Edgar Filing: TRACTOR SUPPLY CO /DE/

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TRACTOR SUPPLY COMPANY

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


(Mark One)

x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended June 28, 2003

		OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

Commission file number 000-23314

TRACTOR SUPPLY COMPANY

(Exact Name of Registrant as Specified in Its Charter)


Delaware		13-3139732

(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

320 Plus Park Boulevard, Nashville, Tennessee		37217

(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code:		(615) 366-4600

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

YES X NO

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES X NO

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


Class		Outstanding at July 26, 2003

Common Stock, $0.008 par value		18,623,485

TRACTOR SUPPLY COMPANY

INDEX


			Page No.

Part I. Financial Information:
	Item 1. Consolidated Financial Statements:
		Consolidated Balance Sheets - June 28, 2003 and December 28, 2002		3
		Consolidated Statements of Income - For the Fiscal Three and Six Months Ended June 28, 2003 and June 29, 2002		4
		Consolidated Statements of Cash Flows - For the Fiscal Six Months Ended June 28, 2003 and June 29, 2002		5
		Notes to Unaudited Consolidated Financial Statements		6-13
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			14-18
	Item 3. Quantitative and Qualitative Disclosures About Market Risk			18
	Item 4. Controls and Procedures			19
Part II. Other Information:
	Item 4. Submission of Matters to a Vote of Security Holders			20
	Item 6. Exhibits and Reports on Form 8-K			20
	Signatures			21

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TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
EX-31.1 CERTIFICATION OF THE CEO
EX-31.2 CERTIFICATION OF THE CFO
EX-32.1 CERTIFICATION/CEO AND CFO

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TRACTOR SUPPLY COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)


			June 28,			Dec. 28,
			2003			2002

			(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents		$	17,832		$	13,773
	Accounts receivable, net			—			102
	Inventories			355,161			289,253
	Prepaid expenses and other current assets			19,447			17,579
	Assets held for sale			2,949			3,779
	Deferred income taxes			7,462			7,784

		Total current assets		402,851			332,270

Property and equipment:
	Land			13,033			12,569
	Buildings and improvements			108,360			100,843
	Furniture, fixtures and equipment			81,584			75,815
	Construction in progress			5,113			4,271

				208,090			193,498
	Accumulated depreciation and amortization			(77,427	)		(69,953	)

	Property and equipment, net			130,663			123,545

Other assets				2,635			3,104

		Total assets	$	536,149		$	458,919

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	189,997		$	114,851
	Accrued employee compensation			6,282			14,892
	Other accrued expenses			49,483			51,410
	Current maturities of long-term debt			2,142			2,142
	Current portion of capital lease obligations			340			340
	Income taxes currently payable			5,169			3,101
	Other current liabilities			676			1,699

		Total current liabilities		254,089			188,435
Revolving credit loan				9,947			33,542
Long-term debt, less current maturities				2,323			3,395
Capital lease obligations, less current maturities				1,993			2,163
Deferred income taxes				1,584			1,584
Other long-term liabilities				2,346			1,952

		Total liabilities		272,282			231,071

Stockholders’ equity:
Preferred Stock, 40,000 shares authorized; $1.00 par value; no shares issued				—			—
Common stock, 100,000,000 shares authorized; $0.008 par value; 18,608,359 and 18,232,954 shares issued and outstanding in 2003 and 2002, respectively				149			146
Additional paid-in capital				60,114			52,174
Retained earnings				204,013			176,501
Accumulated other comprehensive loss, net				(409	)		(973	)

		Total stockholders’ equity		263,867			227,848

		Total liabilities and stockholders’ equity	$	536,149		$	458,919

The accompanying notes are an integral part of this statement.

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TRACTOR SUPPLY COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)


			For the fiscal				For the fiscal
			three months ended				six months ended

			June 28,		June 29,		June 28,			June 29,
			2003		2002		2003			2002

			(Unaudited)				(Unaudited)
Net sales			$	449,391	$	392,048	$	723,151		$	585,858
Cost of merchandise sold				313,099		283,657		506,062			425,488

		Gross margin		136,292		108,391		217,089			160,370
Selling, general and administrative expenses				87,356		74,809		159,494			129,096
Depreciation and amortization				4,750		4,457		9,204			7,550

		Income from operations		44,186		29,125		48,391			23,724
Interest expense, net				941		1,148		1,951			2,215

Income before income taxes and cumulative effect of change in accounting principle				43,245		27,977		46,440			21,509
Income tax expense				15,858		10,631		17,040			8,173

Income before cumulative effect of change in accounting principle				27,387		17,346		29,400			13,336
Cumulative effect on prior years of retroactive application of change in accounting principle, net of income taxes (Note 3)				—		—		(1,888	)		—

	Net income		$	27,387	$	17,346	$	27,512		$	13,336

Net income per share — basic, before cumulative effect of change in accounting principle			$	1.48	$	0.96	$	1.60		$	0.74
Cumulative effect of accounting change, net of income taxes				—		—		(0.11	)		—

Net income per share — basic			$	1.48	$	0.96	$	1.49		$	0.74

Net income per share — assuming dilution before cumulative effect of change in accounting principle			$	1.37	$	0.88	$	1.47		$	0.69
Cumulative effect of accounting change, net income of taxes				—		—		(0.09	)		—

Net income per share — assuming dilution			$	1.37	$	0.88	$	1.38		$	0.69

Pro-forma amounts assuming the change in accounting principle is applied retroactively:
	Net income		$	27,387	$	18,223	$	29,400		$	14,225

	Net income per share — basic		$	1.48	$	1.01	$	1.60		$	0.79

	Net income per share — assuming dilution		$	1.37	$	0.93	$	1.47		$	0.73

The accompanying notes are an integral part of this statement.

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TRACTOR SUPPLY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


				For the fiscal six months ended

				June 28,			June 29,
				2003			2002

				(Unaudited)
Cash flows from operating activities:
Net income				$	27,512		$	13,336
Adjustments to reconcile net income to net cash provided by operating activities:
		Cumulative effect of change in accounting principle			1,888			—
		Depreciation and amortization			9,204			7,550
		Loss (gain) on sale of property and equipment			(765	)		5
		Asset impairment related to closed stores and relocations			78			558
		Deferred income taxes			322			138
		Tax benefit of stock options exercised			3,324			995
		Change in assets and liabilities:
		Accounts receivable			102			(4,682	)
		Inventories			(68,961	)		(106,521	)
		Prepaid expenses and other current assets			(2,667	)		646
		Accounts payable			75,146			146,744
		Accrued expenses			(10,537	)		7,739
		Income taxes currently payable			3,233			3,064
		Other			365			(427	)

	Net cash provided by operating activities				38,244			69,145

	Cash flows from investing activities:
		Capital expenditures (Note 9)			(16,396	)		(49,319	)
		Proceeds from sale of property and equipment			2,429			289

	Net cash used in investing activities				(13,967	)		(49,030	)

	Cash flows from financing activities:
		Borrowings under revolving credit agreement			229,669			161,602
		Repayments under revolving credit agreement			(253,264	)		(176,719	)
		Repayment of long-term debt			(1,072	)		(1,072	)
		Principal payments under capital lease obligations			(170	)		(154	)
		Net proceeds from issuance of common stock			4,619			2,912

	Net cash used in financing activities				(20,218	)		(13,431	)

	Net increase in cash and cash equivalents				4,059			6,684
	Cash and cash equivalents at beginning of period				13,773			8,927

	Cash and cash equivalents at end of period			$	17,832		$	15,611

Supplemental disclosures of cash flow information:
Cash paid during the period for:
			Interest	$	1,683		$	1,740
			Income taxes		10,253			4,117

The accompanying notes are an integral part of this statement

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TRACTOR SUPPLY COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Significant Accounting Policies:

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Company’s annual report on Form 10-K for the fiscal year ended December 28, 2002. The results of operations for the fiscal three-month and six-month periods are not necessarily indicative of results for the full fiscal year.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated.

Management Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States inherently requires estimates and assumptions by management that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures. Actual results could differ from those estimates.

Significant estimates and assumptions by management primarily impact the following key financial statement areas:

		Inventory Valuation

		The Company identifies potentially excess and slow-moving inventory by evaluating turn rates and overall inventory levels. Excess quantities are identified through the application of benchmark turn targets and historical sales experience. Further, exposure to inadequate realization of carrying value is identified through analysis of gross margin achievement and markdown experience, in combination with all merchandising initiatives. The estimated reserve is based on management’s current knowledge with respect to inventory levels, sales trends and historical experience relating to the sale of the excess and/or slow-moving inventory. Management does not believe the Company’s merchandise inventories are subject to significant risk of obsolescence in the near-term, and management has the ability to adjust purchasing practices based on anticipated sales trends and general economic conditions. However, changes in consumer purchasing patterns could result in the need for additional reserves.

		Inventory Shrinkage

		The Company estimates its expected shrinkage of inventory between physical inventory counts by assessing the chain-wide average shrinkage experience rate, applied to the related periods’ sales volumes. Such assessments are updated on a regular basis for the most recent individual store experiences.

		Vendor Funding

		The Company receives funding from its vendors for promotion of the Company’s brand as well as the sale of their products. Vendor funding is accounted for as a discount on the purchase price of inventories and is recognized in cost of sales as inventory is sold. The amount of expected funding is estimated based upon initial guaranteed commitments, as well as anticipated purchase levels with applicable vendors. The estimated purchase volume is based on management’s current knowledge with respect to inventory levels, sales trends and expected customer demand, as well as planned new store openings. Although management believes it has the ability to reasonably estimate its purchase volume, it is possible that actual results could significantly differ from the estimated amounts.

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		Sales Returns

		The Company generally honors customer refunds within 30 days of the original purchase, with the supporting receipt. The Company estimates its reserve for likely customer returns based on the average refund experience in relation to sales for the related period. Due to the seasonality of the Company’s sales, the refund experience can vary, depending on the fiscal quarter of measurement.

		Self-insurance

		The Company is self-insured for certain losses relating to workers’ compensation, medical and general liability claims. Self-insurance claims filed and claims incurred but not reported are accrued based upon management’s estimates of the aggregate liability for uninsured claims incurred using actuarial assumptions followed in the insurance industry and historical experience. Although management believes it has the ability to adequately record estimated losses related to claims, it is possible that actual results could significantly differ from recorded self-insurance liabilities.

Revenue Recognition

The Company recognizes revenue when sales transactions occur and customers take possession of the merchandise. A provision for anticipated merchandise returns is provided in the period during which the related sales are recorded.

Store Pre-opening Costs

Non-capital expenditures incurred in connection with start-up activities, including organizational costs, are expensed as incurred.

Store Closing Costs

Beginning in fiscal 2003, the Company recognizes store closing costs in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Prior to the adoption of SFAS 146, the Company recognized store-closing costs (primarily remaining lease obligations and disposals of property and equipment) at the time the plan for the related store closing or relocation was finalized. The adoption of SFAS 146 did not materially impact the Company’s financial position, cash flows, or results of operations.

Cash and Cash Equivalents

The Company considers temporary cash investments, with a maturity of three months or less when purchased, to be cash equivalents.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, short-term trade receivables and payables and long-term debt instruments, including capital leases. The carrying values of cash and cash equivalents, trade receivables and trade payables equal current fair value. The terms of the Company’s revolving credit agreement and term loan agreement include variable interest rates, which approximate current market rates.

Derivative Instruments and Hedging Activities

The Company complies with SFAS Nos. 133, 137, and 138 (collectively “SFAS 133”) pertaining to the accounting for derivatives and hedging activities. SFAS 133 requires the Company to recognize all derivative instruments in the balance sheet at fair value. SFAS 133 impacts the accounting for the Company’s interest rate swap agreement, which is designated as a cash flow hedge. (Note 6)

Inventories

The value of the Company’s inventories was determined using the lower of last-in, first-out (LIFO) cost or market. Inventories are not in excess of market value. The Company receives funding from its vendors for promotion of the Company’s brand as well as the sale of its products. Such funds are recognized as a reduction of the purchase cost of

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inventory. Quarterly inventory determinations under LIFO are based on assumptions as to projected inventory levels at the end of the fiscal year, sales for the year and the rate of inflation/deflation for the year. If the first-in, first-out (FIFO) method of accounting for inventory had been used, inventories would have been approximately $656,000 and $5,267,000 higher than reported at June 28, 2003 and December 28, 2002, respectively. (The reduction in the LIFO reserve is primarily due to the adoption of Emerging Issue Task Force (EITF) issue 02-16, which resulted in a reduction of the carrying value of inventory (Note 3).)

Freight Costs

The Company incurs various types of transportation and delivery costs in connection with inventory purchases and distribution. Such costs are included as a component of the overall cost of merchandise.

Property and Equipment

Property and equipment are carried at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets. Improvements to leased premises are amortized using the straight-line method over the life of the lease or the useful life of the improvement, whichever is shorter. The following estimated useful lives are generally applied:


	Life

Buildings		30 - 35	years
Leasehold improvements		5 - 15	years
Furniture, fixtures and equipment		5 - 10	years
Computer software and hardware		3 - 5	years

Impairment of Long-Lived Assets

The Company complies with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” in the recognition of asset impairment. Accordingly, the Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of the asset may not be recoverable. Impairment is recognized on assets classified as held and used when the sum of undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. Impairment on long-lived assets to be disposed of is recognized by writing down the related assets to their fair value (less costs to sell, as appropriate), when the criteria have been met for the asset to be classified as held for sale or disposal (Note 4).

Advertising Costs

Advertising costs consist of expenses incurred in connection with newspaper circulars, television and radio, as well as direct mail, newspaper advertisements and other promotions. Expenses incurred are charged to operations at the time the related advertising first takes place.

Beginning in fiscal 2003, the Company adopted the provisions of EITF No. 02-16 (“EITF 02-16”), “Accounting by a Customer (including a Reseller) for Certain Consideration Received from a Vendor,” as required. Under EITF 02-16, vendor-provided funding is recognized as a reduction of cost of sales as the related vendors’ purchased inventory is sold.

Income Taxes

The Company accounts for income taxes using the liability method, whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to be recovered or settled.

Extinguishment of Debt

In April 2002, the FASB issued SFAS 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections,” which requires gains and losses from extinguishment of debt to no longer be classified as extraordinary items, net of related income tax effect. SFAS 145 requires that extinguishment gains or losses be classified as ordinary gains or losses, and that all such gains or losses in prior periods be reclassified to ordinary gain or loss in comparative financial statements. The Company adopted this Statement in the

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first quarter of fiscal 2003, as required. The adoption of SFAS 145 had no impact on the Company’s financial position, cash flows, or results of operations.

Stock-based Compensation Plans

In December 2002, the FASB issued SFAS 148 “Accounting for Stock-Based Compensation-Transition and Disclosure,” which amends SFAS 123, “Accounting for Stock-Based Compensation.” SFAS 148 provides alternative methods of transition for a voluntary change to the fair value–based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. The Company has elected to account for its stock-based compensation plans under the intrinsic value-based method of accounting as permitted by SFAS 123 and as prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” However, the Company has adopted the disclosure requirements of SFAS 123 and SFAS 148, as required.

Had compensation cost for the Company’s stock option plan been determined based on the fair value at the grant dates for awards under the plan consistent with the method prescribed by SFAS 123, the Company’s pro forma net income and net income per share, for the fiscal three months and six months ended June 28, 2003 and June 29, 2002, would have been as follows (in thousands, except per share amounts):


		Three months ended						Six months ended

		June 28,			June 29,			June 28,			June 29,
		2003			2002			2003			2002

Net income – as reported		$	27,387		$	17,346		$	27,512		$	13,336
Pro-forma compensation expense, net of income taxes			(858	)		(438	)		(1,499	)		(914	)

	Net income – pro-forma	$	26,529		$	16,908		$	26,013		$	12,422

Net income per share – basic:
	As reported	$	1.48		$	0.96		$	1.49		$	0.74
	Pro-forma	$	1.44		$	0.94		$	1.41		$	0.69
Net income per share – diluted:
	As reported	$	1.37		$	0.88		$	1.38		$	0.69
	Pro-forma	$	1.34		$	0.86		$	1.31		$	0.64

Net Income Per Share

The Company presents both basic and diluted earning per share (“EPS”) on the face of the consolidated income statement. As provided by SFAS 128, “Earnings per Share,” basic EPS is calculated as net income available to common stockholders divided by the weighted average number of shares outstanding during the period. Diluted EPS is calculated using the treasury stock method for options and warrants. All earnings per share data included in the consolidated financial statements and notes thereto has been restated to give effect to a two-for-one stock split that occurred on August 19, 2002 (Note 8). Additionally, on July 17, 2003, the Company’s Board of Directors approved a two-for-one split of the Company’s common stock, which has not been reflected in the accompanying consolidated financial statements (Note 12).

Reclassifications

Certain amounts in previously issued financial statements were reclassified to conform to fiscal 2003 presentations.

Note 2 — Seasonality:

The Company’s business is subject to seasonality and, as a result, a significant portion of its sales and income are realized in the second and fourth fiscal quarter. The Company typically builds inventory in the first fiscal quarter in preparation for a higher volume second quarter.

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Note 3 — Change in Accounting Principle:

EITF 02-16 provides guidance for the accounting treatment and income statement classification for consideration given by a vendor to a retailer in connection with the sale of the vendor’s products or for the promotion of sales of the vendor’s products. The EITF concluded that such consideration received from vendors should be reflected as a decrease in prices paid for inventory and recognized in cost of sales as the related inventories are sold, unless specific criteria are met qualifying the consideration for treatment as reimbursement of specific, identifiable incremental costs. Prior to adopting this pronouncement, the Company classified all vendor-provided marketing support funds as a reduction in selling, general and administrative expenses.

The effect of applying the consensus of EITF 02-16 on prior-period financial statements resulted in a change to previously reported net income, thus, the Company has reported the adoption of EITF 02-16 as a cumulative effect adjustment in accordance with APB Opinion No. 20, “Accounting Changes” and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements” and as permitted by EITF 02-16. During the first quarter of fiscal 2003, the Company recognized a charge against net income of $3,053,000 ($1,888,000 net of income taxes), that resulted from the cumulative effect on prior years. Net income for the second quarter and the first six months of 2002, assuming EITF 02-16 had been applied retroactively, would have increased $877,000 and $889,000 respectively. Basic and diluted income per share for the second fiscal quarter of 2002 would have increased $0.05 to $1.01 and $0.93, respectively, had EITF 02-16 been applied retroactively. Basic and diluted income per share for the first six months of fiscal 2002 would have increased $0.05 and $0.04, respectively, to $0.79 and $0.73 had EITF 02-16 been applied retroactively.

Note 4 — Assets Held for Sale:

Assets held for sale consists of certain buildings and properties that the Company either acquired through the significant asset purchase as described in Note 9 or that the Company vacated upon relocation of a store.

The Company applies the provisions of SFAS 144 to assets held for sale. SFAS 144 requires assets held for sale to be valued on an asset-by-asset basis at the lower of carrying amount or fair value, less costs to sell. In applying these provisions, recent appraisals, valuations, offers and bids are considered. The Company recorded an impairment charge of $78,000 and $572,000 in the first quarter of fiscal 2003 and 2002, respectively, to adjust the carrying value of certain property and equipment related to vacated stores to fair value, less costs to sell. No impairment charges were required during the second quarter of fiscal 2003 or 2002.

The buildings and properties held for sale are separately presented as assets held for sale in the accompanying consolidated balance sheets. The assets are classified as current, as the Company believes they will be sold within the next twelve months and have met all the criteria for classification as held for sale pursuant to SFAS 144.

Note 5 — Senior Credit Facility:

In August 2002, the Company entered into a replacement unsecured senior revolving credit facility with Bank of America, N.A., as agent for a lender group, expanding the maximum available borrowings from $125.0 million to $155.0 million, extending the maturity to February 2006 and increasing the number of participating banks from seven to ten. The Credit Facility bears interest at either the bank’s prime rate (4.0% at June 28, 2003) or the London Inter-Bank Offer Rate (1.12% at June 28, 2003) plus an additional amount ranging from 0.75% to 1.5% per annum, adjusted quarterly based on the Company’s performance (0.75% at June 28, 2003).

Note 6 — Derivative Financial Instruments:

The Company has entered into an interest rate swap agreement as a means of managing its interest rate exposure. This agreement has the effect of converting certain of the Company’s variable rate obligations to fixed rate obligations.

The Company complies with SFAS 133 and recognizes the fair value of the interest rate swap in its consolidated balance sheet. The Company regularly adjusts the carrying value of the interest rate swap to reflect its current fair value. The related gain or loss on the swap is deferred in stockholders’ equity (as a component of comprehensive income) to the extent that the swap was an effective hedge. The deferred gain or loss is recognized in income in the period in which the related interest rate payments being hedged have been recognized as an expense. However, to the extent that the change in value of an interest rate swap contract does not perfectly offset the change in the interest

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rate payments being hedged, the ineffective portion is immediately recognized as an expense. Net amounts paid or received are reflected as adjustments to interest expense.

The Company expects to recognize income of approximately $409,000 on interest rate swaps from accumulated other comprehensive loss to earnings over the remaining life of the swap agreement. The interest rate swap agreement matures in November 2003.

Note 7 — Comprehensive Income:

Comprehensive income includes the change in the fair value of the Company’s interest rate swap agreement, which qualifies for hedge accounting. Comprehensive income for each period is as follows (in thousands):


	Three Months Ended					Six Months Ended

	June 28,		June 29,			June 28,		June 29,
	2003		2002			2003		2002

Net income – as reported	$	27,387	$	17,346		$	27,512	$	13,336
Change in fair value of effective portion of interest rate swap agreement, net of income taxes		204		(88	)		564		242

Comprehensive income	$	27,591	$	17,258		$	28,076	$	13,578

Note 8 — Net Income Per Share:

Basic net income per share is based on the weighted average outstanding common shares. Diluted net income per share is based on the weighted average outstanding common shares and reflects basic net income per share reduced by the dilutive effect of stock options.

Net income per share is calculated as follows (in thousands, except per share amounts):


			Three months ended						Three months ended
					June 28, 2003					June 29, 2002

							Per Share						Per Share
			Income		Shares		Amount		Income		Shares		Amount

Basic net income per share:
	Net income		$	27,387		18,539	$	1.48	$	17,346		18,033	$	0.96
Diluted net income per share:
		Net income	$	27,387		20,055	$	1.37	$	17,346		19,590	$	0.88

Net income per share before and after the cumulative effect of accounting change is as follows (in thousands, except per share amounts):


		Six months ended								Six months ended
		June 28, 2003								June 29, 2002

							Per Share							Per Share
		Income			Shares		Amount			Income		Shares		Amount

Basic net income per share:
	Net income, before cumulative effect of accounting change	$	29,400			18,424	$	1.60		$	13,336		17,963	$	0.74
	Cumulative effect of accounting change, net of income taxes		(1,888	)		18,424		(0.11	)		—		17,963		—

	Net income	$	27,512			18,424	$	1.49		$	13,336		17,963	$	0.74

Diluted net income per share:
	Net income, before cumulative effect of accounting change	$	29,400			19,958	$	1.47		$	13,336		19,377	$	0.69
	Cumulative effect of accounting change, net of income taxes		(1,888	)		19,958		(0.09	)		—		19,377		—

	Net income	$	27,512			19,958	$	1.38		$	13,336		19,377	$	0.69

Page 11 of 21


		Three Months Ended				Six Months Ended

		June 28,		June 29,		June 28,		June 29,
		2003		2002		2003		2002

Weighted average shares outstanding:
	Shares outstanding		18,539		18,033		18,424		17,963
	Dilutive effect of stock options outstanding		1,516		1,557		1,534		1,414

	Diluted shares outstanding		20,055		19,590		19,958		19,377

On July 18, 2002, the Company’s Board of Directors approved a two-for-one split of the Company’s common stock. As a result, stockholders received one additional share on August 19, 2002 for each share held as of the record date of August 2, 2002. The par value of the Company’s common stock remains $0.008. All share and per share data included in the consolidated financial statements and notes thereto has been restated to give effect to the stock split. Additionally, on July 17, 2003, the Company’s Board of Directors approved a two-for-one split of the Company’s common stock (Note 12). The accompanying presentation of the consolidated balance sheets and earnings per share do not reflect the effect of this stock split.

Note 9 — Significant Asset Purchase:

On December 31, 2001, the Company, through a joint venture with Great American Group, Gordon Brothers Retail Partners, LLC and DJM Asset Management LLC, was the successful bidder at a liquidation bankruptcy auction for the buildings, improvements, fixtures and lease rights of certain retail stores formerly operated by Quality Stores, Inc., a debtor and debtor in possession under Chapter 11 of the United States Bankruptcy Code. The Company’s share of the bid totaled $34.0 million and was funded entirely through the Senior Credit Facility.

Under its agreement with the other joint venture partners, the Company acquired the buildings for 24 retail stores, assumed the building lease rights for 76 additional retail stores, and acquired the related equipment, furniture and fixtures. The liquidation of the existing inventory by other members of the joint venture was completed in late February 2002, with the Company having conducted hiring, training, refurbishment and merchandising efforts throughout the first fiscal quarter. The transition of these locations, which was completed in the third quarter of fiscal 2002, included the opening of new stores as well as the relocation of existing stores into the newly acquired properties.

Note 10 — Contingencies:

Litigation

The Company is involved in various litigation arising in the ordinary course of business. After consultation with legal counsel, management expects these matters will be resolved without material adverse effect on the Company’s consolidated financial position or results of operations. Any estimated loss has been adequately provided in accrued liabilities to the extent probable and reasonably estimable. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in circumstances relating to these proceedings.

Environmental Matters

In connection with certain contaminated leased properties that the Company relocated from in 2002, the Company has agreed to indemnify property owners with respect to environmental liabilities associated with the use of those properties, as defined in the related lease agreements. During fiscal 2003, the Company has not paid or accrued material amounts related to these properties. Because of the uncertainties associated with environmental assessment and remediation activities, the Company’s future expenses to remediate the currently identified sites could be higher than amounts accrued. Future expenditures for environmental remediation may be affected in the near-term by identification of additional contaminated sites, the level and type of contamination found, and the extent and nature of cleanup activities required.

Page 12 of 21

Note 11 — Impact of Recently Issued Accounting Standards:

In January, 2003 the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities (“VIE”), an Interpretation of Accounting Research Bulletin No. 51” (“FIN 46”). The Interpretation provides guidance for determining whether an entity is a variable interest entity and evaluation for consolidation based on their variable interests. The Interpretation is effective immediately for VIEs created after January 31, 2003 and in the first interim period beginning after June 15, 2003 for VIEs created prior to February 1, 2003. The Company is currently determining the impact of FIN 46 and expects the adoption to have little or no impact on the Company’s financial position or results of operation.

The FASB issued SFAS 150, “Accounting for Certain Instruments with Characteristics of Both Liabilities and Equity”, which is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the Company’s third quarter of 2003. SFAS 150 requires common and preferred stock subject to mandatory redemption to be classified as a liability. The Company will adopt SFAS 150 in the third quarter of 2003 and expects the adoption to have no impact on its financial position or results of operations.

Note 12 — Subsequent Event — Stock Split:

On July 17, 2003, the Company’s Board of Directors approved a two-for-one split of the Company’s common stock. As a result, stockholders will receive one additional share on August 21, 2003 for each share held as of the record date of August 4, 2003. The par value of the Company’s common stock will remain $0.008 per share. The accompanying presentations of the consolidated balance sheets and earnings per share do not reflect the effect of this stock split.

Page 13 of 21

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The following discussion and analysis describes certain factors affecting Tractor Supply Company (the “Company”), its results of operations for the fiscal three and six month periods ended June 28, 2003 and June 29, 2002 and significant developments affecting its financial condition since the end of the fiscal year, and should be read in conjunction with the Company’s annual report on Form 10-K for the fiscal year ended December 28, 2002. The following discussion and analysis also contains certain historical and forward-looking information. The forward-looking statements included herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”). All statements, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including their amount and nature), business strategy, expansion and growth of the Company’s business operations and other such matters are forward-looking statements. To take advantage of the safe harbor provided by the Act, the Company is identifying certain factors that could cause actual results to differ materially from those expressed in any forward-looking statements, whether oral or written, made by or on behalf of the Company.

All phases of the Company’s operations are subject to influences outside its control. Any one, or a combination, of these factors could materially affect the results of the Company’s operations. These factors include general economic cycles affecting consumer spending, weather factors, operating factors affecting customer satisfaction, consumer debt levels, pricing and other competitive factors, the ability to attract, train and retain highly qualified employees, the ability to identify suitable locations and negotiate favorable lease agreements on new and relocated stores, the timing and acceptance of new products in the stores, the mix of goods sold, the continued availability of favorable credit sources, capital market conditions in general, threats of war or terrorism, and the seasonality of the Company’s business. Forward-looking statements made by or on behalf of the Company are based on knowledge of its business and the environment in which it operates, but because of the factors listed above, actual results could differ materially from those reflected by any forward-looking statements. Consequently, all of the forward-looking statements made are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business and operations.

Change in Accounting Principle

Emerging Issue Task Force item 02-16 (“EITF 02-16”), “Accounting by a Customer (including a Reseller) for Certain Consideration Received from a Vendor” provides guidance for the accounting treatment and income statement classification for consideration given by a vendor to a retailer in connection with the sale of the vendor’s products or for the promotion of sales of the vendor’s products. The EITF concluded that such consideration received from vendors should be reflected as a decrease in prices paid for inventory and recognized in cost of sales as the related inventory is sold, unless specific criteria are met qualifying the consideration for treatment as reimbursement of specific, identifiable incremental costs. Prior to adopting this pronouncement, the Company classified all vendor-provided marketing support funds as a reduction in selling, general and administrative expenses.

The effect of applying EITF 02-16 on prior-period financial statements results in a change to previously reported net income, thus, the Company has reported the adoption of EITF 02-16 as a cumulative effect adjustment in accordance with APB Opinion No. 20, “Accounting Changes,” and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and as permitted by EITF 02-16. Accordingly, in the first quarter of fiscal 2003, the Company recorded a cumulative effect of accounting change of $3.1 million ($1.9 million net of income taxes) for the impact of this adoption on prior fiscal years. For the three-months and six-months ended June 28, 2003, vendor-provided funding in the amount of $12.4 million and $19.7 million, respectively, has been included as a reduction in inventory costs.

Page 14 of 21

The following pro forma financial information for the three months and six months ended June 29, 2002 reflects the impact of EITF 02-16 as if it had been adopted prior to fiscal 2002 (in thousands):


		Three months ended				Six months ended

		June 29,		June 29,		June 29,		June 29,
		2002		2002		2002		2002

		(as reported)		(pro forma)		(as reported)		(pro forma)
Net sales		$	392,048	$	392,048	$	585,858	$	585,858
	Cost of merchandise sold		283,657		272,482		425,488		409,828

	Gross profit		108,391		119,566		160,370		176,030
	Selling, general and administrative expenses		74,809		84,610		129,096		143,363
	Depreciation and amortization		4,457		4,457		7,550		7,550

	Income from operations		29,125		30,499		23,724		25,117
Interest expense, net			1,148		1,148		2,215		2,215

	Income before income taxes		27,977		29,351		21,509		22,902
Income tax expense			10,631		11,128		8,173		8,677

Net income			17,346		18,223		13,336		14,225

Net income per share — basic		$	0.96	$	1.01	$	0.74	$	0.79

Net income per share — assuming dilution		$	0.88	$	0.93	$	0.69	$	0.73

Weighted average shares outstanding (000’s):
	Basic		18,033		18,033		17,963		17,963
	Assuming dilution		19,590		19,590		19,377		19,377

Results of Operations

Fiscal Three Months (Second Quarter) and Six Months ended June 28, 2003 and June 29, 2002

Net sales increased 14.6% to $449.4 million for the second quarter of fiscal 2003 from $392.0 million for the second quarter of fiscal 2002. Net sales rose 23.4% to $723.2 for the first six months of fiscal 2003 from $585.9 million for the first six months of fiscal 2002. The net sales increase resulted primarily from the addition of new stores. Comparable store sales increased 1.2% for the second quarter of fiscal 2003 and 2.1% for the first six months of fiscal 2003. The Company opened a total of 13 new stores in the second quarter of fiscal 2003 and 25 new stores during the first six months of fiscal 2003. This compares to 90 openings in the second quarter of fiscal 2002 and 106 new stores in the first six months of fiscal 2002. (The Company substantially expanded its store base during 2002 due largely to its purchase of property and lease rights from Quality Stores, Inc. in the first quarter of 2002.) The Company also relocated three stores and five stores in the second quarter of fiscal 2003 and the first six months of fiscal 2003, respectively, compared to none in the three months ended and one in the six months ended June 29, 2002.

The gross margin rate for the second quarter and first six months of fiscal 2003 was 30.3% and 30.0%, respectively. Assuming the provisions of EITF 02-16 had been applied prior to 2002, gross margin decreased 20 basis points for the second quarter of fiscal 2003 and remained flat for the first six months of fiscal 2003 compared with the corresponding periods in the prior fiscal year. Improved margins as a result of lower merchandise costs and changes in sales mix were more than offset by an increase in freight costs.

As a percent of sales, selling, general and administrative (“SG&A”) expenses were 19.4% and 22.1% for the second quarter and first six months of fiscal 2003, respectively. Assuming the provisions of EITF 02-16 had been applied prior to fiscal 2002, SG&A expenses decreased 220 basis points for the second quarter of fiscal 2003 and decreased 250 basis points for the first six months of fiscal 2003 compared with the corresponding periods in the prior fiscal year. Excluding the non-recurring expansion costs of $4.5 million and $10.7 million for the second quarter and first six months of fiscal 2002, SG&A decreased 100 basis points for the second quarter of fiscal 2003 and 70 basis points for the first six months of fiscal 2003 compared with the corresponding periods in the prior fiscal year. This decrease is primarily a result of controlled spending, greater leverage from increased sales and lower incentive accruals.

Page 15 of 21

Depreciation and amortization expense increased 6.6% and 21.9% over the second quarter and the first six months of fiscal 2002, respectively. The increase is due mainly to costs associated with new and relocated stores, as well as remodeled existing stores.

Net interest expense decreased 18.0% and 11.9% over the second quarter and the first six months of fiscal 2002, respectively. This decrease reflects stronger cash flow and less cash requirements for store openings, which resulted in reduced average short-term borrowings under the senior credit facility.

The Company’s effective tax rate decreased to 36.7% for the second quarter and the first six months of fiscal 2003 compared with 38.0% for the same periods of the prior fiscal year. This decrease is primarily due to changes in applicable state tax rates.

As a result of the foregoing factors, net income for the second quarter of fiscal 2003 increased 57.9% to $27.4 million, or $1.37 per diluted share, compared to net income of $17.3 million, or $0.88 per diluted share, in the prior year. Net income for the first six months of fiscal 2003 was $27.5 million or $1.38 per diluted share compared to net income of $13.3 million or $0.69 per diluted share, in the prior year. These increases are primarily a result of increased leverage from increased sales and non-recurring store expansion costs experienced in the second quarter and first six months of fiscal 2002 as follows (in thousands, except per share amounts):


		Three Months Ended										Six Months Ended

		June 28, 2003					June 29, 2002					June 28, 2003					June 29, 2002

							(Pro-forma)										(Pro-forma)
				%					%					%					%
				of Sales					of Sales					of Sales					of Sales

Net income — as reported		$	27,387		6.1	%	$	17,346		4.4	%	$	27,512		3.8	%	$	13,336		2.3	%
	Change in accounting for vendor funding had EITF 02-16 been adopted prior to fiscal 2002, net of income taxes							877		0.2			1,888		0.3			889		0.2
Non-recurring store expansion costs, net of income taxes			—		—			2,799		0.7			—		—			6,666		1.1

Pro-forma income assuming the change in accounting for vendor funding occurred prior to 2002 and exclusive of non-recurring store expansion costs		$	27,387		6.1	%	$	21,022		5.3	%	$	29,400		4.1	%	$	20,891		3.6	%


	Three Months Ended

			June 28, 2003							June 29, 2002

								(Pro-forma)
						Per Share						Per Share
						Amount						Amount
	Income			Shares		(Diluted)		Income		Shares		(Diluted)

Net income — as reported	$	27,387			20,055	$	1.37	$	17,346		19,590	$	0.88
Change in accounting for vendor funding had EITF 02-16 been adopted prior to fiscal 2002, net of income taxes		—			20,055		—		877		19,590		0.05
Non-recurring store expansion costs, net of income taxes		—			20,055		—		2,799		19,590		0.14

Pro-forma income assuming the change in accounting for vendor funding had occurred prior to 2002 and exclusive of non-recurring store expansion costs	$	27,387			20,055	$	1.37	$	21,022		19,590	$	1.07

Page 16 of 21


	Six Months Ended

	June 28, 2003							June 29, 2002

				(Pro-forma)							(Pro-forma)
						Per Share							Per Share
						Amount								Amount
	Income			Shares		(Diluted)		Income			Shares		(Diluted)

Net income — as reported:		$	27,512		19,958	$	1.38		$	13,336		19,377	$	0.69
Change in accounting for vendor funding had EITF 02-16 been adopted prior to fiscal 2002, net of income taxes			1,888		19,958		0.09			889		19,377		0.04
Non-recurring store expansion costs, net of income taxes			—		19,958		—			6,666		19,377		0.34

Pro-forma income assuming the change in accounting for vendor funding had occurred prior to 2002 and exclusive of non-recurring store expansion costs		$	29,400		19,958	$	1.47		$	20,891		19,377	$	1.07

Liquidity and Capital Resources

In addition to normal operating expenses, the Company’s primary ongoing cash requirements are for expansion, remodeling and relocation programs, including inventory purchases and capital expenditures. The Company’s primary ongoing sources of liquidity are funds provided from operations, commitments available under its revolving credit agreement and normal trade credit. The Company’s inventory and accounts payable levels typically build in the first and third fiscal quarters in anticipation of the spring and fall selling seasons.

At June 28, 2003, the Company’s inventories had increased $65.9 million to $355.2 million from $289.3 million at December 28, 2002. This increase resulted primarily from additional inventory for new stores and unplanned inventory increases in seasonal product lines. Trade credit increased $75.1 million to $190.0 million at June 28, 2003 from $114.9 million at December 28, 2002, primarily due to the increase in inventory. Trade credit arises from the Company’s vendors granting payment terms for inventory purchases. Payment terms vary from 30 days to 180 days depending on the inventory product.

At June 28, 2003, the Company had working capital of $148.8 million, which represented a $4.9 million increase from December 28, 2002. This increase resulted primarily from a $10.5 million decrease in accrued expenses (due largely to an $8.6 million decrease in incentive compensation accruals and timing of payments) and a $4.1 million increase in cash and cash equivalents, offset by a $9.2 million increase in accounts payable over the related increase in inventory.

Operations provided net cash of $38.2 million and $69.1 million for the first six months of fiscal 2003 and 2002, respectively. The decrease in net cash provided resulted primarily from inventories increasing at a slower rate than accounts payable in the first six months of 2003 compared to the first six months of 2002, (during the first half of fiscal 2002, many vendors offered special extended payment terms for inventory purchases). Additionally, net income increased $14.2 million compared to the prior year, while being partially offset by a decrease in accrued expenses.

Cash used in investing activities of $14.0 million for the first six months of fiscal 2003 represented a $35.0 million decrease over cash used in the first six months fiscal 2002 of $49.0 million. Cash used in investing activities in the first six months of fiscal 2002 primarily reflects the purchase of buildings, improvements, fixtures and lease rights of certain retail stores formerly operated by Quality Stores, Inc.

Financing activities in the first six-months of fiscal 2003 used $20.2 million in cash, which represented a $6.8 million increase over the $13.4 million in cash used in the first six months of fiscal 2002. This increase in net cash used resulted primarily from greater repayments than short term borrowings under the senior credit facility. Net repayments under the senior credit facility were $23.6 million and $15.1 million for the first six months of fiscal 2003 and 2002, respectively. This increase in net repayments primarily reflects lower borrowing for capital

Page 17 of 21

expenditures in the current period compared to the first fiscal six months of 2002, offset in part by the favorable accounts payable terms, which required less short term borrowings under the senior credit facility.

The Company believes that its cash flow from operations, borrowings available under credit agreements, and normal trade credit will be sufficient to fund the Company’s operations and its capital expenditure needs, including store openings and renovations, over the next several years.

Off-Balance Sheet Arrangements

The Company’s off-balance sheet arrangements consist of operating leases for buildings and equipment for retail stores, distribution centers and offices. In addition, the Company has outstanding letters of credit totaling $13.4 million at June 28, 2003.

Significant Accounting Policies and Estimates

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


-	Inventory valuation, including reserves	-	Vendor funding
-	Sales returns	-	Inventory shrinkage
-	Impairment of long-lived assets	-	Self-insurance

The Company’s critical accounting policies are subject to judgments and uncertainties, which affect the application of such policies. (See Note 1 of the Unaudited Consolidated Financial Statements.) 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company applies Statements of Financial Accounting Standards Nos. 133, 137, and 138 (collectively “SFAS 133”) in the accounting for derivatives and hedging activities. SFAS 133 requires the Company to recognize all derivative instruments in the balance sheet at fair value. SFAS 133 impacts the accounting for the Company’s interest rate swap agreement. The Company’s interest rate swap agreement is designated as a cash flow hedge. At June 28, 2003, the interest rate agreement hedged cash flows related to variable-rate debt of $9.9 million. At June 29, 2002 the Company had no outstanding balance of variable rate debt. The fair value of the interest rate swap was a liability of $0.7 million at June 28, 2003 and $2.1 million at June 29, 2002. The interest rate swap agreement expires in November 2003.

The Company is exposed to changes in interest rates primarily from its variable-rate, long-term debt arrangements. Under its current policies, the Company uses the interest rate swap to manage exposure to interest rate changes for a portion of its debt arrangements. Taking into account the effects of the interest rate swap designated as a hedge, a hypothetical 100 basis point adverse move (increase) in interest rates along the entire interest rate yield curve would not materially impact the fair market value of the long-term debt.

Although the Company cannot accurately determine the precise effect of inflation on its operations, it does not believe its sales or results of operations have been materially affected by inflation. The Company has been successful, in many cases, in reducing or mitigating the effects of inflation principally by taking advantage of vendor incentive programs, economies of scale from increased volume of purchases and selective buying from the most competitive vendors without sacrificing quality.

Page 18 of 21

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the design and operation of the Company’s disclosure controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective for gathering, analyzing and disclosing the information the Company is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

The evaluation referred to above did not identify any change in the Company’s internal control over financial reporting that occurred in the period covered by this report that has materially affected or is reasonably likely to materially affect the Company’s internal controls over financial reporting.

Page 19 of 21

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

(a)		The Company’s Annual Meeting of Stockholders was held on April 17, 2003 at the Company’s corporate headquarters in Nashville, Tennessee.

(b)		The stockholders elected, for a three-year term, three Class III directors nominated for election as set forth in the proxy statement dated March 14, 2003. The following table sets forth certain information concerning each director of the Company whose term of office as a director continued after the meeting:


	Current Term as
Name	Director Expires

James F. Wright		2004
Thomas O. Flood		2004
Gerard E. Jones		2004
Joseph D. Maxwell		2005
Joseph M. Rodgers		2005
Sam K. Reed		2005

(c)

(1)

The stockholders elected three Class III directors for a three-year term ending at the 2006 Annual Meeting of Stockholders.


Name	For		Withheld

Joseph H. Scarlett, Jr.		15,561,060		590,405
S.P. Braud		15,354,592		796,873
Cynthia T. Jamison		15,360,349		790,816

(c)

(2)

The stockholders ratified the reappointment of Ernst & Young LLP as independent auditors of the Company for the fiscal year ending December 27, 2003.


For	Against		Abstain

15,723,433		401,519		26,513

Item 6. Exhibits and Reports on Form 8-K

(a)

Exhibits


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

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

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

(b)

Reports on Form 8-K


			The Company filed one report on Form 8-K, dated April 15, 2003 issuing a press release announcing it’s financial results for the first quarter ended March 29, 2003. Notwithstanding the foregoing, information furnished under items 9 and 12 of our Current Reports on Form 8-K, including the related exhibits, is not incorporated by reference in this quarterly report.

Page 20 of 21

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.

Page 21 of 21

TRACTOR SUPPLY COMPANY

August 7, 2003

/s/ Calvin B. Massmann

Calvin B. Massmann
Senior Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)