Good afternoon, ladies and gentlemen, and welcome to Tractor Supply Company's Conference Call to Discuss Fourth Quarter and Full Year 2016 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. We ask that all participants limit themselves to one question with one follow-up. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization of Tractor Supply Company. And, as a reminder, this call is being recorded. I would now like to introduce your host for today's call, Ms. Christine Skold of Tractor Supply Company. Christine, please go ahead.

Thank you, Kevin. Good afternoon and thank you for joining us for Tractor Supply Company's quarterly earnings conference call. Before we begin, let me reference the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. This call may contain certain 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 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 statements will remain operative at a later time. Lastly, Tractor Supply Company undertakes no obligation to update any information discussed in this call. I'm now pleased to introduce Greg Sandfort, Tractor Supply Company's Chief Executive Officer. Greg, please go ahead.

Good afternoon, everyone, and thank you for joining us this afternoon. On the call with me today are Steve Barbarick, our President and Chief Merchandising and Marketing Officer; Tony Crudele, our EVP and Chief Financial Officer; and Kurt Barton, our Senior VP and Controller and soon to be Chief Financial Officer, as Tony plans to retire in early March of this year. We are pleased with our fourth quarter results. It was obviously a challenging retail environment, and our team at Tractor Supply managed the business well and drove both the top and the bottom line. We focused on driving our sales in several of our key categories and kept our inventories balanced across the entire company. On a market-by-market basis, we aligned our businesses from all sides using merchandising, pricing promotion and inventory. We spent considerable time last year managing the business around weather trends and geographical pockets of both strength and weakness. While we never have all of the answers, through careful planning and execution, we successfully drove growth in the fourth quarter. Comparable store sales increased 3.1%, and were positive across every region. Strength in sales came from everyday basic items across a number of consumable, usable and edible categories and hardline-related categories such as livestock and pet, bird, trailers and accessories, hand tools and livestock equipment, to mention a few. These are the types of products that our customers buy based upon need and seasonal change. They are the core of our business at Tractor Supply. And as indicated on our last earnings call, we believed we could drive these areas of our business in the fourth quarter with the right planning and execution. Throughout the quarter, the team worked diligently to further localize assortments, manage the flow of inventory and improve the speed of replenishment…

Thanks, Greg, and good afternoon, everyone. I want to take a minute to thank Greg for allowing me to be part of the best team in retail as well as thank all of our dedicated team members that are truly the heart and soul of Tractor Supply and have made the past 11 years the best of my career. We will be completing the transition at the end of February, so hopefully I will see many of you before then. But I wanted to thank the investment community and our many analysts that have supported the company and me over the years. Your insights and professionalism have made us a better company, and I'm very fortunate to have had the opportunity to interact with all of you. Now back to business at hand. For the quarter, ended December 31, 2016, on a consolidated year-over-year basis comparable store sales increased 3.1%. Net sales increased 16.4%, to $1.92 billion. Net income increased 10.6% to $123.6 million, and EPS increased 14.6% to $0.94 per diluted share. Demand for our core everyday basic items remained steady throughout the quarter. However, demand was limited for winter-related products during the months of October and November due to a warm start to the quarter combined with an unseasonably warm winter last year, which limited early season urgency. When cold weather arrived, the consumer responded positively and we saw a lift in seasonal sales. As a result, sales were the strongest in the month of December, as cold weather drove sales of winter seasonal merchandise such as heating fuel, insulated outerwear and power equipment. We managed the warmer than normal months of October and November by taking advantage of an extended summer selling season, most significantly in parts of the Southeast and Texas, where we maintained a full…

Thanks Tony, and good afternoon, everyone. We expect consolidated full year sales to range from $7.22 billion to $7.29 billion. We have forecasted comp sales to range between 2% and 3%. We are estimating EBIT margin to decline by 25 basis points to 40 basis points. We anticipate net income to range from approximately $445 million to $457 million, or $3.44 to $3.52 per diluted share. We expect to open approximately 100 new Tractor Supply stores with around 45% scheduled to open in the first half of the year. We will continue the transition of our Del's stores and we expect to close nine Del's stores as we execute our Tractor Supply Western expansion plan. We expect to open approximately 25 to 30 Petsense stores which includes the conversion of the two HomeTown Pet stores to Petsense. All sales from Petsense will be included in non-comp sales through the third quarter of 2017. Additionally, we forecast that our effective tax rate will be in the range of 36.2% to 36.4%. Our adoption of the new accounting rules related to the recognition of incremental tax benefit on stock options exercises is estimated to have approximately 50 basis points favorable impact on the effective tax rate in 2017 and will more than offset the headwind of cycling the benefit from federal and state tax credits in 2016. We are initially targeting capital expenditures of $270 million to $290 million in 2017. The increase over 2016 results principally from the initial development of our Northeast distribution center, which is targeted to begin construction in second quarter of 2017 and expected to be completed in the third quarter of 2018, with capital allocated over that time. Other key initiatives that we have identified for 2017 include expansion of our distribution center in Waverly, Nebraska,…

We'll take our first question from Peter Keith with Piper Jaffray. Please go ahead.

Hey, thanks a lot everyone. Good afternoon. I was wondering if you could talk about the demand trends during the quarter and I was particularly interested in if you saw any inflection or change before and after the election. And also if there was any change in demand outside of weather. Thank you.

Peter, this is Greg. We did not really see any significant movement before or after the election. So I would tell you, no, not much change there. But we did have the favorability of weather as it broke in the latter part of November and December. That did help the business, no question, brought customers in to purchase heating products, cold weather products and alike. A little soft in the first part of the quarter, very strong in the latter part of the quarter.

Okay. Thank you. And then I assume there's no change. But last quarter there was discussion around both the energy markets and ag markets, which each I believe are about 10% of your store base. Maybe could you comment on those for the fourth quarter and how you anticipate those trending in 2017?

Well, first of all, the ag markets are somewhat incidental. I think, as we saw the weather change, we would say that more of the impact was weather than it was things happening in the ag markets. Secondly, in Texas and in the energy markets, we saw a slight recovery but nothing that was that significant yet. We'd like to hope that it will continue to improve, but it was very slight.

Okay. Thank you very much. Good luck this year.

You're welcome.

Thank you.

We'll go next to Seth Sigman with Credit Suisse. Go ahead. Seth I. Sigman - Credit Suisse Securities (USA) LLC: Thanks. Good afternoon, guys. Maybe just a follow up on that last question, as you think about the cadence for 2017 – and you guys gave a lot of color, so I appreciate that but I'm not sure if you could comment on how Q1 has started off specifically. But if we assume Q1 comps are lower, it would imply the rest of the year gets back to that high end of the historical range of 3% to 5%. Is that the right way to think about it? And if so, what have you sort of embedded in here as the drivers of that improvement? Thank you.

Hey Seth, this is Kurt. First, I'll point you to the comparable sales table just to kind of recognize the shift in the comps. Q1 was strong last year, and it is a tough comparison. But as we look at the – our assumptions for the year, we look at first and second half, both of the halves falling within the sales range that we gave you. So we anticipate some balance between Q1 and Q2, again, with the second half falling within the range also that we provided for 2017. Seth I. Sigman - Credit Suisse Securities (USA) LLC: Okay. Got it. And then a separate topic on some of the payroll investments that you made in the fourth quarter and are expecting to make in 2017. Could you elaborate on those changes, and what prompted you to go down this path? Clearly, service has always been a strong point here, but just curious what's changing on that front? Thanks.

Seth, this is Greg. What I would tell you is that we were listening to our customers and our team members. And we track our customer service scores very closely, and we noticed in the early part of the year our scores were not as healthy as we would have liked. And John Ortis (30:55) and I – John runs all of our storage organization, sat down and we said we're going to protect payroll in the fourth quarter. We're going to make sure that payroll is protected. And we believe that that was also part of the sales improvement that we had. Team members on the floor able to assist customers and give that traditional legendary service that we always talk about. So it was a conscious decision. I believe it paid off well and as we're looking at payroll for 2017, we will look to make similar adjustments as we go through the year. Seth I. Sigman - Credit Suisse Securities (USA) LLC: Does it at all change how you guys think about the ability to get leverage going forward, what type of comp needed?

Well that's always taken into consideration. And the plan, the payroll plan is we believe the way we've got it laid out for 2017 is more than adequate to play back to what we've got planned quarter by quarter in our sales comps. But if we start to see an acceleration of sales, John and I have agreed, we're going to start adding more payroll. And if we see sales retract a bit, we're going to hold payroll because we don't believe that taking payroll out of the stores and affecting the things that are closest to the customer can pay any big benefit. We'll take cost out someplace else in the company. Seth I. Sigman - Credit Suisse Securities (USA) LLC: Okay, great. Thanks very much.

We'll go next to Peter Benedict with Robert Baird. Go ahead, please. Peter S. Benedict - Robert W. Baird & Co., Inc.: Hi guys. Thanks for taking the question. Congrats Tony. We'll certainly miss you, but – and welcome Kurt. Steve, could you talk maybe a little bit about the first half resets. I think Greg mentioned some things that were on top from a merchandising perspective. What can we expect to see and what do you think are going to be the biggest drivers this year in terms of merchandising?

Yes, good question. I mean this is one of the things that's really helped fuel our growth in the past and it's really a point of differentiation for us. I'd frame it up in a couple of ways here. First I would talk about new products. And when you talk about new products, we've got two or three events that are planned for the center court that are going to be fairly significant. Things in the Garden event, and our Chick Days event as well as what we're doing with outdoor sports will add hundreds of new items to this treasure hunt experience that our customers have come to rely on us for. In addition to that, I would tell you that one of the key resets that we'll be looking at and we're executing it right now on our stores, is our stores aren't getting any bigger. That said, using our air rights is something that we're going to take advantage of. We've got 1,000 stores today that are executing a program on the right side of our store mainly in a key area of our business that being pet and in some of the C.U.E. areas. And we are going to take the beams from 72 inches up to 84 inches, which will give us between 20 linear feet and 24 linear feet to bring in new products and to help fuel the continued growth that we're seeing in that side of our business. And then the last thing I would tell you is that, we're a company and you've heard us say this in the past that believes in test and learn. I'm going to change it to test and roll, not to confuse you here, but we've tested a number of programs and we're rolling a bunch of these programs out to more stores. Give you three quick examples. Carhartt, we are expanding our assortments and the look of the layouts in a couple hundred stores. We will be expanding a hay program and forge program into another couple of hundred stores. And we're seeing success in the stores that have brought in the new Muck shops, which is premium rubber footwear. And those vignettes will be going into a couple hundred stores. That's just a few to name. There's plenty more on the docket, but I would tell you that we're excited about the changes that are going to be happening inside of the box. Peter S. Benedict - Robert W. Baird & Co., Inc.: That's helpful. Thank you. And then just somewhat related, a little bit on private label where it's already north of 30% here. But where do you think you can lean further into that and how does that play into your thinking about how your merchandise online and kind of keep this business a little more insulated from some online risk of disremediation there. Thank you.

It's a great point. So we're very fortunate that 10 years or so ago we started really focusing on what we call exclusive brands. And we have seen nice growth there, and I will tell you, 4Health, which is our store brand for pet food, continues to take market share we believe and continues to grow which keeps us somewhat insulated. This coming year you'll see an expansion of that program. Originally it started off with basic ingredients then we went to grain free. And now we're going to be adding a line that's really targeted nutrition, supporting our customers that own cats and dogs that might have needs that are around sensitive skin, sensitive stomach, weight management, things that we weren't able to support before with our own exclusive brands. Another great example would be our DuMOR line of livestock feed. Last year we upgraded the nutrition around our equine segment. And we're going to be rolling out organic chicken food within our own line of exclusive brand this coming year. And then the last one I would note and I like to give you all examples so they're somewhat tangible, is that we're taking what we had in electric fencing and converting that entire aisle to a control brand, which we'll roll into an exclusive brand. We'll be the only ones who have it. It'll be called American FarmWorks. And that reset is taking place, as we now speak. So a lot of exciting things on the exclusive brand front. Not only will they help differentiate us, keep us a little more insulated, they also come with a little better margin and value to the consumer. Peter S. Benedict - Robert W. Baird & Co., Inc.: Terrific. Thanks very much.

We'll go next to Simeon Gutman with Morgan Stanley. Go ahead, please. Simeon Ari Gutman - Morgan Stanley & Co. LLC: Thanks. Congratulations, Tony. I'll see you in February, but figured last call. Just first follow-up on the cadence. I think Seth asked this earlier. Kurt, you mentioned that you think the halves actually may be I thought pretty similar. There is a tough compare in Q1. I guess some were thinking it could be negative. I know you're not guiding specifically. I don't think you were trying to imply that it wouldn't be, but that it would just even out. And then thinking about the fourth quarter, I think, you're encouraging us to look at the adjustments in the release, meaning the fourth quarter compare actually is a little tougher based on the adjustments. And then can you tell us, within that, is Petsense very material to Q4 comp, meaning how much should it add by next year's fourth quarter?

Sure. Starting with the first question on the first half and first quarter, yes, I would say that we're not indicating that Q1 is that strong of a headwind. It is a challenge to us. And I would encourage you to look at it as a half between Q1 and Q2 and that there could be some challenges. Just, I'll – March is the one month that is the biggest month that is impactful for Q1. And I would say that for Q1 we'd expect it to be below our target range that we stated of 2% to 3%. In fourth quarter, we do recognize that it does have a strong comp. We're also considering, as Greg mentioned, that we did see a soft October-November with the warm weather. So for a number of reasons, we still see strength in our opportunities in Q4 in the back half. Petsense, not material. And I would say comping them, which would be only the fourth quarter where they would introduce as a comp, would not be a significant factor. Simeon Ari Gutman - Morgan Stanley & Co. LLC: Okay. And then my follow-up – this is a question, I think, asked of Greg earlier, and I'll put it in this way. I don't know if the answer is going to be any different. But if we look at the spread in performance between, let's say, the healthier and the impacted markets, whatever the causes of those impacted markets, it sounds like the business improved maybe because some of the healthier markets got stronger but not necessarily the weaker markets stabilized or got better. I don't know if that's fair, if you can just clarify please?

Simeon, it's Greg. I would tell you that it was very similar. I wouldn't categorize that the markets that were healthy were healthier and the markets that were difficult were more difficult. We saw a little bit of a bottoming effect, I guess, earlier in maybe the third and fourth quarter. We started to see a little improvement in the energy markets. But in general, the rest of the markets were performing similarly honestly from quarter to quarter. So the big culprit was what we talked about. You had energy markets that had an impact. Most people continue to forget about deflation, but deflation is a serious component when it comes to a lot of the products that we sell. When we're selling a bag of bird seed a year ago at $20 a bag, and this year it's at $14. That's tough to offset. We did have a little bit of drag, I would say, with weather early, but that came back in December. So not a lot of movement, Simeon, really not a lot of movement. Simeon Ari Gutman - Morgan Stanley & Co. LLC: Okay. Thank you.

We'll go next to Michael Lasser with UBS. Go ahead please.

Good evening. Thanks a lot (40:52) for taking my question. And it's kind of simple. Is 2% to 3% the right long run comp growth to think about for the business now?

Yeah. Michael, this is Kurt. We're giving guidance for 2017. And as we've seen the trends and the headwinds we had in 2016, we have explained the challenges that we see for 2017. We're not giving more guidance necessarily for years beyond 2017. We still see us as a growth company and a lot of opportunity. So in regards to beyond 2017, we still feel confident with the target ranges that we've given for Tractor Supply.

And my second question is, Greg, you mentioned some increased promotions in the fourth quarter, some increased labor and some favorable weather. So to what extent did your internal initiatives drive the comp? And to what extent was it the external environment that drove the comp? Again, this is just in an effort to try and understand what the long...

Great question, Mike. But one thing I can tell you is we didn't buy comps. Comps came because of the fact that we have the right products and we were able to react to the business as that weather broke. And I would tell you that the promotional cadence was slightly more, but nothing extreme. And you know us, we don't believe in buying sales. We like to run a good steady business. And we reacted when we saw some soft performance in some categories, see the (42:38) team reacted and started either being a little bit more aggressive in those categories or taking some earlier markdowns to make sure that we came out of the season clean. But other than that, it wasn't anything heroic that we did.

Okay. Thank you so much.

We'll go next to Dan Wewer with Raymond James. Go ahead, please. Dan R. Wewer - Raymond James & Associates, Inc.: Thanks. Greg, I wanted to talk about the decision to slow the rate of new store openings from 113 in this last year to 100 in 2017. And I guess you'll have more flexibility to adjust the store openings the following year, but thinking what is the right annual number let's say after 2017?

Good question, Dan. We had said a few years ago that the ultimate number would be 120-ish, if we could find all the locations, get all of the leases secured and we had enough people in the pipeline to be able to fill that. And we have tried year after year and the best we could come was I think about 116 a few years ago and then we started dropping back into that 107 to 113, 114 number. We think the 100 number is the bottom and we said, listen, at least 100 stores, we know we can open those. And it gives us a little bit of room because in some categories when you look at certain parts of the country, for example the Northeast. One of the reasons that we are building that new distribution center is because there's continued growth opportunities there but we can't get to those until we can service those. No different than what's happening in the West. We could not get to some of those opportunities until we opened Casa Grande. So that's probably more of the factor than anything else. And I'll also tell you, I don't know of another retailer that's opening 100 stores a year right now. The number kind of settled there at 100, but it'll be 100, maybe a few more than 100 depending upon when we can find the locations and of course getting that new distribution center open in the Northeast is going to be key for us. Dan R. Wewer - Raymond James & Associates, Inc.: Okay, thanks. And then just as a follow up, looking at the operating margin rate forecasted to drop a bit in 2017, do you think that we've seen operating margin having peaked? This is meteoric increase the last seven years, and I know you're forecasting gross margin rates to grow. But are you at the point now where you believe it's probably best to reinvest savings back into the business to grow share rather than trying to grow operating margin rate?

Dan, it's a great question about balance. We always talk about the business, balancing sales, margin and how we handle inventories. I don't think that we are at the peak of our operating margin. I think that we've seen some headwinds in the last year to 18 months. As we clear through those headwinds, I think, we'll have more confidence in saying, beyond that point, are we of that number or is there still a little bit more room for growth. But I think we're optimistic there's still some more room for growth. We know some of the efficiencies that we have yet to gain inside the company, whether it be through supply chain, be it through how we're running our business with technology. And I think we need a little bit more time, as we get through this curve of headwinds, before I think we would give you any affirmative answer as to we think operating margin has either leveled off or there could be any more growth. Dan R. Wewer - Raymond James & Associates, Inc.: Do you think capital expenditures are peaking this year at $280 million, $290 million, and then after the DCs are completed that drops or is this the new norm?

Yeah. I think that number could come down a little bit over time. I think it's a healthy number this year. We've not been – we have not hit the number we forecasted over the last several years. There's lots of things that come into play with capital, as you know, as you get into the scenario of spending for either building a building or retrofitting installing (46:54) new lighting and such. But, no, I think we're in the range, and we'll be there for at least the next year or two. Dan R. Wewer - Raymond James & Associates, Inc.: Okay. Great. Thank you.

Thank you.

We'll go next to Chris Horvers with JPMorgan.

Thanks. Good evening. So I just wanted to understand the comp day in the fourth quarter lapping that 60 basis points versus the second quarter. So, as we look at that table, which clearly lays out a shift making 1Q look a lot less daunting, but as you think about the second quarter, are we losing 100 basis points, 120 basis points, because you're lapping a Sunday as Easter hops into the second quarter? And then do we have to take the 60 basis points out, as we lap in the fourth quarter as well?

Yeah. Chris, there's a number of variables in that calculation, as to the timing of Easter and the volume in second quarter. We mentioned the 60 basis points impact in the fourth quarter as a point of reference to the value of the day. And our calculation would tell you that the value for the lost day in the second quarter is similar. So you will have that one headwind of 60 basis points in the second quarter. But there's a number of variables in regards to what day and what impact we get to the day subsequent to Easter after that. So best reference is 60 basis point impact on that day for the quarter.

And then, is there an actual 60 basis point headwind in the fourth quarter or is that just – that was 2016 and that's gone?

Right. That's 2016, and that's gone.

Okay. Understood. And then, my follow-up question is, Greg you talked about sort of ag markets being, I guess, very small relative to your prior perception. So could you expand on that? How are you thinking about ag markets as a headwind as you face 2017 and in retrospect do you think ag markets was worth any discussion at all, frankly?

Frankly, I think we – it's not worth a discussion. As we've learned more, it was more of a weather effect than it was anything else. I think we need to focus our efforts around what's happening in energy markets. And then, as I said in my comments, maneuvering around some of the weather, I'll call it, conditions and things that we can only affect through reaction. We can't plan for that. I can't plan whether there will or won't be cold weather. I can't plan if it'll be warm or cold or rain or whatever. So I think that's the part of our company that sometimes, I think, people forget how nimble we are and how we can with our logistics and distribution network today really manage our inventories well, move inventory around as it's coming into the system, and take advantage of being able to react fast and move sales. But I think I'd like to focus on the things that I think are more challenging and that's the energy markets and then just how we manage weather. And then I'm not going to let any of you forget about deflation. Deflation is a factor. And it's somewhat flat, I guess, to maybe slightly up as we go into this year. But it was a factor of what, I think, about 40 basis points last year. So these are things we deal with. These are sometimes things that we don't talk about, but I'm convinced that we've got a good handle on the business, and the ag market thing is not worth really talking about.

Thanks very much.

And we'll go next to Steven Forbes with Guggenheim Securities. Go ahead, please.

Good afternoon.

Good afternoon.

I want to start with your relationship with Revionics. When you consider the current consumer spending environment, has your view of the company's relationship with Revionics changed, maybe as it relates to the importance of the different modules? I know you spoke in the past about price being most important but you clearly mentioned promotional activity within the release, so can you just kind of update us on where you are with the relationship and how you view it over the next few years here?

Sure. Steven, this is Steve. I would tell you that we've got a solid relationship with the folks at Revionics. As a matter of fact, we renewed our contract, it was a year ago. Today we're using two of their promotional tools or their pricing tools that being basic price op as well as clearance. As we move forward, we'll be doing more due diligence around what promotional optimization looks like, what their tool looks like and others. But right now we're not at a point of making that decision. But we do recognize it's out there and that is something we'll be talking about for the future.

And then, as a follow up, as it relates to the balance sheet, I mean I sit here and think about just how important you are to your suppliers and then look at the 35% to 40% payable to inventory ratio. And I would imagine that this ratio is much higher within the C.U.E. categories and I guess lower within the more discretionary categories. Is that fair and then how do you think about it as an opportunity, if it is one, over the next few years? And if you can touch on it, how big of an opportunity may it be?

Sure. Yes. That's a fair assessment. And we saw some improvement in the finance inventory this quarter. But I would say there was just a few small favorable impacts there. We are focused on it. We will be focused on it. We've got a number of things to address in that category. But that is an area over the next couple of years, I think, we can make some movement.

Steven, the other thing I would mention – this is Steve, just to kind of cap that as well. I mean, there's a variety of tools that we work with our vendors, and there's gives and takes. This is certainly one of the negotiables along with many others. I would tell you that where we've been able to make headway with our vendors may not necessarily be on this one line. If you look at the last year or so, our sales – top line sales hasn't been that strong. We had carried some inventory over a year ago. It is something that's on the docket to look at. But again, it goes back to a give and take and what do we want to really work with our vendors on to drive for the future. So I appreciate you bringing it up. It is in the consideration set, and we will look at it.

Thank you.

And we go next to Matthew McClintock with Barclays. Go ahead, please.

Hi. Yeah. Good afternoon, everyone. And, Tony, best wishes to you.

Thank you.

I was wondering if we could talk about ticket for a second. Greg, you talked a little bit about the deflationary aspect on your business. But as I think broader, bigger picture, what's it going to take to get return ticket back to positive maybe accelerating – an accelerating trend? And is that more just having a recovery in the energy markets, the ag markets or is that more maybe having some inflation in some of your core inputs? Thanks.

Matthew this is Steve. There's a difference between big ticket and average ticket. And if you talk about the bigger ticket products that we've got in our stores, we've had some headwinds over the last several years. And one of those headwinds that we've publicly stated is safes. That business has been declining for us, and so we're kind of fighting an uphill battle in that category as well as a few others. What I can tell you is I don't believe it's the fact that the customer is still willing to spend if given the right opportunity and the right product. And then if you look at our business, the last three of the last four quarters we've seen a decline in big ticket. Now, that said, we are not giving up on big ticket and in talking with the team, we are resetting this coming year our commercial zero-turn mowers, which is under the Bad Boy brand. And we believe there's going to be some life in that business for us as we move forward. In addition to that, they've got a $6,000 unit and today it's been successful in a couple hundred of our stores and we're going to expand it into more stores. We're looking at testing Kawasaki engines in OPE in a couple markets to see, again, if customer is willing to spend if given a reason to do so. We're making traction in UTVs and you're going to see us rollout an $8,000 UTV to more stores, not the chain because we recognize there is some local needs here. And then the last one I'd leave you with, is because I do think it goes back to who and what we're about, and that is the trailer business for us is a good business. And customers have relied on us as a destination for that category. In this coming year, we are going to be testing a dual axle trailer, again with a retail of $2,000 in about 100 of our stores. So my point there is that, while we've seen some softness in big ticket, some of it could be oil, some of it could safes. We're not giving up on it. And we do believe there's a market there. We just got to give the customers a reason to buy from us.

Thank you very much.

And we go next to Brian Nagel with Oppenheimer. Brian Nagel - Oppenheimer & Co., Inc.: Hi. Good afternoon.

Hey, Brian. Brian Nagel - Oppenheimer & Co., Inc.: I wanted to focus back on the fourth quarter. We talked, had a lot of questions already on this, but can you give us maybe a better example on how much stronger December was than the first two months period as the weather turned? And then the second question I have on that is, and this is more qualitative I assume that, as the weather turned, and we maybe got this first wave of what maybe a more normal weather in a while, did the consumer react as you would expect or was there still – did you still see indications of maybe some hesitation as the consumer – as the weather turned?

Brian, this is Greg. I'll talk to consumer reaction here. Yes, December was the stronger of the three months in the quarter. No question. As the weather became more normalized, the consumer came back into the store spending in the categories that we would traditionally find them spending in – cold weather products, heating products, heating fuels and so on and so forth. We felt there was pent-up demand. And we found that clearly there was, and December proved that to be the case. So more normalized, I'm not sure what normal might be anymore because there's been so much fluctuation. But it was a good indication that our consumers were willing to spend with us and traffic our stores when that need or that demand was created. Brian Nagel - Oppenheimer & Co., Inc.: Okay.

And, Brian, this is Kurt. Brian Nagel - Oppenheimer & Co., Inc.: (58:09) follow-up...

Brian, I was just going to reiterate that as we said December was the strongest and October-November weakest. And the comp sales were weakest in the beginning of the quarter, strongest in December. And that's about the detail we can give you on that. Brian Nagel - Oppenheimer & Co., Inc.: Got it. And then maybe a follow-up, Greg. During the (58:30) prepared comments, you talk a lot about – what I heard – I think I heard you say is that Tractor Supply did a much better job of being nimble around this weather and almost like localizing stores. How much different was that effort this year than it had been in prior years?

Well, I think, we've been working this for a number of years. And I think Steve would tell you that there's never – and we haven't had two years the same in some time. I was making this comment earlier that it used to be we could pretty much pinpoint when fall would start, winter would start, spring would start, summer would start. Now the seasons continue to lap over and move around and such. And so we had to have a supply chain that was more nimble. So is it unusual the last year? I'd say, warm weather goods sold in the South and cold weather goods sold in the North. I mean, we've been able to work our assortments around that over time. And I think we've learned that the consumer is going to be driven by demand. So if it's warm outside, there's going to be certain demand for certain products. If it's cooler and colder, demand for other products. We're able to do that and address that today far better than we could in the past. Brian Nagel - Oppenheimer & Co., Inc.: Thank you.

We'll go next to Stephen Tanal with Goldman Sachs. Go ahead, please. Stephen Tanal - Goldman Sachs & Co.: Thanks a lot, guys, for tons of detail. A lot of it's been answered and helpful. But I guess I just wanted to confirm. It sounds like you're reiterating that you feel comfortable with the mid-teens EPS guide long-term or a target. Is that the intention?

Well, here's what I'm going to tell you. I think on a longer-term approach – we know that in the shorter term, due to some factors, we're going to be a little bit challenged to get back to that 3% to 5% comp and mid-teens EPS. But I do believe, with all the things that we're doing as a company and the things that we're seeing from our customer, we're still finding positive transaction counts. We're opening 100-plus stores on the TSC side, 30-some-odd stores on the Petsense side. We're expanding our digital footprint and then adding more and more capabilities there and that particular online business is growing exponentially to what we're seeing in the four wall. Mix of products. Steve talked about all the things that he's doing to renew the product mix and that's what drives our business. Neighbor's Club, bringing in the new CRM program. And also I could go on and on about all of the things that we're doing to enhance, improve and drive the business. So it is our belief that for the longer-term we should be able to get back to those 3% to 5% comps. And if it's not mid-teen EPS it's going to be at least double-digit EPS. Stephen Tanal - Goldman Sachs & Co.: Got it. Understood. And just thinking about Petsense, I know you guys have framed it as relatively immaterial. Like, what is in the guide in terms of like EPS from Petsense? Is that something we should be modeling in or thinking about? And then if I could just sneak one in, I mean, the loyalty program sounds pretty exciting. If you could tell us how different traffic trends may be were in some of those markets versus the ones that have yet to get the program, that would be helpful too.

Sure. Stephen, it's Kurt. Petsense, net of the margin and the SG&A impact that we mentioned in our assumptions, I would say bottom line, they are not material to net income. They will not impact either favorably or unfavorably operating income. Stephen Tanal - Goldman Sachs & Co.: Okay.

And Stephen, I would tell you, on the loyalty program or Neighbor's Club as we call it, again, it's still fairly confined. We just rolled out another couple hundred stores. So we're up to 600 stores now total. A couple of tidbits that I will share with you and that is, membership rate is growing. As Greg said, it's exceeding our expectation. Here, very shortly, we will exceed 1 million members to the program. I thought I would share that with you all. That'll be our first milestone on route to many more millions. The exciting thing about the program is that 80% of the folks that are signed up for the program, they are new to our email database. So you can only imagine the amount of communication now that we're able to do, that we didn't have prior to before. Greg talked about the click-throughs and the redemption rates and everything else being higher, and it really giving us an opportunity to personalize our communication. What I will say is, is until we scale and we cycle a full year, traffic count and some of the other metrics we're a little hesitant to go too much detail there, because I don't know if some of that's weather, because we're doing this geographically, or not. And so, rather than trying to confuse matters, I would just ask that that you understand that we wouldn't be rolling it out if we didn't think there was a lot of opportunity in front of us. So I'll leave you with that. Stephen Tanal - Goldman Sachs & Co.: Sure. All right. Thanks a lot guys.

We'll go next to Scott Mushkin with Wolfe Research. Go ahead, please.

Hey, guys. Thanks for taking my questions. So, just wanted to make sure, I know, we spent a lot on the kind of the long term outlook algorithms, so just really a housekeeping item. Are you guys going to update your thoughts on the long term ranges at the Analyst Day?

Yeah. Scott, this is Kurt. We'll certainly address our long-term outlook at Analyst Day. At this point I expect to provide more details and reaffirm what our expectations are for 2017, and then give some short-term plans as well as what we expect it takes to get to those long-term target range. So at this point, we are not changing, but reaffirming our long-term guidance.

Okay. But it will be a topic of discussion at the Analyst Day?

Yeah.

Okay, great. Then my second question is, in regards to overlap with your merchandising online, what do you think the percentage of what you guys sell is available online, and then where do you think your price vis-à-vis online with whatever's available?

Yeah, Scott this is Steve. We spend a lot of time looking at what's happening out there in the digital space, and we're not so naïve as if you read any of the headlines to realize that there's intrusion of online in a lot of brick-and-mortar. That said, we have done a few things here to do our best to insulate ourselves and we think that the model itself is somewhat unique. One, it's the customers that we cater to. Two, it's the stuff we have inside the box such as big bag feed, things that are very difficult to ship that last mile where there's not a lot of margin in it. And Tractor Supply plays in a lot of that space. A third of our business is also in exclusive brands, and it's one of the things we've worked really hard at just to develop those brands, so our customers know they can only come to us to get it. Now, there are alike products, I think with any brick-and-mortar that you're going to find online. So a shirt's a shirt and you can buy a shirt, depends on what you want and what brand you want and what you're willing to pay for it. In terms of pricing, I would say that we're relatively competitive. And we're not seeing any erosion in the categories that I would be the most concerned with in terms of driving C.U.E. products. And we've talked about that at the opening here.

Okay, great. That's it for me, and then obviously congratulations to both Tony and Kurt. See you guys...

Thanks, Scott.

...on the 21st.

We'll go next to Ben Bienvenu with Stephens, Incorporated.

Yeah thanks, good afternoon. Steve, you had alluded to some of the additions you guys are making in your private label in the feed category on DuMOR and 4Health. I'm curious as you look at the broader livestock and pet category as a percentage of sales, where do you think we are in that timeline of penetration on the overall business?

It's an interesting question. I've been fortunate enough to be with the company for – this is my 19th year, and I think we've probably been asked that question for 17 of the 19 and it's the last 17, we've been asked. Every year I go back to this. I do believe there's still long-term potential for us. For a couple of reasons: one, we are a consolidator in the markets that we go into and the markets that we serve. And talking to a lot of our key suppliers that are in the livestock feed business, they would tell you that there's a lot of generational transfer happening right now, and that we continue to pick up market share in the markets we serve. And I think that's one thing that makes us very unique. I would also tell you that we don't own 100% of the market in things like pet food or pet supplies. As a matter of fact, we own a very small portion of the overall total that's being sold out there right now. So I still believe there's upside and opportunity there. And as we continue to expand and grow our 4Health business and it becomes a bigger and bigger portion of our overall total, it continues to insulate us and adds value to those folks, quite frankly, that live the azure (01:07:50) lifestyle. So I still see upside and I still see momentum. Those are just two of the categories and there's plenty of other C.U.E. categories that do make us very unique that we are continuing to drive share in.

That's great. And then, Greg, I think in your opening comments you made some commentary on the drop ship program, extending additional products to that program, Buy Online Pickup in Store, could you just provide a little bit of even if it's anecdotal, some of the progress that you're seeing in those initiatives?

Yeah, I'll take that one. This is Steve again. I would tell you that we're looking at the digital space as a real opportunity for Tractor. I know there's a lot of folks out there that are trying to find defense to what's happening. And I would tell you, there's good reason for many of them, including Tractor to be constantly looking over our shoulder and building our own business. We've made great strides, I think, in the digital space over the last couple of years, but we still have more opportunity and more momentum. In terms of things like Buy Online and Pickup in Store, we rolled that out last fall. And we are now in 900 stores, and I would tell you that we had no national marketing. The only marketing we've done is on our website and in the inside of our stores. And our customers have responded very favorably. And they're using this now, this tool, and I think that it sets us apart from a lot of other farm and ranch chains. And we continue to see that as a growth opportunity. And by mid next year or mid this year, I should say, we will have that fully functional, chain-wide. And we'll be able to really do a blast nationally. The other thing I would tell you is that our customers use our site for a variety of reasons, and our web visits this last year were up 20%, which is exciting. And the other exciting thing is our store locator activity was up over 20%. So not only are customers finding us through the site, but there are actually many new customers using that store locator to come into our brick-and-mortar space. Our sales online continue to grow. While they're still less than 1% of our sales, we're very encouraged with the growth rate that we're seeing. We doubled the amount of drop ship vendors we had from year over year. We've got 75,000 plus SKUs now that you have access to online compared to about 15,000 to 20,000 inside the store. And what's also exciting is about half of our sales online are from products that you can't find in one of our stores. So we see that as a growth opportunity for incremental comp store sales as we continue to expand that out. So that's kind of an overview and an update, and I would tell you that our customers are responding very favorably to what we have to offer them.

Thanks so much and best of luck.

We'll go next to Chuck Cerankosky with Northcoast Research.

Good afternoon, everyone.

Hey, Chuck.

Hi, Chuck.

In looking at the item you mentioned about acquisition costs in the fourth quarter, is that worth breaking out? Can you give us what that was?

Yeah. Chuck, I think, Tony mentioned that in his script at for the fourth quarter it's about $2.5 million pre-tax in there. There was other costs that were absorbed prior to the fourth quarter, but that was your Q4 impact.

All right. Great. Now, switching to store openings, Greg, you mentioned that sometimes it's just difficult to get the number of people to man the stores when they open. Do you have that same problem or anticipate it, as the Petsense stores open? And is this going to be an ongoing sharing of the ability to get a full complement of Tractor Supply stores opened alongside of the Petsense units?

Chuck, I think, you misunderstood me. We do not have a problem finding capable people and training them to get the stores open. So my apologies, if you misheard that. What I said was that we could open up to 120 Tractor Supplys because we have a pipeline of people to do that. I'd also tell you that in the Petsense side of the business, now that I've spent some time with Steve Neibergall and the team, they also have a fairly robust, I'll call it, supply chain of people in the works. Petsense is a much smaller staffed store than Tractor Supply. So it's not as demanding on finding the number of heads of people, but no different than Tractor Supply. They are being very careful and making sure that they put qualified, well-trained store managers into those stores, as they ramp their growth.

Okay. Thank you on that. Steve, what are some of the outdoor sports SKUs you might be expanding into this year?

Yeah. Great comment. We expanded our ammo program in Q4 to up to 200 stores now, and we're still trying to get a good read on it. I say that because we had some in stock issues during the third quarter on that program. So it's hard to get a good measurement on it. I can tell you, even though we had some challenges there, we still think that there is a potential there for further expansion. Anything that has to do with kayaks, fishing kayaks, unique differentiated kayaks. Things around deer feeding and watching, all those categories seem to be performing very well for us. Now that said, there are some categories in the program today haven't performed and we'll be continuing to cull those out. I think we've got three or four different outdoor sports tests going on right now across the country to try to find which tests seem to make the most sense for us as we move forward. And we're going to watch it very closely and continue to evolve and refine that program as we move forward.

Thank you.

We'll go next to Alan Rifkin with BTIG.

Thank you. So with respect at your expansion of 100 stores in 2017, I was wondering if relative as you look to the expansion in the West, is there a disproportionate number of the 100 new stores in 2017 coming in the West compared to where we were in 2016. And if that is the case, is that having any effect as to why your EBIT margins will delever by 25 basis points to 40 basis points? Thank you.

Alan, the answer is no. It's a very well-balanced portfolio of stores across. The only reason we had a little bit of disproportionate openings in the West a few years ago was to get that distribution center up, and we needed about 125 stores minimum. And now that that was completed, no, it's a good, balanced mix across.

Okay. And my follow-up, if I may Greg, so it appears if you look at your trends over the last couple of years that your store is in the oil patch community came back quicker. There was less of a lag period from when oil has rebounded versus when oil was sinking and you kind of held in there with your comps better. What would be your best guess as to why that anomaly is apparently so?

Well there's a number of things that happened in the oil patch. It's not just the fact that people are working or not working, there's also other things that affect this consumer that lives this lifestyle. For example, most of them have a large animal. Some of them have cattle. Things like that that get affected when their loss of income or lowered income comes into play, and so, they seem to either sell off the cattle and they'll have less need for certain products that we sell them, or the fact that they had certain projects they were going to do like a large fencing project, and that didn't materialize because guess what, didn't have the extra cash. So my comment on that is, I can't say that they bounced back any faster. I would say that it's been very slow so far from what we're seeing in the energy markets. And we just have to kind of wait and see.

Okay, thank you very much. Tony, best of luck to you in the future.

Thank you.

Next to Seth Basham with Wedbush Securities.

Thanks a lot, and good evening. My question is around ticket versus traffic in 2017. I apologize if I had missed any comments here, but when you look at the comp guidance of 2% to 3%, how much of that is traffic versus ticket?

Yeah, this is Steve. I'll start. I would tell you that if you looked over the last several years, what's driven our comps is more traffic than it has been ticket. And while we're making an effort to try to gain the other side of the ledger of the ticket side, as I mentioned earlier, more sales around some of the bigger than average ticket, I would still tell you that traffic has been one of those things that Tractor Supply's been very fortunate with. And that's if you look at the C.U.E. categories, the strategy around a lot of that that's what's driven it. So if you're asking me and I was laying out what next year would look like, I would say, I'd lean on traffic more than I would on ticket.

Got it, but overall, thinking about it, you had a little bit less deflation forecasted, and I assume you're thinking big ticket won't be as big a drag. So does that suggest that you could see a positive contribution to comp ticket in 2017?

That would be fantastic. If you could make that happen for us, I would support that. I would be uncomfortable telling you, I think, that that's what would happen just based on what the history has done. It's not that we've given up on ticket or average ticket, there is still some headwind there. But I will tell you that I feel traffic is one of the things that we continue to see. And I think a lot of what we're doing with Neighbor's Club and Buy Online Pickup in Store is continuing to drive that. So, again, I wouldn't give up on ticket or average ticket, and if it happens, fantastic, we are going to put a strategy around driving it. But I still would lean more toward the traffic side of the ledger.

Great. Thanks and my follow up is just around marketing. Can you talk about your marketing mix, how that shifted and any significant changes that you're planning for 2017?

In Q4, one of the things that we've really been transitioning to is taking what has been traditional marketing and moving it into the digital space. We still recognize that our customers use newspapers, and they still view things the old way so to speak. So we've been slow to transition, but we are transitioning. In Q4 specifically, we did increase distribution in a couple of our circulars, and I think Greg had mentioned slightly more promotional but what we were able to do was get more of exposure out there for the circulars that we did do. As you look into 2017, I think, you'll continue to see an evolution of where we're putting our marketing dollars. We'll be spending more of those dollars on things that are more digital. We will be taking advantage of our Neighbor's Club program, as we continue to scale that out and talking to our consumers. And we'll continue to evolve based on what they're wanting from us, and we can measure that through the response rates in a lot of what we do. So we've always said the customer drives where we go. And in this case, we are going to get in the backseat and let them take us for a ride.

Very good. Thanks a lot, guys, and good luck.

Our final question comes from Adam Sindler from Deutsche Bank.

All right. Very good. Thank you so much. Tony, my congratulations as well, enjoy the time off. Greg, I'm really glad you brought up the deflation point because I do think that is important. And I wanted to go back maybe to some discussion around deflation coming out of 2015 as long ago as that was. I think back then we were seeing some waning deflation mostly in seed and lubricants. Steel was becoming less of an impact. And then we started to see better trends into this year, and then things turned pretty sharply in the third quarter. What was it specifically that turned negatively and sort of against maybe expectations? And then what should we maybe be looking for going forward to see if we could ever get back to an inflationary environment?

Well, one of the biggest things was two things – the oil category going one direction and seed or bird going in another direction. Both categories where we sell tremendous amount of tonnage of product. What can change that, as we go forward, we always like to have a little bit of inflation pushing our sales. And a little bit of inflation is a good thing for the business. Unfortunately, it's been a mixed bag. And again we have to deal with that. We have to manage through that. Adam, it's not been easy. But I'd like to see a little inflation this next year maybe as we get toward the end of the year into 2018, but I can't predict that. Right now, it looks a little bit like we're still going to see some deflation for a while.

Okay. And then, in that regard, does the mix of private label impact that at all or is this just deflation sort of on a pure product cost? I mean, my example, I guess, would be private label is – not always in your case specifically but often more lower priced. As you mix more to private label, is that impacting deflation or is that just more on the comp ticket?

I think Steve can answer that.

Yeah. I would say that when we talk private label, we talk private label across all the brands that we have in our stores. So some of them are related to more commodity-based products and some of them aren't. So I want to make that point clear first. I would tell you that if you look at the drivers of deflation or inflation, like you said, it's steel, it's corn, and it's lubricating or petroleum-based products. But we keep a close eye on all of those. As we grow some of our exclusive brands and take share, it's a balance and it's a mix. So I don't necessarily think that it's a deflation necessarily driven solely from that, and that's what I would leave you with. I don't know if I confused you more or not.

No, that's perfect. One follow-up on the average ticket question. As you look to the back half of this year, the average ticket was down on down from the year before and close to down 3 points on the fourth quarter on a two-year stack. I mean, I understand for the year you're probably not going to get positive ticket. But would you expect that by that fourth quarter ticket starts to turn positive especially with sort of the expectation of waning deflation by the fourth quarter?

Well, again, there's the difference between big ticket and the big ticket impact on average ticket. And so, the two of them play together. The only thing I can tell you about big ticket is that things like log splitters and stoves and some heating products, we didn't see much benefit from in October and November. There was a pretty significant headwind there. As it got colder, we started to sell more of that type of product. As you look to next year, again, I don't want to say that it's all weather-driven, we are doing a lot of things within the assortments that we have ourselves, but there is a factor there. So if you look year-to-year, you're right, we've had two Q4s that showed big ticket off than average ticket. We're doing everything in our end to try to keep that number up. But, again, customers are going to buy what they need. And we've always said we're a needs-based retailer.

Excellent. Thank you so much. I appreciate it.

And there are no further questions at this time, I'll turn the conference back over to your speakers.

Okay. Thank you everyone for your continued support and interest in Tractor Supply. And we look forward to speaking with you again in April regarding our first quarter of 2017 performance.

Ladies and gentlemen this concludes today's conference. Thank you for your participation.