tsco-20230401

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended			April 1, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from						to

Commission file number 000-23314

TRACTOR SUPPLY COMPANY

(Exact Name of Registrant as Specified in Its Charter)

Delaware

13-3139732

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

5401 Virginia Way, Brentwood, Tennessee 37027

(Address of Principal Executive Offices and Zip Code)

(615) 440-4000

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.008 par value

TSCO

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.


Class						Outstanding at April 24, 2023
Common Stock, $0.008 par value						109,568,348

TRACTOR SUPPLY COMPANY

INDEX


		Page No.

PART I.	Financial Information	3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets (unaudited) – April 1, 202 3 , December 31 , 202 2 and March 2 6 , 20 2 2	3
	Condensed Consolidated Statements of Income (unaudited) – For the Fiscal Three Months Ended April 1, 2023 and March 2 6 , 2022	4
	Condensed Consolidated Statements of Comprehensive Income (unaudited) – For the Fiscal Three Months Ended April 1, 2023 and March 2 6, 2022	5
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) – For the Fiscal Three Months Ended April 1, 2023 and March 26, 2022	6
	Condensed Consolidated Statements of Cash Flows (unaudited) – For the Fiscal Three Months Ended April 1, 2023 and March 26, 2022	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

PART II.	Other Information	25
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26
Signature		27

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(Unaudited)


	April 1,		December 31,		March 26,
	2023		2022		2022
ASSETS
Current assets:
Cash and cash equivalents	$	190,078	$	202,502	$	405,432

Inventories	3,030,712		2,709,597		2,568,179
Prepaid expenses and other current assets	235,510		245,676		185,634
Income taxes receivable	2,621		—		9,030
Total current assets	3,458,921		3,157,775		3,168,275
Property and equipment, net	2,144,769		2,083,616		1,655,750
Operating lease right-of-use assets	2,950,610		2,953,801		2,744,095
Goodwill and other intangible assets	253,262		253,262		55,520

Other assets	41,253		41,536		63,168
Total assets	$	8,848,815	$	8,489,990	$	7,686,808
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,526,540	$	1,398,288	$	1,341,645
Accrued employee compensation	21,507		120,302		49,124
Other accrued expenses	472,742		498,575		445,079

Current portion of finance lease liabilities	2,818		3,179		4,042
Current portion of operating lease liabilities	313,809		346,397		359,774
Income taxes payable	12,284		9,471		—

Total current liabilities	2,349,700		2,376,212		2,199,664
Long-term debt	1,601,563		1,164,056		986,896
Finance lease liabilities, less current portion	33,831		34,651		36,649
Operating lease liabilities, less current portion	2,751,756		2,721,877		2,529,605
Deferred income taxes	76,450		30,775		37,487

Other long-term liabilities	120,969		120,003		106,485
Total liabilities	6,934,269		6,447,574		5,896,786
Stockholders’ equity:
Preferred stock	—		—		—
Common stock	1,417		1,415		1,413
Additional paid-in capital	1,262,775		1,261,283		1,204,294
Treasury stock	(5,053,077)		(4,855,909)		(4,452,026)
Accumulated other comprehensive income	9,438		11,275		7,338
Retained earnings	5,693,993		5,624,352		5,029,003
Total stockholders’ equity	1,914,546		2,042,416		1,790,022
Total liabilities and stockholders’ equity	$	8,848,815	$	8,489,990	$	7,686,808

Preferred Stock (shares in thousands): $1.00 par value; 40 shares authorized; no shares were issued or outstanding during any period presented.

Common Stock (shares in thousands): $0.008 par value; 400,000 shares authorized for all periods presented. 177,151, 176,876, and 176,679 shares issued; 109,660, 110,251, and 112,075 shares outstanding at April 1, 2023, December 31, 2022, and March 26, 2022, respectively.

Treasury Stock (at cost, shares in thousands): 67,491, 66,625, and 64,604 shares at April 1, 2023, December 31, 2022, and March 26, 2022, respectively.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(Unaudited)


	For the Fiscal Three
	Months Ended
	April 1, 2023		March 26, 2022
Net sales	$	3,299,225	$	3,024,132
Cost of merchandise sold	2,129,317		1,967,623
Gross profit	1,169,908		1,056,509
Selling, general and administrative expenses	828,235		734,577
Depreciation and amortization	97,233		77,646

Operating income	244,440		244,286
Interest expense, net	12,680		7,069
Income before income taxes	231,760		237,217
Income tax expense	48,672		49,990
Net income	$	183,088	$	187,227

Net income per share – basic	$	1.66	$	1.66
Net income per share – diluted	$	1.65	$	1.65

Weighted average shares outstanding:
Basic	110,045		112,531
Diluted	110,781		113,504

Dividends declared per common share outstanding	$	1.03	$	0.92

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)


	For the Fiscal Three
	Months Ended
	April 1, 2023		March 26, 2022
Net income	$	183,088	$	187,227
Other comprehensive (loss) / income:
Change in fair value of interest rate swaps, net of taxes	(1,837)		5,993
Total other comprehensive (loss) / income	(1,837)		5,993
Total comprehensive income	$	181,251	$	193,220

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Treasury Stock		Accum. Other Comp. Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Dollars
Stockholders’ equity at December 31, 2022	110,251	$	1,415	$	1,261,283	$	(4,855,909)	$	11,275	$	5,624,352	$	2,042,416
Common stock issuance under stock award plans & ESPP	275	2		8,621								8,623
Share-based compensation expense				14,514								14,514
Repurchase of shares to satisfy tax obligations				(21,643)								(21,643)
Repurchase of common stock	(866)					(197,168)						(197,168)
Cash dividends paid to stockholders										(113,447)		(113,447)
Change in fair value of interest rate swaps, net of taxes								(1,837)				(1,837)
Net income										183,088		183,088
Stockholders’ equity at April 1, 2023	109,660	$	1,417	$	1,262,775	$	(5,053,077)	$	9,438	$	5,693,993	$	1,914,546


	Common Stock			Additional Paid-in Capital		Treasury Stock		Accum. Other Comp. Income		Retained Earnings		Total Stockholders’ Equity
	Shares	Dollars
Stockholders’ equity at December 25, 2021	113,125	$	1,411	$	1,210,512	$	(4,155,846)	$	1,345	$	4,945,243	$	2,002,665
Common stock issuance under stock award plans & ESPP	308	2		7,908								7,910
Share-based compensation expense				12,316								12,316
Repurchase of shares to satisfy tax obligations				(26,442)								(26,442)
Repurchase of common stock	(1,358)					(296,180)						(296,180)
Cash dividends paid to stockholders										(103,467)		(103,467)
Change in fair value of interest rate swaps, net of taxes								5,993				5,993
Net income										187,227		187,227
Stockholders’ equity at March 26, 2022	112,075	$	1,413	$	1,204,294	$	(4,452,026)	$	7,338	$	5,029,003	$	1,790,022

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	For the Fiscal Three Months Ended
	April 1, 2023		March 26, 2022
Cash flows from operating activities:
Net income	$	183,088	$	187,227
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	97,233		77,646
(Gain)/loss on disposition of property and equipment	(139)		326
Share-based compensation expense	14,514		12,316
Deferred income taxes	45,675		39,924
Change in assets and liabilities:
Inventories	(321,115)		(376,987)
Prepaid expenses and other current assets	10,166		(21,516)
Accounts payable	128,252		186,015
Accrued employee compensation	(98,796)		(60,494)
Other accrued expenses	(39,243)		(28,463)
Income taxes	191		8,070
Other	(272)		35,002
Net cash provided by operating activities	19,554		59,066
Cash flows from investing activities:
Capital expenditures	(157,943)		(112,387)
Proceeds from sale of property and equipment	259		99

Net cash used in investing activities	(157,684)		(112,288)
Cash flows from financing activities:
Borrowings under debt facilities	747,000		—
Repayments under debt facilities	(310,000)		—


Principal payments under finance lease liabilities	(1,631)		(1,197)
Repurchase of shares to satisfy tax obligations	(21,643)		(26,442)
Repurchase of common stock	(183,196)		(296,180)
Net proceeds from issuance of common stock	8,623		7,910
Cash dividends paid to stockholders	(113,447)		(103,467)
Net cash provided by/(used in) financing activities	125,706		(419,376)
Net decrease in cash and cash equivalents	(12,424)		(472,598)
Cash and cash equivalents at beginning of period	202,502		878,030
Cash and cash equivalents at end of period	$	190,078	$	405,432

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized	$	9,274	$	4,404
Income taxes	1,955		3,897

Supplemental disclosures of non-cash activities:
Non-cash accruals for property and equipment	$	45,178	$	23,538
Increase of operating lease assets and liabilities from new or modified leases	84,740		37,694
Increase of finance lease assets and liabilities from new or modified leases	450		5,143

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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TRACTOR SUPPLY COMPANY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – General:

Nature of Business

Founded in 1938, Tractor Supply Company (the “Company,” “Tractor Supply,” “we,” “our,” or “us”) is the largest rural lifestyle retailer in the United States (“U.S.”). The Company is focused on supplying the needs of recreational farmers, ranchers, and all those who enjoy living the rural lifestyle (which we refer to as the “Out Here” lifestyle). The Company's stores are located primarily in towns outlying major metropolitan markets and in rural communities. The Company also owns and operates Petsense, LLC ("Petsense by Tractor Supply"), a small-box pet specialty supply retailer focused on meeting the needs of pet owners, primarily in small and mid-sized communities, and offering a variety of pet products and services. On October 12, 2022, the Company completed the acquisition of Orscheln Farm and Home, LLC (“Orscheln” or “Orscheln Farm and Home”) and will convert the 81 acquired Orscheln stores to Tractor Supply stores by the end of fiscal 2023. At April 1, 2023, the Company operated a total of 2,353 retail stores in 49 states (2,164 Tractor Supply and Orscheln retail stores and 189 Petsense by Tractor Supply retail stores) and also offered an expanded assortment of products through the Tractor Supply mobile application and online at TractorSupply.com and Petsense.com.

Basis of Presentation

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The results of operations for our interim periods are not necessarily indicative of results for the full fiscal year.

Recently Adopted Accounting Pronouncements

In September 2022, the Financial Accounting Standard Board issued Accounting Standards Update (“ASU”) 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations”. The ASU requires disclosure about an entity’s use of supplier finance programs, including the key terms of the program, amount of obligations outstanding at the end of the reporting period, and a rollforward of activity within the program during the period. The Company adopted this ASU in fiscal 2023, except for the disclosure of rollforward activity, which is effective on a prospective basis beginning in fiscal 2024.

Supplier Finance Program

The Company has an agreement with a third-party financial institution that allows certain participating suppliers the ability to finance payment obligations from the Company. The third-party financial institution has separate arrangements with the Company’s suppliers and provides them with the option to request early payment for invoices confirmed by the Company. The Company does not determine the terms or conditions of the arrangement between the third-party and its suppliers. The Company’s obligation to its suppliers, including amounts due and scheduled payment dates, are not impacted by the suppliers’ decisions to finance amounts under the arrangement. The Company’s outstanding payment obligations under the supplier finance program, which are included in accounts payable on the Company’s Consolidated Balance Sheets, were $30.8 million, $24.2 million, and $32.2 million at April 1, 2023, December 31, 2022, and March 26, 2022, respectively.

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Note 2 – Fair Value of Financial Instruments:

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

•Level 1 - defined as observable inputs such as quoted prices in active markets;

•Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

•Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company’s financial instruments consist of cash and cash equivalents, short-term credit card receivables, trade payables, debt instruments, and interest rate swaps. Due to their short-term nature, the carrying values of cash and cash equivalents, short-term credit card receivables, and trade payables approximate current fair value at each balance sheet date.

As described in further detail in Note 6 to the Condensed Consolidated Financial Statements, the Company had $1.62 billion, $1.18 billion and $1.00 billion in borrowings under its debt facilities at April 1, 2023, December 31, 2022 and March 26, 2022, respectively. The fair value of the Company's $150 million 3.70% Senior Notes due 2029 (the "3.70% Senior Notes") and the borrowings under the Company's revolving credit facility (the "Revolving Credit Facility") were determined based on market interest rates (Level 2 inputs). The carrying value of borrowings in the 3.70% Senior Notes and the Revolving Credit Facility approximate fair value for each period reported.

The fair value of the Company's $650 million 1.75% Senior Notes due 2030 (the "1.75% Senior Notes") is determined based on quoted prices in active markets, which are considered Level 1 inputs. The carrying value and the fair value of the 1.75% Senior Notes, net of discounts, were as follows (in thousands):

SEC Form 10-Q filed by Tractor Supply Company