UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September~~June 30, ~~2022,~~2023, 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 incorporation or organization)						(I.R.S. Employer Identification No.)


2001 Theurer Boulevard, Winona, Minnesota						55987-1500
(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)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $.01 per share	FAST	The Nasdaq Stock Market LLC

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 ý No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ý No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of ~~October~~July 12, ~~2022,~~2023, there were approximately ~~572,759,880~~571,333,004 shares of the registrant's common stock outstanding.

Table of Contents

FASTENAL COMPANY

INDEX

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

FASTENAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Amounts in millions except share information)


		(Unaudited)				(Unaudited)
Assets	Assets	September 30, 2022		December 31, 2021	Assets	June 30, 2023		December 31, 2022
Current assets:	Current assets:				Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	231.5	236.2	Cash and cash equivalents	$	243.6	230.1
Trade accounts receivable, net of allowance for credit losses of $10.2 and $12.0, respectively		1,110.6		900.2
Trade accounts receivable, net of allowance for credit losses of $6.5 and $8.3, respectively					Trade accounts receivable, net of allowance for credit losses of $6.5 and $8.3, respectively	1,171.6		1,013.2
Inventories	Inventories	1,678.1		1,523.6	Inventories	1,565.4		1,708.0
Prepaid income taxes	Prepaid income taxes	3.2		8.5	Prepaid income taxes	14.7		8.1
Other current assets	Other current assets	172.2		188.1	Other current assets	141.7		165.4
Total current assets	Total current assets	3,195.6		2,856.6	Total current assets	3,137.0		3,124.8

Property and equipment, net	Property and equipment, net	1,008.5		1,019.2	Property and equipment, net	1,010.3		1,010.0
Operating lease right-of-use assets	Operating lease right-of-use assets	249.8		242.3	Operating lease right-of-use assets	263.7		243.0
Other assets	Other assets	173.5		180.9	Other assets	165.8		170.8

Total assets	Total assets	$	4,627.4	4,299.0	Total assets	$	4,576.8	4,548.6

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity				Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:				Current liabilities:
Current portion of debt	Current portion of debt	$	150.3	60.0	Current portion of debt	$	150.0	201.8
Accounts payable	Accounts payable	277.2		233.1	Accounts payable	262.0		255.0
Accrued expenses	Accrued expenses	282.4		298.3	Accrued expenses	229.5		241.1
Current portion of operating lease liabilities	Current portion of operating lease liabilities	92.7		90.8	Current portion of operating lease liabilities	95.1		91.9
Total current liabilities	Total current liabilities	802.6		682.2	Total current liabilities	736.6		789.8

Long-term debt	Long-term debt	404.7		330.0	Long-term debt	200.0		353.2
Operating lease liabilities	Operating lease liabilities	161.2		156.0	Operating lease liabilities	173.3		155.2
Deferred income taxes	Deferred income taxes	92.9		88.6	Deferred income taxes	84.3		83.7
Other long-term liabilities	Other long-term liabilities	4.8		—	Other long-term liabilities	1.8		3.5

Stockholders' equity:	Stockholders' equity:				Stockholders' equity:
Preferred stock: $0.01 par value, 5,000,000 shares authorized, no shares issued or outstanding	Preferred stock: $0.01 par value, 5,000,000 shares authorized, no shares issued or outstanding	—		—	Preferred stock: $0.01 par value, 5,000,000 shares authorized, no shares issued or outstanding	—		—
Common stock: $0.01 par value, 800,000,000 shares authorized, 572,754,406 and 575,464,682 shares issued and outstanding, respectively		5.8		5.8
Common stock: $0.01 par value, 800,000,000 shares authorized, 571,288,830 and 570,811,674 shares issued and outstanding, respectively					Common stock: $0.01 par value, 800,000,000 shares authorized, 571,288,830 and 570,811,674 shares issued and outstanding, respectively	5.7		5.7
Additional paid-in capital	Additional paid-in capital	2.8		96.2	Additional paid-in capital	19.9		3.6
Retained earnings	Retained earnings	3,239.7		2,970.9	Retained earnings	3,412.1		3,218.7
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(87.1)		(30.7)	Accumulated other comprehensive loss	(56.9)		(64.8)
Total stockholders' equity	Total stockholders' equity	3,161.2		3,042.2	Total stockholders' equity	3,380.8		3,163.2
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	4,627.4	4,299.0	Total liabilities and stockholders' equity	$	4,576.8	4,548.6

See accompanying Notes to Condensed Consolidated Financial Statements.

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FASTENAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(Amounts in millions except earnings per share)


		(Unaudited)			(Unaudited)				(Unaudited)			(Unaudited)
		Nine Months Ended September 30,			Three Months Ended September 30,				Six Months Ended June 30,			Three Months Ended June 30,
		2022		2021	2022		2021		2023		2022	2023		2022
Net sales	Net sales	$	5,285.0	4,479.0	$	1,802.4	1,554.2	Net sales	$	3,742.2	3,482.6	$	1,883.1	1,778.6

Cost of sales	Cost of sales	2,837.6		2,414.7	975.9		834.0	Cost of sales	2,034.7		1,861.7	1,025.6		951.0
Gross profit	Gross profit	2,447.4		2,064.3	826.5		720.2	Gross profit	1,707.5		1,620.9	857.5		827.6

Operating and administrative expenses	Operating and administrative expenses	1,326.7		1,147.8	447.3		401.8	Operating and administrative expenses	919.4		879.5	462.6		444.2
Operating income	Operating income	1,120.7		916.5	379.2		318.4	Operating income	788.1		741.4	394.9		383.4

Interest income	Interest income	0.4		0.1	0.2		0.1	Interest income	1.0		0.1	0.6		0.1
Interest expense	Interest expense	(9.3)		(7.3)	(4.1)		(2.4)	Interest expense	(6.8)		(5.0)	(2.9)		(2.8)

Earnings before income taxes	Earnings before income taxes	1,111.8		909.3	375.3		316.1	Earnings before income taxes	782.3		736.5	392.6		380.7

Income tax expense	Income tax expense	270.5		215.5	90.7		72.6	Income tax expense	189.2		179.8	94.6		93.6

Net earnings	Net earnings	$	841.3	693.8	$	284.6	243.5	Net earnings	$	593.1	556.7	$	298.0	287.1

Basic net earnings per share	Basic net earnings per share	$	1.46	1.21	$	0.50	0.42	Basic net earnings per share	$	1.04	0.97	$	0.52	0.50

Diluted net earnings per share	Diluted net earnings per share	$	1.46	1.20	$	0.50	0.42	Diluted net earnings per share	$	1.04	0.96	$	0.52	0.50

Basic weighted average shares outstanding	Basic weighted average shares outstanding	574.7		574.6	573.0		575.0	Basic weighted average shares outstanding	571.0		575.5	571.1		575.5

Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	576.6		576.9	574.7		577.3	Diluted weighted average shares outstanding	572.8		577.5	572.9		577.4

See accompanying Notes to Condensed Consolidated Financial Statements.

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FASTENAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Amounts in millions)


		(Unaudited)			(Unaudited)				(Unaudited)			(Unaudited)
		Nine Months Ended September 30,			Three Months Ended September 30,				Six Months Ended June 30,			Three Months Ended June 30,
		2022		2021	2022		2021		2023		2022	2023		2022
Net earnings	Net earnings	$	841.3	693.8	$	284.6	243.5	Net earnings	$	593.1	556.7	$	298.0	287.1
Other comprehensive loss, net of tax:
Foreign currency translation adjustments (net of tax of $0.0 in 2022 and 2021)		(56.4)		(8.4)	(32.7)		(10.8)
Other comprehensive income (loss), net of tax:								Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (net of tax of $0.0 in 2023 and 2022)								Foreign currency translation adjustments (net of tax of $0.0 in 2023 and 2022)	7.9		(23.7)	3.6		(26.0)
Comprehensive income	Comprehensive income	$	784.9	685.4	$	251.9	232.7	Comprehensive income	$	601.0	533.0	$	301.6	261.1

See accompanying Notes to Condensed Consolidated Financial Statements.

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FASTENAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity

(Amounts in millions except per share information)


		(Unaudited)				(Unaudited)					(Unaudited)			(Unaudited)
		Nine Months Ended September 30,				Three Months Ended September 30,					Six Months Ended June 30,			Three Months Ended June 30,
		2022		2021		2022		2021			2023		2022	2023		2022
Common stock	Common stock									Common stock
Balance at beginning of period	Balance at beginning of period	$	5.8	5.7		$	5.8	5.7		Balance at beginning of period	$	5.7	5.8	$	5.7	5.8
Balance at end of period	Balance at end of period	5.8		5.7		5.8		5.7		Balance at end of period	5.7		5.8	5.7		5.8
Additional paid-in capital	Additional paid-in capital									Additional paid-in capital
Balance at beginning of period	Balance at beginning of period	96.2		59.1		55.7		75.6		Balance at beginning of period	3.6		96.2	11.4		101.6
Stock options exercised	Stock options exercised	7.8		24.4		2.0		10.8		Stock options exercised	12.5		5.8	6.6		1.9
Purchases of common stock	Purchases of common stock	(105.6)		—		(56.3)		—		Purchases of common stock	—		(49.3)	—		(49.3)
Stock-based compensation	Stock-based compensation	4.4		4.3		1.4		1.4		Stock-based compensation	3.8		3.0	1.9		1.5
Balance at end of period	Balance at end of period	2.8		87.8		2.8		87.8		Balance at end of period	19.9		55.7	19.9		55.7
Retained earnings	Retained earnings									Retained earnings
Balance at beginning of period	Balance at beginning of period	2,970.9		2,689.6		3,171.6		2,818.3		Balance at beginning of period	3,218.7		2,970.9	3,314.0		3,063.0
Net earnings	Net earnings	841.3		693.8		284.6		243.5		Net earnings	593.1		556.7	298.0		287.1
Dividends paid in cash		(534.4)		(482.6)		(177.5)		(161.0)
Cash dividends paid										Cash dividends paid	(399.7)		(356.9)	(199.9)		(178.5)
Translation adjustment upon merger of foreign subsidiary	Translation adjustment upon merger of foreign subsidiary	0.9		—		—		—		Translation adjustment upon merger of foreign subsidiary	—		0.9	—		—
Purchases of common stock		(39.0)		—		(39.0)		—
Balance at end of period	Balance at end of period	3,239.7		2,900.8		3,239.7		2,900.8		Balance at end of period	3,412.1		3,171.6	3,412.1		3,171.6
Accumulated other comprehensive loss
Accumulated other comprehensive income (loss)										Accumulated other comprehensive income (loss)
Balance at beginning of period	Balance at beginning of period	(30.7)		(21.2)		(54.4)		(18.8)		Balance at beginning of period	(64.8)		(30.7)	(60.5)		(28.4)
Other comprehensive loss		(56.4)		(8.4)		(32.7)		(10.8)
Other comprehensive income (loss)										Other comprehensive income (loss)	7.9		(23.7)	3.6		(26.0)
Balance at end of period	Balance at end of period	(87.1)		(29.6)		(87.1)		(29.6)		Balance at end of period	(56.9)		(54.4)	(56.9)		(54.4)
Total stockholders' equity	Total stockholders' equity	$	3,161.2	2,964.7		$	3,161.2	2,964.7		Total stockholders' equity	$	3,380.8	3,178.7	$	3,380.8	3,178.7

Cash dividends paid per share of common stock	Cash dividends paid per share of common stock	$	0.93	$	0.84	$	0.31	$	0.28	Cash dividends paid per share of common stock	$	0.70	0.62	$	0.35	0.31

See accompanying Notes to Condensed Consolidated Financial Statements.

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FASTENAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in millions)


		(Unaudited)			(Unaudited)				(Unaudited)			(Unaudited)
		Nine Months Ended September 30,			Three Months Ended September 30,				Six Months Ended June 30,			Three Months Ended June 30,
		2022		2021	2022		2021		2023		2022	2023		2022
Cash flows from operating activities:	Cash flows from operating activities:							Cash flows from operating activities:
Net earnings	Net earnings	$	841.3	693.8	$	284.6	243.5	Net earnings	$	593.1	556.7	$	298.0	287.1
Adjustments to reconcile net earnings to net cash provided by operating activities:	Adjustments to reconcile net earnings to net cash provided by operating activities:							Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation of property and equipment	Depreciation of property and equipment	123.8		119.0	41.4		40.1	Depreciation of property and equipment	84.0		82.4	42.2		41.2
Loss (gain) on sale of property and equipment		1.2		(1.1)	(1.1)		0.2
(Gain) loss on sale of property and equipment								(Gain) loss on sale of property and equipment	(1.2)		2.3	(0.6)		(1.2)
Bad debt expense	Bad debt expense	(0.9)		0.8	(1.3)		0.9	Bad debt expense	0.2		0.4	1.6		0.7
Deferred income taxes	Deferred income taxes	4.3		2.3	3.8		1.6	Deferred income taxes	0.6		0.5	0.3		(0.5)
Stock-based compensation	Stock-based compensation	4.4		4.3	1.4		1.4	Stock-based compensation	3.8		3.0	1.9		1.5
Amortization of intangible assets	Amortization of intangible assets	8.1		8.1	2.7		2.7	Amortization of intangible assets	5.4		5.4	2.7		2.7
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Trade accounts receivable	Trade accounts receivable	(222.9)		(182.2)	(13.6)		(44.2)	Trade accounts receivable	(155.0)		(209.3)	(21.3)		(39.4)
Inventories	Inventories	(176.9)		(66.5)	(26.3)		(77.1)	Inventories	145.6		(150.6)	87.9		(74.2)
Other current assets	Other current assets	15.9		(22.3)	(43.0)		(15.9)	Other current assets	23.7		58.9	(21.7)		(1.8)
Accounts payable	Accounts payable	44.1		49.9	(14.6)		20.8	Accounts payable	9.9		58.7	1.4		1.9
Accrued expenses	Accrued expenses	(15.9)		5.9	13.7		0.1	Accrued expenses	(11.3)		(29.6)	0.6		0.5
Income taxes	Income taxes	5.3		—	3.3		(8.1)	Income taxes	(6.6)		2.0	(90.5)		(67.6)
Other	Other	7.3		1.7	6.9		1.4	Other	(1.6)		0.4	(0.4)		0.3
Net cash provided by operating activities	Net cash provided by operating activities	639.1		613.7	257.9		167.4	Net cash provided by operating activities	690.6		381.2	302.1		151.2

Cash flows from investing activities:	Cash flows from investing activities:							Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(131.0)		(114.7)	(48.0)		(47.4)	Purchases of property and equipment	(89.6)		(83.0)	(55.9)		(47.5)
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	10.1		7.7	3.6		1.9	Proceeds from sale of property and equipment	4.8		6.5	2.0		4.1
Other	Other	(0.7)		—	(0.1)		(0.1)	Other	(0.4)		(0.6)	(0.3)		(0.5)
Net cash used in investing activities	Net cash used in investing activities	(121.6)		(107.0)	(44.5)		(45.6)	Net cash used in investing activities	(85.2)		(77.1)	(54.2)		(43.9)

Cash flows from financing activities:	Cash flows from financing activities:							Cash flows from financing activities:
Proceeds from debt obligations	Proceeds from debt obligations	1,390.0		300.0	695.0		135.0	Proceeds from debt obligations	635.0		695.0	405.0		460.0
Payments against debt obligations	Payments against debt obligations	(1,225.0)		(340.0)	(645.0)		(175.0)	Payments against debt obligations	(840.0)		(580.0)	(455.0)		(320.0)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	7.8		24.4	2.0		10.8	Proceeds from exercise of stock options	12.5		5.8	6.6		1.9
Purchases of common stock	Purchases of common stock	(144.6)		—	(95.3)		—	Purchases of common stock	—		(49.3)	—		(49.3)
Payments of dividends		(534.4)		(482.6)	(177.5)		(161.0)
Cash dividends paid								Cash dividends paid	(399.7)		(356.9)	(199.9)		(178.5)
Net cash used in financing activities	Net cash used in financing activities	(506.2)		(498.2)	(220.8)		(190.2)	Net cash used in financing activities	(592.2)		(285.4)	(243.3)		(85.9)

Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(16.0)		(3.7)	(9.0)		(2.9)	Effect of exchange rate changes on cash and cash equivalents	0.3		(7.0)	(0.8)		(7.7)

Net (decrease) increase in cash and cash equivalents		(4.7)		4.8	(16.4)		(71.3)
Net increase in cash and cash equivalents								Net increase in cash and cash equivalents	13.5		11.7	3.8		13.7

Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	236.2		245.7	247.9		321.8	Cash and cash equivalents at beginning of period	230.1		236.2	239.8		234.2
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	231.5	250.5	$	231.5	250.5	Cash and cash equivalents at end of period	$	243.6	247.9	$	243.6	247.9

Supplemental information:	Supplemental information:							Supplemental information:
Cash paid for interest	Cash paid for interest	$	9.2	7.6	$	4.2	2.6	Cash paid for interest	$	8.2	5.0	$	3.1	2.7
Net cash paid for income taxes	Net cash paid for income taxes	$	257.3	210.7	$	81.9	78.0	Net cash paid for income taxes	$	193.7	175.4	$	184.0	160.2
Leased assets obtained in exchange for new operating lease liabilities	Leased assets obtained in exchange for new operating lease liabilities	$	74.0	83.4	$	18.4	17.8	Leased assets obtained in exchange for new operating lease liabilities	$	64.3	55.6	$	38.4	31.7

See accompanying Notes to Condensed Consolidated Financial Statements.

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FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

(Unaudited)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Fastenal Company and subsidiaries (collectively referred to as ~~the company, Fastenal,~~'the company', 'Fastenal', or by terms such as ~~we, our,~~'we', 'our', or ~~us)~~'us') have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. They do not include all information and footnotes required by U.S. GAAP for complete financial statements. However, except as described herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in our consolidated financial statements as of and for the year ended December 31, ~~2021.~~2022. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

~~Immaterial Revision~~

The prior period balances for additional paid-in capital and common stock have been updated in the Condensed Consolidated Statements of Stockholders' Equity to reflect the impact of an immaterial correction which reclassified $2.9 from additional paid-in capital to common stock in connection with the 2019 stock split.

Recently Issued Accounting Pronouncements

~~In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients~~We have implemented all new accounting pronouncements that are in effect and ~~exceptions to U.S. GAAP on contract modifications, hedging relationships,~~that may impact our financial statements and other transactions affected by reference rate reform to ease entities' financial reporting burdens as the market transitions from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made, hedging relationships entered into, and other transactions affected by reference rate reform, evaluated on or before December 31, 2022, beginning during the reporting period in which the guidance has been elected. We do not believe that there are any other new pronouncements that have ~~any receivables, hedging relationships, lease agreements,~~been issued that might have a material impact on our financial position or debt agreements that reference LIBOR or another reference rate expected to be discontinued. On September 28, 2022, we amended and restated our unsecured revolving credit agreement. At the same time, we also amended our master note agreement. As a resultresults of ~~the various changes made, our floating rate debt no longer references a LIBOR based benchmark rate. Therefore, we will not be electing the optional practical expedients associated with this ASU.~~operations.

(2) Revenue

Revenue Recognition

Net sales include products and shipping and handling charges, net of estimates for product returns and any related sales incentives. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products. All revenue is recognized when or as we satisfy our performance obligations under the contract. We recognize revenue by transferring control of the promised products to the customer, with the majority of revenue recognized at the point in time the customer obtains control of the products. We recognize revenue for shipping and handling charges at the time the products are delivered to or picked up by the customer. We estimate product returns based on historical return rates. Using probability assessments, we estimate sales incentives expected to be paid over the term of the contract. The majority of our contracts have a single performance obligation and are short term in nature. Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Revenues are attributable to countries based on the selling location from which the sale occurred.

Disaggregation of Revenue

Our revenues related to the following geographic areas were as follows for the periods ended June 30:


	Six-month Period					Three-month Period
	2023			2022		2023			2022
United States	$	3,130.4		2,928.4		$	1,571.7		1,496.7
% of revenues	83.6		%	84.1	%	83.5		%	84.2	%
Canada and Mexico	498.8			438.4		254.9			225.0
% of revenues	13.3		%	12.6	%	13.5		%	12.7	%
North America	3,629.2			3,366.8		1,826.6			1,721.7
% of revenues	96.9		%	96.7	%	97.0		%	96.9	%
All other foreign countries	113.0			115.8		56.5			56.9
% of revenues	3.1		%	3.3	%	3.0		%	3.1	%
Total revenues	$	3,742.2		3,482.6		$	1,883.1		1,778.6

Table of Contents

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

(Unaudited)

~~Disaggregation of Revenue~~

~~Our revenues related to the following geographic areas were as follows for the periods ended September 30:~~

Nine-month Period Three-month Period
2022 2021 2022 2021
United States $ 4,445.1 3,753.6 $ 1,516.7 1,307.5
Canada and Mexico 666.5 558.8 228.1 189.9
North America 5,111.6 4,312.4 1,744.8 1,497.4
All other foreign countries 173.4 166.6 57.6 56.8
Total revenues $ 5,285.0 4,479.0 $ 1,802.4 1,554.2

The percentages of our sales by end market were as follows for the periods ended ~~September~~June 30:


		Nine-month Period				Three-month Period					Six-month Period				Three-month Period
		2022		2021		2022		2021			2023		2022		2023		2022
Manufacturing	Manufacturing	72.0	%	68.6	%	72.9	%	68.9	%	Manufacturing	74.7	%	71.5	%	74.8	%	71.8	%
Non-residential construction	Non-residential construction	10.4	%	11.2	%	10.2	%	11.3	%	Non-residential construction	9.2	%	10.5	%	9.2	%	10.7	%
Other	Other	17.6	%	20.2	%	16.9	%	19.8	%	Other	16.1	%	18.0	%	16.0	%	17.5	%
		100.0	%	100.0	%	100.0	%	100.0	%		100.0	%	100.0	%	100.0	%	100.0	%

The percentages of our sales by product line were as follows for the periods ended ~~September~~June 30:


			Nine-month Period				Three-month Period						Six-month Period				Three-month Period
Type	Type	Introduced	2022		2021		2022		2021		Type	Introduced	2023		2022		2023		2022
Fasteners (1)	Fasteners (1)	1967	34.3	%	33.2	%	34.1	%	33.4	%	Fasteners (1)	1967	33.1	%	34.4	%	32.6	%	34.6	%
Tools	Tools	1993	8.3	%	8.6	%	8.4	%	8.5	%	Tools	1993	8.5	%	8.2	%	8.5	%	8.2	%
Cutting tools	Cutting tools	1996	5.0	%	5.0	%	5.0	%	5.0	%	Cutting tools	1996	5.4	%	5.0	%	5.5	%	5.0	%
Hydraulics & pneumatics	Hydraulics & pneumatics	1996	6.6	%	6.4	%	6.6	%	6.5	%	Hydraulics & pneumatics	1996	6.7	%	6.6	%	6.8	%	6.7	%
Material handling	Material handling	1996	5.7	%	5.5	%	5.6	%	5.5	%	Material handling	1996	5.6	%	5.7	%	5.6	%	5.7	%
Janitorial supplies	Janitorial supplies	1996	8.0	%	8.2	%	8.1	%	8.3	%	Janitorial supplies	1996	8.2	%	7.9	%	8.3	%	8.0	%
Electrical supplies	Electrical supplies	1997	4.4	%	4.3	%	4.5	%	4.3	%	Electrical supplies	1997	4.6	%	4.3	%	4.7	%	4.3	%
Welding supplies	Welding supplies	1997	3.8	%	3.8	%	3.9	%	3.8	%	Welding supplies	1997	4.1	%	3.8	%	4.1	%	3.8	%
Safety supplies	Safety supplies	1999	20.6	%	21.2	%	20.5	%	21.1	%	Safety supplies	1999	20.5	%	20.7	%	20.7	%	20.3	%
Other	Other		3.3	%	3.8	%	3.3	%	3.6	%	Other		3.3	%	3.4	%	3.2	%	3.4	%
			100.0	%	100.0	%	100.0	%	100.0	%			100.0	%	100.0	%	100.0	%	100.0	%

(1) The fasteners product line represents fasteners and miscellaneous supplies.

(3) Stockholders' Equity

Dividends

On ~~October~~July 12, ~~2022,~~2023, our board of directors declared a quarterly dividend of ~~$0.31~~$0.35 per share of common stock to be paid in cash on ~~November 23, 2022~~August 24, 2023 to shareholders of record at the close of business on ~~October~~July 27, ~~2022. Since 2011, we have paid quarterly~~2023.

The following table presents the cash dividends ~~and in 2020, we~~either paid a special cash dividend late in the year. Future determination as to payment of dividends will depend on the financial condition and results of operations of the company and such other factors as are deemed relevantpreviously or declared by ~~the~~our board of ~~directors.~~directors for future payment on a per share basis:


	2023		2022
First quarter	$	0.35	$	0.31
Second quarter	0.35		0.31
Third quarter	0.35		0.31
Fourth quarter			0.31
Total	$	1.05	$	1.24

Table of Contents

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

(Unaudited)

~~The following table presents the cash dividends either paid previously or declared by our board of directors for future payment on a per share basis:~~

2022 2021
First quarter $ 0.31 $ 0.28
Second quarter $ 0.31 $ 0.28
Third quarter $ 0.31 $ 0.28
Fourth quarter $ 0.31 $ 0.28
Total $ 1.24 $ 1.12

Stock Options

The following tables summarize the details of options granted under our stock option plans that were outstanding as of ~~September~~June 30, ~~2022,~~2023, and the assumptions used to value ~~these~~those grants. All such grants were effective at the close of business on the date of grant.


		Options Granted	Option Exercise (Strike) Price				Closing Stock Price on Date of Grant				September 30, 2022				Options Granted			Option Exercise Price				Closing Stock Price on Date of Grant				June 30, 2023
Date of Grant	Date of Grant								Options Outstanding			Options Exercisable	Date of Grant							Options Outstanding						Options Exercisable
January 3, 2023														January 3, 2023			1,071,943			$	48.00			$	47.400		1,046,851		70,562
January 3, 2022	January 3, 2022	713,438			$	62.00			$	61.980		689,415		53,355		January 3, 2022	713,438			$	62.00			$	61.980		656,520		53,355
January 4, 2021	January 4, 2021	741,510	$	48.00			$	47.650			676,305		26,643	January 4, 2021	741,510			$	48.00			$	47.650			637,416		234,203
January 2, 2020	January 2, 2020	902,263	$	38.00			$	37.230			774,842		266,832	January 2, 2020	902,263			$	38.00			$	37.230			727,427		370,152
January 2, 2019	January 2, 2019	1,316,924	$	26.00			$	25.705			942,372		411,536	January 2, 2019	1,316,924			$	26.00			$	25.705			862,003		534,009
January 2, 2018	January 2, 2018	1,087,936	$	27.50			$	27.270			693,780		420,712	January 2, 2018	1,087,936			$	27.50			$	27.270			636,123		506,029
January 3, 2017	January 3, 2017	1,529,578	$	23.50			$	23.475			675,420		516,344	January 3, 2017	1,529,578			$	23.50			$	23.475			627,243		523,609
April 19, 2016	April 19, 2016	1,690,880	$	23.00			$	22.870			498,563		375,563	April 19, 2016	1,690,880			$	23.00			$	22.870			446,559		386,293
April 21, 2015	April 21, 2015	1,786,440	$	21.00			$	20.630			363,211		286,051	April 21, 2015	1,786,440			$	21.00			$	20.630			212,347		212,347
April 22, 2014		1,910,000	$	28.00			$	25.265			137,868		137,868
Total	Total	11,678,969									5,451,776		2,494,904	Total	10,840,912											5,852,489		2,890,559


Date of Grant	Date of Grant	Risk-free Interest Rate		Expected Life of Option in Years	Expected Dividend Yield		Expected Stock Volatility		Estimated Fair Value of Stock Option		Date of Grant	Risk-free Interest Rate		Expected Life of Option in Years	Expected Dividend Yield		Expected Stock Volatility		Estimated Fair Value of Stock Option
January 3, 2023											January 3, 2023	4.0	%	5.00	2.6	%	29.58	%	$	11.62
January 3, 2022	January 3, 2022	1.3	%	5.00	1.7	%	28.52	%	$	13.68	January 3, 2022	1.3	%	5.00	1.7	%	28.52	%	$	13.68
January 4, 2021	January 4, 2021	0.4	%	5.00	2.0	%	29.17	%	$	9.57	January 4, 2021	0.4	%	5.00	2.0	%	29.17	%	$	9.57
January 2, 2020	January 2, 2020	1.7	%	5.00	2.4	%	25.70	%	$	6.81	January 2, 2020	1.7	%	5.00	2.4	%	25.70	%	$	6.81
January 2, 2019	January 2, 2019	2.5	%	5.00	2.9	%	23.96	%	$	4.40	January 2, 2019	2.5	%	5.00	2.9	%	23.96	%	$	4.40
January 2, 2018	January 2, 2018	2.2	%	5.00	2.3	%	23.45	%	$	5.02	January 2, 2018	2.2	%	5.00	2.3	%	23.45	%	$	5.02
January 3, 2017	January 3, 2017	1.9	%	5.00	2.6	%	24.49	%	$	4.20	January 3, 2017	1.9	%	5.00	2.6	%	24.49	%	$	4.20
April 19, 2016	April 19, 2016	1.3	%	5.00	2.6	%	26.34	%	$	4.09	April 19, 2016	1.3	%	5.00	2.6	%	26.34	%	$	4.09
April 21, 2015	April 21, 2015	1.3	%	5.00	2.7	%	26.84	%	$	3.68	April 21, 2015	1.3	%	5.00	2.7	%	26.84	%	$	3.68
April 22, 2014		1.8	%	5.00	2.0	%	28.55	%	$	4.79

All of the options in the tables above vest and become exercisable over a period of up to eight years. Generally, each option will terminate approximately ~~ten~~10 years after the grant date.

~~Table of Contents~~

~~FASTENAL COMPANY AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions except share and per share information and where otherwise noted)~~

~~September 30, 2022 and 2021~~

~~(Unaudited)~~

The fair value of each share-based option is estimated on the date of grant using a Black-Scholes valuation method that uses the assumptions listed above. The risk-free interest rate is based on the U.S. Treasury rate over the expected life of the option at the time of grant. The expected life is the average length of time over which we expect the employee groups will exercise their options, net of forfeitures, which is based on historical experience with similar grants. The dividend yield is estimated over the expected life of the option based on our current dividend payout, historical dividends paid, and expected future cash dividends. Expected stock volatilities are based on the movement of our stock price over the most recent historical period equivalent to the expected life of the option.

Compensation expense equal to the grant date fair value is recognized for all of these awards over the vesting period. The stock-based compensation expense for the ~~nine-month~~six-month periods ended ~~September~~June 30, 2023 and 2022 was $3.8 and ~~2021 was $4.4 and $4.3,~~$3.0, respectively, ~~and~~while the ~~third~~second quarter of 2023 and 2022 was $1.9 and ~~2021 was $1.4 and $1.4,~~$1.5, respectively. Unrecognized stock-based compensation expense related to outstanding unvested stock options as of ~~September~~June 30, ~~2022~~2023 was ~~$15.8~~$20.6 and is expected to be recognized over a weighted average period of ~~4.23~~4.49 years. Any future changes in estimated forfeitures will impact this amount.

Table of Contents

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

June 30, 2023 and 2022

(Unaudited)

Earnings Per Share

The following tables present a reconciliation of the denominators used in the computation of basic and diluted earnings per share and a summary of the options to purchase shares of common stock which were excluded from the diluted earnings per share calculation because they were anti-dilutive:


		Nine-month Period		Three-month Period			Six-month Period		Three-month Period
Reconciliation	Reconciliation	2022	2021	2022	2021	Reconciliation	2023	2022	2023	2022
Basic weighted average shares outstanding	Basic weighted average shares outstanding	574,667,188	574,637,254	573,019,381	574,973,196	Basic weighted average shares outstanding	571,033,444	575,510,253	571,138,039	575,462,097
Weighted shares assumed upon exercise of stock options	Weighted shares assumed upon exercise of stock options	1,912,011	2,291,000	1,724,550	2,286,643	Weighted shares assumed upon exercise of stock options	1,724,032	1,998,786	1,752,121	1,940,124
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	576,579,199	576,928,254	574,743,931	577,259,839	Diluted weighted average shares outstanding	572,757,476	577,509,039	572,890,160	577,402,221


		Nine-month Period			Three-month Period				Six-month Period			Three-month Period
Summary of Anti-dilutive Options Excluded	Summary of Anti-dilutive Options Excluded	2022		2021	2022		2021	Summary of Anti-dilutive Options Excluded	2023		2022	2023		2022
Options to purchase shares of common stock	Options to purchase shares of common stock	1,343,160		680,227	1,340,567		688,410	Options to purchase shares of common stock	2,244,555		1,350,936	1,866,320		1,354,464
Weighted average exercise prices of options	Weighted average exercise prices of options	$	55.23	48.00	$	55.22	48.00	Weighted average exercise prices of options	$	52.17	55.20	$	52.96	55.22

Any dilutive impact summarized above related to periods when the average market price of our stock exceeded the exercise price of the potentially dilutive stock options then outstanding.

~~Translation Adjustment Upon Merger of ForeignSubsidiary~~

~~Retained earnings for the nine-month period ended September 30, 2022, includes $0.9 of historical cumulative translation upon the merger of a foreign subsidiary recognized in March 2022.~~

(4) Income Taxes

We file income tax returns in the United States federal jurisdiction, all states, and various local and foreign jurisdictions. We are no longer subject to income tax examinations by taxing authorities for taxable years before ~~2018~~2019 in the case of United States federal examinations, and with limited ~~exceptions,~~exception, before 2017 in the case of foreign, state, and local examinations. During the first ~~nine~~six months of ~~2022,~~2023, there were no material changes in unrecognized tax benefits.

During 2020, we deferred approximately $30.0 in payroll taxes as allowed under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which was signed into law in March 2020 to help businesses navigate COVID-19 related challenges. The deferred payroll taxes were paid during the third quarter of 2021.

(5) Operating Leases

Certain operating leases for pick-up trucks contain residual value guarantee provisions which would generally become due at the expiration of the operating lease agreement if the fair value of the leased vehicles is less than the guaranteed residual value. The aggregate residual value guarantee related to these leases iswas approximately ~~$86.6.~~$94.6. We believe the likelihood of funding the guarantee obligation under any provision of the operating lease agreements is remote.

Table of Contents

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

(Unaudited)

(6) Debt Commitments

Credit Facility, Notes Payable, and Commitments

Debt obligations and letters of credit outstanding at the end of each period consisted of the following:


		Average Interest Rate at September 30, 2022						Debt Outstanding						Average Interest Rate at June 30, 2023							Debt Outstanding
				Maturity Date			September 30, 2022			December 31, 2021							Maturity Date			June 30, 2023			December 31, 2022
Unsecured revolving credit facility	Unsecured revolving credit facility			3.94	%		September 28, 2027			$	225.0		25.0		Unsecured revolving credit facility		6.10	%		September 28, 2027			$	90.0		225.0
Senior unsecured promissory notes payable, Series B		2.45	%			July 20, 2022		—				35.0
Senior unsecured promissory notes payable, Series C	Senior unsecured promissory notes payable, Series C	3.22	%			March 1, 2024		60.0				60.0	Senior unsecured promissory notes payable, Series C	3.22		%			March 1, 2024		60.0				60.0
Senior unsecured promissory notes payable, Series D	Senior unsecured promissory notes payable, Series D	2.66	%			May 15, 2025		75.0				75.0	Senior unsecured promissory notes payable, Series D	2.66		%			May 15, 2025		75.0				75.0
Senior unsecured promissory notes payable, Series E	Senior unsecured promissory notes payable, Series E	2.72	%			May 15, 2027		50.0				50.0	Senior unsecured promissory notes payable, Series E	2.72		%			May 15, 2027		50.0				50.0
Senior unsecured promissory notes payable, Series F	Senior unsecured promissory notes payable, Series F	1.69	%			June 24, 2023		70.0				70.0	Senior unsecured promissory notes payable, Series F	1.69		%			June 24, 2023		—				70.0
Senior unsecured promissory notes payable, Series G	Senior unsecured promissory notes payable, Series G	2.13	%			June 24, 2026		25.0				25.0	Senior unsecured promissory notes payable, Series G	2.13		%			June 24, 2026		25.0				25.0
Senior unsecured promissory notes payable, Series H	Senior unsecured promissory notes payable, Series H	2.50	%			June 24, 2030		50.0				50.0	Senior unsecured promissory notes payable, Series H	2.50		%			June 24, 2030		50.0				50.0
Total	Total							555.0				390.0	Total								350.0				555.0
Less: Current portion of debt	Less: Current portion of debt							(150.3)				(60.0)	Less: Current portion of debt								(150.0)				(201.8)
Long-term debt	Long-term debt							$	404.7			330.0	Long-term debt								$	200.0			353.2

Outstanding letters of credit under unsecured revolving credit facility - contingent obligation	Outstanding letters of credit under unsecured revolving credit facility - contingent obligation							$	36.3			36.3	Outstanding letters of credit under unsecured revolving credit facility - contingent obligation								$	32.7			36.3

Unsecured Revolving Credit Facility

We have an $835.0 committed unsecured revolving credit facility (Credit Facility) with an uncommitted accordion option to increase the aggregate revolving commitment by an additional $365.0 for a total ~~commitment~~amount of $1,200.0. The Credit Facility includes a committed letter of credit subfacility of $55.0. Any borrowings outstanding under the Credit Facility for which we have the ability and intent to pay using cash within the next ~~twelve~~12 months will be classified as a current liability. The Credit Facility contains certain financial and other covenants, and our right to borrow under the Credit Facility is conditioned upon, among other things, our compliance with these covenants. We are currently in compliance with these covenants.

Borrowings under the Credit Facility generally bear interest at a rate per annum equal to Daily Simple SOFR plus a 0.10% spread adjustment plus 0.95%. We pay a commitment fee for the unused portion of the Credit Facility. This fee is either 0.10% or 0.125% per annum based on our usage of the Credit Facility.

Senior Unsecured Promissory Notes Payable

We have issued senior unsecured promissory notes under our master note agreement (the Master Note Agreement) in the aggregate principal amount of ~~$330.0~~$260.0 as of ~~September~~June 30, ~~2022.~~2023. Our aggregate borrowing capacity under the Master Note Agreement is $900.0; however, none of the institutional investors party to that agreement are committed to purchase notes thereunder. There is no amortization of these notes prior to their maturity date and interest is payable quarterly. The notes currently issued under our Master Note Agreement, including the maturity date and fixed interest rate per annum of each series of note, are contained in the table above. The Master Note Agreement contains certain financial and other covenants and we are currently in compliance with these covenants.

(7) Legal Contingencies

The nature of our potential exposure to legal contingencies is described in our ~~2021~~2022 annual report on Form 10-K in Note 10 of the Notes to Consolidated Financial Statements. As of ~~September~~June 30, ~~2022,~~2023, there were no litigation matters that we consider to be probable or reasonably possible to have a material adverse outcome.

Table of Contents

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

(Unaudited)

(8) Subsequent Events

We evaluated all subsequent event activity and concluded that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements or disclosure in the Notes to Condensed Consolidated Financial Statements, with the exception of the dividend declaration disclosed in Note 3 'Stockholders' Equity'.

Table of Contents

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 our financial position and operating results during the periods included in the accompanying condensed consolidated financial statements. Dollar amounts are stated in millions except for share and per share amounts and where otherwise noted. Throughout this document, percentage and dollar change calculations, which are based on non-rounded dollar values, may not be able to be recalculated using the dollar values in this document due to the rounding of those dollar values. References to daily sales rate (DSR) change may reflect either growth (positive) or contraction (negative) for the applicable period.

Business

Fastenal is a North American leader in the wholesale distribution of industrial and construction supplies. We distribute these supplies through a network of ~~approximately~~more than 3,300 in-market locations. Most of our customers are in the manufacturing and non-residential construction markets. The manufacturing market includes sales of products for both original equipment manufacturing (OEM), where our products are consumed in the final products of our customers, and manufacturing, repair and operations (MRO), where our products are consumed to support the facilities and ongoing operations of our customers. The non-residential construction market includes general, electrical, plumbing, sheet metal, and road contractors. Other users of our products include farmers, truckers, railroads, oil exploration companies, oil production and refinement companies, mining companies, federal, state, and local governmental entities, schools, and certain retail trades. Geographically, our branches, Onsite locations, and customers are primarily located in North ~~America.~~America, though we continue to grow our non-North American presence as well.

Our motto is Growth Through Customer Service® and our tagline is Where Industry Meets Innovation™. We are a ~~customer~~customer- and growth-centric organization focused on identifying unique technologies, capabilities, and supply chain solutions that get us closer to our customers and reduce the total cost of their global supply chain. We believe this close-to-the-customer, ~~high touch~~'high-touch, high-tech' partnership approach is differentiated in the marketplace and allows us to gain market share in what remains a fragmented industrial distribution market.

Executive Overview

The following table presents a performance summary of our results of operations for the ~~nine-month~~six-month and three-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~

Nine-month Period Three-month Period
2022 2021 Change 2022 2021 Change
Net sales $ 5,285.0 4,479.0 18.0 % $ 1,802.4 1,554.2 16.0 %
Business days 192 191 64 64
Daily sales $ 27.5 23.5 17.4 % $ 28.2 24.3 16.0 %
Gross profit $ 2,447.4 2,064.3 18.6 % $ 826.5 720.2 14.8 %
% of net sales 46.3 % 46.1 % 45.9 % 46.3 %
Operating and administrative expenses $ 1,326.7 1,147.8 15.6 % $ 447.3 401.8 11.3 %
% of net sales 25.1 % 25.6 % 24.8 % 25.9 %
Operating income $ 1,120.7 916.5 22.3 % $ 379.2 318.4 19.1 %
% of net sales 21.2 % 20.5 % 21.0 % 20.5 %
Earnings before income taxes $ 1,111.8 909.3 22.3 % $ 375.3 316.1 18.7 %
% of net sales 21.0 % 20.3 % 20.8 % 20.3 %
Net earnings $ 841.3 693.8 21.3 % $ 284.6 243.5 16.9 %
Diluted net earnings per share $ 1.46 1.20 21.3 % $ 0.50 0.42 17.4 %

2022.


	Six-month Period							Three-month Period
	2023			2022		Change		2023			2022		Change
Net sales	$	3,742.2		3,482.6		7.5	%	$	1,883.1		1,778.6		5.9	%
Business days	128			128				64			64
Daily sales	$	29.2		27.2		7.5	%	$	29.4		27.8		5.9	%
Gross profit	$	1,707.5		1,620.9		5.3	%	$	857.5		827.6		3.6	%
% of net sales	45.6		%	46.5	%			45.5		%	46.5	%
Operating and administrative expenses	$	919.4		879.5		4.5	%	$	462.6		444.2		4.1	%
% of net sales	24.6		%	25.3	%			24.6		%	25.0	%
Operating income	$	788.1		741.4		6.3	%	$	394.9		383.4		3.0	%
% of net sales	21.1		%	21.3	%			21.0		%	21.6	%
Earnings before income taxes	$	782.3		736.5		6.2	%	$	392.6		380.7		3.1	%
% of net sales	20.9		%	21.2	%			20.9		%	21.4	%
Net earnings	$	593.1		556.7		6.6	%	$	298.0		287.1		3.8	%
Diluted net earnings per share	$	1.04		0.96		7.4	%	$	0.52		0.50		4.6	%

Note – Daily sales are defined as the total net sales for the period divided by the number of business days (in the United States) in the period.

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The table below summarizes our ~~total~~absolute and ~~FTE (based~~full time equivalent (FTE; based on 40 hours per week) employee headcount, our investments related to in-market locations (defined as the sum of the total number of branch locations and the total number of active Onsite locations), and weighted Fastenal Managed Inventory (FMI) devices at the end of the periods presented and the percentage change compared to the end of the prior periods.

Change
Since: Change
Since: Change
Since:
Q3
2022 Q2
2022 Q2
2022 Q4
2021 Q4
2021 Q3
2021 Q3
2021
In-market locations - absolute employee headcount
13,243 13,134 0.8 % 12,464 6.3 % 12,347 7.3 %
In-market locations - FTE employee headcount 11,897 12,039 -1.2 % 11,337 4.9 % 11,104 7.1 %
Total absolute employee headcount 22,025 21,629 1.8 % 20,507 7.4 % 20,231 8.9 %
Total FTE employee headcount 19,519 19,523 0.0 % 18,370 6.3 % 17,860 9.3 %
Number of branch locations 1,716 1,737 -1.2 % 1,793 -4.3 % 1,859 -7.7 %
Number of active Onsite locations 1,567 1,501 4.4 % 1,416 10.7 % 1,367 14.6 %
Number of in-market locations 3,283 3,238 1.4 % 3,209 2.3 % 3,226 1.8 %
Weighted FMI devices (MEU installed count) (1)
99,409 96,872 2.6 % 92,874 7.0 % 90,493 9.9 %

~~(1)This number excludes approximately 7,500 non-weighted devic~~es ~~that are part of our locker lease program.~~


			Change Since:			Change Since:			Change Since:
	Q2 2023	Q1 2023	Q1 2023		Q4 2022	Q4 2022		Q2 2022	Q2 2022
In-market locations - absolute employee headcount	13,668	13,668	0.0	%	13,410	1.9	%	13,134	4.1	%
In-market locations - FTE employee headcount	12,380	12,219	1.3	%	12,017	3.0	%	12,039	2.8	%
Total absolute employee headcount	22,913	22,820	0.4	%	22,386	2.4	%	21,629	5.9	%
Total FTE employee headcount	20,631	20,262	1.8	%	19,854	3.9	%	19,523	5.7	%

Number of branch locations	1,635	1,660	-1.5	%	1,683	-2.9	%	1,737	-5.9	%
Number of active Onsite locations	1,728	1,674	3.2	%	1,623	6.5	%	1,501	15.1	%
Number of in-market locations	3,363	3,334	0.9	%	3,306	1.7	%	3,238	3.9	%
Weighted FMI devices (MEU installed count)	107,115	104,673	2.3	%	102,151	4.9	%	96,872	10.6	%

During the last twelve months, we increased our total FTE employee headcount by ~~1,659.~~1,108. This reflects an increase in our in-market and non-in-market selling FTE employee headcount of ~~1,131~~655 to support growth in the marketplace and sales initiatives targeting customer acquisition. We had an increase in our distribution center FTE employee headcount of ~~329~~181 to support ~~increasing~~increased product throughput at our facilities and to expand our local inventory fulfillment terminals (LIFTs). We had an increase in our remaining FTE employee headcount of ~~199~~272 that relates primarily to personnel investments in information technology, manufacturing, and operational support, such as purchasing and product development.

WeThe table below summarizes the number of branches opened ~~three branches in the third quarter of 2022~~ and closed, ~~24 branches,~~ net of ~~conversions. We~~conversions, as well as the number of Onsites activated ~~92 Onsite locations in the third quarter of 2022~~ and closed, ~~26,~~ net of ~~conversions.~~ conversions during the periods presented.


	Six-month Period		Three-month Period
	2023	2022	2023	2022
Branch openings	5	8	3	2
Branch closures, net of conversions	(53)	(64)	(28)	(25)

Onsite activations	173	138	89	81
Onsite closures, net of conversions	(68)	(53)	(35)	(20)

In any period, the number of closings tends to reflect ~~both~~ normal churn in our business, whether due to ~~redefinin~~gredefining or exiting customer relationships, the shutting or relocation of customer facilities that host our locations, or a customer decision, as well as our ongoing review of underperforming locations. Our in-market n~~etwork~~network forms the foundation of our business strategy, and we will continue to open or close locations as is deemed necessary to sustain and improve our network, support our growth drivers, and manage our operating expenses.

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~~THIRD~~SECOND QUARTER OF ~~2022~~2023 VERSUS ~~THIRD~~SECOND QUARTER OF ~~2021~~2022

Results of Operations

The following table sets forth condensed consolidated statement of earnings information (as a percentage of net sales) for the periods ended ~~September~~June 30:


		Three-month Period					Three-month Period
		2022		2021			2023		2022
Net sales	Net sales	100.0	%	100.0	%	Net sales	100.0	%	100.0	%
Gross profit	Gross profit	45.9	%	46.3	%	Gross profit	45.5	%	46.5	%
Operating and administrative expenses	Operating and administrative expenses	24.8	%	25.9	%	Operating and administrative expenses	24.6	%	25.0	%
Operating income	Operating income	21.0	%	20.5	%	Operating income	21.0	%	21.6	%
Net interest expense	Net interest expense	-0.2	%	-0.2	%	Net interest expense	-0.1	%	-0.2	%
Earnings before income taxes	Earnings before income taxes	20.8	%	20.3	%	Earnings before income taxes	20.9	%	21.4	%

Note – Amounts may not foot due to rounding difference.	Note – Amounts may not foot due to rounding difference.					Note – Amounts may not foot due to rounding difference.

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~~Net~~ Sales

The table below sets forth net sales and daily sales for the periods ended ~~September~~June 30, and changes in such sales from the prior period to the more recent period:


		Three-month Period						Three-month Period
		2022			2021			2023			2022
Net sales	Net sales	$	1,802.4		1,554.2		Net sales	$	1,883.1		1,778.6
Percentage change	Percentage change	16.0		%	10.0	%	Percentage change	5.9		%	18.0	%
Business days	Business days	64			64		Business days	64			64
Daily sales	Daily sales	$	28.2		24.3		Daily sales	$	29.4		27.8
Percentage change	Percentage change	16.0		%	10.0	%	Percentage change	5.9		%	18.0	%
Daily sales impact of currency fluctuations	Daily sales impact of currency fluctuations	-0.6		%	0.5	%	Daily sales impact of currency fluctuations	-0.4		%	-0.5	%

Note – Daily sales are defined as the total net sales for the period divided by the number of business days (in the United States) in the period.

Net sales increased ~~$248.2,~~$104.6, or ~~16.0%~~5.9%, in the ~~third~~second quarter of ~~2022~~2023 when compared to the ~~third~~second quarter of ~~2021.~~2022. The number of business days were the same in both periods. We ~~estimate adverse weather that impacted the southeastern U.S. reduced our quarterly growth by 10 to 30 basis points.~~ We experienced higher unit sales in the ~~third~~second quarter of ~~2022~~2023 that contributed to the increase in net sales in the period. This was primarily due to ~~good underlying demand~~growth at our Onsite locations, particularly those opened in ~~markets tied to industrial capital goods and commodities,~~the last two years, which more than offset ~~softer~~lower revenues in construction and reseller end markets ~~tied~~related to ~~consumer goods and relatively lower growth in construction.~~the execution of our go-to-market branch strategy. Foreign exchange negatively affected sales in the ~~third quarter of 2022 by approximately 60 basis points.~~

The overall impact of product pricing on net sales in the third quarter of 2022 was 550 to 580 basis points compared to the third quarter of 2021. The increase is from actions taken over the past twelve months intended to mitigate the impact of marketplace inflation for our products, particularly fasteners, and transportation services. We did not take any broad pricing actions in the third quarter of 2022, and price levels in the market remained stable. The favorable impact of product pricing moderated in the third quarter of 2022 relative to the second quarter of 2022 due to comparisons against initial price events that began in the third quarter of 2021. Spot prices in the marketplace for many inputs, particularly fuel, transportation services, and steel, began to decline during the period. Due to our long supply chain for fasteners and certain non-fastener products, however, it is likely to take several quarters before this is reflected in our cost of goods. 2023 by approximately 40 basis points.

The impact of product pricing on net sales in the ~~third~~second quarter of ~~2021~~2023 was ~~230~~190 to ~~260~~220 basis points compared to the second quarter of 2022. This largely reflects the impact of general inflationary conditions in the marketplace over the past twelve months and the carryover of targeted actions taken in the first quarter of 2023 to address gross margin pressure for non-fastener and non-safety products. The impact of product pricing on net sales in the second quarter of 2022 was 660 to 690 basis points.

From a product standpoint, we have three categories: fasteners, safety supplies, and other product lines, the latter of which includes eight smaller product categories, such as tools, janitorial supplies, and cutting tools. The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:


		DSR Change Three-month Period				% of Sales Three-month Period					DSR Change Three-month Period				% of Sales Three-month Period
		2022		2021		2022		2021			2023		2022		2023		2022
Fasteners	Fasteners	18.2	%	20.2	%	34.1	%	33.4	%	Fasteners	0.0%		21.2	%	32.6	%	34.6	%
Safety supplies	Safety supplies	12.4	%	-2.9	%	20.5	%	21.1	%	Safety supplies	7.9	%	13.8	%	20.7	%	20.3	%
Other	Other	15.4	%	9.2	%	45.4	%	45.5	%	Other	9.8	%	17.0	%	46.7	%	45.1	%

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Our end markets consist of manufacturing, non-residential construction, and other, the latter of which includes resellers, government/education, and transportation/warehousing. The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:

DSR Change
Three-month Period % of Sales
Three-month Period
2022 2021 2022 2021
Manufacturing 22.6% 20.8% 72.9% 68.9%
Non-residential construction 5.2% 10.5% 10.2% 11.3%
Other -1.4% -16.2% 16.9% 19.8%

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	DSR Change Three-month Period		% of Sales Three-month Period
	2023	2022	2023	2022
Manufacturing	10.4%	23.1%	74.8%	71.8%
Non-residential construction	-8.8%	10.8%	9.2%	10.7%
Other	-3.2%	4.7%	16.0%	17.5%

We report our customers in two categories: national accounts, which are customers with a multi-site contract, and non-national accounts, which include large regional customers, small local customers, and government customers. Sales to most of our national account customers grew in the ~~third~~second quarter of ~~2022~~2023 over the prior year, ~~earlier period,~~ as our sales grew at 8373 of our Top 100 national account customers. The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:


		DSR Change Three-month Period				% of Sales Three-month Period					DSR Change Three-month Period				% of Sales Three-month Period
		2022		2021		2022		2021			2023		2022		2023		2022
National Accounts	National Accounts	20.8	%	16.8	%	58.0	%	56.6	%	National Accounts	10.3	%	22.9	%	59.3	%	57.3	%
Non-National Accounts	Non-National Accounts	9.9	%	2.2	%	42.0	%	43.4	%	Non-National Accounts	0.2	%	12.2	%	40.7	%	42.7	%

Growth Drivers

•We signed 86 new Onsite locations (defined as dedicated sales and service provided from within, or in ~~close~~ proximity to, the customer's facility) in the ~~third~~second quarter of ~~2022,~~2023, resulting in 175 year-to-date signings of new Onsite ~~locations of 294.~~locations. We had ~~1,567~~1,728 active sites on ~~September~~June 30, ~~2022,~~2023, which represented an increase of ~~14.6%~~15.1% from ~~September~~June 30, ~~2021.~~2022. Daily sales through our Onsite locations, excluding sales transferred from branches to new Onsites, grew at a ~~greater than 20%~~high-teens rate in the ~~third~~second quarter of ~~2022~~2023 over the ~~third~~second quarter of ~~2021.~~2022. This growth is due to ~~improved business activity~~contributions from Onsites activated and implemented in 2022 and 2023, as well as continued growth from our older Onsite ~~customers and, to a lesser degree, contributions from~~locations. Based on the ~~increase~~signings in the ~~number~~first six months of ~~Onsites we operate. We continue to anticipate signing 375 to 400 Onsites in 2022, though~~2023, we currently expect to ~~be in~~sign approximately 350 new Onsite locations for the ~~lower half~~full year of ~~this range given year-to-date signings.~~2023, which is adjusted from our original goal of 375 to 400.

•FMI Technology is comprised of our FA~~STStock~~FASTStock℠ (scanned stocking locations), FASTBin® (infrared, RFID, and scaled bins), and FASTVend® (vending devices) offering. FASTStock's fulfillment processing technology is not embedded, is relatively less expensive and highly flexible in application, and delivered using our proprietary mobility technology. FASTBin and FASTVend incorporate highly efficient and powerful embedded data tracking and fulfillment processing technologies. Prior to 2021, we reported exclusively on the signings, installations, and sales of FASTVend. Beginning in the first quarter of 2021, we began disclosing certain statistics around our FMI offering. The first statistic is a weighted FMI® measure which combines the signings and installations of FASTBin and FASTVend in a standardized machine equivalent unit (MEU) based on the ~~expecte~~dexpected output of each type of device. We do not include FASTStock in this measurement because scanned stocking locations can take many forms, such as bins, shelves, cabinets, pallets, etc., that cannot be converted into a standardized MEU. The second statistic is revenue through FMI Technology which combines the sales through FASTStock, FASTBin, and FASTVend. A portion of the growth in sales experienced by FMI, particularly FASTStock and FASTBin, reflects the migration of products from less efficient non-digital stocking locations to more efficient, digital stocking locations.

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The table below summarizes the signings and installations of, and sales through, our FMI devices.


		Three-month Period								Three-month Period
		2022			2021		Change			2023			2022		Change
Weighted FASTBin/FASTVend signings (MEUs)	Weighted FASTBin/FASTVend signings (MEUs)	5,187			4,813		7.8	%	Weighted FASTBin/FASTVend signings (MEUs)	6,794			5,490		23.8	%
Signings per day	Signings per day	81			75				Signings per day	106			86
Weighted FASTBin/FASTVend installations (MEUs; end of period)	Weighted FASTBin/FASTVend installations (MEUs; end of period)	99,409			90,493		9.9	%	Weighted FASTBin/FASTVend installations (MEUs; end of period)	107,115			96,872		10.6	%

FASTStock sales	FASTStock sales	$	215.9		165.9		30.2	%	FASTStock sales	$	237.7		207.3		14.7	%
% of sales	% of sales	11.8		%	10.6	%			% of sales	12.5		%	11.5	%
FASTBin/FASTVend sales	FASTBin/FASTVend sales	$	456.9		352.4		29.7	%	FASTBin/FASTVend sales	$	520.6		433.3		20.2	%
% of sales	% of sales	25.1		%	22.4	%			% of sales	27.3		%	24.1	%
FMI sales	FMI sales	$	672.8		518.3		29.8	%	FMI sales	$	758.3		640.6		18.4	%
FMI daily sales	FMI daily sales	$	10.5		8.1		29.8	%	FMI daily sales	$	11.8		10.0		18.4	%
% of sales	% of sales	36.9		%	33.0	%			% of sales	39.8		%	35.6	%

~~We continue to anticipate~~Our goal for weighted FASTBin and FASTVend device signings in ~~2022 in a range of 21,000~~2023 remains between 23,000 to ~~23,000~~25,000 MEUs.

~~All metrics provided above exclude~~ ~~approximately 7,500 non-weighted vending devices that are part of a leased locker program.~~

•Our eCommerce business includes sales made through an electronic data interface (EDI), or other types of technical integrations, and through our web verticals. Daily sales through eCommerce grew ~~50.2%~~44.7% in the ~~third~~second quarter of ~~2022~~2023 and represented ~~18.0%~~23.3% of our total ~~revenues~~sales in the period.

Our digital products and services are comprised of sales through FMI (FASTStock, FASTBin, and FASTVend) plus that proportion of our eCommerce sales that do not represent billings of FMI services (collectively, our Digital Footprint). We believe the data that is created through our digital capabilities enhances product visibility, traceability, and control that reduces risk in operations and creates ordering and fulfillment efficiencies for both ourselves and our customers. As a result, we believe our opportunity to grow our business will be enhanced through the continued development and expansion of our digital capabilities.

Our Digital Footprint in the ~~third~~second quarter of ~~202~~20232 represented ~~49.5%~~55.3% of our sales, an increase from ~~43.7%~~47.9% of sales in the ~~third~~second quarter of ~~2021.~~2022.

Gross Profit

Our gross profit, as a percentage of net sales, declined to ~~45.9%~~45.5% in the ~~third~~second quarter of 22023~~022~~ from ~~46.3%~~46.5% in the ~~third~~second quarter of ~~2021.~~2022. The ~~decline~~change in our gross profit percentage ~~was~~ primarily ~~related~~reflected three items. First, customer and product mix reduced our gross profit percentage. We continued to ~~three factors. First, the net impact from product and customer mix was dilutive, reflecting~~experience relatively strong growth ~~of our~~from Onsite customers and ~~national account customers,~~non-fastener products, each of which tend to ~~be larger and~~ have a lower gross ~~margin percentage.~~profit percentage than our business as a whole. This impact widened on a sequential basis. Second, we ~~experienced unfavorable price/cost, reflecting stable pricing for our products and services but slightly~~had higher costs. Third, we had a $3.4 write down in the value of certain gloves in our inventory. Demand for nitrile gloves expanded dramatically during the pandemic, and we purchased significant quantities in 2021 to address needs from certain industries. As market conditions normalized, some of the product had an inventory value above current market value, a situation we did not see reversing. These impacts were partly offset by strong freight revenue, which narrowed our freight losses, and our ability to leverage organizational expenses.

~~Operating and Administrative Expenses~~

~~Our operating and administrative expenses, as a percentage of net sales, fell to 24.8% in the third quarter of 2022 from 25.9% in the third quarter of 2021. This was~~organizational/overhead costs, primarily due to ~~a decline,~~higher inbound freight costs and working capital needs being relieved from inventory and generating higher period costs. Third, freight expenses were favorable, partially offsetting the negative impacts of mix and organizational/overhead costs. This favorable impact reflects record domestic freight revenue leveraging what are relatively stable costs to support our captive fleet, lower expenses related to external freight providers, and lower fuel costs. The impact of price/cost was immaterial to our gross profit percentage in the second quarter of 2023.

Operating Income

Our operating income, as a percentage of net sales, decreased to 21.0% in ~~occupancy-related and employee-related expenses.~~the second quarter of 2023 from 21.6% in the second quarter of 2022. The operating leverage we achieved in the second quarter of 2023 was not sufficient to offset the decline in our gross profit percentage.

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Operating and Administrative Expenses

Our operating and administrative expenses, as a percentage of net sales, improved to 24.6% in the second quarter of 2023 from 25.0% in the second quarter of 2022. This reflected a decline, as a percentage of net sales, in employee-related expenses partly offset by an increase, as a percentage of net sales, in occupancy-related expenses.

The percentage change in employee-related, occupancy-related, and all other operating and administrative expenses compared to the same periods in the preceding year, is outlined in the table below.


	Approximate Percentage of Total Operating and Administrative Expenses	Three-month Period
		~~2022~~2023
Employee-related expenses	70% to 75%	~~14.1~~2.5	%
Occupancy-related expenses	15% to 20%	~~3.8~~9.5	%
All other operating and administrative expenses	10% to 15%	~~5.9~~7.3	%

Employee-related expenses include: (1) payroll (which includes cash compensation, stock option expense, and profit sharing), (2) health care, (3) personnel development, and (4) social taxes.

In the ~~third~~second quarter of ~~2022,~~2023, our employee-related expenses increased when compared to the ~~third~~second quarter of ~~2021.~~2022. We experienced an increase in employee base pay ~~albeit at a rate below the growth in sales,~~ due to higher average FTE during the period and, to a lesser degree, higher average wages. Bonus and commission payments ~~increased at a rate greater than~~decreased reflecting the impact of slower sales ~~reflecting improved business activity~~ and ~~financial performance~~profit growth versus the ~~year-ago period.~~prior year. We also ~~had~~experienced higher ~~profit sharing expense. These costs were partly offset by lower healthcare expenses reflecting post-COVID normalization of the healthcare environment.~~healthcare-related costs.

The table below summarizes our FTE headcount at the end of the periods presented and the percentage change compared to the end of the prior periods:


				Change Since:			Change Since:					Change Since:			Change Since:
		Q3 2022	Q2 2022			Q3 2021				Q2 2023	Q1 2023			Q2 2022
In-market locations (branches & Onsites)	In-market locations (branches & Onsites)	11,897	12,039	-1.2	%	11,104	7.1	%	In-market locations (branches & Onsites)	12,380	12,219	1.3	%	12,039	2.8	%
Non-in-market selling	Non-in-market selling	2,387	2,299	3.8	%	2,049	16.5	%	Non-in-market selling	2,613	2,485	5.2	%	2,299	13.7	%
Selling subtotal	Selling subtotal	14,284	14,338	-0.4	%	13,153	8.6	%	Selling subtotal	14,993	14,704	2.0	%	14,338	4.6	%
Distribution/Transportation	Distribution/Transportation	2,889	2,872	0.6	%	2,560	12.9	%	Distribution/Transportation	3,053	3,029	0.8	%	2,872	6.3	%
Manufacturing	Manufacturing	671	672	-0.1	%	616	8.9	%	Manufacturing	723	714	1.3	%	672	7.6	%
Organizational support personnel (1)	Organizational support personnel (1)	1,675	1,641	2.1	%	1,531	9.4	%	Organizational support personnel (1)	1,862	1,815	2.6	%	1,641	13.5	%
Non-selling subtotal	Non-selling subtotal	5,235	5,185	1.0	%	4,707	11.2	%	Non-selling subtotal	5,638	5,558	1.4	%	5,185	8.7	%
Total	Total	19,519	19,523	0.0	%	17,860	9.3	%	Total	20,631	20,262	1.8	%	19,523	5.7	%

(1) Organizational support personnel consists of: (1) Sales & Growth Driver Support personnel (35%~~-40%~~ to 40% of category), which includes sourcing, purchasing, supply chain, product development, etc.; (2) Information Technology personnel ~~(30%-35%~~(35% to 40% of category); and (3) Administrative Support personnel (25%~~-30%~~ to 30% of category), which includes human resources, Fastenal School of Business, accounting and finance, senior management, etc.

Occupancy-related expenses include: (1) building rent and depreciation, (2) building utility costs, (3) equipment related to our branches and distribution locations, and (4) industrial vending equipment (we consider the vending equipment, excluding leased locker equipment, to be a logical extension of our in-market operations and classify the depreciation and repair costs as occupancy expenses).

In the ~~third~~second quarter of ~~2022,~~2023, our occupancy-related expenses increased when compared to the ~~third~~second quarter of ~~2021. Costs increased related~~2022. This increase largely reflects higher costs for FMI hardware as we continue to ~~investment in~~expand our installed base of such hardware, higher facility costs, including utilities, and ~~equipment, including FMI devices and materials and equipment involved in maintaining and upgrading our branches and hubs. Total building costs were mostly flat in the period.~~higher maintenance expenses.

All other operating and administrative expenses include: (1) selling-related transportation, (2) information technology (IT) expenses, (3) general corporate expenses, which consists of legal expenses, general insurance expenses, travel and marketing expenses, etc., and (4) ~~the loss (gain) on~~ sales of property and equipment.

Combined, all other operating and administrative expenses increased in the ~~third~~second quarter of ~~2022~~2023 when compared to the ~~third~~second quarter of ~~2021.~~2022. The increase in other operating and administrative expenses relates primarily to higher ~~product movement and fuel costs for our local truck fleet, increased~~ spending on information technology ~~services,~~ and ~~increased spending~~expenses for travel and supplies. This was ~~only~~ partly offset by ~~reduced spending for general insurance.~~lower fuel costs related to our local truck fleet.

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Net Interest Expense

Our net interest expense was ~~$3.9 in the third quarter of 2022, compared to~~ $2.3 in the ~~third~~second quarter of ~~2021. This increase was due~~2023, compared to ~~higher~~$2.7 in the second quarter of 2022. Lower average ~~debt balances and~~borrowings over the period were only partially offset by higher average interest rates ~~during the period.~~paid on those borrowings.

Income Taxes

We recorded income tax expense of ~~$90.7~~$94.6 in the ~~third~~second quarter of ~~2022,~~2023, or ~~24.2%~~24.1% of earnings before income taxes. Income tax expense was ~~$72.6~~$93.6 in the ~~third~~second quarter of ~~2021,~~2022, or ~~23.0%~~24.6% of earnings before income taxes. We believe our ongoing tax rate, absent any discrete tax items or broader changes to tax law, will be approximately 24.5%.

Net Earnings

Our net earnings during the ~~third~~second quarter of ~~2022~~2023 were ~~$284.6,~~$298.0, an increase of ~~16.9%~~3.8% compared to the ~~third~~second quarter of ~~2021.~~2022. Our diluted net earnings per share were $0.52 during the second quarter of 2023, which increased from $0.50 during the ~~third~~second quarter of ~~2022, which increased from $0.42 during the third quarter of 2021.~~2022.

Liquidity and Capital Resources

Cash flow activity was as follows for the periods ended ~~September~~June 30:


		Three-month Period					Three-month Period
		2022		2021			2023			2022		Change
Net cash provided by operating activities	Net cash provided by operating activities	257.9		167.4		Net cash provided by operating activities	$	302.1		151.2		99.8	%
Percentage of net earnings	Percentage of net earnings	90.6	%	68.8	%	Percentage of net earnings	101.4		%	52.7	%
Net cash used in investing activities	Net cash used in investing activities	44.5		45.6		Net cash used in investing activities	$	54.2		43.9		23.5	%
Percentage of net earnings	Percentage of net earnings	15.6	%	18.7	%	Percentage of net earnings	18.2		%	15.3	%
Net cash used in financing activities	Net cash used in financing activities	220.8		190.2		Net cash used in financing activities	$	243.3		85.9		183.2	%
Percentage of net earnings		77.6	%	78.1	%

Net Cash Provided by Operating Activities

~~We produced~~Net cash provided by operating activities increased $150.9 in the second quarter of 2023 when compared to the second quarter of 2022. The improvement in operating cash flow, as a percent of ~~$257.9~~net earnings, reflects working capital being a reduced use of cash in the ~~third~~second quarter of ~~2022, an increase of 54.1% from~~2023 relative to the ~~third~~second quarter of ~~2021, representing 90.6%~~2022. Global supply chains have normalized versus the prior year, which has reduced the rate of the period's net earnings versus 68.8% in the third quarter of 2021. While the conversion rate in the third quarter of 2022 remains below historical norms for the period, it also represents the first year-over-year improvement in the metric since the first quarter of 2021. The resources required for operating working capital ~~eased relative~~expansion necessary to ~~prior periods.~~support our customers' growth.

The dollar and percentage change in accounts receivable, net, inventories, and accounts payable as of ~~September~~June 30, ~~2022~~2023 when compared to ~~September~~June 30, ~~2021~~2022 were as follows:


		September 30			Twelve-month Dollar Change		Twelve-month Percentage Change			June 30			Twelve-month Dollar Change		Twelve-month Percentage Change
		2022		2021	2022		2022			2023		2022	2023		2023
Accounts receivable, net	Accounts receivable, net	$	1,110.6	949.4	$	161.2	17.0	%	Accounts receivable, net	$	1,171.6	1,103.9	$	67.7	6.1	%
Inventories	Inventories	1,678.1		1,401.1	277.0		19.8	%	Inventories	1,565.4		1,665.2	(99.8)		-6.0	%
Trade working capital	Trade working capital	$	2,788.7	2,350.5	$	438.3	18.6	%	Trade working capital	$	2,737.0	2,769.1	$	(32.1)	-1.2	%

Accounts payable	Accounts payable	$	277.2	256.9	$	20.3	7.9	%	Accounts payable	$	262.0	291.8	$	(29.9)	-10.2	%

Trade working capital, net	Trade working capital, net	$	2,511.5	2,093.6	$	418.0	20.0	%	Trade working capital, net	$	2,475.0	2,477.3	$	(2.2)	-0.1	%

Net sales in last two months		$	1,249.1	1,062.5	$	186.6	17.6	%
Net sales in last three months									Net sales in last three months	$	1,883.1	1,778.6	$	104.6	5.9	%

Note - Amounts may not foot due to rounding difference.

The increase in our accounts receivable balance in the ~~third~~second quarter of ~~2022~~2023 is primarily attributable to two factors. First, our receivables increased as a result of ~~improved business activity and resulting~~ growth in sales to our ~~customers' sales.~~customers. Second, we continue to experience a shift in our mix due to relatively stronger growth from national account customers, which tend to ~~be larger and~~ carry longer payment terms than our non-national account customers. These factors were partly offset by improved receivables quality.

The decrease in our inventory balance in the second quarter of 2023 is primarily attributable to the absence of supply disruptions from the prior year. Our response at the time was to deepen our inventory as a means of maintaining high service to our customers, particularly for imported inventory. Dissipation of these disruptions has allowed us to shorten our product ordering cycle.

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The ~~increase~~decrease in our ~~inventory~~accounts payable balance in the ~~third~~second quarter of ~~2022~~2023 is primarily attributable to ~~three factors. First, our inventory increased to support improved business activity by our customers. Second, over~~ the ~~past twelve months we have aggressively imported product to deepen our inventory as a means~~dissipation of ~~addressing~~ supply disruptions ~~and provide our customers with resilient and robust product availability. In~~from the ~~third quarter of 2022, we achieved target product availability in our hubs and experienced easing constraints in our supply chain, which~~prior year. That allowed us to ~~slightly~~gradually begin to shorten our product ordering ~~cycle. Third, inflation was responsible for slightly less than half~~cycle and reduce the volume of the overall increase. The impact of inflation remains significant but continues to moderate, with the third quarter being the first quarter in 2022 where inflation was not the primary driver of inventory growthproduct purchases in the ~~period.~~

~~Our accounts payable balance increased due to higher product purchases to support~~second quarter of 2023 versus the ~~growth~~second quarter of ~~our customers and, to a lesser degree, the favorable impact of timing on certain payable balances.~~2022.

Net Cash Used in Investing Activities

Net cash used in investing activities ~~decreased~~increased by ~~$1.1~~$10.3 in the ~~third~~second quarter of ~~2022~~2023 when compared to the ~~third~~second quarter of ~~2021. This~~2022. This was ~~primarily du~~edue to ~~an increase in our~~higher net capital expenditures (purchases of property and equipment, net of proceeds from sales of property and ~~equipment~~equipment) in the ~~third~~second quarter of ~~2022~~2023 compared to the ~~third~~second quarter of ~~2021.~~2022.

Our capital spending will typically fall into six categories: (1) purchases related to industrial vending, (2) purchases of property and equipment related to expansion of and enhancements to distribution centers, (3) spending on software and hardware for our information processing systems, (4) the addition of fleet vehicles, (5) expansion, improvement or investment in certain owned or leased branch properties, and (6) the addition of manufacturing and warehouse equipment. Proceeds from the sales of property and equipment, typically for the planned disposition of pick-up trucks as well as distribution vehicles and trailers in the normal course of business, are netted against these purchases and additions. During the ~~third~~second quarter of ~~2022,~~2023, our net capital expenditures ~~(purchases of property and equipment net of proceeds from sales of property and equipment)~~ were ~~$44.4,~~$53.9, which is ~~a decrease of 2.4%~~an increase from $43.4 in the ~~third~~second quarter of 2021. We had higher spending for FMI equipment, information technology, and hub safety and automation upgrades, which was more than offset by lower spending on a new building in downtown Winona, completed in 2021.2022.

Cash requirements for capital expenditures were satisfied from cash generated from operations, available cash and cash equivalents, our borrowing capacity, and the proceeds of disposals. ~~We now~~During the full year of 2023, we continue to expect our investment in property and equipment, net of proceeds offrom sales, to be within a range of ~~$170.0~~$210.0 to ~~$190.0 (versus our prior $180.0 to $200.0), an~~$230.0, increasing from $162.4 in 2022. This increase ~~from $148.2 in 2021. This annual increase~~for the full year of 2023 reflects primarily: (1) higher property-related spending on ~~FMI equipment in anticipation of higher signings, a deepening of FMI unit inventory to address supply chain risks, and higher unit costs; (2) an increase in spending on hub properties to reflect~~ upgrades to and investments in automation ~~as well as facility upgrades;~~of certain facilities, the beginning of construction of a distribution center in Utah, and investment in materials to facilitate our branch conversion projects; (2) investments in fleet equipment to support our network of heavy trucks; and (3) an increase in ~~manufacturing capacity~~spending on information technology. We expect our spending to ~~support demand and expand capabilities. We reduced~~trend toward the low end of this range as a result of generally slower business activity.

Net Cash Used in Financing Activities

Net cash used in financing activities increased $157.4 in the second quarter of 2023 when compared to the second quarter of 2022. This is primarily related to a reduction in our ~~range for~~debt obligations, versus an increase in our debt obligations in the ~~full year~~second quarter of 2022, which reflected strong operating cash generation in the period. This more than offset a reduction in the second quarter of 2023 of total capital returned to shareholders compared to the second quarter of 2022.

During the second quarter of 2023, we returned $199.9 to our shareholders in the form of dividends, compared to the second quarter of 2022 when we returned $227.8 to our shareholders in the form of dividends ($178.5) and purchases of our common stock ($49.3).

During the second quarter of 2023, we did not repurchase any of our common stock. During the second quarter of 2022, we purchased 1,000,000 shares of our common stock at an average price of approximately $49.29 per share.

We have authority to purchase up to 6,200,000 additional shares of our common stock under the July 12, 2022 authorization. This authorization does not have an expiration date.

Total debt on our balance sheet was $350.0 at the end of the second quarter of 2023, or 9.4% of total capital (the sum of stockholders' equity and total debt). This compares to $505.0, or 13.7% of total capital, at the end of the second quarter of 2022. This decrease is due to ~~slightly lower purchases~~applying operating cash generation to the reduction of ~~FMI devices deriving from our lower signings activity, slightly lower vehicle purchases due to availability constraints, and higher asset sales.~~ total borrowings on the balance sheet.

~~In addition to capital expenditures,~~Our material cash requirements for known contractual obligations include capital expenditures, debt, and lease obligations, which are discussed in more detail earlier in this report in the Notes to Condensed Consolidated Financial Statements and in our ~~2021~~2022 annual report on Form 10-K.

~~Net Cash Used in Financing Activities~~

~~Net cash used in financing acti~~vities increased $30.6 in the third quarter of 2022 when compared to the third quarter of 2021. This is primarily due to an increase in cash used for dividend payments and to purchase our common stock, which exceeded the increase in our debt obligations.

During the third quarter of 2022, we returned $272.8 to our shareholders in the form of dividends ($177.5) and purchases of our common stock ($95.3), compared to $161.0 in the third quarter of 2021, all in the form of dividends. During the third quarter of 2022, we purchased 2,000,000 shares of our common stock at an average price of approximately $47.68 per share. We did not purchase any shares of our common stock in the third quarter of 2021.

We have authority to purchase up to 200,000 additional shares of our common stock under the July 11, 2017 authorization and 8,000,000 additional shares of our common stock under the July 12, 2022 authorization. These authorizations do not have an expiration date.

An overview of our cash dividends paid or declared in ~~2022~~2023 and ~~2021~~2022 is contained in Note 3 of the Notes to Condensed Consolidated Financial Statements.

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~~NINE~~

SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2022~~2023 VERSUS ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2021~~2022

Results of Operations

The following table sets forth condensed consolidated statement of earnings information (as a percentage of net sales) for the periods ended ~~September~~June 30:


		Nine-month Period					Six-month Period
		2022		2021			2023		2022
Net sales	Net sales	100.0	%	100.0	%	Net sales	100.0	%	100.0	%
Gross profit	Gross profit	46.3	%	46.1	%	Gross profit	45.6	%	46.5	%
Operating and administrative expenses	Operating and administrative expenses	25.1	%	25.6	%	Operating and administrative expenses	24.6	%	25.3	%
Operating income	Operating income	21.2	%	20.5	%	Operating income	21.1	%	21.3	%
Net interest expense	Net interest expense	-0.2	%	-0.2	%	Net interest expense	-0.2	%	-0.1	%
Earnings before income taxes	Earnings before income taxes	21.0	%	20.3	%	Earnings before income taxes	20.9	%	21.2	%

Note – Amounts may not foot due to rounding difference.	Note – Amounts may not foot due to rounding difference.					Note – Amounts may not foot due to rounding difference.

~~Net~~ Sales

The table below sets forth net sales and daily sales for the periods ended ~~September~~June 30, and changes in such sales from the prior period to the more recent period:


		Nine-month Period						Six-month Period
		2022			2021			2023			2022
Net sales	Net sales	$	5,285.0		4,479.0		Net sales	$	3,742.2		3,482.6
Percentage change	Percentage change	18.0		%	4.4	%	Percentage change	7.5		%	19.1	%
Business days	Business days	192			191		Business days	128			128
Daily sales	Daily sales	$	27.5		23.5		Daily sales	$	29.2		27.2
Percentage change		17.4		%	5.0	%
Percentage Change							Percentage Change	7.5		%	18.1	%
Daily sales impact of currency fluctuations	Daily sales impact of currency fluctuations	-0.4		%	0.8	%	Daily sales impact of currency fluctuations	-0.5		%	-0.3	%

Note – Daily sales are defined as the total net sales for the period divided by the number of business days (in the United States) in the period.

Net sales increased ~~$806.0,~~$259.6, or ~~18.0%~~7.5%, in the first ~~nine~~six months of ~~2022~~2023 when compared to the first ~~nine~~six months of ~~2021. Adjusted for an extra selling~~ ~~day~~2022. The number of business days were the same in both periods. We experienced higher unit sales during the period that contributed to the increase in net sales in the ~~first~~ ~~ninemonths~~ ~~of 2022, our net daily~~ ~~sales increased 17.4%.~~period. This ~~increase is~~was primarily due to ~~improved unit sales across all major product categories, resulting from continued strength~~growth at our Onsite locations, particularly those opened in ~~business activity.~~the last two years, which more than offset lower revenues in construction and reseller end markets related to the execution of our go-to-market branch strategy. Foreign exchange negatively affected sales in the first ~~nine~~six months of ~~2022~~2023 by approximately 4050 basis points. We estimate that adverse weather reduced our growth by approximately 1010 basis points during the ~~nine-month~~six-month period.

The overall impact of product pricing on net sales was ~~600~~240 to ~~630~~270 basis points during the first ~~nine~~six months of ~~2022.~~2023. This ~~increase~~ reflects the carryover of broad actions taken ~~as part~~in the first quarter of ~~our strategy~~2022 and targeted actions taken in the first quarter of 2023 to mitigate the ~~impact~~effects of ~~marketplace inflation~~higher transportation and material costs for our products ~~and services, particularly fasteners, and transportation services. During~~as well as the ~~first nine months~~impact of ~~2022, material costs remained elevated while costs for fuel and transportation services accelerated~~general inflationary conditions in ~~their inflationary impact. However, during~~ the third quarter of 2022 we began to see costs for key inputs, such as steel and fuel, decline. Should that trend be sustained, it could eventually benefit our cost of goods, although given our long supply chain it would likely take several quarters to see such an impact. marketplace over the past twelve months. T~~The~~he impact of product pricing on net sales ~~was 120~~was 620 to ~~150 basis~~650 basis points during the first ~~nine~~six months of ~~2021~~2022.


		DSR Change Nine-month Period				% of Sales Nine-month Period					DSR Change Six-month Period				% of Sales Six-month Period
		2022		2021		2022		2021			2023		2022		2023		2022
Fasteners	Fasteners	21.2	%	17.1	%	34.3	%	33.2	%	Fasteners	3.4	%	22.8	%	33.1	%	34.4	%
Safety supplies	Safety supplies	13.8	%	-15.0	%	20.6	%	21.2	%	Safety supplies	6.8	%	14.5	%	20.5	%	20.7	%
Other	Other	15.7	%	8.1	%	45.1	%	45.6	%	Other	11.1	%	15.9	%	46.4	%	44.9	%

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		DSR Change Nine-month Period		% of Sales Nine-month Period			DSR Change Six-month Period		% of Sales Six-month Period
		2022	2021	2022	2021		2023	2022	2023	2022
Manufacturing	Manufacturing	23.2%	16.7%	72.0%	68.6%	Manufacturing	12.3%	23.5%	74.7%	71.5%
Non-residential construction	Non-residential construction	9.8%	2.9%	10.4%	11.2%	Non-residential construction	-5.7%	12.3%	9.2%	10.5%
Other	Other	2.1%	-21.1%	17.6%	20.2%	Other	-3.8%	3.9%	16.1%	18.0%

We report our customers in two categories: national accounts, which are customers with a multi-site contract, and non-national accounts, which include large regional customers, small local customers, and government customers. Sales to most of our national account customers grew in the first ~~nine~~six months of ~~2022~~2023 over the prior year, ~~earlier period,~~ as our sales grew at 9276 of our Top 100 national account customers. The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:


		DSR Change Nine-month Period				% of Sales Nine-month Period					DSR Change Six-month Period				% of Sales Six-month Period
		2022		2021		2022		2021			2023		2022		2023		2022
National Accounts	National Accounts	22.1	%	8.2	%	57.5	%	56.2	%	National Accounts	12.0	%	22.8	%	59.3	%	57.2	%
Non-National Accounts	Non-National Accounts	11.6	%	1.0	%	42.5	%	43.8	%	Non-National Accounts	1.8	%	12.6	%	40.7	%	42.8	%

Growth Drivers

The table below summarizes the signings and installations of, and sales through, our FMI devices.

Nine-month Period
2022 2021 Change
Weighted FASTBin/FASTVend signings (MEUs) 16,005 15,339 4.3 %
Signings per day 83 80
Weighted FASTBin/FASTVend installations (MEUs; end of period) 99,409 90,493 9.9 %
FASTStock sales $ 621.7 416.9 49.1 %
% of sales 11.6 % 9.2 %
FASTBin/FASTVend sales $ 1,302.2 981.1 32.7 %
% of sales 24.4 % 21.7 %
FMI sales $ 1,923.9 1,398.0 37.6 %
FMI daily sales $ 10.0 7.3 36.9 %
% of sales 36.0 % 30.9 %

~~All metrics provided above exclude~~ ~~approximately 7,500 non-weighted vending devices that are part of a leased locker program.~~


	Six-month Period
	2023			2022		Change
Weighted FASTBin/FASTVend signings (MEUs)	12,695			10,818		17.4	%
Signings per day	99			85
Weighted FASTBin/FASTVend installations (MEUs; end of period)	107,115			96,872		10.6	%

FASTStock sales	$	474.4		405.8		16.9	%
% of sales	12.5		%	11.5	%
FASTBin/FASTVend sales	$	1,024.3		845.3		21.2	%
% of sales	27.0		%	24.0	%
FMI sales	$	1,498.7		1,251.1		19.8	%
FMI daily sales	$	11.7		9.8		19.8	%
% of sales	39.6		%	35.5	%

Daily sales through ~~eCommerce~~ eCommerce grew ~~52.6%~~46.5% in the first ~~nine~~six months of ~~2022~~2023 and represented ~~17.1%~~22.6% of our total revenues in the period.

Our Digital Footprint in the first ~~nine~~six months of ~~2022~~2023 represented ~~48.2%~~54.7% of our sales, an increase from ~~41.5%~~47.5% of sales in the first ~~nine~~six months of ~~2021.~~2022.

~~Gross Profit~~

In the first nine months of 2022, our gross profit, as a percentage of net sales, improved to 46.3%, or 20 basis points from 46.1% in the first nine months of 2021. This was driven by relatively modest changes in a number of variables. The net effect of write-downs was favorable, as the absence of the $7.8 mask write-down we had in the first quarter of 2021 was more favorable than the $3.4 glove write-down we had in the third quarter of 2022. We also achieved good leverage over organizational expenses as a result of strong business activity. These factors more than offset the dilutive impact of customer and product mix and slightly lower product margin as the impact of weaker price/cost for fasteners more than offset strong safety product margins. The impact of price/cost was largely neutral to our gross profit percentage in the first nine months of 2022.

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Gross Profit

In the first six months of 2023, our gross profit, as a percentage of net sales, declined to 45.6% from 46.5% in the first six months of 2022. The change in our gross profit percentage primarily reflected four items. First, customer and product mix reduced our gross profit percentage. We continued to experience relatively strong growth from Onsite customers and non-fastener products, each of which tend to have a lower gross profit percentage than our business as a whole. This impact widened on a sequential basis. Second, we had higher organizational/overhead costs, primarily due to higher inbound freight costs and working capital needs being relieved from inventory and generating higher period costs. Third, lower product margins in certain of our other products, a result of elevated costs and supply chain normalization for products with lower supply chain visibility, produced some gross profit margin pressure. Fourth, freight expenses were favorable, partially offsetting the negative impacts of mix, organizational/overhead costs, and price/cost. This was from shipping costs related to importing product from overseas suppliers being below prior year levels, the reduced volume of containers being imported from overseas suppliers, and record domestic freight revenue leveraging what are relatively stable costs to support our captive fleet.

Operating Income

Our operating income, as a percentage of net sales, declined to 21.1% in the first six months of 2023 from 21.3% in the first six months of 2022. The operating leverage we achieved in the second quarter of 2023 was not sufficient to offset the decline in our gross profit percentage.

Operating and Administrative Expenses

Our operating and administrative expenses, as a percentage of net sales, ~~fell~~improved to ~~25.1% compared to 25.6%~~24.6% in the first ~~nine~~six months of ~~2021.~~2023 from 25.3% in the first six months of 2022. This is ~~almost entirely~~ due to a decline, as a percentage of net sales, in ~~occupancy-related~~payroll-related expenses.

The percentage change in employee-related, occupancy-related, and all other operating and administrative expenses compared to the same periods in the preceding year, is outlined in the table below.


	Approximate Percentage of Total Operating and Administrative Expenses	~~Nine-month~~Six-month Period
		~~2022~~2023
Employee-related expenses	70% to 75%	~~17.8~~3.4	%
Occupancy-related expenses	15% to 20%	~~3.5~~6.3	%
All other operating and administrative expenses	10% to 15%	~~20.8~~8.9	%

In the first ~~nine~~six months of ~~2022,~~2023, our employee-related expenses increased when compared to the first ~~nine~~six months of ~~2021.~~2022. We ~~experienced a significant increase in bonus and commission payments, including as a percentage of net sales, based on our improved operating and financial performance over the period. We also~~ experienced an increase in employee base pay ~~although at a rate below our growth in net sales, related~~due to higher average FTE ~~over~~and average wages during the ~~period,~~period. Bonus and commission payments decreased reflecting the impact of slower sales and profit growth versus the prior year. We also experienced higher healthcare costs and, to a ~~shift in mix toward full-time labor, and higher wages.~~lesser degree, profit sharing costs.

The table below summarizes our FTE headcount at the end of the periods presented and the percentage change compared to the end of the prior period:


				Change Since:					Change Since:
		Q3 2022	Q4 2021				Q2 2023	Q4 2022
In-market locations (branches & Onsites)	In-market locations (branches & Onsites)	11,897	11,337	4.9	%	In-market locations (branches & Onsites)	12,380	12,017	3.0	%
Non-in-market selling	Non-in-market selling	2,387	2,076	15.0	%	Non-in-market selling	2,613	2,459	6.3	%
Selling subtotal	Selling subtotal	14,284	13,413	6.5	%	Selling subtotal	14,993	14,476	3.6	%
Distribution/Transportation	Distribution/Transportation	2,889	2,740	5.4	%	Distribution/Transportation	3,053	2,971	2.8	%
Manufacturing	Manufacturing	671	619	8.4	%	Manufacturing	723	696	3.9	%
Organizational support personnel (1)	Organizational support personnel (1)	1,675	1,598	4.8	%	Organizational support personnel (1)	1,862	1,711	8.8	%
Non-selling subtotal	Non-selling subtotal	5,235	4,957	5.6	%	Non-selling subtotal	5,638	5,378	4.8	%
Total	Total	19,519	18,370	6.3	%	Total	20,631	19,854	3.9	%

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In the first ~~nine~~six months of ~~2022,~~2023, our occupancy-related expenses increased when compared to the first ~~nine~~six months of ~~2021.~~2022. This was primarily related to an increase in expenses for FMI technology to support growth in our business, as well as higher costs to maintain and upgrade facility equipment. ~~Total facility costs were flat, with lower costs related to branch rationalization being offset by higher utility expenses.~~

Combined, all other operating and administrative expenses increased in the first ~~nine~~six months of ~~2022~~2023 when compared to the first ~~nine~~six months of ~~2021.~~2022. The ~~most significant contributors~~increase in other operating and administrative expenses relates primarily to ~~this increase were higher selling-related transportation expenses to support growth and as a result of higher fuel costs, higher costs related to travel and supplies,~~ higher spending on information technology, expenses for travel and supplies, and higher general insurance costs. This was partly offset by lower fuel costs related to our local truck fleet.

Net Interest Expense

Our net interest expense was ~~$8.9~~$5.8 in the first ~~nine~~six months of ~~2022,~~2023, compared to ~~$7.2~~$4.9 in the first ~~nine~~six months of ~~2021.~~2022. This increase was due to slightly lower average borrowings during the period being more than offset by higher average interest rates paid on those borrowings.

Income Taxes

We recorded income tax expense of ~~$270.5~~$189.2 in the first ~~nine~~six months of ~~2022,~~2023, or ~~24.3%~~24.2% of earnings before income taxes. Income tax expense was ~~$215.5~~$179.8 in the first ~~nine~~six months of ~~2021,~~2022, or ~~23.7%~~24.4% of earnings before income taxes.

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Net Earnings

Our net earnings during the first ~~nine~~six months of ~~2022~~2023 were ~~$841.3,~~$593.1, an increase of ~~21.3%~~6.6% when compared to the first ~~nine~~six months of ~~2021.~~2022. Our diluted net earnings per share ~~where $1.46~~were $1.04 during the first ~~nine~~six months of ~~2022,~~2023, which increased from ~~$1.20~~$0.96 during the first ~~nine~~six months of ~~2021.~~2022.

Liquidity and Capital Resources

Cash flow activity was as follows for the periods ended ~~September~~June 30:


		Nine-month Period						Six-month Period
		2022			2021			2023			2022		Change
Net cash provided by operating activities	Net cash provided by operating activities	$	639.1		613.7		Net cash provided by operating activities	$	690.6		381.2		81.2	%
Percentage of net earnings	Percentage of net earnings	76.0		%	88.5	%	Percentage of net earnings	116.4		%	68.5	%
Net cash used in investing activities	Net cash used in investing activities	$	121.6		107.0		Net cash used in investing activities	$	85.2		77.1		10.5	%
Percentage of net earnings	Percentage of net earnings	14.5		%	15.4	%	Percentage of net earnings	14.4		%	13.8	%
Net cash used in financing activities	Net cash used in financing activities	$	506.2		498.2		Net cash used in financing activities	$	592.2		285.4		107.5	%
Percentage of net earnings		60.2		%	71.8	%

Net Cash Provided by Operating Activities

~~We produced~~Net cash provided by operating ~~cash flow of $639.1~~activities increased by $309.4 in the first ~~nine~~six months of ~~2022, an increase of 4.1% from~~2023 when compared to the first ~~nine~~six months of ~~2021, representing 76.0% of the period's net earnings versus 88.5% in the first nine months of 2021.Growth~~2022. The improvement in operating cash flow, ~~was due~~as a percent of net earnings, reflects working capital being a reduced use of cash in the first six months of 2023 relative to ~~higher net income,~~the first six months of 2022. Global supply chains have normalized versus the prior year, which ~~more than offset an increased need for~~has reduced the rate of working capital expansion necessary to support our ~~customer’s growth as well as inflation in inventory. The working capital effects were more impactful to our conversion ratio, however, causing that metric to decline over the nine-month period.~~customers' growth.

Net Cash Used in Investing Activities

Net cash used in investing activities increased by ~~$14.6~~$8.1 in the first ~~nine~~six months of ~~2022~~2023 when compared to the first ~~nine~~six months of ~~2021.~~2022. This was primarily due to ~~an increase~~a slight decline in proceeds from sales of property and equipment in the first six months of 2023 compared to in the first six months of 2022.

During the first six months of 2023, our net capital expenditures ~~(purchases~~were $84.8, which is an increase from $76.5 in the first six months of 2022. During the full year of 2023, we continue to expect our investment in property and equipment, net of proceeds from sales, to be within a range of ~~property~~$210.0 to $230.0, increasing from $162.4 in 2022. This increase for the full year of 2023 reflects primarily: (1) higher property-related spending on upgrades to and ~~equipment)~~investments in automation of certain facilities, the ~~first nine months~~beginning of ~~2022 compared~~construction of a distribution center in Utah, and investment in materials to facilitate our branch conversion projects; (2) investments in ~~the first nine months~~fleet equipment to support our network of ~~2021.~~

~~During the first nine months of 2022, our net capital expenditures were $120.9, which is~~heavy trucks; and (3) an increase ~~of 13.0% from the first nine months of 2021. The most significant areas driving this increase are higher~~in spending on ~~hub safety and automation upgrades, FMI equipment, and~~ information ~~technology, only partly offset by lower~~technology. We expect our spending onto trend toward the low end of this range as a ~~new building in downtown Winona, completed in 2021.~~result of generally slower business activity.

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Net Cash Used in Financing Activities

Net cash used in financing activities increased by ~~$8.0~~$306.8 in the first ~~nine~~six months of ~~2022~~2023 when compared to the first ~~nine~~six months of ~~2021~~.2022. This is primarily ~~due~~related to ~~an increase~~a reduction in ~~cash used for dividend payments and to purchase~~ our ~~common stock, which exceeded the~~debt obligations, versus an increase in our debt ~~obligations.~~obligations in the first six months of 2022, which reflected strong operating cash generation in the period.

During the first ~~nine~~six months of ~~2022,~~2023, we returned ~~$679.0~~$399.7 to our shareholders in the form of dividends, compared to the first six months of 2022 when we returned $406.2 to our shareholders in the form of dividends ($~~534.4)~~356.9) and purchases of our common stock ($~~144.6), compared to $482.6 in the first nine months of 2021, all in the form of dividends.~~ 49.3).

During the first ~~nine~~six months of 2023, we did not repurchase any of our common stock. During the first six months of 2022, we purchased ~~3,000,000~~1,000,000 shares of our common stock at an average price of approximately ~~$48.22~~$49.29 per share. ~~We did not purchase any shares of our common stock in the first nine months of 2021.~~

Critical Accounting Policies and Estimates – A discussion of our critical accounting policies and estimates is contained in our ~~2021~~2022 annual report on Form 10-K.

Recently Issued and Adopted Accounting Pronouncements – A description of recently issued and adopted accounting pronouncements, if any, is contained in Note 1 of the Notes to Condensed Consolidated Financial Statements.

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Certain Risks and Uncertainties – Certain statements contained in this document do not relate strictly to historical or current facts. As such, they are considered 'forward-looking statements' that provide current expectations or forecasts of future events. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of terminology such as anticipate, believe, should, estimate, expect, intend, may, will, plan, goal, project, hope, trend, target, opportunity, and similar words or expressions, or by references to typical outcomes. Any statement that is not a purely historical fact, including estimates, projections, trends, and the outcome of events that have not yet occurred, is a forward-looking statement. Our forward-looking statements generally relate to our expectations and beliefs regarding the business environment in which we operate, our projections of future performance, our perceived marketplace opportunities, our strategies, goals, mission and vision, ~~and~~ our expectations related to future capital expenditures, future tax rates, future inventory levels, pricing, Onsite and weighted FMI device signings, the impact of inflation on our cost of goods or operating costs, ~~and~~ the impact of price increases ~~and surge sales~~ on overall sales growth or margin ~~performance.~~performance, and our ability to grow our business through the enhancement of sales through our Digital Footprint. You should understand that forward-looking statements involve a variety of risks and uncertainties, known and unknown, and may be affected by inaccurate assumptions. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially. Factors that could cause our actual results to differ from those discussed in the forward-looking statements include, but are not limited to, ~~the impact of the COVID-19 pandemic,~~ economic downturns, weakness in the manufacturing or commercial construction industries, competitive pressure on selling prices, changes in our current mix of products, customers, or geographic locations, changes in our average branch size, changes in our purchasing patterns, changes in customer needs, changes in fuel or commodity prices, inclement weather, changes in foreign currency exchange rates, difficulty in adapting our business model to different foreign business environments and the challenges of operating in foreign business environments, failure to accurately predict the market potential of our business strategies, the introduction or expansion of new business strategies, weak acceptance or adoption of our FMI offering or Onsite business models, increased competition in FMI or Onsite, difficulty in maintaining installation quality as our FMI business expands, the leasing to customers of a significant number of additional FMI devices, the failure to meet our goals and expectations regarding branch openings, branch closings, or expansion of our FMI offering or Onsite operations, changes in the implementation objectives of our business strategies, challenges in developing and expanding our ~~ability to retain certain government and other types of customers that bought product from us for the first time during the pandemic,~~digital capabilities, difficulty in hiring, relocating, training, or retaining qualified personnel, difficulty in controlling operating expenses, difficulty in collecting receivables or accurately predicting future inventory needs, dramatic changes in sales trends, changes in supplier production lead times, changes in our cash position or our need to make capital expenditures, credit market volatility, changes in tax law or the impact of any such changes on future tax rates, changes in tariffs or the impact of any such changes on our financial results, changes in the availability or price of commercial real estate, changes in the nature, price, or availability of distribution, supply chain, or other technology (including software licensed from third parties) and services related to that technology, cyber-security incidents, potential liability and reputational damage that can arise if our products are defective, difficulties measuring the contribution of price increases on sales growth, acts of war, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission, including our most recent annual and quarterly reports. Each forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any such statement to reflect events or circumstances arising after such date.

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ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks from changes in foreign currency exchange rates, commodity steel pricing, commodity energy prices, and interest rates. Changes in these factors cause fluctuations in our earnings and cash flows. We evaluate and manage exposure to these market risks as follows:

Foreign currency exchange rates – Foreign currency fluctuations can affect our net investments, our operations in countries other than the U.S., and earnings denominated in foreign currencies. Historically, our primary exchange rate exposure has been with the Canadian dollar against the United States dollar. Our estimated net earnings exposure for foreign currency exchange rates was not material in the first six months of 2023. We have not historically hedged our foreign currency risk given that exposure to date has not been material. In the first ~~nine~~six months of ~~2022,~~2023, changes in foreign currency exchange rates decreased our reported net sales by ~~$22.9~~$19.9 with the estimated effect on our net earnings being immaterial.

Commodity steel pricing – We buy and sell various types of steel products; these products consist primarily of different types of threaded fasteners and related ~~hardware.~~hardware. We are exposed to the impacts of commodity steel pricing and our related ability to pass through the impacts to our end customers. ~~Although the price level of steel can vary by geography, for most of~~During the first ~~nine~~six months of ~~2022,~~2023, the ~~market~~ price of steel ~~remained broadly elevated. In~~as reflected in many market indexes was below the ~~third quarter, the market price of steel began~~prior year. Due to ~~decline from previous peaks in most areas. This trend, should it be sustained, could lead to lower product costs. Traditionally,~~our long supply chain, changes in the cost of ~~input prices are at least partly passed on~~steel can take a number of quarters to ~~customers, although given~~be reflected in our financial results. Further, the ~~length~~cost of the ~~supply chain~~raw material is generally a small part of the total value of the steel products that we sell, which can also diminish the impact of cost changes for ~~most products this can take several quarters to occur. As a result,~~ the ~~estimated~~raw material. We estimate the effect on our net earnings was immaterial in the first ~~nine~~ mo~~nths~~six months of ~~2022 was immaterial.~~2023.

Commodity energy prices – We have market risk for changes in prices of oil, gasoline, diesel fuel, natural gas, and electricity. ~~During the first nine months of 2022, the price of energy as~~As reflected in many market indexes, ~~increased due to both strong economic activity and~~energy prices during the ~~effects~~first six months of ~~the Ukrainian conflict,~~2023 were generally below prior year levels, which contributed to ~~higher~~lower costs for fuel consumed in our vehicles and

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~~utilities~~ lower utility costs at our facilities. ~~While energy costs have eased from their peaks during 2022, they remain elevated relative~~Total direct fuel consumption is a relatively minor cost to ~~average costs experienced in~~ the ~~first nine months of 2021. However, based on the fact that total energy exposure is less than 5% of our total net sales, our~~company and, as a result, estimated net earnings exposure ~~for~~related to changes in commodity energy prices was immaterial in the first ~~nine~~six months of ~~2022.~~2023.

Fossil fuels are also often a key feedstock for chemicals and plastics that comprise a key raw material for many products that we sell. During the first six months of 2023, prices for fossil fuels were generally below prior year levels. The cost of the raw material is generally a small part of the total value of the products that we sell, which can diminish the impact of cost changes for the raw material. As a result, ~~the increase in the cost of oil has resulted in slightly higher costs~~our estimated net earnings exposure for ~~certain plastics and resins used in our products. Given the volatility of the current marketplace and the time it takes~~materials for ~~higher~~which fossil fuel costs to flow through the supply chain, it is unclear to what degree recent changes in the cost of fossil fuel prices might affect future net earnings. Based on our ability to pass higher input costs on, the estimated effect on our net earningsfuels are feedstock was immaterial in the first ~~nine~~six months of ~~2022 was immaterial.~~2023.

Interest rates - Loans under our Credit Facility bear interest at floating rates. As a result, changes in such rates can affect our operating results and liquidity to the extent we do not have effective interest rate swap arrangements in place. We have not historically used interest rate swap arrangements to hedge the variable interest rates under our Credit Facility. A one percentage point increase to our floating rate debt in the first ~~nine~~six months of ~~2022~~2023 would have resulted in approximately ~~$0.9~~$0.5 of additional interest expense. A description of our Credit Facility is contained in Note 6 of the Notes to Condensed Consolidated Financial Statements.

ITEM 4 — CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures – As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Securities Exchange Act)). Based on this evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including the principal executive officer and principal financial officer, to allow for timely decisions regarding disclosure.

Changes in Internal Control Over Financial Reporting – There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1 — LEGAL PROCEEDINGS

A description of our legal proceedings, if any, is contained in Note 7 of the Notes to Condensed Consolidated Financial Statements. The description of legal proceedings, if any, in Note 7 is incorporated herein by reference.

ITEM 1A — RISK FACTORS

The significant factors known to us that could materially adversely affect our business, financial condition, or operating results are described in Item 2 of Part I above and in our most recently filed annual report on Form 10-K under Forward-Looking Statements and Item 1A – Risk Factors.

ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The table below sets forth information regarding purchases of our common stock during the ~~third~~second quarter of ~~2022:~~2023:

(a) (b) (c) (d)
Period Total Number of
Shares
Purchased Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
Maximum Number (or
Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans or
Programs (1)
July 1-31, 2022 2,000,000 $47.68 2,000,000 8,200,000
August 1-31, 2022 0 $0.00 0 8,200,000
September 1-30, 2022 0 $0.00 0 8,200,000
Total 2,000,000 $47.68 2,000,000 8,200,000


	(a)		(b)		(c)		(d)
Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1)
April 1-30, 2023		0		$0.00		0		6,200,000
May 1-31, 2023		0		$0.00		0		6,200,000
June 1-30, 2023		0		$0.00		0		6,200,000
Total		0		$0.00		0		6,200,000


(1)			As of ~~September~~June 30, ~~2022,~~2023, we had remaining authority to repurchase ~~200,000 shares under the July 11, 2017 authorization and 8,000,000~~6,200,000 shares under the July 12, 2022 authorization. ~~These authorizations do~~This authorization does not have an expiration date.

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ITEM 6 — EXHIBITS

INDEX TO EXHIBITS


Exhibit Number						Description of Document

3.1						Restated Articles of Incorporation of Fastenal Company, as amended (incorporated by reference to Exhibit 3.1 to Fastenal Company's Form 8-K dated as of April 22, 2019)

3.2						Restated By-Laws of Fastenal Company (incorporated by reference to Exhibit 3.2 to Fastenal Company's Form 8-K dated as of January 17, 2019)

~~10.1~~						Amended and Restated Credit Agreement, dated as of September 28, 2022, by and among Fastenal Company, the Lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to Fastenal Company's Form 8-K dated as of September 30, 2022).

~~10.2~~						Omnibus Second Amendment to Master Note Agreement and Subsidiary Guaranty Agreement dated as of September 28, 2022 by and among Fastenal Company, Fastenal Company Purchasing, and Fastenal IP Company, on one hand, and Metropolitan Life Insurance Company, MetLife Investment Management, LLC, NYL Investors LLC, PGIM, Inc., and each holder of Notes that is a signatory thereto, on the other hand (incorporated by reference to Exhibit 10.2 to Fastenal Company's Form 8-K dated as of September 30, 2022).
31						Certifications under Section 302 of the Sarbanes-Oxley Act of 2002

32						Certification under Section 906 of the Sarbanes-Oxley Act of 2002

101						The following financial statements from the Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Earnings, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.

104						The cover page from the Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in Inline XBRL.

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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


Date: ~~October~~July 18, ~~2022~~2023	By:	/s/ Holden Lewis
		Holden Lewis
		Senior Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)



Date: ~~October~~July 18, ~~2022~~2023	By:	/s/ Sheryl A. Lisowski
		Sheryl A. Lisowski
		Executive Vice President - Chief Accounting Officer and Treasurer
		(Duly Authorized Officer and Principal Accounting Officer)

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		Page
PART I	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Earnings	2

	Condensed Consolidated Statements of Comprehensive Income	3

	Condensed Consolidated Statements of Stockholders' Equity	4

	Condensed Consolidated Statements of Cash Flows	5

	Notes to Condensed Consolidated Financial Statements	6

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2425

ITEM 4.	CONTROLS AND PROCEDURES	25

PART II	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	26

ITEM 1A.	RISK FACTORS	26

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	26

ITEM 6.	EXHIBITS	2726