TRACTOR SUPPLY CO /DE/ (TSCO) FY 2023 MD&A

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to provide the reader with information that will assist in understanding the significant factors affecting our consolidated operating results, financial condition, liquidity, and capital resources during the two-year period ended December 30, 2023 (our fiscal years 2023 and 2022). For a comparison of our results of operations for fiscal year December 31, 2022 and December 25, 2021, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 23, 2023. This discussion should be read in conjunction with our Consolidated Financial Statements and Notes to the Consolidated Financial Statements included elsewhere in this report. This discussion contains forward-looking statements and information. See “Forward-Looking Statements and Information” and “Risk Factors” included elsewhere in this report.

Tractor Supply reports its financial results in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Tractor Supply also uses certain non-GAAP measures that fall within the meaning of Securities and Exchange Commission Regulation G and Regulation S-K Item 10(e), which may provide users of the financial information with additional meaningful comparison to prior reported results. Non-GAAP measures do not have standardized definitions and are not defined by U.S. GAAP. Therefore, Tractor Supply’s non-GAAP measures are unlikely to be comparable to similar measures presented by other companies. The presentation of these non-GAAP measures should not be considered in isolation from, as a substitute for, or as superior to the financial information presented in accordance with U.S. GAAP. We believe this information is useful in providing period-to-period comparisons of the results of our continuing operations.

Overview

Founded in 1938, Tractor Supply Company (the “Company” or “Tractor Supply” or “we” or “our” or “us”) is the largest rural lifestyle retailer in the United States (“U.S.”). The Company is focused on supplying the needs of recreational farmers, ranchers, and all those who enjoy living the rural lifestyle (which we refer to as the “Out Here” lifestyle). As of December 30, 2023, we operated 2,414 retail stores in 49 states under the names Tractor Supply Company and Petsense by Tractor Supply. Our stores are located primarily in towns outlying major metropolitan markets and in rural communities. We also operate websites under the names TractorSupply.com and Petsense.com, as well as a Tractor Supply Company mobile application. Through our stores and e-commerce channels, we offer the following comprehensive selection of merchandise:

•Livestock, Equine & Agriculture: livestock and equine feed & equipment, poultry, fencing, and sprayers & chemicals;

•Companion Animal: food, treats and equipment for dogs, cats, and other small animals as well as dog wellness;

•Seasonal & Recreation: tractor & rider, lawn & garden, bird feeding, power equipment, and other recreational products;

•Truck, Tool, & Hardware: truck accessories, trailers, generators, lubricants, batteries, and hardware and tools; and

•Clothing, Gift, & Décor: clothing, footwear, toys, snacks, and decorative merchandise.

Tractor Supply Company believes we can grow our business by being a more integral part of our customers’ lives as the dependable supplier of “Out Here” lifestyle solutions, creating customer loyalty through personalized experiences, and providing convenience that our customers expect anytime, anywhere, and in any way they choose. Our long-term growth strategy is to: (1) expand and deepen our customer base by providing personal, localized, and memorable customer engagements by leveraging content, social media, and digital shopping experiences, attracting new customers and driving loyalty, (2) evolve customer experiences by digitizing our business processes and furthering our omni-channel capabilities, (3) offer relevant assortments and services across all channels through exclusive and national brands and continue to grow our total addressable market by introducing new products and services through our test and learn strategy, (4) drive operational excellence and productivity through continuous improvement, increasing space utilization, and implementing advanced supply chain capabilities to support growth, scale and agility, and (5) expand through selective acquisitions, as such opportunities arise, to add complementary businesses and to enhance penetration into new and existing markets to supplement organic growth.

Achieving this strategy will require a foundational focus on: (1) connecting, empowering and growing our team to enhance their lives and the communities they live in, enabling them to provide legendary service to our customers, and (2) allocating resources in a disciplined and efficient manner to drive profitable growth and build stockholder value, including leveraging technology and automation, to align our cost structure to support new business capabilities for margin improvement and cost reductions.

Over the past five years, we have experienced considerable growth in stores, growing from 1,940 stores at the end of fiscal 2018 to 2,414 stores (2,216 Tractor Supply retail stores and 198 Petsense by Tractor Supply retail stores) at the end of fiscal 2023, and in net sales, with a compounded annual growth rate of approximately 13.0%. Given the size of the communities that we target, we believe that there is ample opportunity for new store growth in many existing and new markets. We have developed a proven method for selecting store sites, and we believe we have significant additional opportunities for new Tractor Supply stores. We also believe that there is opportunity for continued growth for Petsense by Tractor Supply stores.

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Executive Summary

In fiscal 2023, we opened 70 new Tractor Supply stores in 28 states and 13 new Petsense by Tractor Supply stores in nine states. In fiscal 2022, we opened 63 new Tractor Supply stores in 25 states and nine new Petsense by Tractor Supply stores in seven states. We also acquired 81 Orscheln Farm and Home stores in eight states, which were all rebranded as Tractor Supply stores as of the end of fiscal 2023. This resulted in a selling square footage increase of approximately 3% in fiscal 2023 and 11% in fiscal 2022.

Net sales increased 2.5% to $14.56 billion in fiscal 2023 from $14.20 billion in fiscal 2022. The prior year’s fourth quarter included an extra sales week as part of the Company’s 53-week calendar in 2022, which negatively impacted the overall sales increase by approximately 1.6 percentage points. Comparable store sales were even in fiscal 2023 versus a 6.3% increase in fiscal 2022. Gross profit increased 5.1% to $5.23 billion in fiscal 2023 from $4.97 billion in fiscal 2022, and gross margin increased 92 basis points to 35.9% of net sales in fiscal 2023 from 35.0% of net sales in fiscal 2022. Operating income increased 6 basis points to 10.2% of net sales in fiscal 2023 from 10.1% of net sales in fiscal 2022. For fiscal 2023, net income was $1.11 billion, or $10.09 per diluted share, compared to $1.09 billion, or $9.71 per diluted share, in fiscal 2022.

We ended fiscal 2023 with $397.1 million in cash and cash equivalents and outstanding long-term debt of $1.73 billion, after returning $1.05 billion to our stockholders through stock repurchases and quarterly cash dividends.

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. An Orscheln store will be considered a comparable store one year after its point-of-sale system conversion. Fiscal 2023 includes 52 weeks and fiscal 2022 includes 53 weeks. For our calculation of comparable store sales in fiscal 2023, we compare weeks 1 through 52 in fiscal 2023 against weeks 2 through 53 in fiscal 2022. Comparable store sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with U.S. GAAP.

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.

Significant Accounting Policies and Estimates

Management’s discussion and analysis of our financial position and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with 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.  Our financial position and/or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies.  In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.  Our significant accounting policies are disclosed in Note 1 to the Consolidated Financial Statements.  The following discussion addresses our most critical accounting policies and estimates, which are those that are both important to the portrayal of our financial condition and results of operations and that require significant judgment or use of complex estimates.

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Merchandise Inventory:

We identify potentially excess and slow-moving inventory by evaluating turn rates, historical and expected future sales trends, age of merchandise, overall inventory levels, current cost of inventory, and other benchmarks. We have established an inventory valuation reserve to recognize the estimated impairment in value (i.e., an inability to realize the full carrying value) based on our aggregate assessment of these valuation indicators under prevailing market conditions and current merchandising strategies.

We also have established a reserve for estimating inventory shrinkage between physical inventory counts. The reserve is established by assessing the chain-wide average shrinkage experience rate, applied to the related periods’ sales volumes. Such assessments are updated on a regular basis for the most recent individual store experiences. Our general policy is to perform physical inventories at least once a year for each store that has been open more than twelve months.

We do not believe our merchandise inventories are subject to significant risk of obsolescence in the near term. However, changes in market conditions or consumer purchasing patterns could result in the need for additional reserves. Our impairment reserves contain uncertainties because the calculations require management to make assumptions and to apply judgment regarding forecasted customer demand and the promotional environment. The estimated store inventory shrink rate is based on historical experience. We believe historical rates are a reasonably accurate reflection of future trends. Our shrinkage reserve contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding future shrinkage trends, the effect of loss prevention measures and merchandising strategies.

We have not made any material changes in the accounting methodology used to recognize inventory impairment reserves or shrinkage in the financial periods presented. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate impairment or shrinkage. However, if assumptions regarding consumer demand, clearance potential or inventory loss for certain products are inaccurate, we may be exposed to losses or gains that could be material. A 10% change in our inventory impairment reserve as of December 30, 2023, would have affected net income by approximately $2.7 million in fiscal 2023. A 10% change in our shrinkage reserve as of December 30, 2023, would have affected net income by approximately $4.9 million in fiscal 2023.

In addition, we receive funding from substantially all of our significant merchandise vendors, in support of our business initiatives, through a variety of programs and arrangements, including guaranteed vendor support funds (“vendor support”) and volume-based rebate funds (“volume rebates”). The amounts received are subject to terms of vendor agreements, most of which are “evergreen”, reflecting the on-going relationship with our significant merchandise vendors. Certain of our agreements, primarily volume rebates, are renegotiated annually, based on expected annual purchases of the vendor’s product. Vendor funding is initially deferred as a reduction of the purchase price of inventory, and then recognized as a reduction of cost of merchandise as the related inventory is sold. During interim periods, the amount of vendor support and volume rebates are estimated based upon initial commitments and anticipated purchase levels with applicable vendors.

We have not made any material changes in the accounting methodology used to establish our vendor funding reserves in the financial periods presented. At the end of each fiscal year, a significant portion of the actual purchase activity is known. Thus, we do not believe there is a reasonable likelihood that there will be a material change in the amounts recorded as vendor funding. We do not believe there is a significant collectability risk related to vendor funding amounts due to us at the end of fiscal 2023. If a 10% reserve had been applied against our outstanding vendor funding due as of December 30, 2023, net income would have been affected by approximately $3.5 million in fiscal 2023. Although it is unlikely that there will be any significant reduction in historical levels of vendor funding, if such a reduction were to occur in future periods, the Company could experience a higher inventory balance and higher cost of sales.

For vendor funding, we estimate the purchase volume (and related vendor funding) based on our current knowledge of inventory levels, sales trends and expected customer demand, as well as planned new store openings and relocations. Although we believe we can reasonably estimate purchase volume and related volume rebates at interim periods, it is possible that actual year-end results could be different from previously estimated amounts. Our allocation methodology contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding customer demand, purchasing activity, target thresholds, vendor attrition and collectability.

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Self-Insurance Reserves:

We self-insure a significant portion of our workers’ compensation insurance and general liability (including product liability) insurance plans. We have stop-loss insurance policies to protect from individual losses over specified dollar values. Provisions for losses related to our self-insured liabilities are based upon periodic independent actuarially determined estimates that consider a number of factors including historical claims experience, loss development factors, and severity factors.

The full extent of certain workers’ compensation and general liability claims may not become fully determined for several years. Our self-insured liabilities contain uncertainties because management is required to make assumptions and to apply judgment to estimate the ultimate cost to settle reported claims and claims incurred but not reported as of the balance sheet date based upon historical data and experience, including actuarial calculations.

We have not made any material changes in the accounting methodology used to establish our self-insurance reserves in the financial periods presented. We do not believe there is a reasonable likelihood that there will be a material change in the assumptions we use to calculate insurance reserves. However, if we experience a significant increase in the number of claims or the cost associated with these claims, we may be exposed to losses that could be material. A 10% change in our self-insurance reserves as of December 30, 2023, would have affected net income by approximately $10.7 million in fiscal 2023.

Impairment of Long-Lived Assets:

Long-lived assets, including lease right-of-use assets, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When evaluating long-lived assets for potential impairment, we first compare the carrying value of the asset or asset group to its estimated undiscounted future cash flows. The evaluation for long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual store level. The significant assumptions used to determine estimated undiscounted cash flows include cash inflows and outflows directly resulting from the use of those assets in operations, including margin on net sales, payroll and related items, occupancy costs, insurance allocations, and other costs to operate a store. If the estimated future cash flows are less than the carrying value of the related asset, we calculate an impairment loss. The impairment loss calculation compares the carrying value of the related asset or asset group to its estimated fair value, which may be based on an estimated future cash flow model, market valuation, or other valuation technique, as appropriate. We recognize an impairment loss if the amount of the asset’s carrying value exceeds the asset’s estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated (amortized) over the remaining estimated useful life of that asset.

Our impairment loss calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values.

We have not made any material changes in our impairment loss assessment methodology in the financial periods presented.

We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses. None of these estimates and assumptions are significantly sensitive, and a 10% change in any of these estimates would not have a material impact on our analysis. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material.

There were no significant long-lived assets impairment charges recognized in fiscal 2023.

Impairment of Goodwill and Other Indefinite-Lived Intangible Assets:

Goodwill and other indefinite-lived intangible assets are evaluated for impairment annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In accordance with the accounting standards, an entity has the option first to assess qualitative factors to determine whether events and circumstances indicate that it is more likely than not that goodwill or an indefinite-lived intangible asset is impaired. If after such assessment an entity concludes that the asset is not impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the asset using a quantitative impairment test, and if impaired, the associated assets must be written down to fair value.

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The quantitative impairment test for goodwill compares the fair value of a reporting unit with the carrying value of its net assets, including goodwill. If the fair value of the reporting unit is less than the carrying value of the reporting unit, an impairment charge would be recorded to the Company’s operations, for the amount in which the carrying amount exceeds the reporting unit’s fair value. We determine fair values for each reporting unit using the market approach, when available and appropriate, the income approach, or a combination of both. The income approach involves forecasting projected financial information (such as revenue growth rates, profit margins, tax rates, and capital expenditures) and selecting a discount rate that reflects the risk inherent in estimated future cash flows. Under the market approach, the fair value is based on observed market data. If multiple valuation methodologies are used, the results are weighted appropriately.

The quantitative impairment test for other indefinite-lived intangible assets involves comparing the carrying amount of the asset to the sum of the discounted cash flows expected to be generated by the asset. If the implied fair value of the indefinite-lived intangible asset is less than the carrying value, an impairment charge would be recorded to the Company’s operations.

Our impairment loss calculation contains uncertainties because they require management to make assumptions and to apply judgment to qualitative factors as well as estimate future cash flows and asset fair values, including forecasting projected financial information and selecting the discount rate that reflects the risk inherent in future cash flows.

The valuation approaches utilized to estimate fair value for the purposes of the impairment tests of goodwill and other indefinite-lived intangible assets require the use of assumptions and estimates, which involve a degree of uncertainty. If actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to non-cash impairment losses that could be material.

There were no goodwill or other indefinite-lived intangible assets impairment charges recognized in fiscal 2023.

Results of Operations

The following table sets forth, for the periods indicated, certain items in the Consolidated Statements of Income expressed as a percentage of net sales.

(a) Our gross margin amounts may not be comparable to those of other retailers since some retailers include all of the costs related to their distribution facility network in cost of merchandise sold and others (like our Company) exclude a portion of these distribution facility network costs from gross margin and instead include them in Selling, general, and administrative expenses; refer to Note 1 – Significant Accounting Policies of the Notes to the Consolidated Financial Statements, included in Item 8 Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Fiscal 2023 Compared to Fiscal 2022

Net sales increased 2.5% to $14.56 billion in fiscal 2023 from $14.20 billion in fiscal 2022. The prior year included an extra sales week as part of the Company’s 53-week calendar in 2022, which negatively impacted the overall sales increase by approximately 1.6 percentage points. Comparable store sales were even with prior year and represented $13.89 billion in sales. Comparable store sales in 2022 increased by 6.3% from 2021. The comparable store average transaction value increased 0.4% and comparable store average transaction count decreased 0.4% for fiscal 2023, as compared to an increase of 6.9% and decrease of 0.6% in fiscal 2022, respectively. Comparable store sales performance reflects continued strength in core year-round merchandise, including consumable, usable and edible (“C.U.E.”) products which significantly outpaced the chain average. This performance largely offset declines in demand for seasonal goods and big-ticket items.

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Sales from stores opened less than one year and stores from the Orscheln acquisition were $652.8 million in fiscal 2023, which contributed a net 4.1 percentage points of the 2.5% increase over fiscal 2022 net sales. Sales from stores opened less than one year, including $80.0 million related to the acquisition of Orscheln Farm and Home, were $396.2 million in fiscal 2022, which represented 3.1 percentage points of the 11.6% increase over fiscal 2021 net sales.

The following table summarizes our store growth during fiscal 2023 and 2022:

The following table indicates the percentage of net sales represented by each of our major product categories during fiscal 2023 and 2022:

Gross profit increased 5.1% to $5.23 billion in fiscal 2023 compared to $4.97 billion in fiscal 2022.  As a percent of net sales, gross margin increased 92 basis points to 35.9% for fiscal 2023 compared to 35.0% for fiscal 2022. Gross margin continued to benefit from the Company’s ongoing execution of an everyday low price strategy, complemented by the use of its Neighbor’s Club loyalty program. The gross margin rate increase was attributable to ongoing lower transportation costs and disciplined product cost management, modestly offset by negative product mix.

Total selling, general and administrative (“SG&A”) expenses, including depreciation and amortization, increased 6.0% to $3.75 billion in fiscal 2023 from $3.54 billion in fiscal 2022. As a percent of net sales, SG&A expenses increased 86 basis points to 25.8% from 24.9%. The increase in SG&A as a percentage of net sales was primarily attributable to the Company’s planned growth investments, which included higher depreciation and amortization and the onboarding of a new distribution center, as well as higher medical claims and fixed cost deleverage. During fiscal 2023, the Company completed its strategically planned sale-leaseback of 15 Tractor Supply store locations, benefiting SG&A by approximately 25 basis points, net of transaction and repair costs.

Our effective income tax rate increased to 22.7% for fiscal 2023 compared to 22.5% in fiscal 2022. The primary drivers for the increase in the Company's effective income tax rate year over year were an increase in state income taxes and a decrease in Federal credits, partially offset by an increase in share-based compensation.

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Net income in fiscal 2023 was $1.11 billion, or $10.09 per diluted share, compared to $1.09 billion, or $9.71 per diluted share, in fiscal 2022. The benefit of the 53rd week contributed approximately $0.16 to diluted EPS in fiscal 2022.

During fiscal 2023, we repurchased approximately 2.7 million shares of the Company’s common stock at a total cost of $602.9 million, including the 1% excise tax, as part of our share repurchase program.  In fiscal 2022, we repurchased approximately 3.4 million shares at a total cost of $700.1 million.

Fiscal 2022 Compared to Fiscal 2021

For a comparison of our performance and financial metrics for the fiscal years ended December 31, 2022 and December 25, 2021, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 23, 2023.

Liquidity and Capital Resources

In addition to normal operating expenses, 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.

Additionally, we plan to continue to leverage our sale-leaseback program on both existing owned stores as well as future new store openings. This program will help fund our planned owned store development. We plan to execute sale-leaseback transactions of our existing portfolio of owned stores to fund the cash required by the new development program over the next eight to 10 years.

We believe that our existing cash balances, expected cash flow from future operations, funds available under our debt facilities, operating and finance leases, normal trade credit, sale of existing stores, and access to the long-term debt capital markets will be sufficient to fund our operations and capital allocation needs in the short term, through the end of fiscal 2024, and in the longer term thereafter.

Debt

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

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We manage our business and financial ratios to target an investment-grade bond rating, which has historically allowed flexible access to financing at reasonable market costs. As of December 30, 2023, and the date of this filing, February 23, 2024, the Company's senior unsecured debt is rated “Baa1,” by Moody’s Investor Services with a stable outlook and “BBB” by Standard & Poor’s with a stable outlook. These ratings have been obtained with the understanding that Moody’s Investors Services and Standard & Poor’s will continue to monitor our credit and make future adjustments to these ratings to the extent warranted. The ratings are not a recommendation to buy, sell or hold our securities, may be changed, superseded or withdrawn at any time and should be evaluated independently of any other rating.

Our current ratings, as well as future rating agency actions, could impact our ability to finance our operations on satisfactory terms and affect our financing costs. There can be no assurance that we will maintain or improve our current credit ratings.

On May 5, 2023, the Company completed the sale of $750 million aggregate principal amount of its 5.25% Senior Notes. The entire principal amount of the 5.25% Senior Notes is due in full on May 15, 2033. Interest is payable semi-annually in arrears on each May 15 and November 15. The terms of the 5.25% Senior Notes are governed by the Base Indenture, as amended and supplemented by the Second Supplemental Indenture between the Company and Regions Bank, as trustee.

For additional information about the Company’s debt and credit facilities, refer to Note 5 to the Consolidated Financial Statements.

Operating Activities

Operating activities provided cash of $1.33 billion and $1.36 billion in fiscal 2023 and 2022, respectively. The $23.0 million decrease in net cash provided by operating activities in fiscal 2023, compared to fiscal 2022, was due to changes in the following (in millions):

The $23.0 million decrease in net cash provided by operating activities in fiscal 2023, compared to fiscal 2022, is primarily driven by the net impact of changes in our operating assets and liabilities, primarily due to the Company's strategic initiatives as well as the timing of accruals and related payments.

Investing Activities

Investing activities used cash of $653.1 million and $1.09 billion in fiscal 2023 and 2022, respectively.  The $440.6 million decrease in net cash used in investing activities primarily reflects the acquisition of Orscheln Farm and Home in fiscal 2022 and the proceeds from the sale-leaseback transactions in fiscal 2023, partially offset by cash received from Orscheln stores divestiture in fiscal 2022.

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Investing activities, including capital expenditures, for fiscal 2023 and 2022 were as follows (in millions):

The spending for existing stores in fiscal 2023 and fiscal 2022 primarily reflects our strategic initiatives related to store remodels, including internal space productivity, side lot garden center transformations and Orscheln store conversions. Spending in both fiscal 2023 and fiscal 2022 also includes routine refresh activity.

The spending for distribution center capacity and improvements in fiscal 2023 and fiscal 2022 is primarily related to the construction of Maumelle, Arkansas, and Navarre, Ohio, respectively. On January 18, 2023, the Company opened its ninth distribution center located in Navarre, Ohio, which expanded the distribution center capacity by approximately 900,000 square feet. The Maumelle, Arkansas distribution center is currently expected to begin operations in the second quarter of fiscal 2024 and will expand our distribution capacity by approximately 1,200,000 square feet.

The spending on information technology represents continued support of our store growth and our omni-channel initiatives, as well as improvements in security and compliance and other strategic initiatives.

The above table reflects an investment in 70 new Tractor Supply stores, 13 new Petsense by Tractor Supply stores, and eight store relocations during fiscal 2023. In fiscal 2022, we opened 63 new Tractor Supply stores and nine new Petsense by Tractor Supply stores and had seven store relocations.

In fiscal 2022, we completed the acquisition of Orscheln Farm and Home and subsequently divested 85 stores to Bomgaars Supply, Inc. and Buchheit Enterprises, Inc. In fiscal 2023, we received $4.3 million from the Orscheln acquisition net working capital settlement and $10.0 million from the sale of Orscheln corporate headquarters and distribution center.

In fiscal 2023, we sold and subsequently leased back 15 of our retail locations, resulting in proceeds of $82.0 million.

Our projected capital expenditures, net of sale leaseback proceeds, for fiscal 2024 are currently estimated to be in a range of approximately $625.0 million to $700.0 million. The capital expenditures include a plan to open a total of approximately 80 Tractor Supply stores, continuing Project Fusion remodels and garden center transformations, completion of our 10th distribution center and opening a total of 10 to 15 new Petsense by Tractor Supply stores.

Financing Activities

Financing activities used cash of $486.4 million and $938.8 million in fiscal 2023 and 2022, respectively. The $452.4 million decrease in net cash used in financing activities in fiscal 2023, compared to fiscal 2022, was due to changes in the following (in millions):

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The decrease in net cash used in financing activities in fiscal 2023, compared to fiscal 2022, is primarily due to the increase in net borrowings under the debt facilities, namely the sale of $750.0 million 5.25% Senior Notes, and a decrease in the repurchase of common stock, partially offset by an increase in cash dividends paid to stockholder.

Repurchase of Common Stock

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 $6.50 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, or terminated at any time without prior notice.

We repurchased approximately 2.7 million and 3.4 million shares of common stock under the share repurchase program and paid cash totaling $594.4 million and $700.1 million in fiscal 2023 and 2022, respectively.  Our projected share repurchases for fiscal 2024 are currently estimated to be in a range of approximately $575 million to $625 million.

Cash Dividends Paid to Stockholders

We paid cash dividends totaling $449.6 million and $409.6 million in fiscal 2023 and 2022, respectively. In fiscal 2023, we declared and paid cash dividends to stockholders of $4.12 per common share outstanding as compared to $3.68 per common share outstanding in fiscal 2022. These payments reflect an increase in the quarterly dividend in all four quarters of fiscal 2023 to $1.03 per share from $0.92 per share in all four quarters of fiscal 2022.

On February 5, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $1.10 per share of the Company’s outstanding common stock.  The dividend will be paid on March 12, 2024, to stockholders of record as of the close of business on February 26, 2024.

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 amount 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 which the Company’s Board of Directors deem relevant.

New Accounting Pronouncements

Refer to Note 1 to the Consolidated Financial Statements for recently adopted accounting pronouncements and recently issued pronouncements not yet adopted as of December 30, 2023.