<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, 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 July 15, 1997
- ----------------------------- ----------------------------
Common Stock, $.01 par value 37,938,688
<PAGE>
FASTENAL COMPANY
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I Financial Information:
Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 1
Consolidated Statements of Earnings for the six months and three months
ended June 30, 1997 and 1996 2
Consolidated Statements of Cash Flows for the six months ended
June 30, 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 4 Submission of matters to a vote of security holders 7
Item 6 Exhibits and reports on Form 8-K 7
</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 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 284,000 426,000
Trade accounts receivable, net of allowance for doubtful
accounts of $600,000 and $540,000 as of June
30, 1997 and December 31, 1996, respectively 57,404,000 41,553,000
Inventories 60,096,000 56,526,000
Deferred income tax asset 1,219,000 1,219,000
Other current assets 5,492,000 3,731,000
- ------------------------------------------------------------------------------------------------
Total current assets 124,495,000 103,455,000
Marketable securities 515,000 515,000
Property and equipment, less accumulated depreciation 52,039,000 43,930,000
Other assets, less accumulated amortization 3,639,000 3,645,000
- ------------------------------------------------------------------------------------------------
Total assets $ 180,688,000 151,545,000
- ------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- ------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 13,301,000 10,010,000
Notes payable 12,385,000 8,622,000
Accrued expenses 7,510,000 5,611,000
Income taxes payable 2,523,000 795,000
- ------------------------------------------------------------------------------------------------
Total current liabilities 35,719,000 25,038,000
- ------------------------------------------------------------------------------------------------
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 139,831,000 121,346,000
Translation loss (205,000) (182,000)
- ------------------------------------------------------------------------------------------------
Total stockholders' equity 144,429,000 125,967,000
- ------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 180,688,000 151,545,000
- ------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
- 2 -
FASTENAL COMPANY AND SUBSIDIARY
Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
------------------------- ------------------------
1997 1996 1997 1996
- ------------------------------------------------------ ------------------------
<S> <C> <C> <C> <C>
Net sales $ 185,327,000 133,911,000 98,232,000 70,850,000
Cost of sales 88,326,000 62,450,000 47,067,000 32,814,000
- ------------------------------------------------------ ------------------------
Gross profit 97,001,000 71,461,000 51,165,000 38,036,000
Operating and
administrative expenses 64,954,000 45,708,000 33,775,000 24,168,000
- ------------------------------------------------------ ------------------------
Operating income 32,047,000 25,753,000 17,390,000 13,868,000
Other income (expense):
Interest income 30,000 93,000 15,000 30,000
Interest expense (500,000) (7,000) (271,000) (7,000)
Gain on disposal of
property and equipment 635,000 772,000 403,000 249,000
- ------------------------------------------------------ ------------------------
Total other income 165,000 858,000 147,000 272,000
- ------------------------------------------------------ ------------------------
Earnings before
income taxes 32,212,000 26,611,000 17,537,000 14,140,000
Income tax expense 12,968,000 10,733,000 7,058,000 5,695,000
- ------------------------------------------------------ ------------------------
Net earnings $ 19,244,000 15,878,000 10,479,000 8,445,000
- ------------------------------------------------------ ------------------------
Earnings per share $ .51 .42 .28 .22
- ------------------------------------------------------ ------------------------
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
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 19,244,000 15,878,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation of property and equipment 4,219,000 3,495,000
Gain on disposal of property and equipment (635,000) (772,000)
Amortization of goodwill and non-compete 110,000 20,000
Amortization of premium on marketable securities 0 4,000
Changes in operating assets and liabilities:
Trade accounts receivable (15,851,000) (7,980,000)
Inventories (3,570,000) (8,221,000)
Other current assets (1,761,000) (477,000)
Accounts payable 3,291,000 3,511,000
Accrued expenses 1,899,000 1,329,000
Income taxes payable 1,728,000 (797,000)
- --------------------------------------------------------------------------------
Net cash provided by operating activities 8,674,000 5,990,000
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Sale of marketable securities 0 89,000
Additions of property and equipment, net (14,702,000) (14,713,000)
Proceeds from sale of property and equipment 3,009,000 1,750,000
Translation adjustment (23,000) (159,000)
Increase in other assets (104,000) (3,493,000)
- --------------------------------------------------------------------------------
Net cash used in investing activities (11,820,000) (16,526,000)
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in notes payable 3,763,000 5,562,000
Payment of dividends (759,000) (759,000)
- --------------------------------------------------------------------------------
Net cash provided by
financing activities 3,004,000 4,803,000
- --------------------------------------------------------------------------------
Net decrease in cash and
cash equivalents (142,000) (5,733,000)
Cash and cash equivalents at beginning of period 426,000 6,583,000
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 284,000 850,000
- --------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during each period for:
Income taxes $ 11,240,000 11,530,000
- --------------------------------------------------------------------------------
Interest $ 500,000 7,000
- --------------------------------------------------------------------------------
</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, 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.
<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.
First six months of 1997 vs. 1996
- ---------------------------------
Net sales for the six months ended June 30, 1997 increased 38.4% to
$185,327,000 versus the $133,911,000 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. Sites opened in 1995 or earlier had average sales
increases of 24.2%. The remainder of the 38.4% sales growth came from store
sites opened in 1996 and during the first six months of 1997. One hundred
fifty-eight new store sites were added from July 1996 through June 1997.
During the first six months of 1997, 92 new sites were opened consisting of 66
Fastenal(R) stores and 26 satellite stores. The total sites at the end of the
second quarter were 576, which consisted of 536 Fastenal(R) stores and 40
satellite stores.
During the six months ended June 30, 1997, 12.6% of net sales came from sales
of the Company's FastTool(R) product line, 3.9% of net sales came from sales of
the Company's SharpCut(R) product line, 2.2% of net sales came from sales of the
Company's PowerFlow/TM/ product line, 2.1% 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.
Net earnings for the first six months grew from $15,878,000 in 1996 to
$19,244,000 in 1997, an increase of 21.2%. Net earnings increased at a slower
rate than net sales primarily because operating and administrative expenses
increased at a 42.1% 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 51.2% over the comparable period. The Company increased its site
personnel from 1,989 on December 31, 1996 to 2,409 on June 30, 1997, an increase
of 21.1%. The increase in employment costs was caused primarily by the opening
of new store sites and the product line expansion at existing store sites.
<PAGE>
- 6 -
ITEM 2. (continued)
Second quarter of 1997 vs. 1996
- -------------------------------
Net sales for the three months ended June 30, 1997 increased 38.6% to
$98,232,000 versus the $70,850,000 recorded during the comparable 1996 period.
As discussed earlier, 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 23.0%.
The remainder of the 38.6% sales growth came from store sites opened in 1996 and
during the first six months of 1997.
During the three months ended June 30, 1997, 48 new sites were opened
consisting of 36 Fastenal(R) stores and 12 satellite stores.
During the three months ended June 30, 1997, 12.8% of net sales came from
sales of the Company's FastTool(R) product line, 4.1% of net sales came from
sales of the Company's SharpCut(R) product line, 2.3% of net sales came from
sales of the Company's PowerFlow/TM/ product line, 2.2% 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.
Net earnings for the three months ended June 30 grew from $8,445,000 in 1996
to $10,479,000 in 1997, an increase of 24.1%. Net earnings increased at a
slower rate than net sales primarily because of a decrease in the overall gross
margin from 53.7% in the second quarter of 1996 to 52.1% in the second quarter
of 1997 and because operating and administrative expenses increased at a 39.8%
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 49.0% over the
comparable period. The Company increased its site personnel from 2,215 on March
31, 1997 to 2,409 on June 30, 1997, an increase of 8.8%. The increase in
employment costs was caused primarily by the opening of new store sites and the
previously discussed product line expansion at existing store sites.
Liquidity and Capital Resources
- -------------------------------
The higher level of sales during the six month period resulted in the growth
of trade accounts receivable and inventory. 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 borrowings.
As of June 30, 1997, the Company had outstanding commitments of approximately
$450,000 to acquire real property in Winona, Minnesota. Management is funding
this from available cash and from its borrowing capacity.
<PAGE>
- 7 -
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 22, 1997, 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 34,389,638 76,190
Stephen M. Slaggie 34,389,588 76,240
Michael M. Gostomski 34,389,338 76,490
John D. Remick 34,389,494 76,334
Henry K. McConnon 34,389,178 76,650
</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, 1997.
Voting to ratify the appointment were 33,804,302 shares. Voting against the
ratification were 23,021 shares. There were no broker non-votes.
Abstentions totaled 121,487 shares.
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, 1997.
<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 25,1997 /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, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 284,000
<SECURITIES> 0<F1>
<RECEIVABLES> 58,004,000
<ALLOWANCES> 600,000
<INVENTORY> 60,096,000
<CURRENT-ASSETS> 124,495,000
<PP&E> 75,783,000
<DEPRECIATION> 23,744,000
<TOTAL-ASSETS> 180,688,000
<CURRENT-LIABILITIES> 35,719,000
<BONDS> 0
<COMMON> 379,000
0
0
<OTHER-SE> 144,050,000
<TOTAL-LIABILITY-AND-EQUITY> 180,688,000
<SALES> 185,327,000
<TOTAL-REVENUES> 185,327,000
<CGS> 88,326,000
<TOTAL-COSTS> 88,326,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 642,000
<INTEREST-EXPENSE> 500,000
<INCOME-PRETAX> 32,212,000
<INCOME-TAX> 12,968,000
<INCOME-CONTINUING> 19,244,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,244,000
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
<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 June 30, 1997.
</FN>
</TABLE>
