<PAGE> 1
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 30, 2000
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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
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3139732
--------------------------------------- ------------------------------------
(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
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 28, 2000
-------------------------------- ----------------------------------
Common Stock, $.008 par value 8,792,527
Page 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 -
September 30, 2000 and January 1, 2000 3
Statements of Income -
For the Fiscal Three and Nine Months Ended
September 30, 2000 and September 25, 1999 4
Statements of Cash Flows -
For the Fiscal Nine Months Ended
September 30, 2000 and September 25, 1999 5
Notes to Unaudited Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 - 11
Part II. Other Information:
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
Page 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>
SEPT. 30, JANUARY 1,
2000 2000
---------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................................. $ 9,189 $ 6,991
Accounts receivable, net .................................................. 6,876 6,765
Inventories ............................................................... 266,761 207,325
Prepaid expenses .......................................................... 8,880 4,845
--------- ---------
Total current assets ............................................... 291,706 225,926
--------- ---------
Land ........................................................................ 6,450 6,449
Buildings and improvements .................................................. 66,268 58,135
Machinery and equipment ..................................................... 47,762 39,885
Construction in progress .................................................... 2,039 4,514
--------- ---------
122,519 108,983
Accumulated depreciation and amortization ................................... (42,435) (35,270)
--------- ---------
Property and equipment, net ............................................... 80,084 73,713
--------- ---------
Deferred income taxes ....................................................... 999 999
Other assets ................................................................ 2,740 1,992
--------- ---------
Total assets ....................................................... $ 375,529 $ 302,630
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................................... $ 92,400 $ 59,764
Accrued expenses .......................................................... 25,450 34,037
Current maturities of long-term debt ...................................... 3,048 3,048
Current portion of capital lease obligations .............................. 279 279
Income taxes currently payable ............................................ 886 4,135
Deferred income taxes ..................................................... 7,357 7,357
--------- ---------
Total current liabilities .......................................... 129,420 108,620
--------- ---------
Revolving credit loan ....................................................... 81,899 38,126
Term loan ................................................................... 8,214 9,821
Other long-term debt ........................................................ 2,785 3,456
Capital lease obligations ................................................... 3,071 3,280
Other long-term liabilities ................................................. 481 487
Excess of fair value of assets acquired over cost less accumulated
amortization of $3,190 and $3,055, respectively ........................... 400 535
Stockholders' equity:
Common stock, 100,000,000 shares authorized; $.008 par value; 8,785,146
and 8,769,106 shares issued and outstanding in 2000 and 1999, respectively 70 70
Additional paid-in capital ................................................ 42,928 42,668
Retained earnings ......................................................... 106,261 95,567
--------- ---------
Total stockholders' equity .............................................. 149,259 138,305
--------- ---------
Total liabilities and stockholders' equity ......................... $ 375,529 $ 302,630
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
Page 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 NINE MONTHS ENDED
-------------------------- -------------------------
SEPT. 30, SEPT. 25, SEPT. 30, SEPT. 25,
2000 1999 2000 1999
-------------------------- -------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales ....................................... $175,478 $160,214 $555,301 $499,985
Cost of merchandise sold ........................ 130,361 118,591 410,995 370,651
-------- -------- -------- --------
Gross margin ............................... 45,117 41,623 144,306 129,334
Selling, general and administrative expenses .... 38,908 34,058 114,746 101,826
Depreciation and amortization ................... 2,590 1,941 7,217 5,204
-------- -------- -------- --------
Income from operations ..................... 3,619 5,624 22,343 22,304
Interest expense, net ........................... 1,725 1,137 4,337 2,589
-------- -------- -------- --------
Income before income taxes ................. 1,894 4,487 18,006 19,715
Income tax provision ............................ 771 1,840 7,312 8,083
-------- -------- -------- --------
Net income ................................. $ 1,123 $ 2,647 $ 10,694 $ 11,632
======== ======== ======== ========
Net income per share - basic ............... $ 0.13 $ 0.30 $ 1.22 $ 1.33
======== ======== ======== ========
Net income per share - assuming dilution ... $ 0.13 $ 0.30 $ 1.22 $ 1.31
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
Page 4 of 12
<PAGE> 5
TRACTOR SUPPLY COMPANY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL NINE MONTHS ENDED
--------------------------------
SEPT. 30, SEPT. 25,
2000 1999
---- ----
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................... $ 10,694 $ 11,632
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization expense ............ 7,217 5,204
Gain on sale of property and equipment ........... (232) (103)
Change in assets and liabilities:
Accounts receivable ............................ (111) (871)
Inventories .................................... (59,436) (63,082)
Prepaid expenses ............................... (4,035) 2,410
Accounts payable ............................... 32,636 14,705
Accrued expenses ............................... (8,587) (3,478)
Income taxes currently payable ................. (3,249) (2,836)
Other .......................................... (716) (393)
-------- --------
Net cash used in operating activities .................. (25,819) (36,812)
-------- --------
Cash flows from investing activities:
Capital expenditures ............................... (14,038) (14,698)
Proceeds from sale of property and equipment ....... 509 543
-------- --------
Net cash used in investing activities .................. (13,529) (14,155)
-------- --------
Cash flows from financing activities:
Net borrowings under revolving credit loan ......... 43,773 28,210
Principal payments under term loan ................. (1,607) (1,607)
Borrowings under short-term note payable ........... -- 15,000
Principal payments under capital lease obligations (209) (456)
Repayment of long-term debt ........................ (671) (605)
Proceeds from issuance of common stock ............. 260 376
-------- --------
Net cash provided by financing activities .............. 41,546 40,918
-------- --------
Net increase (decrease) in cash and cash equivalents ... 2,198 (10,049)
Cash and cash equivalents at beginning of period ....... 6,991 18,201
-------- --------
Cash and cash equivalents at end of period ............. $ 9,189 $ 8,152
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ............................................. $ 4,254 $ 2,560
Income taxes ......................................... 10,048 10,918
Non-cash investing and financing activities:
Capital lease-buildings .............................. -- 1,581
</TABLE>
The accompanying notes are an integral part of this statement.
Page 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 January 1, 2000. The
results of operations for the fiscal three-month 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 30,
2000 and its results of operations and its cash flows for the fiscal three-month
and nine-month periods ended September 30, 2000 and September 25, 1999.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to December 31. As a
result of this policy, the quarterly reporting periods for fiscal 2000 fall one
week later in the calendar year compared to fiscal 1999.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles inherently requires estimates and assumptions by
management that affect the reported amounts of assets and liabilities, revenues
and expenses and related disclosures. Actual results could differ from those
estimates.
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 $5,478,000 and $4,680,000 higher than reported at
September 30, 2000 and January 1, 2000, 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>
2000
-------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
-------------------------------------------------------------------------
PER SHARE PER SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic net income per share:
Net income $ 1,123 8,784 $ 0.13 $ 10,694 8,779 $ 1.22
======== ========
Stock options outstanding -- 22
------- ------- -------- -------
Diluted net income per share $ 1,123 8,784 $ 0.13 $ 10,694 8,801 $ 1.22
======= ======= ======== ======== ======= ========
</TABLE>
Page 6 of 12
<PAGE> 7
<TABLE>
<CAPTION>
1999
----------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 25, 1999 SEPTEMBER 25, 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 $ 2,647 8,761 $ 0.30 $ 11,632 8,757 $ 1.33
======== =======
Stock options outstanding 52 106
------- ------- -------- -------
Diluted net income per share $ 2,647 8,813 $ 0.30 $ 11,632 8,863 $ 1.31
======= ======= ======== ======== ======= =======
</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.
NOTE 3 - REVOLVING CREDIT AGREEMENT:
In August 2000, the Company entered into a revolving credit agreement with Bank
of America, N.A. whereby the Company was permitted to borrow up to $20 million
(the "August 2000 Credit Agreement"). The August 2000 Credit Agreement was
scheduled to expire on November 6, 2000. All borrowings under this credit
agreement bore interest at the LIBOR rate plus 75 basis points (7.37% as of
September 30, 2000). There were no compensating balance requirements. This
credit agreement was unsecured. This credit agreement was repaid in full on
November 3, 2000 (see Note 5).
NOTE 4 - SHORT-TERM NOTE PAYABLE:
In September 1999, the Company entered into an unsecured term note (the "Term
Note") with SunTrust Bank, Nashville, N.A. ("SunTrust") pursuant to which the
Company borrowed $15 million. The Term Note was pursuant to the Company's
existing loan agreement with SunTrust (the "Loan Agreement") and bore interest
at approximately 6.15% per year until its repayment in November 1999.
NOTE 5 - SUBSEQUENT EVENTS:
On November 3, 2000, the Company entered into an unsecured senior revolving
credit facility with Bank of America, N.A., as agent for a lender group, (the
"Senior Credit Facility") whereby the Company may borrow up to $125 million.
This credit facility was used to refinance all outstanding indebtedness under
the existing revolving credit agreements. Under the terms of the Senior Credit
Facility, all borrowings will bear interest at a base rate tied to the LIBOR
rate, plus an additional amount ranging from 75 to 150 basis points, adjusted
quarterly based on Company performance. The agreement provides for certain
restrictive covenants, primarily relating to minimum net worth, earnings and
debt leverage, fixed charge coverage and working capital. The Senior Credit
Facility expires in three years, with options to extend the term an additional
two years.
In connection with this event, the Company also refinanced existing indebtedness
under its June 1998 term note and loan agreement with SunTrust Bank Nashville,
N.A. The terms of the agreement were amended to provide that the existing
indebtedness would bear interest under the same provision as that in the Senior
Credit Facility and the restrictive covenants would be modified to be the same
as those in the Senior Credit Facility.
At the same time, the Company entered into a three-year interest rate swap
agreement with SunTrust Bank whereby the Company can manage its exposure to
adverse movements in the interest rate on its existing Term Note with SunTrust
Bank, as amended, as well as the interest rate on an additional $30 million
under the Senior Credit Facility. The terms of the agreement provide that the
base interest rate would be fixed at 6.65%; the Company's actual interest rate
would range from 75 to 150 basis points above this fixed base interest rate. Any
payments or receipts under this agreement will be reported as part of interest
expense on the related indebtedness.
Page 7 of 12
<PAGE> 8
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 30, 2000 and September 25, 1999,
and significant developments affecting its financial condition since the end of
the fiscal year, January 1, 2000, and should be read in conjunction with the
Company's annual report on Form 10-K for the fiscal year ended January 1, 2000.
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 (Third Quarter) and Nine Months Ended September 30, 2000
and September 25, 1999
Net sales increased 9.5% to $175.5 million for the third quarter of fiscal 2000
from $160.2 million for the third quarter of fiscal 1999. Net sales rose 11.1%
to $555.3 million for the first nine months of fiscal 2000 from $500.0 million
for the first nine months of fiscal 1999. The sales increases resulted primarily
from new stores as comparable store sales (excluding relocations, using all
stores open at least one year) decreased 1.5% for the third quarter of fiscal
2000 and decreased 1.0% for the first nine months of fiscal 2000 compared to the
corresponding periods in the prior fiscal year. Comparable store sales decreased
1.5% in the third quarter as a result of lower than anticipated sales in
higher-priced retail items, as well as the impact of Hurricane Floyd related
sales and Y2K related generator sales in the prior year. The Company opened 32
new retail farm stores (seven in the third quarter of fiscal 2000), closed three
stores and relocated one store during the first nine months of fiscal 2000. The
Company opened 24 new retail farm stores (nine in the third quarter of fiscal
1999) and relocated one store during the first nine months of fiscal 1999. At
September 30, 2000, the Company operated 302 retail farm stores (in 27 states)
versus 266 stores (in 26 states) at September 25, 1999. The Company's current
plans call for the opening of approximately three additional new stores in the
fourth quarter of fiscal 2000. The Company is also well positioned to meet its
goal of opening 25 new stores in fiscal 2001.
As part of the Company's on-going efforts to continually focus on improving its
comparable store sales, the Company has placed more aggressive advertising with
very competitive pricing on key "driver" items and taken early delivery of
certain early fall seasonal inventory to generate sales to offset the
significant Y2K-related sales of the prior year. In addition, certain store
operation functions have been reorganized with increased emphasis on store-level
improvements. Also, the Company has accelerated product assortment changes, with
emphasis on animal health-related products and products that are differentiated
from big box retailers. The Company has also begun plans to replicate the
merchandise sets and store layout of its recent store openings in Florida to
other markets to take advantage of the greater product display and favorable
merchandising emphasis experienced there.
Page 8 of 12
<PAGE> 9
The gross margin rate decreased .3 percentage points to 25.7% of sales for the
third quarter of fiscal 2000 and increased .1 percentage point to 26.0% of sales
for the first nine months of fiscal 2000 compared with the corresponding periods
in the prior fiscal year. The gross margin rate decrease for the third quarter
of fiscal 2000 was primarily due to higher fuel prices which increased the
overall cost of transportation of goods to the stores.
As a percent of sales, selling, general and administrative ("SG&A") expenses
increased .9 percentage points to 22.2% of sales in the third quarter of fiscal
2000 and increased .3 percentage points to 20.7% of sales for the first nine
months of fiscal 2000. On an absolute basis, SG&A expenses increased 14.2% to
$38.9 million in the third quarter of fiscal 2000 and increased 12.7% to $114.7
million for the first nine months of fiscal 2000. The increase in expenses on a
percentage-of-sales basis for the third quarter is primarily a result of costs
associated with new stores (new stores have considerably higher occupancy costs
than the existing store base) and the leverage loss attributable to the lower
than anticipated comparable store sales performance. The increase in absolute
dollars is primarily attributable to costs associated with new store openings,
as well as increased costs associated with the Company's expanded infrastructure
(primarily larger distribution facilities and store support service capacity).
These increases were offset, to some extent, by lower incentive accruals.
Depreciation and amortization expense increased 33.4% and 38.7% over the prior
year for the third quarter and the first nine months of fiscal 2000,
respectively, due mainly to costs associated with new stores and greater
infrastructure costs (primarily new computer systems). Net interest expense
increased 51.7% to $1.7 million in the third quarter of fiscal 2000 and
increased 67.5% to $4.3 million in the first nine months of fiscal 2000
primarily due to additional borrowings under the Credit Agreement to support the
Company's growth and expansion plans.
The Company's effective tax rate decreased to 40.7% for the third quarter of
fiscal 2000 and 40.6% for the first nine months of fiscal 2000, compared with
41.0% for both the third quarter of fiscal 1999 and the first nine months of
fiscal 1999, primarily due to a lower effective state income tax rate in fiscal
2000.
As a result of the foregoing factors, net income for the third quarter of fiscal
2000 decreased 57.6% to $1.1 million from $2.6 million for the third quarter of
fiscal 1999, and net income per share (assuming dilution) for the third quarter
of fiscal 2000 decreased 56.7% to $.13 per share from $.30 per share for the
third quarter of last year. Net income for the first nine months of fiscal 2000
decreased 8.1% to $10.7 million from $11.6 million for the first nine months of
fiscal 1999, and net income per share (assuming dilution) for the first nine
months of fiscal 2000 decreased 6.9% to $1.22 per share from $1.31 per share
last year. As a percentage of sales, net income decreased 1.1 percentage points
to 0.6% of sales for the third quarter of fiscal 2000 from 1.7% of sales for the
third quarter of fiscal 1999 and decreased .4 percentage points to 1.9% of sales
for the first nine months of fiscal 2000 from 2.3% of sales for the first nine
months of fiscal 1999.
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.
In September 1999, the Company entered into an unsecured term note (the "Term
Note") with SunTrust Bank, Nashville, N.A. ("SunTrust") pursuant to which the
Company borrowed $15 million. The Term Note was pursuant to the Company's
existing loan agreement with SunTrust (the "Loan Agreement") and bears interest
at approximately 6.15% per year until its maturity in November 1999. There are
no compensating balance requirements associated with the Loan Agreement. The
Loan Agreement contains certain restrictions regarding additional indebtedness;
employee loans; business operations; guarantees; investments; mergers,
consolidations and sales of assets; transactions with subsidiaries; and liens.
In addition, the Company must comply with certain quarterly restrictions
regarding net worth, working capital, ratios of total liabilities to net worth
and interest coverage and current ratio requirements.
In August 2000, the Company entered into a revolving credit agreement with Bank
of America, N.A. whereby the Company was permitted to borrow up to $20 million
(the "August 2000 Credit Agreement"). The August 2000 Credit Agreement was
scheduled to expire on November 6, 2000. All borrowings under this credit
agreement bore interest at the LIBOR rate plus 75 basis points (7.37% as of
September 30, 2000). There were no compensating balance requirements. This
credit agreement was unsecured. This credit agreement was repaid in full on
November 3, 2000.
Page 9 of 12
<PAGE> 10
On November 3, 2000, the Company entered into an unsecured senior revolving
credit facility with Bank of America, N.A., as agent for a lender group, (the
"Senior Credit Facility") whereby the Company may borrow up to $125 million.
This credit facility was used to refinance all outstanding indebtedness under
the existing revolving credit agreements. Under the terms of the Senior Credit
Facility, all borrowings will bear interest at a base rate tied to the LIBOR
rate, plus an additional amount ranging from 75 to 150 basis points, adjusted
quarterly based on Company performance. The agreement provides for certain
restrictive covenants, primarily relating to minimum net worth, earnings and
debt leverage, fixed charge coverage and working capital. The Senior Credit
Facility expires in three years, with options to extend the term an additional
two years.
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 September 30, 2000, the Company's
inventories had increased $59.5 million to $266.8 million from $207.3 million at
January 1, 2000. This increase resulted primarily from additional inventory for
new stores and planned inventory increases in seasonal product lines, as well as
certain unplanned early inventory receipts to support expected fourth quarter
sales in offset of the Y2K-related sales experienced in 1999. Short-term trade
credit, which represents a source of financing for inventory, increased $32.6
million to $92.4 million at September 30, 2000 from $59.8 million at January 1,
2000. 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.
At September 30, 2000, the Company had working capital of $162.3 million, which
represented a $45.0 million increase from January 1, 2000. This increase
resulted primarily from an increase in inventories without a corresponding
increase in accounts payable, a decrease in accrued expenses (primarily due to
timing of payments and lower incentive accruals), an increase in prepaid
expenses (mainly due to prepaid costs on new stores), an increase in cash and
cash equivalents and a decrease in income taxes payable.
Operations used net cash of $25.8 million and $36.8 million in the first nine
months of fiscal 2000 and 1999, respectively. The decrease in net cash used in
the first nine months of fiscal 2000 resulted primarily from inventories
increasing at a slower rate than accounts payable in the first nine months of
fiscal 2000 compared to the first nine months of fiscal 1999, a larger increase
in accrued expenses in the first nine months of fiscal 2000 compared to the
first nine months of fiscal 1999 (primarily due to timing of payments and
incentive accruals) and a decrease in income taxes payable, partially offset by
the timing of certain prepaid expenses.
Cash used in investing activities of $13.5 million for the first nine months of
fiscal 2000 represented a $0.7 million decrease over cash used in the first nine
months of fiscal 1999 of $14.2 million. The decrease in cash used for capital
expenditures during the first nine months of fiscal 2000 compared to the prior
year primarily reflects less capital expenditures as compared to the first nine
months of fiscal 1999 (mainly due to installation of the Company's new
merchandise and warehouse management systems in 1999), partially offset by the
opening of 32 new stores during the first nine months of fiscal 2000 compared
with 24 new store openings during the first nine months of fiscal 1999.
Financing activities in the first nine months of fiscal 2000 provided $41.5
million in cash, which represented a $0.6 million increase in net cash provided
over the $40.9 million in net cash provided in the first nine months of fiscal
1999. This increase in net cash provided resulted primarily from net short-term
borrowings under the credit agreements of approximately $43.8 million during the
first nine months of fiscal 2000 compared to net borrowings of approximately
$28.2 million during the first nine months of fiscal 1999, offset, in part, by
short-term borrowings of $15.0 million under the Term Note in the first nine
months of fiscal 1999.
The Company believes that its cash flow from operations, borrowings available
under its revolving credit facility and short-term trade credit will be
sufficient to fund the Company's operations and its current growth and expansion
plans.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company had no holdings of derivative financial or commodity instruments at
September 30, 2000. In November 2000, the Company entered into an interest rate
swap agreement to fix its base borrowing rate on a portion of existing
indebtedness. 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 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
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exchange rate fluctuations have never had a significant impact on the Company,
and they are not expected to in the foreseeable future.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Effective October 30, 2000, James F. Wright joined the Company as President and
Chief Operating Officer.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.47 Loan Agreement, dated as of August 10, 2000 between the Company
and Bank of America, N.A.
10.48 Term Note, dated as of August 10, 2000, issued by the Company
to Bank of America, N.A., in the aggregate amount of $20
million.
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 30, 2000.
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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: November 14, 2000 By: /s/ Calvin B. Massmann
-------------------------------------
Calvin B. Massmann
Senior Vice President-
Chief Financial Officer and
Treasurer (Duly Authorized
Officer and Principal Financial
Officer)
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