Good afternoon, ladies and gentlemen and welcome to the Tractor Supply Company’s conference call to discuss fourth quarter and full year results. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. (Operator Instructions) Please be advised that reproduction of this call in whole or in part is not permitted without prior written authorization of the Tractor Supply Company. As a reminder, ladies and gentlemen, this conference is being recorded. I would now like to introduce your host for today’s conference, Ms. Erica Pettit.

Thank you, Operator. Good afternoon everyone, and thank you for joining us. Before we begin we would like to take a moment to reference the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. This conference call may contain forward-looking statements that are subject to significant risks and uncertainties, including the future operating and financial performance of the company. Although the company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct. Important risk factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included in the company’s filings with the Securities and Exchange Commission. The information contained in this call is accurate only as of the date discussed. Investors should not assume that the statements will remain operative at a later time. Lastly, Tractor Supply Company undertakes no obligation to update any information discussed in this call. Now I am pleased to introduce Jim Wright, Chairman, President, and Chief Executive Officer.

Thank you, Erica, and good afternoon, everyone. I’m here today with Tony Crudele, our Chief Financial Officer, Stan Ruta, EVP of Stores, and Greg Sandfort, EVP of Merchandising. Before our review of our performance during 2008, I’ll discuss the fourth quarter briefly. As we all know, the fourth quarter of 2008 was extremely challenging for the retail industry as the consume stayed home, traded down, and in some categories, simply stopped buying. In the face of these headwinds, our team continued to take the necessary actions to change the merchandise offering, intensify customer engagement, and tightly control costs. As a result of these efforts, we’ve produced solid operating earnings. For the holiday season 2008, we refined our strategy as we planned purchasing less giftable inventory and focused our gift assortments on items that supported our customers’ basic lifestyle needs at compelling value prices. We’re pleased with our ability to navigate through the quarter by properly managing our up front buying and highlighting more every day basics, thus reducing exposure to markdowns and improving inventory productivity. Throughout the year we saw consumers shifting purchases from wants to need and from style to value, and the fourth quarter was no different. While the holiday season was challenging, our team correctly anticipated consumer buying patterns and executed very well. As I mentioned last week, we believe our operating performance in 2008 represented one of our strongest periods every for the company. I want to thank our team members for their hard work and consistent execution this year. We remain committed to offering great prices and merchandise assortments that are core to our customers’ rural lifestyle needs and we successfully executed the fundamentals of our business model. Early in the year our team recognized the external challenges and we adjusted our strategies accordingly. Overall,…

Thanks, Jim, and good afternoon everyone. As we said, we were very pleased with the operating performance for the quarter. We achieved double digit sales growth and continued to manage our clearance process and inventory levels. For the fourth quarter ended December 27, 2008, sales were $799.5 million and net income was $24.7 million or $0.67 per diluted share. Excluding LIFO, net income was $37.2 million or $1.01 per diluted share compared to $31.6 million or $0.81 per diluted share in the same period last year. As discussed last week, the company will restate its financial results for the first three quarters of fiscal 2008 to reflect an adjustment to the company’s LIFO provision. All figures discussed here have taken the effect of the restatement into account. For comparative purposes, we are providing gross margin and net income metrics both including and excluding LIFO. I’ll review some of the drivers of each P&L line item but please note that gross margin improvement excluding LIFO expense management and lower pre-opening expenses were all drivers of our substantially stronger than expected performance in the quarter. Total comp sales for the period increased 1.3% and non comp sales were approximately $65.6 million or 8.2% of sales. Comp transaction count increased 1% and we are pleased that we continue to drive footsteps into the store. Average comp ticket increased 0.3% due to the inflation on commodity related items offset by a decrease in big ticket item sales. Our core consumable categories continue to be the key driver of the business. We also had strong sales in our heating consumables but had some difficulty obtaining enough product from suppliers as many customers made advance purchases in the third quarter. While some discretionary and big ticket items categories performed well, such as alternative heating stoves and…

Thanks, Tony. We’re excited about our opportunities this year. While we believe our plans are realistic for the existing economic outlook, we will continue to monitor the underlying trends to remain nimble and adjust our plans quickly if there are any significant positive or negative changes. Throughout ’09 we will continue differentiating Tractor Supply Company in the market and executing our retail strategy to win in the current environment and beyond. Let me go into more detail into both of these priorities. We serve an attractive niche. We will remain committed to supporting the functional needs of those living the rural lifestyle. While we are not immune to the challenges in the macro environment, we continue to see relative strength in both the consumers and the markets we serve. Our customers are fiscally conservative. They have proven to be more resilient and less reliant on credit than the average. Further, the initial approval rate for new applicants on our Tractor Supply consumer credit card remains strong. As you know, our unique mix of merchandise is the foundation of our business. I am pleased with our efforts to ensure that we continuously offer a variety of products that are relevant to the customer’s lifestyle and make our stores a destination. We’ll continue refining our merchandise assortment and expect to direct more of our mix towards consumable products and basic lifestyle items that we can offer at compelling values. We expect these categories such as animal health and pet related products will drive sales growth and repeat business, especially in a difficult economy. Throughout the year we’ll also be focused on further reducing our dependency on discretionary and big ticket items by significantly scaling back this inventory. We did well with this strategy in 2008 and expect that applying those learnings will…

(Operator Instructions) Your first question comes from Mitch Kaiser with Piper Jaffray.

One of the things I really liked about the prepared remarks is that you are assuming a warmer March in the northern states. We’d really appreciate that. Just want to understand, I know that there’s a lot of noise around the margins and things like that, but you said EBIT margin was going to be up 50 basis points inclusive of LIFO but down 45 if we exclude that. Is that purely a function of the roughly flat comp at the midpoint to the guidance or could you just kind of take us through your overall thinking on that. I know you gave a lot of detail on that but if you could help us on that, it would help.

Mitch, you’re asking about the impact of LIFO within the range itself?

I think, Tony, you said that your EBIT margin guidance was up 50 basis points but ex LIFO would be down 45, right?

Right.

So the down 45, is that a function of basically being a flat comp at the midpoint of the guidance range? The deleverage on the SG&A?

The deleverage on the SG&A clearly is a result of the limited comp that we’re projecting for the full year. So in excluding the LIFO adjustment, we will have some margin improvement that will not fully offset the SG&A deleverage, if that’s where you --

No, that’s exactly, that’s very helpful.

That’s absolutely the case.

Okay. Then with CapEx roughly at $90 million, what would you, and I know that there’s going to be some working capital improvements, you guys have done a very good job on that, what would you expect, kind of free cash to be if you were to assume kind of the midpoint of the guidance range on EPS?

On EPS, we’re looking for it to be in a similar range as we put together this year so we finished at about the $3.35 in the prepared remarks, so we expect to be in that range as well.

Your next question comes from Jack Murphy from William Blair. Jack Murphy - William Blair & Company: Just on the gross margin in the quarter. On the components of the improvement of shrink and [inaudible] allowances and mark down management, are those roughly equal contributors, and then secondly, on the shrink in particular, could you just give us a sense of what your absolute shrink ratio is at this point and what you think the risks are of that going in backing up and going against you next year?

Let me speak to the shrink. We don’t give out the detail. We’ve been expecting to see an increase in shrink on a year-over-year basis due to the number of unemployed and so forth. That’s why we have not seen that, so shrink has actually been marginally better year-over-year and we’ve not seen any increase in the shrink factor as we’ve gone throughout the four quarters of ’08.

The relationship to the gross margin performance, vendor allowances were slightly ahead of a year ago but they were in relationship to the mix of products that to be honest with you performed better or worse from a year ago. Secondly we really managed the seasonal transition from fall to Christmas to spring far better this year than last year. I think that’s one of the issues that saved us a ton of dollars in markdowns, so we really... the exchange there was fewer markdowns, acting faster on sole selling products, transitioning faster to spring, if you were in our stores you would have seen some spring products in our stores in the late fourth quarter where in years past it would have been first quarter, so it was just kind of a shift in momentum but it worked very, very well for us.

To answer your question, I would break those three in fairly equal components. Jack Murphy - William Blair & Company: Just one follow up on the SG&A. If you were to do something below the negative 1.5, does the deleverage in the model become much greater? I assume that you can’t do a lot more with staffing levels in the store given you need sort of minimum coverage in terms of keeping the service levels high, so could you talk a little bit about that, in the event that you do worse on the comp line, just how much greater the deleverage becomes.

There are a couple different levers as we move down that continuum in the model. Obviously there’s the incentive compensation piece that tends to be a little bit of a trigger as well, so there’s not a significant fall off. I would model it more in a ratable manner as opposed to sort of a steep decline after the negative 1.5.

Your next question comes from Peter Benedict from Wachovia.

First on the POS system, can you talk a little bit about the cost there? What’s the magnitude, what should we be thinking about in the second half of ’09, and what kind of benefits do you guys expect to get from the new system?

We’ll take it in two parts. When it comes to the expense side, we had outfitted the stores with any type of hardware that is required in the previous year. We’re looking at some additional software expenses. It ranges in the sort of the $2 million to $3 million range. So it’s a valuable investment but not overly significant. Then as it relates to the benefits that we expect to inure from the system itself, let me turn that over to Stan to give you some highlights.

The benefits of the POS, really two big areas. Number one, the customer experience and secondly, what the system is going to help us learn about our customer. In terms of the customer experience, it’s speed of checkout. The transactions are going to be faster, notably faster on the specialty transactions like return transactions, layaways, and special orders, will be much faster for our customer. The new system is going to give us the ability to take checks electronically so that will not only speed up the process at the point of sale but it will also eliminate us from having to process checks at night because it’s all going to be electronic, so we’ll save some labor there while increasing transaction speed. The system is going to be much easier for our team members to learn. It’s a touch screen system and it’s much more intuitive than what we currently have, and it will give us real time inventory so we’ll have better inventory accuracy in the store to speed up our customer service. The information capture is significantly more than what we have today. It will increase our ability to understand the market basket and what our customers are buying at the SKU level as well as how often they’re buying that merchandise, and we’ll get that info whenever we get their name on check transactions, bank card transactions, or tax exempt transactions, and this information will really be used by the marketing department in our direct mail programs and the CRM program that Jim talked about earlier. We’ll also get some significant LP controls and information that will help our LP department measure fraud in refunds and other areas. Then lastly, we will get a little bit of cost savings out of it. The new system will help us eliminate counter tickets in our store. It will help us remove some equipment that we’re leasing today and we’ll probably save $300,000 to $400,000 a year when those things go away, but overall the new system is better, faster, it’s more efficient, and it’s going to improve our customer shopping experience while helping us become a little smarter about our customer.

Switching over, Tony, I guess, or on the free cash flow front, if you guys are going to generate another $100 plus million in free cash flow net year, I know you’re not assuming some buybacks, I assume there will be some there, what are other uses of the free cash flow would you guys consider for ’09?

Good question, Peter. When we look at it, obviously we look at the stock repurchase programs first, but secondly, our real estate program, we’re going to assess it as far as what assistance developers may need and as far as acquiring really grade A sites as we move forward. We’ll have to make an assessment as to how we’re going to utilize our balance sheet to make those deals work. At this point in time, it has not become an issue, but it’s one area that we’ve targeted potentially in 2009 where we can utilize that additional free cash flow.

One last question. Just on the pre-opening cost trend down nicely in the back half of ’08, down about 20% to 30% I guess year-over-year on a per-store basis. How should we be thinking about the pre-opening costs for the stores that you’ve got on tap for ’09?

It generally is going to be a similar spread based on the number of stores that I’ve provided as far as the rollout, about 60% of the stores in the first half. The one thing that we’ve focused on at the end of 2008 was to reduce the number of store openings in January. That reduced the pre-opening that we would normally incur in the December month as well as January is really our weakest sales month as well, so it behooved us on two fronts to push January openings into more the February/March time frame. Other than that, the roll out and the approximate cost to open the store remain about the same.

Your next question comes from Matt Nemer with Thomas Weisel Partners .

My first question is, in a less inflationary environment, how are you thinking about balancing maybe the capture some incremental gross margins as your costs come down versus market share? Is that by category or maybe give us a little bit of color on how you’re going to balance those two.

As we looked at last year, we had to maintain margin and market share on the way up and frankly as we experienced some deflation in the steel, petroleum, and grain, we’ve managed it the same way on the way down with really an eye towards maintaining margin dollars, not necessarily rate, but margin dollars, and we view it as we think a significant opportunity to gain share in some categories that are most important to us.

Then the second question, can you give us any detail on customer behavior in the pet category? Have you seen any evidence that it seems like if somebody’s getting a pink slip, it’s only intuitive to me that they might decide not to buy the highest quality of Nutro and maybe trade in to one of your private label brands but just curious as to what you’re seeing there.

We have seen some trade down with some customers but in the general text of how our business is operating, we’re very pleased that we haven’t seen any massive moves yet. We are very cautious on how we price both our private brand and national brands and keep those spreads fairly consistent and as inflation rose, both of those followed suit and as deflation comes into play, it would be the same, so there’s not going to be less feeding of animals or pets but there could be some additional trade off and we’ve actually planned for that. We anticipate some of that.

Do you have any data that would sort of explain how somebody is trading down and perhaps trading out, is there any way to determine where they’re going, if they would be going to a Wal-mart or Target or Pet Smart or kind of what channel, if they were migrating away from your store, is there any way to determine where they’re going?

Actually we believe we’re taking share in the pet food particularly and frankly in the pet category. It continues to be part of our very best comp performing categories. The trade down within the category which I really don’t believe there’s any trading up going on, the trading down within the category, if someone trades from grocery to or private brand, they win and we win. They save $5 a bag and we make a little more margin dollar. We’re fine with that one. We’ve not seen a lot of trade down from premium brand to grocery thus far. We’ve seen some trade down within premium but again, the yield on all those brands is fairly comparable to us and frankly what complicates it is if the consumer goes down the price continuum, they win, and we do as well.

Lastly, on the expense side, is there an opportunity to renegotiate occupancy expense? How many leases do you have coming due this year, next year, and do you have any issues where a co-tenancy change or an occupancy change maybe allows you to go back in and renegotiate?

On all leases that are coming up, they come through real estate committee first of all and we can take a look at them and on each of them we are going back to the landlord and if we want to stay in that location which most of them would do, we go to the landlord at that time and we renegotiate a new term at our existing rent without wanting to pay the additional increase that is due. We just started that over the last four months or so and we’re having some success and it’s early and we’ll probably report more on it as time goes on but we are having some success as landlords realize this environment is a little bit different.

Your next question comes from Dan Wewer from Raymond James.

[inaudible] correctly that you anticipate fourth quarter of ’09 would be your best same-store sales opportunity?

That is correct. We saw softer comps in Q4 as well as in Q1. In Q1 though, I want to caution as in my notes, that there is a shift of the comp date.

I was thinking that with inflation benefiting fourth quarter ’08 same store sales by 4 percentage points and the chance that we could be seeing deflation in the fourth quarter of ’09 that it could actually be a challenging quarter from that perspective?

That is absolutely a possibility and I think you could make that statement about all four quarters in looking at the sales and the type of sales that we had in Q4 by category, we believe that there’s some upside that would offset some of that deflationary pressure if it does occur, and also as we noted, we felt that there was a shift, the heating sales into Q3, that normalized would translate back into Q4 in 2009.

Second question on the real estate, I know that your unit expansion rate is slower than you were running a few years ago, but nevertheless it’s still one of the fast hardline retail other retailers are telling us that properties aren’t developing as quickly as they wanted due to financing issues. Could you tell us on the 70 to 80 stores that you’re planning to open, how many of those have actually been secure in the leases refined?

There might be one or two for ’09 that haven’t been signed [inaudible].

We are into ’10 in some commitments already.

And with the silver mile strategy, can you remind me how the prices on these leases compare with opening say a year or two years ago?

I guess the most significant thing, if we looked at the metric I have in hand, if we look at the new stores, all of them combined, prototype and second use real estate that we approved in 2006 versus those that we approved in 2008, our rent and depreciation, whichever it is, is 120 basis points lower for the stores that we approved in ’08 as a percent of sales when compared to ’06. We’ve been very successful in those initiatives and we continue to test and push and take cost out.

I think the last question I had was on Jim’s comments on Del’s, I want to make sure I understand the issue, if that the new store productivity in the non-core markets is not where you want it to be, is that correct?

Yes, that’s correct, again, the markets are really very different from eastern Washington through western Washington, and that impacted the merchandise mix much more significantly than we anticipated. We are recasting that merchandise mix right now and we’ll need I think through Q3 to fully understand what the potential of those markets is.

When do you think you’ll be able to make a long term decision on Del’s?

I would think over the next 3 to 5 quarters we’ll have a good idea of how fast we’re going to grow it and where we’re going to grow it, if we’re going to grow it.

Your next question comes from John Lawrence from Morgan Keegan.

On merchandise mix for ’09 as it relates to private label, give us a little breakdown. You mentioned pets and feed related consumables but how would the breakdown go between say C. E. Schmidt, Masterhand, and Red Shed looking to ’09 as far as your expansion of those SKUs?

Let me kind of break them up a little bit. C. E. Schmidt will expand with the work wear strategy and the focus we have in that category of business, so we’re going to be adding more components, probably female component by the end of third quarter. It’s performed well and it continues to be a good I’d call it stair step to the Carhartt brand which of course we do a wonderful job with [inaudible] tractor. As far as Red Shed and the gift category, very cautious approach. We’ve had to retrench, pull back, and really kind of assort based upon what the consumer would expect to pay, number one, and number two, the kind of and type of items that are more day in and day out not driven so much and solely towards holiday type purchasing. Our consumer looks at that as very discretionary and so we’ve really kind of refocused our efforts there. We think we’ve got that on a very positive note as we go into the spring and into the fall so pretty comfortable with that. As far as Master Hand, that’s the tool category, we are working through right now re-establishing the brand in first the hand tool segment. If you think about Craftsman, it took them many many years to build the brand and they started with hand tools. You’ve got to get the tools in customers’ hands and use and from there it will move the brand back in again under the power tool category but be very cautious, probably overstepped our bounds in 2007 and early 2008 there. Then I think we have to understand is where we play off on the tool mix and for us there’s an opening price and then there’s probably the Master Hand which is a step up. We feel very good about it, we are probably in the early stages of that relaunch. You’ll see more in the stores the latter part of second and third quarter.

Any new brands you’re thinking about?

actually, no, not at this time, it’s more of editing what we had. I think that there’s nothing out there that I see today except for maybe some acquisition on the feeder food side and I’ll leave it at that, but nothing in the private label sector that we’ve got it in the hopper right now.

This concludes our conference call today. Please continue with any closing comments.

Thanks again for your support, great to talk to you all on the call. While we are in a very volatile environment, there’s lots of things around the corner that we may not be able to fully anticipate. When I look at the issues of our business within the control of this management team, I have never been more confident in our ability to plan correctly, to execute crisply, and to continue to build a great team of merchants and operating executives. So I look forward to ’09 with great confidence on those things that we can control and also our ability to react quickly to those things that we cannot control. Thank you very much, talk to you next quarter.

Ladies and gentlemen, you may all disconnect, and thank you for participating.