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 28, 2019 (the "2019 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, 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 timing and acceptance of new products in the stores, the timing and mix of goods sold, purchase price volatility (including inflationary and deflationary pressures), the ability to increase sales at existing stores, the ability to manage growth and identify suitable locations, 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 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 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, 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 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 Item 1A of our 2019 10-K, Part II, Item 1A of the Quarterly Report on Form 10-Q for the quarter endedMarch 28, 2020 , 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 has been and continues to closely monitor the impact of the COVID-19
outbreak 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, rapidly providing personal protective
equipment to our team members, requiring the use of masks in our facilities,
rolling out additional functionality to support contactless shopping
experiences, adding services for cleaning and sanitation in our stores and
distribution centers, hiring additional team members to assist in promoting
social distancing and cleaning actions in our stores, and implementing remote
work plans at our store support center.
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Additionally, we have taken significant actions to support our team members during this pandemic including COVID-19 paid medical leave, 100% coverage of COVID-19 testing and treatment under our medical plan, and the payment of incremental appreciation bonuses for frontline team members of approximately$35 million fromMarch 16 to June 27 . EffectiveJune 28 we have implemented permanent wage increases for all of our hourly team members in our stores and distribution centers of a minimum of$1 per hour and are now providing a new benefit package for part-time team members, including medical, vision and dental coverage, paid sick time and life insurance. Further, we have also implemented annual restricted stock unit grants to more than 2,000 frontline salaried managers in our stores and distribution centers. These actions, among others, are intended to support our team members both during and after the COVID-19 pandemic. As further described in the results of operations for the three and six fiscal months endedJune 27, 2020 , our net sales have significantly increased due to unprecedented customer demand across all major product categories, channels, and geographic regions. However, the net incremental costs of doing business during this crisis have increased as a result of the aforementioned actions we have taken to support and ensure the safety and well-being of our team members and customers, and we believe these incremental costs will continue after the pandemic is over. OnJuly 23, 2020 we provided financial guidance for the results of operations expected for the third fiscal quarter endingSeptember 26, 2020 which reflected a continuation of the strong consumer demand for our products, albeit to a lesser extent than experienced during our second fiscal quarter. Additionally, we anticipate incurring incremental costs to respond to the COVID-19 pandemic, as well as costs associated with the previously announced permanent increase in compensation and benefits for our frontline team members, and incremental costs for strategic investments in our business. However, there are numerous uncertainties surrounding the pandemic and its impact on the economy and our business, as further described in the Risk Factors section of our 2019 10-K (as updated in Part II, Item 1A of the Quarterly Report on Form 10-Q for the quarter endedMarch 28, 2020 and Part II, Item 1A of this Quarterly Report on Form 10-Q), which make it difficult to predict the impact on our business, financial position, or results of operations for the remainder of fiscal 2020 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. Therefore, as previously disclosed, in an effort to strengthen our liquidity and preserve cash while navigating the COVID-19 pandemic, we suspended our share repurchase program effectiveMarch 12, 2020 and increased borrowings under our debt facilities as described in Note 5 to the Condensed Consolidated Financial Statements. 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 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.
Comparable Store Metrics
Comparable store metrics are a key performance indicator used in the retail
industry 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.
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Results of Operations
Fiscal Three Months (Second Quarter) Ended
Net sales for the second quarter of fiscal 2020 increased 35.0% to$3.18 billion from$2.35 billion for the second quarter of fiscal 2019. Comparable store sales for the second quarter of fiscal 2020 were$3.08 billion , a 30.5% increase as compared to the second quarter of fiscal 2019. Comparable store sales increased 3.2% in the second quarter of fiscal 2019. The comparable store sales results for the second quarter of fiscal 2020 included an increase in comparable average transaction value of 15.8% and an increase of 14.6% in comparable average transaction count, each as compared to the second quarter of fiscal 2019. The COVID-19 pandemic had a significant impact on consumer demand across all of the Company's major product categories as customers focused on the care of their homes, land and animals. Additionally, consumer demand in the quarter benefited from growth in new customer acquisition and the re-engagement of lapsed customers as a result of advertising campaigns focused on brand awareness, favorable spring and summer weather conditions across much of the country, and other factors such as government stimulus. These factors all led to a significant increase in comparable store sales which was driven by unprecedented demand for spring and summer seasonal categories along with exceptional growth in everyday merchandise, including consumable, usable and edible products. All geographic regions of the Company had robust comparable store sales growth. In addition, the Company's e-commerce sales experienced triple-digit sales growth as compared to the second quarter of fiscal 2019. In addition to comparable store sales growth for the second quarter of fiscal 2020, sales from stores open less than one year were$110.2 million for the second quarter of fiscal 2020, which represented 4.7 percentage points of the 35.0% increase over second quarter fiscal 2019 net sales. For the second quarter of fiscal 2019, sales from stores open less than one year were$71.6 million , which represented 3.2 percentage points of the 6.3% increase over second quarter fiscal 2018 net sales.
The following table summarizes store growth for the fiscal three months ended
Fiscal Three Months Ended
June 27, June 29,
Store Count Information: 2020 2019
Tractor Supply
Beginning of period 1,863 1,775
New stores opened 18 15
Stores closed - -
End of period 1,881 1,790
Petsense
Beginning of period 180 176
New stores opened 3 1
Stores closed (3) -
End of period 180 177
Consolidated, end of period 2,061 1,967
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 endedJune 27, 2020 andJune 29, 2019 : Percent ofNet Sales Fiscal Three Months EndedJune 27 ,June 29 ,
Product Category: 2020 2019
Livestock and Pet 43 % 45 %
Seasonal, Gift and Toy Products 26 24
Hardware, Tools and Truck 21 21
Clothing and Footwear 5 5
Agriculture 5 5
Total 100 % 100 %
Gross profit increased 41.0% to $1.16 billion for the second quarter of fiscal
2020 from $820.7 million for the second quarter of fiscal 2019. As a percent of
net sales, gross margin in the second quarter of fiscal 2020 increased 155 basis
points to 36.42% from the 34.87% in the second quarter of fiscal 2019. The
increase in gross margin was driven by lower depth and frequency of sales
promotions, favorable product mix and lower transportation costs as a percent of
net sales.
Selling, general and administrative ("SG&A") expenses, including depreciation
and amortization, increased 33.0% to $709.1 million for the second quarter of
fiscal 2020 from $533.2 million for the second quarter of fiscal 2019. As a
percent of net sales, SG&A expenses decreased 33 basis points to 22.32% for the
second quarter of fiscal 2020 from 22.65% for the second quarter of fiscal 2019.
The decrease in SG&A as a percent of net sales was primarily attributable to
leverage in occupancy and other fixed costs from the increase in comparable
store sales. The leverage from these SG&A expenses was partially offset by
incremental costs related to the COVID-19 pandemic and increased incentive
compensation given the Company's strong performance in the quarter. The Company
incurred incremental costs related to the COVID-19 pandemic of approximately $55
million , including appreciation wages for frontline team members as well as
additional labor hours and supply costs associated with cleaning and sanitation
measures related to COVID-19.
Operating income for the second quarter of fiscal 2020 increased 55.7% to
The effective income tax rate increased to 22.9% for the second quarter of fiscal 2020 compared to 22.4% for the second quarter of fiscal 2019. The primary driver for the increase in the Company's effective income tax rate was attributable to a reduction in the tax benefit associated with share-based compensation. The CARES Act was enacted in theU.S. onMarch 27, 2020 . We do not anticipate that the enactment of this legislation will significantly impact our full year effective tax rate in fiscal 2020; however, the legislation resulted in the deferral of certain tax payments. As a result of the foregoing factors, net income for the second quarter of fiscal 2020 increased 54.5% to$338.7 million , or$2.90 per diluted share, as compared to net income of$219.2 million , or$1.80 per diluted share, for the second quarter of fiscal 2019.
Fiscal Six Months (Second Quarter) Ended
Net sales increased 23.0% to$5.14 billion for the first six months of fiscal 2020 from$4.18 billion for the first six months of fiscal 2019. Comparable store sales for the first six months of fiscal 2020 were$4.98 billion , a 19.0% increase over the first six months of fiscal 2019. Comparable store sales increased 4.0% in the first six months of fiscal 2019. For the first six months of fiscal 2020, the comparable store sales results included an increase in comparable average transaction value of 11.7% and comparable average transaction count of 7.3%. Beginning inMarch 2020 , the COVID-19 pandemic had a significant impact on consumer demand across all of the Company's major product categories and geographic regions. All geographic regions of the Company had robust comparable store sales growth during the first six months of fiscal 2020. The increase in comparable store sales was driven by unprecedented demand for spring and summer seasonal categories along with exceptional growth in everyday merchandise, including consumable, usable and edible products. In addition to comparable store sales growth in the first six months of fiscal 2020, sales from stores open less than one year were$170.4 million in the first six months of fiscal 2020, which represented 4.1 percentage points of the 23.0% increase over the first six months of fiscal 2019 net sales. For the first six months of fiscal 2019, sales from stores open less than one year Page 22
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were
The following table summarizes store growth for the fiscal six months ended
Fiscal Six Months Ended
June 27, June 29,
Store Count Information: 2020 2019
Tractor Supply
Beginning of period 1,844 1,765
New stores opened 38 25
Stores closed (1) -
End of period 1,881 1,790
Petsense
Beginning of period 180 175
New stores opened 3 2
Stores closed (3) -
End of period 180 177
Consolidated, end of period 2,061 1,967
Stores relocated 1 1
The following table indicates the percentage of net sales represented by each of
our major product categories for the fiscal six months ended June 27, 2020 and
June 29, 2019 :
Percent of Net Sales
Fiscal Six Months Ended
June 27, June 29,
Product Category: 2020 2019
Livestock and Pet 47 % 48 %
Seasonal, Gift and Toy Products 22 21
Hardware, Tools and Truck 21 21
Clothing and Footwear 5 6
Agriculture 5 4
Total 100 % 100 %
Gross profit increased 26.6% to $1.82 billion from $1.44 billion in the first
six months of fiscal 2019, and gross margin increased to 35.40% from 34.38% in
the first six months of fiscal 2019. The increase in gross margin was driven by
the performance in the second quarter which improved as a result of lower depth
and frequency of sales promotions, favorable product mix and lower
transportation costs as a percent of net sales.
Total SG&A expenses, including depreciation and amortization, increased 20.4% to
$1.26 billion from $1.04 billion in the first six months of fiscal 2019. As a
percent of net sales, SG&A expenses decreased to 24.49% from 25.02% in the first
six months of fiscal 2019. The decrease in SG&A as a percent of net sales was
primarily attributable to leverage in occupancy and other fixed costs from the
increase in comparable store sales, partially offset by incremental costs
related to the COVID-19 pandemic and increased incentive compensation given the
Company's strong financial performance. The costs related to the COVID-19
pandemic were approximately $62 million during the first six months of fiscal
2020 which includes appreciation wages for frontline team members as well as
additional labor hours and supply costs associated with cleaning and sanitation
measures related to COVID-19.
Operating income for the first six months of fiscal 2020 increased 43.3% to
The effective income tax rate was 22.7% in the first six months of fiscal 2020
compared to 22.3% in the first six months of fiscal 2019. The primary driver
for the increase in the Company's effective income tax rate was attributable to
a reduction in
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the tax benefit associated with share-based compensation. The Company expects the full fiscal year 2020 effective tax rate to be in a range between 22.6% and 22.9%. The CARES Act was enacted in theU.S. onMarch 27, 2020 . We do not anticipate that the enactment of this legislation will significantly impact our full year effective tax rate in fiscal 2020; however, the legislation resulted in the deferral of certain tax payments. As a result of the foregoing factors, net income increased 42.7% to$422.5 million from$296.0 million in the first six months of fiscal 2019, and diluted earnings per share increased 48.6% to$3.61 from$2.43 in the first six months of fiscal 2019.
Liquidity and Capital Resources
In addition to normal operating expenses, our primary ongoing cash requirements are for new store expansion, remodeling and relocation programs, 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, finance and operating 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, finance and operating leases, and normal trade credit will be sufficient to fund its operations, including increased expenses associated with COVID-19, and its capital expenditure needs, including new store openings, store acquisitions, relocations and renovations, and distribution facility capacity, through the end of fiscal 2020. Working Capital AtJune 27, 2020 , the Company had working capital of$873.1 million , which increased$332.8 million fromDecember 28, 2019 , and increased$206.7 million fromJune 29, 2019 . The shifts in working capital were attributable to changes in the following components of current assets and current liabilities (in millions): June 27, December 28, June 29, 2020 2019 Variance 2019 Variance Current assets: Cash and cash equivalents$ 1,206.4 $ 84.2 $ 1,122.2 $ 104.0 $ 1,102.4 Inventories 1,688.5 1,602.8 85.7 1,733.2 (44.7) Prepaid expenses and other current assets 135.2 100.9 34.3 95.0 40.2 Income taxes receivable - - - 5.6 (5.6) Total current assets 3,030.1 1,787.9 1,242.2 1,937.8 1,092.3 Current liabilities: Accounts payable 1,003.7 643.0 360.7 681.6 322.1 Accrued employee compensation 77.4 39.8 37.6 26.9 50.5 Other accrued expenses 270.5 247.7 22.8 222.9 47.6 Current portion of long-term debt 380.0 30.0 350.0 22.5 357.5 Current portion of finance lease liabilities 4.3 4.0 0.3 3.7 0.6 Current portion of operating lease liabilities 287.3 277.1 10.2 264.7 22.6 Income taxes payable 133.8 6.0 127.8 49.1 84.7 Total current liabilities 2,157.0 1,247.6
909.4 1,271.4 885.6
Working capital $ 873.1 $ 540.3 $ 332.8 $ 666.4 $ 206.7
In comparison to December 28, 2019 , working capital as of June 27, 2020 , was
impacted most significantly by changes in cash and cash equivalents,
inventories, accounts payable, current portion of long-term debt, and income
taxes payable.
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•The increase in cash and cash equivalents was driven by significant net cash provided by operating activities in the first six months of fiscal 2020 and an increase in borrowings, net of repayments, under our debt facilities as we sought to strengthen liquidity and preserve cash while navigating the COVID-19 pandemic. These increases in cash and cash equivalents were partially offset by share repurchases, cash dividends paid to stockholders, and capital expenditures to support our strategic growth. •Inventories increased to support new store growth. Average inventory per store did not fluctuate significantly as the increases in inventory for normal seasonal patterns were offset by reduced inventory positions resulting from the increased demand associated with the strong comparable store sales performance in the second quarter of fiscal 2020. •The increase in accounts payable was strongly correlated to the significant increase in comparable store sales during the second quarter of fiscal 2020. A significant increase in the sales volumes and higher inventory turns resulted in an increase in the amount of inventory purchases that remain in accounts payable at quarter end. •The increase in the current portion of long-term debt was related to the new$350 million April 2020 Term Loan borrowing, which was executed in order to strengthen liquidity and preserve cash while navigating the COVID-19 pandemic. •The increase in income taxes payable is primarily the result of pre-tax income generated in the first six months of fiscal 2020, along with a deferral of certain income tax payments as a result of the CARES Act.
In comparison to
•The increase in cash and cash equivalents was driven by a significant year-over-year increase in net cash provided by operating activities as well as an increase in borrowings, net of repayments, under our debt facilities as we sought to strengthen liquidity and preserve cash while navigating the COVID-19 pandemic. •The increase in accounts payable resulted primarily from the purchase of additional inventory to support new store growth and increased sales volumes during the second quarter of fiscal 2020. However, the inventory balance did not increase at the same rate as accounts payable due to the significant increase in sales and inventory turns in the second quarter of fiscal 2020 which resulted in a year-over-year decrease in average inventory per store. •The increase in the current portion of long-term debt was related to the new$350 million April 2020 Term Loan borrowing, which was executed in order to strengthen liquidity and preserve cash while navigating the COVID-19 pandemic. •The increase in income taxes payable is primarily the result of a significant year-over-year increase in pre-tax income generated in the first six months of fiscal 2020, along with a deferral of certain income tax payments as a result of the CARES Act. Debt The following table summarizes the Company's outstanding debt as of the dates indicated (in millions): June 27, December 28, June 29, 2020 2019 2019 Senior Notes$ 150.0 $ 150.0 $ 150.0
Senior Credit Facility:
February 2016 Term Loan 135.0 145.0 150.0
June 2017 Term Loan 82.5 87.5 90.0
March 2020 Term Loan 200.0 - -
April 2020 Term Loan 350.0 - -
Revolving credit loans - 15.0 100.0
Total outstanding borrowings 917.5 397.5 490.0
Less: unamortized debt issuance costs (1.4) (1.0) (1.2)
Total debt 916.1 396.5 488.8
Less: current portion of long-term debt (380.0) (30.0) (22.5)
Long-term debt $ 536.1 $
366.5
Outstanding letters of credit $ 52.4 $
32.0
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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$993.1 million and$348.9 million in the first six months of fiscal 2020 and fiscal 2019, respectively. The$644.2 million increase in net cash provided by operating activities in the first six months of fiscal 2020 compared to the first six months of fiscal 2019 is due to changes in the following operating activities (in millions): Fiscal Six Months Ended June 27, June 29, 2020 2019 Variance Net income$ 422.5 $ 296.0 $ 126.5 Depreciation and amortization 104.0 94.8 9.2 Share-based compensation expense 14.4 18.4
(4.0)
Deferred income taxes (13.0) 10.2
(23.2)
Inventories and accounts payable 274.9 (82.1)
357.0
Prepaid expenses and other current assets (34.4) 19.4 (53.8) Accrued expenses 62.6 (49.0) 111.6 Income taxes 127.8 45.9 81.9 Other, net 34.3 (4.7) 39.0
Net cash provided by operating activities
The$644.2 million increase in net cash provided by operating activities in the first six months of fiscal 2020 compared with the first six months of fiscal 2019 resulted from a year-over-year increase in our net income as well as the net impact of changes in our operating assets and liabilities, principally due to the timing of accruals and related payments and a significant increase in inventory that remains in accounts payable due to the increased sales volume and inventory turns in the second quarter of fiscal 2020.
Investing Activities
Investing activities used net cash of$86.0 million and$82.9 million in the first six months of fiscal 2020 and fiscal 2019, respectively. The$3.1 million increase in net cash used in investing activities primarily reflects an increase in capital expenditures in the first six months of fiscal 2020 compared to fiscal 2019.
Capital expenditures for the first six months of fiscal 2020 and fiscal 2019 were as follows (in millions):
Fiscal Six Months Ended
June 27, June 29,
2020 2019
Information technology $ 36.0 $ 35.6
New and relocated stores and stores not yet opened 27.1 22.3
Existing stores 16.0 13.0
Distribution center capacity and improvements 6.0 11.8
Corporate and other 1.5 0.8
Total capital expenditures $ 86.6 $ 83.5
The spending on information technology represents continued support of our store
growth and our omni-channel initiatives, as well as improvements in security and
compliance, enhancements to our customer relationship management program, and
other strategic initiatives. As we continue throughout fiscal 2020, we intend to
prioritize our information technology capital expenditures to accelerate
initiatives to enhance safety and convenience for customers, including
initiatives such as Buy Online, Pickup In Store ; Buy Online, Deliver from Store;
Contactless Curbside Pickup; Contactless Payment capabilities; and additional
Mobile POS devices in all stores.
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Spending on existing stores principally reflects routine refresh activity. In the first six months of fiscal 2020, the Company opened 38 newTractor Supply stores compared to 25 newTractor Supply stores during the first six months of fiscal 2019. The Company also opened three newPetsense stores during the first six months of fiscal 2020 compared to two newPetsense stores during the first six months of fiscal 2019. We expect to open approximately 75 to 80 newTractor Supply stores and approximately 10 newPetsense stores during fiscal 2020, but the timing of new store openings in some areas may be delayed as a result of the COVID-19 pandemic, including local and state orders. For fiscal 2020, the Company expects capital expenditures to be approximately$300 million to$325 million , compared to its previous range of$225 million to$275 million , with the anticipated increase to support strategic growth initiatives related to space productivity and side lot improvements in certain existing store locations as well as new technology and service enhancements that are being implemented across the enterprise.
Financing Activities
Financing activities provided net cash of$215.0 million in the first six months of fiscal 2020 compared to using net cash of$248.2 million in the first six months of fiscal 2019. The$463.2 million change in net cash provided by financing activities in the first six months of fiscal 2020 compared to the first six months of fiscal 2019 is due to changes in the following (in millions): Fiscal Six Months Ended June 27, June 29, 2020 2019 Variance
Net borrowings and repayments under debt facilities
(263.2) (334.2) 71.0
Net proceeds from issuance of common stock 50.3 89.4 (39.1)
Cash dividends paid to stockholders (81.5) (79.7) (1.8)
Other, net (10.6)
(5.0) (5.6)
Net cash provided by/(used in) financing activities
The$463.2 million change in net cash provided by financing activities in the first six months of fiscal 2020 compared with the first six months of fiscal 2019 is due to an increase in net borrowings under debt facilities, which included the addition of the$200 million March 2020 Term Loan and the$350 million April 2020 Term Loan as described in Note 5 to the Condensed Consolidated Financial Statements. Additionally, we used less cash for the repurchase of common stock as we have suspended our share repurchase program effectiveMarch 12, 2020 . The incremental borrowings and suspension of our share repurchase program were both intended to strengthen our liquidity and preserve cash while navigating the COVID-19 pandemic.
Dividends
During the first six months of fiscal 2020 and fiscal 2019, the Board of Directors declared the following cash dividends:
Dividend Amount
Date Declared Per Share of Common Stock Record Date Date Paid
May 6, 2020 $ 0.35 May 26, 2020 June 9, 2020
February 5, 2020 $ 0.35 February 24, 2020 March 10, 2020
May 8, 2019 $ 0.35 May 28, 2019 June 11, 2019
February 6, 2019 $ 0.31 February 25, 2019 March 12, 2019
It is the present intention of the Board of Directors to continue to pay a
quarterly cash dividend; however, the declaration and payment of future
dividends will be determined by the 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 Board of Directors deems
relevant.
On August 5, 2020 , the Company's Board of Directors declared a quarterly cash
dividend of $0.40 per share of the Company's outstanding common stock. The
dividend will be paid on September 9, 2020 , to stockholders of record as of the
close of business on August 24, 2020 .
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Share Repurchase Program
The Company's Board of Directors has authorized common stock repurchases under a share repurchase program up to$4.5 billion , exclusive of any fees, commissions, or other expenses related to such repurchases. 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 or terminated at any time without prior notice. As ofJune 27, 2020 , the Company had remaining authorization under the share repurchase program of$1.22 billion , exclusive of any fees, commissions, or other expenses.
The Company has suspended the share repurchase program effective
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 six months endedJune 27, 2020 andJune 29, 2019 , respectively (in thousands, except per share amounts): Fiscal Six Months Fiscal Three Months Ended Ended June 27, June 29, June 27, June 29, 2020 2019 2020 2019 Total number of shares repurchased - 1,732 2,853 3,456 Average price paid per share $ -$ 103.27 $ 92.28 $ 96.69 Total cash paid for share repurchases $ -$ 178,916
Off-Balance Sheet Arrangements
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
At
At
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 - Impairment of long-lived assets - Self-insurance reserves - Impairment of
goodwill and other indefinite-lived
intangible assets
See the Notes to the Consolidated Financial Statements in our Annual Report on
Form 10-K for the fiscal year ended December 28, 2019 , 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.
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Index
New Accounting Pronouncements
Refer to Note 12 to the Condensed Consolidated Financial Statements for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as ofJune 27, 2020 .
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