Tractor Supply (TSCO) 10-Q2023 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

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.

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

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

TRACTOR SUPPLY COMPANY

INDEX

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(Unaudited)

TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

TRACTOR SUPPLY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

TRACTOR SUPPLY COMPANY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – General:

Nature of Business

Recently Adopted Accounting Pronouncements

Note 2 – Fair Value of Financial Instruments:

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.  These tiers include:

The Company’s financial instruments consist of cash and cash equivalents, short-term credit card receivables, trade payables, debt instruments, and interest rate swaps.  Due to their short-term nature, the carrying values of cash and cash equivalents, short-term credit card receivables, and trade payables approximate current fair value at each balance sheet date.

The fair value of the Company's $650 million 1.75% Senior Notes due 2030 (the "1.75% Senior Notes") is determined based on quoted prices in active markets, which are considered Level 1 inputs. The carrying value and the fair value of the 1.75% Senior Notes, net of discounts, were as follows (in thousands):

The Company's interest rate swap is carried at fair value, which is determined based on the present value of expected future cash flows using forward rate curves, which is considered a Level 2 input. In accordance with hedge accounting, the gains and losses on interest rate swaps that are designated and qualify as cash flow hedges are recorded as a component of Other Comprehensive Income, net of related income taxes, and reclassified into earnings in the same income statement line and period in which the hedged transactions affect earnings. The fair value of the interest rate swap, excluding accrued interest, was as follows (in thousands):

Note 3 – Share-Based Compensation:

Share-based compensation includes stock options, restricted stock units, performance-based restricted share units, and transactions under the Company's Employee Stock Purchase Plan (the “ESPP”). Share-based compensation expense is recognized based on grant date fair value of all stock options, restricted stock units, and performance-based restricted share units. Share-based compensation expense is also recognized for the value of the 15% discount on shares purchased by employees as a part of the ESPP. The discount under the ESPP represents the difference between the market value on the first day of the purchase period or the market value on the purchase date, whichever is lower, and the employee’s purchase price.

There were no significant modifications to the Company’s share-based compensation plans during the fiscal three months ended April 1, 2023.

Share-based compensation expense was $14.5 million and $12.3 million for the first quarter of fiscal 2023 and 2022, respectively.

The following table summarizes information concerning stock option grants during the first three months of fiscal 2023:

As of April 1, 2023, total unrecognized compensation expense related to non-vested stock options was approximately $13.2 million with a remaining weighted average expense recognition period of 2.3 years.

Restricted Stock Units and Performance-Based Restricted Share Units

The following table summarizes information concerning restricted stock unit and performance-based restricted share unit grants during the first three months of fiscal 2023:

In the first three months of fiscal 2023, the Company granted performance-based restricted share unit awards that are subject to the achievement of specified performance goals. The performance metrics for the units are growth in net sales and growth in earnings per diluted share and also include a relative total shareholder return modifier. The number of performance-based restricted share units presented in the foregoing table represent the shares that can be achieved at the performance metric target value. The actual number of shares that will be issued under the performance-based restricted share unit awards, which may be higher or lower than the target, will be determined by the level of achievement of the performance goals and the relative total shareholder return modifier. If the performance targets are achieved, the units will be issued based on the achievement level, inclusive of the relative total shareholder return modifier, and the grant date fair value and will cliff vest in full on the third anniversary of the date of the grant, subject to continued employment.

As of April 1, 2023, total unrecognized compensation expense related to non-vested restricted stock units and non-vested performance-based restricted share units was approximately $103.2 million with a remaining weighted average expense recognition period of 2.3 years.

Note 4 - Acquisition of Orscheln Farm and Home, LLC and Related Divestitures

On October 12, 2022, the Company completed its acquisition of Orscheln, which expands the Company's footprint in the Midwest part of the United States. Pursuant to the agreement governing the acquisition, the Company acquired 100% of the equity interest in Orscheln, inclusive of 166 Orscheln stores, the Orscheln corporate headquarters, and the Orscheln distribution

center, for an all-cash purchase price of $397.7 million, exclusive of cash acquired. The acquisition was financed with cash-on-hand and Revolving Credit Facility borrowings under the 2022 Senior Credit Facility (as defined below).

In order to obtain regulatory approval for the Orscheln acquisition, the Federal Trade Commission required the Company to divest of 85 stores, which were sold to two buyers, Bomgaars Supply, Inc. (“Bomgaars”) (73 stores) and Buchheit Enterprises, Inc. (12 stores), on October 12, 2022, concurrently with the closing of the acquisition. Net proceeds from the store divestitures were $69.4 million. In addition, the Company has agreed to sell the Orscheln corporate headquarters and distribution center to Bomgaars for $10 million within 15 months after the closing of the acquisition.

The purchase consideration and preliminary estimated fair value of Orscheln’s net assets acquired on October 12, 2022 are shown below and remain subject to revisions as additional information is obtained about the facts and circumstances that existed at the valuation date. The assets and liabilities of the 85 divested stores, along with the Orscheln corporate headquarters and the Orscheln distribution center, are shown as held for sale in the fair value of assets acquired and liabilities assumed.

The resulting goodwill of $197.7 million is deductible for income tax purposes and represents the expected synergies from combining the operations of Orscheln with Tractor Supply stores and the expanded footprint that Orscheln brings in the Midwest part of the United States.

Note 5 – Net Income Per Share:

The Company presents both basic and diluted net income per share on the Condensed Consolidated Statements of Income.  Basic net income per share is calculated by dividing net income by the weighted average number of shares outstanding during the period.  Diluted net income per share is calculated by dividing net income by the weighted average diluted shares outstanding during the period. Dilutive shares are computed using the treasury stock method for share-based awards. Performance-based restricted share units are included in diluted shares only if the related performance conditions are considered satisfied as of the end of the reporting period. Net income per share is calculated as follows (in thousands, except per share amounts):

Anti-dilutive stock awards excluded from the above calculations totaled approximately 0.2 million shares for fiscal three months ended April 1, 2023 and less than 0.1 million shares for the fiscal three months ended March 26, 2022.

Note 6 – Debt:

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

Borrowings under the Company's Revolving Credit Facility bore interest either at the bank’s base rate (8.000% at April 1, 2023) plus an additional amount ranging from 0.000% to 0.250% (0.000% at April 1, 2023) or at adjusted Secured Overnight Financing Rate (4.802% at April 1, 2023) plus an additional amount ranging from 0.750% to 1.250% (1.000% at April 1, 2023), adjusted based on the Company's public credit ratings. The Company was also required to pay, quarterly in arrears, a commitment fee related to unused capacity on the Revolving Credit Facility ranging from 0.080% to 0.150% per annum (0.100% at April 1, 2023), adjusted based on the Company's public credit ratings.

The Company has entered into an interest rate swap agreement in order to hedge its exposure to variable rate interest payments associated with its debt. The interest rate swap agreement will mature on March 18, 2025, and the notional amount of the agreement is fixed at $200.0 million.

As of April 1, 2023, the 2022 Senior Credit Facility and the Note Purchase Facility (collectively, the “Debt Agreements”) required quarterly compliance with respect to two material covenants: a fixed charge coverage ratio and a leverage ratio.  Both ratios are calculated on a trailing twelve-month basis at the end of each fiscal quarter. The fixed charge coverage ratio compares earnings before interest, taxes, depreciation, amortization, share-based compensation, and rent expense (“consolidated EBITDAR”) to the sum of interest paid and rental expense (excluding any straight-line rent adjustments).  The fixed charge coverage ratio was required to be greater than or equal to 2.00 to 1.00 as of the last day of each fiscal quarter. The leverage ratio compares total funded debt to consolidated EBITDAR.  The leverage ratio was required to be less than or equal to 4.00 to 1.00 as of the last day of each fiscal quarter. The Debt Agreements also contain certain other restrictions regarding additional subsidiary indebtedness, business operations, subsidiary guarantees, mergers, consolidations and sales of assets, transactions with subsidiaries or affiliates, and liens.  As of April 1, 2023, the Company was in compliance with all debt covenants.

The Debt Agreements contain customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, certain events of bankruptcy and insolvency, material judgments, certain ERISA events, and invalidity of loan documents. Upon certain changes of control, amounts outstanding under the Debt Agreements could become due and payable. In addition, under the Note Purchase Facility, upon an event of default or change of control, a whole payment may become due and payable.

The Note Purchase Facility also requires that, in the event the Company amends its 2022 Senior Credit Facility, or any subsequent credit facility of $100 million or greater, such that it contains covenant or default provisions that are not provided in the Note Purchase Facility or that are similar to those contained in the Note Purchase Facility but which contain percentages, amounts, formulas, or grace periods that are more restrictive than those set forth in the Note Purchase Facility or are otherwise more beneficial to the lenders thereunder, the Note Purchase Facility shall be automatically amended to include such additional or amended covenants and/or default provisions.

Note 7 – Capital Stock and Dividends:

Capital Stock

The authorized capital stock of the Company consists of common stock and preferred stock. The Company is authorized to issue 400 million shares of common stock. The Company is also authorized to issue 40 thousand shares of preferred stock, with such designations, rights and preferences as may be determined from time to time by the Company's Board of Directors.

Dividends

During the first three months of fiscal 2023 and fiscal 2022, the Company's Board of Directors declared the following cash dividends:

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

Note 8 – Treasury Stock:

The Company’s Board of Directors has authorized common stock repurchases under a share repurchase program which was announced in February 2007. The total authorized amount of the program, which has been increased from time to time, is currently $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. As of April 1, 2023, the Company had remaining authorization under the share repurchase program of $1.45 billion, exclusive of any fees, commissions, or other expenses.

The following table provides the number of shares repurchased, average price paid per share, and total amount paid for share repurchases during the fiscal three months ended April 1, 2023 and March 26, 2022, respectively (in thousands, except per share amounts):

Note 9 – Income Taxes:

The Company’s effective income tax rate was 21.0% in the first quarter of fiscal 2023 compared to 21.1% in the first quarter of fiscal 2022. The decrease in the effective income tax rate in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022 was driven primarily by a decrease in state income taxes.

Note 10 – Commitments and Contingencies:

Construction and Real Estate Commitments

As of April 1, 2023, the Company had contractual commitments of approximately $53.0 million related to the construction and onboarding of new distribution centers.

Letters of Credit

At April 1, 2023, the Company had $58.4 million in outstanding letters of credit under the 2022 Senior Credit Facility.

Litigation

In March 2023, U.S. Customs and Border Protection (“U.S. Customs”) sent the Company a notice that proposed to classify certain of our imports from China as subject to anti-dumping and countervailing (“AD/CV”) duties. We have responded to U.S. Customs outlining the reasons for our position that these imports are not subject to AD/CV duties. The Company currently expects this matter will be resolved without material adverse effect on its consolidated financial position, results of operations or cash flows. However, this matter is subject to inherent uncertainties and management’s view of this matter may change in the future.

The Company is involved in various litigation matters arising in the ordinary course of business. The Company believes that, based upon information currently available, any estimated loss related to such matters has been adequately provided for in accrued liabilities to the extent probable and reasonably estimable. Accordingly, the Company currently expects these matters will be resolved without material adverse effect on its consolidated financial position, results of operations, or cash flows.  However, litigation and other legal matters involve an element of uncertainty. Future developments in such matters, including adverse decisions or settlements or resulting required changes to the Company's business operations, could affect our consolidated operating results when resolved in future periods or could result in liability or other amounts material to the Company's Condensed Consolidated Financial Statements.

Note 11 – Segment Reporting:

The Company has one reportable segment which is the retail sale of products that support the rural lifestyle.  The following table indicates the percentage of net sales represented by each of our major product categories during the fiscal three months ended April 1, 2023 and March 26, 2022:

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

General

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

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

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. Fiscal 2023 includes 52 weeks and fiscal 2022 includes 53 weeks. For our calculation of comparable store sales in fiscal 2023, we will 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.

Results of Operations

Fiscal Three Months (First Quarter) Ended April 1, 2023 and March 26, 2022

Net sales for the first quarter of fiscal 2023 increased 9.1% to $3.30 billion from $3.02 billion for the first quarter of fiscal 2022. The increase in net sales was driven by positive sales contributions from the acquisition of Orscheln Farm and Home, new store openings and growth in comparable store sales. Comparable store sales for the first quarter of fiscal 2023 increased 2.1%. In the first quarter of fiscal 2022, net sales increased 8.3% and comparable store sales increased 5.2%.

The comparable store sales results for the first quarter of fiscal 2023 included an increase in comparable average transaction value of 2.8% and a decrease in comparable average transaction count of 0.7%. Comparable store sales growth reflects continued strength in core year-round merchandise, including consumable, usable and edible (“C.U.E.”) products, offset by declines for seasonal goods. The strongest regions for comparable store sales growth were the South Atlantic, Texas/Oklahoma and Far West where there was less negative impact from seasonal shifts. The strength of these regions was offset by pressure in the Northeast and Midwest regions due to a mild January combined with a delay in the start to the spring selling season.

In addition to comparable store sales growth for the first quarter of fiscal 2023, sales from stores open less than one year, including stores from the Orscheln acquisition, were $140.5 million for the first quarter of fiscal 2023, which represented 4.6 percentage points of the 9.1% increase over first quarter fiscal 2022 net sales. For the first quarter of fiscal 2022, sales from stores open less than one year were $77.8 million, which represented 2.8 percentage points of the 8.3% increase over first quarter fiscal 2021 net sales.

The following table summarizes store growth for the fiscal three months ended April 1, 2023 and March 26, 2022:

The following table indicates the percentage of net sales represented by each of our major product categories for the fiscal three months ended April 1, 2023 and March 26, 2022:

Gross profit increased 10.7% to $1.17 billion for the first quarter of fiscal 2023 from $1.06 billion for the first quarter of fiscal 2022. As a percent of net sales, gross margin in the first quarter of fiscal 2023 increased 52 basis points to 35.5% from 34.9% in the first quarter of fiscal 2022. The gross margin rate increase was primarily attributable to the Company’s consistent execution of an everyday low price strategy, lower transportation costs and other margin-driving initiatives that were able to more than offset the impact from product cost inflation pressures and product mix from the robust growth of C.U.E. products.

Selling, general and administrative (“SG&A”) expenses, including depreciation and amortization, increased 13.9% to $925.5 million for the first quarter of fiscal 2023 from $812.2 million for the first quarter of fiscal 2022. As a percent of net sales, SG&A expenses increased 119 basis points to 28.1% from 26.9% in the first quarter of fiscal 2022. The increase in SG&A as a percent of net sales was primarily attributable to deleverage given the moderate comparable store sales growth, as well as growth in depreciation and amortization, the onboarding of a new distribution center and the impact of the Orscheln Farm and Home acquisition.

Operating income for the first quarter of fiscal 2023 of $244.4 million was effectively flat compared to $244.3 million in the first quarter of fiscal 2022.

Net income for the first quarter of fiscal 2023 decreased 2.2% to $183.1 million, or $1.65 per diluted share, as compared to net income of $187.2 million, or $1.65 per diluted share, for the first quarter of fiscal 2022.

During the first quarter of fiscal 2023, we repurchased approximately 0.9 million shares of the Company’s common stock at a total cost of $197.2 million as part of our share repurchase program and paid quarterly cash dividends totaling $113.4 million, returning $310.6 million to our stockholders.

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.

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, and access to the long-term debt capital markets will be sufficient to fund our operations and our capital expenditure needs, including new store openings, existing store remodeling and improvements, store relocations, distribution facility capacity and improvements, and information technology improvements, for the foreseeable future.

Working Capital

At April 1, 2023, the Company had working capital of $1.11 billion, which increased $327.8 million from December 31, 2022, and increased $140.7 million from March 26, 2022.  The shifts in working capital were attributable to changes in the following components of current assets and current liabilities (in millions):

In comparison to December 31, 2022, working capital as of April 1, 2023 was impacted most significantly by changes in inventories, accounts payable and accrued employee compensation.

In comparison to March 26, 2022, working capital as of April 1, 2023 was impacted most significantly by changes in cash and cash equivalents, inventories and accounts payable.

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

(b) Outstanding balances as of April 1, 2023 and December 31, 2022 represent amounts drawn under the 2022 Senior Credit Facility.

Operating Activities

Operating activities provided net cash of $19.6 million and $59.1 million in the first three months of fiscal 2023 and fiscal 2022, respectively.  The $39.5 million decrease in net cash provided by operating activities in the first three months of fiscal 2023 compared to the first three months of fiscal 2022 is due to changes in the following operating activities (in millions):

Investing Activities

Investing activities used net cash of $157.7 million and $112.3 million in the first three months of fiscal 2023 and fiscal 2022, respectively. The $45.4 million increase in net cash used in investing activities primarily reflects an increase in capital expenditures, primarily related to new store openings and store remodels, in the first three months of fiscal 2023 compared to fiscal 2022.

Investing activities, including capital expenditures, for the first three months of fiscal 2023 and fiscal 2022 were as follows (in millions):

The increase in spending for existing stores in the first three months of fiscal 2023 as compared to the first three months of fiscal 2022 primarily reflects our strategic initiatives related to store remodels, including internal space productivity and the outside garden center transformations. Spending in the first three months of both fiscal 2023 and fiscal 2022 also includes routine refresh activity, as well as security enhancements.

In the first three months of fiscal 2023, the Company opened 17 new Tractor Supply stores compared to no new Tractor Supply stores during the first three months of fiscal 2022. The Company also opened three new Petsense by Tractor Supply stores during the first three months of fiscal 2023 compared to one store during the first three months of fiscal 2022.

Expenditures for information technology represent continued support for improvements in mobility in our stores, our omni-channel initiatives, increased security and compliance, and other strategic initiatives.

The increase in spending for distribution center capacity and improvements in the first three months of fiscal 2023 as compared to the first three months of fiscal 2022 is primarily related to the onboarding of the new distribution center in Navarre, Ohio and the construction of the new distribution center in Maumelle, Arkansas.

Our projected capital expenditures for fiscal 2023 are currently estimated to be in a range of $700 million to $775 million. The capital expenditures include plans to open a total of approximately 70 new Tractor Supply stores, complete the Orscheln conversions to Tractor Supply, continue the Project Fusion remodels and garden center transformations, and open a total of 10 to 15 new Petsense by Tractor Supply stores.

Financing Activities

Financing activities provided net cash of $125.7 million in the first three months of fiscal 2023 compared to using net cash of $419.4 million in the first three months of fiscal 2022. The $545.1 million change in net cash provided by financing activities in the first three months of fiscal 2023 compared to the first three months of fiscal 2022 is due to changes in the following (in millions):

The $545.1 million change in net cash provided by financing activities in the first three months of fiscal 2023 compared to the first three months of fiscal 2022 is primarily due to net borrowings under the debt facilities and a decrease in the repurchase of common stock, partially offset by an increase in cash dividends paid to stockholders.

Dividends

During the first three months of fiscal 2023 and fiscal 2022, the Company's Board of Directors declared the following cash dividends:

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

Share Repurchase Program

The Company’s Board of Directors has authorized common stock repurchases under a share repurchase program which was announced in February 2007. The total authorized amount of the program, which has been increased from time to time, is currently $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. As of April 1, 2023, the Company had remaining authorization under the share repurchase program of $1.45 billion, exclusive of any fees, commissions, or other expenses.

The following table provides the number of shares repurchased, average price paid per share, and total amount paid for share repurchases during the fiscal three months ended April 1, 2023 and March 26, 2022 (in thousands, except per share amounts):

Significant Contractual Obligations and Commercial Commitments

Significant Accounting Policies and Estimates

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

New Accounting Pronouncements    

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

Disclosure Controls and Procedures

Our management carried out an evaluation required by the Securities Exchange Act of 1934, as amended (the “1934 Act”), under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the 1934 Act) as of April 1, 2023.  Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of April 1, 2023, our disclosure controls and procedures were effective.

Internal Control over Financial Reporting

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

PART II.  OTHER INFORMATION

Issuer Purchases of Equity Securities

Share repurchases were made pursuant to the share repurchase program, which is described under Part I, Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q. Additionally, the Company withholds shares from vested restricted stock units and performance-based restricted share units to satisfy employees’ minimum statutory tax withholding requirements. Stock repurchase activity during the first quarter of fiscal 2023 was as follows: