TRACTOR SUPPLY CO /DE/TSCO
TRACTOR SUPPLY CO /DE/ Stock Compensation Disclosure
Share-Based Compensation
Share-based compensation includes stock options, restricted stock units, performance-based restricted share units, and certain transactions under the Company’s ESPP. Share-based compensation expense is recognized based on the 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 since the adoption of the 2018 Omnibus Incentive Plan (the “2018 Plan”) on May 10, 2018, which replaced the 2009 Stock Incentive Plan. Following the adoption of the 2018 Plan, no further grants may be made under the 2009 Stock Incentive Plan.
Under our share-based compensation plans, awards may be granted to officers, non-employee directors, and other employees. The per share exercise price of options granted shall not be less than the fair market value of the stock on the date of grant and
such awards will expire no later than years from the date of grant. Vesting of awards commences at various anniversary dates following the dates of each grant. Performance-based awards will vest if established performance conditions are met subject to continued employment. Certain performance-based awards are also subject to a market condition such that the actual number of shares vesting are further modified based on the achievement of a relative stockholder return modifier. At December 27, 2025, the Company had approximately 35.3 million shares available for future equity awards under the Company’s 2018 Plan.
Share-based compensation expense of awards was $57.1 million, $48.4 million, and $57.0 million for fiscal 2025, 2024, and 2023, respectively.
Stock Options
The fair value is separately estimated for each option grant. The fair value of each option is recognized as compensation expense ratably over the vesting period. The Company has estimated the fair value of all stock option awards as of the date of the grant by applying a Black-Scholes pricing valuation model. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense. The ranges of key assumptions used in determining the fair value of options granted during fiscal 2025, 2024, and 2023, as well as a summary of the methodology applied to develop each assumption, are as follows:
| Fiscal Year | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected price volatility | 27.6% - 28.2% | 27.3% - 29.8% | 30.7% - 30.9% | ||||||||||||||
| Risk-free interest rate | 3.7% - 4.3% | 3.7% - 4.6% | 3.5% - 4.5% | ||||||||||||||
| Weighted average expected lives | 4.0 years | 4.2 years | 4.2 years | ||||||||||||||
| Forfeiture rate | 7.9 | % | 6.9 | % | 6.9 | % | |||||||||||
| Dividend yield | 1.6 | % | 2.0 | % | 1.7 | % | |||||||||||
Expected Price Volatility — This is a measure of the amount by which a price has fluctuated or is expected to fluctuate. The Company calculates the expected price volatility based on the historical volatility of the Company’s stock price, as well as implied volatility. To calculate historical changes in market value, the Company uses daily market value changes from the date of grant over a past period generally representative of the expected life of the options to determine volatility. The Company believes the use of a blended volatility provides an appropriate indicator of future volatility. An increase in the expected volatility will increase compensation expense.
Risk-Free Interest Rate — This is the U.S. Treasury Constant Maturity rate over a term equal to the expected term of the option. An increase in the risk-free interest rate will increase compensation expense.
Weighted Average Expected Term — This is the period of time over which the options granted are expected to remain outstanding and is based on historical experience. Options granted generally have a maximum term of years. An increase in the expected term will increase compensation expense.
Forfeiture Rate — This is the estimated percentage of options granted that are expected to be forfeited or canceled before becoming fully vested. This estimate is based on historical experience. An increase in the forfeiture rate will decrease compensation expense.
Dividend Yield — This is the estimated dividend yield for the weighted average expected term of the option granted. An increase in the dividend yield will decrease compensation expense.
The Company issues shares for options when exercised. A summary of stock option activity is as follows:
| Stock Option Activity | Options | Weighted Average Exercise Price | Weighted Average Fair Value | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value (in thousands) | |||||||||||||||||||||||||||
| Outstanding at December 28, 2024 | 4,118,065 | 31.43 | 6.0 | $ | 95,268 | |||||||||||||||||||||||||||
| Granted | 666,838 | 54.87 | $ | 13.34 | ||||||||||||||||||||||||||||
| Exercised | (534,369) | 23.66 | ||||||||||||||||||||||||||||||
| Canceled | (87,637) | 45.19 | ||||||||||||||||||||||||||||||
| Outstanding at December 27, 2025 | 4,162,897 | $ | 35.89 | 5.8 | $ | 66,770 | ||||||||||||||||||||||||||
| Exercisable at December 27, 2025 | 2,946,516 | $ | 29.66 | 4.7 | $ | 64,034 | ||||||||||||||||||||||||||
The aggregate intrinsic values in the table above represent the total difference between the Company’s closing stock price at each year-end and the option exercise price, multiplied by the number of in-the-money options at each year-end. As of December 27, 2025, total unrecognized compensation expense related to non-vested stock options was approximately $8.7 million with a weighted average expense recognition period of 1.8 years.
There were no material modifications to options in fiscal 2025, 2024, or 2023.
Other information relative to options activity during fiscal 2025, 2024, and 2023 is as follows (in thousands):
| Fiscal Year | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Total fair value of stock options vested | $ | 6,674 | $ | 6,837 | $ | 7,070 | |||||||||||
| Total intrinsic value of stock options exercised | $ | 17,692 | $ | 46,629 | $ | 26,092 | |||||||||||
Restricted Stock Units
The Company issues shares for restricted stock units once vesting occurs and related restrictions lapse. The fair value of the restricted stock units is the closing price of the Company’s common stock the day preceding the grant date, discounted for the expected dividend yield over the term of the award. The units generally vest over a to -year term. Some plan participants have elected to defer receipt of shares of common stock upon vesting of restricted stock units, and as a result, those shares are not issued until a later date. A summary of restricted stock unit activity is presented below:
| Restricted Stock Unit Activity | Restricted Stock Units | Weighted Average Grant Date Fair Value | ||||||||||||
| Restricted at December 28, 2024 | 2,034,921 | $ | 43.68 | |||||||||||
| Granted | 1,248,081 | 52.74 | ||||||||||||
| Vested | (894,064) | 44.40 | ||||||||||||
| Forfeited | (202,333) | 48.56 | ||||||||||||
| Restricted at December 27, 2025 | 2,186,605 | $ | 48.12 | |||||||||||
As of December 27, 2025, total unrecognized compensation expense related to non-vested restricted stock units was approximately $65.4 million with a weighted average expense recognition period of 2.2 years.
There were no material modifications to restricted stock units in fiscal 2025, 2024, or 2023.
Other information relative to restricted stock unit activity during fiscal 2025, 2024, and 2023 is as follows (in thousands):
| Fiscal Year | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Total grant date fair value of restricted stock units vested and issued | $ | 39,693 | $ | 36,292 | $ | 32,446 | |||||||||||
| Total intrinsic value of restricted stock units vested and issued | $ | 48,045 | $ | 46,647 | $ | 53,112 | |||||||||||
Performance-Based Restricted Share Units
We issue performance-based restricted share units to senior executives that represent shares potentially issuable in the future, 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 over a specified performance period. The performance metrics for the performance-based restricted share units also include a relative total shareholder return (“TSR”) modifier such that the actual number of shares that vest at the end of the respective three-year period is determined based on the Company's TSR performance relative to the constituents of the S&P 500 as well as the level of achievement of the performance goals. If the performance targets are achieved, the performance-based restricted share units will be issued based on the achievement level, inclusive of the relative TSR modifier and the grant date fair value, and will cliff vest in full on the third anniversary of the date of the grant. The fair value of the performance-based restricted share units is estimated using a Monte Carlo simulation model on the grant date. Key assumptions used in the Monte Carlo simulation for the performance shares with a TSR modifier granted during fiscal 2025 and during fiscal 2024 are presented below:
| Fiscal Year | ||||||||||||||
| Assumption | 2025 | 2024 | ||||||||||||
| Expected volatility | 28.47 | % | 28.32 | % | ||||||||||
| Risk-free interest rate | 4.14 | % | 4.06 | % | ||||||||||
| Compounded dividend yield | 1.59 | % | 1.95 | % | ||||||||||
A summary of performance-based restricted share unit activity is presented below:
| Performance-Based Restricted Share Unit Activity | Performance-Based Restricted Share Units | Weighted Average Grant Date Fair Value | |||||||||
| Restricted at December 28, 2024 | 744,980 | $ | 46.51 | ||||||||
Granted (a) | 471,017 | 57.38 | |||||||||
Performance Adjustment (b) | (158,696) | 44.75 | |||||||||
| Vested | (68,009) | 44.75 | |||||||||
| Forfeited | (30,076) | 49.45 | |||||||||
| Restricted at December 27, 2025 | 959,216 | $ | 52.18 | ||||||||
(a) Assumes 100% target level achievement of the relative performance targets. The actual number of shares that will be issued, which may be higher or lower than the target, will be determined by the level of achievement of the relative performance targets, inclusive of the TSR modifier.
(b) Shares adjusted for performance-based restricted share unit awards settled during fiscal 2025 based on actual achievement of performance targets.
As of December 27, 2025, total unrecognized compensation expense related to non-vested performance-based restricted share units was approximately $26.7 million with a weighted average expense recognition period of 3.3 years.
There were no material modifications to performance-based restricted share units in fiscal 2025, 2024, or 2023.
Other information relative to performance-based restricted share unit activity during fiscal 2025 is as follows (in thousands):
| Fiscal Year | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Total grant date fair value of performance-based restricted share units vested and issued | $ | 3,043 | $ | 16,195 | $ | 9,498 | |||||||||||
| Total intrinsic value of performance-based restricted share units vested and issued | $ | 3,705 | $ | 31,020 | $ | 23,155 | |||||||||||
Shares Withheld to Satisfy Tax Withholding Requirements
For the majority of restricted stock units and performance-based restricted share units and certain stock options granted, the number of shares issued on the date the stock awards vest or the number of stock options being exercised is net of shares withheld by the Company to satisfy the minimum statutory tax withholding requirements, which the Company pays on behalf of its employees. The Company issued 686,655, 1,180,731, and 1,134,940 shares as a result of vested restricted stock units and performance-based restricted share units, as well as exercised stock options during fiscal 2025, 2024, and 2023, respectively. Although shares withheld are not issued, they are treated similar to common stock repurchases as they reduce the number of shares that would have been issued upon vesting. The amounts are net of 298,147, 524,204, and 531,365 shares withheld to satisfy $16.1 million, $24.6 million, and $24.4 million of employees’ tax obligations during fiscal 2025, 2024, and 2023, respectively.
Employee Stock Purchase Plan
The ESPP provides Company employees the opportunity to purchase, through payroll deductions, shares of common stock at a 15% discount. Pursuant to the terms of the ESPP, the Company issued 241,415, 219,330, and 225,790 shares of common stock during fiscal 2025, 2024, and 2023, respectively. The total cost related to the ESPP, including the compensation expense calculations, was approximately $2.7 million, $2.0 million, and $1.9 million in fiscal 2025, 2024, and 2023, respectively. There is a maximum of 16.0 million shares of common stock that are reserved under the ESPP. At December 27, 2025, there were approximately 11.2 million remaining shares of common stock reserved for future issuance under the ESPP.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 17, 2022 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.