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 26, 2004 --------------------------------------------- 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 I.R.S. Employer Identification No.) Incorporation or Organization) 200 POWELL PLACE, BRENTWOOD, TENNESSEE 37027 - ---------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) 320 PLUS PARK BOULEVARD, NASHVILLE, TENNESSEE 37217 - -------------------------------------------------------------------------------- Former name, former address and former fiscal year if changed since last report) 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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 24, 2004 - -------------------------------------- ----------------------------- Common Stock, $.008 par value 38,257,252
<TABLE> <CAPTION> TRACTOR SUPPLY COMPANY INDEX PAGE NO. -------- <S> <C> <C> Part I. Financial Information: Item 1. Financial Statements: Consolidated Balance Sheets - June 26, 2004 and December 27, 2003................................................3 Consolidated Statements of Income - For the Fiscal Three and Six Months Ended June 26, 2004 and June 28, 2003....................................................4 Consolidated Statements of Cash Flows - For the Fiscal Six Months Ended June 26, 2004 and June 28, 2003....................................................5 Notes to Unaudited Consolidated Financial Statements...............................6-12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................13-17 Item 3. Quantitative and Qualitative Disclosures About Market Risk...........................18 Item 4. Controls and Procedures..............................................................18 Part II. Other Information: Item 1. Legal Proceedings....................................................................19 Item 4. Submission of Matters to a Vote of Security Holders..................................19 Item 6. Exhibits and Reports on Form 8-K.....................................................20 Signature ....................................................................................20 </TABLE> Page 2 of 20
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TRACTOR SUPPLY COMPANY CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) <TABLE> <CAPTION> JUNE 26, DECEMBER 27, 2004 2003 --------- --------- (UNAUDITED) <S> <C> <C> ASSETS Current assets: Cash and cash equivalents .................................................. $ 66,421 $ 19,980 Inventories ................................................................ 407,050 324,518 Prepaid expenses and other current assets .................................. 23,507 27,725 Assets held for sale ....................................................... 2,472 3,636 Deferred income taxes ...................................................... 7,467 7,467 --------- --------- Total current assets .......................................... 506,917 383,326 --------- --------- Land ......................................................................... 15,857 14,307 Buildings and improvements ................................................... 145,309 124,968 Furniture, fixtures and equipment ............................................ 99,984 89,633 Construction in progress ..................................................... 6,327 3,563 --------- --------- 267,477 232,471 Accumulated depreciation and amortization .................................... (94,913) (83,880) --------- --------- Property and equipment, net ................................................ 172,564 148,591 Other assets ................................................................. 4,234 4,292 --------- --------- Total assets .................................................. $ 683,715 $ 536,209 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ........................................................... $ 237,732 $ 131,564 Accrued employee compensation .............................................. 7,903 12,716 Other accrued expenses ..................................................... 71,717 61,208 Income taxes currently payable ............................................. 5,542 -- Current portion of capital lease obligations ............................... 339 339 --------- --------- Total current liabilities ..................................... 323,233 205,827 --------- --------- Revolving credit loan ........................................................ -- 19,403 Capital lease obligations .................................................... 1,630 1,807 Deferred income taxes ........................................................ 8,879 8,879 Other long-term liabilities .................................................. 5,528 4,909 --------- --------- Total liabilities ............................................. 339,270 240,825 --------- --------- 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; 38,244,518 and 37,390,469 shares issued and outstanding in 2004 and 2003, respectively 306 299 Additional paid-in capital ................................................... 75,940 62,083 Retained earnings ............................................................ 268,199 233,002 --------- --------- Total stockholders' equity .................................... 344,445 295,384 --------- --------- Total liabilities and stockholders' equity .................... $ 683,715 $ 536,209 ========= ========= The accompanying notes are an integral part of this statement. </TABLE> Page 3 of 20
TRACTOR SUPPLY COMPANY CONSOLIDATED 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 28, JUNE 26, JUNE 28, 2004 2003 2004 2003 --------- --------- --------- --------- (UNAUDITED) (UNAUDITED) <S> <C> <C> <C> <C> Net sales .............................................................. $ 525,919 $ 449,391 $ 856,473 $ 723,151 Cost of merchandise sold ............................................... 365,376 313,099 596,761 506,062 --------- --------- --------- --------- Gross margin ...................................................... 160,543 136,292 259,712 217,089 Selling, general and administrative expenses ........................... 104,606 87,356 191,497 159,494 Depreciation and amortization .......................................... 6,114 4,750 11,917 9,204 --------- --------- --------- --------- Income from operations ............................................ 49,823 44,186 56,298 48,391 Interest expense, net .................................................. 190 941 571 1,951 --------- --------- --------- --------- Income before income taxes and cumulative effect of change in accounting principle .................................... 49,633 43,245 55,727 46,440 Income tax expense ..................................................... 18,257 15,858 20,530 17,040 --------- --------- --------- --------- Income before cumulative effect of change in accounting principle ................................................. 31,376 27,387 35,197 29,400 Cumulative effect on prior years of retroactive application of change in accounting principle, net of income taxes of $1,165 ........................................ -- -- -- (1,888) --------- --------- --------- --------- Net income ............................................................ $ 31,376 $ 27,387 $ 35,197 $ 27,512 ========= ========= ========= ========= Net income per share - basic, before cumulative effect of change in accounting principle ............................. $ 0.82 $ 0.74 $ 0.93 $ 0.80 Cumulative effect of accounting change, net of income taxes ......................................................... -- -- -- (0.06) --------- --------- --------- --------- Net income per share - basic ........................................... $ 0.82 $ 0.74 $ 0.93 $ 0.74 ========= ========= ========= ========= Net income per share - assuming dilution before cumulative effect of change in accounting principle ............................................................ $ 0.75 $ 0.68 $ 0.84 $ 0.74 Cumulative effect of accounting change, net of income taxes ......................................................... -- -- -- (0.05) --------- --------- --------- --------- Net income per share - assuming dilution ............................... $ 0.75 $ 0.68 $ 0.84 $ 0.69 ========= ========= ========= ========= Pro-forma amounts assuming the change in accounting principle is applied retroactively: Net income ....................................................... $ 31,376 $ 27,387 $ 35,197 $ 29,400 Net income per share - basic ..................................... $ 0.82 $ 0.74 $ 0.93 $ 0.80 Net income per share - assuming dilution ......................... $ 0.75 $ 0.68 $ 0.84 $ 0.74 The accompanying notes are an integral part of this statement. </TABLE> Page 4 of 20
TRACTOR SUPPLY COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) <TABLE> <CAPTION> FOR THE FISCAL SIX MONTHS ENDED ----------------------- JUNE 26, JUNE 28, 2004 2003 --------- --------- (UNAUDITED) <S> <C> <C> Cash flows from operating activities: Net income ................................................................... $ 35,197 $ 27,512 Tax benefit of stock options exercised ....................................... 8,014 3,324 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of a change in accounting principle .................. -- 1,888 Depreciation and amortization .......................................... 11,917 9,204 Gain on sale of property and equipment .................................. (965) (765) Asset impairment related to closed stores ............................... 71 78 Deferred income taxes ................................................... -- 322 Change in assets and liabilities: Inventories .......................................................... (82,532) (68,961) Prepaid expenses and other current assets ............................ 4,218 (2,565) Accounts payable ..................................................... 106,168 75,146 Accrued expenses ..................................................... 5,696 (10,537) Income taxes currently payable ....................................... 5,542 3,233 Other ................................................................ 1,271 365 --------- --------- Net cash provided by operating activities .................................... 94,597 38,244 --------- --------- Cash flows from investing activities: Capital expenditures ..................................................... (36,843) (16,396) Proceeds from sale of property and equipment ............................. 2,417 2,429 --------- --------- Net cash used in investing activities ........................................ (34,426) (13,967) --------- --------- Cash flows from financing activities: Borrowings under revolving credit agreement .............................. 122,367 229,669 Repayments under revolving credit agreement .............................. (141,770) (253,264) Repayment of long-term debt .............................................. -- (1,072) Principal payments under capital lease obligations ....................... (177) (170) Net proceeds from issuance of common stock ............................... 5,850 4,619 --------- --------- Net cash used in financing activities ........................................ (13,730) (20,218) --------- --------- Net increase in cash and cash equivalents .................................... 46,441 4,059 Cash and cash equivalents at beginning of period ............................. 19,980 13,773 --------- --------- Cash and cash equivalents at end of period ................................... $ 66,421 $ 17,832 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest ................................................................... $ 340 $ 1,683 Income taxes ............................................................... 543 10,482 The accompanying notes are an integral part of this statement </TABLE> Page 5 of 20
TRACTOR SUPPLY COMPANY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES: 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 the Company's annual report on Form 10-K for the fiscal year ended December 27, 2003. The results of operations for the fiscal three-month and six-month periods are not necessarily indicative of results for the full fiscal year. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated. MANAGEMENT ESTIMATES The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States 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. Significant estimates and assumptions by management primarily impact the following key financial statement areas: Inventory Valuation ------------------- The Company identifies potentially excess and slow-moving inventory by evaluating turn rates and overall inventory levels. Excess quantities are identified through the application of benchmark turn targets and historical sales experience. Further, exposure to inadequate realization of carrying value is identified through analysis of gross margin achievement and markdown experience, in combination with all merchandising initiatives. The estimated reserve is based on management's current knowledge with respect to inventory levels, sales trends and historical experience relating to the sale of the excess and/or slow-moving inventory. Management does not believe the Company's merchandise inventories are subject to significant risk of obsolescence in the near-term, and management has the ability to adjust purchasing practices based on anticipated sales trends and general economic conditions. However, changes in consumer purchasing patterns could result in the need for additional reserves. The Company estimates its expected shrinkage of inventory between physical inventory counts by assessing the chain-wide average shrinkage experience rate, applied to the related periods' sales volumes. Such assessments are updated on a regular basis for the most recent individual store experiences. The Company receives funding from its vendors for promotion of the Company's brand as well as the sale of their products. Vendor funding is accounted for as a discount on the purchase price of inventories and is recognized in cost of sales as inventory is sold. The amount of expected funding is estimated based upon initial guaranteed commitments, as well as anticipated purchase levels with applicable vendors. The estimated purchase volume is based on management's current knowledge with respect to inventory levels, sales trends and expected customer demand, as well as planned new store openings. Although management believes it has the ability to reasonably estimate its purchase volume, it is possible that actual results could significantly differ from the estimated amounts. Page 6 of 20
Sales Returns ------------- The Company generally honors customer refunds within 30 days of the original purchase, with the supporting receipt. The Company estimates its reserve for likely customer returns based on the average refund experience in relation to sales for the related period. Due to the seasonality of the Company's sales, the refund experience can vary, depending on the fiscal quarter of measurement. Self-insurance -------------- The Company is self-insured for certain losses relating to workers' compensation, medical and general liability claims. However, the Company has stop-loss limits and umbrella insurance coverage for certain risk exposures subject to specified limits. Self-insurance claims filed and claims incurred but not reported are accrued based upon management's estimates of the aggregate liability for uninsured claims incurred using actuarial assumptions followed in the insurance industry and historical experience. Although management believes it has the ability to adequately record estimated losses related to claims, it is possible that actual results could significantly differ from recorded self-insurance liabilities. REVENUE RECOGNITION The Company recognizes revenue when sales transactions occur and customers take possession of the merchandise. A provision for anticipated merchandise returns is provided in the period during which the related sales are recorded. STORE PRE-OPENING COSTS Non-capital expenditures incurred in connection with start-up activities are expensed as incurred. STORE CLOSING COSTS The Company recognizes store closing costs in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") 146, "Accounting for Costs Associated with Exit or Disposal Activities," which requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. CASH AND CASH EQUIVALENTS The Company considers temporary cash investments with a maturity of three months or less when purchased to be cash equivalents. The majority of payments due from banks for customer credit card transactions process within 24 to 48 hours and are accordingly classified as cash and cash equivalents. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments consist of cash and cash equivalents, short-term receivables and payables and long-term debt instruments, including capital leases. The carrying values of cash and cash equivalents, receivables, and trade payables equal current fair value. The terms of the Company's senior revolving credit agreement includes a variable interest rate which approximates the current market rate. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company complies with SFAS Nos. 133, 137, and 138 (collectively "SFAS 133") pertaining to the accounting for derivatives and hedging activities. SFAS 133 requires the Company to recognize all derivative instruments in the balance sheet at fair value. SFAS 133 impacted the accounting for the Company's interest rate swap agreement, which was designated as a cash flow hedge. The interest rate swap expired in November 2003. INVENTORIES The value of the Company's inventories was 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, Page 7 of 20
inventories would have been approximately $2,339,000 higher than reported at June 26, 2004. At December 27, 2003, LIFO and FIFO inventory values were the same. FREIGHT COSTS The Company incurs various types of transportation and delivery costs in connection with inventory purchases and distribution. Such costs are included as a component of the overall cost of merchandise. WAREHOUSING AND DISTRIBUTION COSTS Costs incurred at the Company's distribution centers for receiving, warehousing and preparing product for delivery are expensed as incurred. These costs are included in selling, general and administrative expenses in the accompanying statements of income. PROPERTY AND EQUIPMENT Property and equipment are carried at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets. Improvements to leased premises are amortized using the straight-line method over the life of the lease or the useful life of the improvement, whichever is shorter. The following estimated useful lives are generally applied: Life ------------- Buildings 30 - 35 years Leasehold improvements 5 - 15 years Furniture, fixtures and equipment 5 - 10 years Computer software and hardware 3 - 5 years IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of the asset may not be recoverable. Impairment is recognized on assets classified as held and used when the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. Impairment on long-lived assets to be disposed of is recognized by writing down the related assets to their fair value (less costs to sell, as appropriate) when the criteria have been met for the asset to be classified as held for sale or disposal. (Note 3) ADVERTISING COSTS Advertising costs consist of expenses incurred in connection with newspaper circulars, television and radio, as well as direct mail, newspaper advertisements and other promotions. Expenses incurred are charged to operations at the time the related advertising first takes place. INCOME TAXES The Company accounts for income taxes using the liability method, whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to be recovered or settled. STOCK-BASED COMPENSATION PLANS As permitted by SFAS 123, "Accounting for Stock-Based Compensation," the Company has elected to account for its stock-based compensation plans under the intrinsic value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees." Under APB No. 25, compensation expense would be recorded if the current market price of the underlying stock on the date of grant exceeded the exercise price. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant date (derived through use of Black-Scholes methodology) for awards under the plans consistent with the method Page 8 of 20
prescribed by SFAS 123, the Company's pro forma net income and net income per share for the fiscal three and six months ended June 26, 2004 and June 28, 2003, would have been as follows (in thousands, except per share amounts): <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED ----------------------- ---------------------------- JUNE 26, JUNE 28, JUNE 26, JUNE 28, 2004 2003 2004 2003 ---------- --------- ---------- ---------- <S> <C> <C> <C> <C> Net income - as reported $ 31,376 $ 27,387 $ 35,197 $ 27,512 Pro forma compensation expense, net of income taxes (1,134) (858) (2,114) (1,499) ---------- --------- ---------- ---------- Net income - pro forma $ 30,242 $ 26,529 $ 33,083 $ 26,013 ========== ========= ========== =========== Net income per share - basic: As reported $ 0.82 $ 0.74 $ 0.93 $ 0.74 Pro forma $ 0.79 $ 0.72 $ 0.87 $ 0.71 Net income per share - diluted: As reported $ 0.75 $ 0.68 $ 0.84 $ 0.69 Pro forma $ 0.72 $ 0.66 $ 0.79 $ 0.65 </TABLE> NET INCOME PER SHARE The Company presents both basic and diluted earning per share ("EPS") on the face of the 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 treasury stock method for options and warrants. All earnings per share data included in the fiscal 2003 consolidated financial statements and notes thereto have been restated to give effect to a two-for-one stock split. (Note 7) NOTE 2 - CHANGE IN ACCOUNTING PRINCIPLE: Beginning in 2003, the Company adopted the provisions of Emerging Issues Task Force Issue No. 02-16 ("EITF 02-16"). EITF 02-16 provides guidance for the accounting and income statement classification for consideration given by a vendor to a retailer in connection with the sale of the vendor's products or for the promotion of sales of the vendor's products. The EITF concluded that such consideration received from vendors should be reflected as a decrease in prices paid for inventory and recognized in cost of sales as the related inventory is sold, unless specific criteria are met qualifying the consideration for treatment as reimbursement of specific, identifiable incremental costs. Prior to adopting this pronouncement, the Company classified all vendor-provided marketing support funds as a reduction in selling, general and administrative expenses. The effect of applying the consensus of EITF 02-16 on prior-period financial statements resulted in a change to previously reported net income; thus, the Company has reported the adoption of EITF 02-16 as a cumulative effect adjustment in accordance with Accounting Principles Board Opinion ("APB") No. 20, "Accounting Changes" and Financial Accounting Standards Board ("FASB") Statement No. 3, "Reporting Accounting Changes in Interim Financial Statements" and as permitted by EITF 02-16. In the first quarter of 2003, the Company recognized a net income reduction of $3.1 million ($1.9 million net of income taxes) that resulted from the cumulative effect on prior years. NOTE 3 - ASSETS HELD FOR SALE: Assets held for sale consists of certain buildings and related store properties that the Company intends to sell. The Company applies the provisions of SFAS 144, "Accounting for the Impairment or Disposal of Long Lived Assets," to assets held for sale. SFAS 144 requires assets held for sale to be valued on an asset-by-asset basis at the lower of carrying amount or fair value less costs to sell. In applying these provisions, recent appraisals, valuations, offers and bids are considered. The Company recorded an impairment charge of $0.7 million and $0.8 million in the first quarter of fiscal 2004 and 2003, respectively, to adjust the carrying value of certain property to fair value, less costs to sell. This charge is included in selling, general, and administrative expenses. No impairment charges were required during the second quarter of fiscal 2004 or 2003. Page 9 of 20
The buildings and properties held for sale are separately presented as assets held for sale in the accompanying consolidated balance sheets. The assets are classified as current, as the Company believes they will be sold within the next twelve months and have met all the criteria for classification as held for sale pursuant to SFAS 144. NOTE 4 - CREDIT AGREEMENT: In August 2002, the Company entered into a replacement unsecured senior revolving credit agreement (the "Credit Agreement") with Bank of America, N.A., as agent for a lender group, expanding the maximum available borrowings from $125 million to $155 million and extending the maturity to February 2006. The Credit Agreement bears interest at either the bank's prime rate (4.0% at June 26, 2004) or the London Inter-Bank Offer Rate (1.33% at June 26, 2004) plus an additional amount ranging from 0.75% to 1.5% per annum, adjusted quarterly based on the Company's performance (0.75% at June 26, 2004). On January 28, 2004, the Credit Agreement was amended to extend the maturity date to February 28, 2007. Additionally, the amendment included changes to certain financial covenants, primarily to provide flexibility for capital expenditures. NOTE 5 - DERIVATIVE FINANCIAL INSTRUMENTS: During fiscal 2000, the Company entered into an interest rate swap agreement as a means of managing its interest rate exposure. This agreement, which matured in November 2003, had the effect of converting certain of the Company's variable rate obligations to fixed rate obligations. The Company complies with SFAS 133 and recognized the fair value of the interest rate swap in its consolidated balance sheet. The Company regularly adjusted the carrying value of the interest rate swap to reflect its current fair value. The related gain or loss on the swap was deferred in stockholders' equity (as a component of comprehensive income) to the extent that the swap was an effective hedge. The deferred gain or loss was recognized in income in the period in which the related interest rate payments being hedged were recognized as an expense. However, to the extent that the change in value of an interest rate swap contract did not perfectly offset the change in the interest rate payments being hedged, the ineffective portion was immediately recognized as an expense. Net amounts paid or received were reflected as adjustments to interest expense. Page 10 of 20
NOTE 6 - COMPREHENSIVE INCOME: Comprehensive income includes the change in the fair value of the Company's interest rate swap agreement (which expired in November 2003), which qualified for hedge accounting. Comprehensive income for each period is as follows (in thousands): <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED ----------------------- ----------------------- JUNE 26, JUNE 28, JUNE 26, JUNE 28, 2004 2003 2004 2003 ---------- --------- ---------- ---------- <S> <C> <C> <C> <C> Net income-- as reported $31,376 $27,387 $35,197 $27,512 Change in fair value of effective portion of interest rate swap agreement, net of income taxes -- 204 -- 564 ------- ------- ------- ------- Comprehensive income $31,376 $27,591 $35,197 $28,076 ======= ======= ======= ======= </TABLE> NOTE 7 - NET INCOME PER SHARE: Basic net income per share is based on the weighted average outstanding common shares. Diluted net income per share is based on the weighted average outstanding common shares and reflects basic net income per share reduced by the dilutive effect of stock options. Net income per share is calculated as follows (in thousands, except per share amounts): <TABLE> <CAPTION> THREE MONTHS ENDED THREE MONTHS ENDED JUNE 26, 2004 JUNE 28, 2003 -------------------------------- --------------------------------- PER SHARE PER SHARE INCOME SHARES AMOUNT INCOME SHARES AMOUNT ------- ------ -------- ------- ------ -------- <S> <C> <C> <C> <C> <C> <C> BASIC NET INCOME PER SHARE: Net income $31,376 38,213 $ 0.82 $27,387 37,078 $ 0.74 DILUTED NET INCOME PER SHARE: Net income $31,376 41,845 $ 0.75 $27,387 40,111 $ 0.68 </TABLE> <TABLE> <CAPTION> SIX MONTHS ENDED SIX MONTHS ENDED JUNE 26, 2004 JUNE 28, 2003 -------------------------------- --------------------------------- PER SHARE PER SHARE INCOME SHARES AMOUNT INCOME SHARES AMOUNT ------- ------ -------- ------- ------ -------- <S> <C> <C> <C> <C> <C> <C> BASIC NET INCOME PER SHARE: Net income, before cumulative effect of accounting change $ 35,197 38,021 $ 0.93 $ 29,400 36,848 $ 0.80 Cumulative effect of accounting change -- 38,021 -- (1,888) 36,848 (0.06) -------- ------ -------- -------- ------ -------- Net income $ 35,197 38,021 $ 0.93 $ 27,512 36,848 $ 0.74 ======== ====== ======== ======== ====== ======== DILUTED NET INCOME PER SHARE: Net income, before cumulative effect of accounting change $ 35,197 41,828 $ 0.84 $ 29,400 39,915 $ 0.74 Cumulative effect of accounting change -- 41,828 -- (1,888) 39,915 (0.05) -------- ------ -------- -------- ------ -------- Net income $ 35,197 41,828 $ 0.84 $ 27,512 39,915 $ 0.69 ======== ====== ======== ======== ====== ======== </TABLE> Page 11 of 20
Weighted average shares outstanding are as follows: <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED -------------------- ----------------------- JUNE 26, JUNE 28, JUNE 28, JUNE 28, 2004 2003 2004 2003 ------ ------ ------ ------ <S> <C> <C> <C> <C> Shares outstanding 38,213 37,078 38,021 36,848 Dilutive stock options outstanding 3,632 3,033 3,807 3,067 ------ ------ ------ ------ Diluted shares outstanding 41,845 40,111 41,828 39,915 ====== ====== ====== ====== </TABLE> On July 17, 2003, the Company's Board of Directors approved a two-for-one split of the Company's common stock. As a result, stockholders received one additional share on August 21, 2003 for each share held as of the record date of August 4, 2003. The par value of the Company's common stock remains $0.008. All share and per share data included in the fiscal 2003 consolidated financial statements and notes thereto have been restated to give effect to the stock split. NOTE 8 - CONTINGENCIES: LITIGATION The Company is involved in various litigations arising in the ordinary course of business. After consultation with legal counsel, management expects these matters will be resolved without material adverse effect on the Company's consolidated financial position or results of operations. Any estimated loss 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. Subsequent to the end of the quarter, a purported shareholder derivative suit was filed against each of the Company's directors and certain of its officers. The Company was named as a nominal defendant. (See Note 10 - Subsequent Events and Part II - Item 1. Legal Proceedings) NOTE 9 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS: In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46, "Consolidation of Variable Interest Entities ("VIE"), an Interpretation of Accounting Research Bulletin No. 51" ("FIN 46"). The Interpretation provides guidance for determining whether an entity is a variable interest entity and evaluation for consolidation based on a company's variable interests. The Interpretation was effective (1) immediately for VIEs created after January 31, 2003 and (2) in the first interim period ending after March 15, 2004 for VIEs created prior to February 1, 2003. The adoption of FIN 46 had no impact on the Company's financial position or results of operations. NOTE 10 - SUBSEQUENT EVENTS: In July 2004, the Company relocated its existing headquarters to consolidate multiple headquarter facilities within one facility. The Company expects to incur incremental after-tax costs of approximately $2.0 million primarily related to the remaining lease obligations of the current facilities. A purported shareholder derivative lawsuit has been filed in the Chancery Court for Davidson County, Tennessee by the Hawaii Laborers Pension Plan against each of the Company's directors, certain of its officers and one former director. The Company is named as a nominal defendant in the complaint, which alleges breaches of fiduciary duty, acts of bad faith, abuse of control, mismanagement, waste of corporate assets, unjust enrichment and other violations of Tennessee law relating to the preparation of the Company's financial statements. The complaint seeks, on behalf of the Company, unspecified damages, restitution, the plaintiff's costs and disbursements and such other relief as the Court deems proper. The Audit Committee of the Board of Directors, with the assistance of independent legal counsel, is conducting an investigation of the claims set forth in the complaint. The Company has moved to dismiss the case for failure to make a pre-suit demand on the Board of Directors. Page 12 of 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following discussion and analysis describe certain factors affecting Tractor Supply Company (the "Company"), its results of operations for the fiscal three-month and six-month periods ended June 26, 2004 and June 28, 2003 and significant developments affecting its financial condition since the end of the fiscal year, December 27, 2003, and should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 27, 2003. 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 the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including their amount and nature), 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 attract, train and retain highly qualified employees, the ability to identify suitable locations and negotiate favorable lease agreements on new and relocated stores, the timing and acceptance of new products in the stores, the mix of goods sold, the continued availability of favorable credit sources, capital market conditions in general, and the seasonality of the Company's business. Consequently, the forward-looking statements made herein 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. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake any 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 THE FISCAL THREE MONTHS (SECOND QUARTER) AND SIX MONTHS ENDED JUNE 26, 2004 AND JUNE 28, 2003 Net sales increased 17.0% to $525.9 million for the second quarter of 2004 from $449.4 million for the second quarter of 2003. Net sales rose 18.4% to $856.5 for the first six months of fiscal 2004 from $723.2 million for the first six months of fiscal 2003. The net sales increase resulted primarily from same-store sales increases of 10.0% for the second quarter of fiscal 2004 and 10.9% for the first six months of fiscal 2004. The Company experienced strong same-store sales increases in all regions and across all product lines with equine, animal and pet products representing the strongest category. Same-store sales increases include a benefit of 2.1% for the second fiscal quarter of 2004 and 1.6% for the first six months of fiscal 2004 due to increased prices to cover rising steel and other commodity costs. Page 13 of 20
The following charts indicate the average percentages of sales represented by each of the Company's major product categories during the first six months and second quarter of fiscal 2004 and 2003: THREE MONTHS ENDED SIX MONTHS ENDED -------------------- ----------------------- JUNE 26, JUNE 28, JUNE 28, JUNE 28, PRODUCT CATEGORY 2004 2003 2004 2003 Equine, Pet and Animal 29% 28% 32% 31% Seasonal Products 28 27 24 24 Hardware and Tools 15 16 16 17 Truck/Trailer/Tow/Lube 12 13 12 13 Agriculture Products 12 12 10 9 Clothing and Footwear 4 4 6 6 --- --- --- --- Total 100% 100% 100% 100% === === === === The Company opened a total of 12 new stores in the second quarter of fiscal 2004 and 25 new stores during the first six months of fiscal 2004. This compares to 13 new store openings in the second quarter of fiscal 2003 and 25 new stores in the first six months of 2003. The Company also relocated five stores in the second quarter of 2004 and eight stores in the first six months of 2004, compared to three store relocations in the second quarter of 2003 and five store relocations in the first six months of 2003. The Company operated 487 stores in 31 states at June 26, 2004 compared to 458 stores in 30 states at June 28, 2003. The gross margin rate for the second quarter and first six months of fiscal 2004 was 30.5% and 30.3%, respectively. This represents an increase of 20 and 30 basis points, respectively, over the comparable prior year periods. The margin improvement is a result of increased year-over-year selling prices, lower merchandise costs in some categories and favorable sales mix changes partially offset by an increase in freight costs and a $1.6 million LIFO inventory charge. Increased costs of steel products and grain-based feeds were passed through in increased selling prices. As a percent of net sales, selling, general and administrative ("SG&A") expenses were 19.9% and 22.3% of net sales for the second quarter and first six months of 2004, respectively. The increase over comparable prior year periods (50 basis points and 30 basis points, respectively) is primarily a result of increased spending on long-term growth initiatives including distribution capacity, supply chain technology and people development. Depreciation and amortization expense in the second quarter and first six months of 2004 increased 28.7% and 29.5% over the second quarter and the first six months of 2003, respectively. These increases are due primarily to costs associated with new and relocated stores, the purchase of the Pendleton, Indiana distribution center and increased technology investments. Net interest expense in the second quarter and first six months of 2004 decreased 79.8% and 70.7% over the second quarter and the first six months of fiscal 2003, respectively. These decreases reflect stronger cash flow, which permitted reduced short-term borrowings under the Credit Agreement to fund new store expansion. In addition, the expiration of fixed rate agreements under the Credit Agreement and term note resulted in less interest cost being incurred. For the second quarter and first six months of 2004, the Company's effective tax rate increased to 36.8% from 36.7% for the prior year periods, primarily due to changes in the Company's effective state tax rate resulting from the geographic concentration of business. As a result of the foregoing factors, net income for the second quarter of 2004 was $31.4 million, or $0.75 per diluted share, compared with $27.4 million, or $0.68 per diluted share for the prior year quarter. Net income for the first six months of 2004 was $35.2 million, or $0.84 per diluted share, compared to net income of $27.5 million, or $0.69 per diluted share for the prior year period. The results for the second quarter and first six months of 2003 included an after-tax charge of $1.9 million, or $0.05 per diluted share, related to the adoption of new accounting guidance for allowances that requires retailers to recognize, as a reduction of product cost, any consideration given by a vendor to a retailer in connection with the purchase of the vendor's products or the promotion of sales of the vendor's products by the retailer. See Note 2 of Notes to Unaudited Consolidated Financial Statements. LIQUIDITY AND CAPITAL RESOURCES In addition to normal operating expenses, the Company's primary ongoing cash requirements are for expansion, remodeling and relocation programs, including inventory purchases and capital expenditures. The Company's Page 14 of 20
primary ongoing sources of liquidity are funds provided from operations, commitments available under its revolving Credit Agreement and normal trade credit. The Company's inventory and accounts payable levels typically build in the first and third fiscal quarters in anticipation of the spring and winter selling seasons, respectively. At June 26, 2004, the Company had working capital of $183.7 million, a $6.2 million increase from December 27, 2003. This increase is primarily attributable to the changes in the following components of current assets and current liabilities (in millions): <TABLE> <CAPTION> JUNE 26, DEC. 27, 2004 2003 VARIANCE -------- -------- -------- <S> <C> <C> <C> Current assets: Cash and cash equivalents $ 66.4 $ 20.0 $ 46.4 Inventories 407.1 324.5 82.6 Prepaid expenses and other current assets 23.5 27.7 (4.2) Other, net 9.9 11.1 (1.2) -------- -------- -------- 506.9 383.3 123.6 -------- -------- -------- Current liabilities: Accounts payable 237.7 131.6 106.1 Accrued expenses 85.2 73.9 11.3 Other, net 0.3 0.3 -- -------- -------- -------- 323.2 205.8 117.4 -------- -------- -------- Working capital $ 183.7 $ 177.5 $ 6.2 ======== ======== ======== </TABLE> The increases in cash and cash equivalents and prepaid expenses are generally due to the increase in the number of stores in operation and resulting increases in sales, growth in operations, and timing of payments. Additionally, the Company has experienced favorable same-store sales increases which have generated cash in excess of current operating and capital expenditure needs. The increase in inventories and related increase in trade credit resulted primarily from the addition of new stores and increased sales expectations. Payment terms vary from 30 to 180 days depending on the inventory product. The variance in payment terms, coupled with continued improvements in inventory turns, resulted in accounts payable increases exceeding the corresponding increases in inventory. The increase in accrued expenses is primarily due to timing of payments offset by a $5.2 million decrease in incentive compensation accruals, (resulting from payment of certain 2003 annual incentives during the first quarter of 2004) and general timing of other payments. Operations provided net cash of $94.6 million and $38.2 million in the first six months of 2004 and 2003, respectively. This $56.4 million increase in net cash provided in 2004 over 2003 is primarily due to changes in the following operating activities (in millions): <TABLE> <CAPTION> JUNE 26, JUNE 28, 2004 2003 VARIANCE ------- -------- -------- <S> <C> <C> <C> Net income $ 35.2 $ 27.5 $ 7.7 Tax benefit of stock options exercised 8.0 3.3 4.7 Cumulative effect of a change in accounting principle -- 1.9 (1.9) Depreciation and amortization 11.9 9.2 2.7 Income taxes currently payable 5.5 (4.8) 10.3 Inventories and accounts payable 23.6 6.2 17.4 Accrued expenses 5.7 (10.5) 16.2 Other, net 4.7 5.4 (0.7) ------- ------- ------- Net cash provided by operations $ 94.6 $ 38.2 $ 56.4 ======= ======= ======= </TABLE> The increase in net cash provided by operations in the first six months of 2004 compared with 2003 is primarily due to strong sales performance and the timing of payments, particularly estimated income taxes. The increase in depreciation and amortization is primarily due to costs associated with new and relocated stores, the purchase of the Pendleton, Indiana and Waco, Texas distribution centers and increased technology investments. The increase in net cash provided for inventories and accounts payable is due to the increase in inventory levels and vendor payment terms discussed above. The decrease in cash used for accrued expenses is due to the timing of payments as described above. Page 15 of 20
Investing activities used $34.4 million and $14.0 million in the first six months of 2004 and 2003, respectively. The majority of this cash requirement relates to the Company's capital expenditures as described above. Financing activities used $13.7 million and $20.2 million in the first six months of 2004 and 2003, respectively, largely due to borrowing requirements resulting from cash flow from operations, partially reduced by proceeds received from the exercise of stock options. The Company plans to spend approximately $60 million to purchase fixed assets during the balance of 2004. Significant future purchases include the expansion of the Pendleton, Indiana distribution center, the purchase of a new distribution center in Hagerstown, Maryland, continued growth through new and relocated stores and additional technology enhancements. The Company believes that its cash flow from operations, borrowings available under the Credit Agreement, and normal trade credit will be sufficient to fund the Company's operations and its capital expenditure needs, including store openings and renovations, over the next few years. OFF-BALANCE SHEET ARRANGEMENTS The extent of the Company's off-balance sheet arrangements are operating leases and outstanding letters of credit. Leasing buildings and equipment for retail stores and offices rather than acquiring these significant assets allows the Company to utilize financial capital to operate the business rather than maintain assets. Letters of credit allow the Company to purchase inventory in a timely manner. The Company had outstanding letters of credit of $25.8 million at June 26, 2004. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES Management's discussion and analysis of the Company's financial position and results of operations are based upon the Company's 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 management 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. The Company's significant accounting policies, including areas of critical management judgments and estimates, have primary impact on the following financial statement areas: - Inventory valuation - Sales returns - Self insurance The Company's critical accounting policies are subject to judgments and uncertainties, which affect the application of such policies. (See Note 1 to the Notes to the Unaudited Consolidated Financial Statements for a discussion of the Company's critical accounting policies.) The Company's 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. SUBSEQUENT EVENTS In July 2004, the Company relocated its existing headquarters to consolidate multiple headquarter facilities within one facility. The Company expects to incur incremental after-tax costs of approximately $2.0 million primarily related to the remaining lease obligations of the current facilities. A purported shareholder derivative lawsuit has been filed in the Chancery Court for Davidson County, Tennessee by the Hawaii Laborers Pension Plan against each of the Company's directors, certain of its officers and one former director. The Company is named as a nominal defendant in the complaint, which alleges breaches of fiduciary duty, acts of bad faith, abuse of control, mismanagement, waste of corporate assets, unjust enrichment and other violations of Tennessee law relating to the preparation of the Company's financial statements. The complaint seeks, on behalf of the Company, unspecified damages, restitution, the plaintiff's costs and disbursements and such other relief as the Court deems proper. The Audit Committee of the Board of Directors, with the assistance of Page 16 of 20
independent legal counsel, is conducting an investigation of the claims set forth in the complaint. The Company has moved to dismiss the case for failure to make a pre-suit demand on the Board of Directors. CHANGE IN ACCOUNTING PRINCIPLE Emerging Issue Task Force Issue 02-16 ("EITF 02-16"), "Accounting by a Customer (including a Reseller) for Certain Consideration Received from a Vendor" provides guidance for the accounting treatment and income statement classification for consideration given by a vendor to a retailer in connection with the sale of the vendor's products or for the promotion of sales of the vendor's products. The EITF concluded that such consideration received from vendors should be reflected as a decrease in prices paid for inventory and recognized in cost of sales as the related inventory is sold, unless specific criteria are met qualifying the consideration for treatment as reimbursement of specific, identifiable incremental costs. Prior to adopting this pronouncement, the Company classified all vendor-provided marketing support funds as a reduction in selling, general and administrative expenses. The effect of applying EITF 02-16 on prior-period financial statements results in a change to previously reported net income; thus, the Company has reported the adoption of EITF 02-16 as a cumulative effect adjustment in accordance with APB Opinion No. 20, "Accounting Changes," and FASB Statement No. 3, "Reporting Accounting Changes in Interim Financial Statements," and as permitted by EITF 02-16. Accordingly, in the first quarter of fiscal 2003, the Company recorded a cumulative effect of accounting change of $3.1 million ($1.9 million net of income taxes) for the impact of this adoption on prior fiscal years. Page 17 of 20
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company entered into an interest rate swap agreement as a means of managing its interest rate exposure. This agreement, which matured in November 2003, had the effect of converting certain of the Company's variable rate obligations to fixed rate obligations. Net amounts paid or received are reflected as an adjustment to interest expense. The Company complies with SFAS Nos. 133, 137, and 138 (collectively "SFAS 133") pertaining to the accounting for derivatives and hedging activities. SFAS 133 requires the Company to recognize all derivative instruments in the balance sheet at fair value. SFAS 133 impacted the accounting for the Company's interest rate swap agreement, which was designated as a cash flow hedge. The Company is exposed to changes in interest rates primarily from its Credit Agreement. The Credit Agreement bears interest at either the bank's base rate (4.0% at June 26, 2004 and June 28, 2003) or LIBOR (1.33% and 1.12% at June 26, 2004 and June 28, 2003, respectively) plus an additional amount ranging from 0.75% to 1.50% per annum, adjusted quarterly, based on Company performance (0.75% at June 26, 2004 and June 28, 2003). The Company is also required to pay, quarterly in arrears, a commitment fee ranging from 0.20% to 0.35% based on the daily average unused portion of the Credit Agreement. (See Note 4 of Notes to the Unaudited Consolidated Financial Statements for further discussion regarding the Credit Agreement.) Although the Company cannot accurately determine the precise effect of inflation on its operations, it does not believe its sales or results of operations have been materially affected by inflation. The Company is subject to market risk with respect to the pricing of certain products, which include, among other materials, steel, corn, soybean and other commodities. If prices of these materials continue to increase dramatically, consumer demand may fall and /or the Company may not be able to pass such increases on to its customers and, as a result, sales and/or gross margins could decline. The Company has been successful, in many cases, in reducing or mitigating the effects of inflation principally by taking advantage of vendor incentive programs, economies of scale from increased volume of purchases and selective buying from the most competitive vendors without sacrificing quality. Same-store sales increases include a benefit of 2.1% for the second fiscal quarter of 2004 and 1.6% for the first six months of fiscal 2004 due to increased prices to cover rising steel and other commodity costs. ITEM 4. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES At June 26, 2004, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Chief Executive Officer and the Chief Financial Officer, of the design and operation of the Company's disclosure controls and procedures. Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(a) and 15d-15(e) under the Securities Exchange Act of 1934) are effective for gathering, analyzing and disclosing the information the Company is required to disclose in the reports it files under the Securities Exchange Act of 1934, as of June 26, 2004, and that such information is accumulated and communicated to the Company's management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. CHANGES IN INTERNAL CONTROLS There were no changes in the Company's internal control over financial reporting during the second quarter of 2004 that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting. Page 18 of 20
PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS A purported shareholder derivative lawsuit has been filed in the Chancery Court for Davidson County, Tennessee by the Hawaii Laborers Pension Plan against each of the Company's directors and certain of its officers. The Company is names as a nominal defendant in the complaint, which alleges breaches of fiduciary duty, acts of bad faith, abuse of control, mismanagement, waste of corporate assets, unjust enrichment and other violations of Tennessee law relating to preparation of the Company's financial statements. The complaint seeks unspecified damages, restitution, the plaintiff's costs and disbursements and such other relief as the court deems proper. The Audit Committee of the Board of Directors, with the assistance of independent legal counsel, is conducting an investigation of the claims set forth in the complaint. The Company has moved to dismiss the case for failure to make a pre-suit demand on the Board of Directors. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Company's Annual Meeting of Stockholders was held on April 15, 2004 at the Company's corporate headquarters in Nashville, Tennessee. (b) The stockholders elected, for a three-year term, three Class I directors nominated for election as set forth in the proxy statement dated March 8, 2004. The following table sets forth certain information concerning each director of the Company whose term of office as a director continued after the meeting: Current Term as Name Director Expires ---- ---------------- Joseph D. Maxwell 2005 Joseph M. Rodgers 2005 Sam K. Reed 2005 Joseph H. Scarlett, Jr. 2006 S. P. Braud 2006 Cynthia T. Jamison 2006 (c) (1) The stockholders elected three Class I directors for a three-year term ending at the 2007 Annual Meeting of Stockholders. Name For Withheld ---- --- -------- James F. Wright 33,419,488 1,486,218 Gerard E. Jones 22,507,834 12,397,872 Edna K. Morris 33,942,384 963,322 (2) The stockholders ratified the reappointment of Ernst & Young LLP as independent auditors of the Company for the fiscal year ending December 25, 2004. FOR AGAINST ABSTAIN --- ------- ------- 23,435,961 11,369,870 99,875 (3) The stockholders approved the 2004 Cash Incentive Plan: FOR AGAINST ABSTAIN --- ------- ------- 32,801,382 ,057,614 46,710 Page 19 of 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits -------- 3.5 Amendment No. 1 to Amended and Restated By-laws 10.1 Tractor Supply Company 2004 Cash Incentive Plan, effective April 15, 2004. 10.2 Employment Agreement between Tractor Supply Company and James F. Wright, effective July 12, 2004. 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. (b) Reports on Form 8-K The Company filed a report on Form 8-K dated April 13, 2004 issuing a press release announcing its financial results for the first quarter ended March 27, 2004. Notwithstanding the foregoing, information furnished under Items 9 and 12 of our Current Reports on Form 8-K, including the related exhibits, is not to be incorporated by reference into any filing of the Company with the Securities and Exchange Commission. 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:AUGUST 4, 2004 By: /S/ CALVIN B. MASSMANN ------------------------------ Calvin B. Massmann Senior Vice President - Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer) Page 20 of 20