Exhibit 13
[LOGO OF FASTENAL COMPANY]
2000
ANNUAL
REPORT
www.fastenal.com
[DEPICTION OF THE EARTH]
Servicing the World
From Branches in the U.S., Canada, Puerto Rico and on the Web!
2000 | Profile of Fastenal Company
Fastenal Company was founded in 1967. As of December 31, 2000, the Company
operated 897 store sites located in 48 states, Puerto Rico and Canada and
employed 4,356 people at these sites. In addition, there were 2,121 people
employed in various support positions. The Company sells approximately 195,000
different types of industrial and construction supplies in nine product
categories. These include approximately 68,000 different types of threaded
fasteners and miscellaneous supplies; approximately 51,000 different types of
tools; approximately 24,000 different types of metal cutting tool blades;
approximately 23,000 different types of fluid transfer components and
accessories for hydraulic and pneumatic power; approximately 8,000 different
types of material handling and storage products; approximately 4,000 different
types of janitorial and paper products; approximately 7,000 different types of
electrical supplies; approximately 7,000 different types of welding supplies
(excluding gas & welding machines) and approximately 3,000 different types of
safety supplies. As of December 31, 2000, the Company also operated eleven
distribution centers located in Minnesota, Indiana, Ohio, Pennsylvania, Texas,
Georgia, Washington, California, Utah, North Carolina and Missouri, and a
packaging facility in Tennessee. Approximately 95.3% of the Company's 2000 sales
were attributable to products manufactured by others, and approximately 4.7%
related to items manufactured, modified or repaired by either the Company's
Manufacturing Division or its Support Services. Since December 31, 2000, the
Company has opened additional store sites.
[PHOTO OF FASTENAL CORPORATE HEADQUARTERS IN WINONA, MINNESOTA]
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This Annual Report, including the sections captioned "President's Letter to
Shareholders," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Stock and Financial Data," contains statements that
are not historical in nature and that are intended to be, and are hereby
identified as, "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), including statements regarding
broadening of the Company's customer base into service accounts, growth in
manufacturing operations, opening of new stores, additions of new employees,
expansion of foreign operations, capital expenditures, funding of expansion
plans, and dividends. A discussion of certain risks and uncertainties that could
cause actual results to differ materially from those predicted in such
forward-looking statements is included in the section of this Annual Report
captioned "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The Company assumes no obligation to update either such
forward-looking statements or the discussion of such risks and uncertainties.
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2000 | Table of Contents
[PHOTO OF BIG BLUE CATALOG]
2001 BIG BLUE CATALOG
pages 2-3
PRESIDENT'S LETTER TO SHAREHOLDERS
page 4
SIX-YEAR SELECTED FINANCIAL DATA
pages 5-7
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
page 8
STOCK AND FINANCIAL DATA
page 9
CONSOLIDATED BALANCE SHEETS
page 10
CONSOLIDATED STATEMENTS OF EARNINGS
11 page
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY & COMPREHENSIVE INCOME
12 page
CONSOLIDATED STATEMENTS OF CASH FLOWS
13 -18 pages
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19 page
INDEPENDENT AUDITORS' REPORT
20 page
OFFICERS & DIRECTORS
CORPORATE INFORMATION
[PHOTO OF FASTENAL'S COMPANY WEBSITE]
FASTENAL COMPANY'S WEBSITE
www.fastenal.com
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2000 Annual Report 1
2000 | President's Letter to Shareholders
For Fastenal, the year 2000 was a good one, but not a spectacular one. Our net
sales growth of 22.4% over our 1999 sales was better than the 21.1% growth we
experienced in 1999, but below our historical growth rates. Once again, the
overall economy created the background that influenced our performance.
The slowing of the US economy in the second half of the year 2000 particularly
impacted our main customer base of manufacturers. Over 95% of our sales are
within the USA, and the majority of these sales are to manufacturers.
Manufacturers use our products either as a component of what they make or in the
maintenance of their facilities. The strong dollar throughout the year and high
natural gas prices in the second half of the year created a difficult
environment for US industrial firms.
The service economy and the construction market remained strong in the year
2000. Going forward, we believe the growth of our product lines will allow us to
broaden our customer base into service accounts. The percentage of our sales
coming from fasteners has declined in each of the last four years, while
products such as safety and janitorial supplies have increased as a percentage
of sales.
By placing more emphasis on our newer product lines we are able to grow our
total sales at a faster rate than we open new stores. We grew our store count
from 809 at the start of the year to 897 at the end of the year. Our older
stores continue to see much of their growth coming from sales of products other
than fasteners.
Our growth in employees also was consistent with emphasizing the growth of newer
product lines in existing stores. We finished the year 2000 with 4,356 branch
store employees, an 18.7% increase over the 3,670 at the start of the year. The
majority of these people were added to existing stores.
The number of our support people grew from 1,823 at the start of the year to
2,121 at the end of the year, an increase of 16.3%. With overall selling price
increases in 2000 estimated at about 2%, our net sales increase of 22.4% for the
year suggests that we experienced some productivity gains throughout the
Company.
Fastenal has its own distribution capability including distribution centers,
connecting truck routes and local delivery services. In July we began offering
our logistics services to other firms. In the second half of the year we
generated approximately $500,000 in sales for logistics services such as
warehousing, material management, transportation and brokerage of freight. At
year end, ten people were involved in this new part of our business.
In the year 2000 we began operating our second manufacturing facility. Prior to
this year, all of the special fasteners we made were manufactured in our Winona
facility. We now have a machining capability in our Fresno, California
distribution center. We plan on adding this capability at some of our other
distribution centers during 2001.
During the year 2000 we continued evolving our decentralization program. Several
years ago all of our regional managers resided in Winona and our distribution
centers reported back to a national distribution manager in Winona. By the end
of 2000, most of our regional managers resided within the regions they managed
and they had responsibility for the distribution centers within those regions.
We want all decisions to be made as close to the customer as possible.
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2 2000 Annual Report
2000 | President's Letter to Shareholders continued
Our sales development effort in 2000 included an emphasis on securing key
accounts. These accounts are defined as large customers with annual sales
potential of at least $3 million each. In 1999 we had three accounts at this
level, but in 2000 we had ten such accounts that contributed over $50 million to
our total sales.
During 2000 our technology people developed "FastNet", an internal web site that
serves as a repository for all Company information for the use of Fastenal
employees. This site contains a wealth of Company information such as job
postings, product information, price changes, links to suppliers and a listing
of all non-standard parts located within Fastenal.
In June of 2000 we increased the size of our Board of Directors from seven to
nine with the additions of Michael J. Dolan and Reyne K. Wisecup. With these two
new directors, we believe we have a strong board that will oversee our future
growth.
Looking forward, our intention is to continue to grow through customer service.
Subject to general economic conditions, we will continue to add more stores and
employees throughout 2001. We ended the year debt free, with enough cash to
finance our continued expansion.
We thank you for your belief in us and we promise to work for the continued
success of Fastenal.
/s/ Robert A Kierlin
January 16, 2001
[PHOTO OF UNITED STATES AND FASTENAL COMPANY TRUCK]
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2000 Annual Report 3
2000 | Six-Year Selected Financial Data
(AMOUNTS IN THOUSANDS EXCEPT EARNINGS AND DIVIDENDS PER SHARE INFORMATION.)
6-Year
Operating Results Percent
Years Ended Dec. 31 2000 Change 1999 1998 1997 1996 1995
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Net sales $745,740 +22.4% $609,186 503,100 397,992 287,691 222,555
Gross profit 388,560 +21.7% 319,266 264,280 208,929 152,880 118,944
Earnings before
income taxes 131,430 +23.4% 106,479 86,123 67,336 54,432 46,206
Net earnings 80,730 +23.3% 65,455 52,953 40,834 32,539 27,411
Basic and diluted
earnings per share 2.13 +23.3% 1.73 1.40 1.08 .86 .72
Dividends per share $ .08 +100% $ .04 .02 .02 .02 .02
Weighted average
shares outstanding 37,939 - 37,939 37,939 37,939 37,939 37,939
Financial Position
December 31
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Net working capital $256,845 +32.6% $193,744 142,459 106,555 78,417 66,100
Total assets 402,464 +26.3% 318,621 251,234 205,137 151,545 109,320
Total stockholders' equity $359,258 +27.4% $281,960 217,646 165,872 125,967 94,323
All information contained in this Annual Report reflects the 2-for-1 stock split
effected in the form of a 100% stock dividend in 1995.
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4 2000 Annual Report
2000 | Management's Discussion & Analysis of
Financial Condition & Results of Operations
(AMOUNTS IN THOUSANDS EXCEPT PERSONNEL COUNTS AND DIVIDENDS PER SHARE.)
Results of Operations
Net sales for 2000 exceeded net sales for 1999 by 22.4%. This compares with a
21.1% net sales growth rate experienced from 1998 to 1999. The increase in net
sales in 2000 came primarily from new site openings, unit sales growth in
existing sites and growth in the newer product lines. This growth was tempered
by a deflationary impact to pricing in the first half of the year. The increase
in net sales in 1999 came primarily from new site openings, unit sales growth in
existing sites, and growth in the newer product lines. The growth in 1999 was
also tempered by a slight deflationary impact to pricing. The following tables
indicate: (1) sales from the Fastenal product line and from the newer product
lines, and (2) product lines added to the original fastener product line and the
year of introduction.
2000 1999
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Fastenal Product Line 64.5% 68.3%
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Newer Product Lines 35.5% 31.7%
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Product Line Introduced
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Tools 1993
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Cutting Tools 1996
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Hydraulics & Pneumatics 1996
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Material Handling 1996
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Janitorial Supplies 1996
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Electrical Supplies 1997
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Welding Supplies 1997
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Safety Supplies 1999
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Threaded fasteners accounted for approximately 51%, 51% and 55% of the Company's
consolidated sales in 2000, 1999 and 1998, respectively. Sites opened in 2000
contributed approximately $8,500 (or 1.1%) to 2000 net sales. Sites opened in
1999 contributed approximately $17,900 (or 2.4%) to 2000 net sales
and approximately $1,900 (or 0.3%) to 1999 net sales. The rate of growth in
sales of sites generally levels off after sites have been open for five years,
and the sales of older sites typically vary more with the economy than the sales
of younger sites.
Gross profit as a percent of net sales was 52.1% in 2000, 52.4% in 1999 and
52.5% in 1998. The fluctuations resulted primarily from changes in the mix of
products being sold.
Operating and administrative expenses were 34.7% of net sales in 2000 after
having been 35.1% of net sales in 1999 and 35.2% of net sales in 1998. The
fluctuations in operating and administrative costs were primarily due to changes
in payroll and related costs and changes in occupancy costs. In both 2000 and
1999, payroll and related costs increased at a rate which was less than the rate
of increase in net sales. The increases in payroll and related costs were due to
the following increases in employees:
2000 1999
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Sales Personnel 18.7% 21.3%
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Support Personnel 16.3% 19.6%
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In 2000 and 1999, the rate of increase in occupancy costs was less than the rate
of increase in net sales. Occupancy costs increased in both years due to an
11.1% and a 5.6% increase in the number of sites in 2000 and 1999, respectively,
and due to the relocation of existing stores to larger sites to accommodate
their growth in activity and the introduction of new product lines. This
reduction, from the 30% historical annual store growth rate, was due to a shift
of emphasis, which began in 1999, from new store openings to growth of existing
stores. Distribution costs benefited from productivity gains in both 2000 and
1999.
Net interest income/expense in 2000 improved $1,458 over 1999. Net interest
income/expense in 1999 increased $1,626 over 1998. Changes were due to the
fluctuations in the weighted average amount of outstanding Company borrowings
and investments. The loss/gains on disposal of property and equipment in 2000,
1999 and 1998 came primarily from the disposal of used vehicles.
Net earnings grew 23.3% from 1999 to 2000 and 23.6% from 1998 to 1999. The
growth in net earnings in both years resulted primarily from increased net
sales. In 2000 and 1999 the net earnings growth rate was higher than that of net
sales because of the earlier mentioned impact of payroll and related costs and
occupancy costs.
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2000 Annual Report 5
2000 | Management's Discussion & Analysis of
Financial Condition & Results of Operations
(AMOUNTS IN THOUSANDS EXCEPT PERSONNEL COUNTS AND DIVIDENDS PER SHARE.)
The Asian economic turmoil impacted the Company in several ways during 2000 and
1999. During 1999, the Company experienced lower prices on low-carbon and
stainless steel fasteners imported from the Far East when compared to most of
1998. To the extent the Company was able to retain the cost advantage, gross
margins improved. However, these lower costs also affected net sales because
some of the lower costs were passed on to customers in the competitive
marketplace. During the winter of 1999/2000 this trend began to reverse itself
and prices began to increase. To the extent the Company was able to pass on
these increases, gross margins were not impacted. However, during the second
quarter of 2000 the Company did experience a reduction in the gross margin
percentage. This trend was reversed in the third and fourth quarters of 2000. In
2000 and 1999 the Company also experienced lower net sales of products to
customers who export to the Far East when compared to sales levels to these
customers in most of 1998.
In addition to the impacts of the Far East situation, 2000 and 1999 showed a
continuation of the slowdown in the manufacturing activity of customers we sell
to in the U.S. and Canada.
Effects of Inflation
Price deflation related to certain products negatively impacted net sales in
2000, 1999 and 1998.
Liquidity and Capital Resources
Net cash provided by operating activities was:
2000 $ 38,253
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1999 $ 55,989
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1998 $ 43,316
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The 2000 decrease was primarily due to the 34.2% increase in inventory levels.
The 1999 increase was primarily from the growth in net earnings, depreciation
and accounts payable exceeding the growth in accounts receivable and inventory.
Net cash used in investing activities was:
2000 $ 30,360
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1999 $ 24,654
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1998 $ 28,609
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The 2000 increase in net cash used in investing activities resulted primarily
from a decrease in the proceeds from sale of property and equipment. This
decrease is directly related to the migration of our vehicles from owned to
leased in 1999 and 2000.
The 1999 decrease in net cash used in investing activities resulted primarily
from an increase in proceeds from the disposal of vehicles and the increase in
the leasing of branch vehicles and distribution semi-tractors. This decrease was
partially offset by the purchase of a new distribution center in Indiana,
additions to several other distribution centers, and the addition to the
Minnesota manufacturing facility.
The Company had no long-term debt at December 31, 2000, 1999, or 1998. See note
8 of the Notes to Consolidated Financial Statements for a description of the
Company's current line of credit.
The Company paid an annual dividend of $.08 per share in 2000, $.04 per share in
1999 and $.02 per share in 1998.
As of December 31, 2000, the Company had no material outstanding commitments for
capital expenditures.
The Company expects to make approximately $40,000 in total capital expenditures
in 2001, consisting of approximately $21,200 for manufacturing, warehouse and
packaging equipment and facilities, approximately $10,000 for data processing
equipment, and approximately $8,800 for vehicles. The capital expenditures for
vehicles, which represented a substantial portion of the total amount in prior
years, represented a smaller portion in both 2000 and 1999. This decrease, from
earlier years, is a direct result of increases in the number of vehicles leased
as opposed to owned. We expect this to recur in 2001.
Management anticipates funding its current expansion plans with cash generated
from operations, from available cash and cash equivalents, and, to a lesser
degree, from its borrowing capacity. In addition to opening new sites in the
United States, the Company plans to continue opening additional sites in Canada
and Puerto Rico and to continue expanding operations in Mexico.
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6 2000 Annual Report
2000 | Management's Discussion & Analysis of
Financial Condition & Results of Operations
(AMOUNTS IN THOUSANDS EXCEPT PERSONNEL COUNTS AND DIVIDENDS PER SHARE.)
Market Risk Management
The Company is exposed to certain market risks from changes in interest rates
and foreign currency exchange rates. Changes in these factors cause fluctuations
in the Company's earnings and cash flows. The Company evaluates and manages
exposure to these market risks as follows:
Interest Rates - The Company has a $15,000 line of credit
of which $0 was outstanding at December 31, 2000. The line
bears interest at .9% over the LIBOR rate.
Foreign Currency Exchange Rates - Foreign currency fluctuations
can affect the Company's net investments and earnings denominated
in foreign currencies. The Company's primary exchange rate
exposure is with the Canadian dollar against the U.S. dollar.
The Company's estimated net earnings exposure for foreign currency
exchange rates was not material at December 31, 2000.
Certain Risks and Uncertainties
Certain statements in this Annual Report, in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2000, in future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases and in oral statements made by or with approval of the Company's
executive officers constitute or will constitute "forward-looking statements"
under the Reform Act. The following factors are among those that could cause the
Company's actual results to differ materially from those predicted in such
forward-looking statements: (i) an upturn or downturn in the economy could
impact sales at existing stores and the rates of new store openings and
additions of new employees, (ii) a change, from that projected, in the number of
smaller communities able to support future store sites could impact the rates of
new store openings and additions of new employees, (iii) the ability of the
Company to develop product expertise at the store level, to identify future
product lines that complement existing product lines, to transport and store
certain hazardous products and to otherwise integrate new product lines into the
Company's existing stores and distribution network could impact sales and
margins, (iv) the ability of the Company to successfully attract and retain
qualified personnel to staff the Company's stores could impact sales at existing
stores and the rate of new store openings, (v) changes in governmental
regulations related to product quality or product source traceability could
impact the cost to the Company of regulatory compliance, (vi) inclement weather
could impact the Company's distribution network, (vii) foreign currency
fluctuations, changes in trade relations, or fluctuations in the relative
strength of foreign economies could impact the ability of the Company to procure
products overseas at competitive prices and the Company's sales, (viii)
disruptions caused by the implementation of the Company's new management
information systems infrastructure could impact sales, and (ix) changes in the
rate of new store openings could impact expenditures for computers and other
capital equipment.
New Accounting Pronouncements
During 1998, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes new standards for
recognizing all derivatives as either assets or liabilities, and measuring those
instruments at fair value. The new standard will be effective for the Company in
the first quarter of 2001. The adoption of SFAS 133 will not have a significant
impact on the Company's financial condition or results of operations.
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2000 Annual Report 7
2000 | Stock & Financial Data
Common Stock Data
The Company's shares are traded on The Nasdaq Stock Market under the symbol
"FAST". The following table sets forth, by quarter, the high and low closing
sale price of the Company's shares on The Nasdaq Stock Market for 2000 and 1999.
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2000: High Low
First quarter $ 49 3/4 35 11/16
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Second quarter 73 5/16 45 1/4
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Third quarter 68 7/8 51 1/16
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Fourth quarter 62 3/4 45 1/8
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1999: High Low
First quarter $ 45 3/8 33 5/8
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Second quarter 54 1/2 34
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Third quarter 60 9/16 45 13/16
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Fourth quarter 49 15/16 34
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As of February 16, 2001, there were approximately 2,400 recordholders of the
Company's Common Stock. An $.08 annual dividend per share was paid in 2000 and a
$.04 annual dividend per share was paid in 1999. On January 16, 2001, the
Company announced a $.09 annual dividend per share to be paid on March 9, 2001
to shareholders of record at the close of business on February 23, 2001. The
Company expects that it will continue to pay comparable cash dividends in the
foreseeable future, provided that any future determination as to payment of
dividends will depend upon the financial condition and results of operations of
the Company and such other factors as are deemed relevant by the board of
directors.
Selected Quarterly Financial Data (Unaudited)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
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2000: Net sales Gross profit Net earnings Earnings per share
First quarter $ 176,268 92,187 20,046 .53
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Second quarter 188,589 97,662 20,975 .55
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Third quarter 192,922 100,460 20,802 .55
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Fourth quarter 187,961 98,251 18,907 .50
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Total $ 745,740 388,560 80,730 2.13
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1999: Net sales Gross profit Net earnings Earnings per share
First quarter $ 140,634 73,789 15,415 .41
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Second quarter 153,891 81,034 17,062 .45
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Third quarter 159,359 83,247 17,091 .45
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Fourth quarter 155,302 81,196 15,887 .42
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Total $ 609,186 319,266 65,455 1.73
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8 2000 Annual Report
2000 | Consolidated Balance Sheets DECEMBER 31, 2000 & 1999
(AMOUNTS IN THOUSANDS EXCEPT SHARE INFORMATION.)
2000 1999
Assets
Current assets:
Cash and cash equivalents $ 32,707 27,849
Trade accounts receivable, net of allowance for doubtful
accounts of $2,238 and $1,400, respectively 106,120 84,563
Inventories 143,068 106,597
Deferred income tax asset 4,060 2,886
Other current assets 7,469 5,510
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Total current assets 293,424 227,405
Marketable securities -- 215
Property and equipment, less accumulated depreciation 105,807 87,630
Other assets, net 3,233 3,371
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Total assets $ 402,464 318,621
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 19,898 19,325
Accrued expenses 13,502 11,785
Income tax payable 3,179 2,551
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Total current liabilities 36,579 33,661
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Deferred income tax liability 6,627 3,000
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Stockholders' equity:
Preferred stock -- --
Common stock, 50,000,000 shares authorized
37,938,688 shares issued 379 379
Additional paid-in capital 4,424 4,424
Retained earnings 355,248 277,553
Accumulated other comprehensive loss (793) (396)
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Total stockholders' equity 359,258 281,960
Commitments (notes 4, 7, and 8)
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Total liabilities and stockholders' equity $ 402,464 318,621
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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2000 Annual Report 9
2000 | Consolidated Statements of Earnings
(AMOUNTS IN THOUSANDS EXCEPT EARNINGS PER SHARE.) YEARS ENDED DECEMBER 31,
2000, 1999 & 1998
2000 1999 1998
Net sales $ 745,740 609,186 503,100
Cost of sales 357,180 289,920 238,820
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Gross profit 388,560 319,266 264,280
Operating and administrative expenses 259,003 213,580 177,180
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Operating income 129,557 105,686 87,100
Other income (expense):
Interest income 2,035 634 4
Interest expense -- (57) (1,053)
(Loss) gain on disposal of property and equipment (162) 216 72
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Total other income (expense) 1,873 793 (977)
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Earnings before income taxes 131,430 106,479 86,123
Income tax expense 50,700 41,024 33,170
Net earnings $ 80,730 65,455 52,953
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Basic and diluted earnings per share $ 2.13 1.73 1.40
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Weighted average shares outstanding 37,939 37,939 37,939
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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10 2000 Annual Report
2000 | Consolidated Statements of Stockholders'
Equity & Comprehensive Income
(AMOUNTS IN THOUSANDS.) YEARS ENDED DECEMBER 31,
2000, 1999 & 1998
Accumulated
Common Stock Additional Other Total
----------------------- Paid-in Retained Comprehensive Stockholders'
Shares Amount Capital Earnings Income (Loss) Equity
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Balances as of
December 31, 1997 37,939 $ 379 4,424 161,421 (352) 165,872
Dividends paid in cash -- -- -- (759) -- (759)
Net earnings for the year -- -- -- 52,953 -- 52,953
Translation adjustment -- -- -- -- (420) (420)
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Total comprehensive income 52,533
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Balances as of
December 31, 1998 37,939 $ 379 4,424 213,615 (772) 217,646
Dividends paid in cash -- -- -- (1,517) -- (1,517)
Net earnings for the year -- -- -- 65,455 -- 65,455
Translation adjustment -- -- -- -- 376 376
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Total comprehensive income 65,831
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Balances as of
December 31, 1999 37,939 $ 379 4,424 277,553 (396) 281,960
Dividends paid in cash -- -- -- (3,035) -- (3,035)
Net earnings for the year -- -- -- 80,730 -- 80,730
Translation adjustment -- -- -- -- (397) (397)
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Total comprehensive income 80,333
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Balances as of
December 31, 2000 37,939 $ 379 4,424 355,248 (793) 359,258
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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2000 Annual Report 11
2000 | Consolidated Statements of Cash Flows
(AMOUNTS IN THOUSANDS.) YEARS ENDED DECEMBER 31,
2000, 1999 & 1998
2000 1999 1998
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Cash flows from operating activities:
Net earnings $ 80,730 65,455 52,953
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation of property and equipment 11,757 11,777 11,040
Loss (gain) on disposal of property and equipment 162 (216) (72)
Deferred income taxes 2,453 (354) 410
Amortization of goodwill and non-compete agreement 220 220 220
Changes in operating assets and liabilities:
Trade accounts receivable (21,557) (16,065) (10,956)
Inventories (36,471) (12,863) (14,319)
Other current assets (1,959) 1,127 (1,400)
Accounts payable 573 1,914 4,461
Accrued expenses 1,717 2,786 1,685
Income taxes payable 628 2,208 (706)
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Net cash provided by operating activities 38,253 55,989 43,316
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Cash flows from investing activities:
Sales of marketable securities 215 50 --
Additions of property and equipment (36,729) (39,176) (37,232)
Proceeds from sale of property and equipment 6,633 14,197 9,136
Translation adjustment (397) 376 (420)
Increase in other assets (82) (101) (93)
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Net cash used in investing activities (30,360) (24,654) (28,609)
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Cash flows from financing activities:
Net decrease in line of credit -- (4,055) (12,030)
Payment of note payable -- -- (218)
Payment of dividends (3,035) (1,517) (759)
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Net cash used in financing activities (3,035) (5,572) (13,007)
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Net increase in cash and cash equivalents 4,858 25,763 1,700
Cash and cash equivalents at beginning of year 27,849 2,086 386
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Cash and cash equivalents at end of year $ 32,707 27,849 2,086
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Supplemental disclosure of cash flow information:
Cash paid during each year for:
Income taxes $ 50,072 38,183 34,100
Interest $ -- 87 1,073
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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12 2000 Annual Report
2000 | Notes to Consolidated Financial Statements
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA.) YEARS ENDED DECEMBER 31,
2000, 1999 & 1998
1 Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Fastenal
Company and its wholly-owned subsidiaries, Fastenal Company Services,
Fastenal Company Purchasing, Fastenal Company Leasing, Fastenal Canada
Company , Fastenal Mexico, S. de R.L. de C.V. and Fastenal Mexico Services,
S. de R.L. de C.V. (collectively referred to as the Company). All material
intercompany balances and transactions have been eliminated in
consolidation.
Revenue Recognition
The Company recognizes sales and the related cost of sales on the accrual
basis of accounting at the time products are shipped to or picked up by
customers.
Financial Instruments
All financial instruments are carried at amounts that approximate estimated
fair value.
Cash Equivalents
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly-liquid debt instruments purchased with original
maturities of three months or less to be cash equivalents.
Inventories
Inventories, consisting of merchandise held for resale, are stated at the
lower of cost (first in, first out method) or market.
Marketable Securities
Marketable securities as of December 31, 1999 consist of debt securities.
The Company classifies its debt securities as available-for-sale.
Available-for-sale securities are recorded at fair value based on current
market value. Unrealized holding gains and losses on available-for-sale
securities are excluded from earnings, but are included in comprehensive
income, and are reported as a separate component of stockholders' equity
until realized, provided that a decline in the market value of any
available-for-sale security below cost that is deemed other than temporary
is charged to earnings resulting in the establishment of a new cost basis
for the security.
The amortized cost approximated the fair value of available-for-sale debt
securities as of December 31, 1999.
- --------------------------------------------------------------------------------
2000 Annual Report 13
2000 | Notes to Consolidated Financial Statements
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA.) YEARS ENDED DECEMBER 31,
2000, 1999 & 1998
1 Summary of Significant Accounting Policies continued
Property and Equipment
Property and equipment are stated at cost. Depreciation on buildings
and equipment is provided for financial statement reporting purposes
by the straight line method and over the lives mandated by Internal
Revenue Service Regulations. These lives approximate the anticipated
economic useful lives of the related property.
Other Assets
Other assets consists of prepaid security deposits, goodwill and a
non-compete agreement. Goodwill represents the excess of the purchase
price over the fair value of net assets acquired and is amortized on a
straight-line basis over 15 years. The non-compete agreement is
amortized on a straight-line basis over 15 years. Goodwill and other
long-term asset balances are reviewed periodically to determine that
the unamortized balances are recoverable. In evaluating the
recoverability of these assets, the following factors, among others,
are considered: a significant change in the factors used to determine
the amortization period, an adverse change in legal factors or in the
business climate, a transition to a new product or services strategy,
a significant change in the customer base, and/or a realization of
failed marketing efforts. If the unamortized balance is believed to be
unrecoverable, the Company recognizes an impairment charge necessary
to reduce the unamortized balance to the amount of undiscounted cash
flows expected to be generated over the remaining life. If the
acquired entity has been integrated into other operations and cash
flows cannot be separately measured, the Company recognizes an
impairment charge necessary to reduce the unamortized balance to its
estimated fair value. The amount of impairment is charged to earnings
as a part of operating and administrative expenses in the current
period.
Long-Lived Assets
The Company reviews tangible and certain identifiable intangible
assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amounts of the assets exceed the fair
value of the assets. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less cost to sell.
Accounting Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
Stock-Based Compensation
The Company has not granted any stock options. During 2000, the
Company established a stock appreciation rights plan (SAR). During
July 2000, the Company granted 10,000 SAR units under this plan. The
SAR units are exerciseable from July 2002 through December 2002. The
Company recognized no compensation expense during 2000 related to the
SAR.
- --------------------------------------------------------------------------------
14 2000 Annual Report
2000 | Notes to Consolidated Financial Statements
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA.) YEARS ENDED DECEMBER 31,
2000, 1999 & 1998
1 Summary of Significant Accounting Policies continued
Income Taxes
The Company accounts for income taxes under the asset and liability
method. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Earnings Per Share
Earnings per share is computed by dividing net earnings by the
weighted average number of common shares outstanding.
2 Property and Equipment
Property and equipment as of December 31 consists of the following:
Depreciable
life in years 2000 1999
------------------------------------------------------------------------------------
Land -- $ 6,703 4,442
Buildings and improvements 31 to 39 34,123 29,255
Equipment and shelving 3 to 10 82,180 63,999
Transportation equipment 3 to 5 18,362 21,352
Construction in progress -- 17,461 12,365
----------------------------
158,829 131,413
Less accumulated depreciation (53,022) (43,783)
----------------------------
Net property and equipment $ 105,807 87,630
----------------------------
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2000 Annual Report 15
2000 | Notes to Consolidated Financial Statements
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA.) YEARS ENDED DECEMBER 31,
2000, 1999 & 1998
3 Accrued Expenses
Accrued expenses as of December 31 consist of the following:
2000 1999
----------------------------------------------------------------------------------------------------
Payroll and related taxes $ 6,359 5,927
Bonuses and commissions 3,480 3,393
Insurance 1,577 1,072
Sales and real estate taxes 982 866
Other 1,104 527
---------------------------------
$ 13,502 11,785
---------------------------------
4 Stockholders' Equity
Preferred stock has a par value of $.01 per share. There were 5,000,000
shares authorized and no shares issued as of December 31, 2000 and
1999.
Common Stock has a par value of $.01 per share. There were 50,000,000
shares authorized and 37,938,688 shares issued and outstanding as of
December 31, 2000 and 1999.
Dividends
On January 16, 2001, the Company's board of directors declared a
dividend of $.09 per share of Common Stock to be paid in cash on March
9, 2001 to shareholders of record at the close of business on February
23, 2001.
5 Retirement Plan
In 1998 the Company established the Fastenal Company and Subsidiaries
401(k) Plan. This plan covers all employees of the Company in the
United States. The Company made no contributions to the plan in 2000,
1999 or 1998.
- --------------------------------------------------------------------------------
16 2000 Annual Report
2000 | Notes to Consolidated Financial Statements
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA.) YEARS ENDED DECEMBER 31,
2000, 1999 & 1998
6 Income Taxes
Components of income tax expense are as follows:
2000: Current Deferred Total
------------------------------------------------------------------
Federal $ 41,472 2,110 43,582
State 6,775 343 7,118
--------------------------------------------------
$ 48,247 2,453 50,700
--------------------------------------------------
1999: Current Deferred Total
------------------------------------------------------------------
Federal $ 35,618 (305) 35,313
State 5,760 (49) 5,711
--------------------------------------------------
$ 41,378 (354) 41,024
--------------------------------------------------
1998: Current Deferred Total
------------------------------------------------------------------
Federal $ 28,199 353 28,552
State 4,561 57 4,618
--------------------------------------------------
$ 32,760 410 33,170
--------------------------------------------------
Income tax expense in the accompanying consolidated financial statements
differs from the "expected" tax expense as follows:
2000 1999 1998
-----------------------------------------------------------------------
Federal income tax expense at
the "expected" rate of 35% $ 46,000 37,268 30,143
Increase attributed to:
State income taxes, net of federal benefit 4,627 3,712 3,002
Other, net 73 44 25
--------------------------
Total income tax expense $ 50,700 41,024 33,170
--------------------------
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities as of December 31 are as follows:
2000 1999
-------------------------------------------------------------------------
Deferred tax asset (liability):
Inventory costing and valuation methods $ 2,597 1,940
Allowance for doubtful accounts receivable 862 539
Insurance claims payable 628 434
Fixed assets (6,627) (3,000)
Other, net (27) (27)
------------------------
Net deferred tax liability $ (2,567) (114)
------------------------
No valuation allowance for deferred tax assets was necessary as of December
31, 2000 and 1999. The character of the deferred tax assets is such that
they can be realized through carry-back to prior tax periods or offset
against future taxable income.
- --------------------------------------------------------------------------------
2000 Annual Report 17
2000 | Notes to Consolidated Financial Statements
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA.) YEARS ENDED DECEMBER 31,
2000, 1999 & 1998
7 Operating Leases
The Company leases space under non-cancelable operating leases for its
California, Missouri, North Carolina, Utah and Washington distribution
centers, its Tennessee packaging center, and certain store sites with
initial terms of one to 48 months.
The Company leases certain semi-tractors and pick-ups under operating
leases. The semi-tractor leases typically have a 36 month term. The
pick-up leases typically have a 72 month term and include an early buy
out clause the Company intends to exercise, thereby giving the leases
an effective term of 12-15 months.
Future minimum annual rentals for the leased facilities and the vehicles
are as follows:
Distribution Centers, Semi-tractors
Packaging Center and Store Sites and Pick-ups Total
-----------------------------------------------------------------------------------------
2001 $ 14,725 5,985 20,710
2002 8,674 1,899 10,573
2003 3,352 1,200 4,552
2004 461 0 461
2005 and thereafter 119 0 119
Rent expense under all operating leases was as follows:
Distribution Centers, Semi-tractors
Packaging Center and Store Sites and Pick-ups Total
-----------------------------------------------------------------------------------------
2000 $ 16,899 8,328 25,227
1999 14,867 4,282 19,149
1998 13,040 0 13,040
8 Lines of Credit and Commitments
The Company has a line of credit arrangement with a bank which expires
June 30, 2001. The line allows for borrowings of up to $15,000 at .9%
over the LIBOR rate. On December 31, 2000 there was $0 outstanding on
the line.
The Company currently has a letter of credit issued on its behalf to
its insurance carrier. As of December 31, 2000, the total undrawn
balance of this letter of credit was $3,600.
- --------------------------------------------------------------------------------
18 2000 Annual Report
2000 | Independent Auditors' Report
The Board of Directors and Stockholders
Fastenal Company:
We have audited the accompanying consolidated balance sheets of Fastenal Company
and subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of earnings, stockholders' equity and comprehensive income, and cash
flows for each of the years in the three-year period ended December 31, 2000.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Fastenal Company and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
Minneapolis, Minnesota
January 16, 2001
- --------------------------------------------------------------------------------
2000 Annual Report 19
0fficers
Robert A. Kierlin
Chairman of the Board,
Chief Executive Officer and President
Willard D. Oberton
Chief Operating Officer
and Executive Vice-President
Nicholas J. Lundquist
Vice-President of Sales
Daniel L. Florness
Chief Financial Officer
and Treasurer
Stephen M. Slaggie
Secretary
Directors
Michael M. Gostomski
President and Chief Executive Officer
Winona Heating & Ventilating Company
(sheet metal and roofing contractor)
Michael J. Dolan
Chief Operating Officer and Executive Vice-President
The Smead Manufacturing Company
(office products manufacturer)
Robert A. Hansen
Associate Professor of Marketing and Logistics
Management, Carlson School of Management,
University of Minnesota
Robert A. Kierlin
Henry K. McConnon
President
Wise Eyes, Inc.
(eyeglass retailer and wholesaler)
Willard D. Oberton
John D. Remick
President and Chief Executive Officer
Rochester Athletic Club, Inc.
(health club)
Stephen M. Slaggie
Reyne K. Wisecup
Human Resource Manager
Fastenal Company Services
Corporate Information
Annual Meeting
The annual meeting of shareholders
will be held at 10:00 a.m.,
Tuesday, April 17, 2001,
at Corporate Headquarters,
2001 Theurer Boulevard,
Winona, Minnesota
Corporate Headquarters
Fastenal Company
2001 Theurer Boulevard
Winona, Minnesota 55987-1500
Phone: (507) 454-5374
Fax: (507) 453-8049
Legal Counsel
Faegre & Benson LLP
Minneapolis, Minnesota
Streater & Murphy, PA
Winona, Minnesota
Form 10-K
A copy of the Company's 2000 Annual Report
on Form 10-K to the Securities and Exchange
Commission is available without charge to
shareholders upon written request to the
Secretary of the Company at the address listed
on this page for the Company's corporate
headquarters.
Copies of our latest press release, unaudited
supplemental Company information and monthly
sales information (beginning with October 2000
sales) are available at the Fastenal Company
World Wide Web site at: www.fastenal.com
Auditors
KPMG LLP
Minneapolis, Minnesota
Transfer Agent
Wells Fargo Bank Minnesota, National Association
Minneapolis, Minnesota
[FASTENAL COMPANY LOGO]
- --------------------------------------------------------------------------------
20 2000 ANNUAL REPORT
www.fastenal.com
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Products
Fasteners
Tools & Accessories
Safety Supplies
Cutting Tools
Hydraulics & Pneumatics
Material Handling
Packaging Supplies
Janitorial Supplies
Electrical Supplies
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Services
Special Manufacturing
Tool & Hoist Repair
Cutting Tool Regrind
Hose Crimping
Material Management
CAD Storeroom Design
Custom Packaging
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Integrated Logistics
Band Saw
Blade Welding
Corporate Headquarters:
2001 Theurer Blvd. -- Winona, MN 55987
Phone: 507-454-5374 -- Fax 507-453-8049