Exhibit 13
[LOGO OF FASTENAL COMPANY]
[PHOTO OF [PHOTO OF METALS, [PHOTO OF TOOLS [PHOTO OF CUTTING [PHOTO OF MATERIAL
FASTENERS] ALLOYS & MATERIALS] & ACCESSORIES] TOOLS] HANDLING]
[PHOTO OF JANITORIAL [PHOTO OF HYDRAULICS
SUPPLIES] & PNEUMATICS]
[PHOTO OF ELECTRICAL [PHOTO OF PACKAGING
SUPPLIES] SUPPLIES]
[PHOTO OF WELDING [PHOTO OF SAFETY
SUPPLIES] SUPPLIES]
2001
ANNUAL
REPORT
GROWTH THROUGH CUSTOMER SERVICE
2001 Profile of Fastenal Company
Fastenal Company was founded in 1967. As of December 31, 2001, the Company
operated 1,025 store sites located in 50 states, Puerto Rico, Canada, Mexico and
Singapore and employed 4,263 people at these sites. In addition, there were
2,273 people employed in various support positions. The Company sells
approximately 280,000 different types of industrial and construction supplies in
eleven product categories. These include approximately 78,000 different types of
threaded fasteners and miscellaneous supplies; approximately 58,000 different
types of tools; approximately 25,000 different types of metal cutting tool
blades; approximately 24,000 different types of fluid transfer components and
accessories for hydraulic and pneumatic power; approximately 9,000 different
types of material handling and storage products; approximately 5,000 different
types of janitorial and paper products; approximately 8,000 different types of
electrical supplies; approximately 12,000 different types of welding supplies
(excluding gas & welding machines); approximately 29,000 different types of
safety supplies; approximately 6,000 different types of raw materials; and
approximately 26,000 different types of retail packaged products. As of December
31, 2001, the Company also operated eleven distribution centers located in
Minnesota, Indiana, Ohio, Pennsylvania, Texas, Georgia, Washington, California,
Utah, North Carolina and Kansas, a packaging facility located in Tennessee, and
a packaging/processing center located in both Tennessee and Illinois. The retail
packaged product line and the packaging/processing centers were from a 2001
acquisition. Approximately 95.7% of the Company's 2001 sales were attributable
to products manufactured by others, and approximately 4.3% related to items
manufactured, modified or repaired by either the Company's Manufacturing
Division or its Support Services. Since December 31, 2001, the Company has
opened additional store sites.
[Photo of Corporate Headquarters]
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
improved results in 2002, 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.
2001 Table of Contents
pages 2-3
President's Letter to Shareholders
page 4
Six-Year Selected Financial Data
pages 5-8
[Photo of Big Blue Product Catalog] Management's Discussion & Analysis of
Financial Condition & Results of Operations
2002
Big Blue page 9
Product Catalog Stock and Financial Data
page 10
Consolidated Balance Sheets
page 11
Consolidated Statements of Earnings
page 12
Consolidated Statements of Stockholders'
Equity & Comprehensive Income
page 13
Consolidated Statements of Cash Flows
pages 14 -19 [Photo of Fastenal's Company website]
Notes to Consolidated Financial Statements
page 20
Report of Management &
Independent Auditors' Report
Inside Back Cover Fastenal Company's Website
Officers & Directors www.fastenal.com
Corporate Information
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2001 ANNUAL REPORT 1
2001 President's Letter to Shareholders
The year 2001 started out well for Fastenal with a 20.3% daily sales growth rate
in January; this was a nice recovery from the 17.8% daily sales growth rate in
December 2000. As it turned out, January was our best month of the year; the
remainder of the year would have to be described as challenging. As the
industrial economy in North America continued to slow, so did our year over year
growth rates. Absent the impact of our August 2001 acquisition, our daily sales
growth rate bottomed in November at negative 0.3%. We closed the year with a
slight rebound in sales growth during December. Our 2001 net sales of $818.3
million, including the acquisition, represents an 8.3% increase over the $755.6
million net sales for 2000.
The slowdown in our business was most noticeable in our large manufacturing
customers. Sales to some of our top customers were down more than 30% from the
previous year. In spite of this, our branch people worked hard and continued to
add new accounts and to increase our number of active accounts every month.
Our net earnings for 2001 of $70.1 million were impacted by the slower sales
growth during the year. This was a decline of 13.2% from our 2000 earnings of
$80.7 million. Early in 2001 we decided to continue opening new stores even as
the economy slowed. We believe this was the right decision and it should help us
going forward, but these openings added to our total expenses.
Fastenal had an exciting year for new store openings, passing several
milestones. In February we opened our first store in Mexico, locating it in the
industrial city of Monterrey. Then in July we opened our first stores in Alaska
and Hawaii. This gave us locations in all 50 states. The opening in Hawaii also
happened to be our 1,000th store. In August, with the business support of a
large customer, we opened our first branch in Asia, locating it in Singapore.
Throughout the year we opened 128 stores in four countries. We ended the year
with 1,025 stores.
During 2001 The Fastenal School of Business continued to create new programs to
help develop our employees. In April we completed a market based planning
course. This is a one-week program designed for our store managers. The course
was designed to help them better understand the potential in their markets.
During the year, 397 managers completed the course. We have also increased the
number of product training classes given by our regional development teams.
In August we completed the acquisition of a business operated by two
subsidiaries of Textron, Inc. The acquired business packages and sells fasteners
to the retail market. The target markets for the acquired business are hardware
cooperatives such as Ace, lumberyards and farm & fleet stores. This market is
estimated to generate net sales of over $1 billion annually in the United
States. The acquired business fits well with our existing distribution
structure.
In 2001 we opened a satellite manufacturing facility in our Indianapolis
distribution center. Our satellite manufacturing facilities in Fresno,
California, and Indianapolis, Indiana concentrate most of their efforts on
machining parts that require rapid delivery. These parts are often produced and
shipped the same day we receive the order.
Our operations people continued to develop systems to handle products more
accurately and efficiently. In December we moved our Kansas City distribution
center into a new facility designed by our employees. The material handling
system installed in this facility uses the latest technology in scanning and
sortation. We also completed an 80,000 sq. ft. expansion to our distribution
center in Scranton, Pennsylvania.
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2 2001 ANNUAL REPORT
2001 President's Letter to Shareholders continued
Product development continued to move at a steady pace in 2001 as we completed
the introduction of our safety products line. We sold some of these products in
the past, but we now have a more complete line. A section of our new catalog is
dedicated to these safety products. We are also working on several other new
product introductions. Our 2002 catalog has 32 pages of metal products,
including rods, sheets, and angles. This new product line is targeted at the
maintenance and small contractor markets.
During 2001 we made great strides in our marketing initiatives. We started a
direct mail program in 2000 with the support of our suppliers. In 2001 we more
than doubled the size of this program, mailing over 5 million 32-page product
catalogs to over 700,000 industrial and construction companies in the U.S. and
Canada. We also printed 207,000 copies of our 1,500 page (big blue) catalog and
distributed them to our customers.
As I said in the opening paragraph, 2001 was a challenging year for Fastenal,
but I am very proud of everything the dedicated employees in our company
accomplished in a difficult economic environment. I believe 2002 will be a much
better year for our company. Our plans are to continue opening new stores,
hiring additional personnel, and creating more opportunities for all of the
great people that have chosen to build a career at Fastenal.
Thank you for your continued support and believing in our company and our
people.
/s/ Will Oberton
[Photo of United States and Fastenal Company Truck]
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2001 ANNUAL REPORT 3
2001 Six-Year Selected Financial Data
(AMOUNTS IN THOUSANDS EXCEPT EARNINGS AND DIVIDENDS PER SHARE INFORMATION.)
Operating Results Percent
Years Ended Dec. 31 2001 Change 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
Net sales/1/ $ 818,283 8.3% $ 755,618 618,191 511,233 404,248 292,311
Gross profit/1/ 412,427 6.3% 388,118 319,460 265,179 209,143 152,677
Earnings before
income taxes 113,634 (13.5%) 131,430 106,479 86,123 67,336 54,432
Net earnings 70,112 (13.2%) 80,730 65,455 52,953 40,834 32,539
Basic and diluted
earnings per share 1.85 (13.1%) 2.13 1.73 1.40 1.08 .86
Dividends per share $ .09 12.5% $ .08 .04 .02 .02 .02
Weighted average
shares outstanding 37,939 -- 37,939 37,939 37,939 37,939 37,939
Financial Position
December 31
- ------------------------------------------------------------------------------------------------------------------
Net working capital $ 300,680 21.3% $ 247,876/2/ 193,744 142,459 106,555 78,417
Total assets 475,244 18.1% 402,464 318,621 251,234 205,137 151,545
Total stockholders' equity $ 424,888 18.3% $ 359,258 281,960 217,646 165,872 125,967
/1/ The net sales and gross profit dollar amounts for 1996 to 2000 have been
restated to reflect the reclassification of shipping and handling costs billed
to customers and sales incentives paid to customers. The gross profit dollar
amounts for 1996 to 2000 have also been restated to reflect outbound shipping
costs as a cost of sale. These amounts were previously included in operating and
administrative expenses. This reclassification was in accordance with Emerging
Issues Task Force (EITF) 00-10, Accounting for Shipping and Handling Fees and
Costs, and EITF 00-22, Accounting for "Points" and Certain Other Time-Based or
Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to
Be Delivered in the Future.
/2/ The 2000 net working capital was reclassified to conform to the 2001
presentation. This reclassification did not impact 1999 and earlier years.
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4 2001 ANNUAL REPORT
2001 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 2001 exceeded net sales for 2000 by 8.3%. This compares with a
22.2% net sales growth rate experienced from 1999 to 2000. The increase in net
sales in 2001 came primarily from new site openings, unit sales growth in
existing sites less than 5 years old, growth in the newer product lines, and an
acquisition completed on August 31, 2001. This growth was tempered by a
contraction of 3.0% in the sales of sites open more than 5 years and by a
deflationary impact to pricing during the year. 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. The growth in 2000 was also tempered by a
slight deflationary impact to pricing in the first half of the year. The
following table indicates: (1) percentage of net sales from the Fastenal(R)
product line and from the newer product lines, and (2) product lines added to
the original fastener product line and the year of introduction.
Introduced 2001 2000
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Fastenal Product Line 1967 58.8% 64.5%
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Tools 1993 11.6% 12.5%
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Cutting Tools 1996 5.5% 5.3%
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Hydraulics & Pneumatics 1996 5.2% 4.8%
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Material Handling 1996 6.7% 6.4%
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Janitorial Supplies 1996 2.5% 2.0%
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Electrical Supplies 1997 2.4% 1.5%
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Welding Supplies 1997 2.3% 0.6%
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Safety Supplies 1999 3.3% 2.2%
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Raw Materials 2001 0.2% -
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Retail Packaged Products* 2001 1.0% -
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Other - 0.5% 0.2%
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*The Retail Packaged Product line was added as a result of the August 2001
acquisition. This acquired business produced $8,526 of net sales in 2001.
- --------------------------------------------------------------------------------
Threaded fasteners accounted for approximately 49%, 51% and 51% of the Company's
consolidated sales in 2001, 2000 and 1999, respectively. Sites opened in 2001
contributed approximately $21,620 (or 2.6%) to 2001 net sales. Sites opened in
2000 contributed approximately $35,900 (or 4.4%) to 2001 net sales and
approximately $7,940 (or 1.1%) to 2000 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 50.4% in 2001, 51.4% in 2000 and
51.7% in 1999. The fluctuations resulted primarily from changes in the mix of
products being sold. Absent the August 2001 acquisition, the 2001 gross profit
percent would have been approximately 0.3% higher.
Operating and administrative expenses were 36.7% of net sales in 2001 compared
to 34.2% of net sales in 2000 and 34.6% of net sales in 1999. The fluctuations
in operating and administrative costs were primarily due to changes in payroll
and related costs, changes in occupancy costs, and, with respect to 2001,
reductions in net sales in stores greater than five years old and the impact of
the August 2001 acquisition. In 2001, payroll and related costs increased at a
rate which was greater than the rate of increase in net sales. In 2000, 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 the average number of employees:
2001 2000
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Sales Personnel 7.4% 22.0%
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Support Personnel 8.3% 20.0%
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In 2001, the rate of increase in occupancy costs was greater than the rate of
increase in net sales. In 2000, 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 a 14.3% and an 11.1% increase in the number of sites in 2001 and 2000,
respectively, and, in 2000, due to the relocation of existing stores to larger
sites to accommodate their growth in activity and the introduction of new
product lines. Distribution costs benefited from productivity gains in 2000.
Net interest income/expense in 2001 increased $207 over 2000. Net interest
income/expense in 2000 increased $1,458 over 1999. Changes were due to the
fluctuations in the weighted average amount of outstanding Company borrowings
and investments less the impact of lower interest rates in 2001. The loss/gains
on disposal of property and equipment in 2001, 2000 and 1999 came primarily from
the disposal of used vehicles.
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2001 ANNUAL REPORT 5
2001 Management's Discussion & Analysis of Financial Condition &
Results of Operations
(AMOUNTS IN THOUSANDS EXCEPT PERSONNEL COUNTS AND DIVIDENDS PER SHARE.)
Net earnings contracted 13.2% from 2000 to 2001 and grew 23.3% from 1999 to
2000. The contraction in net earnings in 2001 resulted primarily from (1) lower
net sales growth, (2) the decrease in gross margin percentage, caused primarily
by changes in product mix, (3) the decrease in the gross margin dollars
generated in older stores due to decreases in net sales, (4) the additional
expenses of store site openings (see comments earlier), (5) the added impact of
increases in utility and health care costs when compared to the same period in
2000, and (6) the increase in depreciation expense associated with additions of
property and equipment, most notably software and hardware for the Company's
management information system. The growth in net earnings in 2000 resulted
primarily from increased net sales. In 2000 the net earnings growth rate was
higher than that of net sales because of the earlier mentioned impact of
operating and administrative costs.
The Asian economic turmoil impacted the Company in several ways during 2000.
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 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 1999.
In addition to the impacts of the Far East situation, 2001 and 2000 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
2001, 2000 and 1999.
Critical Accounting Policies
The Company's estimates related to certain assets and liabilities are an
integral part of the consolidated financial statements. These estimates are
considered critical to the consolidated financial statements because they
require subjective and complex judgments.
Allowance for doubtful accounts - This reserve is for accounts receivable
balances that are potentially uncollectible. The reserve is based on (1) an
analysis of customer accounts and (2) the Company's historical experience with
accounts receivable write-offs. The analysis would include the age of the
receivable, the financial condition of a customer or industry, and general
economic conditions. Management believes the results could be materially
different if historical trends do not reflect actual results or if economic
conditions worsened for the Company's customers.
Inventory reserves - This reserve is for shrinkage, slow moving, and obsolete
inventory. The reserve is based on an analysis of inventory trends. The analysis
would include inventory levels, physical inventory counts, cycle count
adjustments, the nature of the product and its inherent risk of obsolescence,
the gross margin of the product, and the on-hand quantities relative to the
sales history for the product. Management believes the results could be
materially different if historical trends do not reflect actual results or if
demand for the Company's products decreased because of economic or competitive
conditions.
Health insurance reserves - This reserve is for incurred but not reported health
claims. The reserve is based on an external analysis of the Company's historical
claim reporting trends. Management believes the results could be materially
different if historical trends do not reflect actual results.
General insurance reserves - This reserve for general insurance claims. The
reserve is based on an external analysis of the Company's historical general
insurance trends. Management believes the results could be materially different
if historical trends do not reflect actual results.
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6 2001 ANNUAL REPORT
2001 Management's Discussion & Analysis of Financial Condition & Results of
Operations
(AMOUNTS IN THOUSANDS EXCEPT PERSONNEL COUNTS AND DIVIDENDS PER SHARE.)
Liquidity and Capital Resources
Net cash provided by operating activities was:
2001 $ 91,727
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2000 $ 38,253
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1999 $ 55,989
- ----------------------------------------------------------------------
The 2001 increase in net cash provided by operating activities was primarily due
to the decrease in cash needed to fund trade accounts receivable and inventory
due to lower sales growth in 2001. In 2000, these two assets consumed $62,524 of
cash, while in 2001 these two assets generated $3,627 of cash. The 2000 decrease
in net cash provided by operating activities was primarily due to the 34.2%
increase in inventory levels.
Net cash used in investing activities was:
2001 $ 60,648
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2000 $ 43,300
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1999 $ 24,654
- ----------------------------------------------------------------------
The 2001 increase in net cash used in investing activities resulted primarily
from the purchase of a business and from the increase in marketable securities.
The 2000 increase in net cash used in investing activities resulted primarily
from an increase in marketable securities and 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 2000.
The Company has future commitments for leased facilities and for leased vehicles
at December 31, 2001. The Company has $6,533 of long-term debt related to an
Industrial Revenue Bond (IRB) at December 31, 2001, and had no long-term debt at
December 31, 2000 and 1999. The Company has a letter of credit issued on its
behalf to its insurance carrier. See notes 8 and 9 of the Notes to Consolidated
Financial Statements for additional information related to these obligations and
to our current line of credit.
The future contractual cash obligations related to these
commitments are as follows:
2004
and After
Total 2002 2003 2005 2005
- --------------------------------------------------------------------------------
Facilities $23,795 13,698 7,114 2,407 576
Vehicles 11,106 7,099 2,406 1,601 --
IRB 6,533 653 653 1,306 3,921
-------------------------------------------------------
Total $41,434 21,450 10,173 5,314 4,497
-------------------------------------------------------
The future commercial commitment related to the letter of credit is $3,969.
The Company paid an annual dividend of $.09 per share in 2001, $.08 per share in
2000 and $.04 per share in 1999.
As of December 31, 2001, the Company had no material outstanding commitments for
capital expenditures.
The Company expects to make approximately $30,000 in total capital expenditures
in 2002, consisting of approximately $14,000 for manufacturing, warehouse and
packaging equipment and facilities, approximately $8,000 for data processing
equipment, and approximately $8,000 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 2001 and 2000. 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 2002.
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,
Puerto Rico, Mexico and Singapore.
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2001 ANNUAL REPORT 7
2001 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, 2001. 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, 2001.
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, 2001, 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
markets 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 2001, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Account Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets, and SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 142 will require that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with SFAS No. 142. The company's net
goodwill at December 31, 2001 was $1,405. The related goodwill amortization was
$152 in 2001. SFAS No. 142 will also require that intangible assets with
definite useful lives be amortized over their respective estimated useful lives
to their estimated residual values, and reviewed for impairment in accordance
with SFAS 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of. SFAS No. 144, which will supersede SFAS No.
121, retains many of the fundamental provisions of that Statement. The adoption
of both SFAS 142 and 144 is not expected to have a significant impact on the
Company's financial condition or results of operations.
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8 2001 ANNUAL REPORT
2001 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 2001 and 2000.
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2001: High Low
First quarter $ 64.06 $ 48.37
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Second quarter 73.00 49.00
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Third quarter 67.90 50.47
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Fourth quarter 67.45 54.64
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2000: High Low
First quarter $ 49.75 $ 35.69
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Second quarter 73.31 45.25
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Third quarter 68.88 51.06
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Fourth quarter 62.75 45.13
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As of February 16, 2002, there were approximately 2,400 recordholders of the
Company's Common Stock. A $.09 annual dividend per share was paid in 2001 and an
$.08 annual dividend per share was paid in 2000. On January 18, 2002, the
Company announced a $.10 annual dividend per share to be paid on March 8, 2002
to shareholders of record at the close of business on February 22, 2002. 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)/1/
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
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2001: Net sales Gross profit Net earnings Earnings per share
First quarter $203,374 104,555 20,739 .55
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Second quarter 207,442 104,631 19,018 .50
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Third quarter 209,397 104,774 17,001 .45
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Fourth quarter 198,070 98,467 13,354 .35
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Total $818,283 412,427 70,112 1.85
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2000: Net sales Gross profit Net earnings Earnings per share
First quarter $178,687 91,924 20,046 .53
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Second quarter 191,177 97,305 20,975 .55
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Third quarter 195,407 100,631 20,802 .55
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Fourth quarter 190,347 98,258 18,907 .50
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Total $755,618 388,118 80,730 2.13
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/1/The net sales and gross profit dollar amounts for all periods presented have
been restated to reflect the reclassification of shipping and handling costs
billed to customers and sales incentives paid to customers. The gross profit
dollar amounts for all periods presented have also been restated to reflect
outbound shipping costs as a cost of sale. These amounts were previously
included in operating and administrative expenses. This reclassification was in
accordance with Emerging Issues Task Force (EITF) 00-10, Accounting for Shipping
and Handling Fees and Costs, and EITF 00-22, Accounting for "Points" and Certain
Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free
Products or Services to Be Delivered in the Future.
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2001 ANNUAL REPORT 9
2001 Consolidated Balance Sheets DECEMBER 31, 2001 & 2000
(AMOUNTS IN THOUSANDS EXCEPT SHARE INFORMATION.)
Assets 2001 2000
Current assets:
Cash and cash equivalents $ 47,264 19,710
Marketable securities 21,258 4,028
Trade accounts receivable, net of allowance for doubtful
accounts of $3,474 and $2,238, respectively 101,356 106,120
Inventories 152,706 143,068
Deferred income tax asset 4,696 4,060
Other current assets 13,961 7,469
-------------------------------
Total current assets 341,241 284,455
Marketable securities 9,374 8,969
Property and equipment, less accumulated depreciation 121,607 105,807
Other assets, net 3,022 3,233
-------------------------------
Total assets $ 475,244 402,464
-------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 20,100 19,898
Accrued expenses 17,973 13,502
Income tax payable 2,488 3,179
-------------------------------
Total current liabilities 40,561 36,579
-------------------------------
Deferred income tax liability 9,795 6,627
-------------------------------
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 421,945 355,248
Accumulated other comprehensive loss (1,860) (793)
-------------------------------
Total stockholders' equity 424,888 359,258
Commitments (notes 5, 8, and 9)
-------------------------------
Total liabilities and stockholders' equity $ 475,244 402,464
-------------------------------
The Accompanying Notes are an Integral Part of the Financial Statements.
- --------------------------------------------------------------------------------
10 2001 ANNUAL REPORT
2001 Consolidated Statements of Earnings
(AMOUNTS IN THOUSANDS EXCEPT EARNINGS PER SHARE.) YEARS ENDED DECEMBER 31,
2001, 2000 & 1999
2001 2000 1999
Net sales $ 818,283 755,618 618,191
Cost of sales 405,856 367,500 298,731
-----------------------------------
Gross profit 412,427 388,118 319,460
Operating and administrative expenses 300,696 258,561 213,774
-----------------------------------
Operating income 111,731 129,557 105,686
Other income (expense):
Interest income 2,242 2,035 634
Interest expense 0 0 (57)
(Loss) gain on disposal of property and equipment (339) (162) 216
-----------------------------------
Total other income 1,903 1,873 793
-----------------------------------
Earnings before income taxes 113,634 131,430 106,479
Income tax expense 43,522 50,700 41,024
-----------------------------------
Net earnings $ 70,112 80,730 65,455
-----------------------------------
Basic and diluted earnings per share $ 1.85 2.13 1.73
-----------------------------------
Weighted average shares outstanding 37,939 37,939 37,939
-----------------------------------
The Accompanying Notes are an Integral Part of the Financial Statements.
- --------------------------------------------------------------------------------
2001 ANNUAL REPORT 11
2001 Consolidated Statements of Stockholders' Equity & Comprehensive Income
(AMOUNTS IN THOUSANDS.) YEARS ENDED DECEMBER 31,
2001, 2000 & 1999
Accumulated
Additional Other Total
Common Stock Paid-in Retained Comprehensive Stockholders'
---------------
Shares Amount Capital Earnings Income (Loss) Equity
- -----------------------------------------------------------------------------------------------------------
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
-------------
Total comprehensive income 65,831
- -----------------------------------------------------------------------------------------------------------
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)
-------------
Total comprehensive income 80,333
- -----------------------------------------------------------------------------------------------------------
Balances as of
December 31, 2000 37,939 $ 379 4,424 355,248 (793) 359,258
Dividends paid in cash -- -- -- (3,415) -- (3,415)
Net earnings for the year -- -- -- 70,112 -- 70,112
Translation adjustment -- -- -- -- (1,067) (1,067)
-------------
Total comprehensive income 69,045
- -----------------------------------------------------------------------------------------------------------
Balances as of
December 31, 2001 37,939 $ 379 4,424 421,945 (1,860) 424,888
- -----------------------------------------------------------------------------------------------------------
The Accompanying Notes are an Integral Part of the Financial Statements.
- --------------------------------------------------------------------------------
12 2001 ANNUAL REPORT
2001 Consolidated Statements of Cash Flows
(AMOUNTS IN THOUSANDS.) YEARS ENDED DECEMBER 31,
2001, 2000 & 1999
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 70,112 80,730 65,455
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation of property and equipment 14,747 11,757 11,777
Loss (gain) on disposal of property and equipment 339 162 (216)
Bad debt expense 5,453 4,496 3,566
Deferred income taxes 2,532 2,453 (354)
Amortization of goodwill and non-compete agreement 220 220 220
Changes in operating assets and liabilities, net of acquisition
Trade accounts receivable 6,232 (26,053) (19,631)
Inventories (2,605) (36,471) (12,863)
Other current assets (4,407) (1,959) 1,127
Accounts payable (1,835) 573 1,914
Accrued expenses 1,630 1,717 2,786
Income taxes payable (691) 628 2,208
-----------------------------
Net cash provided by operating activities 91,727 38,253 55,989
-----------------------------
Cash flows from investing activities:
Purchases of business and property and equipment (45,342) (36,729) (39,176)
Proceeds from sale of property and equipment 3,295 6,633 14,197
Translation adjustment (957) (340) 376
Net (increase) decrease in marketable securities (17,635) (12,782) 50
Increase in other assets (9) (82) (101)
-----------------------------
Net cash used in investing activities (60,648) (43,300) (24,654)
-----------------------------
Cash flows from financing activities:
Net decrease in line of credit -- -- (4,055)
Payment of dividends (3,415) (3,035) (1,517)
-----------------------------
Net cash used in financing activities (3,415) (3,035) (5,572)
-----------------------------
Effect of exchange rate changes on cash (110) (57) --
-----------------------------
Net increase (decrease) in cash and cash equivalents 27,554 (8,139) 25,763
Cash and cash equivalents at beginning of year 19,710 27,849 2,086
-----------------------------
Cash and cash equivalents at end of year $ 47,264 19,710 27,849
=============================
Supplemental disclosure of cash flow information:
Cash paid during each year for:
Income taxes $ 41,682 50,072 38,183
Interest $ -- -- 87
The Accompanying Notes are an Integral Part of the Financial Statements.
- --------------------------------------------------------------------------------
2001 ANNUAL REPORT 13
2001 Notes to Consolidated Financial Statements
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA.) YEARS ENDED DECEMBER
31, 2001, 2000 & 1999
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., Fastenal Mexico Services,
S. de R.L. de C.V., and Fastenal Singapore P.T.E., Ltd. (collectively
referred to as the Company). All material One 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.
Reclassifications
Certain amounts in the consolidated balance sheets and consolidated
statements of cash flows were restated to conform to the current
presentation.
During 2001, the Company adopted the provisions of Emerging Issues Task
Force (EITF) 00-10, Accounting for Shipping and Handling Fees and Costs,
and EITF 00-22, Accounting for "Points" and Certain Other Time-Based or
Volume-Based Sales Incentive Offers, and Offers for Free Products or
Services to Be Delivered in the Future. As required by EITF 00-10 and
EITF 00-22, the Company has reclassified shipping and handling costs
billed to customers as an increase of net sales and incentives paid to
customers as a reduction of net sales. The Company has also reclassified
outbound shipping costs to cost of sales. These amounts were previously
included in operating and administrative expenses. The reclassification
resulted in a net increase in net sales of $9,878 and $9,005 in 2000 and
1999, respectively. The reclassification resulted in an increase in cost
of sales of $10,320 and $8,811 in 2000 and 1999, respectively. Certain
delivery costs such as labor and transportation can not be readilly
allocated between selling and delivery activities and continue to be
included in operating and administration costs.
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, 2001 and 2000 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, 2001 and 2000.
- --------------------------------------------------------------------------------
14 2001 ANNUAL REPORT
2001 Notes to Consolidated Financial Statements
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA.) YEARS ENDED DECEMBER
31, 2001, 2000 & 1999
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 using the straight line method over 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 One 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 (SAR) plan. During 2001 and 2000,
the Company granted 4,000 and 10,000 SAR units, respectively, under this
plan. The SAR units are exerciseable in 2002 and 2003. The Company
recognized $154 and $0 compensation expense during 2001 and 2000,
respectively, related to the SAR plan.
- --------------------------------------------------------------------------------
2001 ANNUAL REPORT 15
2001 Notes to Consolidated Financial Statements
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA.) YEARS ENDED DECEMBER
31, 2001, 2000 & 1999
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 One 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.
Segment Reporting
The Company has reviewed SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, and determined the Company meets the
aggregation criteria outlined as the various operations of the Company
have similar (1) economic characteristics, (2) products and services, (3)
customers, (4) distribution channels, and (5) regulatory environments.
Therefore the Company reports as a single business segment.
2 Property and Equipment
Property and equipment as of December 31 consists of the following:
Depreciable
life in years 2001 2000
-----------------------------------------------------------------------
Land -- $ 7,029 6,703
Buildings and improvements 31 to 39 37,572 34,123
Equipment and shelving 3 to 10 111,079 82,180
Transportation equipment 3 to 5 17,413 18,362
Construction in progress -- 13,349 17,461
--------------------
186,442 158,829
Less accumulated depreciation (64,835) (53,022)
--------------------
Net property and equipment $121,607 105,807
====================
- --------------------------------------------------------------------------------
16 2001 ANNUAL REPORT
2001 Notes to Consolidated Financial Statements
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA.) YEARS ENDED DECEMBER
31, 2001, 2000 & 1999
3 Accrued Expenses
Accrued expenses as of December 31 consist of the following:
2001 2000
-----------------------------------------------------
Payroll and related taxes $ 7,273 6,359
Bonuses and commissions 3,449 3,480
Insurance 2,371 1,577
Sales and real estate taxes 1,062 982
Other 3,818 1,104
----------------
$17,973 13,502
----------------
4 Acquisition of Business
On August 31, 2001, the Company acquired certain assets of two
subsidiaries of Textron, Inc. These assets were used in their business of
selling packaged fasteners to the retail market (Do-It-Yourself or DIY
Business). The asset were purchased for a cash payment at closing. The
acquisition was not material to the financial statements of the Company.
On July 1, 2001, the Company adopted SFAS No. 141, Business Combinations.
SFAS 141 requires the use of the purchase method of accounting and,
accordingly, the operating results of the DIY Business have been included
in the Company's consolidated financial statements since the date of
acquisition. The total purchase price was allocated to tangible assets
and liabilities based upon the estimate of their fair value on the
acquisition date. The final purchase price remains contingent on
resolution of the closing balance sheet. The final purchase price could
result in tangible assets in excess of the cash paid and liabilities
assumed, or negative goodwill. The negative goodwill realized, if any,
will be recognized in income when the purchase price is finalized.
The DIY Business was purchased after a prolonged period of contraction;
therefore, the historical sales and earnings are not reflective of the
DIY Business's current operations. If the business combination had
occurred at the beginning of the respective years, net income would not
have been materially different from the amounts reported. The net sales
from the DIY Business totaled $8,526 from August 31, 2001 through
December 31, 2001. The DIY Business has operated at approximately a break
even level from August 31, 2001 through December 31, 2001.
5 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, 2001 and 2000.
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, 2001 and 2000.
Dividends
On January 18, 2002, the Company's board of directors declared a dividend
of $.10 per share of Common Stock to be paid in cash on March 8, 2002 to
shareholders of record at the close of business on February 22, 2002.
6 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 2001, 2000 or
1999.
- --------------------------------------------------------------------------------
2001 ANNUAL REPORT 17
2001 Notes to Consolidated Financial Statements
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA.) YEARS ENDED DECEMBER
31, 2001, 2000 & 1999
7 Income Taxes
Components of income tax expense (benefit) are as follows:
2001: Current Deferred Total
--------------------------------------------------------------------------
Federal $ 35,623 2,199 37,822
State 5,367 333 5,700
--------------------------------------------
$ 40,990 2,532 43,522
============================================
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
============================================
Income tax expense in the accompanying consolidated financial statements
differs the "expected" tax expense as follows:
2001 2000 1999
---------------------------------------------------------------------------
Federal income tax expense at
the "expected" rate of 35% $39,772 46,000 37,268
Increase attributed to:
State income taxes, net of federal benefit 3,705 4,627 3,712
Other, net 45 73 44
---------------------------
Total income tax expense $43,522 50,700 41,024
=====================------
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities as of December 31 are as follows:
2001 2000
-----------------------------------------------------------------
Deferred tax asset (liability):
Inventory costing and valuation methods $ 2,020 2,597
Allowance for doubtful accounts receivable 1,188 862
Insurance claims payable 965 628
Fixed assets (9,795) (6,627)
Other, net 523 (27)
-----------------
Net deferred tax liability $(5,099) (2,567)
=================
No valuation allowance for deferred tax assets was necessary as of December
31, 2001 and 2000. The character of the deferred tax assets is such that
they can be realized through carryback to prior tax periods or offset
against future taxable income.
- --------------------------------------------------------------------------------
18 2001 ANNUAL REPORT
2001 Notes to Consolidated Financial Statements
(AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA.) YEARS ENDED DECEMBER
31, 2001, 2000 & 1999
8 Operating Leases
The Company leases space under non-cancelable operating leases for its
California, 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 its Illinois packaging/processing
center under an assumed lease with five years remaining on the lease.
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 leased
vehicles are as follows:
Leased Leased
Facilities Vehicles Total
-------------------------------------------------------------------
2002 $ 13,698 7,099 20,797
2003 7,114 2,406 9,520
2004 1,910 1,601 3,511
2005 497 - 497
2006 and thereafter 576 - 576
Rent expense under all operating leases is as follows:
Leased Leased
Facilities Vehicles Total
-------------------------------------------------------------------
2001 $ 19,826 10,660 30,486
2000 16,899 8,328 25,227
1999 14,867 4,282 19,149
9 Lines of Credit and Commitments
The Company has a line of credit arrangement with a bank which expires
June 30, 2002. The line allows for borrowings of up to $15,000 at .9%
over the LIBOR rate. On December 31, 2001 there is $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, 2001, the total undrawn balance of
this letter of credit is $3,969.
During 2001, the Company completed the construction of a new building for
its Kansas City warehouse. This Company was required to obtain financing
for this facility under an Industrial Revenue Bond (IRB). The Company
subsequently purchased 100% of the outstanding bonds under the IRB at
par. In addition to purchasing the outstanding obligations, the Company
has a right of offset included in the IRB debt agreement. Accordingly,
the Company has netted the impact of the IRB in the accompanying
consolidated financial statements. The total IRB at December 31, 2001 is
$6,533.
- --------------------------------------------------------------------------------
2001 ANNUAL REPORT 19
2001 Report of Management & Independent Auditors' Report
The Board of Directors and Stockholders Fastenal Company:
Management is responsible for the integrity and accuracy of the consolidated
financial information included in this report. Management believes these
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of the consolidated financial statements 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 consolidated financial statements and the reported amounts of revenues and
expenses during the periods reported.
In meeting its responsibility for the reliability of the financial statements,
management relies on a system of internal accounting control. This system is
designed to provide reasonable assurance assets are safeguarded and transactions
are appropriately authorized and included in the financial records in all
material aspects. The design of this system recognizes errors or irregularities
may occur and estimates and judgments are required to assess the relative cost
and expected benefits of the controls. Management believes the Company's
accounting controls provide reasonable assurance errors or irregularities
material to the consolidated financial statements are prevented or would be
detected in a reasonable time period.
The Audit Committee, comprised of members of the Board of Directors who are not
employees of the Company, meets periodically with the independent auditors and
management of the Company to discuss internal accounting control, auditing and
financial reporting matters. The Audit Committee recommends the selection of the
independent auditors, who are then appointed by the Board of Directors, subject
to ratification by the shareholders. The independent auditors, KPMG LLP, conduct
an independent audit of the consolidated financial statements
/s/ Robert A. Kierlin
Robert A. Kierlin
Chairman of the Board and Chief Executive Officer
/s/ Daniel L. Florness
Daniel L. Florness
Chief Financial Officer and Treasurer
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, 2001 and 2000, 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, 2001.
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, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Note 4 to consolidated financial statements, the Company adopted
the provisions of Statement of Financial Accounting Standards No. 141,
Business Combinations, on July 1, 2001.
/s/ KPMG LLP
Minneapolis, Minnesota
January 18, 2002
- --------------------------------------------------------------------------------
20 2001 ANNUAL REPORT
Officers
Robert A. Kierlin
Chairman of the Board and
Chief Executive Officer
Willard D. Oberton
President and Chief Operating Officer
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
Self Employed Business Consultant
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 16, 2002, 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 2001 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
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