Tractor Supply (TSCO) 10-K risk factor changes: FY2020 vs FY2019

[removed: Those] [added: Certain] risks of which we are currently aware and deem to be material are described below.

Various factors affect the comparable store sales at our existing stores, including, among others, the general retail sales environment, our ability to efficiently source and distribute products, changes in our merchandise assortment, competition, proximity of our locations to one another or to the locations of other competing retailers, increased presence of online retailers, current economic conditions, customer satisfaction with our products, retail pricing, the timing of promotional events, the release of new merchandise, the success of marketing programs, [removed: and] weather [removed: conditions.][added: conditions, and our ability to attract and retain qualified team members.]

In addition, extreme weather conditions, including snow and ice storms, flood and wind damage, hurricanes, tornadoes, extreme rain, [added: fires] and droughts, have impacted operating results.

We believe our past performance has been based on, and future success will [removed: depend upon,] [added: depend,] in part, [added: upon] the ability to develop and execute merchandising initiatives with effective marketing programs.

*Failure to open and manage new stores in the number and manner currently contemplated could adversely affect our [removed: financial*][added: financial performance.*]

[removed: We may not] be able to successfully integrate an organization that we acquire, including their personnel, financial systems, distribution, operations, and general operating procedures.

These competitors include general merchandise retailers, home center retailers, [added: pet retailers,] specialty and discount retailers, independently-owned retail farm and ranch stores, numerous privately-held regional farm store chains, and farm cooperatives, as well as internet-based retailers.

The Company is dependent upon numerous service providers and other third-parties to conduct our [removed: business.][added: business, including e-commerce among others.]

This reliance exposes us to the risk of inadequate and untimely supplies of various products due to political, economic, social, health (including, but not limited to, the [removed: recent] COVID-19 [removed: coronavirus outbreak originating in China),] [added: coronavirus),] or environmental conditions, transportation delays, or changes in laws and regulations affecting distribution.

[removed: Our] vendors may be forced to reduce their production, shut down their operations or file for bankruptcy protection, which could make it difficult for us to serve the market’s needs and could have a material adverse effect on our business.

While the Company selects these third-party vendors carefully, it does not control their actions or the components or [removed: manufacturer] [added: manufacture] of their products.

Any problems caused by these third-parties, or issues associated with their [removed: products,] [added: products or workforce,] including customer or governmental complaints, breakdowns or other disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes, and cyber attacks or security breaches at a vendor could subject the Company to litigation and adversely affect the Company’s ability to deliver products and services to its customers and have a material adverse effect on our results of operations and financial condition.

The [removed: current] political landscape in the U.S. [removed: has introduced greater] [added: contains] uncertainty with respect to tax and trade policies, tariffs and regulations affecting trade between the U.S. and other countries.

We rely on our distribution and transportation [removed: network] [added: network, including third-party logistics providers,] to provide goods to our stores [added: and to our customers] in a timely and cost-effective manner through deliveries to our distribution facilities from vendors and then from the distribution facilities or direct ship vendors to our stores [added: or customers] by various means of transportation, including shipments by sea, air, rail, and truck.

[removed: For example, unexpected delivery delays (including delays due to weather, fuel shortages, work stoppages, global or regional health epidemics, or other reasons) or increases in transportation] costs (including increased fuel costs or a decrease in transportation capacity for overseas shipments) could significantly decrease our ability to provide adequate products for sale, or products at a desired price, resulting in lower sales and profitability.

In addition, labor shortages or work stoppages in the transportation industry or long-term disruptions to the national and international transportation infrastructure that lead to delays or interruptions of deliveries could [added: negatively affect our business.]

*We are subject to personal injury, workers’ compensation, product liability, discrimination, harassment, wrongful termination, [added: wage] and [added: hour, and] other claims in the ordinary course of business.*

Our business involves a risk of personal injury, workers’ compensation, product liability, discrimination, harassment, wrongful termination, [added: wage] and [added: hour, and] other claims in the ordinary course of business.

We maintain general liability [removed: and workers’ compensation insurance] with a self-insured retention [removed: for each policy type] and [added: workers’ compensation insurance with] a deductible for each occurrence.

Additionally, we also receive and process information permitting cashless payments as part of our in-store and online operations at [removed: *TractorSupply.com*,] [added: *TractorSupply.com* and *Petsense.com* and on our mobile application,] some of which depend upon the secure transmission of confidential information over public networks.

We accept payments using a variety of methods, including credit cards, debit cards, credit accounts, our private label [removed: and co-branded] credit cards, gift cards, direct debit from a customer’s bank account, consumer invoicing, and physical bank checks, and we may offer different payment options over time.

[added: In addition, we] continually make investments in technology to implement new processes and systems, as well as to maintain and update our existing processes and systems.

We use our [removed: website, *TractorSupply.com*, both] [added: websites, *TractorSupply.com* and *Petsense.com*, and our mobile application] as [added: both] a sales channel for our products and as a method of providing product, project, and other relevant information to our customers to drive [removed: both] in-store and online sales.

Furthermore, although our Board of Directors has authorized a share repurchase program of up to $4.5 billion, [added: which has remaining authorization as of December 26, 2020 of $1.14 billion,] we may [added: temporarily pause or permanently] discontinue this program at any time or significantly reduce [added: the amount of] repurchases under the program.

Our operations, including our outsourced exclusive brand manufacturing partners, are subject to regulation by the Occupational Safety and Health Administration (“OSHA”), the Food and Drug Administration (the “FDA”), the Department of Agriculture (the [removed: “USDA”)] [added: “USDA”), the Environmental Protection Agency (the "EPA")] and by various other federal, state, local and foreign authorities regarding the processing, packaging, storage, distribution, advertising, labeling and export of our products, including food safety standards.

Strategic and Competitive Risks

Furthermore, the significant positive impact of the COVID-19 pandemic on the demand for our products in fiscal 2020 resulted in a significant increase in new or reacquired customers and in comparable store sales growth.

Our sales performance in fiscal 2020 may present a greater risk to our ability to increase comparable store sales in the following year(s) and in our ability to

maintain our new or reacquired customers gained in fiscal 2020.

Therefore, we may not be able to sustain or increase our comparable store sales in fiscal 2021 and beyond.

We may not

Additionally, acquired businesses may not achieve desired profitability objectives, causing lower than expected earnings and cash flows which could subsequently require impairment of long-lived assets, goodwill and other intangible assets.

Weather and Climate Risks

*Weather conditions may cause a disruption in our distribution and transportation network that would adversely affect our ability to conduct our operations.*

Although we believe that our operations are efficient, disruptions due to extreme weather conditions, including snow and ice storms, flood and wind damage, hurricanes, tornadoes, extreme rain, fires and droughts may result in delays in the transportation and delivery of merchandise to our distribution centers, our stores, or our customers.

Significant disruptions or delays in our distribution and transportation network could adversely affect sales and the satisfaction of our customers which could have a material adverse impact on our financial condition and results of operations.

*Factors associated with climate change could adversely affect our business.*

We use natural gas, diesel fuel, gasoline and electricity in conducting our operations.

Increased government regulations to limit carbon dioxide and other greenhouse gas emissions may result in increased compliance costs and legislation or regulation affecting energy inputs, which could materially affect our profitability.

Further, climate change could affect our ability to procure needed commodities at costs and in the quantities that we currently expect.

Additionally, climate change may be associated with extreme weather conditions, such as more frequent or intense hurricanes, thunderstorms, tornadoes, floods, fire, drought, and snow or ice storms, as well as rising sea levels, all of which may negatively impact our business and have a material adverse effect on our financial condition and results of operations.

Macroeconomic Risks

Team Member Risks

Supply Chain and Third-Party Vendor Risks

Our

We rely on our distribution and transportation network, including third-party logistics providers, to provide goods to our stores in a timely and cost-effective manner through deliveries to our distribution facilities from vendors and then from the distribution facilities or direct ship vendors to our stores or customers by various means of transportation, including shipments by sea, air, rail, and truck.

For example, unexpected delivery delays (including delays due to weather, fuel shortages, work stoppages, global or regional health epidemics, product shortages from vendors, or other reasons) or increases in transportation

Technology, Data Security, Business Continuity and Disaster Recovery Risks

Financial Risks

*Changes in market conditions or in our credit rating could restrict capital and adversely affect our business operations and growth initiatives.*

We rely on the positive cash flow we generate from our operating activities and our access to the credit and capital markets to fund our operations, growth strategy, capital expenditures, and return of cash to our shareholders through share repurchases and dividends.

Changes in the credit and capital markets, including market disruptions, limited liquidity and interest rate fluctuations, may increase the cost of financing or restrict our access to these potential sources of future liquidity.

Our continued access to liquidity sources on favorable terms depends on multiple factors, including our operating performance and credit ratings.

There can be no assurance that we will be able to maintain and/or improve our current credit ratings.

A rating organization may lower our rating, or change our ratings’ outlook, or decide not to rate our securities, temporarily or permanently, in its sole discretion.

In the event that our current credit ratings are downgraded or removed, we would most likely incur higher borrowing costs and experience greater difficulty in obtaining additional financing, which in turn would have a material adverse impact on our financial condition, results of operations, cash flows, and liquidity.

We can make no assurances that our ability to obtain additional financing through the debt markets will not be adversely affected by economic conditions or that we will be able to maintain or improve our current credit ratings.

*Our level of indebtedness could limit our cash flow available for operations and could adversely affect our ability to service our debt or obtain additional financing.*

As of December 26, 2020, our total outstanding consolidated debt was approximately $984.3 million.

Our level of indebtedness could restrict our operations and make it more difficult for us to satisfy our debt obligations.

Our ability to make payments on our indebtedness, to refinance our indebtedness, and to fund planned capital expenditures will depend on our ability to generate cash in the future.

This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control.

The risk exists that our business will be unable to generate sufficient cash flow from operations or that future borrowings will not be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

We may need to refinance all or a portion of our indebtedness on or before maturity.

Our ability to refinance all or a portion of our indebtedness on acceptable terms, or at all, will be dependent upon a number of factors, including our degree of leverage, the value of our assets, borrowing and other financial restrictions imposed by lenders and conditions in the credit markets at the time we refinance.

*Capital required for growth may not be available.*

The construction or acquisition of new stores, store support center facilities, distribution facilities, or other facilities, the remodeling and renovation of existing facilities, and investments in information technology require significant amounts of capital.

In the past, our growth has been funded through internally generated cash flow and bank borrowings.

Our failure to generate expected cash flow could impair our growth.

In addition, disruptions to the capital and credit markets could adversely affect the ability of the banks to meet their commitments.

Our access to funds under our debt facilities is dependent on the

ability of the banks that are parties to the facility to meet their funding commitments.

Those banks may not be able to meet their funding commitments to us if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time.

*performance.*

negatively affect our business.

In addition, we

*The following discussion and analysis is intended to provide the reader with information that will assist in understanding the significant factors affecting our consolidated operating results, financial condition, liquidity, and capital resources during the [removed: three-year] [added: two-year] period ended December [removed: 28, 2019] [added: 26, 2020] (our fiscal years [removed: 2019, 2018] [added: 2020] and [removed: 2017).][added: 2019).]

This discussion contains forward-looking [removed: statements.][added: statements and information.]

See “Forward-Looking [removed: Statements”] [added: Statements] and [added: Information” and] “Risk Factors” included elsewhere in this report.*

[removed: As of December 28, 2019, we operated 2,024 retail stores in 49 states under the names *Tractor Supply Company,* *Del’s Feed & Farm Supply,* and *Petsense.*] We also operate websites under the names *TractorSupply.com* and [removed: *Petsense.com*.][added: *Petsense.com* as well as a Tractor Supply Company mobile application.]

Tractor Supply Company believes we can grow our business by being [added: an integral part of our customers’ lives as] the [removed: most] dependable supplier of [removed: relevant products and services for the “*Out Here*” lifestyle,] [added: *"Out Here"* lifestyle solutions,] creating customer loyalty through personalized experiences, and providing convenience that our customers expect at anytime, anywhere, and in any way they choose.

Our long-term growth strategy is to: (1) [removed: drive profitable growth through new store openings] [added: expand] and [removed: by expanding omni-channel capabilities, thus tying together] [added: deepen] our [removed: website product] [added: customer base by providing personal, localized, and memorable customer engagements by leveraging] content, social media, [removed: digital,] and [removed: online] [added: digital] shopping [removed: experience,] [added: experiences,] attracting new customers and driving loyalty, (2) [removed: build customer-centric engagement by leveraging analytics to deliver legendary] [added: evolve] customer [removed: service, seasoned advice,] [added: experiences by digitizing our business processes] and [removed: personalized experiences,] [added: furthering our omni-channel capabilities,] (3) offer relevant assortments and services across all channels through exclusive and national brands and continue to introduce new products and services through our test and learn strategy, (4) [removed: enhance our core] [added: drive operational excellence] and [removed: foundational capabilities by investing in infrastructure] [added: productivity through continuous improvement, increasing space utilization,] and [removed: process improvements which will] [added: implementing advanced supply chain capabilities to] support growth, [removed: scale,] [added: scale] and [removed: agility while improving the customer experience,] [added: agility,] and (5) expand through selective acquisitions, as such opportunities arise, to add complementary businesses and to enhance penetration into new and existing markets to supplement organic growth.

Achieving this strategy will require a foundational focus on: (1) [removed: organizing, optimizing, and] [added: connecting,] empowering [added: and growing] our team [removed: members for growth by developing skills, talent,] [added: to enhance their lives] and [removed: leadership across] the [removed: organization,] [added: communities they live in, enabling them to provide legendary service to our customers,] and (2) [removed: implementing operational efficiency initiatives,] [added: allocating resources in a disciplined and efficient manner to drive profitable growth and build shareholder value,] including [removed: leverage of] [added: leveraging] technology and automation, to align our cost structure to support new business capabilities for margin improvement and cost reductions.

Over the past five years, we have experienced considerable growth in stores, growing from [removed: 1,382] [added: 1,488] stores at the end of fiscal [removed: 2014] [added: 2015] to [removed: 2,024] [added: 2,105] stores [removed: (1,844] [added: (1,923] Tractor Supply and Del’s retail stores and [removed: 180] [added: 182] Petsense retail stores) at the end of fiscal [removed: 2019,] [added: 2020,] and in net sales, with a compounded annual growth rate of approximately [removed: 7.9%.][added: 11.3%.]

Given the size of the communities that we target, we believe that there is ample opportunity for new store growth in [added: many] existing and new markets.

We have developed a proven method for selecting store sites and [added: we believe we] have [removed: identified over 600] [added: significant] additional opportunities for new Tractor Supply stores.

We also believe that there is opportunity for [removed: up to 1,000] [added: continued growth for] Petsense stores.

In fiscal [removed: 2018,] [added: 2020,] we opened 80 new Tractor Supply stores in [removed: 33] [added: 31] states and [removed: 18] [added: nine] new Petsense stores in [removed: 14] [added: three] states.

This resulted in a selling square footage increase of approximately [removed: 4.3%] [added: 4%] in [added: each of] fiscal [removed: 2019] [added: 2020] and [removed: approximately 4.9% in] fiscal [removed: 2018.][added: 2019.]

Net sales increased [removed: 5.6%] [added: 27.2%] to [removed: $8.35] [added: $10.62] billion in fiscal [removed: 2019] [added: 2020] from [removed: $7.91] [added: $8.35] billion in fiscal [removed: 2018.][added: 2019.]

Comparable store sales increased [removed: 2.7%] [added: 23.1%] in fiscal [removed: 2019] [added: 2020] versus a [removed: 5.1%] [added: 2.7%] increase in fiscal [removed: 2018.][added: 2019.]

Gross profit increased [removed: 6.3%] [added: 31.0%] to [removed: $2.87] [added: $3.76] billion in fiscal [removed: 2019] [added: 2020] from [removed: $2.70] [added: $2.87] billion in fiscal [removed: 2018,] [added: 2019,] and gross margin increased [removed: 22] [added: 104] basis points to [removed: 34.38%] [added: 35.42%] of net sales in fiscal [removed: 2019] [added: 2020] from [removed: 34.16%] [added: 34.38%] of net sales in fiscal [removed: 2018.][added: 2019.]

Operating income increased [removed: three] [added: 49] basis points to [removed: 8.90%] [added: 9.39%] of net sales in fiscal [removed: 2019] [added: 2020] from [removed: 8.87%] [added: 8.90%] of net sales in fiscal [removed: 2018.][added: 2019.]

For fiscal [removed: 2019,] [added: 2020,] net income was [removed: $562.4] [added: $749.0] million, or [removed: $4.66] [added: $6.38] per diluted share, compared to [removed: $532.4] [added: $562.4] million, or [removed: $4.31] [added: $4.66] per diluted share, in fiscal [removed: 2018.][added: 2019.]

We ended [removed: the year] [added: fiscal 2020] with [removed: $84.2 million] [added: $1.34 billion] in cash and [added: cash equivalents and] outstanding debt of [removed: $396.5] [added: $984.3] million, after returning [removed: $696.0] [added: $517.6] million to our stockholders through stock repurchases and quarterly cash dividends.

[removed: |] Inventory Valuation: [removed: | | | | | | | | | | | | | | |]

[removed: |] Inventory Impairment [removed: | | | | | | | | | | | | | | |]

[removed: |] Shrinkage [removed: | | | | | | | | | | | | | | |]

[removed: |] Vendor Funding [removed: | | | | | | | | | | | | | | |]

[removed: |] Freight [removed: | | | | | | | | | | | | | | |]

[removed: |] Self-Insurance Reserves: [removed: | | | | | | | | | | | | | | |]

[removed: |] Impairment of Long-Lived Assets: [removed: | | | | | | | | | | | | | | |]

[removed: |] Impairment of Goodwill and Other Indefinite-Lived Intangible Assets: [removed: | | | | | | | | | | | | | | |]

Our unaudited quarterly operating results for each fiscal quarter of [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] are shown below (in thousands, except per share amounts):

| [removed: 2018] | | | [removed: | | | (13 weeks) | | | | | | (13 weeks) | | | | | | (13 weeks) | | | | | | (13] [added: (52] weeks) | | | | | | (52 weeks) | | |

| | | | Fiscal Year | | | | | | | | | | | | | | | [removed: | | | | | | | | | | | |]

| Net sales | | | 100.00 | | % | | | | 100.00 | | % | | | | [removed: 100.00] | | [removed: %] | [removed: | | | | | | | | | | | |]

| Cost of merchandise sold (a) | | | [removed: 65.62 | | | | | | 65.84 | | | | | | 65.66] [added: 64.58] | | | | | | [added: 65.62] | | | | | | | | |

| Gross margin (a) | | | [removed: 34.38 | | | | | | 34.16 | | | | | | 34.34] [added: 35.42] | | | | | | [added: 34.38] | | | | | | | | |

| Selling, general and administrative expenses (a) | | | [removed: 23.14 | | | | | | 23.05 | | | | | | 22.60] [added: 23.34] | | | | | | [added: 23.14] | | | | | | | | |

| Depreciation and amortization | | | [removed: 2.34 | | | | | | 2.24 | | | | | | 2.28] [added: 2.04] | | | | | | [added: 2.34] | | | | | | | | |

| Operating income | | | [removed: 8.90 | | | | | | 8.87 | | | | | | 9.46] [added: 9.39] | | | | | | [added: 8.90] | | | | | | | | |

| Interest expense, net | | | [removed: 0.24 | | | | | | 0.23 | | | | | | 0.19] [added: 0.27] | | | | | | [added: 0.24] | | | | | | | | |

| Income before income taxes | | | [removed: 8.66 | | | | | | 8.64 | | | | | | 9.27] [added: 9.12] | | | | | | [added: 8.66] | | | | | | | | |

| Income tax expense | | | [removed: 1.93 | | | | | | 1.91 | | | | | | 3.45] [added: 2.07] | | | | | | [added: 1.93] | | | | | | | | |

| Net income | | | [removed: 6.73] [added: 7.05] | | % | | | | 6.73 | | % | | | | [removed: 5.82] | | [removed: %] | [removed: | | | | | | | | | | | |]

As of December 26, 2020, we operated 2,105 retail stores in 49 states under the names *Tractor Supply Company,* *Del’s Feed & Farm Supply,* and *Petsense.* Our stores are located primarily in towns outlying major metropolitan markets and in rural communities.

Through our stores and e-commerce channels, we offer the following comprehensive selection of merchandise:

Net sales increased 27.2% to $10.62 billion in fiscal 2020 from $8.35 billion in fiscal 2019 as we experienced significant demand for our products across all product categories, geographies and channels in fiscal 2020 as our customers focused on the care of their homes, land and animals while navigating the COVID-19 pandemic.

Information Regarding COVID-19 Coronavirus Pandemic

The Company has been and continues to closely monitor the impact of the COVID-19 pandemic on all facets of our business.

This includes the impact on our team members, customers, suppliers, vendors, business partners, and supply chain networks.

The health and safety of our team members and customers are the primary concerns of our management team.

We have taken and continue to take numerous actions to promote health and safety, including, providing personal protective equipment to our team members, establishing mask protocols in our facilities, rolling out additional functionality to support contactless shopping experiences, adding services for cleaning and sanitation in our stores and distribution centers, hiring additional team members to assist in promoting social distancing and cleaning actions in our stores, and implementing remote work plans at our store support center.

Additionally, we have taken significant actions to support our team members during this pandemic including COVID-19 paid medical leave, 100% coverage of COVID-19 testing and treatment under our medical plan, and the payment of incremental appreciation bonuses for frontline team members of approximately $44 million during fiscal 2020.

Effective June 28, 2020, we implemented permanent wage increases for all of our hourly team members in our stores and distribution centers of a minimum of $1 per hour and are now providing a new benefit package for part-time team members, including medical, vision and dental coverage, behavioral health services, paid sick time and life insurance.

We have also implemented annual restricted stock unit grants to more than 2,000 frontline salaried managers in our stores and distribution centers.

As further described in the results of operations, our net sales have significantly increased due to unprecedented customer demand across all major product categories, channels, and geographic regions.

However, the net incremental costs of doing business during this crisis have increased as a result of the aforementioned actions we have taken to support and promote the safety and well-being of our team members and customers, and we believe many of these incremental costs will continue after the pandemic is over.

There are numerous uncertainties surrounding the pandemic and its impact on the economy and our business, as further described in the Risk Factors section under Part I Item 1A.

of this Form 10-K, which make it difficult to predict the impact on our business, financial position, or results of operations in fiscal 2021 and beyond.

While our stores, distribution centers, and e-commerce operations are open and plan to remain open, we cannot predict the uncertainties, or the corresponding impacts on our business, at this time.

Comparable Store Metrics

Comparable store metrics are a key performance indicator used in the retail industry and by the Company to measure the performance of the underlying business.

We identify potentially excess and slow-moving inventory by evaluating turn rates, historical and expected future sales trends, age of merchandise, overall inventory levels, current cost of inventory, and other benchmarks.

We have established an inventory valuation reserve to recognize the estimated impairment in value (i.e., an inability to realize the full carrying value) based on our aggregate assessment of these valuation indicators under prevailing market conditions and current merchandising strategies.

We do not believe our merchandise inventories are subject to significant risk of obsolescence in the near term.

However, changes in market conditions or consumer purchasing patterns could result in the need for additional reserves.

Our impairment reserve contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding forecasted customer demand and the promotional environment.

We have not made any material changes in the accounting methodology used to recognize inventory impairment reserves in the financial periods presented.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate impairment.

However, if assumptions regarding consumer demand or clearance potential for certain products are inaccurate, we may be exposed to losses or gains that could be material.

A 10% change in our inventory impairment reserve as of December 26, 2020, would have affected net income by approximately $1.1 million in fiscal 2020.

Our general policy is to perform physical inventories at least once a year for each store that has been open more than 12 months, and we have established a reserve for estimating inventory shrinkage between physical inventory counts.

The reserve is established 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.

While the Company continued to operate as an essential retailer during the year, the COVID-19 pandemic had a direct impact on our ability to complete all originally planned store physical inventories in fiscal 2020.

Our plan was complicated by state and local mandates such as shelter at home restrictions and social distancing requirements.

Our decision to revise our inventory schedule was based on these mandates as well as consideration of the health and safety of our team members, customers and vendor partners which are crucial to our business operations.

We assessed the risks associated with the stores not inventoried and concluded there is no material risk of misstatement to the financial statements for the stores not inventoried and further concluded that effective compensating controls are in place to ensure completeness and accuracy of reported inventory balances and estimated shrink losses.

The estimated store inventory shrink rate is based on historical experience.

We believe historical rates are a reasonably accurate reflection of future trends.

Our shrinkage reserve contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding future shrinkage trends, the effect of loss prevention measures and merchandising strategies.

We have not made any material changes in the accounting methodology used to recognize shrinkage in the financial periods presented.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our shrinkage reserve.

However, if our estimates regarding inventory losses are inaccurate, we may be exposed to losses or gains that could be material.

Our stores are located primarily in towns outlying major metropolitan markets and in rural communities, and they offer the following comprehensive selection of merchandise:

| | | | | | | | | | | | | | | |

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| Description | | | | | | Judgments and Uncertainties | | | | | | Effect if Actual Results Differ from Assumptions | | |

| We identify potentially excess and slow-moving inventory by evaluating turn rates, historical and expected future sales trends, age of merchandise, overall inventory levels, current cost of inventory, and other benchmarks. We have established an inventory valuation reserve to recognize the estimated impairment in value (i.e., an inability to realize the full carrying value) based on our aggregate assessment of these valuation indicators under prevailing market conditions and current merchandising strategies. | | | | | | We do not believe our merchandise inventories are subject to significant risk of obsolescence in the near term. However, changes in market conditions or consumer purchasing patterns could result in the need for additional reserves. Our impairment reserve contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding forecasted customer demand and the promotional environment. | | | | | | We have not made any material changes in the accounting methodology used to recognize inventory impairment reserves in the financial periods presented. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate impairment. However, if assumptions regarding consumer demand or clearance potential for certain products are inaccurate, we may be exposed to losses or gains that could be material. A 10% change in our inventory impairment reserve as of December 28, 2019, would have affected net income by approximately $1.1 million in fiscal 2019. | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Description | | | | | | Judgments and Uncertainties | | | | | | Effect if Actual Results Differ from Assumptions | | |

| We perform physical inventories at least once a year for each store that has been open more than 12 months, and we have established a reserve for estimating inventory shrinkage between physical inventory counts. The reserve is established 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 estimated store inventory shrink rate is based on historical experience. We believe historical rates are a reasonably accurate reflection of future trends. Our shrinkage reserve contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding future shrinkage trends, the effect of loss prevention measures and merchandising strategies. | | | | | | We have not made any material changes in the accounting methodology used to recognize shrinkage in the financial periods presented. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our shrinkage reserve. However, if our estimates regarding inventory losses are inaccurate, we may be exposed to losses or gains that could be material. A 10% change in our shrinkage reserve as of December 28, 2019, would have affected net income by approximately $2.2 million in fiscal 2019. | | |

| We receive funding from substantially all of our significant merchandise vendors, in support of our business initiatives, through a variety of programs and arrangements, including guaranteed vendor support funds (“vendor support”) and volume-based rebate funds (“volume rebates”). The amounts received are subject to terms of vendor agreements, most of which are “evergreen”, reflecting the on-going relationship with our significant merchandise vendors. Certain of our agreements, primarily volume rebates, are renegotiated annually, based on expected annual purchases of the vendor’s product. Vendor funding is initially deferred as a reduction of the purchase price of inventory, and then recognized as a reduction of cost of merchandise as the related inventory is sold. During interim periods, the amount of vendor support and volume rebates are estimated based upon initial commitments and anticipated purchase levels with applicable vendors. | | | | | | The estimated purchase volume (and related vendor funding) is based on our current knowledge of inventory levels, sales trends and expected customer demand, as well as planned new store openings and relocations. Although we believe we can reasonably estimate purchase volume and related volume rebates at interim periods, it is possible that actual year-end results could be different from previously estimated amounts. Our allocation methodology contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding customer demand, purchasing activity, target thresholds, vendor attrition and collectability. | | | | | | We have not made any material changes in the accounting methodology used to establish our vendor funding reserves in the financial periods presented. At the end of each fiscal year, a significant portion of the actual purchase activity is known. Thus, we do not believe there is a reasonable likelihood that there will be a material change in the amounts recorded as vendor funding. We do not believe there is a significant collectability risk related to vendor funding amounts due to us at the end of fiscal 2019. If a 10% reserve had been applied against our outstanding vendor funding due as of December 28, 2019, net income would have been affected by approximately $2.2 million in fiscal 2019. Although it is unlikely that there will be any significant reduction in historical levels of vendor funding, if such a reduction were to occur in future periods, the Company could experience a higher inventory balance and higher cost of sales. | | |

| We incur 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 inventories (on an aggregate basis) and recognized as a component of cost of merchandise sold as the related inventory is sold. | | | | | | We allocate freight as a component of total cost of sales without regard to inventory mix or unique freight burden of certain categories. This assumption has been consistently applied for all years presented. | | | | | | We have not made any material changes in the accounting methodology used to establish our capitalized freight balance or freight allocation in the financial periods presented. If a 10% increase or decrease had been applied against our current inventory capitalized freight balance as of December 28, 2019, net income would have been affected by approximately $10.4 million in fiscal 2019. | | |

| Description | | | | | | Judgments and Uncertainties | | | | | | Effect if Actual Results Differ from Assumptions | | |

| We self-insure a significant portion of our workers’ compensation insurance and general liability (including product liability) insurance plans. We have stop-loss insurance policies to protect from individual losses over specified dollar values. Provisions for losses related to our self-insured liabilities are based upon periodic independent actuarially determined estimates that consider a number of factors including historical claims experience, loss development factors, and severity factors. | | | | | | The full extent of certain workers’ compensation and general liability claims may not become fully determined for several years. Our self-insured liabilities contain uncertainties because management is required to make assumptions and to apply judgment to estimate the ultimate cost to settle reported claims and claims incurred but not reported as of the balance sheet date based upon historical data and experience, including actuarial calculations. | | | | | | We have not made any material changes in the accounting methodology used to establish our self-insurance reserves in the financial periods presented. We do not believe there is a reasonable likelihood that there will be a material change in the assumptions we use to calculate insurance reserves. However, if we experience a significant increase in the number of claims or the cost associated with these claims, we may be exposed to losses that could be material. A 10% change in our self-insurance reserves as of December 28, 2019, would have affected net income by approximately $5.0 million in fiscal 2019. | | |

| Long-lived assets, including lease assets, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When evaluating long-lived assets for potential impairment, we first compare the carrying value of the asset or asset group to its estimated undiscounted future cash flows. The evaluation for long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual store level. The significant assumptions used to determine estimated undiscounted cash flows include cash inflows and outflows directly resulting from the use of those assets in operations, including margin on net sales, payroll and related items, occupancy costs, insurance allocations, and other costs to operate a store. If the estimated future cash flows are less than the carrying value of the related asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the related asset or asset group to its estimated fair value, which may be based on an estimated future cash flow model, market valuation, or other valuation technique, as appropriate. We recognize an impairment loss if the amount of the asset’s carrying value exceeds the asset’s estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated (amortized) over the remaining estimated useful life of that asset. | | | | | | Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values. | | | | | | We have not made any material changes in our impairment loss assessment methodology in the financial periods presented, other than to include operating lease right-of-use assets in our ongoing impairment assessment upon adoption of the new lease accounting standard in fiscal 2019. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses. None of these estimates and assumptions are significantly sensitive, and a 10% change in any of these estimates would not have a material impact on our analysis. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material. | | |

| Description | | | | | | Judgments and Uncertainties | | | | | | Effect if Actual Results Differ from Assumptions | | |

| Goodwill and other indefinite-lived intangible assets are evaluated for impairment annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In accordance with the accounting standards, an entity has the option first to assess qualitative factors to determine whether events and circumstances indicate that it is more likely than not that goodwill or an indefinite-lived intangible asset is impaired. If after such assessment an entity concludes that the asset is not impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the asset using a quantitative impairment test, and if impaired, the associated assets must be written down to fair value. The quantitative impairment test for goodwill compares the fair value of a reporting unit with the carrying value of its net assets, including goodwill. If the fair value of the reporting unit is less than the carrying value of the reporting unit, an impairment charge would be recorded to the Company’s operations, for the amount in which the carrying amount exceeds the reporting unit’s fair value. We determine fair values for each reporting unit using the market approach, when available and appropriate, the income approach, or a combination of both. The income approach involves forecasting projected financial information (such as revenue growth rates, profit margins, tax rates, and capital expenditures) and selecting a discount rate that reflects the risk inherent in estimated future cash flows. Under the market approach, the fair value is based on observed market data. If multiple valuation methodologies are used, the results are weighted appropriately. The quantitative impairment test for other indefinite-lived intangible assets involves comparing the carrying amount of the asset to the sum of the discounted cash flows expected to be generated by the asset. If the implied fair value of the indefinite-lived intangible asset is less than the carrying value, an impairment charge would be recorded to the Company’s operations. | | | | | | Our impairment loss calculation contains uncertainties because they require management to make assumptions and to apply judgment to qualitative factors as well as estimate future cash flows and asset fair values, including forecasting projected financial information and selecting the discount rate that reflects the risk inherent in future cash flows. | | | | | | The valuation approaches utilized to estimate fair value for the purposes of the impairment tests of goodwill and other indefinite-lived intangible assets require the use of assumptions and estimates, which involve a degree of uncertainty. If actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to non-cash impairment losses that could be material. | | |

| Net sales | | | | | | $ | 1,682,901 | | | | | $ | 2,213,249 | | | | | $ | 1,881,625 | | | | | $ | 2,133,271 | | | | | $ | 7,911,046 | |

| Gross profit | | | | | | 563,649 | | | | | | 769,414 | | | | | | 653,132 | | | | | | 716,333 | | | | | | 2,702,528 | | |

| Operating income | | | | | | 94,749 | | | | | | 273,458 | | | | | | 153,148 | | | | | | 180,382 | | | | | | 701,737 | | |

| Net income | | | | | | 71,433 | | | | | | 207,289 | | | | | | 116,784 | | | | | | 136,851 | | | | | | 532,357 | | |

| Basic | | | | | | $ | 0.57 | | | | | $ | 1.70 | | | | | $ | 0.96 | | | | | $ | 1.12 | | | | | $ | 4.34 | |

| Diluted | | | | | | $ | 0.57 | | | | | $ | 1.69 | | | | | $ | 0.95 | | | | | $ | 1.11 | | | | | $ | 4.31 | |

| Comparable store sales increase (a) | | | | | | 3.7 | | % | | | | 5.6 | | % | | | | 5.1 | | % | | | | 5.7 | | % | | | | 5.1 | | % |

If the effect of relocated stores on our comparable store metrics becomes material, we would remove relocated stores from the calculations.

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| | | | 2019 | | | | | | 2018 | | | | | | 2017 | | | | | | | | | | | | | | |

Net sales increased 5.6% to $8.35 billion in fiscal 2019 from $7.91 billion in fiscal 2018.

Comparable store sales for fiscal 2019 were $8.13 billion, a 2.7% increase over fiscal 2018.

This compares to a 5.1% comparable store sales increase in the prior year.

Comparable store metrics are calculated on an annual basis using sales generated from all stores open at least one year and all online sales, excluding certain adjustments to net sales.

Stores closed during the year are removed from our comparable store metrics calculations.

Stores relocated during the years being compared are not removed from our comparable store metrics.

The growth in seasonal merchandise was driven from solid demand throughout the first three fiscal quarters of the year; however, the fourth fiscal quarter experienced weakness in sales of cold-weather seasonal and holiday discretionary products primarily as a result of unseasonably warm weather across much of the country and six fewer selling days between Thanksgiving and Christmas compared to last year.

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We are exposed to interest rate changes, primarily as a result of borrowings under our [removed: 2016] Senior Credit Facility (as discussed in Note 4 to the Consolidated Financial Statements), which bear interest based on variable rates.

As discussed in Note 5 to the Consolidated Financial Statements, we entered into interest rate swap agreements which are intended to mitigate interest rate risk associated with future changes in interest rates for the term loan borrowings under the [removed: 2016] Senior Credit Facility.

A 1% change in interest rates on our variable rate debt in excess of that amount covered by the interest rate swaps would have affected interest expense by approximately [removed: $1.9] [added: $2.4] million, [removed: $1.6] [added: $1.9] million, and [removed: $2.1] [added: $1.6] million in fiscal [added: 2020,] 2019, [removed: 2018,] and [removed: 2017,] [added: 2018,] respectively.

Based on the amount of outstanding variable rate debt as of December [removed: 28, 2019,] [added: 26, 2020,] excluding those borrowings for which we have interest rate swaps, a 1% change in interest rates would not result in any material increase in our interest expense on a prospective basis.

We [removed: operate retail stores under the names *Tractor Supply Company, Del’s Feed & Farm Supply,* and *Petsense* and] [added: also] operate websites under the names *TractorSupply.com* and [removed: *Petsense.com*.][added: *Petsense.com* as well as a Tractor Supply Company mobile application.]

[added: We operate retail stores under the names *Tractor Supply Company, Del’s Feed & Farm Supply,* and *Petsense.*] Our stores are located primarily in towns outlying major metropolitan markets and in rural communities.

At December [removed: 28, 2019,] [added: 26, 2020,] we operated [removed: 2,024] [added: 2,105] retail stores in 49 states [removed: (1,844] [added: (1,923] Tractor Supply and Del’s retail stores and [removed: 180] [added: 182] Petsense retail stores).

Our online selling websites [added: and our mobile application] are positioned to offer an extended assortment of products beyond those offered in-store and drive traffic into our stores through our buy online and pickup in-store and ship to store programs.

We also engage with our customers through our e-commerce [removed: website (*TractorSupply.com*),] [added: websites and mobile application,] which [removed: provides] [added: provide] the opportunity to allow customers to shop [removed: at] anytime, anywhere, and in any way they choose, while delivering enhanced product information, research, and decision tools that support product selection and informational needs in specific subject areas.

Also, our store team members wear highly visible red [removed: vests, aprons,] [added: vests] or [removed: smocks] [added: aprons] with nametags, and our customer service and checkout counters are conveniently located near the front of the store.

Our full line of product offerings includes a broad selection of high quality, reputable brand name and exclusive brand products [removed: and is supported by a strong in-stock inventory position] with approximately 15,500 to 20,000 products per store as well as over 125,000 products online.

No single product accounted for more than 10% of our sales during fiscal [removed: 2019.][added: 2020.]

The following table indicates the percentage of net sales represented by each of our major product categories during fiscal [added: 2020,] 2019, [removed: 2018,] and [removed: 2017:][added: 2018:]

| | | | Percent of Net Sales | | | | | | | | | | | | | | | [removed: | | | | | | | | | | | |]

| | | | Fiscal Year | | | | | | | | | | | | | | | [removed: | | | | | | | | | | | |]

| Product Category: | | | [removed: 2019 | | | | | | 2018 | | | | | | 2017] [added: 2020] | | | | | | [added: 2019] | | | | | | [added: 2018] | | |

| Livestock and Pet | | | 47 | | % | | | | 47 | | % | | | | 47 | | % | [removed: | | | | | | | | | | | |]

| Hardware, Tools and Truck | | | 21 | | | | | | [removed: 22] [added: 21] | | | | | | 22 | | | [removed: | | | | | | | | | | | |]

| Seasonal, Gift and Toy Products | | | [removed: 20] [added: 21] | | | | | | [removed: 19] [added: 20] | | | | | | 19 | | | [removed: | | | | | | | | | | | |]

| Clothing and Footwear | | | [removed: 8] [added: 7] | | | | | | 8 | | | | | | 8 | | | [removed: | | | | | | | | | | | |]

| Agriculture | | | 4 | | | | | | 4 | | | | | | 4 | | | [removed: | | | | | | | | | | | |]

| Total | | | 100 | | % | | | | 100 | | % | | | | 100 | | % | [removed: | | | | | | | | | | | |]

Examples of C.U.E. product categories include, but are not limited to, livestock feed and bedding, pet food, [added: bird seed,] lubricants, [added: propane,] and various seasonal products, such as heating, [added: fertilizer, weed control, mulch,] pest control, and twine.

Our products are sourced through both domestic and international vendors, each of whom [added: are expected to] adhere to a code of conduct that guides our relationship.

We purchase our products from a group of approximately 975 vendors, with no one vendor representing more than 10% of our purchases during fiscal [removed: 2019.][added: 2020.]

Approximately 375 core vendors accounted for 90% of our merchandise purchases during fiscal [removed: 2019.][added: 2020.]

Our exclusive brands represented approximately [removed: 31%] [added: 29%] of our total sales in fiscal [removed: 2019 and 2018, respectively,] [added: 2020] and [removed: 32%] [added: 31%] of our total sales in fiscal [removed: 2017.][added: 2019 and 2018, respectively.]

| [removed: • | | |] *4health*® (pet foods and supplies) | | | [removed: • | | |] *Producer’s Pride*® (livestock and horse feed and supplies) | | |

| [removed: • | | | *Bit & Bridle*® (apparel] [added: *American Farmworks*® (livestock, farm] and [removed: footwear) | | | •] [added: ranch] | | | *Red Shed*® (gifts, collectibles, and outdoor furniture) | | |

| [removed: • | | | *Blue Mountain*® (apparel) | | | •] [added: *Bit & Bridle*® (apparel and footwear)] | | | *Redstone*® (heating products) | | |

| [removed: • | | | *C.E. Schmidt*® (apparel and footwear) | | | •] [added: *Blue Mountain*® (apparel)] | | | *Retriever*® (pet foods and supplies) | | |

| [removed: • | | |] *Countyline*® (livestock, farm and ranch equipment) | | | [removed: • | | | *Ridgecut*® (apparel)] [added: *Royal Wing*® (bird feed and supplies)] | | |

| [removed: • | | |] *Dumor*® (livestock and horse feed and supplies) | | | [removed: • | | | *Royal Wing*® (bird feed and supplies)] [added: *Strive*® (pet food)] | | |

| [removed: • | | |] *Groundwork*® (lawn and garden supplies) | | | [removed: • | | |] *Traveller*® (truck and automotive products) | | |

| [removed: • | | |] *Huskee*® (outdoor power equipment) | | | [removed: • | | |] *Treeline*® (hunting gear and accessories) | | |

| [removed: • | | |] *JobSmart*® (tools) | | | [removed: • | | |] *TSC Tractor Supply Co*® (trailers, truck tool boxes, and animal | | |

| | | | [removed: | | | | | |] bedding) | | |

| [removed: • | | |] *Paws & Claws*® (pet foods and supplies) | | | [removed: • | | |] *Untamed*® (pet foods) | | |

The exclusive brands identified above have been registered as trademarks with the USPTO for certain products and [added: some] are the subject of [added: additional] applications for registration pending before the USPTO for other products.

Our trademark and service mark registrations have various expiration dates; however, provided that we continue to use the marks and [removed: renew] [added: file appropriate maintenance and renewal documentation with] the [removed: registrations] [added: USPTO] in a timely manner, the registrations are potentially perpetual in duration.

We believe our intellectual property, which includes the trademarks and service marks identified above, together with certain [removed: trade names,] [added: tradenames,] domain names, patents, and copyrights, has significant value and is an important component of our merchandising and marketing strategies.

We currently operate a distribution facility network for supplying stores with merchandise and delivering product ordered through [removed: *TractorSupply.com*.][added: our websites and mobile application.]

In fiscal [removed: 2019,] [added: 2020,] our Tractor Supply stores received approximately [removed: 74%] [added: 75%] of merchandise through this network while the remaining merchandise shipped directly from our vendors to our stores or customers.

We believe this flow facilitates the prompt and efficient distribution of merchandise [removed: in order] [added: that allows us] to [removed: enhance] [added: be a dependable supplier to our customers for their "*Out Here"* lifestyle solutions by enhancing] in-stock inventory positions, [removed: minimize] [added: while minimizing] freight [removed: expense,] [added: expense] and [removed: improve] [added: improving] the inventory turn rate.

Our retail store locations and digital capabilities provide the convenience to allow our customers to engage with us anytime, anywhere and in any way they choose.

Business Strategy for Tractor Supply Company

In addition, our stores have been equipped with tools such as team member communication devices, wireless internet, and mobile point-of-sale devices that enable our team members to provide an enhanced shopping experience to our customers.

Our stores have been equipped with tools such as team member communication devices, wireless internet, and mobile point-of-sale devices that enable our team members to provide an enhanced shopping experience to our customers.

In addition, our buy online and pick up in-store program, including curbside pick up, provides convenient access for customers to pick up merchandise from our store locations.

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| equipment) | | | | | |

| *C.E. Schmidt*® (apparel and footwear) | | | *Ridgecut*® (apparel) | | |

Our patents (both United States and foreign) have expiration dates ranging from March, 2024 to December, 2045 and protect various elements, designs or functions of farm and ranch equipment, as well as light systems for trucks and other vehicles.

On December 7, 2020, the Company announced plans to build a new distribution center in Navarre, Ohio.

The new distribution center is expected to be approximately 895,000 square feet.

Construction is planned to begin in fiscal 2021 and is currently anticipated to be complete by the end of fiscal 2022.

This allows us to extend our aisles beyond our store locations and provides convenient and useful content that is relevant to our customers’ lifestyle.

Areas of focus include cloud, end point protection and privacy.

Human Capital

We believe that our team members are the foundation of our business and that their hard work drives our success.

As a result of our commitment to our team members, we were recognized by the Great Place to Work Institute as a *"Great Place to Work-Certified"* company.

Below are further descriptions of our Company and our focus on the development and support of our team members:

We additionally provide our team members with paid time off and a six-week parental leave policy for new parents.

- Diversity and Inclusion training which is intended to advance a diverse and inclusive culture built on our core value of Respect, to foster different perspectives, ideas and innovative thinking;

*COVID-19 Response*

The Company has been and continues to closely monitor the impact of the COVID-19 pandemic on all facets of our business.

This includes the impact on our team members, customers, suppliers, vendors, business partners, and supply chain networks.

The health and safety of our team members and customers are the primary concerns of our management team.

We have taken and continue to take numerous actions to promote health and safety, including, providing personal protective equipment to our team members, establishing mask protocols in our facilities, rolling out additional functionality to support contactless shopping experiences, adding services for cleaning and sanitation in our stores and distribution centers, hiring additional team members to assist in promoting social distancing and cleaning actions in our stores, and implementing remote work plans at our store support center.

Additionally, we have taken significant actions to support our team members during this pandemic including COVID-19 paid medical leave, 100% coverage of COVID-19 testing and treatment under our medical plan, and the payment of incremental appreciation bonuses for frontline team members of approximately $44 million in fiscal 2020.

Effective June 28, 2020, we implemented permanent wage increases for all of our hourly team members in our stores and distribution centers of a minimum of $1 per hour and are now providing a new benefit package for part-time team members, including medical, vision and dental coverage, behavioral health services, paid sick time and life insurance.

We have also implemented annual restricted stock unit grants to more than 2,000 frontline salaried managers in our stores and distribution centers.

*Diversity, Equity and Inclusion*

Tractor Supply is committed to the principles of diversity, equity and inclusion.

We have built a strong and diverse team by purposefully seeking highly qualified diverse candidates with different backgrounds, perspectives, ideas and skill sets.

As we move forward, we are working to implement new diversity, equity and inclusion initiatives that will result in an even more diverse team across the entire company.

We are committed to providing a diverse and inclusive culture supported by our Mission & Values where we respectfully foster different perspectives, ideas and innovative thinking.

We know that together we are better, and we believe in the authenticity our team members bring to work every day.

By focusing on our team members, we know that our customers and communities will be well served.

Diversity and inclusion play a key role in moving our business forward.

Our workforce is approximately 51% male and 49% female.

Business Strategy

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In fiscal 2019, we completed and began shipping operations at our new northeast distribution center in Frankfort, New York.

Benjamin F.

Parrish, Jr. has served as Executive Vice President – General Counsel and Corporate Secretary of the Company since February 2016, after having served as Senior Vice President – General Counsel and Corporate Secretary of the Company since October 2010.

Mr. Parrish previously served as Executive Vice President and General Counsel of MV Transportation, Inc. from September 2008, until he joined the Company.

Mr. Parrish served as Senior Vice President and General Counsel of Central Parking Corporation from 1998 to 2008.

The Company is [added: also] involved in various litigation matters arising in the ordinary course of business.

On October 9, 2020, an alleged stockholder, the City of Pontiac Police and Fire Retirement System, filed a derivative lawsuit in the U.S. District Court for the Middle District of Tennessee, purportedly on the Company's behalf, against certain current and former members of our Board of Directors, and the Company as a nominal defendant, seeking unspecified compensatory and punitive damages payable to the Company, disgorgement, restitution, corporate governance and hiring changes, mandated community investment, and attorneys' fees and costs.

Plaintiff alleges that defendants violated the federal securities laws governing proxy solicitations and breached their fiduciary duties by misrepresenting the Company’s commitment to and support for diversity and inclusion.

The Company disputes the allegations of the complaint.

The Company and the individual defendants moved to dismiss the complaint based on plaintiff’s failure to make a demand on the board and to state a claim upon which relief may be granted.

Given the indeterminate claims for monetary damages and the early stage of the proceedings where key factual and legal issues have not been resolved, the Company is unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range of possible losses resulting from the matter described above.

For the fiscal year ended December [removed: 28, 2019][added: 26, 2020]

[removed: ][added: ]

The aggregate market value of the Common Stock held by non-affiliates of the registrant, based on the closing price of the Common Stock on The NASDAQ Global Select Market on June [removed: 29, 2019,] [added: 27, 2020,] the last business day of the registrant’s most recently completed second fiscal quarter, was approximately [removed: $10.8] [added: $12.6] billion.

| Class | | | | | | Outstanding at January [removed: 25, 2020] [added: 23, 2021] | | |

| Common Stock, $.008 par value | | | | | | [removed: 117,282,010] [added: 116,301,841] | | |

Portions of the Registrant’s definitive Proxy Statement for its [removed: 2020] [added: 2021] Annual Meeting of Stockholders are incorporated by reference into Part III hereof.

| Item no. | | | | | | [removed: | | |] Form 10-K Report Page | | |

| [Forward-Looking [removed: Statements](#i_0_10) | | |] [added: Statements](#i137f04c25e1e4da3b6d1f469d06f3319_10)] | | | | | | [removed: [ii](#i_0_10)] [added: [ii](#i137f04c25e1e4da3b6d1f469d06f3319_10)] | | |

| [PART [removed: I](#i_0_13) | | |] [added: I](#i137f04c25e1e4da3b6d1f469d06f3319_13)] | | | | | | [removed: [1](#i_0_13)] [added: [1](#i137f04c25e1e4da3b6d1f469d06f3319_13)] | | |

| [removed: [1.](#i_0_16) | | | [Business](#i_0_16)] [added: [1.](#i137f04c25e1e4da3b6d1f469d06f3319_16)] | | | [removed: [1](#i_0_16)] [added: [Business](#i137f04c25e1e4da3b6d1f469d06f3319_16)] | | | [added: [1](#i137f04c25e1e4da3b6d1f469d06f3319_16)] | | |

| [removed: [1A.](#i_0_19)] [added: [1A.](#i137f04c25e1e4da3b6d1f469d06f3319_19)] | | | [Risk [removed: Factors](#i_0_19) | | | [9](#i_0_19)] [added: Factors](#i137f04c25e1e4da3b6d1f469d06f3319_19)] | | | [added: [11](#i137f04c25e1e4da3b6d1f469d06f3319_19)] | | |

| [removed: [1B.](#i_0_22)] [added: [1B.](#i137f04c25e1e4da3b6d1f469d06f3319_22)] | | | [Unresolved Staff [removed: Comments](#i_0_22) | | | [17](#i_0_22)] [added: Comments](#i137f04c25e1e4da3b6d1f469d06f3319_22)] | | | [added: [23](#i137f04c25e1e4da3b6d1f469d06f3319_22)] | | |

| [removed: [2.](#i_0_25) | | | [Properties](#i_0_25)] [added: [2.](#i137f04c25e1e4da3b6d1f469d06f3319_25)] | | | [removed: [17](#i_0_25)] [added: [Properties](#i137f04c25e1e4da3b6d1f469d06f3319_25)] | | | [added: [24](#i137f04c25e1e4da3b6d1f469d06f3319_25)] | | |

| [removed: [3.](#i_0_28)] [added: [3.](#i137f04c25e1e4da3b6d1f469d06f3319_28)] | | | [Legal [removed: Proceedings](#i_0_28) | | | [19](#i_0_28)] [added: Proceedings](#i137f04c25e1e4da3b6d1f469d06f3319_28)] | | | [added: [25](#i137f04c25e1e4da3b6d1f469d06f3319_28)] | | |

| [removed: [4.](#i_0_31)] [added: [4.](#i137f04c25e1e4da3b6d1f469d06f3319_31)] | | | [Mine Safety [removed: Disclosures](#i_0_31) | | | [19](#i_0_31)] [added: Disclosures](#i137f04c25e1e4da3b6d1f469d06f3319_31)] | | | [added: [25](#i137f04c25e1e4da3b6d1f469d06f3319_31)] | | |

| [PART [removed: II](#i_0_34) | | |] [added: II](#i137f04c25e1e4da3b6d1f469d06f3319_34)] | | | | | | [removed: [19](#i_0_34)] [added: [26](#i137f04c25e1e4da3b6d1f469d06f3319_34)] | | |

| [removed: [5.](#i_0_37)] [added: [5.](#i137f04c25e1e4da3b6d1f469d06f3319_37)] | | | [Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity [removed: Securities](#i_0_37) | | | [19](#i_0_37)] [added: Securities](#i137f04c25e1e4da3b6d1f469d06f3319_37)] | | | [added: [26](#i137f04c25e1e4da3b6d1f469d06f3319_37)] | | |

| [removed: [6.](#i_0_40)] [added: [6.](#i137f04c25e1e4da3b6d1f469d06f3319_40)] | | | [Selected Financial [removed: Data](#i_0_40) | | | [22](#i_0_40)] [added: Data](#i137f04c25e1e4da3b6d1f469d06f3319_40)] | | | [added: [29](#i137f04c25e1e4da3b6d1f469d06f3319_40)] | | |

| [removed: [7.](#i_0_43)] [added: [7.](#i137f04c25e1e4da3b6d1f469d06f3319_43)] | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i_0_43) | | | [23](#i_0_43)] [added: Operations](#i137f04c25e1e4da3b6d1f469d06f3319_43)] | | | [added: [30](#i137f04c25e1e4da3b6d1f469d06f3319_43)] | | |

| [removed: [7A.](#i_0_70)] [added: [7A.](#i137f04c25e1e4da3b6d1f469d06f3319_70)] | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#i_0_70) | | | [38](#i_0_70)] [added: Risk](#i137f04c25e1e4da3b6d1f469d06f3319_70)] | | | [added: [45](#i137f04c25e1e4da3b6d1f469d06f3319_70)] | | |

| [removed: [8.](#i_0_73)] [added: [8.](#i137f04c25e1e4da3b6d1f469d06f3319_73)] | | | [Financial Statements and Supplementary [removed: Data](#i_0_73) | | | [39](#i_0_73)] [added: Data](#i137f04c25e1e4da3b6d1f469d06f3319_73)] | | | [added: [46](#i137f04c25e1e4da3b6d1f469d06f3319_73)] | | |

| [removed: [9.](#i_0_166)] [added: [9.](#i137f04c25e1e4da3b6d1f469d06f3319_160)] | | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#i_0_166) | | | [72](#i_0_166)] [added: Disclosure](#i137f04c25e1e4da3b6d1f469d06f3319_160)] | | | [added: [79](#i137f04c25e1e4da3b6d1f469d06f3319_160)] | | |

| [removed: [9A.](#i_0_169)] [added: [9A.](#i137f04c25e1e4da3b6d1f469d06f3319_163)] | | | [Controls and [removed: Procedures](#i_0_169) | | | [72](#i_0_169)] [added: Procedures](#i137f04c25e1e4da3b6d1f469d06f3319_163)] | | | [added: [79](#i137f04c25e1e4da3b6d1f469d06f3319_163)] | | |

| [removed: [9B.](#i_0_172)] [added: [9B.](#i137f04c25e1e4da3b6d1f469d06f3319_166)] | | | [Other [removed: Information](#i_0_172) | | | [72](#i_0_172)] [added: Information](#i137f04c25e1e4da3b6d1f469d06f3319_166)] | | | [added: [80](#i137f04c25e1e4da3b6d1f469d06f3319_166)] | | |

| [PART [removed: III](#i_0_175) | | |] [added: III](#i137f04c25e1e4da3b6d1f469d06f3319_169)] | | | | | | [removed: [72](#i_0_175)] [added: [80](#i137f04c25e1e4da3b6d1f469d06f3319_169)] | | |

| [removed: [10.](#i_0_178)] [added: [10.](#i137f04c25e1e4da3b6d1f469d06f3319_172)] | | | [Directors, Executive Officers, and Corporate [removed: Governance](#i_0_178) | | | [72](#i_0_178)] [added: Governance](#i137f04c25e1e4da3b6d1f469d06f3319_172)] | | | [added: [80](#i137f04c25e1e4da3b6d1f469d06f3319_172)] | | |

| [removed: [11.](#i_0_181)] [added: [11.](#i137f04c25e1e4da3b6d1f469d06f3319_175)] | | | [Executive [removed: Compensation](#i_0_181) | | | [73](#i_0_181)] [added: Compensation](#i137f04c25e1e4da3b6d1f469d06f3319_175)] | | | [added: [80](#i137f04c25e1e4da3b6d1f469d06f3319_175)] | | |

| [removed: [12.](#i_0_184)] [added: [12.](#i137f04c25e1e4da3b6d1f469d06f3319_178)] | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#i_0_184) | | | [73](#i_0_184)] [added: Matters](#i137f04c25e1e4da3b6d1f469d06f3319_178)] | | | [added: [80](#i137f04c25e1e4da3b6d1f469d06f3319_178)] | | |

| [removed: [13.](#i_0_187)] [added: [13.](#i137f04c25e1e4da3b6d1f469d06f3319_181)] | | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#i_0_187) | | | [73](#i_0_187)] [added: Independence](#i137f04c25e1e4da3b6d1f469d06f3319_181)] | | | [added: [81](#i137f04c25e1e4da3b6d1f469d06f3319_181)] | | |

| [removed: [14.](#i_0_190)] [added: [14.](#i137f04c25e1e4da3b6d1f469d06f3319_184)] | | | [Principal Accountant Fees and [removed: Services](#i_0_190) | | | [73](#i_0_190)] [added: Services](#i137f04c25e1e4da3b6d1f469d06f3319_184)] | | | [added: [81](#i137f04c25e1e4da3b6d1f469d06f3319_184)] | | |

| [removed: [15.](#i_0_196)] [added: [15.](#i137f04c25e1e4da3b6d1f469d06f3319_190)] | | | [Exhibits and Financial Statement [removed: Schedules](#i_0_196) | | | [74](#i_0_196)] [added: Schedules](#i137f04c25e1e4da3b6d1f469d06f3319_190)] | | | [added: [81](#i137f04c25e1e4da3b6d1f469d06f3319_190)] | | |

| [removed: [16.](#i_0_199)] [added: [16.](#i137f04c25e1e4da3b6d1f469d06f3319_193)] | | | [Form 10-K [removed: Summary](#i_0_199) | | | [74](#i_0_199)] [added: Summary](#i137f04c25e1e4da3b6d1f469d06f3319_193)] | | | [added: [81](#i137f04c25e1e4da3b6d1f469d06f3319_193)] | | |

All statements, other than statements of historical facts, which address activities, [removed: events] [added: events,] or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures (including their amount and nature), business strategy, [removed: expansion] [added: expansion,] and growth of the business operations and other such matters are forward-looking statements.

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 [removed: oral] [added: oral,] or written.

These factors include, without limitation, national, [removed: regional] [added: regional,] and local economic conditions affecting consumer spending, [removed: weather conditions,] [added: including] the [removed: seasonal nature] [added: effects] of [added: COVID-19,] the [added: effects that “shelter in place” or other similar mandated or suggested social distancing protocols could have on the] business, the [added: costs of doing business as a retailer during the COVID-19 pandemic, the effectiveness of the Company’s responses to COVID-19 and customer response with respect to those actions, the effects of COVID-19 on our suppliers, business partners and supply chain, the] timing and acceptance of new [removed: products in] [added: products,] the [removed: stores,] [added: timing and mix of goods sold, weather conditions,] the [added: seasonal nature of the business, the] timing and mix of goods sold, purchase price volatility (including inflationary and deflationary pressures), the ability to increase sales at existing stores, the failure to realize anticipated benefits of our investments in technology, infrastructure, and digital and omni-channel capabilities, the ability to manage growth and identify suitable locations, failure of an acquisition to produce anticipated results, the ability to successfully manage [removed: expenses] [added: expenses, particularly in light of COVID-19, including but not limited to, increases in wages,] and execute key gross margin enhancing initiatives, increases in fuel, carrier and other transportation costs, increases in wages due to competitive pressures or minimum wage laws and regulations, the availability of favorable credit sources, capital market conditions in general, the ability to open new stores in the [removed: manner] [added: manner, timing] and number currently contemplated, the impact of new stores on the business, competition, including competition from online retailers, effective merchandising [added: initiatives] and marketing [removed: initiatives,] [added: emphasis,] the ability to retain vendors, reliance on foreign suppliers, the ability to attract, train and retain qualified employees, [added: the unionization or collective bargaining of employees,] product liability and other claims, changes in federal, state or local regulations, potential judgments, fines, legal fees and other costs, breach of information systems or theft of employee or customer data, ongoing and potential future legal or regulatory proceedings, management of the Company’s information systems, failure to develop and implement new technologies, the failure of customer-facing technology systems, business disruption [removed: resulting] [added: including] from [removed: a natural or other disaster or] [added: the] implementation of [removed: new technologies, including but not limited to, new] supply chain technologies, effective tax rate changes, including expected effects of the Tax Cuts and Jobs Act, and results of examination by taxing authorities, the imposition of tariffs on imported products or the disallowance of tax deductions on imported products, the ability to maintain an effective system of internal control over financial reporting, changes in accounting standards, assumptions and estimates, and those described in Item 1A.

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of effectiveness of its internal control over financial reporting under section 404(b) of Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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| [PART IV](#i137f04c25e1e4da3b6d1f469d06f3319_187) | | | | | | [81](#i137f04c25e1e4da3b6d1f469d06f3319_187) | | |

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| [PART IV](#i_0_193) | | | | | | | | | [74](#i_0_193) | | |

ii

At December [removed: 28, 2019,] [added: 26, 2020,] the Company operated [removed: 2,024] [added: 2,105] stores in 49 states [removed: (1,844] [added: (1,923] Tractor Supply and Del’s retail stores and [removed: 180] [added: 182] Petsense retail stores).

The Company leases approximately [removed: 94%] [added: 95%] of its stores.

| Texas | | | | | | [removed: 221] [added: 227] | | | | | | Wisconsin | | | | | | [removed: 24] [added: 26] | | |

| [removed: Michigan] [added: New York] | | | | | | [removed: 90] [added: 92] | | | | | | New Hampshire | | | | | | [removed: 21] [added: 22] | | |

| New [removed: York] [added: Jersey] | | | | | | [removed: 90] [added: 26] | | | | | | [removed: New Jersey] | | | | | | [removed: 21] | | |

| Florida | | | | | | [removed: 73] [added: 86] | | | | | | Connecticut | | | | | | 20 | | |

| [removed: Indiana] [added: Virginia] | | | | | | [removed: 63] [added: 64] | | | | | | North Dakota | | | | | | 14 | | |

| Louisiana | | | | | | [removed: 59] [added: 60] | | | | | | Iowa | | | | | | 9 | | |

| Oklahoma | | | | | | [removed: 56] [added: 57] | | | | | | South Dakota | | | | | | 9 | | |

| South Carolina | | | | | | [removed: 48] [added: 50] | | | | | | Vermont | | | | | | 8 | | |

| Mississippi | | | | | | [removed: 41] [added: 47] | | | | | | Wyoming | | | | | | 8 | | |

| Arizona | | | | | | [removed: 34] [added: 35] | | | | | | Montana | | | | | | 6 | | |

| Missouri | | | | | | [removed: 30] [added: 31] | | | | | | Idaho | | | | | | [removed: 5] [added: 6] | | |

| New Mexico | | | | | | 29 | | | | | | [removed: Rhode Island] [added: Nevada] | | | | | | [removed: 5] [added: 6] | | |

| West Virginia | | | | | | 28 | | | | | | [removed: Nevada] [added: Rhode Island] | | | | | | [removed: 4] [added: 5] | | |

| Kansas | | | | | | [removed: 26] [added: 27] | | | | | | Hawaii | | | | | | 2 | | |

Approximately 56% of our stores are in freestanding buildings and 44% are located in shopping centers.

| North Carolina | | | | | | 103 | | | | | | Washington | | | | | | 25 | | |

| Pennsylvania | | | | | | 98 | | | | | | Illinois | | | | | | 24 | | |

| Tennessee | | | | | | 98 | | | | | | Maine | | | | | | 23 | | |

| Georgia | | | | | | 96 | | | | | | Maryland | | | | | | 23 | | |

| Ohio | | | | | | 96 | | | | | | Massachusetts | | | | | | 23 | | |

| Michigan | | | | | | 95 | | | | | | Colorado | | | | | | 22 | | |

| California | | | | | | 74 | | | | | | Nebraska | | | | | | 18 | | |

| Kentucky | | | | | | 71 | | | | | | Utah | | | | | | 15 | | |

| Alabama | | | | | | 67 | | | | | | Minnesota | | | | | | 14 | | |

| Indiana | | | | | | 63 | | | | | | Oregon | | | | | | 13 | | |

| | | | | | | | | | | | | | | | | | | 2,105 | | |

On December 7, 2020, the Company announced plans to build a new distribution center in Navarre, Ohio.

The new distribution center is expected to be approximately 895,000 square feet.

Construction is planned to begin in fiscal 2021 and is currently anticipated to be complete by the end of fiscal 2022.

| North Carolina | | | | | | 100 | | | | | | Massachusetts | | | | | | 23 | | |

| Pennsylvania | | | | | | 97 | | | | | | Maryland | | | | | | 23 | | |

| Tennessee | | | | | | 97 | | | | | | Colorado | | | | | | 22 | | |

| Ohio | | | | | | 93 | | | | | | Illinois | | | | | | 22 | | |

| Georgia | | | | | | 92 | | | | | | Maine | | | | | | 21 | | |

| Kentucky | | | | | | 71 | | | | | | Nebraska | | | | | | 18 | | |

| California | | | | | | 69 | | | | | | Utah | | | | | | 15 | | |

| Virginia | | | | | | 63 | | | | | | Minnesota | | | | | | 13 | | |

| Alabama | | | | | | 62 | | | | | | Oregon | | | | | | 10 | | |

| Washington | | | | | | 25 | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | 2,024 | | |

As of January [removed: 25, 2020,] [added: 23, 2021,] the number of record holders of our common stock was [removed: 519] [added: 665] (excluding individual participants in nominee security position listings), and the estimated number of beneficial holders of our common stock was approximately [removed: 240,000.][added: 300,000.]

Common [removed: Stock Dividends][added: Stock]

On [removed: February 5, 2020,] [added: January 27, 2021,] the Company’s Board of Directors declared a quarterly cash dividend of [removed: $0.35] [added: $0.52] per share of the Company’s outstanding common stock.

The dividend will be paid on March [removed: 10, 2020,] [added: 9, 2021,] to stockholders of record as of the close of business on February [removed: 24, 2020.][added: 22, 2021.]

The Company’s Board of Directors has authorized common stock repurchases under a share repurchase [removed: program.][added: program which was announced in February 2007.]

Stock purchase activity during fiscal [removed: 2019] [added: 2020] is set forth in the table below:

(a) The total number of shares purchased and average price paid per share include shares withheld from vested stock awards to satisfy employees’ minimum statutory tax withholding requirements of [removed: 33,999] [added: 57,053] during the first quarter, [removed: 1,118] [added: 22,102] during the second quarter, [removed: 6,381] [added: 2,305] during the third quarter, and [removed: 288] [added: 486] during the fourth quarter.

The program may be [removed: limited] [added: limited, temporarily paused,] or terminated at any time, without prior notice.

The following graph compares the cumulative total stockholder return on our common stock from December [removed: 27, 2014] [added: 26, 2015] to December [removed: 28, 2019] [added: 26, 2020] (the Company’s fiscal year-end), with the cumulative total returns of the S&P 500 Index and the S&P Retail Index over the same period.

The comparison assumes that $100 was invested on December [removed: 27, 2014,] [added: 26, 2015,] in our common stock and in each of the foregoing indices and in each case assumes reinvestment of dividends.

[removed: ][added: ]

| | | | | | | [removed: 12/27/2014] [added: 12/26/2015] | | | | | | [removed: 12/26/2015] [added: 12/31/2016] | | | | | | [removed: 12/31/2016] [added: 12/30/2017] | | | | | | [removed: 12/30/2017] [added: 12/29/2018] | | | | | | [removed: 12/29/2018] [added: 12/28/2019] | | | | | | [removed: 12/28/2019] [added: 12/26/2020] | | |

Dividends

We paid cash dividends totaling $174.7 million and $162.7 million in fiscal 2020 and 2019, respectively.

In fiscal 2020, we declared and paid cash dividends to stockholders of $1.50 per common share outstanding as compared to $1.36 per common share outstanding in fiscal 2019.

These payments reflect an increase in the quarterly dividend in the third quarter of fiscal 2020 to $0.40 per share from $0.35 per share and an increase in the quarterly dividend in the second quarter of fiscal 2019 from $0.31 per share.

The authorization amount of the program, which has been increased from time to time, is currently authorized for up to $4.5 billion, exclusive of any fees, commissions or other expenses related to such repurchases.

The share repurchase program does not have an expiration date.

As of December 26, 2020, the Company had remaining authorization under the share repurchase program of $1.14 billion, exclusive of any fees, commissions or other expenses.

| First Quarter (a) | | | | | | 2,909,572 | | | | | | $ | 92.33 | | | | | 2,852,519 | | | | | | $ | 1,223,586,890 | |

| Second Quarter (a) | | | | | | 22,102 | | | | | | 89.74 | | | | | | — | | | | | | 1,223,586,890 | | |

| Third Quarter (a) | | | | | | 2,305 | | | | | | 147.94 | | | | | | — | | | | | | 1,223,586,890 | | |

| 9/27/20 - 10/24/20 | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,223,586,890 | | |

| 10/25/20 - 11/21/20 | | | | | | 205,486 | | | | | | 131.21 | | | | | | 205,000 | | | | | | 1,196,695,377 | | |

| 11/22/20 - 12/26/20 | | | | | | 381,683 | | | | | | 138.45 | | | | | | 381,683 | | | | | | 1,143,856,948 | | |

| | | | | | | 587,169 | | | | | | 135.91 | | | | | | 586,683 | | | | | | 1,143,856,948 | | |

| As of and for the year ended December 26, 2020 | | | | | | 3,521,148 | | | | | | $ | 99.61 | | | | | 3,439,202 | | | | | | $ | 1,143,856,948 | |

| Tractor Supply Company | | | | | | $ | 100.00 | | | | | $ | 89.51 | | | | | $ | 89.80 | | | | | $ | 101.50 | | | | | $ | 114.14 | | | | | $ | 183.91 | |

| S&P 500 | | | | | | $ | 100.00 | | | | | $ | 111.07 | | | | | $ | 135.32 | | | | | $ | 128.28 | | | | | $ | 170.57 | | | | | $ | 198.54 | |

| S&P Retail Index | | | | | | $ | 100.00 | | | | | $ | 105.93 | | | | | $ | 138.13 | | | | | $ | 154.77 | | | | | $ | 199.89 | | | | | $ | 286.46 | |

The table below sets forth the high and low sales prices of our common stock as reported by the Nasdaq Global Select Market for each fiscal quarter of the periods indicated:

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| | | | Price Range | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | 2019 | | | | | | | | | | | | | | | | | | 2018 | | | | | | | | | | | | | | | | | | | | |

| | | | High | | | | | | Low | | | | | | High | | | | | | Low | | | | | | | | | | | | | | | | | | | | |

| First Quarter | | | $98.58 | | | | | | $80.31 | | | | | | $82.68 | | | | | | $58.78 | | | | | | | | | | | | | | | | | | | | |

| Second Quarter | | | $109.67 | | | | | | $96.61 | | | | | | $79.04 | | | | | | $58.27 | | | | | | | | | | | | | | | | | | | | |

| Third Quarter | | | $114.25 | | | | | | $88.41 | | | | | | $92.45 | | | | | | $74.93 | | | | | | | | | | | | | | | | | | | | |

| Fourth Quarter | | | $99.37 | | | | | | $89.07 | | | | | | $97.65 | | | | | | $78.67 | | | | | | | | | | | | | | | | | | | | |

During fiscal 2019 and 2018, the Company’s Board of Directors declared the following cash dividends:

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Date Declared | | | | | | Dividend Amount Per Share of Common Stock | | | | | | Record Date | | | | | | Date Paid | | |

| November 6, 2019 | | | | | | $0.35 | | | | | | November 25, 2019 | | | | | | December 10, 2019 | | |

| August 7, 2019 | | | | | | $0.35 | | | | | | August 26, 2019 | | | | | | September 10, 2019 | | |

| May 8, 2019 | | | | | | $0.35 | | | | | | May 28, 2019 | | | | | | June 11, 2019 | | |

| February 6, 2019 | | | | | | $0.31 | | | | | | February 25, 2019 | | | | | | March 12, 2019 | | |

| | | | | | | | | | | | | | | | | | | | | |

| November 7, 2018 | | | | | | $0.31 | | | | | | November 26, 2018 | | | | | | December 11, 2018 | | |

| August 8, 2018 | | | | | | $0.31 | | | | | | August 27, 2018 | | | | | | September 11, 2018 | | |

| May 9, 2018 | | | | | | $0.31 | | | | | | May 29, 2018 | | | | | | June 12, 2018 | | |

| February 7, 2018 | | | | | | $0.27 | | | | | | February 26, 2018 | | | | | | March 13, 2018 | | |

On May 8, 2019, the Company's Board of Directors authorized a $1.5 billion increase to the existing share repurchase program, bringing the total amount authorized since the inception of the program up to $4.5 billion, exclusive of any fees, commissions or other expenses related to such repurchases.

| First Quarter (a) | | | | | | 1,758,099 | | | | | | $ | 90.07 | | | | | 1,724,100 | | | | | | $ | 364,717,356 | |

| Second Quarter (a) | | | | | | 1,733,618 | | | | | | 103.27 | | | | | | 1,732,500 | | | | | | 1,685,822,720 | | |

| Third Quarter (a) | | | | | | 1,476,094 | | | | | | 105.95 | | | | | | 1,469,713 | | | | | | 1,530,099,430 | | |

| 9/29/19 - 10/26/19 | | | | | | 119,000 | | | | | | 93.12 | | | | | | 119,000 | | | | | | 1,519,019,236 | | |

| 10/27/19 - 11/23/19 | | | | | | 111,288 | | | | | | 96.43 | | | | | | 111,000 | | | | | | 1,508,316,429 | | |

| 11/24/19 - 12/28/19 | | | | | | 228,000 | | | | | | 94.55 | | | | | | 228,000 | | | | | | 1,486,763,173 | | |

| | | | | | | 458,288 | | | | | | 94.64 | | | | | | 458,000 | | | | | | 1,486,763,173 | | |

| As of December 28, 2019 | | | | | | 5,426,099 | | | | | | $ | 98.99 | | | | | 5,384,313 | | | | | | $ | 1,486,763,173 | |

| Tractor Supply Company | | | | | | $ | 100.00 | | | | | $ | 110.89 | | | | | $ | 99.25 | | | | | $ | 99.58 | | | | | $ | 112.55 | | | | | $ | 126.57 | |

| S&P 500 | | | | | | $ | 100.00 | | | | | $ | 100.77 | | | | | $ | 111.92 | | | | | $ | 136.35 | | | | | $ | 129.26 | | | | | $ | 171.88 | |

| S&P Retail Index | | | | | | $ | 100.00 | | | | | $ | 126.12 | | | | | $ | 133.60 | | | | | $ | 174.21 | | | | | $ | 195.19 | | | | | $ | 252.10 | |

FIVE YEAR SELECTED FINANCIAL AND OPERATING HIGHLIGHTS [removed: (a)(b)][added: (a)(b)]

| | | | [removed: 2019] [added: 2020] | | | | | | [removed: 2018] [added: 2019] | | | | | | [removed: 2017] [added: 2018] | | | | | | [removed: 2016] [added: 2017] | | | | | | [removed: 2015] [added: 2016] | | | | | | | | |

| | | | (52 weeks) | | | | | | (52 weeks) | | | | | | (52 weeks) | | | | | | [removed: (53] [added: (52] weeks) | | | | | | [removed: (52] [added: (53] weeks) | | | | | | | | |

| Net sales | | | $ | [removed: 8,351,931] [added: 10,620,352] | | | | | $ | [removed: 7,911,046] [added: 8,351,931] | | | | | $ | [removed: 7,256,382] [added: 7,911,046] | | | | | $ | [removed: 6,779,579] [added: 7,256,382] | | | | | $ | [removed: 6,226,507] [added: 6,779,579] | | | | | | | |

| Gross profit | | | [removed: 2,871,770] [added: 3,761,549] | | | | | | [removed: 2,702,528] [added: 2,871,770] | | | | | | [removed: 2,491,965] [added: 2,702,528] | | | | | | [removed: 2,325,202] [added: 2,491,965] | | | | | | [removed: 2,143,174] [added: 2,325,202] | | | | | | | | |

| Selling, general and administrative expenses | | | [removed: 1,932,572] [added: 2,478,524] | | | | | | [removed: 1,823,440] [added: 1,932,572] | | | | | | [removed: 1,639,749] [added: 1,823,440] | | | | | | [removed: 1,488,164] [added: 1,639,749] | | | | | | [removed: 1,369,097] [added: 1,488,164] | | | | | | | | |

| Depreciation and amortization | | | [removed: 195,978] [added: 217,124] | | | | | | [removed: 177,351] [added: 195,978] | | | | | | [removed: 165,834] [added: 177,351] | | | | | | [removed: 142,958] [added: 165,834] | | | | | | [removed: 123,569] [added: 142,958] | | | | | | | | |

| Operating income | | | [removed: 743,220] [added: 996,928] | | | | | | [removed: 701,737] [added: 743,220] | | | | | | [removed: 686,382] [added: 701,737] | | | | | | [removed: 694,080] [added: 686,382] | | | | | | [removed: 650,508] [added: 694,080] | | | | | | | | |

| Interest expense, net | | | [removed: 19,843] [added: 28,781] | | | | | | [removed: 18,352] [added: 19,843] | | | | | | [removed: 13,859] [added: 18,352] | | | | | | [removed: 5,810] [added: 13,859] | | | | | | [removed: 2,891] [added: 5,810] | | | | | | | | |

| Income before income taxes | | | [removed: 723,377] [added: 968,147] | | | | | | [removed: 683,385] [added: 723,377] | | | | | | [removed: 672,523] [added: 683,385] | | | | | | [removed: 688,270] [added: 672,523] | | | | | | [removed: 647,617] [added: 688,270] | | | | | | | | |

| Income tax expense | | | [removed: 161,023] [added: 219,189] | | | | | | [removed: 151,028] [added: 161,023] | | | | | | [removed: 249,924] [added: 151,028] | | | | | | [removed: 251,150] [added: 249,924] | | | | | | [removed: 237,222] [added: 251,150] | | | | | | | | |

| Net income | | | $ | [removed: 562,354] [added: 748,958] | | | | | $ | [removed: 532,357] [added: 562,354] | | | | | $ | [removed: 422,599] [added: 532,357] | | | | | $ | [removed: 437,120] [added: 422,599] | | | | | $ | [removed: 410,395] [added: 437,120] | | | | | | | |

| Net income per share – basic (c) | | | $ | [removed: 4.70] [added: 6.44] | | | | | $ | [removed: 4.34] [added: 4.70] | | | | | $ | [removed: 3.31] [added: 4.34] | | | | | $ | [removed: 3.29] [added: 3.31] | | | | | $ | [removed: 3.03] [added: 3.29] | | | | | | | |

| Net income per share – diluted (c) | | | $ | [removed: 4.66] [added: 6.38] | | | | | $ | [removed: 4.31] [added: 4.66] | | | | | $ | [removed: 3.30] [added: 4.31] | | | | | $ | [removed: 3.27] [added: 3.30] | | | | | $ | [removed: 3.00] [added: 3.27] | | | | | | | |

| Weighted average shares – diluted (c) | | | [removed: 120,743] [added: 117,436] | | | | | | [removed: 123,471] [added: 120,743] | | | | | | [removed: 128,204] [added: 123,471] | | | | | | [removed: 133,813] [added: 128,204] | | | | | | [removed: 136,845] [added: 133,813] | | | | | | | | |

| Dividends declared per common share outstanding | | | $ | [removed: 1.36] [added: 1.50] | | | | | $ | [removed: 1.20] [added: 1.36] | | | | | $ | [removed: 1.05] [added: 1.20] | | | | | $ | [removed: 0.92] [added: 1.05] | | | | | $ | [removed: 0.76] [added: 0.92] | | | | | | | |

| Gross margin | | | [removed: 34.4] [added: 35.4] | | % | | | | [removed: 34.2] [added: 34.4] | | % | | | | [removed: 34.3] [added: 34.2] | | % | | | | 34.3 | | % | | | | [removed: 34.4] [added: 34.3] | | % | | | | | | |

| Selling, general and administrative expenses | | | [removed: 23.1] [added: 23.3] | | % | | | | [removed: 23.0] [added: 23.1] | | % | | | | [removed: 22.6] [added: 23.0] | | % | | | | [removed: 22.0] [added: 22.6] | | % | | | | 22.0 | | % | | | | | | |

| Operating income | | | [removed: 8.9] [added: 9.4] | | % | | | | 8.9 | | % | | | | [removed: 9.4] [added: 8.9] | | % | | | | [removed: 10.2] [added: 9.4] | | % | | | | [removed: 10.4] [added: 10.2] | | % | | | | | | |

| Net income | | | [removed: 6.7] [added: 7.1] | | % | | | | 6.7 | | % | | | | [removed: 5.8] [added: 6.7] | | % | | | | [removed: 6.4] [added: 5.8] | | % | | | | [removed: 6.6] [added: 6.4] | | % | | | | | | |

| Stores open at end of year | | | [removed: 2,024] [added: 2,105] | | | | | | [removed: 1,940] [added: 2,024] | | | | | | [removed: 1,853] [added: 1,940] | | | | | | [removed: 1,738] [added: 1,853] | | | | | | [removed: 1,488] [added: 1,738] | | | | | | | | |

| Comparable store sales increase (d) | | | [removed: 2.7] [added: 23.1] | | % | | | | [removed: 5.1] [added: 2.7] | | % | | | | [removed: 2.7] [added: 5.1] | | % | | | | [removed: 1.6] [added: 2.7] | | % | | | | [removed: 3.1] [added: 1.6] | | % | | | | | | |

| New store sales (as a % of net sales) (e) | | | [removed: 2.8] [added: 3.3] | | % | | | | [removed: 3.8] [added: 2.8] | | % | | | | [removed: 5.6] [added: 3.8] | | % | | | | 5.6 | | % | | | | 5.6 | | % | | | | | | |

| Average transaction value | | | $ | [removed: 46.89] [added: 51.90] | | | | | $ | [removed: 45.85] [added: 46.89] | | | | | $ | [removed: 44.61] [added: 45.85] | | | | | $ | [removed: 44.42] [added: 44.61] | | | | | $ | [removed: 44.87] [added: 44.42] | | | | | | | |

| Comparable store average transaction value increase (decrease) (c) | | | [removed: 2.4] [added: 12.2] | | % | | | | [removed: 2.8] [added: 2.4] | | % | | | | [removed: 0.5] [added: 2.8] | | % | | | | [removed: (0.9)] [added: 0.5] | | % | | | | [removed: (0.2)] [added: (0.9)] | | % | | | | | | |

| Comparable store average transaction count increase (d) | | | [removed: 0.3] [added: 10.9] | | % | | | | [removed: 2.2] [added: 0.3] | | % | | | | 2.2 | | % | | | | [removed: 2.6] [added: 2.2] | | % | | | | [removed: 3.3] [added: 2.6] | | % | | | | | | |

| Total selling square footage (000’s) | | | [removed: 30,854] [added: 32,139] | | | | | | [removed: 29,571] [added: 30,854] | | | | | | [removed: 28,180] [added: 29,571] | | | | | | [removed: 26,511] [added: 28,180] | | | | | | [removed: 23,938] [added: 26,511] | | | | | | | | |

| Total team members | | | [removed: 33,500] [added: 42,500] | | | | | | [removed: 30,500] [added: 33,500] | | | | | | [removed: 29,300] [added: 30,500] | | | | | | [removed: 26,000] [added: 29,300] | | | | | | [removed: 23,000] [added: 26,000] | | | | | | | | |

| Capital expenditures (000’s) | | | $ | [removed: 217,450] [added: 294,002] | | | | | $ | [removed: 278,530] [added: 217,450] | | | | | $ | [removed: 250,401] [added: 278,530] | | | | | $ | [removed: 226,017] [added: 250,401] | | | | | $ | [removed: 236,496] [added: 226,017] | | | | | | | |

| Average inventory per store (f) | | | $ | [removed: 751.3] [added: 793.7] | | | | | $ | [removed: 766.8] [added: 751.3] | | | | | $ | [removed: 735.4] [added: 766.8] | | | | | $ | [removed: 741.7] [added: 735.4] | | | | | $ | [removed: 820.1] [added: 741.7] | | | | | | | |

| Inventory turns | | | [removed: 3.23] [added: 3.92] | | | | | | [removed: 3.27] [added: 3.23] | | | | | | [removed: 3.24] [added: 3.27] | | | | | | [removed: 3.19] [added: 3.24] | | | | | | [removed: 3.23] [added: 3.19] | | | | | | | | |

| Working capital | | | $ | [removed: 540,287] [added: 1,514,887] | | | | | $ | [removed: 856,292] [added: 540,287] | | | | | $ | [removed: 806,154] [added: 856,292] | | | | | $ | [removed: 740,615] [added: 806,154] | | | | | $ | [removed: 768,177] [added: 740,615] | | | | | | | |

| Total assets (g) | | | $ | [removed: 5,289,268] [added: 7,049,116] | | | | | $ | [removed: 3,085,262] [added: 5,289,268] | | | | | $ | [removed: 2,868,769] [added: 3,085,262] | | | | | $ | [removed: 2,674,942] [added: 2,868,769] | | | | | $ | [removed: 2,370,826] [added: 2,674,942] | | | | | | | |

| Long-term debt, less current portion (h) | | | $ | [removed: 396,869] [added: 1,017,420] | | | | | $ | [removed: 410,370] [added: 396,869] | | | | | $ | [removed: 433,686] [added: 410,370] | | | | | $ | [removed: 289,769] [added: 433,686] | | | | | $ | [removed: 166,992] [added: 289,769] | | | | | | | |

| Operating lease liabilities, less current portion (g) | | | $ | [removed: 2,001,162] [added: 2,220,904] | | | | | $ | [removed: —] [added: 2,001,162] | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | | | |

| Stockholders’ equity | | | $ | [removed: 1,567,123] [added: 1,923,840] | | | | | $ | [removed: 1,561,820] [added: 1,567,123] | | | | | $ | [removed: 1,418,673] [added: 1,561,820] | | | | | $ | [removed: 1,453,218] [added: 1,418,673] | | | | | $ | [removed: 1,393,294] [added: 1,453,218] | | | | | | | |

Stores relocated during the years being compared are not removed from our comparable store [removed: metrics.][added: metrics as they are immaterial.]

For additional information related to the impact of adopting this new accounting guidance, see Note [removed: 1, Note 6,] [added: 1] and Note [removed: 14] [added: 6] to the Consolidated Financial Statements.

| Impairment of goodwill and other intangible assets | | | 68,973 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | | |

| [Management's Report on Internal Control over Financial [removed: Reporting](#i_0_76)] [added: Reporting](#i137f04c25e1e4da3b6d1f469d06f3319_76)] | | | [removed: [40](#i_0_76)] [added: [47](#i137f04c25e1e4da3b6d1f469d06f3319_76)] | | |

| [Reports of Independent Registered Public Accounting [removed: Firm](#i_0_79)] [added: Firm](#i137f04c25e1e4da3b6d1f469d06f3319_79)] | | | [removed: [41](#i_0_79)] [added: [48](#i137f04c25e1e4da3b6d1f469d06f3319_79)] | | |

| [Consolidated Statements of Income for the fiscal years ended December [added: 26, 2020, December] 28, 2019, [removed: December 29, 2018,] and December [removed: 30, 2017](#i_0_85)] [added: 29, 2018](#i137f04c25e1e4da3b6d1f469d06f3319_85)] | | | [removed: [45](#i_0_85)] [added: [51](#i137f04c25e1e4da3b6d1f469d06f3319_85)] | | |

| [Consolidated Statements of Comprehensive Income for the fiscal years ended December [added: 26, 2020, December] 28, 2019, [removed: December 29, 2018,] and December [removed: 30, 2017](#i_0_88)] [added: 29, 2018](#i137f04c25e1e4da3b6d1f469d06f3319_88)] | | | [removed: [46](#i_0_88)] [added: [52](#i137f04c25e1e4da3b6d1f469d06f3319_88)] | | |

| [Consolidated Balance Sheets as of December [removed: 2](#i_0_91)[8](#i_0_91)[, 201](#i_0_91)[9](#i_0_91) [and December](#i_0_91) [29](#i_0_91)[, 20](#i_0_91)[18](#i_0_91)] [added: 26, 2020 and December 28, 2019](#i137f04c25e1e4da3b6d1f469d06f3319_91)] | | | [removed: [47](#i_0_91)] [added: [53](#i137f04c25e1e4da3b6d1f469d06f3319_91)] | | |

| [Consolidated Statements of Stockholders’ Equity for the fiscal years ended December [added: 26, 2020, December] 28, 2019, [removed: December 29, 2018,] and December [removed: 30, 2017](#i_0_97)] [added: 29, 2018](#i137f04c25e1e4da3b6d1f469d06f3319_97)] | | | [removed: [48](#i_0_97)] [added: [54](#i137f04c25e1e4da3b6d1f469d06f3319_97)] | | |

| [Consolidated Statements of Cash Flows for the fiscal years ended December [added: 26, 2020, December] 28, 2019, [removed: December 29, 2018,] and December [removed: 30, 2017](#i_0_100)] [added: 29, 2018](#i137f04c25e1e4da3b6d1f469d06f3319_100)] | | | [removed: [49](#i_0_100)] [added: [55](#i137f04c25e1e4da3b6d1f469d06f3319_100)] | | |

| [Notes to Consolidated Financial [removed: Statements](#i_0_103)] [added: Statements](#i137f04c25e1e4da3b6d1f469d06f3319_103)] | | | [removed: [50](#i_0_103)] [added: [56](#i137f04c25e1e4da3b6d1f469d06f3319_103)] | | |

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December [removed: 28, 2019.][added: 26, 2020.]

Based on this assessment, management believes that, as of December [removed: 28, 2019,] [added: 26, 2020,] the Company’s internal control over financial reporting is effective based on those criteria.

| /s/ Harry A. [removed: Lawton] [added: Lawton,] III | | | | | | | | | | | | /s/ Kurt D. Barton | | | [removed: | | | | | |]

| Harry A. [removed: Lawton] [added: Lawton,] III President and Chief Executive Officer | | | | | | | | | | | | Kurt D. Barton Executive Vice President - Chief Financial Officer and Treasurer | | | [removed: | | | | | |]

| [removed: February 20, 2020] [added: February 5, 2020] | | | | | | [added: $0.35] | | | | | | [removed: February 20, 2020] [added: February 24, 2020] | | | | | | [added: March 10, 2020] | | |

Opinion on [removed: the] Internal Control Over Financial Reporting

We have audited Tractor Supply Company’s internal control over financial reporting as of December [removed: 28, 2019,] [added: 26, 2020,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Tractor Supply Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of December [removed: 28, 2019,] [added: 26, 2020,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Consolidated Balance Sheets of Tractor Supply Company as of December [removed: 28, 2019] [added: 26, 2020] and December [removed: 29, 2018,] [added: 28, 2019,] and the related Consolidated Statements of Income, Comprehensive Income, Stockholders’ Equity, and Cash Flows for each of the three fiscal years in the period ended December [removed: 28, 2019,] [added: 26, 2020,] and the related notes and our report dated February [removed: 20, 2020,] [added: 18, 2021,] expressed an unqualified opinion thereon.

The Company’s management is responsible for maintaining effective internal control over financial [removed: reporting,] [added: reporting] and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

We have audited the accompanying Consolidated Balance Sheets of Tractor Supply Company (the Company) as of December [removed: 28, 2019] [added: 26, 2020] and December [removed: 29, 2018,] [added: 28, 2019,] the related Consolidated Statements of Income, Comprehensive Income, Stockholders’ [removed: Equity,] [added: Equity] and Cash Flows for each of the three fiscal years in the period ended December [removed: 28, 2019,] [added: 26, 2020,] and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December [removed: 28, 2019] [added: 26, 2020] and December [removed: 29, 2018,] [added: 28, 2019,] and the results of its operations and its cash flows for each of the three fiscal years in the period ended December [removed: 28, 2019,] [added: 26, 2020,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December [removed: 28, 2019,] [added: 26, 2020,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 20, 2020,] [added: 18, 2021,] expressed an unqualified opinion thereon.

| *Description of the Matter* | | | At December [removed: 28, 2019,] [added: 26, 2020,] the Company’s net reserves for workers’ compensation and general liability self-insurance risks were [removed: $64.6] [added: $75.5] million. As discussed in Note 1 of the consolidated financial statements, the Company retains a significant portion of risk for its workers’ compensation and general liability exposures. Accordingly, provisions are recorded based upon periodic estimates of such losses, as determined by management. The future claim costs for the workers’ compensation and general liability exposures are estimated using actuarial methods that consider assumptions for a number of factors including, but not limited to, historical claims experience, loss development factors, and severity factors. | | |

| *Description of the Matter* | | | At December [removed: 28, 2019,] [added: 26, 2020,] the Company had [removed: $93.2] [added: $22.2] million in goodwill, [removed: which was assigned at the time] [added: subsequent to an impairment charge] of [added: $60.8 million, related to] the [removed: respective acquisitions.] [added: Petsense reporting unit.] As discussed in Note 1 and Note 3 of the consolidated financial statements, goodwill is qualitatively or quantitatively tested for impairment at the reporting unit level at least annually, during the fourth quarter, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The quantitative evaluation involves the comparison of the carrying value of the reporting unit to its fair value, as determined by management. | | |

| | | | To test the estimated fair value of [removed: a] [added: the Petsense] reporting unit, we performed audit procedures that included, among others, involvement of our valuation specialists to assess fair value methodologies, including the significant assumptions discussed above. Specifically, we compared significant assumptions used by management to current industry and economic trends and changes to the Company’s business model. As part of this assessment, we also compared the discount rate to rates for hypothetical market participants based on the capital structure of the Company and its related peer group. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of a reporting unit that would result from changes in the assumptions, as well as corroborated the estimated fair value by comparing it with peer company trading and transaction multiples. In addition, we tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the Company. | | |

| | | | Fiscal Year | | | | | | | | | | | | | | | [removed: | | | | | | | | | | | |]

| | | | [removed: 2019 | | | | | | 2018 | | | | | | 2017] [added: 2020] | | | | | | [added: 2019] | | | | | | [added: 2018] | | |

| | | | (52 weeks) | | | | | | (52 weeks) | | | | | | (52 weeks) | | | [removed: | | | | | | | | | | | |]

| Net sales | | | $ | [removed: 8,351,931] [added: 10,620,352] | | | | | $ | [removed: 7,911,046] [added: 8,351,931] | | | | | $ | [removed: 7,256,382 | | | | | | | | | | | |] [added: 7,911,046] | |

| Cost of merchandise sold | | | [removed: 5,480,161 | | | | | | 5,208,518 | | | | | | 4,764,417] [added: 6,858,803] | | | | | | [added: 5,480,161] | | | | | | [added: 5,208,518] | | |

| Gross profit | | | [removed: 2,871,770 | | | | | | 2,702,528 | | | | | | 2,491,965] [added: 3,761,549] | | | | | | [added: 2,871,770] | | | | | | [added: 2,702,528] | | |

| Selling, general and administrative expenses | | | [removed: 1,932,572 | | | | | | 1,823,440 | | | | | | 1,639,749] [added: 2,478,524] | | | | | | [added: 1,932,572] | | | | | | [added: 1,823,440] | | |

| Depreciation and amortization | | | [removed: 195,978 | | | | | | 177,351 | | | | | | 165,834] [added: 217,124] | | | | | | [added: 195,978] | | | | | | [added: 177,351] | | |

| Operating income | | | [removed: 743,220 | | | | | | 701,737 | | | | | | 686,382] [added: 996,928] | | | | | | [added: 743,220] | | | | | | [added: 701,737] | | |

| Interest expense, net | | | [removed: 19,843 | | | | | | 18,352 | | | | | | 13,859] [added: 28,781] | | | | | | [added: 19,843] | | | | | | [added: 18,352] | | |

| Income before income taxes | | | [removed: 723,377 | | | | | | 683,385 | | | | | | 672,523] [added: 968,147] | | | | | | [added: 723,377] | | | | | | [added: 683,385] | | |

| Income tax expense | | | [removed: 161,023 | | | | | | 151,028 | | | | | | 249,924] [added: 219,189] | | | | | | [added: 161,023] | | | | | | [added: 151,028] | | |

| Net income | | | $ | [removed: 562,354] [added: 748,958] | | | | | $ | [removed: 532,357] [added: 562,354] | | | | | $ | [removed: 422,599 | | | | | | | | | | | |] [added: 532,357] | |

| Net income per share – basic | | | $ | [removed: 4.70] [added: 6.44] | | | | | $ | [removed: 4.34] [added: 4.70] | | | | | $ | [removed: 3.31 | | | | | | | | | | | |] [added: 4.34] | |