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, 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 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 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, 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.
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
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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 nine fiscal months endedSeptember 26, 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. OnOctober 22, 2020 we provided financial guidance for the results of operations expected for the fourth fiscal quarter endingDecember 26, 2020 which reflected a continuation of the strong consumer demand for our products, albeit to a lesser extent than experienced during our second and third fiscal quarters. 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 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 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.
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 (Third Quarter) Ended
Net sales for the third quarter of fiscal 2020 increased 31.4% to$2.61 billion from$1.98 billion for the third quarter of fiscal 2019. Comparable store sales for the third quarter of fiscal 2020 were$2.51 billion , a 26.8% increase as compared to the third quarter of fiscal 2019. Net sales and comparable store sales increased 5.4% and 2.9% in the third quarter of fiscal 2019, respectively. The comparable store sales results for the third quarter of fiscal 2020 included an increase in comparable average transaction count of 14.3% and an increase in comparable average transaction value of 12.5%, each as compared to the third quarter of fiscal 2019. The COVID-19 pandemic continued to have a significant impact on consumer demand in the third quarter of fiscal 2020 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 favorable weather conditions across much of the country as well as growth in new customer acquisition and the re-engagement of lapsed customers as a result of advertising campaigns focused on brand awareness. These factors all led to a significant increase in comparable store sales which was driven by strong demand for everyday merchandise, including consumable, usable and edible products and robust growth for summer seasonal categories. All geographic regions of the Company had robust comparable store sales growth. In addition, the Company's e-commerce sales experienced triple-digit sales percentage growth as compared to the third quarter of fiscal 2019. In addition to comparable store sales growth for the third quarter of fiscal 2020, sales from stores open less than one year were$93.6 million for the third quarter of fiscal 2020, which represented 4.7 percentage points of the 31.4% increase over third quarter fiscal 2019 net sales. For the third quarter of fiscal 2019, sales from stores open less than one year were$50.0 million , which represented 2.7 percentage points of the 5.4% increase over third quarter fiscal 2018 net sales.
The following table summarizes store growth for the fiscal three months ended
Fiscal Three Months Ended
September 26, September 28,
Store Count Information: 2020 2019
Tractor Supply
Beginning of period 1,881 1,790
New stores opened 23 25
Stores closed - (1)
End of period 1,904 1,814
Petsense
Beginning of period 180 177
New stores opened 3 1
Stores closed - (2)
End of period 183 176
Consolidated, end of period 2,087 1,990
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 26, 2020 andSeptember 28, 2019 : Percent of Net Sales Fiscal Three Months Ended September 26, September 28, Product Category: 2020 2019 Livestock and Pet 48 % 49 % Hardware, Tools and Truck 23 23 Seasonal, Gift and Toy Products 19 18 Clothing and Footwear 5 5 Agriculture 5 5 Total 100 % 100 % Gross profit increased 36.6% to$948.0 million for the third quarter of fiscal 2020 from$694.2 million for the third quarter of fiscal 2019. As a percent of net sales, gross margin in the third quarter of fiscal 2020 increased 138 basis points to 36.37% from 34.99% in the third quarter of fiscal 2019. The increase in gross margin was driven by lower depth and frequency of sales promotions, less clearance activity, and lower transportation costs as a percent of net sales. Selling, general and administrative ("SG&A") expenses, including depreciation and amortization, increased 30.7% to$695.8 million for the third quarter of fiscal 2020 from$532.4 million for the third quarter of fiscal 2019. As a percent of net sales, SG&A expenses improved 14 basis points to 26.69% for the third quarter of fiscal 2020 from 26.83% for the third quarter of fiscal 2019. The decrease in SG&A as a percent of net sales was primarily attributable to leverage in occupancy, personnel and other operating costs from the increase in comparable store sales. The leverage in our personnel costs year-over-year was inclusive of the permanent wage and benefit increases for our store and distribution center team members that went into effect in the third quarter of fiscal 2020. The leverage from these SG&A expenses was partially offset by incremental costs related to the COVID-19 pandemic, investments in strategic initiatives including advertising and increased incentive compensation given the record sales and profit performance in the quarter with the majority allocated to the store teams. The incremental costs related to the COVID-19 pandemic of approximately$20 million included additional labor hours and supply costs dedicated to cleaning and sanitation to enhance the health and safety of team members and customers.
Operating income for the third quarter of fiscal 2020 increased 55.8% to
The effective income tax rate was 22.2% for the third quarter of both fiscal 2020 and 2019.
As a result of the foregoing factors, net income for the third quarter of fiscal 2020 increased 56.1% to$190.6 million , or$1.62 per diluted share, as compared to net income of$122.1 million , or$1.02 per diluted share, for the third quarter of fiscal 2019.
Fiscal Nine Months (Third Quarter) Ended
Net sales increased 25.7% to$7.74 billion for the first nine months of fiscal 2020 from$6.16 billion for the first nine months of fiscal 2019. Comparable store sales for the first nine months of fiscal 2020 were$7.49 billion , a 21.5% increase over the first nine months of fiscal 2019. Net sales and comparable store sales increased 6.6% and 3.6% in the first nine months of fiscal 2019, respectively. For the first nine months of fiscal 2020, the comparable store sales results included an increase in comparable average transaction value of 12.0% and comparable average transaction count of 9.6%. 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 nine 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 nine months of fiscal 2020, sales from stores open less than one year were$264.0 million in the first nine months of fiscal 2020, which represented 4.3 percentage points of the 25.7% increase over the first nine months of fiscal 2019 net sales. For the first nine 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 nine months ended
Fiscal Nine Months Ended
September 26, September 28,
Store Count Information: 2020 2019
Tractor Supply
Beginning of period 1,844 1,765
New stores opened 61 50
Stores closed (1) (1)
End of period 1,904 1,814
Petsense
Beginning of period 180 175
New stores opened 6 3
Stores closed (3) (2)
End of period 183 176
Consolidated, end of period 2,087 1,990
Stores relocated 1 2
The following table indicates the percentage of net sales represented by each of
our major product categories for the fiscal nine months ended September 26, 2020
and September 28, 2019 :
Percent of Net Sales
Fiscal Nine Months Ended
September 26, September 28,
Product Category: 2020 2019
Livestock and Pet 48 % 48 %
Hardware, Tools and Truck 21 21
Seasonal, Gift and Toy Products 21 20
Clothing and Footwear 5 6
Agriculture 5 5
Total 100 % 100 %
Gross profit increased 29.9% to $2.77 billion from $2.13 billion in the first
nine months of fiscal 2019, and gross margin increased 115 basis points to
35.73% from 34.58% in the first nine months of fiscal 2019. The increase in
gross margin was driven by lower depth and frequency of sales promotions, less
clearance merchandise and, to a lesser extent, favorable product mix and lower
transportation costs as a percent of net sales.
Total SG&A expenses, including depreciation and amortization, increased 23.9% to
$1.95 billion from $1.58 billion in the first nine months of fiscal 2019. As a
percent of net sales, SG&A expenses decreased to 25.23% from 25.60% in the first
nine months of fiscal 2019. The decrease in SG&A as a percent of net sales was
primarily attributable to leverage in occupancy, personnel, and other operating
costs from the increase in comparable store sales. The leverage in our personnel
costs year-over-year was inclusive of the permanent wage and benefit increases
for our store and distribution center team members that went into effect in the
third quarter of fiscal 2020. These improvements in our SG&A as a percent of net
sales were partially offset by incremental costs related to the COVID-19
pandemic, increased incentive compensation given the Company's strong financial
performance, and investments in strategic initiatives. The costs related to the
COVID-19 pandemic were approximately $82 million during the first nine months of
fiscal 2020 which includes appreciation wages for frontline team members as well
as additional labor hours and supply costs dedicated to cleaning and sanitation
to enhance the health and safety of team members and customers.
Operating income for the first nine months of fiscal 2020 increased 47.0% to
$812.5 million compared to $552.8 million in the first nine months of fiscal
2019.
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The effective income tax rate was 22.6% in the first nine months of fiscal 2020 compared to 22.2% in the first nine months of fiscal 2019. The primary driver for the increase in the Company's effective income tax rate was attributable to a reduction in the impact of 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 22.5% and 22.7%. 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 46.6% to$613.1 million from$418.2 million in the first nine months of fiscal 2019, and diluted earnings per share increased 51.6% to$5.23 from$3.45 in the first nine 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, distribution facility capacity, and information technology improvements, through the end of fiscal 2020.
Working Capital
AtSeptember 26, 2020 , the Company had working capital of$1.04 billion , which increased$498.0 million fromDecember 28, 2019 , and increased$284.5 million fromSeptember 28, 2019 . The shifts in working capital were attributable to changes in the following components of current assets and current liabilities (in millions): September 26, December 28, September 28, 2020 2019 Variance 2019 Variance Current assets: Cash and cash equivalents$ 1,112.0 $ 84.2 $ 1,027.8 $ 82.6$ 1,029.4 Inventories 1,915.0 1,602.8 312.2 1,812.8 102.2 Prepaid expenses and other current assets 136.1 100.9 35.2 104.5 31.6 Income taxes receivable 7.8 - 7.8 5.6 2.2 Total current assets 3,170.9 1,787.9 1,383.0 2,005.5 1,165.4 Current liabilities: Accounts payable 1,056.9 643.0 413.9 679.8 377.1 Accrued employee compensation 120.4 39.8 80.6 49.2 71.2 Other accrued expenses 274.2 247.7 26.5 218.8 55.4 Current portion of long-term debt 380.0 30.0 350.0 30.0 350.0 Current portion of finance lease liabilities 4.4 4.0 0.4 3.9 0.5 Current portion of operating lease liabilities 294.8 277.1 17.7 270.0 24.8 Income taxes payable 1.9 6.0 (4.1) - 1.9 Total current liabilities 2,132.6 1,247.6 885.0 1,251.7 880.9 Working capital$ 1,038.3 $ 540.3 $ 498.0 $ 753.8 $ 284.5 Page 24
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In comparison toDecember 28, 2019 , working capital as ofSeptember 26, 2020 , was impacted most significantly by changes in cash and cash equivalents, inventories, accounts payable, current portion of long-term debt, and accrued employee compensation. •The increase in cash and cash equivalents was driven by significant net cash provided by operating activities in the first nine 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, capital expenditures to support our strategic growth, and cash dividends paid to stockholders. •The increase in inventories resulted primarily from an increase in average inventory per store due to normal seasonal patterns as well as the purchase of additional inventory to support new store growth. •The increase in accounts payable was strongly correlated to the significant increase in inventory as well as strong comparable store sales during the third quarter of fiscal 2020. The sales performance during the third quarter drove an increase in inventory purchases and produced high inventory turns, resulting 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 accrued employee compensation was primarily due to incentive accruals given the strong year-to-date financial performance in fiscal 2020 and, to a lesser extent, the timing of other payroll accruals and related payments. In comparison toSeptember 28, 2019 , working capital as ofSeptember 26, 2020 , was impacted most significantly by changes in cash and cash equivalents, inventories, accounts payable, current portion of long-term debt, and accrued employee compensation. •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 and a reduced amount of year-over-year share repurchases as we sought to strengthen liquidity and preserve cash while navigating the COVID-19 pandemic. •The increase in inventories resulted primarily from the purchase of additional inventory to support new store growth as average inventory per store did not fluctuate significantly year-over-year. •The increase in accounts payable resulted primarily from the purchase of additional inventory to support new store growth and increased sales volumes during the third 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 third quarter of fiscal 2020 which resulted in a year-over-year 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 accrued employee compensation was primarily due to higher year-over-year incentive accruals given the strong year-to-date financial performance in fiscal 2020. Page 25
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Debt
The following table summarizes the Company's outstanding debt as of the dates indicated (in millions):
September 26, December 28, September 28,
2020 2019 2019
Senior Notes $ 150.0 $ 150.0 $ 150.0
Senior Credit Facility:
February 2016 Term Loan 130.0 145.0 150.0
June 2017 Term Loan 80.0 87.5 90.0
March 2020 Term Loan 200.0 - -
April 2020 Term Loan 350.0 - -
Revolving credit loans - 15.0 255.0
Total outstanding borrowings 910.0 397.5 645.0
Less: unamortized debt issuance costs (0.7) (1.0) (1.1)
Total debt 909.3 396.5 643.9
Less: current portion of long-term debt (380.0) (30.0) (30.0)
Long-term debt $ 529.3 $ 366.5 $ 613.9
Outstanding letters of credit $ 50.4 $ 32.0 $ 34.0
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$1.0 billion and$414.3 million in the first nine months of fiscal 2020 and fiscal 2019, respectively. The$590.7 million increase in net cash provided by operating activities in the first nine months of fiscal 2020 compared to the first nine months of fiscal 2019 is due to changes in the following operating activities (in millions): Fiscal Nine Months Ended September 26, September 28, 2020 2019 Variance Net income$ 613.1 $ 418.2 $ 194.9 Depreciation and amortization 158.6 144.6 14.0 Share-based compensation expense 27.0 25.8 1.2 Deferred income taxes (3.7) 8.5 (12.2) Inventories and accounts payable 101.6 (163.4) 265.0 Prepaid expenses and other current assets (35.2) 10.0 (45.2) Accrued expenses 100.9 (26.4) 127.3 Income taxes (11.9) (3.3) (8.6) Other, net 54.6
0.3 54.3
Net cash provided by operating activities
The$590.7 million increase in net cash provided by operating activities in the first nine months of fiscal 2020 compared with the first nine 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 third quarter of fiscal 2020. Page 26
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Investing Activities
Investing activities used net cash of$160.2 million and$142.0 million in the first nine months of fiscal 2020 and fiscal 2019, respectively. The$18.1 million increase in net cash used in investing activities primarily reflects an increase in capital expenditures in the first nine months of fiscal 2020 compared to fiscal 2019.
Capital expenditures for the first nine months of fiscal 2020 and fiscal 2019 were as follows (in millions):
Fiscal Nine Months Ended
September 26, September 28,
2020 2019
Information technology $ 72.6 $ 66.5
New and relocated stores and stores not yet opened 43.8 38.6
Existing stores 30.6 23.5
Distribution center capacity and improvements 11.6 14.3
Corporate and other 2.7 1.4
Total capital expenditures $ 161.3 $ 144.3
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; additional Mobile
POS devices in all stores; and improvements to our in-store wireless internet.
In the first nine months of fiscal 2020, the Company opened 61 new Tractor
Supply stores compared to 50 new Tractor Supply stores during the first nine
months of fiscal 2019. The Company also opened six new Petsense stores during
the first nine months of fiscal 2020 compared to three new Petsense stores
during the first nine months of fiscal 2019. We expect to open approximately 80
new Tractor Supply stores and approximately 10 new Petsense 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.
Spending for existing stores principally reflects routine refresh activity.
However, the increased spend for existing stores in the first nine months of
fiscal 2020 as compared to the first nine months of fiscal 2019 is driven by
strategic initiatives in select stores including security enhancements, space
productivity and side lot improvements.
For fiscal 2020, the Company expects capital expenditures to be approximately
$300 million to $325 million , as we continue to support our 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$182.9 million in the first nine months of fiscal 2020 compared to using net cash of$276.0 million in the first nine months of fiscal 2019. The$458.9 million change in net cash provided by financing activities in the first nine months of fiscal 2020 compared to the first nine months of fiscal 2019 is due to changes in the following (in millions): Fiscal Nine Months Ended September 26, September 28, 2020 2019 Variance
Net borrowings and repayments under debt facilities
$ 236.3 $ 276.2 Repurchase of common stock (263.2) (490.0) 226.8 Net proceeds from issuance of common stock 73.8 105.5 (31.7) Cash dividends paid to stockholders (128.0) (121.2) (6.8) Other, net (12.2) (6.6) (5.6)
Net cash provided by/(used in) financing activities
$ (276.0) $ 458.9 Page 27
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The$458.9 million change in net cash provided by financing activities in the first nine months of fiscal 2020 compared with the first nine 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 nine months of fiscal 2020 and fiscal 2019, 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 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
August 7, 2019 $ 0.35 August 26, 2019 September 10, 2019
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 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 deems relevant.
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 of
September 26, 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 nine months endedSeptember 26, 2020 andSeptember 28, 2019 , respectively (in thousands, except per share amounts): Fiscal Nine Months Fiscal Three Months Ended Ended September 26, September 28, September 26, September 28, 2020 2019 2020 2019 Total number of shares repurchased - 1,470 2,853 4,926 Average price paid per share $ -$ 105.97 $ 92.28 $ 99.46 Total cash paid for share repurchases $ -$ 155,742
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.
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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.
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 ofSeptember 26, 2020 .
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