SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
Fastenal Company
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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FASTENAL COMPANY
2001 Theurer Boulevard
Winona, Minnesota 55987-1500
(507) 454-5374
March 5, 2002
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held at the Company's offices at 2001 Theurer Boulevard, Winona, Minnesota,
commencing at 10 o'clock a.m., Central Daylight Savings Time, on Tuesday, April
16, 2002.
The Secretary's Notice of Annual Meeting and the Proxy Statement, which follow,
describe the matters to come before the meeting. During the meeting, we will
also review the activities of the past year and items of general interest about
the Company.
We hope that you will be able to attend the meeting in person and we look
forward to seeing you. Please mark, date and sign the enclosed Proxy and return
it in the accompanying envelope as soon as possible, even if you plan to attend
the Annual Meeting. You may revoke the Proxy and vote in person at that time if
you so desire.
Sincerely,
/s/ Robert A. Kierlin
Robert A. Kierlin
Chairman of the Board
and Chief Executive Officer
FASTENAL COMPANY
--------------------------------------------
Notice of Annual Meeting of Shareholders
to be held on April 16, 2002
--------------------------------------------
The Annual Meeting of Shareholders of Fastenal Company will be held at the
Company's offices at 2001 Theurer Boulevard, Winona, Minnesota, commencing at 10
o'clock a.m., Central Daylight Savings Time, on Tuesday, April 16, 2002 for the
following purposes:
1. To elect a Board of Directors of nine directors, to serve until the
next regular meeting of shareholders or until their successors have
been duly elected and qualified.
2. To ratify the appointment of KPMG LLP as independent auditors for the
fiscal year ending December 31, 2002.
3. To transact such other business as may properly be brought before the
meeting.
The Board of Directors has fixed February 26, 2002 as the record date for the
meeting, and only shareholders of record at the close of business on that date
are entitled to receive notice of and vote at the meeting.
Your Proxy is important to ensure a quorum at the meeting. Even if you own only
a few shares, and whether or not you expect to be present, you are urgently
requested to mark, date, sign and mail the enclosed Proxy in the postage-paid
envelope that is provided. You may revoke the Proxy at any time prior to being
exercised, and returning your Proxy will not affect your right to vote in person
if you attend the meeting and revoke the Proxy.
By Order of the Board of Directors,
/s/ Stephen M. Slaggie
Stephen M. Slaggie
Secretary
Winona, Minnesota
March 5, 2002
-1-
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PROXY STATEMENT
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GENERAL INFORMATION
The enclosed Proxy is being solicited by the Board of Directors of Fastenal
Company (the "Company") for use in connection with the Annual Meeting of
Shareholders to be held on Tuesday, April 16, 2002 at the Company's offices at
2001 Theurer Boulevard, Winona, Minnesota, commencing at 10 o'clock a.m.,
Central Daylight Savings Time, and at any adjournments thereof. Only
shareholders of record at the close of business on February 26, 2002 will be
entitled to vote at such meeting or adjournment. Proxies in the accompanying
form, which are properly signed, duly returned to an officer of the Company and
not revoked, will be voted in the manner specified. A shareholder executing a
Proxy retains the right to revoke it at any time before it is exercised by
delivering to an officer of the Company written notice of termination of the
Proxy's authority or a properly signed Proxy bearing a later date.
The address of the principal executive office of the Company is 2001 Theurer
Boulevard, Winona, Minnesota 55987-1500 and the telephone number is (507)
454-5374. The mailing of this Proxy Statement and the Board of Directors' form
of Proxy to shareholders will commence on or about March 5, 2002.
The affirmative vote of the holders of a majority of the outstanding shares of
Common Stock of the Company present and entitled to vote is required for
approval of each proposal included in this Proxy Statement. For this purpose, a
shareholder who abstains with respect to a proposal is considered to be present
and entitled to vote on such proposal at the meeting and is in effect casting a
negative vote, but a shareholder (including a broker) who does not give
authority to a Proxy to vote, or withholds authority to vote, on a proposal
shall not be considered present and entitled to vote on such proposal.
DEADLINES FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Any shareholder proposal intended to be presented at the 2003 Annual Meeting of
Shareholders and desired to be included in the Company's Proxy Statement for
that meeting must be received by the Company at its principal executive office
no later than November 5, 2002 in order to be included in such Proxy Statement.
If notice of any other shareholder proposal intended to be presented at the 2003
Annual Meeting of Shareholders is not received by the Company on or before
January 19, 2003, the Proxy solicited by the Board of Directors of the Company
for use in connection with that meeting may confer authority on the Proxies
named therein to vote in their discretion on such proposal without any
discussion in the Company's Proxy Statement for that meeting of either the
proposal or how such Proxies intend to exercise their voting discretion.
-2-
SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The following table sets forth, as of February 15, 2002, the ownership of Common
Stock of the Company by each shareholder who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock of the Company, by
each director and nominee for the office of director, by each executive officer
named in the Summary Compensation Table set forth under "Executive Compensation"
below, and by all directors and executive officers as a group. At February 15,
2002 there were 37,938,688 shares of Common Stock, par value $.01 per share,
issued and outstanding, each of which is entitled to one vote.
Percentage of
Name and, if Required, Address of Amount and Nature of Outstanding
Beneficial Owner Beneficial Ownership (1) Shares
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Robert A. Kierlin 3,903,036 (2) 10.31%
Route 1, Box 65D
Winona, Minnesota 55987
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Stephen M. Slaggie 1,938,224 (3) 5.11
1870 Ralph Scharmer Drive
Winona, Minnesota 5598
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Michael M. Gostomski 641,761 (4) 1.69
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John D. Remick 1,230,285 (5) 3.24
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Henry K. McConnon 814,712 (6) 2.15
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Robert A. Hansen 200 *
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Willard D. Oberton 80,560 (7) *
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Michael J. Dolan 1,250 *
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Reyne K. Wisecup 80 (8) *
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Nicholas J. Lundquist 8,395 (9) *
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Daniel L. Florness 1,121 (10) *
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Ruane, Cunniff & Co., Inc.
767 Fifth Avenue 4,826,225 (11) 12.72
New York, New York 10153-4798
- ------------------------------------------------------------------------------------------
Directors and executive officers as a group
(11 persons) 8,617,424 22.71
- ------------------------------------------------------------------------------------------
* Less than 1%.
-3-
(1) Except as otherwise indicated in the Notes below, the listed
beneficial owner has sole voting power and investment power with
respect to such shares.
(2) Includes 1,253,060 shares held by Mr. Kierlin, which are subject to
stock options granted by Mr. Kierlin to various employees of the
Company. See "Executive Compensation--Board Report on Executive
Compensation" below. Mr. Kierlin has voting and investment power with
respect to these shares, provided that any transferred shares will
remain subject to the options. Also includes 100 shares held by Mr.
Kierlin's wife, and 2,200 shares held by a local secondary school (the
"School"), of which Mr. Kierlin is a director and member of the
investment committee. As a director and member of the investment
committee, Mr. Kierlin shares voting and investment power with respect
to the shares held by the School. Mr. Kierlin disclaims beneficial
ownership of the shares held by the School.
(3) Includes 102,526 shares held by Mr. Slaggie's wife, and 35,300 shares
held by Mr. Slaggie as custodian for one of his children.
(4) Includes 481,761 shares held in Mr. Gostomski's revocable living
trust, over which Mr. Gostomski has voting and investment power, and
160,000 shares held in the revocable living trust of Mr. Gostomski's
wife, over which Mr. Gostomski's wife has voting and investment power.
(5) Includes 153,887 shares held by Mr. Remick's wife, and 10,000 shares
held by Mr. Remick as custodian for one of his children. Mr. Remick
disclaims beneficial ownership of the shares held by his wife. Also
includes 50,075 shares held by a charitable foundation of which Mr.
Remick is a director. As a director, Mr. Remick shares voting and
investment power with respect to the shares of Common Stock of the
Company held by the foundation. Mr. Remick disclaims beneficial
ownership of the shares held by the foundation.
(6) Includes 160,000 shares held by Mr. McConnon's wife, 300 shares held
by Mr. McConnon as custodian for one of his grandchildren, and 12,000
shares held by Mr. McConnon's father with respect to which Mr.
McConnon has investment power pursuant to a power of attorney granted
to Mr. McConnon by his father. Also includes 2,200 shares held by the
School, of which Mr. McConnon is a director. As a director, Mr.
McConnon shares voting and investment power with respect to the shares
held by the School. Mr. McConnon disclaims beneficial ownership of the
shares held by the School.
-4-
(7) Includes 17,900 shares held by Mr. Oberton's wife, and an aggregate of
3,900 shares held by Mr. Oberton and his wife as custodian for Mr.
Oberton's children.
(8) These shares are held jointly by Ms. Wisecup and her husband.
(9) Includes 1,200 shares held my Mr. Lundquist's wife, and an aggregate
of 1,200 shares held by Mr. Lundquist as custodian for his children.
Also includes 245 shares attributable to the account of Mr. Lundquist
in the Company's 401(k) plan. The number of shares attributable to
such account is based on Mr. Lundquist's most recent plan statement,
which reports units held by Mr. Lundquist in the plan's stock fund.
Such units consist of undivided interests in the shares and cash held
in the fund. The number of shares reported is an estimate based on the
number of units held by Mr. Lundquist. Mr. Lundquist has the right to
direct the investment of, and the voting of all shares attributable
to, his plan account.
(10) Includes 121 shares attributable to the account of Mr. Florness in the
Company's 401(k) plan. The number of shares attributable to such
account is based on Mr. Florness' most recent plan statement, which
reports units held by Mr. Florness in the plan's stock fund. Such
units consist of undivided interest in the shares and cash held in the
fund. The number of shares reported is an estimate based on the number
of units held by Mr. Florness. Mr. Florness has the right to direct
the investment of, and the voting of all shares attributable to, his
plan account.
(11) According to a Schedule 13G statement filed with the Securities and
Exchange Commission reflecting ownership as of April 30, 2001, Ruane,
Cunniff & Co., Inc., which is a registered broker-dealer and
investment advisor, has sole voting power with respect to 3,046,265
shares, sole investment power with respect to 2,806,225 shares, and
shared investment power with respect to 2,020,000 shares.
-5-
ELECTION OF DIRECTORS
Nominees and Required Vote
The Restated Bylaws of the Company provide that the business of the Company
shall be managed by or under the direction of a Board of Directors of not less
than five nor more than nine directors, which number shall be fixed from time to
time by the Board of Directors. Each director shall be elected at the Annual
Meeting of Shareholders for a term that expires at the next regular
shareholders' meeting and shall hold office for the term for which he or she was
elected and until a successor is elected and has qualified. The Board of
Directors has fixed the number of directors to be elected for the ensuing year
at nine and has nominated the nine persons named below for election as
directors. Proxies solicited by the Board of Directors will, unless otherwise
directed, be voted to elect the nine nominees named below to constitute the
entire Board of Directors.
All of the nominees named below are current directors of the Company and have
been previously elected as a director by the Company's shareholders. Each
nominee has indicated a willingness to serve as a director for the ensuing year.
However, in case any nominee is not a candidate at the meeting for any reason,
the Proxies named in the enclosed form of Proxy may vote for a substitute
nominee in their discretion.
The following table sets forth certain information as to each nominee for the
office of director:
Name Age Position
- ------------------------------------------------------------------------------
Robert A. Kierlin 62 Chairman of the Board, Chief Executive Officer
and Director
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Stephen M. Slaggie 62 Secretary and Director
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Michael M. Gostomski 61 Director
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John D. Remick 65 Director
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Henry K. McConnon 62 Director
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Robert A. Hansen 58 Director
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Willard D. Oberton 43 President, Chief Operating Officer and Director
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Michael J. Dolan 53 Director
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Reyne K. Wisecup 39 Human Resources Manager and Director
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Mr. Kierlin has been the Chairman of the Board and Chief Executive Officer of
the Company and has served as a director of the Company since the Company's
incorporation in 1968. From 1968 through July 2001, Mr. Kierlin also served as
President of the Company. Mr. Kierlin has served as a Minnesota State Senator
since April 1999.
Mr. Slaggie has been the Secretary of the Company and has served as a director
of the Company since 1970. He became a full-time employee of the Company in
December 1987, at which time he assumed the additional duties of Shareholder
Relations Director and Insurance Risk Manager.
-6-
Mr. Gostomski has served as a director of the Company since 1973. For more than
the past five years, Mr. Gostomski has been the President and Chief Executive
Officer of Winona Heating & Ventilating Company, a sheet metal and roofing
contractor located in Winona, Minnesota.
Mr. Remick has served as a director of the Company since the Company's
incorporation in 1968. For more than the past five years, Mr. Remick has been
the President and Chief Executive Officer of Rochester Athletic Club, Inc., an
athletic club located in Rochester, Minnesota.
Mr. McConnon has served as a director of the Company since the Company's
incorporation in 1968. For more than the past five years, Mr. McConnon has been
the President of Wise Eyes, Inc., an eyeglass retailer and wholesaler located in
State College, Pennsylvania.
Mr. Hansen has served as a director of the Company since June 1999. For more
than the past five years, Mr. Hansen has been an Associate Professor of
Marketing and Logistics Management with the Carlson School of Management at the
University of Minnesota.
Mr. Oberton has served as a director of the Company since June 1999, and has
been President and Chief Operating Officer of the Company since July 2001. From
June 2000 through July 2001, Mr. Oberton was Executive Vice President and Chief
Operating Officer of the Company. From March 1997 through June 2000, Mr. Oberton
was Vice President and Chief Operating Officer of the Company. From June 1986
through March 1997, Mr. Oberton was the General Operations Manager of the
Company.
Mr. Dolan has served as a director of the Company since June 2000, and has been
self employed as a business consultant since March 2001. From October 1995
through February 2001, Mr. Dolan was Executive Vice President and Chief
Operating Officer of The Smead Manufacturing Company, a manufacturer of office
products located in Hastings, Minnesota. From July 1980 through October 1995,
Mr. Dolan was a partner at KPMG LLP, a public accounting firm.
Ms. Wisecup has served as a director of the Company since June 2000, and has
been Human Resources Manager for the Company since April 1997. From June 1991
through April 1997, Ms. Wisecup was an administrative assistant with the
Company.
None of the above nominees is related to any other nominee or to any executive
officer of the Company.
Board and Committee Meetings
The Board of Directors of the Company held three meetings during 2001.
The Company has an Audit Committee consisting of Robert A. Hansen, John D.
Remick and Michael J. Dolan, each of whom is an independent director (as that
term is defined in the listing standards of The Nasdaq Stock Market); a
Development Committee consisting of Robert A. Kierlin, Willard D. Oberton,
Robert A. Hansen and Reyne K. Wisecup; and an Acquisitions Committee consisting
of Michael J. Dolan, Daniel L. Florness, Chief Financial Officer, and John J.
Milek, General Counsel. The Company does not have a Nominating Committee or a
Compensation Committee, or any other committee of the Board of Directors
performing equivalent functions.
-7-
The Audit Committee held four meetings during 2001. The Audit Committee has the
authority to (a) make recommendations to the Board of Directors as to the
engagement of independent auditors, (b) review with the independent auditors the
scope and results of audit engagements, (c) review the scope, frequency and
results of internal audits and examinations, (d) review the adequacy of the
Company's accounting policies and system of internal accounting controls, and
(e) review all related party transactions for potential conflict-of-interest
situations. The Audit Committee operates under a written charter adopted by the
Board of Directors in June 2000.
Each director of the Company attended more than 75% of the aggregate number of
meetings of the Board, Audit Committee, Development Committee, and Acquisitions
Committee on which he or she served during 2001.
Compensation of Directors
Each director of the Company receives an annual retainer of $1,000 for his or
her services as a director, and, if he or she is not an employee of the Company,
$3,000 (plus reimbursement of reasonable expenses) for attendance at each
meeting of the Board. Each member of the Audit Committee who is not an employee
of the Company receives $3,000 (plus reimbursement of reasonable expenses) for
attendance at each Audit Committee meeting. Each member of the Development
Committee who is not an employee of the Company receives $3,000 (plus
reimbursement of reasonable expenses) for attendance at each Development
Committee meeting. Each member of the Acquisitions Committee who is not an
employee of the Company receives $3,000 (plus reimbursement of reasonable
expenses) for attendance at each Acquisitions Committee meeting.
-8-
Audit Committee Report
The Audit Committee is responsible for overseeing the Company's management and
independent auditors in respect of the Company's accounting and financial
reporting. In performing its oversight function, the Audit Committee relies upon
advice and information received from the Company's management and independent
auditors.
In that regard, the Audit Committee has reviewed and discussed with members of
the Company's management the Company's audited consolidated financial statements
for fiscal 2001, and has discussed with representatives of the Company's
independent auditors the matters required to be discussed with audit committees
by Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Audit Committee has also received the written disclosures and the letter
from the Company's independent auditors required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and has
discussed with representatives of the Company's independent auditors that firm's
independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the Company's audited consolidated
financial statements for fiscal 2001 be included in the Company's Annual Report
on Form 10-K for such fiscal year for filing with the Securities and Exchange
Commission.
John D. Remick Robert A. Hansen Michael J. Dolan
Members of the Audit Committee
Independent Auditors' Fees
Audit Fees
The aggregate fees billed for the audit of the Company's annual consolidated
financial statements for fiscal 2001 and for the review of the Company's interim
consolidated financial statements for each quarter in fiscal 2001 were $200,000.
All Other Fees
The Company also paid its principal accountant an aggregate of $160,000 for all
other fees. This included $34,000 paid for statutory audit services related to
its Puerto Rican operations, for audit services related to its 401(k) benefit
plan, and for acquisition assistance related to its 2001 acquisition; $114,000
paid for tax compliance services related to its Puerto Rican operations and for
corporate tax accounting strategy services; and $12,000 paid for accounting
assistance related to its Mexican operation. The Mexican assistance ended in the
spring of 2001. The Company's principal accountant rendered no other services to
the Company or any of its subsidiaries during fiscal 2001. The Audit Committee
has considered whether, and has determined that, the provision of these services
was compatible with maintaining the independence of the Company's principal
accountant.
-9-
EXECUTIVE COMPENSATION
Summary of Compensation
Set forth in the following table is information with respect to the compensation
of the Chief Executive Officer and certain other executive officers of the
Company for each fiscal year of the Company in the three fiscal years ended
December 31, 2001:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------------------ -----------------
Securities
Name and Fiscal Underlying
Principal Position Year Salary ($) Bonus ($) Options/SARs (#)
- ---------------------------------------------------------------------------------------------
Robert A. Kierlin 2001 $63,500 (1) $ 0 0
Chairman of the Board and Chief 2000 121,000 (1) 0 0
Executive Officer 1999 117,000 (1) 0 0
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Willard D. Oberton 2001 290,585 (2) 0 1,000
President and Chief Operating 2000 301,000 (2) 79,475 5,000
Officer 1999 193,083 (2) 30,841 0
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Daniel L. Florness 2001 143,750 13,039 1,000
Treasurer, Chief Financial Officer 2000 117,500 50,713 5,000
and Chief Accounting Officer 1999 92,916 24,492 0
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Nicholas J. Lundquist (3) 2001 174,996 64,442 1,000
Vice President of Sales 2000 173,538 127,907 5,000
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(1) Includes $1,000, $1,000 and $2,000 paid to Mr. Kierlin during 2001,
2000 and 1999, respectively, in his capacity as a director and member
of the Audit Committee of the Company. See "Board and Committee
Meetings" above. Mr. Kierlin ceased being a member of the Audit
Committee in June 1999.
(2) Includes $1,000 paid to Mr. Oberton during each of the years 2001,
2000 and 1999 in his capacity as a director of the Company. See "Board
and Committee Meetings" above. Mr. Oberton became a director of the
Company in June 1999.
(3) Mr. Lundquist became an executive officer of the Company in June 2000.
Mr. Lundquist's 2000 compensation includes compensation for the full
fiscal year.
The individuals named above are the only persons who were executive officers of
the Company during the fiscal year ended December 31, 2001 and whose total
salary and bonus for such fiscal year was $100,000 or more.
-10-
Option/SAR Grants
The following table sets forth information regarding individual grants of stock
appreciation rights made to the executive officers of the Company named in the
Summary Compensation Table shown above during the fiscal year ended December 31,
2001:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value at
Assumed Annual
Rates of Stock
Price Appreciation
for Option/SAR
Individual Grants Term (1)
--------------------------------------------------- ---------------------
Number of Percent of
Securities Total Options/
Underlying SARs Granted
Options/ to Employees Exercise
SARs in or Base Expiration
Name Granted (#) Fiscal Year Price Date 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------------
Robert A. Kierlin 0 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------
Willard D. Oberton 1,000 (2) 0.3% $55 12/31/03 $ 8,200 $17,240
- ---------------------------------------------------------------------------------------------------
Daniel L. Florness 1,000 (2) 0.3% $55 12/31/03 8,200 17,240
- ---------------------------------------------------------------------------------------------------
Nicholas J. Lundquist 1,000 (2) 0.3% $55 12/31/03 8,200 17,240
- ---------------------------------------------------------------------------------------------------
(1) The dollar amounts under these columns were calculated assuming the
value of the Company's Common Stock appreciates at 5% and 10% each
year, compounded annually, from the date of grant of the applicable
stock appreciation right to the end of the term of the applicable
stock appreciation right. These annual appreciation rates have been
set by the Securities and Exchange Commission for illustrative
purposes and are not intended to forecast future financial performance
of the Company or possible future appreciation, if any, in the price
of the Company's Common Stock. Shareholders are therefore cautioned
against drawing any conclusions from the appreciation data shown,
aside from the fact that the executive officers will only realize
value from the grants of stock appreciation rights shown when the
price of the Company's Common Stock appreciates, which benefits all
shareholders commensurately.
(2) These stock appreciation rights were granted by the Company, on
January 16, 2001, under the stock appreciation rights plan for
employees of the Company described under "Board Report on Executive
Compensation" below, and, in general, will become exercisable on July
1, 2003 and will expire on December 31, 2003. If the holder of the
stock appreciation right ceases to be employed by the Company or one
of its subsidiaries, other than as a result of his death, prior to
July 1, 2003, the stock appreciation right will expire at the time
such holder's employment is terminated.
-11-
The following table sets forth, as to the executive officers of the Company
named in the Summary Compensation Table shown above, information concerning
stock options and stock appreciation rights exercised during, and the value of
stock options and stock appreciation rights held at the end of, the fiscal year
ended December 31, 2001:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Fiscal Options/SARs at Fiscal
Shares Value Year-End (#) Year-End ($)
Acquired on Realized --------------------------- ---------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ------------ -------- ----------- --------------- ----------- -------------
Robert A. Kierlin 0 -- 0 0 -- --
Willard D. Oberton 0 -- 0 6,000 -- $57,150
Daniel L. Florness 0 -- 0 6,000 -- 57,150
Nicholas J. Lundquist 0 -- 0 6,000 -- 57,150
Compensation Committee Interlocks and Insider Participation
As indicated under "Board and Committee Meetings" above, the Company does not
have a Compensation Committee or any other committee of the Board of Directors
performing equivalent functions. The Board of Directors makes decisions
regarding compensation of executive officers of the Company. Three of the
Company's executive officers, Robert A. Kierlin, Stephen M. Slaggie and Willard
D. Oberton, are directors of the Company. Each of these individuals participated
in all deliberations of the Board during the fiscal year ended December 31, 2001
concerning executive officer compensation.
Board Report on Executive Compensation
As required by the rules established by the Securities and Exchange Commission,
the Board of Directors has prepared, for inclusion in this Proxy Statement, the
following report on the compensation policies of the Board applicable to the
Company's executive officers. The Company's executive officers during 2001 were
Robert A. Kierlin, its Chief Executive Officer, Stephen M. Slaggie, its
Secretary, Willard D. Oberton, its President, Nicholas J. Lundquist, its Vice
President of Sales, and Daniel L. Florness, its Chief Financial Officer.
Executive compensation at the Company for 2001 consisted of three components:
base salary, the potential for an incentive bonus, and stock appreciation
rights. The Chief Executive Officer's compensation in 2001 consisted solely of
base salary. The Secretary's compensation in 2001 consisted of base salary and
the potential for a bonus. The compensation in 2001 of the other executive
officers consisted of base salary, the potential for a bonus, and stock
appreciation rights.
-12-
At the first meeting of the Board of Directors in 2001, the Board established
the maximum total compensation to be paid to the Company's Chief Executive
Officer and Secretary for the year. As shown in the table set forth under
"Security Ownership of Principal Shareholders and Management" above, each of
those two officers holds a significant portion of the Company's Common Stock,
which was acquired by him at the time of the Company's incorporation. It is the
philosophy of the Board of Directors that the Company should modestly compensate
the Chief Executive Officer and Secretary, and that financial reward for those
officers should come in large part from increases in the value of the Company's
Common Stock held by them. Consistent with that philosophy, the Board set the
maximum compensation of the Chief Executive Officer and Secretary for 2001 at
the same level as 2000.
The actual base salary paid to the Company's Chief Executive Officer for 2001
was, within the limits established by the Board of Directors, determined by that
officer based on such factors as he deemed appropriate. Since 1987 (the year of
the Company's initial public offering), there has been no increase, from the
level paid in that year, in the annual base salary of the Chief Executive
Officer. The base salary paid to the Chief Executive Officer in 2001 was
approximately 31% of the maximum compensation authorized for payment to him by
the Board. Because of less time spent on Company affairs in 2001, the Chief
Executive Officer requested a smaller compensation for the year.
The actual base salary paid to the Company's Secretary for 2001 was, within the
limits established by the Board of Directors, determined by that officer based
on such factors as he deemed appropriate, provided that the base salary paid to
the Secretary was subject to the review and approval of the Company's Chief
Executive Officer. There has been no increase in the annual base salary paid to
the Secretary since he became a full-time employee of the Company in 1987. The
Secretary's bonus for 2001 was paid under the Company's general employee bonus
program for non-sales personnel. Under the bonus program, an aggregate bonus is
calculated for each of the Company's departments based on the department
achieving certain pre-determined cost containment goals. The aggregate bonus, if
any, for each department is then allocated among the department's employees in a
manner determined by the department's supervisor based on the level of
responsibility of each employee, provided that the allocation is subject to the
review and approval of the Company's Chief Executive Officer. Since the
Secretary is not a member of a department, his bonus was determined by the
supervisor of the Company's accounting department in accordance with the
criteria for allocation of bonuses within that department.
The Board of Directors also established, at its first meeting in 2001, the base
salary to be paid, and the method for determining any bonuses to be paid, to the
Company's other executive officers for that year. The bonus to be paid to the
Company's President for 2001 was calculated based on the amount by which the
Company's pre-tax income in each quarter of 2001 exceeded its pre-tax income in
the same quarter of 2000. The bonus to be paid to the Company's Vice President
of Sales for 2001 was calculated based on two factors: (1) the amount by which
the Company's net sales in each quarter of 2001 exceeded net sales in the same
quarter of 2000 and (2) the amount by which the Company's pre-tax income in each
quarter of 2001 exceeded its pre-tax income in the same quarter of 2000. The
bonus to be paid to the Company's Chief Financial Officer for 2001 was
calculated based on the amount by which net income in each quarter of 2001
exceeded a percentage of net sales in that quarter.
In addition to base salary and bonus, each of the Company's President, Vice
President of Sales and Chief Financial Officer was granted stock appreciation
rights during 2001.
-13-
In 2000, the Chief Executive Officer adopted a stock option plan for employees
of the Company pursuant to which he has granted to a broad group of employees
options to purchase up to an aggregate of 1,253,060 share of common stock of the
Company owned by him at the time of the grant. In general, each such option
expires on the last day of November or December of the second calendar year
after the year in which the option was granted and is exercisable during the
six-month period ending on the expiration date. The benefits to the Company of
the stock option plan are three-fold. First, the plan aligns the interests of
the employees of the Company with the long-term interest of the Company's public
shareholders. Second, the plan allows employees of the Company the potential to
accumulate some wealth. Third, since outstanding shares of Common Stock owned at
the time of the grant by the Chief Executive Officer back the options, the
Company will issue no new shares when the options are exercised and the options
will result in no dilution of the Company's outstanding Common Stock.
The Company granted the stock appreciation rights received by the executive
officers under a stock appreciation rights plan for employees of the Company
adopted by the Board of Directors in 2000. The plan was established so that
stock appreciation rights could be granted to certain officers and
employee-directors of the Company who, due to securities law considerations, are
not able to participate in the stock option plan established by the Chief
Executive Officer. Under the plan, the Company has granted to certain of those
officers and employee-directors an aggregate of 18,000 stock appreciation right
units (with each unit being the equivalent, for purposes of measuring payments
under the plan, of one share of Common Stock of the Company). The terms of the
stock appreciation rights mirror those of the employee stock options, except
that all payments upon exercise of the stock appreciation rights will be made in
cash. As a result, the stock appreciation rights will result in no dilution of
the Company's outstanding Common Stock.
-14-
With the exception of the bonus arrangements described above, the compensation
policies and practices of the Board of Directors applicable to the Company's
executive officers are not subject to specific criteria. The factors considered
by the Board in setting the maximum compensation of the Chief Executive Officer
and Secretary and the base salary and stock-based awards of the Company's other
executive officers, and by the Chief Executive Officer and Secretary in
determining their actual base salary within the limits established by the Board,
were subjective, such as the level of compensation paid by the Company to its
other employees. The Board is aware of the executive compensation historically
paid by members of the peer group selected in connection with the preparation of
the stock performance graph set forth under "Executive Compensation--Performance
Graph" below. However, the Board did not consider the compensation paid by the
companies in the peer group to their chief executive officers in setting the
maximum compensation of the Company's Chief Executive Officer for 2001, since
the higher level of compensation generally present at those companies does not
reflect the philosophy of the Board that the Chief Executive Officer should be
modestly compensated. The Company's performance was not a factor considered by
the Board of Directors in setting the maximum compensation of the Chief
Executive Officer and Secretary or the base salary or stock-based awards of the
Company's other executive officers, nor did the Board require the Chief
Executive Officer and Secretary to consider the Company's performance in
determining their actual base salary. However, the Board of Directors believes
that, as a result of their share ownership and the bonus arrangements and
stock-based awards described above, the interests of the Company's executive
officers are closely aligned with the long-term interests of the Company and its
public shareholders.
Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility of
compensation over $1,000,000 paid by a company to its executive officers. Since
the Company's executive compensation is set at levels such that each executive
officer is likely to receive compensation well below the $1,000,000 limit, the
Board of Directors has determined that it is not necessary at this time to take
any position with respect to the non-deductibility of compensation in excess of
$1,000,000.
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Robert A. Kierlin Stephen M. Slaggie Michael M. Gostomski
- ----------------------------------------------------------------------------
John D. Remick Henry K. McConnon Robert A. Hansen
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Willard D. Oberton Michael J. Dolan Reyne K. Wisecup
- ----------------------------------------------------------------------------
The Board of Directors
-15-
Performance Graph
Set forth below is a graph comparing, for a period of five years ended December
31, 2001, the yearly cumulative total shareholder return on the Company's Common
Stock with the yearly cumulative total shareholder return of the NASDAQ Market
Index and an index of a group of peer companies selected by the Company.
The companies in the peer group are Lawson Products, Inc., Noland Company, MSC
Industrial Direct Co., Inc. and W.W. Grainger, Inc. The Company is not included
in the peer group.
In calculating the yearly cumulative total shareholder return of the peer group
index, the shareholder returns of the companies included in the peer group are
weighted according to the stock market capitalization of such companies at the
beginning of each period for which a return is indicated.
The comparison of total shareholder returns in the performance graph assumes
that $100 was invested on December 31, 1996 in each of the Company, the NASDAQ
Market Index and the peer group index, and that dividends were reinvested when
and as paid.
Comparison of Five Year Cumulative Total Return
Among Fastenal Company, NASDAQ Market Index and Peer Group Index
[PERFORMANCE GRAPH APPEARS HERE]
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1996 1997 1998 1999 2000 2001
- ------------------------------------------------------------------------------
Fastenal Company 100.00 83.65 96.27 98.42 120.41 145.99
- ------------------------------------------------------------------------------
Peer Group Index 100.00 122.04 108.36 117.02 97.94 126.78
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NASDAQ Market Index 100.00 122.32 172.52 304.29 191.25 152.46
- ------------------------------------------------------------------------------
-16-
RELATIONSHIP WITH AND APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP to serve as the Company's
independent auditors for the fiscal year ending December 31, 2002, subject to
ratification by the shareholders. While it is not required to do so, the Board
of Directors is submitting the selection of that firm for ratification in order
to ascertain the view of the shareholders. If the selection is not ratified, the
Board of Directors will reconsider its selection. Proxies solicited by the Board
of Directors will, unless otherwise directed, be voted to ratify the appointment
of KPMG LLP as independent auditors for the Company for the fiscal year ending
December 31, 2002.
A representative of KPMG LLP will be present at the Annual Meeting of
Shareholders and will be afforded an opportunity to make a statement if such
representative so desires and will be available to respond to appropriate
questions during the meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers to file initial reports of share ownership and reports of
changes in share ownership with the Securities and Exchange Commission.
Directors and officers are required by Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on a
review of the copies of such forms furnished to the Company and written
representations from the Company's directors and officers, all Section 16(a)
filing requirements were met for the year ended December 31, 2001, except that
one report, covering two stock gifts in 2001, was filed late by Stephen M.
Slaggie.
-17-
ADDITIONAL MATTERS
The Annual Report of the Company for the fiscal year ended December 31, 2001,
including financial statements, is being mailed with this Proxy Statement.
As of the date of this Proxy Statement, management knows of no matters that will
be presented for determination at the meeting other than those referred to
herein. If any other matters properly come before the meeting calling for a vote
of shareholders, it is intended that the shares represented by the Proxies
solicited by the Board of Directors will be voted by the Proxies named therein
in accordance with their best judgment.
The Company will pay the cost of soliciting Proxies in the accompanying form. In
addition to solicitation by the use of mails, certain directors, officers and
regular employees of the Company may solicit Proxies by telephone, telegram or
personal interview, and may request brokerage firms and custodians, nominees and
other record holders to forward soliciting materials to the beneficial owners of
stock of the Company and will reimburse them for their reasonable out-of-pocket
expenses in so forwarding such materials.
Shareholders who wish to obtain a copy of the Company's 10-K Annual Report filed
with the Securities and Exchange Commission for the fiscal year ended December
31, 2001 may do so without charge by writing to Stephen M. Slaggie, Secretary,
at the Company's offices, 2001 Theurer Boulevard, Winona, Minnesota 55987-1500.
By Order of the Board of Directors,
/s/ Stephen M. Slaggie
Stephen M. Slaggie
Secretary
Dated: March 5, 2002
FASTENAL COMPANY
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, April 16, 2002
10:00 a.m., Central Daylight Savings Time
Fastenal Company Headquarters
2001 Theurer Boulevard
Winona, Minnesota
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Fastenal Company
2001 Theurer Boulevard, Winona, Minnesota 55987-1500 Proxy
- -------------------------------------------------------------------------------
This proxy is solicited by the Board of Directors
for use at the Annual Meeting of Shareholders to be held
on April 16, 2002 and at any adjournment thereof.
By signing this proxy, you revoke all prior proxies and appoint Stephen M.
Slaggie, John D. Remick and Willard D. Oberton, and each of them, as Proxies,
each with full power of substitution, to vote, as designated on the reverse side
and below, at the Annual Meeting of Shareholders to be held on April 16, 2002,
and at any adjournment thereof, all shares of Common Stock of Fastenal Company
registered in your name at the close of business on February 26, 2002.
This proxy when properly executed will be voted as specified on the reverse
side, but, if no direction is given, this proxy will be voted FOR Items 1 and 2.
Notwithstanding the foregoing, if this proxy is to be voted for any nominee
named on the reverse side and such nominee is unwilling or unable to serve, this
proxy will be voted for a substitute in the discretion of the Proxies. The
Proxies are authorized to vote in their discretion upon such other matters as
may properly come before the Annual Meeting or any adjournment thereof.
See reverse for voting instructions.
[FASTENAL COMPANY LOGO]
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\|/ Please detach here \|/
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The Board of Directors Recommends a Vote FOR Items 1 and 2.
1. Election of Directors: 01 Robert A. Kierlin 05 Henry K. McConnon
02 Stephen M. Slaggie 06 Robert A. Hansen
03 Michael M. Gostomski 07 Willard D. Oberton
04 John D. Remick 08 Michael J. Dolan
09 Reyne K. Wisecup
[_] Vote FOR [_] Vote WITHHELD
all nominees from all nominees
(except as marked)
(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominee(s) in the box provided to the right.)
- --------------------------------------------------------
- --------------------------------------------------------
2. Ratification of the appointment of KPMG LLP as independent auditors for
the 2002 fiscal year.
[_] For [_] Against [_] Abstain
Address Change? Mark Box [_] Indicate changes below:
Dated:_________________________, 2002
- ---------------------------------------------------------
- ---------------------------------------------------------
Signature(s) in Box
Please sign exactly as your name(s) appear on proxy. Jointly owned shares will
be voted as directed if one owner signs unless another owner instructs to the
contrary, in which case the shares will not be voted. Trustees, administrators,
etc., should include title and authority. Corporations should provide full name
of corporation and title of authorized officer signing the proxy.