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Dynamic quotes 
OFFON

TRACTOR SUPPLY COMPANY

(TSCO)
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TRACTOR SUPPLY CO /DE/ Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/04/2021 | 03:19pm EST

General


The following discussion and analysis should be read in conjunction with our
Annual Report on Form 10-K for the fiscal year ended December 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 September 25, 2021 and September 26, 2020


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 September 25, 2021 and September 26, 2020:

                                                Fiscal Three Months Ended
                                        September 25,               

September 26,

         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 ended September 25,
2021 and September 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 $297.2 million compared to $252.2 million in the third quarter of fiscal 2020.


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 $141.3 million as part of our share repurchase program and paid quarterly cash dividends totaling $59.4 million, returning $200.6 million to stockholders.

Fiscal Nine Months Ended September 25, 2021 and September 26, 2020


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
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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 September 25, 2021 and September 26, 2020:

                                                Fiscal Nine Months Ended
                                       September 25,               

September 26,

        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 $2.34 billion for the first nine months of fiscal 2021 from $1.95 billion for the first nine months of fiscal 2020. As a percent of net sales, SG&A expenses improved 34 basis

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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 $1.01 billion compared to $812.5 million in the first nine months of fiscal 2020.


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 $598.0 million as part of our share repurchase program and paid quarterly cash dividends totaling $179.8 million, returning $777.8 million to stockholders.

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


At September 25, 2021, the Company had working capital of $1.42 billion, which
decreased $93.0 million from December 26, 2020, and increased $383.6 million
from September 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 December 26, 2020, working capital as of September 25, 2021, was impacted most significantly by changes in cash and cash equivalents, inventories, and accounts payable.


•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 to September 26, 2020, working capital as of September 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.

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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 $ 871.8 $ 1,005.0 $ (133.2)




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.
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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       

$ 160.2 $ 221.1




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 new Tractor
Supply stores compared to 61 new Tractor Supply stores during the first nine
months of fiscal 2020. The Company also opened six new Petsense stores during
the first nine months of fiscal 2021 and fiscal 2020. We continue to expect to
open approximately 80 new Tractor Supply stores and approximately 10 new
Petsense 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 in
Navarre, 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 new Tractor
Supply stores and 10 new Petsense stores, as well as the construction of our new
distribution center in Navarre, 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.

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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 $ (720.6)

$ 182.9 $ (903.5)




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 March 12, 2020 until November 5, 2020.

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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Index

Share Repurchase Program


The Company's Board of Directors has authorized common stock repurchases under a
share repurchase program which was announced in February 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 from March 12, 2020 until November 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 of
September 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 ended September 25, 2021 and September 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

On February 17, 2021, the Company announced that it entered into an agreement to
acquire all of the outstanding equity interests of Orscheln 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 ended September 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 in Navarre, Ohio, which is
expected to be approximately 900,000 square feet and is currently anticipated to
be complete by the end of fiscal 2022. At September 25, 2021, the Company had
contractual commitments of approximately $93.8 million related to the
construction of this new distribution center.

At September 25, 2021, there were $46.5 million of outstanding letters of credit under the Senior Credit Facility.

                                    Page 28

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Index

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 with U.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 of September 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.

© Edgar Online, source Glimpses

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