<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1996, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 0-16125
FASTENAL COMPANY
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(Exact name of registrant as specified in its charter)
Minnesota 41-0948415
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Theurer Boulevard
Winona, Minnesota 55987
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(Address of principal executive offices) (Zip Code)
(507) 454-5374
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Class Outstanding at October 15, 1996
- ----------------------------- -------------------------------
Common Stock, $.01 par value 37,938,688
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FASTENAL COMPANY
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I Financial Information:
Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 1
Consolidated Statements of Earnings for the nine months and three months
ended September 30, 1996 and 1995 2
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1996 and 1995 3
Notes to Consolidated Financial Statements 4
Management's discussion and analysis of financial condition
and results of operations 5-6
Part II Other Information
Item 6 Exhibits and reports on Form 8-K 7
</TABLE>
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- 1 -
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FASTENAL COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
Assets 1996 1995
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 910,000 6,583,000
Trade accounts receivable, net of allowance for doubtful
accounts of $520,000 and $460,000 as of September
30, 1996 and December 31, 1995, respectively 42,847,000 31,866,000
Inventories 51,691,000 40,178,000
Deferred tax asset 947,000 947,000
Other current assets 2,789,000 1,523,000
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Total current assets 99,184,000 81,097,000
Marketable securities 681,000 784,000
Property and equipment, less accumulated depreciation 40,482,000 27,090,000
Other assets, less accumulated amortization 3,810,000 349,000
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Total assets $ 144,157,000 109,320,000
====================================================================================================
Liabilities and Stockholders' Equity
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Current liabilities:
Accounts payable $ 10,228,000 7,882,000
Notes payable 8,766,000 0
Accrued expenses 6,332,000 4,974,000
Income taxes payable 814,000 2,141,000
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Total current liabilities 26,140,000 14,997,000
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Stockholders' equity:
Preferred stock of $.01 par value per share.
Authorized 5,000,000 shares; none issued 0 0
Common stock of $.01 par value per share. Authorized
50,000,000 shares; issued and outstanding 37,938,688
shares 379,000 379,000
Additional paid-in capital 4,424,000 4,424,000
Retained earnings 113,377,000 89,566,000
Translation loss (163,000) (52,000)
Unrealized holding gains on marketable securities 0 6,000
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Total stockholders' equity 118,017,000 94,323,000
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Total liabilities and stockholders' equity $ 144,157,000 109,320,000
====================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
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- 2 -
FASTENAL COMPANY AND SUBSIDIARY
Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
------------------------------ ----------------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net sales $ 210,123,000 164,559,000 76,212,000 57,993,000
Cost of sales 97,975,000 77,054,000 35,525,000 26,972,000
- ------------------------------------------------------- ----------------------------
Gross profit 112,148,000 87,505,000 40,687,000 31,021,000
Operating and administrative
expenses 72,003,000 54,105,000 26,295,000 18,725,000
- ------------------------------------------------------- ----------------------------
Operating income 40,145,000 33,400,000 14,392,000 12,296,000
Other income (expense):
Interest income 107,000 124,000 14,000 21,000
Interest expense (42,000) (68,000) (35,000) (22,000)
Gain on disposal of property
and equipment 923,000 553,000 151,000 157,000
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Total other income 988,000 609,000 130,000 156,000
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Earnings before
income taxes 41,133,000 34,009,000 14,522,000 12,452,000
Income tax expense 16,563,000 13,819,000 5,830,000 5,066,000
- ------------------------------------------------------- ----------------------------
Net earnings $ 24,570,000 20,190,000 8,692,000 7,386,000
- ------------------------------------------------------- ----------------------------
Earnings per share $ .65 .53 .23 .19
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Weighted average shares
outstanding 37,938,688 37,938,688 37,938,688 37,938,688
- ------------------------------------------------------- ----------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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- 3 -
FASTENAL COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 24,570,000 20,190,000
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of property and equipment 5,705,000 3,900,000
Gain on disposal of property and equipment (923,000) (553,000)
Amortization of goodwill and non-compete 78,000 0
Amortization of premium on marketable securities 5,000 15,000
Changes in operating assets and liabilities:
Trade accounts receivable (10,981,000) (9,629,000)
Inventories (11,513,000) (6,138,000)
Other current assets (1,266,000) (121,000)
Accounts payable 2,346,000 (791,000)
Accrued expenses 1,358,000 1,179,000
Income taxes payable (1,327,000) (427,000)
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Net cash provided by operating activities 8,052,000 7,625,000
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Cash flows from investing activities:
Sale of marketable securities 92,000 3,933,000
Additions of property and equipment, net (20,654,000) (12,543,000)
Proceeds from sale of property and equipment 2,480,000 1,229,000
Translation adjustment (111,000) (14,000)
Increase in other assets (3,539,000) (29,000)
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Net cash used in investing activities (21,732,000) (7,424,000)
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Cash flows from financing activities:
Increase in notes payable 8,766,000 0
Payment of dividends (759,000) (759,000)
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Net cash provided by (used for)
financing activities 8,007,000 (759,000)
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Net decrease in cash and
cash equivalents (5,673,000) (558,000)
Cash and cash equivalents at beginning of period 6,583,000 3,133,000
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Cash and cash equivalents at end of period $ 910,000 2,575,000
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Supplemental disclosure of cash flow information:
Cash paid during each period for:
Income taxes $ 17,890,000 14,245,000
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Interest $ 42,000 68,000
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</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
- 4 -
FASTENAL COMPANY AND SUBSIDIARY
NOTES TO CONSOIDATED FINANCIAL STATEMENTS
September 30, 1996 and 1995
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. They do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. However, there has been no material change in the information
disclosed in the notes to consolidated financial statements of Fastenal Company
and its wholly-owned subsidiary, Fastenal Canada Company, (collectively referred
to as the Company) included in the Company's consolidated financial statements
as of and for the year ended December 31, 1995. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included.
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- 5 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying consolidated
financial statements.
Nine months of 1996 vs. 1995
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Net sales for the nine months ended September 30, 1996 increased 27.7% to
$210,123,000 versus the $164,559,000 recorded during the comparable 1995 period.
The increase came primarily from higher unit sales as prices were relatively
stable over the period. Higher unit sales came from increases in sales at
existing store sites and from the addition of new store sites. Sites opened in
1994 or earlier had average sales increases of 19.5%. The remainder of the 27.7%
sales growth came from store sites opened in 1995 and during the first nine
months of 1996. Ninety-one new store sites were added from October 1995 through
September 1996. Forty of the new sites were traditional stores featuring the
fastener product line. The remaining 51 new sites were combination stores with
multiple product lines in smaller communities. During the first nine months of
1996, 5.9% of net sales came from sales of the Company's FastTool(R) product
line and less than 1% of the net sales came from each of the remaining non-
fastener product lines.
Net earnings for the first nine months grew from $20,190,000 in 1995 to
$24,570,000 in 1996, an increase of 21.7%. Net earnings increased at a slower
rate than net sales because operating and administrative expenses increased at a
33.1% rate between the comparable periods, a rate higher than the rate of
increase in net sales. The largest increase in operating and administrative
expense came from employment costs in the store sites which increased by 38.6%.
The Company increased its site personnel from 1,310 on December 31, 1995 to
1,830 on September 30, 1996, an increase of 39.7%.
Third quarter 1996 vs. 1995
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Net sales for the three months ended September 30, 1996 increased 31.4% to
$76,212,000 versus the $57,993,000 recorded during the comparable 1995 period.
Reasons for the increase were the same as those mentioned in the nine month
comparison. The increases in sales at existing store sites are due primarily to
strength in the manufacturing segment of the economy and, to a lesser extent,
the introduction of new product lines at the existing sites. Many of the
Company's customers are in the auto, machinery and processing sections of the
manufacturing economy, all of which are experiencing relatively high sales
rates. Sites opened in 1994 or earlier had average sales increases of 21.7%. The
remainder of the 31.4% sales growth came from store sites opened in 1995 and
during the first nine months of 1996. Thirty-four new store sites were added
during the quarter. Twelve of the new sites were traditional stores featuring
the fastener product line. The remaining 22 new sites were combination stores
with multiple product lines in smaller communities. The total sites at the end
of the quarter were 396 traditional Fastenal stores and 56 combination stores.
<PAGE>
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ITEM 2. (continued)
Net earnings for the three months grew from $7,386,000 in 1995 to
$8,692,000 in 1996, an increase of 17.7%. Net earnings increased at a slower
rate than net sales because operating and administrative expenses increased at a
40.4% rate between the comparable periods, a rate higher than the rate of
increase in net sales. The largest increase in operating and administrative
expense came from employment costs in the store sites which increased by 44.7%.
The increase in employment costs was caused primarily by the opening of new
store sites and the addition of new product lines at existing store sites.
Liquidity and Capital Resources
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The higher level of sales during the period resulted in the growth of trade
accounts receivable and inventories. Property and equipment increased because
of the expansion of the Winona warehouse and corporate offices, the purchase of
the Ohio warehouse, the acquisition of a janitorial supply business, and the
addition of trucks and data processing equipment. Cash requirements for these
asset changes were satisfied from net earnings, use of available cash, and
short-term loans. The Company expects to generate sufficient excess cash flow
in the fourth quarter of 1996 to significantly reduce all short-term loans while
maintaining current expansion plans.
As of September 30, 1996, there were no material commitments outstanding
for capital expenditures.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Restated Articles of Incorporation of Fastenal Company, as amended
(incorporated by reference to Exhibit 3.1 to Fastenal Company's
Form 10-Q for the quarter ended September 30, 1993)
3.2 Restated By-Laws of Fastenal Company (incorporated by reference to
Exhibit 3.2 to Registration Statement No. 33-14923)
27 Financial Data Schedule
(b) Reports on Form 8-K:
No report on Form 8-K was filed by Fastenal Company during the quarter
ended September 30, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FASTENAL COMPANY
/s/ Robert A. Kierlin
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(Robert A. Kierlin, President)
(Duly Authorized Officer)
Date October 30, 1996 /s/ Daniel L. Florness
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(Daniel L. Florness, Treasurer)
(Principal Financial Officer)
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INDEX TO EXHIBITS
3.1 Restated Articles of Incorporation of Fastenal Company, as amended
(incorporated by reference to Exhibit 3.1 to Fastenal Company's Form
10-Q for the quarter ended September 30, 1993).
3.2 Restated By-Laws of Fastenal Company (incorporated by reference to
Exhibit 3.2 to Registration Statement No. 33-14923).
27 Financial Data Schedule..................Electronically Filed
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Consolidated Statement of Earnings of Fastenal
Company and Subsidiary as of, and for the nine months ended, September 30, 1996
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 910,000
<SECURITIES> 0<F1>
<RECEIVABLES> 43,367,000
<ALLOWANCES> 520,000
<INVENTORY> 51,691,000
<CURRENT-ASSETS> 99,184,000
<PP&E> 59,767,000
<DEPRECIATION> 19,285,000
<TOTAL-ASSETS> 144,157,000
<CURRENT-LIABILITIES> 26,140,000
<BONDS> 0
<COMMON> 379,000
0
0
<OTHER-SE> 117,638,000
<TOTAL-LIABILITY-AND-EQUITY> 144,157,000
<SALES> 210,123,000
<TOTAL-REVENUES> 210,123,000
<CGS> 97,975,000
<TOTAL-COSTS> 97,975,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 702,000
<INTEREST-EXPENSE> 42,000
<INCOME-PRETAX> 41,133,000
<INCOME-TAX> 16,563,000
<INCOME-CONTINUING> 24,570,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,570,000
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
<FN>
<F1> Marketable securities in the amount of $681,000 have been classified as
non-current assets on the Consolidated Balance Sheet of Fastenal Company
and Subsidiary as of September 30, 1996.
</FN>
</TABLE>
