Tractor Supply 10-Q 2021-09-25

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

or

Commission file number 000-23314

TRACTOR SUPPLY COMPANY

(Exact Name of Registrant as Specified in Its Charter)

5401 Virginia Way, Brentwood, Tennessee 37027

(Address of Principal Executive Offices and Zip Code)

(615) 440-4000

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

TRACTOR SUPPLY COMPANY

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PART I. FINANCIAL INFORMATION

TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(Unaudited)

Preferred Stock (shares in thousands): $1.00 par value; 40 shares authorized; no shares were issued or outstanding during any period presented.

Common Stock (shares in thousands): $0.008 par value; 400,000 shares authorized at all periods presented. 176,290, 175,128, and 174,793 shares issued; 113,946, 116,246, and 116,497 shares outstanding at September 25, 2021, December 26, 2020, and September 26, 2020, respectively.

Treasury Stock (at cost, shares in thousands): 62,344, 58,882, and 58,296 shares at September 25, 2021, December 26, 2020, and September 26, 2020, respectively.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(Unaudited)

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General

The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 26, 2020 (the "2020 Form 10-K"). This Quarterly Report on Form 10-Q also contains forward-looking statements and information. The forward-looking statements included herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”). All statements, other than statements of historical facts, which address activities, events, or developments that we expect or anticipate will or may occur in the future, including sales and earnings growth, estimated results of operations in future periods, the declaration and payment of dividends, the timing and amount of share repurchases, future capital expenditures (including their amount and nature), business strategy, expansion and growth of our business operations, and other such matters are forward-looking statements. These forward-looking statements may be affected by certain risks and uncertainties, any one, or a combination of which, could materially affect the results of our operations. To take advantage of the safe harbor provided by the Act, we are identifying certain factors that could cause actual results to differ materially from those expressed in any forward-looking statements, whether oral or written.

As with any business, many aspects of our operations are subject to influences outside our control. These factors include, without limitation, national, regional, and local economic conditions affecting consumer spending, including the effects of the COVID-19 pandemic, the efficacy and distribution of COVID-19 vaccines, the timing and acceptance of new products, the timing and mix of goods sold, purchase price volatility (including inflationary and deflationary pressures), transportation costs, constraints in the supply chain affecting timing and availability of merchandise inventory, the ability to increase sales at existing stores or on our e-commerce platforms, the ability to manage growth and identify suitable locations, the ability to complete acquisitions on expected terms, failure of an acquisition to produce anticipated results, the ability to successfully manage expenses (including increased expenses as a result of operating as an essential retailer during the COVID-19 pandemic) and to execute our key gross margin enhancing initiatives, the availability of favorable credit sources, capital market conditions in general, the ability to open new stores in the time, manner and number currently contemplated, particularly in light of the COVID-19 pandemic, the ability to open distribution centers in the anticipated timeframe and within budget, the impact of new stores on our business, competition, including that from online competitors, weather conditions, the seasonal nature of our business, effective merchandising initiatives and marketing emphasis, the ability to retain vendors, reliance on foreign suppliers, the ability to attract, train, and retain qualified employees, our ability to meet our sustainability, stewardship, carbon emission, and DE&I related ESG projections, goals, and commitments, product liability and other claims, changes in federal, state, or local regulations, the effects that “shelter in place” and similar federal, state, and local regulations and protocols could have on our business, including our supply chain and employees, the effectiveness of the Company’s responses to COVID-19, including our efforts to make a vaccine available to our employees, and customer response with respect to those actions, the refusal by our employees and the public generally to be vaccinated against COVID-19, the imposition of tariffs on imported products or the disallowance of tax deductions on imported products, 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 our information systems, failure to develop and implement new technologies, the failure of customer-facing technology systems, business disruption including from the implementation of supply chain technologies, effective tax rate changes and results of examination by taxing authorities, the ability to maintain an effective system of internal control over financial reporting, and changes in accounting standards, assumptions, and estimates. We discuss in greater detail risk factors relating to our business in Part I, Item 1A of our 2020 Form 10-K and in Part II, Item 1A of this Quarterly Report on Form 10-Q. Forward-looking statements are based on our knowledge of our business and the environment in which we operate, but because of the factors listed above or other factors, actual results could differ materially from those reflected by any forward-looking statements. Consequently, all of the forward-looking statements made are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business and operations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Information Regarding COVID-19 Coronavirus Pandemic

The Company 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, encouraging vaccination efforts, providing personal protective equipment to our team members, following local and federal guidance regarding the use of masks in our

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facilities, maintaining enhanced services for cleaning and sanitation, continuing to provide additional functionality to support contactless shopping experiences, promoting social distancing and cleaning actions in our stores, and continuing to offer remote work plans at our store support center.

As further described in the results of operations, our net sales have continued to increase due to customer demand across all major product categories, channels, and geographic regions. However, the net incremental costs of doing business during this pandemic have increased, as a result of the aforementioned actions we have taken, and continue to take, 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 our 2020 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.

Seasonality and Weather

Our business is seasonal. Historically, our sales and profits are the highest in the second and fourth fiscal quarters due to the sale of seasonal products. We usually experience our highest inventory and accounts payable balances during our first fiscal quarter for purchases of seasonal products to support the higher sales volume of the spring selling season, and again during our third fiscal quarter to support the higher sales volume of the cold weather selling season. We believe that our business can be more accurately assessed by focusing on the performance of the halves, not the quarters, due to the fact that different weather patterns from year-to-year can shift the timing of sales and profits between quarters, particularly between the first and second fiscal quarters and the third and fourth fiscal quarters.

Historically, weather conditions, including unseasonably warm weather in the fall and winter months and unseasonably cool weather in the spring and summer months, have unfavorably affected the timing and volume of our sales and results of operations. In addition, extreme weather conditions, including snow and ice storms, flood and wind damage, hurricanes, tornadoes, extreme rain, and droughts have impacted operating results both negatively and positively, depending on the severity and length of these conditions. Our strategy is to manage product flow and adjust merchandise assortments and depth of inventory to capitalize on seasonal demand trends.

Furthermore, we are not able to predict at this time the impact that the COVID-19 pandemic may have on the seasonality of our business in the future.

Performance Metrics

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. Our comparable store metrics are calculated on an annual basis using sales generated from all stores open at least one year and all online sales and exclude certain adjustments to net sales. Stores closed during either of the years being compared are removed from our comparable store metrics calculations. Stores relocated during either of the years being compared are not removed from our comparable store metrics calculations. If the effect of relocated stores on our comparable store metrics calculations became material, we would remove relocated stores from the calculations.

Transaction Count and Transaction Value

Transaction count and transaction value metrics are used by the Company to measure sales performance. Transaction count represents the number of customer transactions during a given period. Transaction value represents the average amount paid per transaction and is calculated as net sales divided by the total number of customer transactions during a given period.

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Results of Operations

Fiscal Three Months (Third Quarter) Ended September 25, 2021 and September 26, 2020

Net sales for the third quarter of fiscal 2021 increased 15.8% to $3.02 billion from $2.61 billion for the third quarter of fiscal 2020. Comparable store sales for the third quarter of fiscal 2021 were $2.95 billion, a 13.1% increase as compared to the third quarter of fiscal 2020. In the third quarter of fiscal 2020, net sales increased 31.4% and comparable store sales increased 26.8%.

The comparable store sales results for the third quarter of fiscal 2021 included an increase in comparable average transaction value of 9.5% and an increase in comparable average transaction count of 3.6%, each as compared to the third quarter of fiscal 2020. Our sales performance continued to benefit from growth in new customer acquisition and the re-engagement of lapsed customers, as well as a continuation of shifting consumer behavior trends from the COVID-19 pandemic as customers focused on the care of their homes, land, and animals. These factors all led to an increase in comparable store sales across all major product categories, driven by robust growth for everyday merchandise, including consumable, usable, and edible ("C.U.E.") products and solid demand for summer seasonal categories. All geographic regions of the Company had positive comparable store sales growth. In addition, the Company’s e-commerce sales also experienced double-digit percentage growth compared to the third quarter of fiscal 2020.

In addition to comparable store sales growth for the third quarter of fiscal 2021, sales from stores open less than one year were $70.3 million for the third quarter of fiscal 2021, which represented 2.7 percentage points of the 15.8% increase over third quarter fiscal 2020 net sales. For the third quarter of fiscal 2020, sales from stores open less than one year were $93.6 million, which represented 4.7 percentage points of the 31.4% increase over third quarter fiscal 2019 net sales.

The following table summarizes store growth for the fiscal three months ended September 25, 2021 and September 26, 2020:

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The following table indicates the percentage of net sales represented by each of our major product categories for the fiscal three months ended September 25, 2021 and September 26, 2020:

Gross profit increased 14.5% to $1.09 billion for the third quarter of fiscal 2021 from $948.0 million for the third quarter of fiscal 2020. As a percent of net sales, gross margin in the third quarter of fiscal 2021 decreased 41 basis points to 36.0% from 36.4% in the third quarter of fiscal 2020. The decrease in gross margin as a percent of net sales was primarily driven by higher product cost inflation, higher transportation costs, and product mix shift towards C.U.E. products. Partially offsetting the decrease was the Company’s price management program, which effectively offset a significant portion of the inflation pressures.

Selling, general and administrative (“SG&A”) expenses, including depreciation and amortization, increased 13.3% to $788.1 million for the third quarter of fiscal 2021 from $695.8 million for the third quarter of fiscal 2020. As a percent of net sales, SG&A expenses were 26.1%, a 58 basis point improvement over the prior year's third quarter. The improvement in SG&A as a percent of net sales was primarily attributable to leverage in occupancy and other fixed costs from the increase in our comparable store sales, along with lower COVID-19 pandemic response costs and decreased incentive compensation. COVID-19 pandemic response costs in the third quarter of fiscal 2021 of approximately $11.5 million consisted of sick pay, benefits, and other health and safety related expenses, as compared to approximately $20.3 million in the third quarter of fiscal 2020. The leverage from these SG&A expenses was partially offset by higher wage rates, incremental store labor hours, and investments in the Company’s strategic initiatives.

Operating income for the third quarter of fiscal 2021 increased 17.9% to $297.2 million compared to $252.2 million in the third quarter of fiscal 2020.

The effective income tax rate was 22.9% in the third quarter of fiscal 2021 compared to 22.2% in the third quarter of fiscal 2020. The primary driver for the increase in the Company's effective income tax rate was attributable to a reduction in the benefit associated with share-based compensation.

As a result of the foregoing factors, net income for the third quarter of fiscal 2021 increased 17.7% to $224.4 million, or $1.95 per diluted share, as compared to net income of $190.6 million, or $1.62 per diluted share, for the third quarter of fiscal 2020.

During the third quarter of fiscal 2021, we repurchased approximately 0.7 million shares of the Company’s common stock at a total cost of $141.3 million as part of our share repurchase program and paid quarterly cash dividends totaling $59.4 million, returning $200.6 million to stockholders.

Fiscal Nine Months Ended September 25, 2021 and September 26, 2020

Net sales increased 21.6% to $9.41 billion for the first nine months of fiscal 2021 from $7.74 billion for the first nine months of fiscal 2020. Comparable store sales for the first nine months of fiscal 2021 were $9.18 billion, a 18.5% increase as compared to the first nine months of fiscal 2020. Net sales increased 25.7% and comparable store sales increased 21.5% in the first nine months of fiscal 2020.

The comparable store sales results for the first nine months of fiscal 2021 included an increase in comparable average transaction value of 9.7% and an increase in comparable average transaction count of 8.8%, each as compared to the first nine months of fiscal 2020. Our sales performance continued to benefit from growth in new customer acquisition and the re-engagement of lapsed customers, as well as a continuation of shifting consumer behavior trends from the COVID-19 pandemic

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as customers focused on the care of their homes, land, and animals. Additionally, consumer demand benefited from favorable weather conditions in the first quarter as well as government stimulus throughout the first nine months of fiscal 2021. These factors all led to a significant increase in comparable store sales across all major product categories, driven by strong demand for everyday merchandise, including C.U.E. products, as well as seasonal categories. All geographic regions of the Company had positive comparable store sales growth. In addition, the Company’s e-commerce sales also experienced growth compared to the prior year's first nine months.

In addition to comparable store sales growth for the first nine months of fiscal 2021, sales from stores open less than one year were $253.7 million for the first nine months of fiscal 2021, which represented 3.3 percentage points of the 21.6% increase over the first nine months of fiscal 2020 net sales. For the first nine months of fiscal 2020, sales from stores open less than one year were $264.0 million, which represented 4.3 percentage points of the 25.7% increase over the first nine months of fiscal 2019 net sales.

The following table summarizes store growth for the fiscal nine months ended September 25, 2021 and September 26, 2020:

The following table indicates the percentage of net sales represented by each of our major product categories for the fiscal nine months ended September 25, 2021 and September 26, 2020:

Gross profit increased 21.4% to $3.36 billion for the first nine months of fiscal 2021 from $2.77 billion for the first nine months of fiscal 2020. As a percent of net sales, gross margin in the first nine months of fiscal 2021 decreased seven basis points to 35.7% as compared to the first nine months of fiscal 2020. The decrease in gross margin as a percent of net sales was primarily driven by higher transportation costs, product cost inflation, and the initial impact from the relaunch of the Company's Neighbor's Club loyalty program. Partially offsetting these factors were lower depth and frequency of sales promotions and less clearance activity, particularly in the first quarter of fiscal 2021, as well as benefits from the Company's price management program.

SG&A expenses, including depreciation and amortization, increased 19.9% to $2.34 billion for the first nine months of fiscal 2021 from $1.95 billion for the first nine months of fiscal 2020. As a percent of net sales, SG&A expenses improved 34 basis

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points to 24.9% for the first nine months of fiscal 2021 from 25.2% for the first nine months of fiscal 2020. The improvement in SG&A as a percent of net sales was primarily attributable to leverage in incentive costs, occupancy, and other fixed costs from the increase in comparable store sales, as well as decreasing COVID-19 pandemic response costs as compared to the prior year period. COVID-19 pandemic response costs for the first nine months of fiscal 2021 of approximately $52.6 million consisted of sick pay, benefits, and other health and safety related expenses, as compared to approximately $82.4 million in the first nine months of fiscal 2020. The improvement was partially offset by higher wage rates, additional incremental store labor hours, and investments in the Company's strategic initiatives.

Operating income for the first nine months of fiscal 2021 increased 24.8% to $1.01 billion compared to $812.5 million in the first nine months of fiscal 2020.

The effective income tax rate was 21.9% in the first nine months of fiscal 2021 compared to 22.6% in the first nine months of fiscal 2020. The improvement in the effective income tax rate in the first nine months of fiscal 2021 compared to the first nine months of fiscal 2020 was primarily related to a discrete incremental tax benefit associated with share-based compensation. The Company expects the full fiscal year 2021 effective tax rate to be in a range between 22.1% and 22.3%.

As a result of the foregoing factors, net income for the first nine months of fiscal 2021 increased 26.5% to $775.8 million, or $6.68 per diluted share, as compared to net income of $613.1 million, or $5.23 per diluted share, for the first nine months of fiscal 2020.

During the first nine months of fiscal 2021, we repurchased approximately 3.5 million shares of the Company’s common stock at a total cost of $598.0 million as part of our share repurchase program and paid quarterly cash dividends totaling $179.8 million, returning $777.8 million to stockholders.

Liquidity and Capital Resources

In addition to normal operating expenses, and expenses associated with our COVID-19 response, our primary ongoing cash requirements are for new store expansion, existing store remodeling and improvements, store relocations, distribution facility capacity and improvements, information technology, inventory purchases, repayment of existing borrowings under our debt facilities, share repurchases, cash dividends, and selective acquisitions as opportunities arise.

Our primary ongoing sources of liquidity are existing cash balances, cash provided from operations, remaining funds available under our debt facilities, operating and finance leases, and normal trade credit. Our inventory and accounts payable levels typically build in the first and third fiscal quarters to support the higher sales volume of the spring and cold weather selling seasons, respectively.

The Company believes that its existing cash balances, expected cash flow from future operations, funds available under its debt facilities, operating and finance leases, and normal trade credit will be sufficient to fund its operations, including expenses associated with COVID-19, and its capital expenditure needs, including new store openings, existing store remodeling and improvements, store relocations, distribution facility capacity and improvements, and information technology improvements, through the end of fiscal 2021.

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Working Capital

At September 25, 2021, the Company had working capital of $1.42 billion, which decreased $93.0 million from December 26, 2020, and increased $383.6 million from September 26, 2020. The shifts in working capital were attributable to changes in the following components of current assets and current liabilities (in millions):

In comparison to December 26, 2020, working capital as of September 25, 2021, was impacted most significantly by changes in cash and cash equivalents, inventories, and accounts payable.

• The decrease in cash and cash equivalents was primarily driven by share repurchases, capital expenditures to support strategic growth, and cash dividends to stockholders, partially offset by cash generated from operations.

• The increase in inventories resulted primarily from the seasonal purchase of additional inventory to support higher sales volume of the cold weather selling season, as well as to support new store growth and the impact of inflation.

• The increase in accounts payable resulted from the purchase of additional inventory to support new store growth and strong sales volume trends.

In comparison to September 26, 2020, working capital as of September 25, 2021, was impacted most significantly by changes in inventories, accounts payable, other accrued expenses, and the current portion of long-term debt.

• The increase in inventories resulted primarily from the purchase of additional inventory to support new store growth as well as an increase in average inventory per store which principally reflects support for strong sales volume trends and the impact of inflation.

• The increase in accounts payable resulted primarily from the purchase of additional inventory to support new store growth and strong sales volume trends.

• The decrease in the current portion of long-term debt was related to the repayment of all short-term debt obligations, including the $350 million April 2020 Term Loan borrowing, which was executed in the prior year in order to strengthen liquidity and preserve cash while navigating the COVID-19 pandemic. These borrowings were repaid in full in the fourth quarter of fiscal 2020 and the underlying loan agreements are no longer in effect.

• The increase in other accrued expenses was driven primarily by Company growth year-over-year as well as the timing of payments and accruals.

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Debt

The following table summarizes the Company’s outstanding debt as of the dates indicated (in millions):

For additional information about the Company’s debt and credit facilities, refer to Note 5 to the Condensed Consolidated Financial Statements. Refer to Note 6 to the Condensed Consolidated Financial Statements for information about the Company’s interest rate swap agreements.

Operating Activities

Operating activities provided net cash of $0.87 billion and $1.00 billion in the first nine months of fiscal 2021 and fiscal 2020, respectively. The $133.2 million decrease in net cash provided by operating activities in the first nine months of fiscal 2021 compared to the first nine months of fiscal 2020 is due to changes in the following operating activities (in millions):

The $133.2 million decrease in net cash provided by operating activities in the first nine months of fiscal 2021 compared with the first nine months of fiscal 2020 resulted from decrease in our net operating assets and liabilities, partially offset by an increase in our net income, principally due to the timing of payments and accruals and a significant increase in inventory that remained in accounts payable in the prior year period; however, the increase was less significant in the first nine months of fiscal 2021 compared to the first nine months of fiscal 2020 which resulted in a lower year-over-year amount of net cash provided by operating activities.

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Investing Activities

Investing activities used net cash of $381.3 million and $160.2 million in the first nine months of fiscal 2021 and fiscal 2020, respectively. The $221.1 million increase in net cash used in investing activities primarily reflects an increase in capital expenditures in the first nine months of fiscal 2021 compared to fiscal 2020.

Investing activities, including capital expenditures, for the first nine months of fiscal 2021 and fiscal 2020 were as follows (in millions):

The increase in spending for existing stores in the first nine months of fiscal 2021 as compared to the first nine months of fiscal 2020 principally reflects our strategic initiatives related to store remodels, including internal space productivity and the outside side lot improvements. Spending in the first nine months of both fiscal 2021 and fiscal 2020 also includes routine refresh activity, as well as security enhancements.

The increase in spending for information technology represents continued support of our omni-channel initiatives, as well as improvements in security and compliance, enhancements and upgrades to our customer loyalty program, mobility in our stores, and other strategic initiatives.

In the first nine months of fiscal 2021, the Company opened 44 new Tractor Supply stores compared to 61 new Tractor Supply stores during the first nine months of fiscal 2020. The Company also opened six new Petsense stores during the first nine months of fiscal 2021 and fiscal 2020. We continue to expect to open approximately 80 new Tractor Supply stores and approximately 10 new Petsense stores during fiscal 2021. The timing of new store openings reflects some short-term delays, as a result of factors such as the COVID-19 pandemic, including local and state orders and constraints on labor and materials in the construction industry.

The increase in spending for distribution center capacity and improvements in the first nine months of fiscal 2021 as compared to the first nine months of fiscal 2020 is related to beginning construction of a new distribution center in Navarre, Ohio, which is expected to be approximately 900,000 square feet and is currently anticipated to be complete by the end of fiscal 2022.

Our projected capital expenditures for fiscal 2021 are currently estimated to be in a range of approximately $550 million to $600 million. The capital expenditures include our new store growth plans for approximately 80 new Tractor Supply stores and 10 new Petsense stores, as well as the construction of our new distribution center in Navarre, Ohio. We also plan to support our strategic growth initiatives related to store remodels, space productivity, and side lot improvements in certain existing stores, as well as continued improvements in technology and infrastructure at our existing stores and ongoing investments to enhance our digital and omni-channel capabilities to better serve our customers.

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Financing Activities

Financing activities used net cash of $720.6 million in the first nine months of fiscal 2021 compared to providing net cash of $182.9 million in the first nine months of fiscal 2020. The $903.5 million change in net cash used in financing activities in the first nine months of fiscal 2021 compared to the first nine months of fiscal 2020 is due to changes in the following (in millions):

The $903.5 million change in net cash used in financing activities in the first nine months of fiscal 2021 compared with the first nine months of fiscal 2020 is principally due to actions taken in the first nine months of fiscal 2020 intended to strengthen our liquidity and preserve cash while navigating the COVID-19 pandemic, including borrowings under our debt facilities as well as a temporary suspension of our share repurchase program.

In the first nine months of fiscal 2020, the Company's net borrowings under its debt facilities included the addition of the $200 million March 2020 Term Loan and the $350 million April 2020 Term Loan, each of which was repaid in full during the fourth quarter of fiscal 2020 as described in Note 5 to the Condensed Consolidated Financial Statements. The Company had no borrowing or repayment activity related to its debt facilities in the first nine months of fiscal 2021.

Repurchases of common stock in the first nine months of fiscal 2020 were impacted by the temporary suspension of our share repurchase program effective March 12, 2020 until November 5, 2020.

Dividends

During the first nine months of fiscal 2021 and fiscal 2020, the Company's Board of Directors declared the following cash dividends:

It is the present intention of the Company’s Board of Directors to continue to pay a quarterly cash dividend; however, the declaration and payment of future dividends will be determined by the Company’s Board of Directors in its sole discretion and will depend upon the earnings, financial condition, and capital needs of the Company, along with any other factors that the Company’s Board of Directors deem relevant.

On November 3, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.52 per share of the Company’s outstanding common stock. The dividend will be paid on December 8, 2021, to stockholders of record as of the close of business on November 22, 2021.

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Share Repurchase Program

The Company’s Board of Directors has authorized common stock repurchases under a share repurchase program which was announced in February 2007. 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. The repurchases may be made from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased under the program will depend on a variety of factors, including price, corporate and regulatory requirements, capital availability, and other market conditions. Repurchased shares are accounted for at cost and will be held in treasury for future issuance. The program may be limited, temporarily paused (as it was from March 12, 2020 until November 5, 2020 in order to strengthen the Company's liquidity and preserve cash while navigating the COVID-19 pandemic), or terminated at any time without prior notice. As of September 25, 2021, the Company had remaining authorization under the share repurchase program of $545.9 million, exclusive of any fees, commissions, or other expenses.

The following table provides the number of shares repurchased, average price paid per share, and total amount paid for share repurchases during the fiscal three and nine months ended September 25, 2021 and September 26, 2020, respectively (in thousands, except per share amounts):

Pending Acquisition

On February 17, 2021, the Company announced that it entered into an agreement to acquire all of the outstanding equity interests of Orscheln Farm and Home, LLC, a farm and ranch retailer with 167 retail stores in 11 states, in an all-cash transaction for approximately $320 million. The Company intends to fund the acquisition through cash-on-hand. The acquisition is conditioned on the receipt of regulatory clearance and satisfactory completion of customary closing conditions.

Off-Balance Sheet Arrangements

There have been no material changes in the Company's off-balance sheet arrangements during the fiscal quarter ended September 25, 2021. The Company’s off-balance sheet arrangements are limited to outstanding letters of credit. Letters of credit allow the Company to purchase inventory, primarily sourced overseas, in a timely manner, and support certain risk management programs.

Significant Contractual Obligations and Commercial Commitments

The Company is building a new distribution center in Navarre, Ohio, which is expected to be approximately 900,000 square feet and is currently anticipated to be complete by the end of fiscal 2022. At September 25, 2021, the Company had contractual commitments of approximately $93.8 million related to the construction of this new distribution center.

At September 25, 2021, there were $46.5 million of outstanding letters of credit under the Senior Credit Facility.

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Significant Accounting Policies and Estimates

Management’s discussion and analysis of the Company’s financial position and results of operations are based upon its Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make informed estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company’s significant accounting policies, including areas of critical management judgments and estimates, have primary impact on the following financial statement areas:

See the Notes to the Consolidated Financial Statements in our 2020 Form 10-K, for a discussion of the Company’s critical accounting policies. The Company’s financial position and/or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies. In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.

New Accounting Pronouncements

For recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of September 25, 2021, refer to Note 12 to the Condensed Consolidated Financial Statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.

For a description of the Company’s quantitative and qualitative disclosures about market risks, see Part II, Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" included in our Annual Report on Form 10-K for the fiscal year ended December 26, 2020. As of September 25, 2021, there has been no material change in this information.

Disclosure Controls and Procedures

Our management carried out an evaluation required by the Securities Exchange Act of 1934, as amended (the “1934 Act”), under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the 1934 Act) as of September 25, 2021. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 25, 2021, our disclosure controls and procedures were effective.

Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of the Company's legal proceedings, refer to Note 10 to the Condensed Consolidated Financial Statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.

The risk factors described in Part I, Item 1A “Risk Factors” in our 2020 Form 10-K should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings with the SEC, in connection with evaluating the Company, our business, and the forward-looking statements contained in this Quarterly Report on Form 10-Q. There have been no material changes to our risk factors as previously disclosed in our 2020 Form 10-K. Other risks that we do not presently know about or that we presently believe are not material could also adversely affect us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Share repurchases were made pursuant to the share repurchase program, which is described under Part I, Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q. Additionally, the Company withholds shares from vested restricted stock units and performance-based restricted share units to satisfy employees’ minimum statutory tax withholding requirements. Stock repurchase activity during the third quarter of fiscal 2021 was as follows:

(a) The number of shares purchased and average price paid per share includes 19, 5,370, and 210 shares withheld from vested stock awards to satisfy employees’ minimum statutory tax withholding requirements for the period of June 27, 2021 - July 24, 2021, July 25, 2021 - August 21, 2021, and August 22, 2021 - September 25, 2021, respectively.

We expect to implement the balance of the share repurchase program through purchases made from time to time either in the open market or through private transactions, in accordance with regulations of the SEC and other applicable legal requirements. The timing and amount of any common stock repurchased under the program will depend on a variety of factors including price, corporate and regulatory requirements, capital availability, and other market conditions.

Any additional share repurchase programs will be subject to the discretion of our Board of Directors and will depend upon earnings, financial condition, and capital needs of the Company, along with any other factors which the Board of Directors deem relevant. The program may be limited, temporarily paused, or terminated at any time, without prior notice.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

None.

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Exhibit

31.1* Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

31.2* Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

32.1** Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

101* The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 25, 2021, formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders' Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

104* The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 25, 2021, formatted in Inline XBRL (included in Exhibit 101).

• Filed herewith

** Furnished herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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