SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
Fastenal Company
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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FASTENAL COMPANY
2001 Theurer Boulevard
Winona, Minnesota 55987-1500
(507) 454-5374
March 6, 2001
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held at the Company's offices at 2001 Theurer Boulevard, Winona, Minnesota,
commencing at 10 o'clock a.m., Central Daylight Savings Time, on Tuesday,
April 17, 2001.
The Secretary's Notice of Annual Meeting and the Proxy Statement which
follow describe the matters to come before the meeting. During the meeting, we
will also review the activities of the past year and items of general interest
about the Company.
We hope that you will be able to attend the meeting in person and we look
forward to seeing you. Please mark, date and sign the enclosed Proxy and
return it in the accompanying envelope as soon as possible, even if you plan
to attend the Annual Meeting. You may revoke the Proxy and vote in person at
that time if you so desire.
Sincerely,
/s/ Robert A. Kierlin
Robert A. Kierlin
Chairman of the Board, President
and Chief Executive Officer
FASTENAL COMPANY
-----------------------------------
Notice of Annual Meeting of Shareholders
to be held on April 17, 2001
-----------------------------------
The Annual Meeting of Shareholders of Fastenal Company will be held at the
Company's offices at 2001 Theurer Boulevard, Winona, Minnesota, commencing at
10 o'clock a.m., Central Daylight Savings Time, on Tuesday, April 17, 2001 for
the following purposes:
1. To elect a Board of Directors of nine directors, to serve until the
next regular meeting of shareholders or until their successors have
been duly elected and qualified.
2. To ratify the appointment of KPMG LLP as independent auditors for
the fiscal year ending December 31, 2001.
3. To transact such other business as may properly be brought before
the meeting.
The Board of Directors has fixed February 27, 2001 as the record date for
the meeting, and only shareholders of record at the close of business on that
date are entitled to receive notice of and vote at the meeting.
Your Proxy is important to ensure a quorum at the meeting. Even if you own
only a few shares, and whether or not you expect to be present, you are
urgently requested to mark, date, sign and mail the enclosed Proxy in the
postage-paid envelope that is provided. The Proxy may be revoked by you at any
time prior to being exercised, and returning your Proxy will not affect your
right to vote in person if you attend the meeting and revoke the Proxy.
By Order of the Board of Directors,
/s/ Stephen M. Slaggie
Stephen M. Slaggie
Secretary
Winona, Minnesota
March 6, 2001
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PROXY STATEMENT
------------------
GENERAL INFORMATION
The enclosed Proxy is being solicited by the Board of Directors of Fastenal
Company (the "Company") for use in connection with the Annual Meeting of
Shareholders to be held on Tuesday, April 17, 2001 at the Company's offices at
2001 Theurer Boulevard, Winona, Minnesota, commencing at 10 o'clock a.m.,
Central Daylight Savings Time, and at any adjournments thereof. Only
shareholders of record at the close of business on February 27, 2001 will be
entitled to vote at such meeting or adjournment. Proxies in the accompanying
form which are properly signed, duly returned to an officer of the Company and
not revoked will be voted in the manner specified. A shareholder executing a
Proxy retains the right to revoke it at any time before it is exercised by
delivering to an officer of the Company written notice of termination of the
Proxy's authority or a properly signed Proxy bearing a later date.
The address of the principal executive office of the Company is 2001 Theurer
Boulevard, Winona, Minnesota 55987-1500 and the telephone number is (507) 454-
5374. The mailing of this Proxy Statement and the Board of Directors' form of
Proxy to shareholders will commence on or about March 6, 2001.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock of the Company present and entitled to vote is required for
approval of each proposal included in this Proxy Statement. For this purpose,
a shareholder who abstains with respect to a proposal is considered to be
present and entitled to vote on such proposal at the meeting and is in effect
casting a negative vote, but a shareholder (including a broker) who does not
give authority to a Proxy to vote, or withholds authority to vote, on a
proposal shall not be considered present and entitled to vote on such
proposal.
DEADLINES FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Any shareholder proposal intended to be presented at the 2002 Annual Meeting
of Shareholders and desired to be included in the Company's Proxy Statement
for that meeting must be received by the Company at its principal executive
office no later than November 14, 2001 in order to be included in such Proxy
Statement. If notice of any other shareholder proposal intended to be
presented at the 2002 Annual Meeting of Shareholders is not received by the
Company on or before January 28, 2002, the Proxy solicited by the Board of
Directors of the Company for use in connection with that meeting may confer
authority on the Proxies named therein to vote in their discretion on such
proposal without any discussion in the Company's Proxy Statement for that
meeting of either the proposal or how such Proxies intend to exercise their
voting discretion.
1
SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The following table sets forth, as of February 15, 2001, the ownership of
Common Stock of the Company by each shareholder who is known by the Company to
own beneficially more than 5% of the outstanding Common Stock of the Company,
by each director and nominee for the office of director, by each executive
officer named in the Summary Compensation Table set forth under "Executive
Compensation" below, and by all directors and executive officers as a group.
At February 15, 2001 there were 37,938,688 shares of Common Stock, par value
$.01 per share, issued and outstanding, each of which is entitled to one vote.
Amount and Nature Percentage of
Name and, if Required, Address of Beneficial Outstanding
of Beneficial Owner Ownership(1) Shares
- ------------------------------ ----------------- -------------
Robert A. Kierlin............................ 4,025,936(2)(3) 10.61%
Route 1, Box 65D
Winona, Minnesota 55987
Stephen M. Slaggie........................... 2,014,964(2)(4) 5.31
1870 Ralph Scharmer Drive
Winona, Minnesota 55987
Michael M. Gostomski......................... 734,692(2)(5) 1.94
John D. Remick............................... 1,281,083(2)(6) 3.38
Henry K. McConnon............................ 836,612(2)(7) 2.21
Robert A. Hansen............................. 200 *
Willard D. Oberton........................... 80,560(8) *
Michael J. Dolan............................. 704 *
Reyne K. Wisecup............................. 80(9) *
Nicholas J. Lundquist........................ 8,310(10) *
Daniel L. Florness........................... 1,105(11) *
Brown Capital Management, Inc................ 2,071,675(12) 5.46
1201 North Calvert Street
Baltimore, Maryland 21202
Directors and executive officers as a group
(11 persons)................................ 8,912,246 23.49
- --------
* Less than 1%.
(1) Except as otherwise indicated in the Notes below, the listed
beneficial owner has sole voting power and investment power with
respect to such shares.
(2) Includes an aggregate of 18,000 shares held by Hiawatha Education
Foundation ("Hiawatha Foundation") and its wholly-owned subsidiary.
Each of Mr. Kierlin (and two of his children), Mr. Slaggie,
Mr. Gostomski, Mr. Remick and Mr. McConnon is a director and member of
Hiawatha Foundation and a director of its subsidiary and, as such,
shares voting and investment power with respect to these shares. Each
such individual disclaims beneficial ownership of the shares held by
Hiawatha Foundation and its subsidiary.
2
(3) Includes 979,540 shares held by Mr. Kierlin which are subject to stock
options granted by Mr. Kierlin to various employees of the Company.
See "Executive Compensation--Board Report on Executive Compensation"
below. Mr. Kierlin has voting and investment power with respect to
these shares, provided that any transferred shares will remain subject
to the options. Also includes 2,200 shares held by a local secondary
school (the "School"), of which Mr. Kierlin is a director and member
of the investment committee. As a director and member of the
investment committee, Mr. Kierlin shares voting and investment power
with respect to the shares held by the School. Mr. Kierlin disclaims
beneficial ownership of the shares held by the School.
(4) Includes 121,221 shares held by Mr. Slaggie's wife, and 34,950 shares
held by Mr. Slaggie as custodian for one of his children.
(5) Includes 556,692 shares held in Mr. Gostomski's revocable living
trust, over which Mr. Gostomski has voting and investment power, and
160,000 shares held in the revocable living trust of Mr. Gostomski's
wife, over which Mr. Gostomski's wife has voting and investment power.
(6) Includes 152,677 shares held by Mr. Remick's wife, and 10,000 shares
held by Mr. Remick as custodian for one of his children. Also includes
55,075 shares held by a charitable foundation of which Mr. Remick is a
director. As a director, Mr. Remick shares voting and investment power
with respect to the shares of Common Stock of the Company held by the
foundation. Mr. Remick disclaims beneficial ownership of the shares
held by the foundation.
(7) Includes 160,000 shares held by Mr. McConnon's wife, and 12,000 shares
held by Mr. McConnon's father with respect to which Mr. McConnon has
investment power pursuant to a power of attorney granted to Mr.
McConnon by his father. Also includes 2,200 shares held by the School,
of which Mr. McConnon is a director. As a director, Mr. McConnon
shares voting and investment power with respect to the shares held by
the School. Mr. McConnon disclaims beneficial ownership of the shares
held by the School.
(8) Includes 17,900 shares held by Mr. Oberton's wife, and an aggregate of
3,900 shares held by Mr. Oberton and his wife as custodian for Mr.
Oberton's children.
(9) These shares are held jointly by Ms. Wisecup and her husband.
(10) Includes 1,200 shares held my Mr. Lundquist's wife, and an aggregate
of 1,200 shares held by Mr. Lundquist as custodian for his children.
Also includes 160 shares attributable to the account of Mr. Lundquist
in the Company's 401(k) plan. The number of shares attributable to
such account is based on Mr. Lundquist's most recent plan statement,
which reports units held by Mr. Lundquist in the plan's stock fund.
Such units consist of undivided interests in the shares and cash held
in the fund. The number of shares reported is an estimate based on the
number of units held by Mr. Lundquist. Mr. Lundquist has the right to
direct the investment of, and the voting of all shares attributable
to, his plan account.
(11) Includes 105 shares attributable to the account of Mr. Florness in
the Company's 401(k) plan. The number of shares attributable to such
account is based on Mr. Florness' most recent plan statement, which
reports units held by Mr. Florness in the plan's stock fund. Such
units consist of undivided interest in the shares and cash held in
the fund. The number of shares reported is an estimate based on the
number of units held by Mr. Florness. Mr. Florness has the right to
direct the investment of, and the voting of all shares attributable
to, his plan account.
3
(12) According to a Schedule 13G statement filed with the Securities and
Exchange Commission reflecting ownership as of December 31, 1999,
Brown Capital Management, Inc., which is a registered investment
advisor, has sole voting power with respect to 991,000 shares, shared
voting power with respect to 101,100 shares, and sole investment
power with respect to 2,071,675 shares.
ELECTION OF DIRECTORS
Nominees and Required Vote
The Restated Bylaws of the Company provide that the business of the Company
shall be managed by or under the direction of a Board of Directors of not less
than five nor more than nine directors, which number shall be fixed from time
to time by the Board of Directors. Each director shall be elected at the
Annual Meeting of Shareholders for a term that expires at the next regular
shareholders' meeting and shall hold office for the term for which he or she
was elected and until a successor is elected and has qualified. The Board of
Directors has fixed the number of directors to be elected for the ensuing year
at nine and has nominated the nine persons named below for election as
directors. Proxies solicited by the Board of Directors will, unless otherwise
directed, be voted to elect the nine nominees named below to constitute the
entire Board of Directors.
All of the nominees named below are current directors of the Company. Each
nominee has been previously elected as a director by the Company's
shareholders, except Michael J. Dolan and Reyne K. Wisecup who were elected
directors by the Board of Directors effective June 14, 2000. Each nominee has
indicated a willingness to serve as a director for the ensuing year. However,
in case any nominee is not a candidate at the meeting for any reason, the
Proxies named in the enclosed form of Proxy may vote for a substitute nominee
in their discretion.
The following table sets forth certain information as to each nominee for
the office of director:
Name Age Position
---- --- --------
Robert A. Kierlin................. 61 Chairman of the Board, President,
Chief Executive Officer and Director
Stephen M. Slaggie................ 61 Secretary and Director
Michael M. Gostomski.............. 60 Director
John D. Remick.................... 64 Director
Henry K. McConnon................. 61 Director
Robert A. Hansen.................. 57 Director
Willard D. Oberton................ 42 Executive Vice President, Chief Operating
Officer and Director
Michael J. Dolan.................. 52 Director
Reyne K. Wisecup.................. 38 Human Resources Manager and Director
Mr. Kierlin has been the Chairman of the Board, President and Chief
Executive Officer of the Company and has served as a director of the Company
since the Company's incorporation in 1968. Mr. Kierlin has also served as a
Minnesota State Senator since April 1999.
Mr. Slaggie has been the Secretary of the Company and has served as a
director of the Company since 1970. He became a full-time employee of the
Company in December 1987, at which time he assumed the additional duties of
Shareholder Relations Director and Insurance Risk Manager. From 1970 through
June 1996, Mr. Slaggie also served as Treasurer of the Company.
4
Mr. Gostomski has served as a director of the Company since 1973. For more
than the past five years, Mr. Gostomski has been the President and Chief
Executive Officer of Winona Heating & Ventilating Company, a sheet metal and
roofing contractor located in Winona, Minnesota.
Mr. Remick has served as a director of the Company since the Company's
incorporation in 1968. For more than the past five years, Mr. Remick has been
the President and Chief Executive Officer of Rochester Athletic Club, Inc., an
athletic club located in Rochester, Minnesota.
Mr. McConnon has served as a director of the Company since the Company's
incorporation in 1968. For more than the past five years, Mr. McConnon has
been the President of Wise Eyes, Inc., an eyeglass retailer and wholesaler
located in State College, Pennsylvania.
Mr. Hansen has served as a director of the Company since June 1999. For more
than the past five years, Mr. Hansen has been an Associate Professor of
Marketing and Logistics Management with the Carlson School of Management at
the University of Minnesota.
Mr. Oberton has served as a director of the Company since June 1999, and has
been Executive Vice President and Chief Operating Officer of the Company since
June 2000. From March 1997 through June 2000, Mr. Oberton was Vice President
and Chief Operating Officer of the Company. From June 1986 through March 1997,
Mr. Oberton was the General Operations Manager of the Company.
Mr. Dolan has served as a director of the Company since June 2000. Since
October 1995, Mr. Dolan has been the Executive Vice President and Chief
Operating Officer of The Smead Manufacturing Company, a manufacturer of office
products located in Hastings, Minnesota. From July 1980 through October 1995,
Mr. Dolan was a partner at KPMG LLP, a public accounting firm.
Ms. Wisecup has served as a director of the Company since June 2000, and has
been Human Resources Manager for the Company since April 1997. From June 1991
through April 1997, Ms. Wisecup was an administrative assistant with the
Company.
None of the above nominees is related to any other nominee or to any
executive officer of the Company.
Board and Committee Meetings
The Board of Directors of the Company held three meetings during 2000.
The Company has an Audit Committee consisting of Robert A. Hansen, John D.
Remick and Michael J. Dolan, each of whom is an independent director (as that
term is defined in the listing standards of The Nasdaq Stock Market), and a
Development Committee consisting of Robert A. Kierlin, Willard D. Oberton,
Robert A. Hansen and Reyne K. Wisecup. The Company does not have a Nominating
Committee or a Compensation Committee, or any other committee of the Board of
Directors performing equivalent functions.
The Audit Committee held two meetings during 2000. The Audit Committee has
the authority to (a) make recommendations to the Board of Directors as to the
engagement of independent auditors, (b) review with the independent auditors
the scope and results of audit engagements, (c) review the scope, frequency
and results of internal audits and examinations, (d) review the adequacy of
the Company's accounting policies and system of internal accounting controls,
and (e) review all related party transactions for potential conflict-of-
interest situations. The Audit Committee operates under a written charter
adopted by the Board of Directors in June 2000. A copy of the Audit Committee
charter is attached as Appendix A to this Proxy Statement.
5
Each director of the Company attended more than 75% of the aggregate number
of meetings of the Board, Audit Committee and Development Committee on which
he or she served during 2000.
Compensation of Directors
Each director of the Company receives an annual retainer of $1,000 for his
or her services as a director, and, if he or she is not an employee of the
Company, $3,000 (plus reimbursement of reasonable expenses) for attendance at
each meeting of the Board. Each member of the Audit Committee who is not an
employee of the Company receives $3,000 (plus reimbursement of reasonable
expenses) for attendance at each Audit Committee meeting. Each member of the
Development Committee who is not an employee of the Company receives $3,000
(plus reimbursement of reasonable expenses) for attendance at each Development
Committee meeting.
Audit Committee Report
The Audit Committee is responsible for overseeing the Company's management
and independent auditors in respect of the Company's accounting and financial
reporting. In performing its oversight function, the Audit Committee relies
upon advice and information received from the Company's management and
independent auditors.
In that regard, the Audit Committee has reviewed and discussed with members
of the Company's management the Company's audited consolidated financial
statements for fiscal 2000, and has discussed with representatives of the
Company's independent auditors the matters required to be discussed with audit
committees by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). The Audit Committee has also received the written disclosures and
the letter from the Company's independent auditors required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and has discussed with representatives of the Company's
independent auditors that firm's independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the Company's audited consolidated
financial statements for fiscal 2000 be included in the Company's Annual
Report on Form 10-K for such fiscal year for filing with the Securities and
Exchange Commission.
John D. Remick Robert A. Hansen Michael J. Dolan
Members of the Audit Committee
Independent Auditors' Fees
Audit Fees
The aggregate fees billed for the audit of the Company's annual consolidated
financial statements for fiscal 2000 and for the review of the Company's
interim consolidated financial statements for each quarter in fiscal 2000 are
expected to be approximately $200,000.
All Other Fees
The Company also paid its principal accountant an aggregate of approximately
$36,000 for audit, accounting and tax services for its Puerto Rican and
Mexican operations in fiscal 2000. No other services were rendered to the
Company or any of its subsidiaries by the Company's principal accountant
during fiscal 2000. The Audit Committee has considered whether, and has
determined that, the provision of these services was compatible with
maintaining the independence of the Company's principal accountant.
6
EXECUTIVE COMPENSATION
Summary of Compensation
Set forth in the following table is information with respect to the
compensation of the Chief Executive Officer and certain other executive
officers of the Company for each fiscal year of the Company in the three
fiscal year period ended December 31, 2000:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
---------------------- ----------------
Securities
Name and Fiscal Underlying
Principal Position Year Salary ($) Bonus ($) Options/SARs (#)
- ------------------ ------ ---------- --------- ----------------
Robert A. Kierlin.............. 2000 $121,000(1) $ 0 0
Chairman of the Board,
President and Chief 1999 117,000(1) 0 0
Executive Officer 1998 102,500(1) 0 0
Willard D. Oberton............. 2000 301,000(2) 79,475 5,000
Executive Vice President and
Chief 1999 193,083(2) 30,841 0
Operating Officer 1998 110,000 82,120 0
Daniel L. Florness............. 2000 117,500 50,713 5,000
Treasurer, Chief Financial
Officer and 1999 92,916 24,492 0
Chief Accounting Officer 1998 84,375 18,641 0
Nicholas J. Lundquist (3)...... 2000 173,538 127,907 5,000
Vice President of Sales
- --------
(1) Includes $1,000, $2,000 and $2,500 paid to Mr. Kierlin during 2000, 1999
and 1998, respectively, in his capacity as a director and member of the
Audit Committee of the Company. See "Board and Committee Meetings" above.
Mr. Kierlin ceased being a member of the Audit Committee in June 1999.
(2) Includes $1,000 paid to Mr. Oberton during each of the years 2000 and
1999 in his capacity as a director of the Company. See "Board and
Committee Meetings" above. Mr. Oberton became a director of the Company
in June 1999.
(3) Mr. Lundquist became an executive officer of the Company in June 2000.
Mr. Lundquist's 2000 compensation includes compensation for the full
fiscal year.
The individuals named above are the only persons who were executive officers
of the Company during the fiscal year ended December 31, 2000 and whose total
salary and bonus for such fiscal year was $100,000 or more.
7
Option/SAR Grants
The following table sets forth information regarding individual grants of
stock options and stock appreciation rights made to the executive officers of
the Company named in the Summary Compensation Table shown above during the
fiscal year ended December 31, 2000:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable
Value at
Assumed Annual
Rates of Stock
Price
Appreciation
for Option/SAR
Individual Grants Term(1)
--------------------------------------------- ---------------
Percent of
Number of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Expiration
Name Granted (#) Fiscal Year Price Date 5% ($) 10% ($)
- ---- ------------ ------------ -------- ---------- ------- -------
Robert A. Kierlin....... 0 -- -- -- -- --
Willard D. Oberton...... 5,000(2) 0.5% $55 12/31/02 $24,465 $61,685
Daniel L. Florness...... 5,000(2) 0.5 55 12/31/02 24,465 61,685
Nicholas J. Lundquist... 5,000(3) 0.5 55 12/31/02 0 7,425
- --------
(1) The dollar amounts under these columns were calculated assuming the value
of the Company's Common Stock appreciates at 5% and 10% each year,
compounded annually, from the date of grant of the applicable option or
stock appreciation right to the end of the term of the applicable option
or stock appreciation right. These annual appreciation rates have been set
by the Securities and Exchange Commission for illustrative purposes and
are not intended to forecast future financial performance of the Company
or possible future appreciation, if any, in the price of the Company's
Common Stock. Shareholders are therefore cautioned against drawing any
conclusions from the appreciation data shown, aside from the fact that the
executive officers will only realize value from the grants of options and
stock appreciation rights shown when the price of the Company's Common
Stock appreciates, which benefits all shareholders commensurately.
(2) These stock appreciation rights were granted by the Company, on July 3,
2000, under the stock appreciation rights plan for employees of the
Company described under "Board Report on Executive Compensation" below,
and, in general, will become exercisable on July 1, 2002 and will expire
on December 31, 2002. If the holder of the stock appreciation right
ceases to be employed by the Company or one of its subsidiaries, other
than as a result of his death, prior to July 1, 2002, the stock
appreciation right will expire at the time such holder's employment is
terminated.
(3) This option was issued by Robert A. Kierlin, on January 3, 2000, under
the stock option plan for employees of the Company described under "Board
Report on Executive Compensation" below, and, in general, will become
exercisable on July 1, 2002 and will expire on December 31, 2002. If the
holder of the option ceases to be employed by the Company or one of its
subsidiaries, other than as a result of his death, prior to July 1, 2002,
the option will expire at the time such holder's employment is
terminated.
8
The following table sets forth, as to the executive officers of the Company
named in the Summary Compensation Table shown above, information concerning
stock options and stock appreciation rights exercised during, and the value of
stock options and stock appreciation rights held at the end of, the fiscal
year ended December 31, 2000:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options/SARs at Fiscal the-Money Options/SARs at
Year-End (#) Fiscal Year-End ($)
------------------------- -------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
Robert A. Kierlin....... 0 -- 0 0 -- --
Willard D. Oberton...... 0 -- 0 5,000 -- $0
Daniel L. Florness...... 0 -- 0 5,000 -- 0
Nicholas J. Lundquist... 0 -- 0 5,000 -- 0
Compensation Committee Interlocks and Insider Participation
As indicated under "Board and Committee Meetings" above, the Company does
not have a Compensation Committee or any other committee of the Board of
Directors performing equivalent functions. Decisions regarding compensation of
executive officers of the Company are made by the Board of Directors. Three of
the Company's executive officers, Robert A. Kierlin, Stephen M. Slaggie and
Willard D. Oberton, are directors of the Company. Each of these individuals
participated in all deliberations of the Board during the fiscal year ended
December 31, 2000 concerning executive officer compensation.
Board Report on Executive Compensation
As required by the rules established by the Securities and Exchange
Commission, the Board of Directors has prepared, for inclusion in this Proxy
Statement, the following report on the compensation policies of the Board
applicable to the Company's executive officers. The Company's executive
officers during 2000 were Robert A. Kierlin, its Chief Executive Officer,
Stephen M. Slaggie, its Secretary, Willard D. Oberton, its Chief Operating
Officer, Nicholas J. Lundquist, its Vice President of Sales, and Daniel L.
Florness, its Chief Financial Officer.
Executive compensation at the Company for 2000 consisted of three
components: base salary, incentive bonus, and stock options or stock
appreciation rights. The Chief Executive Officer's compensation in 2000
consisted solely of base salary. The Secretary's compensation in 2000
consisted of base salary and a bonus. The compensation in 2000 of the other
executive officers consisted of base salary, a bonus, and stock options or
stock appreciation rights.
At the first meeting of the Board of Directors in 2000, the Board
established the maximum total compensation to be paid to the Company's Chief
Executive Officer and Secretary for the year. As shown in the table set forth
under "Security Ownership of Principal Shareholders and Management" above,
each of those two officers holds a significant portion of the Company's Common
Stock, which was acquired by him at the time of the Company's incorporation.
It is the philosophy of the Board of Directors that the Chief Executive
Officer and Secretary should be modestly compensated by the Company, and that
financial rewards for those officers should come in large part from increases
in the value of the Company's Common Stock held by them. Consistent with that
philosophy, the Board set the maximum compensation of the Chief Executive
Officer and Secretary for 2000 at the same level as 1999.
9
The actual base salary paid to the Company's Chief Executive Officer for
2000 was, within the limits established by the Board of Directors, determined
by that officer based on such factors as he deemed appropriate. Since 1987
(the year of the Company's initial public offering), there has been no
increase, from the level paid in that year, in the annual base salary of the
Chief Executive Officer. The base salary paid to the Chief Executive Officer
in 2000 was 60% of the maximum compensation authorized for payment to him by
the Board.
The actual base salary paid to the Company's Secretary for 2000 was, within
the limits established by the Board of Directors, determined by that officer
based on such factors as he deemed appropriate, provided that the base salary
paid to the Secretary was subject to the review and approval of the Company's
Chief Executive Officer. There has been no increase in the annual base salary
paid to the Secretary since he became a full-time employee of the Company in
1987. The Secretary's bonus for 2000 was paid under the Company's general
employee bonus program for non-sales personnel. Under the bonus program, an
aggregate bonus is calculated for each of the Company's departments based on
the department achieving certain pre-determined cost containment goals. The
aggregate bonus, if any, for each department is then allocated among the
department's employees in a manner determined by the department's supervisor
based on the level of responsibility of each employee, provided that the
allocation is subject to the review and approval of the Company's Chief
Executive Officer. The Secretary was the supervisor of his department in 2000.
The Board of Directors also established, at its first meeting in 2000, the
base salary to be paid, and the method for determining any bonuses to be paid,
to the Company's other executive officers for that year. The bonuses paid to
the Company's Chief Operating Officer and Vice President of Sales for 2000
were calculated based on the amount by which the Company's pre-tax income in
2000 exceeded its pre-tax income in 1999. The bonus paid to the Company's
Chief Financial Officer for 2000 was calculated based on the amount by which
net income in 2000 exceeded a percentage of net sales in 2000.
In addition to base salary and bonus, each of the Company's Chief Operating
Officer, Vice President of Sales and Chief Financial Officer was granted
during 2000 either options to purchase Common Stock or stock appreciation
rights.
The options were granted by the Chief Executive Officer under a stock option
plan established by him for employees of the Company at the beginning of 2000.
Pursuant to the plan, the Chief Executive Officer has granted to a broad group
of employees options to purchase up to an aggregate of 979,540 shares of
Common Stock of the Company currently owned by him. In general, each such
options expires on the last day of the second calendar year after the year in
which the option was granted and is exercisable during the six-month period
ending on the expiration date. The benefits to the Company of the stock option
plan are three-fold. First, the plan aligns the interests of the employees of
the Company with the long-term interest of the Company's public shareholders.
Second, the plan allows employees of the Company the potential to accumulate
some wealth. Third, since the options are backed by outstanding shares of
Common Stock owned by the Chief Executive Officer, no new shares will be
issued by the Company when the options are exercised and the options will
result in no dilution of the Company's outstanding Common Stock.
The stock appreciation rights received by the executive officers were
granted by the Company under a stock appreciation rights plan for employees of
the Company adopted by the Board of Directors in 2000. The plan was
established so that stock appreciation rights could be granted to certain
officers and employee-directors of the Company who, due to securities law
considerations, are not able to participate in the stock option plan
established by the Chief Executive Officer. Under the
10
plan, the Company has granted to certain of those officers and employee-
directors an aggregate of 14,000 stock appreciation right units (with each
unit being the equivalent, for purposes of measuring payments under the plan,
of one share of Common Stock of the Company). The terms of the stock
appreciation rights mirror those of the employee stock options, except that
all payments upon exercise of the stock appreciation rights will be made in
cash. As a result, the stock appreciation rights will result in no dilution of
the Company's outstanding Common Stock.
With the exception of the bonus arrangements described above, the
compensation policies and practices of the Board of Directors applicable to
the Company's executive officers are not subject to specific criteria. The
factors considered by the Board in setting the maximum compensation of the
Chief Executive Officer and Secretary and the base salary and stock-based
awards of the Company's other executive officers, and by the Chief Executive
Officer and Secretary in determining their actual base salary within the
limits established by the Board, were subjective, such as the level of
compensation paid by the Company to its other employees. The Board is aware of
the executive compensation historically paid by members of the peer group
selected in connection with the preparation of the stock performance graph set
forth under "Executive Compensation--Performance Graph" below. However, the
Board did not consider the compensation paid by the companies in the peer
group to their chief executive officers in setting the maximum compensation of
the Company's Chief Executive Officer for 2000, since the higher level of
compensation present at those companies does not reflect the philosophy of the
Board that the Chief Executive Officer should be modestly compensated. The
Company's performance was not a factor considered by the Board of Directors in
setting the maximum compensation of the Chief Executive Officer and Secretary
or the base salary or stock-based awards of the Company's other executive
officers, nor did the Board require the Chief Executive Officer and Secretary
to consider the Company's performance in determining their actual base salary.
However, the Board of Directors believes (based on a comparison of executive
compensation published in a national business periodical) that the
compensation of the Company's executive officers in 2000 was low by national
and regional standards, particularly in light of the Company's historical
financial results; and that, as a result of their share ownership and the
bonus arrangements and stock-based awards described above, the interests of
the Company's executive officers are closely aligned with the long-term
interests of the Company and its public shareholders.
Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility
of compensation over $1,000,000 paid by a company to its executive officers.
Since the Company's executive compensation is set at levels such that each
executive officer is likely to receive compensation well below the $1,000,000
limit, the Board of Directors has determined that it is not necessary at this
time to take any position with respect to the non-deductibility of
compensation in excess of $1,000,000.
Robert A. Kierlin Stephen M. Slaggie Michael M. Gostomski
John D. Remick Henry K. McConnon Robert A. Hansen
Willard D. Oberton Michael J. Dolan Reyne K. Wisecup
The Board of Directors
11
Performance Graph
Set forth below is a graph comparing, for a period of five years ended
December 31, 2000, the yearly cumulative total shareholder return on the
Company's Common Stock with the yearly cumulative total shareholder return of
the NASDAQ Market Index and an index of a group of peer companies selected by
the Company.
The companies in the peer group are Lawson Products, Inc., Noland Company,
MSC Industrial Direct Co., Inc. and W.W. Grainger, Inc. The Company is not
included in the peer group.
In calculating the yearly cumulative total shareholder return of the peer
group index, the shareholder returns of the companies included in the peer
group are weighted according to the stock market capitalizations of such
companies at the beginning of each period for which a return is indicated.
The comparison of total shareholder returns in the performance graph assumes
that $100 was invested on December 31, 1995 in each of the Company, the NASDAQ
Market Index and the peer group index, and that dividends were reinvested when
and as paid.
Comparison of Five Year Cumulative Total Return
Among Fastenal Company, NASDAQ Market Index and Peer Group Index
[GRAPH]
Fastenal Company Peer Group NASDAQ Market Index
1995 $100 $100 $100
1996 108.34 122.62 124.27
1997 90.63 149.04 152
1998 104.3 133.97 214.39
1999 106.63 139.91 378.12
2000 130.45 120.22 237.66
12
RELATIONSHIP WITH AND APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP to serve as the Company's
independent auditors for the fiscal year ending December 31, 2001, subject to
ratification by the shareholders. While it is not required to do so, the Board
of Directors is submitting the selection of that firm for ratification in
order to ascertain the view of the shareholders. If the selection is not
ratified, the Board of Directors will reconsider its selection. Proxies
solicited by the Board of Directors will, unless otherwise directed, be voted
to ratify the appointment of KPMG LLP as independent auditors for the Company
for the fiscal year ending December 31, 2001.
A representative of KPMG LLP will be present at the Annual Meeting of
Shareholders and will be afforded an opportunity to make a statement if such
representative so desires and will be available to respond to appropriate
questions during the meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers to file initial reports of share ownership and reports
of changes in share ownership with the Securities and Exchange Commission.
Directors and officers are required by Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on a
review of the copies of such forms furnished to the Company and written
representations from the Company's directors and officers, all Section 16(a)
filing requirements were met for the year ended December 31, 2000, except that
one report, covering a single stock purchase in 2000, was filed late by
Michael J. Dolan and one report, covering a single stock gift in 1997, was
filed late by Henry K. McConnon.
13
ADDITIONAL MATTERS
The Annual Report of the Company for the fiscal year ended December 31,
2000, including financial statements, is being mailed with this Proxy
Statement.
As of the date of this Proxy Statement, management knows of no matters that
will be presented for determination at the meeting other than those referred
to herein. If any other matters properly come before the meeting calling for a
vote of shareholders, it is intended that the shares represented by the
Proxies solicited by the Board of Directors will be voted by the Proxies named
therein in accordance with their best judgment.
The Company will pay the cost of soliciting Proxies in the accompanying
form. In addition to solicitation by the use of mails, certain directors,
officers and regular employees of the Company may solicit Proxies by
telephone, telegram or personal interview, and may request brokerage firms and
custodians, nominees and other record holders to forward soliciting materials
to the beneficial owners of stock of the Company and will reimburse them for
their reasonable out-of-pocket expenses in so forwarding such materials.
Shareholders who wish to obtain a copy of the Company's 10-K Annual Report
filed with the Securities and Exchange Commission for the fiscal year ended
December 31, 2000 may do so without charge by writing to Stephen M. Slaggie,
Secretary, at the Company's offices, 2001 Theurer Boulevard, Winona, Minnesota
55987-1500.
By Order of the Board of Directors,
/s/ Stephen M. Slaggie
Stephen M. Slaggie
Secretary
Dated: March 6, 2001
14
Appendix A
Charter of the Audit Committee
of the Fastenal Company Board of Directors
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee
shall have responsibility to oversee the Company's management and outside
auditors in regard to corporate accounting and financial reporting.
The Audit Committee has the authority to conduct any investigation it
deems appropriate to fulfilling its responsibilities, and shall have
direct access to the outside auditors and other outside advisors of the
Company, as well as the Company's personnel, facilities, and books and
records. The Audit Committee has the power to retain, at the Company's
expense, special legal, accounting, or other consultants or experts it
deems necessary in the performance of its duties.
II. Audit Committee Composition and Meetings
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be an "independent director"
within the meaning of Rule 4200 of the NASD Manual, free from any
relationship with the Company that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgment. All
members of the Audit Committee shall be able to read and understand
fundamental financial statements, including the Company's balance sheet,
income statement and cash flow statement, or shall become able to do so
within a reasonable period of time after appointment to the Audit
Committee. At least one member of the Audit Committee shall have past
employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or
background which results in such individual's financial sophistication,
including being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight
responsibilities.
Audit Committee members shall be appointed by the Board. If an Audit
Committee Chair is not designated or present, the members of the
Committee may designate a Chair by majority vote of those present.
The Committee shall meet at least three times annually, or more
frequently as circumstances dictate.
III. Audit Committee Responsibilities and Duties
The Audit Committee recognizes that the preparation of the Company's
financial statements and other financial information is the
responsibility of the Company's management, and that the auditing, or
conducting limited reviews, of those financial statements and other
financial information is the responsibility of the Company's outside
auditors. The Audit Committee's responsibility is to oversee the
financial reporting process.
The Company's management, and its outside auditors, in the exercise of
their responsibilities, acquire greater knowledge and more detailed
information about the Company and its financial affairs than the members
of the Audit Committee. Consequently, the Audit Committee is not
Page 1 of 3
responsible for providing any expert or other special assurance as to the
Company's financial statements and other financial information or any
professional certification as to the outside auditors' work, including
without limitation their reports on, and limited reviews of, the
Company's financial statements and other financial information.
In carrying out its oversight responsibilities, the Audit Committee
shall:
Review Procedures
1. Review and reassess the adequacy of this Charter at least annually.
Submit the Charter to the Board for approval and have the document
published at least every three years in accordance with Securities
and Exchange Commission regulations.
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and outside auditors of significant issues regarding
accounting principles, practices, and judgments. Based on such review
and discussion, determine whether to recommend to the Board that the
annual audited financial statements be included in the Company's Form
10-K for filing with the Securities and Exchange Commission.
3. Review and discuss with the outside auditors any items required to be
communicated by the outside auditors in accordance with AICPA SAS 71
regarding the Company's interim financial statements. The Chair of
the Committee may represent the entire Audit Committee for purposes
of this review and discussion.
Outside Auditors
4. Require that the outside auditors provide the Audit Committee with a
formal written statement delineating all relationships between the
outside auditors and the Company, consistent with Independence
Standards Board Standard No. 1.
5. Discuss with the outside auditors their independence, and actively
engage in a dialogue with the outside auditors regarding any
disclosed relationships or services that may impact their objectivity
and independence.
6. Take, or recommend that the full Board take, appropriate action to
oversee the independence of the outside auditors.
7. Review and discuss with the outside auditors all matters required to
be communicated to audit committees in accordance with AICPA SAS 61.
Other Audit Committee Responsibilities
8. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be included in
the Company's annual proxy statement.
9. Review financial and accounting personnel succession planning with
the Company.
10. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Audit Committee or the
Board deems necessary or appropriate.
11. Maintain minutes of meetings and periodically report to the Board on
significant results of the foregoing activities.
Page 2 of 3
The outside auditors are ultimately accountable to the Board and the
Audit Committee, as representatives of the shareholders. The Board and
the Audit Committee have ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the outside auditors, and, if
applicable, to nominate the outside auditors to be proposed for approval
by the shareholders in any proxy statement.
Page 3 of 3
FASTENAL COMPANY
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, April 17, 2001
10:00 a.m., Central Daylight Savings Time
Fastenal Company Headquarters
2001 Theurer Boulevard
Winona, Minnesota
- --------------------------------------------------------------------------------
Fastenal Company
2001 Theurer Boulevard, Winona, Minnesota 55987-1500 Proxy
- --------------------------------------------------------------------------------
This proxy is solicited by the Board of Directors for use at the Annual Meeting
of Shareholders to be held on April 17, 2001 and at any adjournment thereof.
By signing this proxy, you revoke all prior proxies and appoint Stephen M.
Slaggie, John D. Remick and Willard D. Oberton, and each of them, as Proxies,
each with full power of substitution, to vote, as designated on the reverse side
and below, at the Annual Meeting of Shareholders to be held on April 17, 2001,
and at any adjournment thereof, all shares of Common Stock of Fastenal Company
registered in your name at the close of business on February 27, 2001.
This proxy when properly executed will be voted as specified on the reverse
side, but, if no direction is given, this proxy will be voted FOR Items 1 and 2.
Notwithstanding the foregoing, if this proxy is to be voted for any nominee
named on the reverse side and such nominee is unwilling or unable to serve, this
proxy will be voted for a substitute in the discretion of the Proxies. The
Proxies are authorized to vote in their discretion upon such other matters as
may properly come before the Annual Meeting or any adjournment thereof.
See reverse for voting instructions.
[FASTENAL COMPANY LOGO]
\|/ Please detach here \|/
- --------------------------------------------------------------------------------
The Board of Directors Recommends a Vote FOR Items 1 and 2.
1. Election of Directors: 01 Robert A. Kierlin 05 Henry K. McConnon
02 Stephen M. Slaggie 06 Robert A. Hansen
03 Michael M. Gostomski 07 Willard D. Oberton
04 John D. Remick 08 Michael J. Dolan
09 Reyne K. Wisecup
[ ] Vote FOR [ ] Vote WITHHELD
all nominees from all nominees
(except as marked)
(Instructions: To withhold authority
to vote for any indicated nominee, -----------------------------------
write the number(s) of the nominee(s)
in the box provided to the right.) -----------------------------------
2. Ratification of the appointment of KPMG LLP as independent auditors for
the 2001 fiscal year.
[ ] For [ ] Against [ ] Abstain
Address Change? Mark Box [ ] Indicate changes below:
Dated:_________________________, 2001
-------------------------------------
-------------------------------------
Signature(s) in Box
Please sign exactly as your name(s)
appear on proxy. Jointly owned shares
will be voted as directed if one
owner signs unless another owner
instructs to the contrary, in which
case the shares will not be voted.
Trustees, administrators, etc.,
should include title and authority.
Corporations should provide full name
of corporation and title of
authorized officer signing the proxy.