the Company entered into capitalized sale-leaseback transactions with
certain officers of the Company for seven of its stores. The Company sold,
leased back and provided the financing for these properties at estimated fair
values totaling $2,575,000. The related gains arising from the sale of these
properties have been deferred and are being amortized on a straight-line basis
over the terms of the related leases. Properties under capital leases acquired
through sale-leaseback transactions have been reduced by the related deferred
gains on the properties and are classified with property and equipment. The
leases have basic terms of 20 years with options to renew for two successive
five-year terms. The Company has an option to purchase the leased properties
after December 31, 1995. Rent payments under these leases were approximately
$393,000 in fiscal 2000 and $425,000 in 1999 and 1998. All the officers have
repaid their outstanding obligations under these notes to the Company. In June
2000, the Company closed operations at one of these seven facilities. In
December 2000, the Company paid $200,000 to terminate the lease on the facility.
The balance of the remaining six capitalized lease obligations, included in
total capital lease obligations at December 30, 2000, was $1,033,000.
28
31
TRACTOR SUPPLY COMPANY NOTES TO FINANCIAL STATEMENTS
The Company leases its management headquarters from a partnership in which
certain stockholders of the Company are general partners. In December 2000, the
management headquarters was sold to an unrelated third party. The remaining
lease term is six years, with the Company having exercised both remaining
five-year renewal options in fiscal 1996, with monthly rent set at $35,000 and
$39,000 per month, respectively. Rent payments under this lease were $420,000
($385,000 paid to the related party), $420,000 and $417,000 in 2000, 1999 and
1998, respectively.
NOTE 10 - RETIREMENT BENEFIT PLAN:
The Company has a defined contribution benefit plan, the Tractor Supply Company
Restated 401(k) Retirement Plan (the "Plan"), which provides retirement and
other benefits for the Company's employees. Employees become eligible for
participation at age 21 and upon completion of 12 consecutive months of
employment and 1,000 hours or more of service. The Company matches 100% of the
employee's elective contributions up to 3% of the employee's compensation plus
50% of the employee's elective contributions from 3% to 7% of the employee's
compensation. In no event shall the total Company match made on behalf of the
employee exceed 5% of the employee's compensation in any Plan year. Through
January 1, 2000, the employee's contribution is vested 20% each year starting at
two years of service. Effective January 1, 2000, the Company amended the Plan
("Amendment No. 2"). In accordance with Amendment No. 2, the Company matches
100% of the employee's elective contributions up to 3% of the employee's
compensation plus 50% of the employee's elective contributions from 3% to 6% of
the employee's compensation. In no event shall the total Company match made on
behalf of the employee exceed 4.5% of the employee's compensation. All employer
contributions are immediately 100% vested. Company contributions to the Plan
during fiscal 2000, 1999 and 1998 were approximately $521,000 (net of applied
forfeitures of $677,000), $969,000 and $822,000, respectively.
NOTE 11 - STOCK-BASED COMPENSATION PLANS:
FIXED STOCK OPTION PLAN
The Company has a stock option plan for officers, directors (including
non-employee directors) and key employees which reserves 1,000,000 shares of
common stock for future issuance under the plan. According to the terms of the
Plan, the per share exercise price of options granted shall not be less than the
fair market value of the stock on the date of grant and such options will expire
no later than ten years from the date of grant. In the case of a stockholder
owning more than 10% of the outstanding voting stock of the Company, the
exercise price of an incentive stock option may not be less than 110% of the
fair market value of the stock on the date of grant and such options will expire
no later than five years from the date of grant. Also, the aggregate fair market
value of the stock with respect to which incentive stock options are exercisable
on a tax deferred basis for the first time by an individual in any calendar year
may not exceed $100,000. Options granted generally vest one-third each year
beginning on the third anniversary date of the grant and expire after ten years,
provided, however, that options granted to non-employee directors vest one-third
each year beginning on the first anniversary of the grant.
29
32
TRACTOR SUPPLY COMPANY NOTES TO FINANCIAL STATEMENTS
Plan activity is summarized as follows:
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
- -------------------------------------------------------------------------------------------------
Outstanding at December 27, 1997 500,000 $ 19.47
Granted 48,000 $ 16.67
Canceled (33,250) $ 19.49
--------
Outstanding at December 26, 1998 514,750 $ 19.21
Exercised (7,249) $ 21.66
Granted 218,000 $ 25.58
Canceled (124,001) $ 20.91
--------
Outstanding at January 1, 2000 601,500 $ 21.14
Granted 371,000 $ 14.13
Canceled (135,667) $ 19.02
--------
Outstanding at December 30, 2000 836,833 $ 18.38
========
The following table summarizes information concerning currently outstanding and
exercisable options:
OPTIONS OUTSTANDING
-------------------------
WEIGHTED
AVERAGE WEIGHTED
REMAINING AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE OPTIONS
YEAR EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE
- ------------------------------------------------------------------------------------------------
1994 $21.50 - $27.00 14,000 3.18 $21.89 14,000
1995 $21.31 - $22.13 22,250 4.09 $22.08 22,250
1996 $21.38 - $25.13 58,750 5.10 $21.89 39,692
1997 $17.75 - $20.00 230,333 6.50 $18.48 82,040
1998 $14.44 - $24.31 19,000 7.16 $18.34 1,340
1999 $18.56 - $26.75 154,500 8.09 $25.48 3,795
2000 $14.94 - $15.16 288,000 9.08 $14.94 0
2000 $ 8.95 50,000 9.84 $ 8.95 0
--------- ---------
836,833 163,117
========= =========
30
33
TRACTOR SUPPLY COMPANY NOTES TO FINANCIAL STATEMENTS
Had compensation cost for the Company's stock option plan been determined based
on the fair value at the grant dates for awards under the plan consistent with
the method prescribed by FASB Statement No. 123 the Company's proforma net
income and net income per share, for fiscal 2000, 1999 and 1998, would have been
as follows (in thousands, except per share amounts):
2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
Net income As reported $ 16,390 $ 17,874 $ 14,800
Proforma $ 15,667 $ 17,179 $ 14,271
Net income per share - basic As reported $ 1.87 $ 2.04 $ 1.69
Proforma $ 1.79 $ 1.96 $ 1.63
Net income per share - diluted As reported $ 1.87 $ 2.02 $ 1.68
Proforma $ 1.79 $ 1.94 $ 1.62
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions.
2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
Expected volatility 39.8% 37.8% 33.3%
Risk-free interest rate 5.5% 6.5% 6.0%
Average expected life (years) 7.25 7.5 9.14
Dividend yield 0% 0% 0%
Weighted average fair value $ 7.11 $ 12.95 $ 9.26
EMPLOYEE STOCK PURCHASE PLAN
The Company provides an Associate Stock Purchase Plan (the "ASPP") whereby
eligible employees of the Company have the opportunity to purchase, through
payroll deductions, shares of common stock of the Company at a 15% discount.
Pursuant to the terms of the ASPP, the Company issued 23,421, 13,752 and
16,887 shares of common stock in fiscal 2000, 1999 and 1998, respectively.
31
34
TRACTOR SUPPLY COMPANY DIRECTORS AND OFFICERS
DIRECTORS
- ----------------------------------------------------------------------------------------------------------------------
JOSEPH H. SCARLETT, JR. S.P. BAUD(1)*(2)*(3) JOSEPH M. RODGERS(1)(2)
Chairman of the Board Retired Chief Financial Officer Chairman of the Board
and Chief Executive Officer Service Merchandise Company, Inc. The JMR Group, an investment firm,
Tractor Supply Company and President and Director and former U.S.
Braud Design/Build, Inc. Ambassador to France
THOMAS O. FLOOD
Retired Senior Vice President GERALD E. JONES(1)(2)(3)*
Tractor Supply Company Senior Partner
Richards & O'Neil LLP
JOSEPH D. MAXWELL(3)
Retired Vice President SAM K. REED(1)(2)
Tractor Supply Company Chief Executive Officer
Keebler Foods Company
(1) Audit Committee
(2) Compensation Committee
(3) Nominating Committee
(*) Committee Chairman
OFFICERS
- ----------------------------------------------------------------------------------------------------------------------
JOSEPH H. SCARLETT, JR. STANLEY L. RUTA LAWRENCE GOLDBERG
Chairman of the Board and Senior Vice President- Vice President-Logistics
Chief Executive Officer Store Operations
STEPHEN E. HULL
JAMES F. WRIGHT JOHN W. ATKINS Vice President-Real Estate
President and Chief Vice President-Information
Operating Officer Technology DAVID C. LEWIS
Vice President-Controller and
GERALD W. BRASE BLAKE A. FOHL Corporate Secretary
Senior Vice President- Vice President-Marketing
Merchandising GARY M. MAGONI
MARK D. GILLMAN Vice President-Store Operations
CALVIN B. MASSMANN Vice President-Store Operations
Senior Vice President-
Chief Financial Officer
and Treasurer
32
35
TRACTOR SUPPLY COMPANY CORPORATE INFORMATION
STORE SUPPORT CENTER
Tractor Supply Company
320 Plus Park Boulevard
Nashville, Tennessee 37217
(615) 366-4600
TRANSFER AGENT AND REGISTRAR
Fleet National Bank
c/o EquiServe
P.O. Box 43010
Providence, RI 02940-3010
(781) 575-3400
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
4400 Harding Road
Nashville, Tennessee 37205
STOCK EXCHANGE LISTING
The Nasdaq National Market
Ticker Symbol: TSCO
INTERNET ADDRESS
www.tractorsupplyco.com
ANNUAL MEETING
The Annual Meeting of Stockholders will
be held at 10:00 a.m., April 26, 2001 at the
Company's Store Support Center, 320 Plus
Park Boulevard, Nashville, Tennessee, 37217
NUMBER OF STOCKHOLDERS
As of January 31, 2001 there were approximately
76 stockholders of record. This number excludes
individual stockholders holding stock under
nominee security position listings.
FORM 10-K
A copy of the Company's Annual Report on
Form 10-K, as filed with the Securities and
Exchange Commission, will be sent to any
stockholder upon written request to the Company.
QUARTERLY STOCK PRICE RANGE
HIGH LOW
FISCAL 2000:
First Quarter $ 21.00 $ 14.63
Second Quarter $ 22.00 $ 12.00
Third Quarter $ 17.19 $ 9.69
Fourth Quarter $ 11.06 $ 6.50
FISCAL 1999:
First Quarter $ 30.25 $ 20.63
Second Quarter $ 30.50 $ 25.00
Third Quarter $ 28.63 $ 17.56
Fourth Quarter $ 20.88 $ 12.75
33
36
[TRACTOR SUPPLY LOGO]
Tractor Supply Company
320 Plus Park Boulevard
Nashville, Tennessee 37217
(615) 366-4600
www.tractorsupplyco.com