Form 10-Q
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 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
30, 2007
OR
o
|
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
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
|
|
13-3139732
|
(State
or Other Jurisdiction of Incorporation or Organization)
|
|
(I.R.S.
Employer Identification No.)
|
|
|
|
200
Powell Place, Brentwood, Tennessee
|
|
37027
|
(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
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check
one):
Large
accelerated filer x
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
YES
o
NO x
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 28, 2007
|
Common
Stock, $.008 par value
|
|
39,070,014
|
TRACTOR
SUPPLY COMPANY
INDEX
PART
I.
FINANCIAL INFORMATION
Item
1. Financial
Statements
TRACTOR
SUPPLY COMPANY
(in
thousands, except share amounts)
|
|
June
30,
|
|
December
30,
|
|
|
|
2007
|
|
2006
|
|
ASSETS
|
|
|
(Unaudited)
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
43,404
|
|
$
|
37,605
|
|
Inventories
|
|
|
692,388
|
|
|
594,851
|
|
Prepaid
expenses and other current assets
|
|
|
40,173
|
|
|
37,007
|
|
Deferred
income taxes
|
|
|
6,999
|
|
|
11,360
|
|
Total
current assets
|
|
|
782,964
|
|
|
680,823
|
|
|
|
|
|
|
|
|
|
Property
and equipment:
|
|
|
|
|
|
|
|
Land
|
|
|
21,707
|
|
|
19,495
|
|
Buildings
and improvements
|
|
|
255,888
|
|
|
248,063
|
|
Furniture,
fixtures and equipment
|
|
|
163,484
|
|
|
146,128
|
|
Computer
software and hardware
|
|
|
44,957
|
|
|
46,853
|
|
Construction
in progress
|
|
|
30,164
|
|
|
15,404
|
|
|
|
|
516,200
|
|
|
475,943
|
|
Accumulated
depreciation and amortization
|
|
|
(194,737
|
)
|
|
(174,339
|
)
|
Property
and equipment, net
|
|
|
321,463
|
|
|
301,604
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
10,258
|
|
|
10,288
|
|
Deferred
income taxes
|
|
|
15,059
|
|
|
10,779
|
|
Other
assets
|
|
|
6,069
|
|
|
5,976
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
1,135,813
|
|
$
|
1,009,470
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
360,517
|
|
$
|
240,383
|
|
Other
accrued expenses
|
|
|
110,237
|
|
|
111,721
|
|
Current
portion of capital lease obligations
|
|
|
896
|
|
|
1,065
|
|
Income
taxes currently payable
|
|
|
17,574
|
|
|
11,550
|
|
Total
current liabilities
|
|
|
489,224
|
|
|
364,719
|
|
|
|
|
|
|
|
|
|
Revolving
credit loan
|
|
|
--
|
|
|
--
|
|
Capital
lease obligations, less current maturities
|
|
|
2,410
|
|
|
2,808
|
|
Straight-line
rent liability
|
|
|
27,773
|
|
|
24,399
|
|
Other
long-term liabilities
|
|
|
22,063
|
|
|
18,640
|
|
Total
liabilities
|
|
|
541,470
|
|
|
410,566
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
Preferred
stock, 40,000 shares authorized, $1.00 par value; no shares
issued
|
|
|
--
|
|
|
--
|
|
Common
stock, 100,000,000 shares authorized; $.008 par value; 40,506,299
shares
issued and 39,286,707 shares outstanding at June 30, 2007 and 40,281,732
shares issued and outstanding at December 30, 2006
|
|
|
324
|
|
|
322
|
|
Additional
paid-in capital
|
|
|
141,481
|
|
|
129,249
|
|
Treasury
stock - at cost, 1,219,592 shares
|
|
|
(63,720
|
)
|
|
--
|
|
Accumulated
other comprehensive loss
|
|
|
--
|
|
|
(22
|
)
|
Retained
earnings
|
|
|
516,258
|
|
|
469,355
|
|
Total
stockholders’ equity
|
|
|
594,343
|
|
|
598,904
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
1,135,813
|
|
$
|
1,009,470
|
|
The
accompanying notes are an integral part of this statement.
TRACTOR
SUPPLY COMPANY
(in
thousands, except per share amounts)
|
|
For
the fiscal
three
months ended
|
|
For
the fiscal
six
months ended
|
|
|
|
June
30,
2007
|
|
July
1,
2006
|
|
June
30,
2007
|
|
July
1,
2006
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
790,929
|
|
$
|
714,944
|
|
$
|
1,350,761
|
|
$
|
1,180,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of merchandise sold
|
|
|
540,505
|
|
|
490,437
|
|
|
932,157
|
|
|
813,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
|
250,424
|
|
|
224,507
|
|
|
418,604
|
|
|
366,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
166,959
|
|
|
144,996
|
|
|
314,146
|
|
|
275,627
|
|
Depreciation
and amortization
|
|
|
12,357
|
|
|
10,580
|
|
|
24,370
|
|
|
20,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
71,108
|
|
|
68,931
|
|
|
80,088
|
|
|
70,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
|
604
|
|
|
647
|
|
|
1,529
|
|
|
1,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
70,504
|
|
|
68,284
|
|
|
78,559
|
|
|
69,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
26,747
|
|
|
25,357
|
|
|
29,803
|
|
|
25,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
43,757
|
|
$
|
42,927
|
|
$
|
48,756
|
|
$
|
43,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share - basic
|
|
$
|
1.10
|
|
$
|
1.07
|
|
$
|
1.22
|
|
$
|
1.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share - diluted
|
|
$
|
1.08
|
|
$
|
1.05
|
|
$
|
1.19
|
|
$
|
1.06
|
|
The
accompanying notes are an integral part of this
statement.
TRACTOR
SUPPLY COMPANY
(in
thousands, except share amounts)
(Unaudited)
|
|
Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Treasury
Stock
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Retained
Earnings
|
|
Total
Stockholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity at December 30, 2006
|
|
$
|
322
|
|
$
|
129,249
|
|
$
|
--
|
|
$
|
(22
|
)
|
$
|
469,355
|
|
$
|
598,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
effect of change in accounting principle (Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,853
|
)
|
|
(1,853
|
)
|
Issuance
of common stock under employee stock purchase plan (24,654
shares)
|
|
|
|
|
|
1,102
|
|
|
|
|
|
|
|
|
|
|
|
1,102
|
|
Exercise
of stock options (199,913 shares)
|
|
|
2
|
|
|
2,758
|
|
|
|
|
|
|
|
|
|
|
|
2,760
|
|
Tax
benefit on disqualifying dispositions of stock options
|
|
|
|
|
|
2,893
|
|
|
|
|
|
|
|
|
|
|
|
2,893
|
|
Stock
compensation
|
|
|
|
|
|
5,479
|
|
|
|
|
|
|
|
|
|
|
|
5,479
|
|
Repurchase
of common stock (1,219,592 shares)
|
|
|
|
|
|
|
|
|
(63,720
|
)
|
|
|
|
|
|
|
|
(63,720
|
)
|
Foreign
currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
22
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,756
|
|
|
48,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity at June 30, 2007
|
|
$
|
324
|
|
$
|
141,481
|
|
$
|
(63,720
|
)
|
$
|
0
|
|
$
|
516,258
|
|
$
|
594,343
|
|
The
accompanying notes are an integral part of this
statement.
TRACTOR
SUPPLY COMPANY
(in
thousands)
|
|
For
the fiscal
six
months ended
|
|
|
|
June
30,
2007
|
|
July
1,
2006
|
|
|
|
(Unaudited)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
48,756
|
|
$
|
43,452
|
|
Adjustments
to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
24,370
|
|
|
20,203
|
|
Gain
on sale of property and equipment
|
|
|
(281
|
)
|
|
(113
|
)
|
Stock
compensation expense
|
|
|
5,479
|
|
|
4,465
|
|
Deferred
income taxes
|
|
|
81
|
|
|
(7,441
|
)
|
Change
in assets and liabilities:
|
|
|
|
|
|
|
|
Inventories
|
|
|
(97,537
|
)
|
|
(124,518
|
)
|
Prepaid
expenses and other current assets
|
|
|
(3,154
|
)
|
|
1,738
|
|
Accounts
payable
|
|
|
120,134
|
|
|
92,545
|
|
Other
accrued expenses
|
|
|
(1,025
|
)
|
|
2,648
|
|
Income
taxes currently payable
|
|
|
6,024
|
|
|
20,308
|
|
Other
|
|
|
4,683
|
|
|
5,100
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
107,530
|
|
|
58,387
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(44,702
|
)
|
|
(41,313
|
)
|
Proceeds
from sale of property and equipment
|
|
|
963
|
|
|
1,302
|
|
Other
|
|
|
--
|
|
|
(746
|
)
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(43,739
|
)
|
|
(40,757
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Borrowings
under revolving credit agreement
|
|
|
356,193
|
|
|
207,129
|
|
Repayments
under revolving credit agreement
|
|
|
(356,193
|
)
|
|
(215,341
|
)
|
Tax
benefit of stock options exercised
|
|
|
2,433
|
|
|
6,881
|
|
Principal
payments under capital lease obligations
|
|
|
(567
|
)
|
|
(629
|
)
|
Repurchase
of common stock
|
|
|
(63,720
|
)
|
|
--
|
|
Net
proceeds from issuance of common stock
|
|
|
3,862
|
|
|
6,481
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
(57,992
|
)
|
|
4,521
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
5,799
|
|
|
22,151
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
37,605
|
|
|
21,203
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
43,404
|
|
$
|
43,354
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1,239
|
|
$
|
1,466
|
|
Income
taxes
|
|
|
21,230
|
|
|
5,113
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash activities:
|
|
|
|
|
|
|
|
Equipment
acquired through capital leases
|
|
$
|
--
|
|
$
|
1,461
|
|
The
accompanying notes are an integral part of this
statement.
TRACTOR
SUPPLY COMPANY
NOTES
TO
UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
Note
1 - Basis of Presentation:
The
accompanying unaudited interim consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States and the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a
fair presentation have been included. These statements should be read in
conjunction with our Annual Report on Form 10-K for the fiscal year ended
December 30, 2006. The results of operations for the fiscal three-month and
six-month periods are not necessarily indicative of results for the full fiscal
year.
Our
business is highly seasonal. Historically, our sales and profits have been
the
highest in the second and fourth fiscal quarters of each year due to the sale
of
seasonal products. Unseasonable weather, excessive rain, drought, and early
or
late frosts may also affect our sales. We believe, however, that the impact
of
adverse weather conditions is somewhat mitigated by the geographic dispersion
of
our stores.
Typically,
we experience our highest inventory and accounts payable balances during our
first fiscal quarter each year for purchases of seasonal product in anticipation
of the spring selling season and again during our third fiscal quarter in
anticipation of the winter selling season.
Note
2 - Reclassifications:
Certain
amounts in previously issued financial statements have been reclassified to
conform to the fiscal 2007 presentation. Inventories in-transit and inventory
initially consigned but ultimately purchased have been included in the inventory
and accounts payable balances in the consolidated balance sheets. Discount
fees
on our proprietary credit card have been reclassified from operating expenses
into cost of merchandise sold in the consolidated statements of
income.
Note
3 - Inventories:
The
value
of our inventory is determined using the lower of last-in, first-out (LIFO)
cost
or market. Inventories are not in excess of market value. Quarterly inventory
determinations under LIFO are based on assumptions as to projected inventory
levels at the end of the fiscal year, sales for the year and the rate of
inflation/deflation for the year. If the first-in, first-out (FIFO) method
of
accounting for inventory had been used, inventories would have been
approximately $20.9 million and $20.3 million higher than reported at June
30,
2007 and December 30, 2006, respectively.
Note
4 - Share-Based Payments:
Pursuant
to
Statement of Financial Accounting Standards No. 123(R), “Share-Based
Payments” (“SFAS 123(R)”) (adopted in fiscal 2006), we recognize compensation
expense for share-based payments based on the fair value of the awards, using
the modified prospective method. Share-based payments include stock option
grants and transactions under our other stock plans. SFAS 123(R) requires
share-based compensation expense to be based on the following: a) grant date
fair value estimated in accordance with the original provisions of SFAS 123
for unvested options granted prior to the adoption of SFAS 123(R); b) grant
date fair value estimated in accordance with the provisions of SFAS 123(R)
for all share-based payments granted subsequent to adoption; and c) the
discount on shares sold to employees subsequent to adoption, which represents
the difference between the grant date fair value and the employee purchase
price. Share-based compensation expense lowered pre-tax income by $2.8 million
and $2.6 million for the second quarter of fiscal 2007 and 2006, respectively
and $5.5 million and $4.5 million for the first six months of fiscal 2007 and
2006, respectively. The benefits of tax deductions in excess of recognized
compensation expense are reported as a financing cash flow.
Under
SFAS 123(R), forfeitures are estimated at the time of valuation and reduce
expense ratably over the vesting period. This estimate is adjusted periodically
based on the extent to which actual forfeitures differ, or are expected to
differ, from the previous estimate.
Stock
Incentive Plan
Under
our
2006 Stock Incentive Plan, options may be granted to officers, non-employee
directors and other employees. The per share exercise price of options granted
shall not be less than the fair market value of the stock on the date of grant
and such options will expire no later than ten years from the date of grant.
In
the case of a stockholder owning more than 10% of our outstanding voting stock,
the exercise price of an incentive stock option may not be less than 110% of
the
fair market value of the stock on the date of grant and such options will expire
no later than five years from the date of grant. Also, the aggregate fair market
value of the stock with respect to which incentive stock options are exercisable
on a tax deferred basis for the first time by an individual in any calendar
year
may not exceed $100,000. Vesting of options commences at various anniversary
dates following the dates of grant.
The
fair
value of each option grant is separately estimated for each vesting date. The
fair value of each option is recognized as compensation expense ratably over
the
vesting period. We have estimated the fair value of all stock option awards
as
of the date of the grant by applying a modified Black-Scholes
pricing
valuation model. The application of this valuation model involves assumptions
that are judgmental and highly sensitive in the determination of compensation
expense, including expected stock price volatility.
The
following summarizes information concerning stock option grants during
fiscal
2007 and 2006:
|
|
Three
months ended
|
|
Six
months ended
|
|
|
|
June
30, 2007
|
|
July
1, 2006
|
|
June
30, 2007
|
|
July
1, 2006
|
|
Stock
options granted
|
|
|
22,600
|
|
|
38,900
|
|
|
437,450
|
|
|
475,500
|
|
Weighted
average exercise price
|
|
$
|
51.56
|
|
$
|
64.45
|
|
$
|
46.44
|
|
$
|
62.09
|
|
Weighted
average fair value
|
|
$
|
22.19
|
|
$
|
37.91
|
|
$
|
19.56
|
|
$
|
34.89
|
|
As
of
June 30, 2007, total unrecognized compensation expense related to non-vested
stock options and restricted stock units was $21,516,048 with a weighted average
expense recognition period of 1.63 years.
Restricted
Stock Units
During
the first six months of 2007, we issued 62,997 restricted stock units which
vest
over an approximate three-year term and had a grant date weighted average fair
value of $46.46.
Employee
Stock Purchase Plan
We
have
an Employee Stock Purchase Plan (the “ESPP”) whereby all our employees have the
opportunity to purchase, through payroll deductions, shares of common stock
at a
15% discount. Pursuant to the terms of the ESPP, we issued 24,654 and 18,501
shares of common stock during the first six months of fiscal 2007 and 2006,
respectively. Total stock compensation expense related to the ESPP was
approximately $68,000 and $92,000 during the first six months of 2007 and 2006,
respectively. At June 30, 2007, there were 3,321,403 shares of common stock
reserved for future issuance under the ESPP.
There
were no modifications to our share-based compensation plans during the six
months ended June 30, 2007.
Note
5 - Net Income Per Share:
We
present both basic and diluted earning per share (“EPS”) on the face of the
consolidated statements of income. As provided by SFAS 128 “Earnings per Share”,
basic EPS is calculated as income available to common stockholders divided
by
the weighted average number of shares outstanding during the period. Diluted
EPS
is calculated using the weighted average outstanding common shares and the
treasury stock method for shares issuable upon exercise of options and vesting
of restricted stock.
Net
income per share is calculated as follows (in thousands, except per share
amounts):
|
|
Three
months ended
June
30, 2007
|
|
Three
months ended
July
1, 2006
|
|
|
|
Income
|
|
Shares
|
|
Per
Share
Amount
|
|
Income
|
|
Shares
|
|
Per
Share
Amount
|
|
Basic
net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
43,757
|
|
|
39,617
|
|
$
|
1.10
|
|
$
|
42,927
|
|
|
39,966
|
|
$
|
1.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive
stock options and restricted stock outstanding
|
|
|
|
|
|
962
|
|
|
(0.02
|
)
|
|
|
|
|
1,123
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
43,757
|
|
|
40,579
|
|
$
|
1.08
|
|
$
|
42,927
|
|
|
41,089
|
|
$
|
1.05
|
|
|
|
Six
months ended
June
30, 2007
|
|
Six
months ended
July
1, 2006
|
|
|
|
Income
|
|
Shares
|
|
Per
Share
Amount
|
|
Income
|
|
Shares
|
|
Per
Share
Amount
|
|
Basic
net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
48,756
|
|
|
39,922
|
|
$
|
1.22
|
|
$
|
43,452
|
|
|
39,832
|
|
$
|
1.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive
stock options and restricted stock outstanding
|
|
|
|
|
|
979
|
|
|
(0.03
|
)
|
|
|
|
|
1,221
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
48,756
|
|
|
40,901
|
|
$
|
1.19
|
|
$
|
43,452
|
|
|
41,053
|
|
$
|
1.06
|
|
Note
6 - Credit Agreement:
In
February 2007, we entered into a new Senior Credit Facility with largely the
same lender group as under our previous credit facility. The new Senior Credit
Facility provides for borrowings up to $250 million (with sublimits of $75
million and $10 million for letters of credit and swingline loans,
respectively). This agreement is unsecured and has a five-year term, with
proceeds expected to be used for working capital, capital expenditures and
share
repurchases. Borrowings bear interest at either the bank’s base rate or LIBOR
plus an additional amount ranging from 0.35% to 0.90% per annum, adjusted
quarterly based on our performance (0.50% at June 30, 2007). We are also
required to pay a commitment fee ranging from 0.06% to 0.18% per annum for
unused capacity (0.10% at June 30, 2007). The agreement requires quarterly
compliance with respect to fixed charge coverage and leverage ratios. We are
in
compliance with all covenants at June 30, 2007.
Note
7 - Treasury Stock:
In
February 2007, our Board of Directors authorized a share repurchase program
which provides for repurchase of up to $200 million of common stock over an
approximate three-year period. The repurchases may be made from time to time
on
the open market or in privately negotiated transactions. The timing and amount
of any shares repurchased under the program will depend on a variety of factors,
including price, corporate and regulatory requirements, capital availability,
and other market conditions. Repurchased shares will be held in treasury. The
program may be limited or terminated at any time without prior
notice.
We
repurchased 806,100 and 1,219,592 shares under the share repurchase program
during the second quarter and first six months of 2007, respectively. The total
cost of the share repurchases was $42.4 million and $63.7 million during the
second quarter and first six months of 2007, respectively. As of June 30,
2007, we had remaining authorization under the share repurchase program of
$136.3 million.
Note
8 - Accounting for Uncertainty in Income Taxes:
In
June
2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109” (“FIN 48”) to create a single model to
address accounting for uncertainty in tax positions. FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in the financial
statements in accordance with FASB Statement No. 109, “Accounting for Income
Taxes”. This Interpretation prescribes the minimum recognition threshold a tax
position is required to meet before being recognized in the financial
statements. Tax positions that meet a “more-likely-than-not” recognition
threshold should be measured in order to determine the tax benefit to be
recognized. We are no longer subject to federal examination for years before
2005, nor state and local income tax examinations for years before
2002.
We
adopted the provisions of FIN 48 in fiscal 2007, as required. As a result,
we
charged approximately $1.9 million to retained earnings for the cumulative
effect of adoption, including interest. Interest and penalties are immaterial
at
the date of adoption. The total amount of unrecognized tax benefits that, if
recognized, would increase the effective tax rate, is $2.3 million. In addition,
we will recognize current interest accrued related to these uncertain tax
positions as interest expense.
Note
9 - New Accounting Pronouncements:
In
March 2006, the Emerging Issues Task Force (“EITF”) reached a consensus on
EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement (That
Is,
Gross Versus Net Presentation)” (“EITF 06-3”), which allows companies to adopt a
policy of presenting taxes in the income statement on either a gross or net
basis. Taxes within the scope of EITF 06-3 would include taxes that are imposed
on a revenue transaction between a seller and a customer, for example, sales
taxes, use taxes, value-added taxes, and some types of excise taxes. We adopted
the provisions of EITF 06-3, as required, in fiscal 2007. EITF 06-3 does not
impact the method for recording and reporting these sales taxes in our
consolidated financial statements as our policy is to exclude all such taxes
from revenue.
In
September 2006, the FASB issued Statement No. 157, “Fair Value
Measurements” (“SFAS
157”). SFAS 157 defines fair value, establishes a framework for measuring fair
value in accordance with generally accepted accounting principles and expands
disclosures about fair value measurements. SFAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 (our fiscal
year 2008), and interim periods within those fiscal years. We
are
currently evaluating the impact that the adoption of SFAS 157 will have on
our
consolidated financial statements.
In
February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial
Assets and Financial Liabilities - Including an Amendment of SFAS 115,"
which permits entities to choose to measure many financial instruments and
certain other items at fair value. The fair value option established by this
standard permits all entities to choose to measure eligible items at fair value
at specified election dates. Entities choosing the fair value option would
be
required to report unrealized gains and losses on items for which the fair
value
option has been elected in earnings at each subsequent reporting date. Adoption
is required for fiscal years beginning after November 15, 2007 (our
fiscal year 2008).
We are
currently evaluating the expected effect of SFAS 159 on our
consolidated
financial statements.
Note
10 - Commitments and Contingencies:
Construction
commitments
We
had
commitments for new store construction projects totaling approximately $8.7
million at June 30, 2007.
Litigation
We
are
involved in various litigation matters arising in the ordinary course of
business. After consultation with legal counsel, our management expects these
matters will be resolved without material adverse effect on our consolidated
financial position or results of operations. Any estimated loss related to
such
matters has been adequately provided in accrued liabilities to the extent
probable and reasonably estimable. It is possible, however, that future results
of operations for any particular quarterly or annual period could be materially
affected by changes in circumstances relating to these proceedings.
Item
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The
following discussion and analysis describes certain factors affecting our
results of operations for the fiscal three and six month periods ended June
30,
2007 and July 1, 2006 and significant developments affecting our financial
condition since the end of the fiscal year ended December 30, 2006, and should
be read in conjunction with our Annual Report on Form 10-K for the fiscal year
ended December 30, 2006. The following discussion and analysis also contains
certain historical and forward-looking information. The forward-looking
statements included herein are made pursuant to the safe harbor provisions
of
the Private Securities Litigation Reform Act of 1995 (the “Act”). All
statements, other than statements of historical facts, which address activities,
events or developments that we expect or anticipate will or may occur in the
future, including such things as estimated results of operations in future
periods, future capital expenditures (including their amount and nature),
business strategy, expansion and growth of our business operations and other
such matters are forward-looking statements. These forward-looking statements
may be affected by certain risks and uncertainties, any one, or a combination
of
which could materially affect the results of our operations. To take advantage
of the safe harbor provided by the Act, we are identifying certain factors
that
could cause actual results to differ materially from those expressed in any
forward-looking statements, whether oral or written.
Our
business is highly seasonal. Historically, our sales and profits have been
the
highest in the second and fourth fiscal quarters of each year due to the sale
of
seasonal products. Unseasonable weather, excessive rain, drought, and early
or
late frosts may also affect our sales. We believe, however, that the impact
of
adverse weather conditions is somewhat mitigated by the geographic dispersion
of
our stores.
Typically,
we experience our highest inventory and accounts payable balances during the
first fiscal quarter each year for purchases of seasonal products in
anticipation of the spring selling season and again during the third fiscal
quarter in anticipation of the winter selling season.
As
with
any business, many aspects of our operations are subject to influences outside
our control. These factors include general economic cycles affecting consumer
spending, weather factors, operating factors affecting customer satisfaction,
consumer debt levels, inflation, pricing and other competitive factors, the
ability to attract, train and retain qualified employees, the ability to manage
growth and 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, capital market conditions in general, the ability to increase sales
at
existing stores, the ability to retain vendors, the risk of product liability
and other claims, reliance on foreign suppliers, the ability to maintain and
improve our management information systems and the seasonality of our business.
We discuss in greater detail risk factors relating to our business in
Item 1A of our Annual Report on Form 10-K for the fiscal year ended
December 30, 2006. Forward-looking statements are based on our knowledge of
our business and the environment in which we operate, but because of the factors
listed above or other factors, actual results could differ materially from
those
reflected by any forward-looking statements. Consequently, all of the
forward-looking statements made are qualified by these cautionary statements
and
there can be no assurance that the actual results or developments anticipated
will be realized or, even if substantially realized, that they will have the
expected consequences to or effects on our business and operations. Readers
are
cautioned not to place undue reliance on these forward-looking statements,
which
speak only as of the date hereof. We undertake no obligation to release publicly
any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Results
of Operations
Fiscal
Three Months (Second Quarter) and Six Months Ended June 30, 2007 and July 1,
2006
Net
sales
increased 10.6% to $790.9 million for the second quarter of 2007 from
$714.9 million for the second quarter of 2006. Net sales increased 14.4% to
$1,350.8 million for the first six months of fiscal 2007 from $1,180.5 million
for the first six months of fiscal 2006. The net sales increase resulted
primarily from the addition of new stores, successful store relocations, and
same-store sales improvement of 1.0% and 3.9% for the second quarter and first
six months, respectively. Our second quarter same-store sales improvements
were
strongest in the apparel and animal health categories, but were largely offset
by lower than expected performance in seasonal riding mowers.
We
opened
20 new stores during the second quarter and 42 stores during the first six
months of fiscal 2007, compared to 17 and 46 stores opened during the second
quarter and first six months of 2006, respectively. We did not relocate any
stores in the second quarter of 2007 compared to six store relocations during
the second quarter of 2006. For the first six months of 2007, we relocated
seven
stores compared to 11 relocations in the first six months of 2006. We also
sold
our store in Canada (which was acquired in the November 2005 acquisition of
Del’s
Farm Supply)
during
the second quarter of fiscal 2007. We operated 717 stores at June 30, 2007
as
compared to 641 stores at July 1, 2006.
The
following chart indicates the average percentage of sales represented by each
of
our major product categories during the second quarter and first six months
of
fiscal 2007 and 2006:
|
|
Three
months ended
|
|
Six
months ended
|
|
|
|
June
30,
2007
|
|
July
1,
2006
|
|
June
30,
2007
|
|
July
1,
2006
|
|
Livestock
and Pet
|
|
|
31
|
%
|
|
30
|
%
|
|
33
|
%
|
|
33
|
%
|
Seasonal
Products
|
|
|
31
|
|
|
32
|
|
|
27
|
|
|
28
|
|
Hardware
and Tools
|
|
|
13
|
|
|
13
|
|
|
15
|
|
|
15
|
|
Clothing
and Footwear
|
|
|
6
|
|
|
5
|
|
|
7
|
|
|
6
|
|
Truck
and Towing
|
|
|
9
|
|
|
9
|
|
|
9
|
|
|
9
|
|
Agriculture
|
|
|
10
|
|
|
11
|
|
|
9
|
|
|
9
|
|
Total
|
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
Gross
margin for the second quarter and the first six months of fiscal 2007 was
$250.4 million and $418.6 million, respectively. This represents an
increase of 11.5% and 14.2%, respectively, over the comparable periods of the
prior year. Gross margin, as a percent of sales, was 31.7% for the second
quarter of fiscal 2007 compared to 31.4% for the comparable period in fiscal
2006. The improvement in gross margin for the quarter resulted from more
favorable product mix and improved product sourcing. For the first six months
of
fiscal 2007, the gross margin rate was consistent with the comparable period
in
the prior year at 31.0% of sales.
Selling,
general and administrative (“SG&A”) expenses increased 80 basis points to
21.1% of sales in the second quarter of fiscal 2007 from 20.3% of sales in
the
second quarter of fiscal 2006. This second quarter increase was primarily
attributable to a shift in comparable marketing expenses from the first quarter
as well as higher occupancy costs resulting from continued store expansion
and
increased costs at our distribution centers to handle more imports and
additional inventory for new initiatives through the supply chain. SG&A
expenses for the first six months of fiscal 2007 remained consistent with the
first six months of fiscal 2006 at 23.3% of sales.
Depreciation
and amortization expense increased 10 basis points to 1.6% of sales in the
second quarter of fiscal 2007 from 1.5% in the second quarter of fiscal 2006.
As
a percent of sales, depreciation and amortization expense increased 10 basis
points to 1.8% in the first six months of fiscal 2007 from 1.7% in the first
six
months of fiscal 2006. The increases were related directly to new store growth
and capital costs for infrastructure and technology.
Interest
expense for the second quarter of 2007 remained consistent with the prior year
at $0.6 million. For the first six months of fiscal 2007, interest expense
decreased slightly to $1.5 million compared to $1.6 million for the comparable
period in fiscal 2006. Our effective income tax rate increased to 37.9% in
the
second quarter and first six months of fiscal 2007 compared with 37.1% for
the
second quarter and first six months of fiscal 2006 primarily due to state taxes
relating to the composition of income among the states and the adoption of
FIN
48 relating to uncertainties in income tax positions. This interpretation
prescribes the minimum recognition threshold a tax position is required to
meet
before being recognized in the financial statements. Tax positions that meet
a
“more-likely-than-not” recognition threshold should be measured in order to
determine the tax benefit to be recognized. We are no longer subject to federal
examination for years before 2005, and state and local income tax examinations
for years before 2002.
We
adopted the provisions of FIN 48 in fiscal 2007, as required. As a result,
we
charged approximately $1.9 million to retained earning for the cumulative effect
of adoption including interest. Interest and penalties are immaterial at the
date of adoption. The total amount of unrecognized tax benefits that, if
recognized, would affect the effective tax rate is $2.3 million. In addition,
we
recognize current interest accrued related to these uncertain tax positions
as
interest expense.
As
a
result of the foregoing factors, net income for the second quarter and first
six
months of fiscal 2007 increased $0.9 million and $5.3 million, respectively,
to
$43.8 million and $48.8 million from $42.9 million and
$43.5 million in the second quarter and first six months of fiscal 2006,
respectively. Net income, as a percent of sales, decreased 50 basis points
to
5.5% for the second quarter of fiscal 2007 compared to 6.0% in the second
quarter of fiscal 2006. For the first six months of fiscal 2007, net income
as a
percent of sales decreased 10 basis points to 3.6% for fiscal 2007 compared
to
3.7% for the first six months of fiscal 2006. Net income per diluted share
increased to $1.08 and $1.19 for the second quarter and the first six months
of
fiscal 2007, respectively, from $1.05 and $1.06 for the second quarter and
the
first six months of fiscal 2006, respectively.
Liquidity
and Capital Resources
In
addition to normal operating expenses, our primary ongoing cash requirements
are
for store expansion, remodeling and relocation programs, including inventory
purchases and capital expenditures. Our primary ongoing sources of liquidity
are
funds provided from operations, commitments available under our revolving credit
agreement and normal trade credit.
At
June
30,
2007,
we had
working capital of $293.8 million, a $22.3 million decrease from
December 30, 2006. This decrease was primarily attributable to changes in
the following components of current assets and current liabilities (in
millions):
|
|
June
30,
2007
|
|
Dec.
30,
2006
|
|
Variance
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
43.4
|
|
$
|
37.6
|
|
$
|
5.8
|
|
Inventories
|
|
|
692.4
|
|
|
594.9
|
|
|
97.5
|
|
Prepaid
expenses and other current assets
|
|
|
40.2
|
|
|
37.0
|
|
|
3.2
|
|
Other,
net
|
|
|
7.0
|
|
|
11.3
|
|
|
(4.3
|
)
|
|
|
|
783.0
|
|
|
680.8
|
|
|
102.2
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
360.5
|
|
|
240.4
|
|
|
120.1
|
|
Accrued
expenses
|
|
|
110.2
|
|
|
111.7
|
|
|
(1.5
|
)
|
Income
tax currently payable
|
|
|
17.6
|
|
|
11.5
|
|
|
6.1
|
|
Other,
net
|
|
|
0.9
|
|
|
1.1
|
|
|
(0.2
|
)
|
|
|
|
489.2
|
|
|
364.7
|
|
|
124.5
|
|
Working
capital
|
|
$
|
293.8
|
|
$
|
316.1
|
|
$
|
(22.3
|
)
|
The
increase in inventories and related increase in accounts payable resulted
primarily from the purchase of additional inventory for new stores and an
increase in average inventory per store due to increased sales expectations
and
planned merchandising initiatives. Trade credit arises from our vendors granting
extended payment terms for inventory purchases. Payment terms generally vary
from 30 days to 180 days depending on the inventory product.
Operations
provided net cash of $107.5 million and $58.4 million in the first six
months of fiscal 2007 and fiscal 2006, respectively. The $49.1 million increase
in net cash provided in 2007 over 2006 is primarily due to changes in the
following operating activities (in millions):
|
|
Six
months ended
|
|
|
|
June
30,
2007
|
|
July
1,
2006
|
|
Variance
|
|
Net
income
|
|
$
|
48.8
|
|
$
|
43.5
|
|
$
|
5.3
|
|
Inventories
and accounts payable
|
|
|
22.6
|
|
|
(32.0
|
)
|
|
54.6
|
|
Prepaid
expenses and other current assets
|
|
|
(3.2
|
)
|
|
1.7
|
|
|
(4.9
|
)
|
Accrued
expenses
|
|
|
(1.0
|
)
|
|
2.6
|
|
|
(3.6
|
)
|
Income
taxes currently payable
|
|
|
6.0
|
|
|
20.3
|
|
|
(14.3
|
)
|
Other,
net
|
|
|
34.3
|
|
|
22.3
|
|
|
12.0
|
|
Net
cash provided by operations
|
|
$
|
107.5
|
|
$
|
58.4
|
|
$
|
49.1
|
|
The
improvement in net cash provided by operations in the first six months of fiscal
2007 compared with the first six months of fiscal 2006 was primarily due to
changes in inventory levels and the timing of payments. The decrease in cash
used for inventory results from a build of seasonal stock levels and other
merchandising initiatives. Improvements in financed inventory resulted from
better accounts payable management and vendor dating, offset by an increase
in
imports (which are largely prepaid). The change in cash used for income taxes
relates to the timing of payments of income taxes.
Investing
activities used $43.7 million and $40.8 million in the first six months of
fiscal 2007 and fiscal 2006, respectively. The majority of this cash requirement
relates to our capital expenditures.
Capital
expenditures (including equipment acquired under capital lease) for the first
six months of fiscal 2007 and fiscal 2006 were as follows (in
millions):
|
|
Six
months ended
|
|
|
|
June
30,
2007
|
|
July
1,
2006
|
|
New/relocated
stores and stores not yet opened
|
|
$
|
20.4
|
|
$
|
30.8
|
|
Existing
store properties acquired from lessor
|
|
|
6.9
|
|
|
--
|
|
Existing
stores
|
|
|
9.0
|
|
|
8.5
|
|
Distribution
center capacity and improvements
|
|
|
1.4
|
|
|
1.5
|
|
Information
technology
|
|
|
7.0
|
|
|
1.9
|
|
Corporate
and other
|
|
|
--
|
|
|
0.1
|
|
|
|
$
|
44.7
|
|
$
|
42.8
|
|
The
above
table reflects 49 new/relocated stores in the first six months of fiscal 2007,
compared to 57 during the first six months of fiscal 2006.
Financing
activities used $58.0 million in the first six months of fiscal 2007 and
provided $4.5 million in the first six months of fiscal 2006. This reduction
in
net cash provided is largely due to the repurchase of shares of our common
stock.
In
February 2007, we entered into a new Senior Credit Facility with largely the
same lender group as under our prior credit facility. The new Senior Credit
Facility provides for borrowings up to $250 million (with sublimits of $75
million and $10 million for letters of credit and swingline loans,
respectively). This agreement is unsecured and has a five-year term, with
proceeds expected to be used for working capital, capital expenditures and
share
repurchases. Borrowings bear interest at either the bank’s base rate or LIBOR
plus an additional amount ranging from 0.35% to 0.90% per annum, adjusted
quarterly based on our performance (0.50% at June 30, 2007). We are also
required to pay a commitment fee ranging from 0.06% to 0.18% per annum for
unused capacity (0.10% at June 30, 2007). The agreement requires quarterly
compliance with respect to fixed charge coverage and leverage ratios. We are
in
compliance with all covenants at June 30, 2007.
We
had
approximately $211.6 million and $134.9 million available for future borrowings,
net of outstanding letters of credit, under our revolving credit agreement
at
June 30, 2007 and July 1, 2006, respectively.
We
believe that our cash flow from operations, borrowings available under our
revolving credit agreement, and normal trade credit will be sufficient to fund
our operations and capital expenditure needs, including store openings and
renovations, over the next several years.
Share
Repurchase Program
In
February 2007, our Board of Directors authorized a share repurchase program
which provides for repurchase of up to $200 million of our outstanding
common stock over an approximate three-year period. The repurchases may be
made
from time to time on the open market or in privately negotiated transactions.
The timing and amount of any shares repurchased under the program will depend
on
a variety of factors, including price, corporate and regulatory requirements,
capital availability, and other market conditions. The program may be limited
or
terminated at any time without prior notice.
In
the
second quarter of 2007, we repurchased 806,100 shares of our common stock,
at a
total cost of $42.4 million. On a year-to-date basis, we have repurchased 1.2
million shares at a total cost of $63.7 million. Repurchased shares are
accounted for at cost and will be held in treasury for future
issuance.
Off-Balance
Sheet Arrangements
Our
off-balance sheet arrangements are limited to operating leases and outstanding
letters of credit. Leasing buildings and equipment for retail stores and offices
rather than acquiring these significant assets allows us to utilize financial
capital to operate the business rather than maintain assets. Letters of credit
allow us to purchase inventory in a timely manner.
We
had
outstanding letters of credit of $38.4 million at June 30,
2007.
Significant
Contractual Obligations and Commercial Commitments
There
has
been no material change in our contractual obligations and commercial
commitments other than in the ordinary course of business since the end of
fiscal 2006.
Significant
Accounting Policies and Estimates
Our
discussion and analysis of our financial position and results of operations
are
based upon our consolidated financial statements, which have been prepared
in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make informed
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and related disclosure of contingent assets and
liabilities. Significant accounting policies, including areas of critical
management judgments and estimates, have primary impact on the following
financial statement areas:
-
|
Revenue
recognition and sales returns
|
-
|
Inventory
valuation
|
-
|
Insurance
reserves
|
-
|
Sales
tax reserve
|
-
|
Share-based
payments
|
-
|
Income
taxes
|
See
Note
1 of the Notes to the Consolidated Financial Statements in our Annual Report
on
Form 10-K for the fiscal year ended December 30, 2006 for a discussion
of our critical accounting policies. Our financial position and/or results
of
operations may be materially different when reported under different conditions
or when using different assumptions in the application of such policies. In
the
event estimates or assumptions prove to be different from actual amounts,
adjustments are made in subsequent periods to reflect more current information.
Item
3. Quantitative and Qualitative Disclosures About
Market Risk
We
are
exposed to changes in interest rates primarily from our revolving credit
agreement (the “Credit Agreement”). The Credit Agreement bears interest at
either the bank’s base rate (8.25% and 8.00% at June 30, 2007 and
July 1, 2006, respectively) or LIBOR (5.32% and 6.10% at June 30, 2007
and July 1, 2006, respectively) plus an additional amount ranging from
0.35% to 0.90% per annum, adjusted quarterly, based on our performance (0.50%
at
June 30, 2007). We are also required to pay, quarterly in arrears, a
commitment fee ranging from 0.06% to 0.18% based on the daily average unused
portion of the Credit Agreement (0.10% at June 30, 2007). See Note 6 of the
Notes to the Consolidated Financial Statements included herein for further
discussion regarding the Credit Agreement.
Although
we cannot accurately determine the precise effect of inflation on our
operations, we believe our sales and results of operations have been affected
by
inflation. We are subject to market risk with respect to the pricing of certain
products and services, which include, among other items, petroleum, steel,
corn,
soybean and other commodities as well as transportation services. If prices
of
these materials continue to increase, consumer demand may fall and/or we
may not be able to pass all such increases on to our customers and, as a
result, sales and/or gross margins could decline. Our strategy is to reduce
or
mitigate the effects of inflation principally by taking advantage of vendor
incentive programs, economies of scale from increased volume of purchases,
increasing retail prices and selectively buying from the most competitive
vendors without sacrificing quality. Due to the competitive environment, such
conditions have and may continue to adversely impact our gross
margin.
Item
4.
Controls and Procedures
Disclosure
Controls and Procedures
We
carried out an evaluation required by the Securities Exchange Act of 1934,
as
amended (the “1934 Act”), under the supervision and with the participation of
our principal executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the 1934 Act)
as of
June 30, 2007. Based on this evaluation, our principal executive officer
and principal financial officer concluded that, as of June 30, 2007, our
disclosure controls and procedures were effective to ensure that information
required to be disclosed by us in the reports that we file or submit under
the
1934 Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission’s rules and
forms.
Changes
in Internal Control over Financial Reporting
There
have been no changes in our internal control over financial reporting during
the
second quarter of fiscal 2007 that have materially affected or are reasonably
likely to materially affect our internal control over financial
reporting.
PART
II.
OTHER INFORMATION
Item
1. Legal Proceedings
We
are
involved in various litigation matters arising in the ordinary course of
business. After consultation with legal counsel, management expects these
matters will be resolved without material adverse effect on our consolidated
financial position or results of operations. Any estimated loss related to
such
matters has been adequately provided in accrued liabilities to the extent
probable and reasonably estimable. It is possible, however, that future results
of operations for any particular quarterly or annual period could be materially
affected by changes in circumstances relating to these proceedings.
None
Item
2. Unregistered Sales of Equity Securities and
Use of
Proceeds
Issuer
Purchases of Equity Securities
In
February 2007, our Board of Directors authorized a share repurchase program
which provides for repurchase of up to $200 million (excluding commissions)
of our outstanding common stock over an approximate three-year period. Stock
repurchase activity during the second quarter of 2007 is set forth in the table
below:
Period
|
|
Total
Number
of
Shares
Purchased
|
|
Average
Price
Paid
Per
Share
|
|
Total
Number
of
Shares
Purchased
as
Part
of Publicly
Announced
Plans
or
Programs
|
|
Maximum
Dollar
Value
of Shares
That
May Yet Be
Purchased
Under
the
Plans or
Programs
|
|
4/1/07
- 4/28/07
|
|
|
225,000
|
|
$
|
53.96
|
|
|
225,000
|
|
$
|
166,546,314
|
|
4/29/07
- 5/26/07
|
|
|
306,100
|
|
|
51.30
|
|
|
306,100
|
|
|
150,852,621
|
|
5/27/07
- 6/30/07
|
|
|
275,000
|
|
|
52.89
|
|
|
275,000
|
|
|
136,316,595
|
|
As
of June 30, 2007
|
|
|
806,100
|
|
|
|
|
|
806,100
|
|
|
|
|
We
expect
to implement the balance of the repurchase program through purchases made from
time to time either in the open market or through private transactions, in
accordance with regulations of the Securities and Exchange
Commission.
None
Item
4. Submission of Matters to a Vote of Security
Holders
(a)
|
Our
Annual Meeting of Stockholders was held on May 2, 2007 at our corporate
headquarters in Brentwood, Tennessee.
|
|
|
|
(b)
|
The
stockholders elected, for a one-year term, the directors set forth
below.
|
(c)
|
The
stockholders voted on the following matters at the Annual
Meeting:
|
|
|
|
|
1.
|
The
election of nine directors for a one-year term ending at the 2008
Annual
Meeting of Stockholders:
|
Nominees
For Directors
|
|
For
|
|
Withheld
|
|
Joseph
H. Scarlett, Jr.
|
|
|
37,474,661
|
|
|
385,542
|
|
James
F. Wright
|
|
|
37,527,311
|
|
|
331,892
|
|
Jack
Bingleman
|
|
|
37,774,300
|
|
|
84,903
|
|
S.P.
Braud
|
|
|
37,513,814
|
|
|
345,389
|
|
Cynthia
T. Jamison
|
|
|
37,714,952
|
|
|
144,251
|
|
Gerard
E. Jones
|
|
|
37,755,031
|
|
|
104,172
|
|
Joseph
D. Maxwell
|
|
|
34,351,876
|
|
|
3,507,327
|
|
Edna
K. Morris
|
|
|
37,772,164
|
|
|
87,039
|
|
Joe
M. Rodgers
|
|
|
37,516,779
|
|
|
342,424
|
|
|
2.
|
Ratification
of the appointment of Ernst & Young LLP as independent auditors for
the fiscal year ending December 29,
2007.
|
For
|
|
Against
|
|
Abstain
|
37,825,473
|
|
15,965
|
|
17,765
|
Item
5. Other Information
None
|
Exhibits
|
|
|
|
|
|
31.1
|
Certification
of Chief Executive Officer under Section 302 of the Sarbanes-Oxley
Act of
2002.
|
|
|
|
|
31.2
|
Certification
of Chief Financial Officer under Section 302 of the Sarbanes-Oxley
Act of
2002.
|
|
|
|
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer under Section
906
of the Sarbanes-Oxley Act of 2002.
|
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: August
9, 2007
|
|
By: |
/s/ Anthony F. Crudele |
|
|
|
|
Anthony
F. Crudele
|
|
|
|
|
Executive
Vice President - Chief Financial Officer and Treasurer
|
|
|
|
(Duly
Authorized Officer and Principal Financial
Officer)
|
Page
19