<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------
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 June 26, 1999
-----------------------------------------------
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
TRACTOR SUPPLY COMPANY
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3139732
- ------------------------------------ -----------------------------------
(State or Other Jurisdiction of (IRS 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 [ ]
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 July 30, 1999
- ----------------------------- ----------------------------
Common Stock, $.008 par value 8,764,278
1 of 12
<PAGE> 2
TRACTOR SUPPLY COMPANY
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements:
Balance Sheets -
June 26, 1999 and December 26, 1998 3
Statements of Income -
For the Fiscal Three and Six Months Ended
June 26, 1999 and June 27, 1998 4
Statements of Cash Flows -
For the Fiscal Six Months Ended
June 26, 1999 and June 27, 1998 5
Notes to Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
Part II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
2 of 12
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRACTOR SUPPLY COMPANY
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 26, DECEMBER 26,
1999 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................. $ 8,803 $ 18,201
Accounts receivable, net .................................................. 13,457 5,578
Inventories ............................................................... 242,145 171,749
Prepaid expenses .......................................................... 3,589 6,301
--------- ---------
Total current assets ............................................... 267,994 201,829
--------- ---------
Land ........................................................................ 6,696 6,871
Buildings and improvements .................................................. 52,486 49,437
Machinery and equipment ..................................................... 37,030 23,121
Construction in progress .................................................... 2,910 8,818
--------- ---------
99,122 88,247
Accumulated depreciation and amortization ................................... (31,679) (28,339)
--------- ---------
Property and equipment, net ............................................... 67,443 59,908
--------- ---------
Deferred income taxes ....................................................... 1,426 1,426
Other assets ................................................................ 1,776 1,486
--------- ---------
Total assets ....................................................... $ 338,639 $ 264,649
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................................... $ 123,127 $ 60,900
Accrued expenses .......................................................... 33,101 29,610
Current maturities of long-term debt ...................................... 3,138 3,138
Current portion of capital lease obligations .............................. 420 553
Income taxes currently payable ............................................ 2,550 4,134
Deferred income taxes ..................................................... 7,964 7,964
--------- ---------
Total current liabilities .......................................... 170,300 106,299
--------- ---------
Revolving credit loan ....................................................... 21,465 19,000
Term loan ................................................................... 10,714 11,786
Other long-term debt ........................................................ 3,963 4,361
Capital lease obligations ................................................... 1,804 1,985
Other long-term liabilities ................................................. 505 527
Excess of fair value of assets acquired over cost less accumulated
amortization of $2,965 and $2,875, respectively ........................... 625 715
Stockholders' equity:
Common stock, 100,000,000 shares authorized; $.008 par value; 8,761,391
and 8,748,105 shares issued and outstanding in 1999 and 1998, respectively 70 70
Additional paid in capital ................................................ 42,515 42,213
Retained earnings ......................................................... 86,678 77,693
--------- ---------
Total stockholders' equity .............................................. 129,263 119,976
--------- ---------
Total liabilities and stockholders' equity ......................... $ 338,639 $ 264,649
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
3 of 12
<PAGE> 4
TRACTOR SUPPLY COMPANY
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- ---------------------
JUNE 26, JUNE 27, JUNE 26, JUNE 27,
1999 1998 1999 1998
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales ................................... $214,124 $196,081 $339,771 $301,668
Cost of merchandise sold .................... 158,605 146,833 252,060 225,931
Gross margin ........................... 55,519 49,248 87,711 75,737
Selling, general and administrative expenses 35,893 31,656 67,768 58,580
Depreciation and amortization ............... 1,815 1,319 3,263 2,594
-------- -------- -------- --------
Income from operations ................. 17,811 16,273 16,680 14,563
Interest expense, net ....................... 720 734 1,452 1,518
-------- -------- -------- --------
Income before income taxes ............. 17,091 15,539 15,228 13,045
Income tax provision ........................ 6,966 6,371 6,243 5,379
-------- -------- -------- --------
Net income ............................. $ 10,125 $ 9,168 $ 8,985 $ 7,666
======== ======== ======== ========
Net income per share - basic ........... $ 1.16 $ 1.05 $ 1.03 $ .88
======== ======== ======== ========
Net income per share - assuming dilution $ 1.14 $ 1.04 $ 1.01 $ .87
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
4 of 12
<PAGE> 5
TRACTOR SUPPLY COMPANY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL
SIX MONTHS ENDED
----------------------
JUNE 26, JUNE 27,
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income .............................................. $ 8,985 $ 7,666
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense ............... 3,263 2,594
Loss (gain) on sale of property and equipment ....... (223) 33
Change in assets and liabilities:
Accounts receivable ............................... (7,879) (6,559)
Inventories ....................................... (70,396) (33,621)
Prepaid expenses .................................. 2,712 1,081
Accounts payable .................................. 62,227 29,293
Accrued expenses .................................. 3,491 6,773
Income taxes currently payable .................... (1,584) (156)
Other ............................................. (335) (22)
-------- --------
Net cash provided by operating activities ................. 261 7,082
-------- --------
Cash flows from investing activities:
Capital expenditures .................................. (11,076) (6,633)
Proceeds from sale of property and equipment .......... 434 171
-------- --------
Net cash used in investing activities ..................... (10,642) (6,462)
-------- --------
Cash flows from financing activities:
Net borrowings (repayments) under revolving credit loan 2,465 (332)
Principal payments under term loan .................... (1,072) --
Principal payments under capital lease obligations .... (314) (393)
Repayment of long-term debt ........................... (398) (359)
Proceeds from issuance of common stock ................ 302 149
-------- --------
Net cash provided by (used in) financing activities ....... 983 (935)
-------- --------
Net decrease in cash and cash equivalents ................. (9,398) (315)
Cash and cash equivalents at beginning of period .......... 18,201 8,477
-------- --------
Cash and cash equivalents at end of period ................ $ 8,803 $ 8,162
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ................................................ $ 1,548 $ 1,577
Income taxes ............................................ 7,828 5,428
</TABLE>
The accompanying notes are an integral part of this statement.
5 of 12
<PAGE> 6
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 26, 1998. The
results of operations for the fiscal three and six-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 June 26, 1999 and
its results of operations and its cash flows for the fiscal three-month and
six-month periods ended June 26, 1999 and June 27, 1998.
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 $6,865,000 and $6,497,000 higher than reported at
June 26, 1999 and December 26, 1998, 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 is calculated as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
1999
-----------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 26, 1999 JUNE 26, 1999
---------------------------- ---------------------------
PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Basic net income per share:
Net income $10,125 8,759 $1.16 $8,985 8,755 $1.03
===== =====
Stock options outstanding 157 142
------- ----- ------ -----
Diluted net income per share $10,125 8,916 $1.14 $8,985 8,897 $1.01
======= ===== ===== ====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
1998
-----------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 27, 1998 JUNE 27, 1998
---------------------------- ---------------------------
PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Basic net income per share:
Net income $ 9,168 8,741 $1.05 $7,666 8,738 $ .88
===== =====
Stock options outstanding 111 47
------- ----- ------ -----
Diluted net income per share $ 9,168 8,852 $1.04 $7,666 8,785 $ .87
======= ===== ===== ====== ===== =====
</TABLE>
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.
6 of 12
<PAGE> 7
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 six-month periods ended June 26, 1999 and June 27, 1998, and
significant developments affecting its financial condition since the end of the
fiscal year, December 26, 1998, and should be read in conjunction with the
Company's annual report on Form 10-K for the fiscal year ended December 26,
1998. 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 and distribution facilities, 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 (Second Quarter) and Six Months Ended June 26, 1999 and
June 27, 1998
Net sales increased 9.2% to $214.1 million for the second quarter of fiscal 1999
from $196.1 million for the second quarter of fiscal 1998. Net sales rose 12.6%
to $339.8 million for the first six months of fiscal 1999 from $301.7 million
for the first six months of fiscal 1998. The sales increases resulted primarily
from new stores as comparable store sales (excluding relocations, using all
stores open at least one year) increased 3.1% for the second quarter of fiscal
1999 and 6.3% for the first six months of fiscal 1999 over the corresponding
periods in the prior fiscal year. The Company opened 15 new retail farm stores
(nine in the second quarter of fiscal 1999) during the first six months of
fiscal 1999 and relocated one store during the second quarter of fiscal 1999.
The Company opened 11 new retail farm stores (seven in the second quarter of
fiscal 1998) during the first six months of fiscal 1998. Comparable store sales
for the second quarter of fiscal 1999 increased 3.1% despite (i) cycling the
prior year's comparable store sales increase of 15.0% and (ii) soft sales in the
Company's power equipment business, which is its highest volume spring category
(partially driven by engine shortages throughout the industry in April and May).
The Company was encouraged, however, in that (a) the top nine core basic sales
categories that represent more than one-third of the Company's total second
quarter business reflected a comparable store sales increase of over 7% for the
second quarter, (b) the group of departments which were remerchandised in the
first quarter of 1999 reflected a comparable store sales increase of over 9% for
the second quarter, and (c) the Company's power equipment business actually
outperformed the overall industry's power equipment performance during the
second quarter of fiscal 1999. At June 26, 1999, the Company operated 257 retail
farm stores (in 26 states) versus 239 stores at June 27, 1998 (in 26 states).
The Company's current plans call for the opening of approximately fifteen
additional new stores in fiscal 1999 (approximately nine of which are scheduled
to open during the third quarter). The Company is on track to achieve its goal
of opening 33 new stores in fiscal 2000.
The gross margin rate increased .8 percentage points to 25.9% of sales for the
second quarter of fiscal 1999 and increased .7 percentage points to 25.8% of
sales for the first six months of fiscal 1999 compared with the corresponding
periods in the prior fiscal year. The gross margin rate improvement for the
second quarter of fiscal 1999 was primarily due to improved product costs and
new higher margin products and product lines associated
7 of 12
<PAGE> 8
with the major remerchandising effort completed in the first quarter of fiscal
1999, and, to a lesser extent, from the positive mix effect of sales of lower
margin spring seasonal merchandise (mainly power equipment) representing a
smaller portion of total sales than in the second quarter last year.
As a percent of sales, selling, general and administrative ("SG&A") expenses
increased .7 percentage points to 16.8% of sales in the second quarter of fiscal
1999 and increased .6 percentage points to 20.0% of sales for the first six
months of fiscal 1999. On an absolute basis, SG&A expenses increased 13.4% to
$35.9 million in the second quarter of fiscal 1999 and increased 15.7% to $67.8
million for the first six months of fiscal 1999. The increase in expenses on a
percent of sales basis was primarily due to costs associated with new stores
(many of which were opened later in the second quarter of fiscal 1999 than in
the prior year) as well as due to the leverage loss attributable to the soft
comparable store sales performance. The increase in absolute dollars was
primarily attributable to costs associated with new store openings (new stores
have considerably higher occupancy costs, primarily rent, than the existing
store base). Depreciation and amortization expense increased 37.6% and 25.8%
over the prior year for the second quarter and the first six months of fiscal
1999, respectively, due mainly to costs associated with new stores, costs
associated with the Company's installation of its new SAP merchandising and
distribution computer systems, and, to a lesser extent, from fixture costs
associated with the remerchandising effort completed during the first quarter of
fiscal 1999. Net interest expense decreased 1.9% to $.7 million in the second
quarter of fiscal 1999 and decreased 4.3% to $1.5 million in the first six
months of fiscal 1999 primarily due to lower average borrowings under the Credit
Agreement.
The Company's effective tax rate decreased to 40.8% for the second quarter of
fiscal 1999 and 41.0% for the first six months of fiscal 1999, compared with
41.0% for the second quarter of fiscal 1998 and 41.2% for the first six months
of fiscal 1998, primarily due to a lower effective state income tax rate in
fiscal 1999.
As a result of the foregoing factors, net income for the second quarter of
fiscal 1999 increased 10.4% to $10.1 million from $9.2 million for the second
quarter of fiscal 1998 and net income per share (assuming dilution) for the
second quarter of fiscal 1999 increased 9.6% to $1.14 per share from $1.04 per
share for the second quarter of last year. Net income for the first six months
of fiscal 1999 increased 17.2% to $9.0 million from $7.7 million for the first
six months of fiscal 1998 and net income per share (assuming dilution) for the
first six months of fiscal 1999 increased 16.1% to $1.01 per share from $.87 per
share last year. As a percentage of sales, net income remained at 4.7% of sales
for the second quarter of fiscal 1999 as compared to the second quarter of
fiscal 1998 and increased .1 percentage point to 2.6% of sales for the first six
months of fiscal 1999 from 2.5% of sales for the first six months of fiscal
1998.
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 (the
"Credit Agreement") and short-term trade credit.
The Company's inventory and accounts payable levels typically build in the first
fiscal quarter and again in the third fiscal quarter in anticipation of the
spring and fall selling seasons. At June 26, 1999, the Company's inventories had
increased $70.4 million to $242.1 million from $171.7 million at December 26,
1998. This increase resulted primarily from additional inventory for new stores,
planned inventory increases in seasonal product lines, as well as unplanned
inventory increases in certain basic goods. The Company implemented a new
merchandising and distribution computer system in the first quarter of 1999 that
unexpectedly compromised the stores' in-stock position in many key categories.
In the Company's attempt to rectify its in-stock position in these key
categories, it over corrected the ordering of these goods. However, the Company
believes that (i) most of the inventory overstock is in basic goods (not spring
seasonal merchandise) and is concentrated in the locations that facilitate a
quicker sell-through (specifically, high volume stores and the distribution
centers); (ii) at least one-half of the inventory overage in excess of planned
levels can be reduced by the end of the third quarter of fiscal 1999 and that it
will be back at planned inventory levels by the end of fiscal 1999; and (iii)
this inventory sell-through can be accomplished without taking significant
incremental markdowns and materially adversely impacting the financial
performance of the Company. Short-term trade credit, which represents a source
of financing for inventory, increased $62.2 million to $123.1 million at June
26, 1999 from $60.9 million at December 26, 1998. 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.
8 of 12
<PAGE> 9
At June 26, 1999, the Company had working capital of $97.7 million, which
represented a $2.2 million increase from December 26, 1998. This increase
resulted primarily from an increase in inventories without a corresponding
increase in accounts payable and an increase in trade accounts receivable
(mainly due to commitments from vendors respecting the Company's 1999 marketing
campaign), partially offset by an increase in accrued expenses (mainly due to
deferred vendor support payments relating to the Company's 1999 marketing
campaign and, to a lesser extent, timing of payments).
Operations provided net cash of $.3 million and $7.1 million in the first six
months of fiscal 1999 and 1998, respectively. The decrease in net cash provided
in the first six months of fiscal 1999 resulted primarily from inventories
increasing at a faster rate than accounts payable in the first six months of
fiscal 1999 compared to the first six months of fiscal 1998, a smaller increase
in accrued expenses in the first six months of fiscal 1999 compared to the first
six months of fiscal 1998 (mainly due to the level of net deferred vendor
support payments relating to the Company's 1999 marketing campaign compared with
the increase experienced in the prior year, the first year of the program, and,
to a lesser extent, timing of payments) as well as a larger increase in trade
accounts receivable compared to the prior year (mainly due to commitments from
vendors respecting the Company's 1999 marketing campaign compared with the
increase experienced in the prior year, the first year of the program) and an
increase in income taxes payable (primarily due to timing of payments),
partially offset by the timing of certain prepaid expenses.
Cash used in investing activities of $10.6 million for the first six months of
fiscal 1999 represented a $4.1 million increase over cash used in the first six
months of fiscal 1998 of $6.5 million. The increase in cash used for capital
expenditures during the first six months of fiscal 1999 compared to the prior
year primarily reflects expenditures for new stores (15 new stores were opened
and one store was relocated during the first six months of fiscal 1999 compared
with 11 new store openings during the first six months of fiscal 1998), costs
associated with the Company's installation of its SAP merchandising and
distribution computer systems, and, to a lesser extent, fixture costs associated
with the Company's remerchandising efforts.
Financing activities in the first six months of fiscal 1999 provided $1.0
million in cash which represented a $1.9 million increase in net cash provided
over the $.9 million in net cash used in the first six months of fiscal 1998.
This increase in net cash provided resulted primarily from net short-term
borrowings under the Credit Agreement of approximately $2.5 million during the
first six months of fiscal 1999 compared to net repayments of approximately $.3
million during the first six months of fiscal 1998, offset, in part, by
repayments under the Term Loan of approximately $1.1 million during the first
six months of fiscal 1999.
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.
YEAR 2000 READINESS PLANS
The Company previously reported that during the first fiscal quarter of 1999 it
had concluded the remaining conversion effort and completed its installation of
a new merchandise and warehouse management system, thus achieving full Year 2000
compliance for its remaining processing systems. That installation had been the
one remaining significant requirement for the Company to achieve Year 2000
compliance prior to the need to execute transactions with Year 2000 implications
(the processing concern created by the change in the century and the traditional
two-digit year fields embedded in most data processing systems is commonly
referred to as the "Year 2000" issue). The total estimated cost of the Company's
Year 2000 remediation efforts, of which the installation of the new system was
the major component, is approximately $10.0 million.
The Company's point-of-sale systems (the "POS systems") are supported by
numerous personal computers and servers that utilize standard operating system
software and hardware. Certain elements of this hardware and software required
upgrade and/or replacement to be fully Year 2000 compliant (collectively, the
"Year 2000 upgrades"). The Company completed the development and testing of
these Year 2000 upgrades for its POS systems, and began the rollout thereof,
during the second quarter of fiscal 1999. The Company expects to complete the
rollout of these Year 2000 upgrades to its POS systems by October 31, 1999. The
Year 2000 upgrades, estimated at $250,000 - $300,000, are a component of the
total estimated cost of the Company's Year 2000 remediation efforts indicated
above.
9 of 12
<PAGE> 10
As a fundamental business consideration, the Company depends heavily on its
vendors to meet the purchasing requirements dictated by the Company's business
needs. To that end, the Company continues to work with each of its critical
vendors to determine the impact the Year 2000 issue will have on their ability
to source products for the Company and process purchase orders with delivery
requirements and terms involving the Year 2000. The Company continues to expect
each of these vendors will likewise take measures to address the risks imposed
by the Year 2000 and adequately prepare their own processing systems so that
their businesses will not be interrupted as a result of this issue. Accordingly,
the Company does not expect any significant interruption in its ability to
source its product needs with existing vendors. As an ongoing measure, the
Company will continue to address this risk with each new vendor to ensure
similar safeguards.
The Company further recognizes the potential impact the Year 2000 issue may have
relative to its customers, creditors and other service providers. The Company
has reviewed its exposure to business interruption or substantial loss in these
areas and believes no risk of material adverse consequences presently exists and
that any other risks previously identified will be resolved before the end of
fiscal 1999.
Finally, the Company has engaged a consulting firm to perform an independent
review of its overall Year 2000 readiness plans and assist with any final
remediation efforts as appropriate.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company had no holdings of derivative financial or commodity instruments at
June 26, 1999. The Company is exposed to financial market risks, including
changes in interest rates. All borrowings under the Company's credit agreement
bear interest at a variable rate based on the prime rate or the London Interbank
Offered Rate. An increase in interest rates of 100 basis points would not
significantly affect the Company's net income. All of the Company's business is
transacted in U.S. dollars and, accordingly, foreign exchange rate fluctuations
have never had a significant impact on the Company, and they are not expected to
in the foreseeable future.
10 of 12
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's Annual Meeting of Stockholders was held on April 22, 1999 at
the Company's corporate headquarters in Nashville, Tennessee.
(b) The stockholders elected for a three-year term two Class II directors
nominated for election (Joseph D. Maxwell and Joseph M. Rodgers) as set
forth in the proxy statement dated March 19, 1999. The following table sets
forth certain information concerning each other director of the Company
whose term of office as a director continued after the meeting:
<TABLE>
<CAPTION>
Current Term as
Name Director Expires
---- ----------------
<S> <C>
Joseph H. Scarlett, Jr. 2000
S. P. Braud 2000
Thomas O. Flood 2001
Gerard E. Jones 2001
</TABLE>
(c) (1) The stockholders elected two Class II directors for a three-year term
ending at the 2002 Annual Meeting of Stockholders.
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Joseph D. Maxwell 7,354,644 3,965
Joseph M. Rodgers 7,354,520 4,089
</TABLE>
(c) (2) The stockholders ratified the reappointment of PricewaterhouseCoopers
LLP as independent certified public accountants of the Company for the
fiscal year ending January 1, 2000.
<TABLE>
<CAPTION>
For Against Abstain Non-Vote
--- ------- ------- --------
<S> <C> <C> <C>
7,343,329 3,244 12,036 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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 June 26, 1999.
11 of 12
<PAGE> 12
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: July 30, 1999 By: /s/ Thomas O. Flood
---------------- ------------------------------------------
Thomas O. Flood
Senior Vice President - Administration
and Finance and Chief Financial
Officer (Duly Authorized Officer &
Principal Financial Officer)
12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TRACTOR SUPPLY COMPANY FOR THE SIX MONTHS ENDED JUNE 26,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> DEC-27-1998
<PERIOD-END> JUN-26-1999
<CASH> 8,803
<SECURITIES> 0
<RECEIVABLES> 13,557
<ALLOWANCES> 0
<INVENTORY> 242,145
<CURRENT-ASSETS> 267,994
<PP&E> 99,122
<DEPRECIATION> 31,679
<TOTAL-ASSETS> 338,639
<CURRENT-LIABILITIES> 170,300
<BONDS> 36,142
0
0
<COMMON> 70
<OTHER-SE> 129,193
<TOTAL-LIABILITY-AND-EQUITY> 338,639
<SALES> 339,771
<TOTAL-REVENUES> 339,771
<CGS> 252,060
<TOTAL-COSTS> 252,060
<OTHER-EXPENSES> 71,031
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,452
<INCOME-PRETAX> 15,228
<INCOME-TAX> 6,243
<INCOME-CONTINUING> 8,985
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,985
<EPS-BASIC> 1.03
<EPS-DILUTED> 1.01
</TABLE>
