TRACTOR SUPPLY COMPANY General
The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the fiscal year endedDecember 26, 2020 (the "2020 Form 10-K"). This Quarterly Report on Form 10-Q also contains forward-looking statements and information. The forward-looking statements included herein 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 we expect or anticipate will or may occur in the future, including sales and earnings growth, estimated results of operations in future periods, the declaration and payment of dividends, the timing and amount of share repurchases, future capital expenditures (including their amount and nature), business strategy, expansion and growth of our business operations, and other such matters are forward-looking statements. These forward-looking statements may be affected by certain risks and uncertainties, any one, or a combination of which, could materially affect the results of our operations. To take advantage of the safe harbor provided by the Act, we are identifying certain factors that could cause actual results to differ materially from those expressed in any forward-looking statements, whether oral or written. As with any business, many aspects of our operations are subject to influences outside our control. These factors include, without limitation, national, regional, and local economic conditions affecting consumer spending, including the effects of the COVID-19 pandemic, the efficacy and distribution of COVID-19 vaccines, the timing and acceptance of new products, the timing and mix of goods sold, purchase price volatility (including inflationary and deflationary pressures), transportation costs, constraints in the supply chain affecting timing and availability of merchandise inventory, the ability to increase sales at existing stores or on our e-commerce platforms, the ability to manage growth and identify suitable locations, the ability to complete acquisitions on expected terms, failure of an acquisition to produce anticipated results, the ability to successfully manage expenses (including increased expenses as a result of operating as an essential retailer during the COVID-19 pandemic) and to execute our key gross margin enhancing initiatives, the availability of favorable credit sources, capital market conditions in general, the ability to open new stores in the time, manner and number currently contemplated, particularly in light of the COVID-19 pandemic, the ability to open distribution centers in the anticipated timeframe and within budget, the impact of new stores on our business, competition, including that from online competitors, weather conditions, the seasonal nature of our business, effective merchandising initiatives and marketing emphasis, the ability to retain vendors, reliance on foreign suppliers, the ability to attract, train, and retain qualified employees, our ability to meet our sustainability, stewardship, carbon emission, and DE&I related ESG projections, goals, and commitments, product liability and other claims, changes in federal, state, or local regulations, the effects that "shelter in place" and similar federal, state, and local regulations and protocols could have on our business, including our supply chain and employees, the effectiveness of the Company's responses to COVID-19, including our efforts to make a vaccine available to our employees, and customer response with respect to those actions, the refusal by our employees and the public generally to be vaccinated against COVID-19, the imposition of tariffs on imported products or the disallowance of tax deductions on imported products, potential judgments, fines, legal fees, and other costs, breach of information systems or theft of employee or customer data, ongoing and potential future legal or regulatory proceedings, management of our information systems, failure to develop and implement new technologies, the failure of customer-facing technology systems, business disruption including from the implementation of supply chain technologies, effective tax rate changes and results of examination by taxing authorities, the ability to maintain an effective system of internal control over financial reporting, and changes in accounting standards, assumptions, and estimates. We discuss in greater detail risk factors relating to our business in Part I, Item 1A of our 2020 Form 10-K and in Part II, Item 1A of this Quarterly Report on Form 10-Q. Forward -looking statements are based on our knowledge of our business and the environment in which we operate, but because of the factors listed above or other factors, 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 will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business and operations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Information Regarding COVID-19 Coronavirus Pandemic
The Company continues to closely monitor the impact of the COVID-19 pandemic on all facets of our business. This includes the impact on our team members, customers, suppliers, vendors, business partners, and supply chain networks.
The health and safety of our team members and customers are the primary concerns
of our management team. We have taken and continue to take numerous actions to
promote health and safety, including, encouraging vaccination efforts, providing
personal protective equipment to our team members, following local and federal
guidance regarding the use of masks in our
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facilities, maintaining enhanced services for cleaning and sanitation, continuing to provide additional functionality to support contactless shopping experiences, promoting social distancing and cleaning actions in our stores, and continuing to offer remote work plans at our store support center. As further described in the results of operations, our net sales have continued to increase due to customer demand across all major product categories, channels, and geographic regions. However, the net incremental costs of doing business during this pandemic have increased, as a result of the aforementioned actions we have taken, and continue to take, to support and promote the safety and well-being of our team members and customers, and we believe many of these incremental costs will continue after the pandemic is over. There are numerous uncertainties surrounding the pandemic and its impact on the economy and our business, as further described in the Risk Factors section under Part I, Item 1A of our 2020 Form 10-K, which make it difficult to predict the impact on our business, financial position, or results of operations in fiscal 2021 and beyond. While our stores, distribution centers, and e-commerce operations are open and plan to remain open, we cannot predict the uncertainties, or the corresponding impacts on our business, at this time.
Seasonality and Weather
Our business is seasonal. Historically, our sales and profits are the highest in the second and fourth fiscal quarters due to the sale of seasonal products. We usually experience our highest inventory and accounts payable balances during our first fiscal quarter for purchases of seasonal products to support the higher sales volume of the spring selling season, and again during our third fiscal quarter to support the higher sales volume of the cold weather selling season. We believe that our business can be more accurately assessed by focusing on the performance of the halves, not the quarters, due to the fact that different weather patterns from year-to-year can shift the timing of sales and profits between quarters, particularly between the first and second fiscal quarters and the third and fourth fiscal quarters. Historically, weather conditions, including unseasonably warm weather in the fall and winter months and unseasonably cool weather in the spring and summer months, have unfavorably affected the timing and volume of our sales and results of operations. In addition, extreme weather conditions, including snow and ice storms, flood and wind damage, hurricanes, tornadoes, extreme rain, and droughts have impacted operating results both negatively and positively, depending on the severity and length of these conditions. Our strategy is to manage product flow and adjust merchandise assortments and depth of inventory to capitalize on seasonal demand trends.
Furthermore, we are not able to predict at this time the impact that the COVID-19 pandemic may have on the seasonality of our business in the future.
Performance Metrics
Comparable Store Metrics
Comparable store metrics are a key performance indicator used in the retail industry and by the Company to measure the performance of the underlying business. Our comparable store metrics are calculated on an annual basis using sales generated from all stores open at least one year and all online sales and exclude certain adjustments to net sales. Stores closed during either of the years being compared are removed from our comparable store metrics calculations. Stores relocated during either of the years being compared are not removed from our comparable store metrics calculations. If the effect of relocated stores on our comparable store metrics calculations became material, we would remove relocated stores from the calculations.
Transaction Count and Transaction Value
Transaction count and transaction value metrics are used by the Company to
measure sales performance. Transaction count represents the number of customer
transactions during a given period. Transaction value represents the average
amount paid per transaction and is calculated as net sales divided by the total
number of customer transactions during a given period.
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Results of Operations
Fiscal Three Months (Third Quarter) Ended
Net sales for the third quarter of fiscal 2021 increased 15.8% to$3.02 billion from$2.61 billion for the third quarter of fiscal 2020. Comparable store sales for the third quarter of fiscal 2021 were$2.95 billion , a 13.1% increase as compared to the third quarter of fiscal 2020. In the third quarter of fiscal 2020, net sales increased 31.4% and comparable store sales increased 26.8%. The comparable store sales results for the third quarter of fiscal 2021 included an increase in comparable average transaction value of 9.5% and an increase in comparable average transaction count of 3.6%, each as compared to the third quarter of fiscal 2020. Our sales performance continued to benefit from growth in new customer acquisition and the re-engagement of lapsed customers, as well as a continuation of shifting consumer behavior trends from the COVID-19 pandemic as customers focused on the care of their homes, land, and animals. These factors all led to an increase in comparable store sales across all major product categories, driven by robust growth for everyday merchandise, including consumable, usable, and edible ("C.U.E.") products and solid demand for summer seasonal categories. All geographic regions of the Company had positive comparable store sales growth. In addition, the Company's e-commerce sales also experienced double-digit percentage growth compared to the third quarter of fiscal 2020. In addition to comparable store sales growth for the third quarter of fiscal 2021, sales from stores open less than one year were$70.3 million for the third quarter of fiscal 2021, which represented 2.7 percentage points of the 15.8% increase over third quarter fiscal 2020 net sales. For the third quarter of fiscal 2020, sales from stores open less than one year were$93.6 million , which represented 4.7 percentage points of the 31.4% increase over third quarter fiscal 2019 net sales.
The following table summarizes store growth for the fiscal three months ended
Fiscal Three Months Ended
September 25 ,
Store Count Information: 2021 2020
Tractor Supply
Beginning of period 1,955 1,881
New stores opened 12 23
Stores closed - -
End of period 1,967 1,904
Petsense
Beginning of period 174 180
New stores opened 3 3
Stores closed - -
End of period 177 183
Consolidated, end of period 2,144 2,087
Stores relocated 1 -
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The following table indicates the percentage of net sales represented by each of our major product categories for the fiscal three months endedSeptember 25, 2021 andSeptember 26, 2020 : Percent of Net Sales Fiscal Three Months Ended September 25, September 26, Product Category: 2021 2020 Livestock and Pet 49 % 48 % Seasonal, Gift and Toy Products 19 19 Hardware, Tools and Truck 22 23 Clothing and Footwear 5 5 Agriculture 5 5 Total 100 % 100 % Gross profit increased 14.5% to$1.09 billion for the third quarter of fiscal 2021 from$948.0 million for the third quarter of fiscal 2020. As a percent of net sales, gross margin in the third quarter of fiscal 2021 decreased 41 basis points to 36.0% from 36.4% in the third quarter of fiscal 2020. The decrease in gross margin as a percent of net sales was primarily driven by higher product cost inflation, higher transportation costs, and product mix shift towards C.U.E. products. Partially offsetting the decrease was the Company's price management program, which effectively offset a significant portion of the inflation pressures. Selling, general and administrative ("SG&A") expenses, including depreciation and amortization, increased 13.3% to$788.1 million for the third quarter of fiscal 2021 from$695.8 million for the third quarter of fiscal 2020. As a percent of net sales, SG&A expenses were 26.1%, a 58 basis point improvement over the prior year's third quarter. The improvement in SG&A as a percent of net sales was primarily attributable to leverage in occupancy and other fixed costs from the increase in our comparable store sales, along with lower COVID-19 pandemic response costs and decreased incentive compensation. COVID-19 pandemic response costs in the third quarter of fiscal 2021 of approximately$11.5 million consisted of sick pay, benefits, and other health and safety related expenses, as compared to approximately$20.3 million in the third quarter of fiscal 2020. The leverage from these SG&A expenses was partially offset by higher wage rates, incremental store labor hours, and investments in the Company's strategic initiatives.
Operating income for the third quarter of fiscal 2021 increased 17.9% to
The effective income tax rate was 22.9% in the third quarter of fiscal 2021 compared to 22.2% in the third quarter of fiscal 2020. The primary driver for the increase in the Company's effective income tax rate was attributable to a reduction in the benefit associated with share-based compensation. As a result of the foregoing factors, net income for the third quarter of fiscal 2021 increased 17.7% to$224.4 million , or$1.95 per diluted share, as compared to net income of$190.6 million , or$1.62 per diluted share, for the third quarter of fiscal 2020.
During the third quarter of fiscal 2021, we repurchased approximately 0.7
million shares of the Company's common stock at a total cost of
Fiscal Nine Months Ended
Net sales increased 21.6% to$9.41 billion for the first nine months of fiscal 2021 from$7.74 billion for the first nine months of fiscal 2020. Comparable store sales for the first nine months of fiscal 2021 were$9.18 billion , a 18.5% increase as compared to the first nine months of fiscal 2020. Net sales increased 25.7% and comparable store sales increased 21.5% in the first nine months of fiscal 2020. The comparable store sales results for the first nine months of fiscal 2021 included an increase in comparable average transaction value of 9.7% and an increase in comparable average transaction count of 8.8%, each as compared to the first nine months of fiscal 2020. Our sales performance continued to benefit from growth in new customer acquisition and the re-engagement of lapsed customers, as well as a continuation of shifting consumer behavior trends from the COVID-19 pandemic Page 21
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as customers focused on the care of their homes, land, and animals. Additionally, consumer demand benefited from favorable weather conditions in the first quarter as well as government stimulus throughout the first nine months of fiscal 2021. These factors all led to a significant increase in comparable store sales across all major product categories, driven by strong demand for everyday merchandise, including C.U.E. products, as well as seasonal categories. All geographic regions of the Company had positive comparable store sales growth. In addition, the Company's e-commerce sales also experienced growth compared to the prior year's first nine months. In addition to comparable store sales growth for the first nine months of fiscal 2021, sales from stores open less than one year were$253.7 million for the first nine months of fiscal 2021, which represented 3.3 percentage points of the 21.6% increase over the first nine months of fiscal 2020 net sales. For the first nine months of fiscal 2020, sales from stores open less than one year were$264.0 million , which represented 4.3 percentage points of the 25.7% increase over the first nine months of fiscal 2019 net sales.
The following table summarizes store growth for the fiscal nine months ended
Fiscal Nine Months Ended
September 25 ,
Store Count Information: 2021 2020
Tractor Supply
Beginning of period 1,923 1,844
New stores opened 44 61
Stores closed - (1)
End of period 1,967 1,904
Petsense
Beginning of period 182 180
New stores opened 6 6
Stores closed (11) (3)
End of period 177 183
Consolidated, end of period 2,144 2,087
Stores relocated 1 1
The following table indicates the percentage of net sales represented by each of
our major product categories for the fiscal nine months ended September 25, 2021
and September 26, 2020 :
Percent of Net Sales
Fiscal Nine Months Ended
September 25, September 26,
Product Category: 2021 2020
Livestock and Pet 48 % 48 %
Seasonal, Gift and Toy Products 21 21
Hardware, Tools and Truck 21 21
Clothing and Footwear 6 5
Agriculture 4 5
Total 100 % 100 %
Gross profit increased 21.4% to $3.36 billion for the first nine months of
fiscal 2021 from $2.77 billion for the first nine months of fiscal 2020. As a
percent of net sales, gross margin in the first nine months of fiscal 2021
decreased seven basis points to 35.7% as compared to the first nine months of
fiscal 2020. The decrease in gross margin as a percent of net sales was
primarily driven by higher transportation costs, product cost inflation, and the
initial impact from the relaunch of the Company's Neighbor's Club loyalty
program. Partially offsetting these factors were lower depth and frequency of
sales promotions and less clearance activity, particularly in the first quarter
of fiscal 2021, as well as benefits from the Company's price management program.
SG&A expenses, including depreciation and amortization, increased 19.9% to
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points to 24.9% for the first nine months of fiscal 2021 from 25.2% for the first nine months of fiscal 2020. The improvement in SG&A as a percent of net sales was primarily attributable to leverage in incentive costs, occupancy, and other fixed costs from the increase in comparable store sales, as well as decreasing COVID-19 pandemic response costs as compared to the prior year period. COVID-19 pandemic response costs for the first nine months of fiscal 2021 of approximately$52.6 million consisted of sick pay, benefits, and other health and safety related expenses, as compared to approximately$82.4 million in the first nine months of fiscal 2020. The improvement was partially offset by higher wage rates, additional incremental store labor hours, and investments in the Company's strategic initiatives.
Operating income for the first nine months of fiscal 2021 increased 24.8% to
The effective income tax rate was 21.9% in the first nine months of fiscal 2021 compared to 22.6% in the first nine months of fiscal 2020. The improvement in the effective income tax rate in the first nine months of fiscal 2021 compared to the first nine months of fiscal 2020 was primarily related to a discrete incremental tax benefit associated with share-based compensation. The Company expects the full fiscal year 2021 effective tax rate to be in a range between 22.1% and 22.3%. As a result of the foregoing factors, net income for the first nine months of fiscal 2021 increased 26.5% to$775.8 million , or$6.68 per diluted share, as compared to net income of$613.1 million , or$5.23 per diluted share, for the first nine months of fiscal 2020.
During the first nine months of fiscal 2021, we repurchased approximately
3.5 million shares of the Company's common stock at a total cost of
Liquidity and Capital Resources
In addition to normal operating expenses, and expenses associated with our
COVID-19 response, our primary ongoing cash requirements are for new store
expansion, existing store remodeling and improvements, store relocations,
distribution facility capacity and improvements, information technology,
inventory purchases, repayment of existing borrowings under our debt facilities,
share repurchases, cash dividends, and selective acquisitions as opportunities
arise.
Our primary ongoing sources of liquidity are existing cash balances, cash
provided from operations, remaining funds available under our debt facilities,
operating and finance leases, and normal trade credit. Our inventory and
accounts payable levels typically build in the first and third fiscal quarters
to support the higher sales volume of the spring and cold weather selling
seasons, respectively.
The Company believes that its existing cash balances, expected cash flow from
future operations, funds available under its debt facilities, operating and
finance leases, and normal trade credit will be sufficient to fund its
operations, including expenses associated with COVID-19, and its capital
expenditure needs, including new store openings, existing store remodeling and
improvements, store relocations, distribution facility capacity and
improvements, and information technology improvements, through the end of fiscal
2021.
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Working Capital
AtSeptember 25, 2021 , the Company had working capital of$1.42 billion , which decreased$93.0 million fromDecember 26, 2020 , and increased$383.6 million fromSeptember 26, 2020 . The shifts in working capital were attributable to changes in the following components of current assets and current liabilities (in millions): September 25, December 26, September 26, 2021 2020 Variance 2020 Variance Current assets: Cash and cash equivalents$ 1,111.7 $ 1,341.8 $ (230.1) $ 1,112.0 $ (0.3) Inventories 2,199.8 1,783.3 416.5 1,915.0 284.8 Prepaid expenses and other current assets 149.6 133.6 16.0 136.1 13.5 Income taxes receivable 6.8 - 6.8 7.8 (1.0) Total current assets 3,467.9 3,258.7 209.2 3,170.9 297.0 Current liabilities: Accounts payable 1,197.8 976.1 221.7 1,056.9 140.9 Accrued employee compensation 122.0 119.7 2.3 120.4 1.6 Other accrued expenses 408.9 324.8 84.1 274.2 134.7 Current portion of long-term debt - - - 380.0 (380.0) Current portion of finance lease liabilities 4.2 4.6 (0.4) 4.4 (0.2) Current portion of operating lease liabilities 312.3 298.7 13.6 294.8 17.5 Income taxes payable 0.8 19.9 (19.1) 1.9 (1.1) Total current liabilities 2,046.0 1,743.8 302.2 2,132.6 (86.6) Working capital$ 1,421.9 $ 1,514.9 $ (93.0) $ 1,038.3 $ 383.6
In comparison to
•The decrease in cash and cash equivalents was primarily driven by share repurchases, capital expenditures to support strategic growth, and cash dividends to stockholders, partially offset by cash generated from operations. •The increase in inventories resulted primarily from the seasonal purchase of additional inventory to support higher sales volume of the cold weather selling season, as well as to support new store growth and the impact of inflation. •The increase in accounts payable resulted from the purchase of additional inventory to support new store growth and strong sales volume trends. In comparison toSeptember 26, 2020 , working capital as ofSeptember 25, 2021 , was impacted most significantly by changes in inventories, accounts payable, other accrued expenses, and the current portion of long-term debt. •The increase in inventories resulted primarily from the purchase of additional inventory to support new store growth as well as an increase in average inventory per store which principally reflects support for strong sales volume trends and the impact of inflation. •The increase in accounts payable resulted primarily from the purchase of additional inventory to support new store growth and strong sales volume trends. •The decrease in the current portion of long-term debt was related to the repayment of all short-term debt obligations, including the$350 million April 2020 Term Loan borrowing, which was executed in the prior year in order to strengthen liquidity and preserve cash while navigating the COVID-19 pandemic. These borrowings were repaid in full in the fourth quarter of fiscal 2020 and the underlying loan agreements are no longer in effect. •The increase in other accrued expenses was driven primarily by Company growth year-over-year as well as the timing of payments and accruals. Page 24
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Debt
The following table summarizes the Company's outstanding debt as of the dates
indicated (in millions):
September 25, December 26, September 26,
2021 2020 2020
1.75% Senior Notes due 2030 $ 650.0 $ 650.0 $ -
3.70% Senior Notes due 2029 150.0 150.0 150.0
Senior Credit Facility:
February 2016 Term Loan - - 130.0
June 2017 Term Loan - - 80.0
March 2020 Term Loan - - 200.0
April 2020 Term Loan - - 350.0
November 2020 Term Loan 200.0 200.0 -
Revolving credit loans - - -
Total outstanding borrowings 1,000.0 1,000.0 910.0
Less: unamortized debt discounts and issuance
costs (14.1) (15.7) (0.7)
Total debt 985.9 984.3 909.3
Less: current portion of long-term debt - - (380.0)
Long-term debt $ 985.9 $ 984.3 $ 529.3
Outstanding letters of credit $ 46.5 $ 48.7 $ 50.4
For additional information about the Company's debt and credit facilities, refer
to Note 5 to the Condensed Consolidated Financial Statements. Refer to Note 6 to
the Condensed Consolidated Financial Statements for information about the
Company's interest rate swap agreements.
Operating Activities
Operating activities provided net cash of$0.87 billion and$1.00 billion in the first nine months of fiscal 2021 and fiscal 2020, respectively. The$133.2 million decrease in net cash provided by operating activities in the first nine months of fiscal 2021 compared to the first nine months of fiscal 2020 is due to changes in the following operating activities (in millions): Fiscal Nine Months Ended September 25, September 26, 2021 2020 Variance Net income$ 775.8 $ 613.1 $ 162.7 Depreciation and amortization 194.7
158.6 36.1
Share-based compensation expense 35.7 27.0 8.7 Deferred income taxes 15.0
(3.7) 18.7
Inventories and accounts payable (194.8)
101.6 (296.4)
Prepaid expenses and other current assets (15.9) (35.2) 19.3 Accrued expenses 77.0 100.9 (23.9) Income taxes (26.0) (11.9) (14.1) Other, net 10.3 54.6 (44.3)
Net cash provided by operating activities
The$133.2 million decrease in net cash provided by operating activities in the first nine months of fiscal 2021 compared with the first nine months of fiscal 2020 resulted from decrease in our net operating assets and liabilities, partially offset by an increase in our net income, principally due to the timing of payments and accruals and a significant increase in inventory that remained in accounts payable in the prior year period; however, the increase was less significant in the first nine months of fiscal 2021 compared to the first nine months of fiscal 2020 which resulted in a lower year-over-year amount of net cash provided by operating activities. Page 25
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Investing Activities
Investing activities used net cash of$381.3 million and$160.2 million in the first nine months of fiscal 2021 and fiscal 2020, respectively. The$221.1 million increase in net cash used in investing activities primarily reflects an increase in capital expenditures in the first nine months of fiscal 2021 compared to fiscal 2020.
Investing activities, including capital expenditures, for the first nine months of fiscal 2021 and fiscal 2020 were as follows (in millions):
Fiscal Nine Months Ended
September 25, September 26,
2021 2020 Variance
Existing stores $ 213.2 $ 30.6 $ 182.6
Information technology 77.0 72.6 4.4
New and relocated stores and stores not yet opened 46.5 43.8 2.7
Distribution center capacity and improvements 36.9 11.6 25.3
Corporate and other 8.8 2.7 6.1
Total capital expenditures 382.4 161.3 221.1
Proceeds from sale of property and equipment 1.1 1.1 -
Net cash used in investing activities $ 381.3 The increase in spending for existing stores in the first nine months of fiscal 2021 as compared to the first nine months of fiscal 2020 principally reflects our strategic initiatives related to store remodels, including internal space productivity and the outside side lot improvements. Spending in the first nine months of both fiscal 2021 and fiscal 2020 also includes routine refresh activity, as well as security enhancements. The increase in spending for information technology represents continued support of our omni-channel initiatives, as well as improvements in security and compliance, enhancements and upgrades to our customer loyalty program, mobility in our stores, and other strategic initiatives. In the first nine months of fiscal 2021, the Company opened 44 newTractor Supply stores compared to 61 newTractor Supply stores during the first nine months of fiscal 2020. The Company also opened six newPetsense stores during the first nine months of fiscal 2021 and fiscal 2020. We continue to expect to open approximately 80 newTractor Supply stores and approximately 10 newPetsense stores during fiscal 2021. The timing of new store openings reflects some short-term delays, as a result of factors such as the COVID-19 pandemic, including local and state orders and constraints on labor and materials in the construction industry. The increase in spending for distribution center capacity and improvements in the first nine months of fiscal 2021 as compared to the first nine months of fiscal 2020 is related to beginning construction of a new distribution center inNavarre, Ohio , which is expected to be approximately 900,000 square feet and is currently anticipated to be complete by the end of fiscal 2022. Our projected capital expenditures for fiscal 2021 are currently estimated to be in a range of approximately$550 million to$600 million . The capital expenditures include our new store growth plans for approximately 80 newTractor Supply stores and 10 newPetsense stores, as well as the construction of our new distribution center inNavarre, Ohio . We also plan to support our strategic growth initiatives related to store remodels, space productivity, and side lot improvements in certain existing stores, as well as continued improvements in technology and infrastructure at our existing stores and ongoing investments to enhance our digital and omni-channel capabilities to better serve our customers. Page 26
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Financing Activities
Financing activities used net cash of$720.6 million in the first nine months of fiscal 2021 compared to providing net cash of$182.9 million in the first nine months of fiscal 2020. The$903.5 million change in net cash used in financing activities in the first nine months of fiscal 2021 compared to the first nine months of fiscal 2020 is due to changes in the following (in millions): Fiscal Nine Months Ended September 25, September 26, 2021 2020 Variance Net borrowings and repayments under debt facilities $ -$ 512.5 $ (512.5) Repurchase of common stock (598.0) (263.2) (334.8) Net proceeds from issuance of common stock 75.2 73.8 1.4 Cash dividends paid to stockholders (179.8) (128.0) (51.8) Other, net (18.0) (12.2) (5.8)
Net cash (used in)/provided by financing activities
The$903.5 million change in net cash used in financing activities in the first nine months of fiscal 2021 compared with the first nine months of fiscal 2020 is principally due to actions taken in the first nine months of fiscal 2020 intended to strengthen our liquidity and preserve cash while navigating the COVID-19 pandemic, including borrowings under our debt facilities as well as a temporary suspension of our share repurchase program. In the first nine months of fiscal 2020, the Company's net borrowings under its debt facilities included the addition of the$200 million March 2020 Term Loan and the$350 million April 2020 Term Loan, each of which was repaid in full during the fourth quarter of fiscal 2020 as described in Note 5 to the Condensed Consolidated Financial Statements. The Company had no borrowing or repayment activity related to its debt facilities in the first nine months of fiscal 2021.
Repurchases of common stock in the first nine months of fiscal 2020 were
impacted by the temporary suspension of our share repurchase program effective
Dividends
During the first nine months of fiscal 2021 and fiscal 2020, the Company's Board of Directors declared the following cash dividends:
Dividend Amount
Date Declared Per Share of Common Stock Record Date Date Paid
August 4, 2021 $ 0.52 August 23, 2021 September 8, 2021
May 5, 2021 $ 0.52 May 24, 2021 June 8, 2021
January 27, 2021 $ 0.52 February 22, 2021 March 9, 2021
August 5, 2020 $ 0.40 August 24, 2020 September 9, 2020
May 6, 2020 $ 0.35 May 26, 2020 June 9, 2020
February 5, 2020 $ 0.35 February 24, 2020 March 10, 2020
It is the present intention of the Company's Board of Directors to continue to
pay a quarterly cash dividend; however, the declaration and payment of future
dividends will be determined by the Company's Board of Directors in its sole
discretion and will depend upon the earnings, financial condition, and capital
needs of the Company, along with any other factors that the Company's Board of
Directors deem relevant.
On November 3, 2021 , the Company's Board of Directors declared a quarterly cash
dividend of $0.52 per share of the Company's outstanding common stock. The
dividend will be paid on December 8, 2021 , to stockholders of record as of the
close of business on November 22, 2021 .
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Share Repurchase Program
The Company's Board of Directors has authorized common stock repurchases under a share repurchase program which was announced inFebruary 2007 . The authorization amount of the program, which has been increased from time to time, is currently authorized for up to$4.5 billion , exclusive of any fees, commissions, or other expenses related to such repurchases. The share repurchase program does not have an expiration date. The repurchases may be made from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased under the program will depend on a variety of factors, including price, corporate and regulatory requirements, capital availability, and other market conditions. Repurchased shares are accounted for at cost and will be held in treasury for future issuance. The program may be limited, temporarily paused (as it was fromMarch 12, 2020 untilNovember 5, 2020 in order to strengthen the Company's liquidity and preserve cash while navigating the COVID-19 pandemic), or terminated at any time without prior notice. As ofSeptember 25, 2021 , the Company had remaining authorization under the share repurchase program of$545.9 million , exclusive of any fees, commissions, or other expenses. The following table provides the number of shares repurchased, average price paid per share, and total amount paid for share repurchases during the fiscal three and nine months endedSeptember 25, 2021 andSeptember 26, 2020 , respectively (in thousands, except per share amounts): Fiscal Three Months Ended Fiscal Nine Months Ended September 25, September 26, September 25, September 26, 2021 2020 2021 2020 Total number of shares repurchased 744 - 3,462 2,853 Average price paid per share$ 190.03 $ -$ 172.73 $ 92.28 Total cash paid for share repurchases$ 141,259 $ -$ 597,973 $ 263,219 Pending Acquisition OnFebruary 17, 2021 , the Company announced that it entered into an agreement to acquire all of the outstanding equity interests ofOrscheln Farm and Home, LLC , a farm and ranch retailer with 167 retail stores in 11 states, in an all-cash transaction for approximately$320 million . The Company intends to fund the acquisition through cash-on-hand. The acquisition is conditioned on the receipt of regulatory clearance and satisfactory completion of customary closing conditions.
Off-Balance Sheet Arrangements
There have been no material changes in the Company's off-balance sheet arrangements during the fiscal quarter endedSeptember 25, 2021 . The Company's off-balance sheet arrangements are limited to outstanding letters of credit. Letters of credit allow the Company to purchase inventory, primarily sourced overseas, in a timely manner, and support certain risk management programs.
Significant Contractual Obligations and Commercial Commitments
The Company is building a new distribution center inNavarre, Ohio , which is expected to be approximately 900,000 square feet and is currently anticipated to be complete by the end of fiscal 2022. AtSeptember 25, 2021 , the Company had contractual commitments of approximately$93.8 million related to the construction of this new distribution center.
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Significant Accounting Policies and Estimates
Management's discussion and analysis of the Company's financial position and results of operations are based upon its Condensed Consolidated Financial Statements, which have been prepared in accordance withU.S. GAAP. The preparation of these financial statements requires management to make informed estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company's significant accounting policies, including areas of critical management judgments and estimates, have primary impact on the following financial statement areas:
- Inventory valuation
- Self-insurance reserves
- Impairment of long-lived assets
- Impairment of goodwill and other indefinite-lived intangible assets
See the Notes to the Consolidated Financial Statements in our 2020 Form 10-K, for a discussion of the Company's critical accounting policies. The Company's financial position and/or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.
New Accounting Pronouncements
For recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as ofSeptember 25, 2021 , refer to Note 12 to the Condensed Consolidated Financial Statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.
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