<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 March 31, 1997, 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)
Not Applicable
____________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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 April 15, 1997
_____________________________ _____________________________
Common Stock, $.01 par value 37,938,688
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FASTENAL COMPANY
INDEX
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<CAPTION>
Page No.
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<S> <C>
Part I Financial Information:
Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996 1
Consolidated Statements of Earnings for the three months
ended March 31, 1997 and 1996 2
Consolidated Statements of Cash Flows for the three months ended
March 31, 1997 and 1996 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)
March 31, December 31,
Assets 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 250,000 426,000
Trade accounts receivable, net of allowance for doubtful
accounts of $570,000 and $540,000 as of March 31, 1997
and December 31, 1996, respectively 52,231,000 41,553,000
Inventories 60,006,000 56,526,000
Deferred income tax asset 1,219,000 1,219,000
Other current assets 4,246,000 3,731,000
- ----------------------------------------------------------------------------------------------
Total current assets 117,952,000 103,455,000
Marketable securities 515,000 515,000
Property and equipment, less accumulated depreciation 50,931,000 43,930,000
Other assets, less accumulated amortization 3,657,000 3,645,000
- ----------------------------------------------------------------------------------------------
Total assets $ 173,055,000 151,545,000
==============================================================================================
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 12,992,000 10,010,000
Notes payable 12,986,000 8,622,000
Accrued expenses 6,827,000 5,611,000
Income taxes payable 5,765,000 795,000
- ----------------------------------------------------------------------------------------------
Total current liabilities 38,570,000 25,038,000
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Deferred income tax liability 540,000 540,000
- ----------------------------------------------------------------------------------------------
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 129,352,000 121,346,000
Translation loss (210,000) (182,000)
- ----------------------------------------------------------------------------------------------
Total stockholders' equity 133,945,000 125,967,000
- ----------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 173,055,000 151,545,000
==============================================================================================
</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>
Three months ended
March 31,
----------------------------
1997 1996
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<S> <C> <C>
Net sales $ 87,095,000 63,061,000
Cost of sales 41,259,000 29,636,000
- ------------------------------------------------------------
Gross profit 45,836,000 33,425,000
Operating and administrative
expenses 31,179,000 21,540,000
- ------------------------------------------------------------
Operating income 14,657,000 11,885,000
Other income (expense):
Interest income 15,000 63,000
Interest expense (229,000) 0
Gain on disposal of property
and equipment 232,000 523,000
- ------------------------------------------------------------
Total other income 18,000 586,000
- ------------------------------------------------------------
Earnings before
income taxes 14,675,000 12,471,000
Income tax expense 5,910,000 5,038,000
- ------------------------------------------------------------
Net earnings $ 8,765,000 7,433,000
============================================================
Earnings per share $ .23 .20
============================================================
Weighted average shares
outstanding 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
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 8,765,000 7,433,000
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of property and equipment 2,075,000 1,628,000
Gain on disposal of property and equipment (232,000) (523,000)
Amortization of goodwill and non-compete 55,000 0
Amortization of premium on marketable securities 0 2,000
Changes in operating assets and liabilities:
Trade accounts receivable (10,678,000) (4,421,000)
Inventories (3,480,000) (2,632,000)
Other current assets (515,000) (40,000)
Accounts payable 2,982,000 1,211,000
Accrued expenses 1,216,000 819,000
Income taxes payable 4,970,000 3,092,000
- -----------------------------------------------------------------------------------
Net cash provided by operating activities 5,158,000 6,569,000
- -----------------------------------------------------------------------------------
Cash flows from investing activities:
Sale of marketable securities 0 35,000
Additions of property and equipment, net (9,815,000) (5,164,000)
Proceeds from sale of property and equipment 971,000 946,000
Translation adjustment (28,000) (8,000)
Increase in other assets (67,000) (15,000)
- -----------------------------------------------------------------------------------
Net cash used in investing activities (8,939,000) (4,206,000)
- -----------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in notes payable 4,364,000 0
Payment of dividends (759,000) (759,000)
- -----------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 3,605,000 (759,000)
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Net (decrease) increase in cash and
cash equivalents (176,000) 1,604,000
Cash and cash equivalents at beginning of period 426,000 6,583,000
- -----------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 250,000 8,187,000
- -----------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during each period for:
Income taxes $ 940,000 1,777,000
- -----------------------------------------------------------------------------------
Interest $ 229,000 0
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</TABLE>
The accompanying notes are an integral part of the financial statements.
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- 4 -
FASTENAL COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 and 1996
(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, 1996. 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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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.
First three months of 1997 vs. 1996
- -----------------------------------
Net sales for the three months ended March 31, 1997 increased 38.1% to
$87,095,000 versus the $63,061,000 recorded during the comparable 1996 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. 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 1995 or earlier had
average sales increases of 25.1%. The remainder of the 38.1% sales growth came
from store sites opened in 1996 and during the first three months of 1997. One
hundred thirty-six new store sites were added from April 1996 through March
1997. During the three months ended March 31, 1997, 12.4% of net sales came from
sales of the Company's FastTool(R) product line, 3.7% of net sales came from
sales of the Company's SharpCut(R) product line, 2.1% of net sales came from
sales of the Company's PowerFlow(TM) product line, 1.9% of net sales came from
sales of the Company's EquipRite(TM) product line and 1.0% of net sales came
from sales of the Company's CleanChoice(TM) product line.
As was indicated in the Company's Form 10-K for the fiscal year ended December
31, 1996, the Company began, in 1997, to stock all new stores with an inventory
drawn from all six product lines. Due to this change, the Company no longer has
a 'combination' store classification. Six of the 72 'combination' stores that
existed as of December 31, 1996 are now grouped with the satellite stores, while
the remaining 66 stores are grouped with the Fastenal(R) stores.
During the first quarter of 1997, 44 new sites were opened consisting of 30
Fastenal(R) stores and 14 satellite stores. The total sites at the end of the
quarter were 528, this consisted of 500 Fastenal(R) stores and 28 satellite
stores.
Net earnings for the first three months grew from $7,433,000 in 1996 to
$8,765,000 in 1997, an increase of 17.9%. Net earnings increased at a slower
rate than net sales because operating and administrative expenses increased at a
44.7% 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 53.6%
over the comparable period. The Company increased its site personnel from 1,989
on December 31, 1996 to 2,215 on March 31, 1997, an increase of 11.4%. The
increase in employment costs was caused primarily by the opening of new store
sites and the previously discussed addition of new product lines at existing
store sites.
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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 purchase of pickup trucks and semi-tractors and trailers, and to a lesser
extent, additions for manufacturing, warehouse and data processing equipment.
Cash requirements for these asset changes were satisfied from net earnings and
short-term loans.
As of March 31, 1997, 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 March 31, 1997.
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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
------------------------------
(Robert A. Kierlin, President)
(Duly Authorized Officer)
Date May 5, 1997 /s/ Daniel L. Florness
----------- ------------------------------
(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 three months ended, March 31, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 250,000
<SECURITIES> 0<F1>
<RECEIVABLES> 52,801,000
<ALLOWANCES> 570,000
<INVENTORY> 60,006,000
<CURRENT-ASSETS> 117,952,000
<PP&E> 73,230,000
<DEPRECIATION> 22,299,000
<TOTAL-ASSETS> 173,055,000
<CURRENT-LIABILITIES> 38,570,000
<BONDS> 0
<COMMON> 379,000
0
0
<OTHER-SE> 133,566,000
<TOTAL-LIABILITY-AND-EQUITY> 173,055,000
<SALES> 87,095,000
<TOTAL-REVENUES> 87,095,000
<CGS> 41,259,000
<TOTAL-COSTS> 41,259,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 293,000
<INTEREST-EXPENSE> 229,000
<INCOME-PRETAX> 14,675,000
<INCOME-TAX> 5,910,000
<INCOME-CONTINUING> 8,765,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,765,000
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
<FN>
<F1> Marketable securities in the amount of $515,000 have been classified as
non-current assets on the Consolidated Balance Sheet of Fastenal Company
and Subsidiary as of March 31, 1997.
</FN>
</TABLE>
