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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 27, 1997
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OR
[ ] 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
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TRACTOR SUPPLY COMPANY
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3139732
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
320 Plus Park Boulevard, Nashville, Tennessee 37217
- --------------------------------------------- ------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (615) 366-4600
--------------------
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 X NO
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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 October 25, 1997
- ------------------------------ -------------------------------
Common Stock, $.008 par value 8,731,218
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TRACTOR SUPPLY COMPANY
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements:
Balance Sheets -
September 27, 1997 and December 28, 1996 3
Statements of Income -
For the Fiscal Three and Nine Months Ended
September 27, 1997 and September 28, 1996 4
Statements of Cash Flows -
For the Fiscal Nine Months Ended
September 27, 1997 and September 28, 1996 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 9
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRACTOR SUPPLY COMPANY
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 27, DECEMBER 28,
1997 1996
----------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 8,302 $ 12,948
Accounts receivable, net...................................................... 5,903 4,930
Inventories................................................................... 168,637 124,082
Prepaid expenses.............................................................. 4,252 1,657
-------- --------
Total current assets................................................... 187,094 143,617
-------- --------
Land............................................................................ 7,399 10,178
Buildings and improvements...................................................... 45,071 40,114
Machinery and equipment......................................................... 20,984 18,117
-------- --------
73,454 68,409
Accumulated depreciation and amortization....................................... (22,292) (18,883)
-------- --------
Property and equipment, net................................................... 51,162 49,526
-------- --------
Deferred income taxes........................................................... 1,064 1,064
Other assets.................................................................... 1,536 1,375
-------- --------
Total assets........................................................... $240,856 $195,582
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................................. $ 74,412 $ 47,591
Accrued expenses.............................................................. 17,791 15,973
Current maturities of long-term debt.......................................... 665 665
Current portion of capital lease obligations.................................. 990 1,020
Income taxes currently payable................................................ 528 2,897
Deferred income taxes......................................................... 9,517 9,517
-------- --------
Total current liabilities.............................................. 103,903 77,663
-------- --------
Revolving credit loan........................................................... 26,763 12,000
Other long-term debt............................................................ 5,422 5,914
Capital lease obligations....................................................... 2,528 3,252
Other long-term liabilities..................................................... 638 949
Excess of fair value of assets acquired over cost less accumulated
amortization of $2,650 and $2,515, respectively............................... 940 1,075
Redeemable preferred stock...................................................... 0 1,763
Stockholders' equity:
Common stock, 100,000,000 shares authorized; $.008 par value; 8,726,659
and 8,718,000 shares issued and outstanding in 1997 and 1996, respectively.. 70 70
Additional paid in capital.................................................... 41,846 1,685
Retained earnings............................................................. 58,746 51,211
-------- --------
Total stockholders' equity.................................................. 100,662 92,966
-------- --------
Total liabilities and stockholders' equity............................. $240,856 $195,582
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
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TRACTOR SUPPLY COMPANY
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- --------------------
SEPT. 27, SEPT. 28, SEPT. 27, SEPT. 28,
1997 1996 1997 1996
-------------------- --------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales....................................... $118,438 $104,990 $374,340 $332,864
Cost of merchandise sold........................ 88,165 77,860 278,655 247,375
-------- -------- -------- --------
Gross margin............................... 30,273 27,130 95,685 85,489
Selling, general and administrative expenses.... 25,891 21,791 77,985 65,801
Depreciation and amortization................... 1,161 883 3,294 2,472
-------- -------- -------- --------
Income from operations..................... 3,221 4,456 14,406 17,216
Interest expense, net........................... 633 632 1,703 1,867
-------- -------- -------- --------
Income before income taxes................. 2,588 3,824 12,703 15,349
Income tax provision............................ 1,036 1,538 5,089 6,159
-------- -------- -------- --------
Net income................................. $ 1,552 $ 2,286 $ 7,614 $ 9,190
======== -------- ======== ========
Net income per share....................... $ .18 $ .26 $ .87 $ 1.04
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
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TRACTOR SUPPLY COMPANY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL NINE MONTHS ENDED
--------------------------------
SEPT. 27, SEPT. 28,
1997 1996
----------- ----------
(UNAUDITED)
<S> <S> <C>
Cash flows from operating activities:
Net income............................................................. $ 7,614 $ 9,190
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense.............................. 3,294 2,472
Loss (gain) on sale of property and equipment...................... (30) (378)
Change in assets and liabilities:
Accounts receivable.............................................. (973) (946)
Inventories...................................................... (44,555) (21,271)
Prepaid expenses................................................. (2,606) 1,591
Accounts payable................................................. 26,821 19,815
Accrued expenses................................................. 1,839 2,105
Income taxes currently payable................................... (2,369) (1,165)
Other............................................................ (529) (269)
-------- -------
Net cash provided by (used in) operating activities...................... (11,494) 11,144
-------- -------
Cash flows from investing activities:
Capital expenditures................................................. (6,624) (5,342)
Proceeds from sale of property and equipment......................... 1,636 1,816
-------- -------
Net cash used in investing activities.................................... (4,988) (3,526)
-------- -------
Cash flows from financing activities:
Net borrowings (repayments) under revolving credit loan.............. 14,763 1,407
Principal payments under capital lease obligations................... (754) (674)
Repayment of long-term debt.......................................... (492) (444)
Proceeds from issuance of common stock............................... 161 0
Payment of preferred stock dividends................................. (79) (150)
Repurchase of preferred stock........................................ (1,763) (1,762)
-------- -------
Net cash provided by (used in) financing activities...................... 11,836 (1,623)
-------- -------
Net increase (decrease) in cash and cash equivalents..................... (4,646) 5,995
Cash and cash equivalents at beginning of period......................... 12,948 5,087
-------- -------
Cash and cash equivalents at end of period............................... $ 8,302 $11,082
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................................... $ 1,835 $ 1,867
Income taxes........................................................... 7,282 7,337
</TABLE>
The accompanying notes are an integral part of this statement.
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TRACTOR SUPPLY COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
The accompanying interim financial statements have been prepared without audit,
and certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted, although the Company believes that the
disclosures herein are adequate to make the information presented not
misleading. These statements should be read in conjunction with the Company's
annual report on Form 10-K for the fiscal year ended December 28, 1996. The
results of operations for the fiscal three and nine month periods are not
necessarily indicative of results for the full fiscal year.
In the opinion of management, the accompanying interim financial statements
contain all adjustments (consisting only of normal recurring accruals) necessary
for a fair statement of the Company's financial position as of September 27,
1997 and its results of operations for the fiscal three and nine month periods
ended September 27, 1997 and September 28, 1996 and its cash flows for the
fiscal nine month periods ended September 27, 1997 and September 28, 1996.
Inventories
The accompanying unaudited financial statements have been prepared without full
physical inventories. The value of the Company's inventories was determined
using the lower of last-in, first-out (LIFO) cost or market. If the first-in,
first-out (FIFO) method of accounting for inventory had been used, inventories
would have been approximately $7,158,000 and $6,163,000 higher than reported at
September 27, 1997 and December 28, 1996, respectively. Since LIFO costs can
only be determined at the end of each fiscal year when inflation rates and
inventory levels are finalized, estimates of LIFO inventory costs are used for
interim financial reporting.
Net Income Per Share
Net income per share for the fiscal three and nine month periods ended September
27, 1997 and September 28, 1996 is calculated based on the weighted average
number of shares of common stock outstanding of 8,726,659 for the fiscal three
month period ended September 27, 1997, 8,723,775 for the fiscal nine month
period ended September 27, 1997 and 8,718,000 for the fiscal three and nine
month periods ended September 28, 1996, after giving effect to preferred stock
dividends of $55,732 for the fiscal nine month period ended September 27, 1997,
and $55,722 and $126,222 for the fiscal three and nine month periods ended
September 28, 1996, respectively. Stock options have been excluded as they are
anti-dilutive.
NOTE 2 - SEASONALITY:
The Company's business is highly seasonal, with a significant portion of its
sales and a majority of its income generated in the second fiscal quarter. The
Company typically operates at a loss in the first fiscal quarter.
NOTE 3 - PREFERRED STOCK REPURCHASE:
On May 23, 1997, the Company repurchased 1,763 shares of the Series B Preferred
Stock (constituting all of the then outstanding shares of Series B Preferred
Stock) at a total repurchase price of approximately $1,772,000 (including
accrued dividends totaling approximately $9,000).
NOTE 4 - COMMON STOCK:
At the Company's Annual Meeting of Stockholders held in April 1997, the
stockholders of the Company approved (i) the Company's 1996 Associate Stock
Purchase Plan; (ii) an amendment to the Company's Restated Certificate of
Incorporation, as amended, to increase the number of authorized shares of Common
Stock from 9,500,000 shares to 100,000,000 shares and (iii) an amendment to the
Company's 1994 Stock Option Plan to increase the number of shares of Common
Stock reserved for issuance thereunder from 250,000 shares to 1,000,000 shares.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis describes certain factors affecting
Tractor Supply Company's (the "Company") results of operations for the fiscal
three and nine month periods ended September 27, 1997 and September 28, 1996,
and significant developments affecting financial condition since the end of the
fiscal year, December 28, 1996, and should be read in conjunction with the
Company's annual report on Form 10-K for the fiscal year ended December 28,
1996. The following discussion and analysis also contains certain historical and
forward-looking information. The forward-looking statements 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 the Company expects or
anticipates will or may occur in the future, including such things as future
capital expenditures (including the amount and nature thereof), business
strategy, expansion and growth of the Company's business operations and other
such matters are forward-looking statements. To take advantage of the safe
harbor provided by the Act, the Company is identifying certain factors that
could cause actual results to differ materially from those expressed in any
forward-looking statements, whether oral or written, made by or on behalf of the
Company.
All phases of the Company's operations are subject to influences outside its
control. Any one, or a combination, of these factors could materially affect the
results of the Company's operations. These factors include general economic
cycles affecting consumer spending, weather factors, operating factors affecting
customer satisfaction, consumer debt levels, pricing and other competitive
factors, the ability to identify suitable locations and negotiate favorable
lease agreements on new and relocated stores, the timing and acceptance of new
products in the stores, the mix of goods sold, the continued availability of
favorable credit sources and other capital market conditions and the seasonality
of the Company's business. Forward-looking statements made by or on behalf of
the Company are based on a knowledge of its business and the environment in
which it operates, but because of the factors listed above, 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 by the Company will be realized or, even if
substantially realized, that they will have the expected consequences to or
effects on the Company or its business and operations.
RESULTS OF OPERATIONS
The Fiscal Three Months (Third quarter) and Nine months Ended September 27, 1997
and September 28, 1996
Net sales increased 12.8% to $118.4 million for the third quarter of fiscal 1997
from $105.0 million for the third quarter of fiscal 1996. Net sales rose 12.5%
to $374.3 million for the first nine months of fiscal 1997 from $332.9 million
for the first nine months of fiscal 1996. The sales increases resulted primarily
from new stores as comparable store sales (excluding relocations, using all
stores open at least one year) increased 3.5% for the third quarter of fiscal
1997 and increased 2.3% for the first nine months of fiscal 1997 over the
corresponding periods in the prior fiscal year. The Company opened 18 new retail
farm stores (two in the third quarter of fiscal 1997), closed two stores (both
in the third quarter of fiscal 1997), and relocated one store during the first
nine months of fiscal 1997. The Company opened 19 new retail farm stores (none
in the third quarter of fiscal 1996) and relocated three stores during the first
nine months of fiscal 1996. Comparable store sales for the third quarter of
fiscal 1997 rose 3.5% despite unseasonably warm weather in September, increasing
competitive pressures and the significant amount of merchandising "relays" that
were undertaken in August and September. As a result, high single-digit
comparable store sales increases in July were offset by low comparable store
sales increases in August and September. At September 27, 1997, the Company
operated 224 retail farm stores (in 26 states) versus 204 stores (in 24 states)
at September 28, 1996. The Company plans to open four additional new stores
during the fourth quarter of fiscal 1997, three of which are scheduled to open
in October.
During the third quarter, the Company (i) completed several significant
merchandising "relays" (the new economy feed line was rolled out to
approximately 100 additional stores; a significantly enhanced animal health
product line was rolled out to approximately 150 stores; the completely revamped
equine product line was rolled out to 100 additional stores and the new ladies
workwear line of clothing was rolled out to 100 additional stores) and (ii)
further strengthened the management team with the hiring of a new senior vice
president in charge of merchandising and marketing and the placement of a third
regional vice president (the Company expects to complete the search for a senior
vice president in charge of operations by year-end). The Company is positioned
to enter the important
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fourth quarter fall/winter selling season with an aggressive inventory position
(having increased the inventory position over originally planned amounts in
certain categories in an attempt to improve the in-stock position and fuel
comparable store sales). However, in light of the continued soft comparable
store sales performance, the Company is now refocusing some of its efforts to
improve gross margins and further tighten expense controls.
The gross margin rate for the third quarter of fiscal 1997 decreased .2
percentage points compared to the same period in the prior year as improved
gross margin rates in certain product categories (mainly work clothing) were
offset by lower volume rebates being recognized during the third quarter this
year (mainly due to timing) and higher shrinkage expense.
As a percentage of sales, selling, general and administrative ("SG&A") expenses
increased 1.2 percentage points to 21.9% of sales for the third quarter of
fiscal 1997 and increased 1.0 percentage point to 20.8% of sales for the first
nine months of fiscal 1997 primarily due to costs associated with new, relocated
and closed stores, the incremental costs of certain planned infrastructure
investments (such as the new point-of-sale system and related "frame relay"
costs) as well as from the leverage loss attributable to the soft comparable
store sales performance. On an absolute basis, SG&A expenses increased 18.8% to
$25.9 million for the third quarter of fiscal 1997 and increased 18.5% to $78.0
million for the first nine months of fiscal 1997. The increased dollar amounts
were primarily attributable to costs associated with new store openings and
relocations (new and relocated stores typically have considerably higher
occupancy costs, primarily rent, than existing stores). Depreciation and
amortization expense increased 31.5% and 33.3% over the prior year for the third
quarter and the first nine months of fiscal 1997, respectively, due mainly to
costs associated with new and relocated stores. Net interest expense remained
flat at $.6 million in the third quarter of fiscal 1997 and decreased 8.8% to
$1.7 million in the first nine months of fiscal 1997.
The Company's effective tax rate was 40.0% for the third quarter and 40.1% for
the first nine months of fiscal 1997, the same as the third quarter and first
nine months of fiscal 1996.
As a result of the foregoing factors, net income for the third quarter of fiscal
1997 decreased 32.1% to $1.6 million from $2.3 million for the third quarter of
fiscal 1996 and net income per share for the third quarter of fiscal 1997
decreased 30.8% to $.18 per share from $.26 per share for the third quarter of
last year. During the second quarter of fiscal 1997, the Company recorded a
reserve for management reorganization costs totaling approximately $1.2 million
pretax (or approximately $.7 million net of tax). Net income for the first nine
months of fiscal 1997 decreased 17.1% to $7.6 million from $9.2 million for the
first nine months of fiscal 1996 and net income per share for the first nine
months of fiscal 1997 decreased 16.3% to $.87 per share from $1.04 per share
last year. Excluding the effect of the reserve for management reorganization
costs, net income for the first nine months of fiscal 1997 would have been
approximately $8.3 million and net income per share for the first nine months of
fiscal 1997 would have been approximately $.95 per share. As a percentage of
sales, net income decreased .9 percentage points to 1.3% of sales for the third
quarter of fiscal 1997 from 2.2% of sales for the third quarter of fiscal 1996
and decreased .8 percentage points to 2.0% of sales for the first nine months of
fiscal 1997 from 2.8% of sales for the first nine months of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
In addition to normal operating expenses, the Company's primary ongoing cash
requirements are those necessary for the Company's expansion, remodeling and
relocation programs, including inventory purchases and capital expenditures. The
Company's primary ongoing sources of liquidity are funds provided from
operations, commitments available under its revolving credit agreement and
short-term trade credit.
The Company's inventory and accounts payable levels typically build in the first
and again in the third fiscal quarters in anticipation of the spring and fall
selling seasons. At September 27, 1997, the Company's inventories had increased
$44.6 million to $168.6 million from $124.1 million at December 28, 1996. This
increase resulted primarily from planned inventory increases in certain seasonal
product lines, planned inventory increases for certain new merchandising
initiatives, additional inventory for new stores and, to a lesser extent, from
higher than planned inventory increases in certain other product lines (power
equipment and certain farm categories). Short-term trade credit, which
represents a source of financing for inventory, increased $26.8 million to $74.4
million at September 27, 1997 from $47.6 million at December 28, 1996. Trade
credit arises from the Company's vendors granting extended payment terms for
inventory purchases. Payment terms vary from 30 days to 180 days depending on
the inventory product.
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At September 27, 1997, the Company had working capital of $83.2 million, which
represented a $17.2 million increase from December 28, 1996. This increase
resulted primarily from an increase in inventories without a corresponding
increase in accounts payable, as well as an increase in trade accounts
receivable (mainly due to sales increases), an increase in prepaid expenses
(mainly due to timing of rent payments) and a decrease in income taxes payable
(mainly due to timing of payments), partially offset by an increase in accrued
expenses (mainly due to timing of payments) and a decrease in cash and cash
equivalents.
Operations used net cash of $11.5 million and provided net cash of $11.1 million
in the first nine months of fiscal 1997 and 1996, respectively. The increase in
net cash used in the first nine months of fiscal 1997 resulted primarily from
inventories increasing at a faster rate than accounts payable in the first nine
months of fiscal 1997 compared to the first nine months of fiscal 1996, as well
as from the timing of certain prepaid expenses and income taxes payable compared
to the prior year.
Cash used in investing activities of $5.0 million for the first nine months of
fiscal 1997 represented a $1.5 million increase from cash used in the first nine
months of fiscal 1996 of $3.5 million. The increase in cash used for capital
expenditures during the first nine months of fiscal 1997 compared to the prior
year (18 new stores were opened and one store was relocated during the first
nine months of fiscal 1997 compared with 19 new store openings and three
relocations during the first nine months of fiscal 1996) reflects the cost of
additional leasehold improvements and fixtures for new stores (new construction
represents a larger portion of new store additions in fiscal 1997 compared to
fiscal 1996) and, to a lesser extent, the effect of decreased proceeds from the
sale of property and equipment during the first nine months of fiscal 1997
compared to the first nine months of fiscal 1996.
Financing activities in the first nine months of fiscal 1997 provided $11.8
million in cash which represented a $13.5 million increase in net cash provided
over the $1.6 million in net cash used in the first nine months of fiscal 1996.
This increase in net cash provided resulted primarily from net borrowings under
the Credit Agreement of approximately $14.8 million during the first nine months
of fiscal 1997 compared to net borrowings of approximately $1.4 million during
the first nine months of fiscal 1996.
The Company believes that its cash flow from operations, borrowings available
under its Credit Agreement and short-term trade credit will be sufficient to
fund the Company's operations and its growth and expansion plans for the next
several years.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.25 Tractor Supply Company Restated 401(k) Retirement Plan (filed as
Exhibit 4.1 to Registrant's Registration Statement on Form S-3,
Registration No. 333-35317, filed with the Commission on September
10, 1997, and incorporated herein by reference).
10.26 Trust Agreement (filed as Exhibit 4.2 to Registrant's Registration
Statement on Form S-3, Registration No. 333-35317, filed with the
Commission on September 10, 1997, and incorporated herein by
reference).
10.35 Noncompetition Agreement, dated as of June 30, 1996, between the
Company and Joseph D. Maxwell.
10.36 Noncompetition Agreement, dated as of June 9, 1997, between the
Company and Gerald E. Newkirk.
27.1 Financial Data Schedule (only submitted to SEC in electronic
format).
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during the fiscal
quarter ended September 27, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRACTOR SUPPLY COMPANY
Date: October 31, 1997 By: /s/ Thomas O. Flood
---------------- ----------------------------------------------
Thomas O. Flood
Senior Vice President - Administration and
Finance, Treasurer and Chief Financial Officer
(Duly Authorized Officer & Principal
Financial Officer)
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EXHIBIT 10.35
NONCOMPETITION AGREEMENT
NONCOMPETITION AGREEMENT, dated as of the 30th day of June,
1996 (the "Agreement"), by and between Tractor Supply Company, a Delaware
corporation (the "Company"), and Joseph D. Maxwell (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is the former Vice President -
Marketing of the Company and has been actively involved in, and has been
instrumental in the success of, the business of the Company;
WHEREAS, the Executive resigned from his position effective
June 30, 1996, but continues to serve on the Company's Board of Directors; and
WHEREAS, the Company desires that the Executive not compete
with the Company, for a limited period of time, upon the terms and conditions
hereinafter provided.
NOW, THEREFORE, for and in consideration of the premises,
mutual covenants and agreements contained herein, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
.A.1. Noncompetition. During the period commencing on June 30,
1996 and ending on June 30, 2001 (the "Noncompetition Term"), the Executive
shall not, directly or indirectly, be associated with any entity whose primary
business is that of, or personally engage, whether as a director, officer,
employee, agent, consultant, partner, owner, independent contractor or
otherwise, in the business of, selling to the public on a retail basis goods of
the type then sold by the Company in any geographical area in which the Company
is then engaged in such business; provided, however, that notwithstanding the
foregoing, the Executive may own stock representing an aggregate of up to two
and one-half percent (2 1/2%) of the total equity of any corporation engaged in
such business in such geographical area whose securities are listed on a
national securities exchange or are traded in an over-the-counter market.
.A.2. Health Benefits.
(a) Coverage. During the Noncompetition Term, the Company
shall, at its option, provide, or reimburse the Executive or the Executive's
Eligible Dependents (as hereinafter defined) for the cost of, health insurance
coverage for the Executive and the Executive's Eligible Dependents comparable to
that provided by the Company to its senior executives from time to time ("Health
Benefits"). Notwithstanding the foregoing, in the event that any person eligible
for Health Benefits pursuant to this Section 2(a) shall also be entitled to
Medicare or other government or private third party health insurance coverage
("Other Coverage"), such person shall promptly notify the Company in writing of
the terms of such Other Coverage. The Company's obligations with respect to such
person under this
<PAGE> 2
Section 2(a) may, at the Company's option, be limited to (i) reimbursing such
person for any premiums payable by such person with respect to such Other
Coverage, and (ii) providing, or reimbursing such person for the cost of, any
supplementary health insurance coverage necessary to provide such person with
aggregate health insurance coverage comparable to the Health Benefits otherwise
required by this Section 2(a).
(b) Eligible Dependents. For purposes of this Agreement,
an Eligible Dependent shall mean the Executive's spouse and any other dependent
of the Executive who would be eligible for coverage under any health insurance
plan maintained by the Company from time to time for its senior executives if
the Executive were then employed by the Company in a senior executive position.
.A.3. Other Covenants.
(a) Confidentiality.
(i) The Executive acknowledges and understands that
the Confidential Information (as hereinafter defined) of the Company is
valuable, special and unique to the business of the Company, that such
business depends on such Confidential Information and that the Company
desires to protect such Confidential Information by keeping it
confidential for the use and benefit of the Company. Based on the
foregoing, the Executive shall undertake the following obligations with
respect to such Confidential Information during the Noncompetition
Term: (A) the Executive shall keep any and all Confidential Information
in trust for the use and benefit of the Company, (B) except as required
by applicable law or as authorized in writing by the Board, the
Executive shall not disclose, directly or indirectly, any Confidential
Information of the Company, (C) the Executive shall use his best
efforts to ensure that all Confidential Information is kept
confidential for the use and benefit of the Company, and (D) upon
termination of this Agreement or at any other time that the Company may
in writing so request, the Executive shall promptly deliver to the
Company all materials constituting Confidential Information (including
all copies thereof) that are in his possession or under his control.
(ii) For purposes of this Agreement, "Confidential
Information" shall mean any and all information developed by or for the
Company or any of its affiliates of which the Executive gains knowledge
during the Noncompetition Term (or gained knowledge prior to the
Noncompetition Term by reason of his employment with the Company) that
is (x) not generally known in any industry in which the Company or any
of its affiliates is or may become engaged, or (y) not publicly
available. Confidential Information includes, but is not limited to,
any information developed by or for the Company or any of its
affiliates concerning plans, marketing and sales methods, materials,
processes, business forms, procedures, devices, management information
services, computer programs and software, plans for development of
products or services or for expansion into new areas or markets,
internal operations and any trade secrets and proprietary information
of any type owned by the Company or any of its
-2-
<PAGE> 3
affiliates, together with all written, graphic and other materials
relating to all or any part thereof.
(b) Non-Solicitation of Employees and Customers. During
the Noncompetition Term, the Executive shall not, and shall use his best
efforts to cause each business or entity with which he shall become associated
not to, (i) solicit for employment or employ any person who is then employed or
during the previous six months was employed in an executive or management
position by the Company, or (ii) solicit then-existing customers of the Company.
.A.4. Remedies.
(a) Injunctive Relief. The Executive acknowledges that
the covenants and obligations of the Executive contained in Sections 1 and 3
hereof relate to special, unique and extraordinary matters and are reasonable
and necessary to protect the legitimate interests of the Company, that a breach
of any of the terms of such covenants or obligations will cause the Company
irreparable injury for which adequate remedies at law are not available, and
that the Company shall be entitled to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction restraining the
Executive from any such breach.
(b) Remedies Cumulative. The rights and remedies of the
Company under this Section 4 are cumulative and are in addition to any other
rights and remedies the Company may have at law or in equity.
.A.5. Notices.
(a) All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
(including telefax, telegraphic, telex or cable communication) and mailed,
telefaxed, telegraphed, telexed, cabled or delivered:
(i) If to the Executive, to:
19 Northumberland
Nashville, Tennessee 37215
(ii) If to the Company, to:
Tractor Supply Company
320 Plus Park Boulevard
Nashville, Tennessee 37217
Facsimile: (615) 366-4686
Attention: Chief Executive Officer
-3-
<PAGE> 4
(b) All notices and other communications required or
permitted under this Agreement which are addressed as provided in this Section 5
(i) if delivered personally against proper receipt or by confirmed telefax or
telex, shall be effective upon delivery, and (ii) if delivered (A) by certified
or registered mail with postage prepaid, (B) by Federal Express or similar
courier service with courier fees paid by the sender, or (C) by telegraph or
cable, shall be effective two business days following the date when mailed,
couriered, telegraphed or cabled, as the case may be. Either party hereto may
from time to time change its address for the purpose of notices to that party by
a similar notice specifying a new address, but no such change shall be deemed to
have been given until it is actually received by the party sought to be charged
with its contents.
.A.6. Assignment.
(a) The Company. This Agreement and all of the terms and
provisions hereof shall be binding upon and inure to the benefit of the Company
and its successors and permitted assigns. The Company may not assign this
Agreement or any of its rights, interests or obligations hereunder without the
prior written consent of the Executive, except that it may make such an
assignment to any of its affiliates or to any successor to its business without
such consent.
(b) The Executive. This Agreement shall be binding upon
and inure to the benefit of the Executive, his Eligible Dependents, and their
respective heirs, beneficiaries, executors, administrators and legal
representatives; provided, however, that neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any such person
without the prior written consent of the Company.
.A.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Tennessee,
without giving effect to the conflict of laws principles thereof.
.A.8. Miscellaneous.
(a) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which when taken together shall constitute one and the same instrument.
(b) Headings. The headings contained in this Agreement
are for convenience of reference only and shall not constitute a part hereof or
define, limit or otherwise affect the meaning or interpretation of any of the
terms or provisions hereof.
(c) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements, commitments,
arrangements or understandings, whether oral or written, between the parties
with respect thereto. There are no agreements,
-4-
<PAGE> 5
covenants, undertakings, representations or warranties with respect to the
subject matter of this Agreement other than those expressly set forth or
referred to herein.
(d) Severability. Each term and provision of this
Agreement constitutes a separate and distinct undertaking, covenant, term and
provision hereof. In the event that any term or provision of this Agreement
shall be determined to be unenforceable, invalid or illegal in any respect, such
unenforceability, invalidity or illegality shall not affect any other term or
provision of this Agreement, but this Agreement shall be construed as if such
unenforceable, invalid or illegal term or provision had never been contained
herein. Moreover, if any term or provision of this Agreement shall for any
reason be held to be excessively broad as to time, duration, scope, activity or
subject, it shall be construed, by limiting and reducing it, so as to be
enforceable to the extent permitted under applicable law as it shall then exist.
(e) Amendment; Waiver. Neither this Agreement, nor any
of the terms or provisions hereof, may be amended, modified, supplemented or
waived, except by an instrument in writing signed by the parties hereto (or, in
the case of a waiver, by the party granting such waiver). No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver. No failure of either party hereto to insist upon
strict compliance by the other party with any obligation, covenant, agreement or
condition contained in this Agreement shall operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
TRACTOR SUPPLY COMPANY
By: /s/ Michael J. Kincaid
-------------------------------
Michael J. Kincaid
Vice President - Controller
and Secretary
EXECUTIVE:
/s/ Joseph D. Maxwell
------------------------------------
Joseph D. Maxwell
-5-
<PAGE> 1
EXHIBIT 10.36
NONCOMPETITION AGREEMENT
NONCOMPETITION AGREEMENT, dated as of the 9th day of June,
1997 (the "Agreement"), by and between Tractor Supply Company, a Delaware
corporation (the "Company"), and Gerald E. Newkirk (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is the former President and Chief
Operating Officer of the Company and has been actively involved in, and has been
instrumental in the success of, the business of the Company;
WHEREAS, the Executive resigned from his position effective
June 9, 1997, but continues to serve on the Company's Board of Directors; and
WHEREAS, the Company desires that the Executive not compete
with the Company, for a limited period of time, upon the terms and conditions
hereinafter provided.
NOW, THEREFORE, for and in consideration of the premises,
mutual covenants and agreements contained herein, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
.A.1. Noncompetition. During the period commencing on June 9,
1997 and ending on June 9, 2002 (the "Noncompetition Term"), the Executive shall
not, directly or indirectly, be associated with any entity whose primary
business is that of, or personally engage, whether as a director, officer,
employee, agent, consultant, partner, owner, independent contractor or
otherwise, in the business of, selling to the public on a retail basis goods of
the type then sold by the Company in any geographical area in which the Company
is then engaged in such business; provided, however, that notwithstanding the
foregoing, the Executive may own stock representing an aggregate of up to two
and one-half percent (2 1/2%) of the total equity of any corporation engaged in
such business in such geographical area whose securities are listed on a
national securities exchange or are traded in an over-the-counter market.
.A.2. Health Benefits.
(a) Coverage. During the Noncompetition Term, the
Company shall, at its option, provide, or reimburse the Executive or the
Executive's Eligible Dependents (as hereinafter defined) for the cost of, health
insurance coverage for the Executive and the Executive's Eligible Dependents
comparable to that provided by the Company to its senior executives from time to
time ("Health Benefits"). Notwithstanding the foregoing, in the event that any
person eligible for Health Benefits pursuant to this Section 2(a) shall also be
entitled to Medicare or other government or private third party health insurance
coverage ("Other Coverage"), such person shall promptly notify the Company in
writing of the terms of such
-1-
<PAGE> 2
Other Coverage. The Company's obligations with respect to such person under this
Section 2(a) may, at the Company's option, be limited to (i) reimbursing such
person for any premiums payable by such person with respect to such Other
Coverage, and (ii) providing, or reimbursing such person for the cost of, any
supplementary health insurance coverage necessary to provide such person with
aggregate health insurance coverage comparable to the Health Benefits otherwise
required by this Section 2(a).
(b) Eligible Dependents. For purposes of this Agreement,
an Eligible Dependent shall mean the Executive's spouse and any other dependent
of the Executive who would be eligible for coverage under any health insurance
plan maintained by the Company from time to time for its senior executives if
the Executive were then employed by the Company in a senior executive position.
.A.3. Other Covenants.
(a) Confidentiality.
(i) The Executive acknowledges and understands that
the Confidential Information (as hereinafter defined) of the Company is
valuable, special and unique to the business of the Company, that such
business depends on such Confidential Information and that the Company
desires to protect such Confidential Information by keeping it
confidential for the use and benefit of the Company. Based on the
foregoing, the Executive shall undertake the following obligations with
respect to such Confidential Information during the Noncompetition
Term: (A) the Executive shall keep any and all Confidential Information
in trust for the use and benefit of the Company, (B) except as required
by applicable law or as authorized in writing by the Board, the
Executive shall not disclose, directly or indirectly, any Confidential
Information of the Company, (C) the Executive shall use his best
efforts to ensure that all Confidential Information is kept
confidential for the use and benefit of the Company, and (D) upon
termination of this Agreement or at any other time that the Company may
in writing so request, the Executive shall promptly deliver to the
Company all materials constituting Confidential Information (including
all copies thereof) that are in his possession or under his control.
(ii) For purposes of this Agreement, "Confidential
Information" shall mean any and all information developed by or for the
Company or any of its affiliates of which the Executive gains knowledge
during the Noncompetition Term (or gained knowledge prior to the
Noncompetition Term by reason of his employment with the Company) that
is (x) not generally known in any industry in which the Company or any
of its affiliates is or may become engaged, or (y) not publicly
available. Confidential Information includes, but is not limited to,
any information developed by or for the Company or any of its
affiliates concerning plans, marketing and sales methods, materials,
processes, business forms, procedures, devices, management information
services, computer programs and software, plans for development of
products or services or for expansion into new areas or markets,
internal operations and any trade
-2-
<PAGE> 3
secrets and proprietary information of any type owned by the Company or
any of its affiliates, together with all written, graphic and other
materials relating to all or any part thereof.
(b) Non-Solicitation of Employees and Customers. During
the Noncompetition Term, the Executive shall not, and shall use his best efforts
to cause each business or entity with which he shall become associated not to,
(i) solicit for employment or employ any person who is then employed or during
the previous six months was employed in an executive or management position by
the Company, or (ii) solicit then-existing customers of the Company.
.A.4. Remedies.
(a) Injunctive Relief. The Executive acknowledges that
the covenants and obligations of the Executive contained in Sections 1 and 3
hereof relate to special, unique and extraordinary matters and are reasonable
and necessary to protect the legitimate interests of the Company, that a breach
of any of the terms of such covenants or obligations will cause the Company
irreparable injury for which adequate remedies at law are not available, and
that the Company shall be entitled to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction restraining the
Executive from any such breach.
(b) Remedies Cumulative. The rights and remedies of the
Company under this Section 4 are cumulative and are in addition to any other
rights and remedies the Company may have at law or in equity.
.A.5. Notices.
(a) All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
(including telefax, telegraphic, telex or cable communication) and mailed,
telefaxed, telegraphed, telexed, cabled or delivered:
(i) If to the Executive, to:
504 Belgrave Park
Nashville, Tennessee 37215
(ii) If to the Company, to:
Tractor Supply Company
320 Plus Park Boulevard
Nashville, Tennessee 37217
Facsimile: (615) 366-4686
Attention: Chief Executive Officer
-3-
<PAGE> 4
(b) All notices and other communications required or
permitted under this Agreement which are addressed as provided in this Section 5
(i) if delivered personally against proper receipt or by confirmed telefax or
telex, shall be effective upon delivery, and (ii) if delivered (A) by certified
or registered mail with postage prepaid, (B) by Federal Express or similar
courier service with courier fees paid by the sender, or (C) by telegraph or
cable, shall be effective two business days following the date when mailed,
couriered, telegraphed or cabled, as the case may be. Either party hereto may
from time to time change its address for the purpose of notices to that party by
a similar notice specifying a new address, but no such change shall be deemed to
have been given until it is actually received by the party sought to be charged
with its contents.
.A.6. Assignment.
(a) The Company. This Agreement and all of the terms and
provisions hereof shall be binding upon and inure to the benefit of the Company
and its successors and permitted assigns. The Company may not assign this
Agreement or any of its rights, interests or obligations hereunder without the
prior written consent of the Executive, except that it may make such an
assignment to any of its affiliates or to any successor to its business without
such consent.
(b) The Executive. This Agreement shall be binding upon
and inure to the benefit of the Executive, his Eligible Dependents, and their
respective heirs, beneficiaries, executors, administrators and legal
representatives; provided, however, that neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any such person
without the prior written consent of the Company.
.A.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Tennessee,
without giving effect to the conflict of laws principles thereof.
.A.8. Miscellaneous.
(a) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which when taken together shall constitute one and the same instrument.
(b) Headings. The headings contained in this Agreement
are for convenience of reference only and shall not constitute a part hereof or
define, limit or otherwise affect the meaning or interpretation of any of the
terms or provisions hereof.
(c) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements, commitments,
arrangements or understandings, whether oral or written, between the parties
with respect thereto. There are no agreements,
-4-
<PAGE> 5
covenants, undertakings, representations or warranties with respect to the
subject matter of this Agreement other than those expressly set forth or
referred to herein.
(d) Severability. Each term and provision of this
Agreement constitutes a separate and distinct undertaking, covenant, term and
provision hereof. In the event that any term or provision of this Agreement
shall be determined to be unenforceable, invalid or illegal in any respect, such
unenforceability, invalidity or illegality shall not affect any other term or
provision of this Agreement, but this Agreement shall be construed as if such
unenforceable, invalid or illegal term or provision had never been contained
herein. Moreover, if any term or provision of this Agreement shall for any
reason be held to be excessively broad as to time, duration, scope, activity or
subject, it shall be construed, by limiting and reducing it, so as to be
enforceable to the extent permitted under applicable law as it shall then exist.
(e) Amendment; Waiver. Neither this Agreement, nor any
of the terms or provisions hereof, may be amended, modified, supplemented or
waived, except by an instrument in writing signed by the parties hereto (or, in
the case of a waiver, by the party granting such waiver). No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver. No failure of either party hereto to insist upon
strict compliance by the other party with any obligation, covenant, agreement or
condition contained in this Agreement shall operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
TRACTOR SUPPLY COMPANY
By: /s/ Michael J. Kincaid
-----------------------------
Michael J. Kincaid
Vice President - Controller
and Secretary
EXECUTIVE:
/s/ Gerald E. Newkirk
----------------------------------
Gerald E. Newkirk
-5-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TRACTOR SUPPLY CO. FOR THE NINE MONTH ENDED SEPTEMBER
27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> SEP-27-1997
<CASH> 8,302
<SECURITIES> 0
<RECEIVABLES> 5,953
<ALLOWANCES> 0
<INVENTORY> 168,637
<CURRENT-ASSETS> 187,094
<PP&E> 73,454
<DEPRECIATION> 22,292
<TOTAL-ASSETS> 240,856
<CURRENT-LIABILITIES> 103,903
<BONDS> 34,713
0
0
<COMMON> 70
<OTHER-SE> 100,592
<TOTAL-LIABILITY-AND-EQUITY> 240,856
<SALES> 374,340
<TOTAL-REVENUES> 374,340
<CGS> 278,655
<TOTAL-COSTS> 278,655
<OTHER-EXPENSES> 81,279
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,703
<INCOME-PRETAX> 12,703
<INCOME-TAX> 5,089
<INCOME-CONTINUING> 7,614
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,614
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
</TABLE>
