<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, 2000, 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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Theurer Boulevard
Winona, Minnesota 55987-1500
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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)
Not Applicable
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(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, 2000
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Common Stock, $.01 par value 37,938,688
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FASTENAL COMPANY
INDEX
Page No.
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Part I Financial Information:
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999 1
Consolidated Statements of Earnings for the three months ended
March 31, 2000 and 1999 2
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 3
Notes to Consolidated Financial Statements 4
Management's discussion and analysis of financial
condition and results of operations 5-7
Quantitative and qualitative disclosures about market risk 8
Part II Other Information:
Exhibits and reports on Form 8-K 8
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-1-
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FASTENAL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands except share information)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 2000 1999
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 40,234 27,849
Trade accounts receivable, net of allowance for doubtful
accounts of $1,700 and $1,400, respectively 97,464 84,563
Inventories 110,791 106,597
Deferred income tax asset 2,886 2,886
Other current assets 5,477 5,510
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Total current assets 256,852 227,405
Marketable securities 146 215
Property and equipment, less accumulated depreciation 92,638 87,630
Other assets, less accumulated amortization 3,344 3,371
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Total assets $352,980 318,621
=============================================================================================================
Liabilities and Stockholders' Equity
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Current liabilities:
Accounts payable $ 23,617 19,325
Accrued expenses 14,117 11,785
Income taxes payable 11,352 2,551
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Total current liabilities 49,086 33,661
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Deferred income tax liability 5,000 3,000
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Stockholders' equity:
Preferred stock 0 0
Common stock, 50,000,000 shares authorized
37,938,688 shares issued and outstanding 379 379
Additional paid-in capital 4,424 4,424
Retained earnings 294,564 277,553
Accumulated other comprehensive loss (473) (396)
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Total stockholders' equity 298,894 281,960
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Total liabilities and stockholders' equity $352,980 318,621
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
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FASTENAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings
(Amounts in thousands except earnings per share.)
(Unaudited)
Three months ended
March 31,
-----------------------------
2000 1999
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Net sales $ 176,268 140,634
Cost of sales 84,081 66,845
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Gross profit 92,187 73,789
Operating and administrative
expenses 60,152 48,668
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Operating income 32,035 25,121
Other income (expense):
Interest income 639 0
Interest expense 0 (57)
(Loss) gain on disposal of
property and equipment (78) 14
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Total other income (expense) 561 (43)
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Earnings before
income taxes 32,596 25,078
Income tax expense 12,550 9,663
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Net earnings $ 20,046 15,415
===============================================================================
Basic and diluted earnings per share $ .53 .41
===============================================================================
Weighted average shares
outstanding 37,939 37,939
===============================================================================
The accompanying notes are an integral part of the
consolidated financial statements.
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FASTENAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 20,046 15,415
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of property and equipment 2,717 3,051
Loss (gain) on disposal of property and equipment 78 (14)
Deferred income taxes 2,000 0
Amortization of goodwill and non-compete 55 55
Changes in operating assets and liabilities:
Trade accounts receivable (12,901) (12,181)
Inventories (4,194) (317)
Other current assets 33 577
Accounts payable 4,292 3,585
Accrued expenses 2,332 2,014
Income taxes payable 8,801 8,044
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Net cash provided by operating activities 23,259 20,229
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Cash flows from investing activities:
Additions of property and equipment, net (10,447) (7,304)
Proceeds from sale of property and equipment 2,644 1,898
Translation adjustment (77) 107
Decrease in marketable securities 69 50
Increase in other assets (28) (22)
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Net cash used in investing activities (7,839) (5,271)
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Cash flows from financing activities:
Net decrease in notes payable 0 (4,055)
Payment of dividends (3,035) (1,516)
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Net cash used in
financing activities (3,035) (5,571)
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Net increase in cash and
cash equivalents 12,385 9,387
Cash and cash equivalents at beginning of period 27,849 2,086
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Cash and cash equivalents at end of period $ 40,234 11,473
==========================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during each period for:
Income taxes $ 1,749 986
==========================================================================================================
Interest $ 0 7
==========================================================================================================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
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FASTENAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements of Fastenal Company
and subsidiaries (collectively referred to as the Company) 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 included in the Company's
consolidated financial statements as of and for the year ended December 31,
1999. 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. (Dollar amounts are in thousands.)
Three months ended March 31, 2000 vs. 1999
Net sales for the three months ended March 31, 2000 were $176,268, an increase
of 25.3% over net sales of $140,634 for the comparable period in 1999. The
increase came primarily from higher unit sales. Higher unit sales resulted
primarily from increases in sales at existing store sites. The increases in
sales at existing store sites are due primarily to increases in market share
and, to a lesser extent, the introduction of new product lines at the existing
sites. Sites opened in 1998 or earlier had average sales increases of 22.2%. The
remainder of the 25.3% sales growth came from store sites opened in 1999 and
during the first three months of 2000.
The first quarter of 2000 proved to be a successful quarter for the Company. The
strong sales growth allowed additional leverage on the infrastructure of the
organization during the quarter. This leverage was tempered somewhat by the
impact of rising fuel costs. The impact was approximately $600 pretax (or $.01
per share after tax) of additional vehicle and freight costs. As we move into
the second quarter, we will continue our planned investment in additional people
and selling locations. The Company's goal of adding approximately 25% more sales
personnel and approximately 100 stores for the year remains unchanged. Many of
these additional personnel will be added in the second and third quarters, while
the additional selling locations will be spread out over the remaining
three-quarters of 2000. The Company will continue to modify these plans
throughout the year based on current results and the strength of the industrial
marketplace. Along with the strong results for the quarter, the Company's cash
continued to grow, ending the quarter at over $40 million.
During March we announced the release of a new Internet / e-commerce site
(www.fastenal.com). The response has been very strong. The four weeks since the
release has seen a fourfold increase in the number of customers purchasing over
the Internet and a threefold increase in Internet sales volume when compared to
February 2000.
Also in March we moved into our new distribution center in Indianapolis,
Indiana. While the 400,000 square foot facility is larger than our current
distribution needs, the property was purchased at a very competitive price and
the extra space will allow us to explore the possibility of providing logistics
services to other firms. Our Manufacturing Division began utilizing its expanded
Winona plant during the quarter. The expanded plant now consists of over 100,000
square feet and will allow the growing business to continue to provide high
quality service to our customers.
During the three months ended March 31, 2000, 12 new sites were opened; all
sites opened as Fastenal(R) stores. During the quarter the Company converted two
customer sites, which had originally been reported as a store, to in-plant
status. The Company began, in 1999, to designate selling locations not selling
to the general public as in-plant stores. The customer sites mentioned above
were converted to have a consistent classification of all selling locations
within the Company.
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ITEM 2. (continued)
The following table indicates product lines added to the original Fastenal(R)
product line, the year of introduction, and the approximate percentage of total
net sales related to each product line during the three months ended March 31,
2000 and 1999:
Product line Introduced 2000 1999
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Tools 1993 11.6%(1) 12.4%(1)
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Cutting tools 1996 5.4% 5.1%
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Hydraulics & pneumatics 1996 4.6% 4.0%
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Material handling 1996 6.0%(1) 5.9%(1)
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Janitorial supplies 1996 1.8%(1) 1.8%(1)
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Electrical supplies 1997 1.3%(1) 1.1%(1)
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Welding supplies 1997 * *
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Safety supplies 1999 1.6%(1) *(1)
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* Less than 1% of net sales
1 During the second quarter of 1999, a safety supplies product line was
added. This product line consists of product formerly included in the
Tools product line and, to a lesser extent, the Material handling,
Janitorial supplies, and Electrical supplies product lines. Restated
comparable numbers were not readily available.
Net earnings for the three months ended March 31, 2000 were $20,046, an increase
of 30.0% over net earnings of $15,415 for the comparable period in 1999.
Operating income grew 27.5% from 1999 to 2000, a rate of growth higher than the
net sales rate of growth. The higher rate of growth in operating income occurred
primarily because operating expenses increased at a 23.6% rate, a rate less than
the net sales growth rate. Net earnings increased at a 30.0% rate, a rate
greater than the operating income growth rate, primarily because the elimination
of outstanding debt caused the Company to have net interest income in 2000
versus net interest expense in 1999. The Company site personnel totaled 3,853 on
March 31, 2000, an increase of 5.0% over the 3,670 on December 31, 1999.
Liquidity and Capital Resources
The higher level of sales during the three-month period resulted in the growth
of trade accounts receivable and inventories. Property and equipment increased
because of: (1) the retrofitting of the Company's new distribution center in
Indianapolis, which was originally purchased in October 1999, (2) the completion
of the 50,000 square foot addition to the Company's manufacturing facility in
Winona, Minnesota, (2) the purchase of software and hardware for the Company's
information processing systems, (3) the addition of certain pickup trucks and
(4) the addition of manufacturing and warehouse equipment. Disposals of property
and equipment related to the planned disposition of certain pickup trucks and
semi-tractors and trailers in the normal course. Cash requirements for these
asset changes were satisfied from net earnings and the proceeds of asset
disposals. As of March 31, 2000, the Company had no material outstanding
commitments for capital expenditures.
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ITEM 2. (continued)
Certain Risks and Uncertainties
This discussion contains statements that are not historical in nature and that
are intended to be, and are hereby identified as, "forward-looking statements"
under the Private Securities Litigation Reform Act of 1995, including statements
regarding planned store openings and additions of new employees. The following
factors are among those that could cause the Company's actual results to differ
materially from those predicted in such forward-looking statements: (i) an
upturn or downturn in the economy could impact sales at existing stores and the
rates of new store openings and additions of new employees, (ii) a change, from
that projected, in the number of smaller communities able to support future
store sites could impact the rate of new store openings and additions of new
employees, (iii) the ability of the Company to develop product expertise at the
store level, to identify future product lines that complement existing product
lines, to transport and store certain hazardous products and to otherwise
integrate new product lines into the Company's existing stores and distribution
network could impact sales and margins, (iv) the ability of the Company to
successfully attract and retain qualified personnel to staff the Company's
smaller community stores could impact sales at existing stores and the rate of
new store openings, (v) changes in governmental regulations related to product
quality or product source traceability could impact the cost to the Company of
regulatory compliance, (vi) inclement weather could impact the Company's
distribution network, (vii) foreign currency fluctuations or changes in trade
relations could impact the ability of the Company to procure products overseas
at competitive prices and the Company's foreign sales, (viii) disruptions caused
by the implementation of the Company's new management information systems
infrastructure could impact sales, (ix) unforeseen disruptions associated with
"Year 2000 Computer Problems" could impact sales and the Company's ability to
order and pay for product and (x) changes in the rate of new store openings
could impact expenditures for computers and other capital equipment.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks from changes in interest rates
and foreign currency exchange rates. Changes in these factors cause fluctuations
in the Company's earnings and cash flows. The Company evaluates and manages
exposure to these market risks as follows:
Interest Rates - The Company has a $10 million line of credit of which $0 was
outstanding at March 31, 2000. The line bears interest at 0.9% over the LIBOR
rate.
Foreign Currency Exchange Rates - Foreign currency fluctuations can affect the
Company's net investments and earnings denominated in foreign currencies. The
Company's primary exchange rate exposure is with the Canadian dollar against the
U.S. dollar. The Company's estimated net earnings exposure for foreign currency
exchange rates was not material at March 31, 2000.
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, 2000.
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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 April 17, 2000 /s/ Daniel L. Florness
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(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>
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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 SUBSIDIARIES AS OF, AND FOR THE THREE MONTHS ENDED, MARCH 31, 2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 40,234,000
<SECURITIES> 0<F1>
<RECEIVABLES> 99,164,000
<ALLOWANCES> 1,700,000
<INVENTORY> 110,791,000
<CURRENT-ASSETS> 256,852,000
<PP&E> 138,084,000
<DEPRECIATION> 45,446,000
<TOTAL-ASSETS> 352,980,000
<CURRENT-LIABILITIES> 49,086,000
<BONDS> 0
0
0
<COMMON> 379,000
<OTHER-SE> 298,515,000
<TOTAL-LIABILITY-AND-EQUITY> 352,980,000
<SALES> 176,268,000
<TOTAL-REVENUES> 176,268,000
<CGS> 84,081,000
<TOTAL-COSTS> 84,081,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,066,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 32,596,000
<INCOME-TAX> 12,550,000
<INCOME-CONTINUING> 20,046,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,046,000
<EPS-BASIC> .53
<EPS-DILUTED> .53
<FN>
<F1>Marketable securities in the amount of $146,000 have been classified as
non-current assets on the Consolidated Balance Sheet of Fastenal Company and
subsidiaries as of March 31, 2000.
</FN>
</TABLE>
