<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
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 June 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 ______________________
Commission file number 0-16125
FASTENAL COMPANY
______________________________________________________
(Exact name of registrant as specified in its charter)
Minnesota 41-0948415
_______________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Theurer Boulevard
Winona, Minnesota 55987
________________________________________ __________
(Address of principal executive offices) (Zip Code)
(507) 454-5374
____________________________________________________
(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 July 15, 1996
____________________________ ____________________________
Common Stock, $.01 par value 37,938,688
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FASTENAL COMPANY
INDEX
<TABLE>
<CAPTION>
Page No.
--------
Part I Financial Information:
<S> <C>
Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 1
Consolidated Statements of Earnings for the six months and three months
ended June 30, 1996 and 1995 2
Consolidated Statements of Cash Flows for the six months ended
June 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 4 Submission of matters to a vote of security holders 7
Item 6 Exhibits and reports on Form 8-K 8
</TABLE>
<PAGE>
-1-
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FASTENAL COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
Assets 1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 850,000 6,583,000
Trade accounts receivable, net of allowance for doubtful
accounts of $500,000 and $460,000 as of June 30,
1996 and December 31, 1995, respectively 39,846,000 31,866,000
Inventories 48,399,000 40,178,000
Deferred tax asset 947,000 947,000
Other current assets 2,000,000 1,523,000
- ---------------------------------------------------------------------------------------------
Total current assets 92,042,000 81,097,000
Marketable securities 719,000 784,000
Property and equipment, less accumulated depreciation 37,330,000 27,090,000
Other assets, less accumulated amortization 3,822,000 349,000
- ---------------------------------------------------------------------------------------------
Total assets $133,913,000 109,320,000
- ---------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- ---------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 11,393,000 7,882,000
Accrued expenses 6,303,000 4,974,000
Notes payable 5,562,000 0
Income taxes payable 1,344,000 2,141,000
- ---------------------------------------------------------------------------------------------
Total current liabilities 24,602,000 14,997,000
- ---------------------------------------------------------------------------------------------
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 104,685,000 89,566,000
Translation loss (211,000) (52,000)
Unrealized holding gains on marketable securities 34,000 6,000
- ---------------------------------------------------------------------------------------------
Total stockholders' equity 109,311,000 94,323,000
- ---------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $133,913,000 109,320,000
- ---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
-2-
FASTENAL COMPANY AND SUBSIDIARY
Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
---------------------------- -------------------------
1996 1995 1996 1995
- ----------------------------------------------------------------- -------------------------
<S> <C> <C> <C> <C>
Net sales $133,911,000 106,566,000 70,850,000 55,475,000
Cost of sales 62,450,000 50,082,000 32,814,000 26,046,000
- ----------------------------------------------------------------- -------------------------
Gross profit 71,461,000 56,484,000 38,036,000 29,429,000
Operating and administrative
expenses 45,708,000 35,380,000 24,168,000 18,188,000
- ----------------------------------------------------------------- -------------------------
Operating income 25,753,000 21,104,000 13,868,000 11,241,000
Other income (expense):
Interest income 93,000 103,000 30,000 35,000
Interest expense (7,000) (46,000) (7,000) (46,000)
Gain on disposal of property
and equipment 772,000 396,000 249,000 83,000
- ----------------------------------------------------------------- -------------------------
Total other income 858,000 453,000 272,000 72,000
- ----------------------------------------------------------------- -------------------------
Earnings before
income taxes 26,611,000 21,557,000 14,140,000 11,313,000
Income tax expense 10,733,000 8,753,000 5,695,000 4,593,000
- ----------------------------------------------------------------- -------------------------
Net earnings $ 15,878,000 12,804,000 8,445,000 6,720,000
================================================================= =========================
Earnings per share $ .42 .34 .22 .18
================================================================= =========================
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.
<PAGE>
-3-
FASTENAL COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 15,878,000 12,804,000
Adjustments to reconcile net earnings to net cash
provided by (used for) operating activities:
Depreciation of plant and equipment 3,495,000 2,600,000
Gain on disposal of property and equipment (772,000) (396,000)
Amortization of goodwill and non-compete 20,000 0
Amortization of premium on marketable securities 4,000 13,000
Changes in operating assets and liabilities:
Trade accounts receivable (7,980,000) (6,267,000)
Inventories (8,221,000) (9,335,000)
Other current assets (477,000) 63,000
Accounts payable 3,511,000 (503,000)
Accrued expenses 1,329,000 1,178,000
Income taxes payable (797,000) (1,046,000)
- -----------------------------------------------------------------------------------------
Net cash provided by (used for)
operating activities 5,990,000 (889,000)
- -----------------------------------------------------------------------------------------
Cash flows from investing activities:
Sale of marketable securities 89,000 3,931,000
Additions of property and equipment, net (14,713,000) (8,586,000)
Proceeds from sale of property and equipment 1,750,000 799,000
Translation adjustment (159,000) (14,000)
Increase in other assets (3,493,000) (14,000)
- -----------------------------------------------------------------------------------------
Net cash used in investing activities (16,526,000) (3,884,000)
- -----------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in notes payable 5,562,000 2,600,000
Payment of dividends (759,000) (759,000)
- -----------------------------------------------------------------------------------------
Net cash provided by financing activities 4,803,000 1,841,000
- -----------------------------------------------------------------------------------------
Net decrease in cash and
cash equivalents (5,733,000) (2,932,000)
Cash and cash equivalents at beginning of period 6,583,000 3,133,000
- -----------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 850,000 201,000
- -----------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during each period for:
Income taxes $ 11,530,000 9,799,000
- -----------------------------------------------------------------------------------------
Interest $ 7,000 46,000
- -----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
- 4 -
FASTENAL COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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.
<PAGE>
- 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.
Six months of 1996 vs. 1995
- ---------------------------
Net sales for the six months ended June 30, 1996 increased 25.7% to
$133,911,000 versus the $106,566,000 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 20.0%. The remainder of the 25.7%
sales growth came from store sites opened in 1995 and during the first six
months of 1996. Seventy new store sites were added from July 1995 through June
1996. Forty of the new sites were traditional stores featuring the fastener
product line. The remaining 30 new sites were combination stores with multiple
product lines in smaller communities. During the first six months of 1996, 5.5%
of net sales came from sales of the Company's FastTool(R) product line and less
than 1% of the net sales came from the sales of the Company's Sharpcut(TM)
product line.
Net earnings for the first six months grew from $12,804,000 in 1995 to
$15,878,000 in 1996, an increase of 24.0%. Net earnings increased at a slower
rate than net sales because operating and administrative expenses increased at a
29.2% 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. The Company increased its
site personnel from 1,310 on December 31, 1995 to 1,659 on June 30, 1996.
Second quarter 1996 vs. 1995
- ----------------------------
Net sales for the three months ended June 30, 1996 increased 27.7% to
$70,850,000 versus the $55,475,000 recorded during the comparable 1995 period.
Reasons for the increase were the same as those mentioned in the six month
comparison. The increases in sales at existing store sites are due primarily to
strength in the manufacturing segment of the economy and 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. Twenty-six new store sites
were added during the quarter. Seven of the new sites were traditional stores
featuring the fastener product line. The remaining 19 new sites were
combination stores with multiple product lines in smaller communities. The
total sites at the end of the quarter were 384 traditional Fastenal stores and
34 combination stores.
Net earnings for the first three months grew from $6,720,000 in 1995 to
8,445,000 in 1996, an increase of 25.7%. Net earnings increased at a slower
rate than net sales because operating and administrative expenses increased at a
32.9% 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. This was caused by the
opening of new stores and the addition of new product lines at existing store
sites.
<PAGE>
- 6 -
ITEM 2. (continued)
Liquidity and Capital Resources
- -------------------------------
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 third and fourth quarters of 1996 to pay off all short-term loans while
maintaining current expansion plans and fulfilling its commitments for capital
expenditures.
As of June 30, 1996, the Company had outstanding commitments of approximately
$300,000 to complete the addition to the Company's corporate offices and
distribution center in Winona, Minnesota.
<PAGE>
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual meeting of shareholders held on April 23, 1996, two
matters were put to a vote of the shareholders. Proxies were solicited from
shareholders unable to attend the meeting. Proxy votes are included in the
results that follow.
Matter 1. To elect a Board of five directors, to serve until the next regular
- -------- meeting of shareholders or until their successors have been duly
elected and qualified.
The previous directors, Robert A. Kierlin, Stephen M. Slaggie, Michael M.
Gostomski, John D. Remick, and Henry K. McConnon, were nominated. There were no
other nominations. The five nominees each received and had withheld the number
of votes set forth opposite their names below:
<TABLE>
<CAPTION>
Total Number of Total Number of
Name of Director Votes Cast For Votes Withheld
- ---------------------- --------------- ---------------
<S> <C> <C>
Robert A. Kierlin 33,814,779 134,134
Stephen M. Slaggie 33,813,311 135,622
Michael M. Gostomski 33,812,019 136,914
John D. Remick 33,812,414 136,519
Henry K. McConnon 33,812,799 136,134
</TABLE>
There were no abstentions or broker non-votes.
Matter 2. To ratify the appointment of KPMG Peat Marwick LLP as independent
- -------- auditors for the fiscal year ending December 31, 1996.
Voting to ratify the appointment were 33,388,842 shares. Voting against the
ratification were 19,150 shares. There were no broker non-votes. Abstentions
totaled 101,151 shares.
<PAGE>
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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 June 30, 1996.
<PAGE>
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
------------------------------
(Robert A. Kierlin, President)
(Duly Authorized Officer)
Date July 31, 1996 /s/ Daniel L. Florness
------------- -------------------------------
(Daniel L. Florness, Treasurer)
(Principal Financial Officer)
<PAGE>
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>
<PAGE>
<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 six months ended, June 30, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 850,000
<SECURITIES> 0<F1>
<RECEIVABLES> 40,346,000
<ALLOWANCES> 500,000
<INVENTORY> 48,399,000
<CURRENT-ASSETS> 92,042,000
<PP&E> 54,714,000
<DEPRECIATION> 17,384,000
<TOTAL-ASSETS> 133,913,000
<CURRENT-LIABILITIES> 24,602,000
<BONDS> 0
<COMMON> 379,000
0
0
<OTHER-SE> 108,932,000
<TOTAL-LIABILITY-AND-EQUITY> 133,913,000
<SALES> 133,911,000
<TOTAL-REVENUES> 133,911,000
<CGS> 62,450,000
<TOTAL-COSTS> 62,450,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 406,000
<INTEREST-EXPENSE> 7,000
<INCOME-PRETAX> 26,611,000
<INCOME-TAX> 10,733,000
<INCOME-CONTINUING> 15,878,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,878,000
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
<FN>
<F1> Marketable securities in the amount of $719,000 have been classified as
non-current assets on the Consolidated Balance Sheet of Fastenal Company
and Subsidiary as of June 30, 1996.
</FN>
</TABLE>
