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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 1997, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _____________________ to ______________________
Commission file number 0-16125
FASTENAL COMPANY
----------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0948415
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Theurer Boulevard
Winona, Minnesota 55987-1500
- -------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
(507) 454-5374
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Common Stock held by non-affiliates of the
registrant as of March 2, 1998 was $1,222,262,811. For purposes of determining
this number, all executive officers and directors of the registrant as of March
2, 1998 are considered to be affiliates of the registrant. This number is
provided only for the purposes of this report on Form 10-K and does not
represent an admission by either the registrant or any such person as to the
status of such person.
As of March 2, 1998, the registrant had 37,938,688 shares of Common Stock issued
and outstanding.
2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1997 are incorporated by reference in Part II. Portions of
the registrant's Proxy Statement for the annual meeting of shareholders to be
held April 21, 1998 are incorporated by reference in Part III.
FORWARD LOOKING STATEMENTS
This Form 10-K, including the sections in Part I hereof captioned "Item 1.
Business - Development of the Business", "Item 1. Business - Products", "Item 1.
Business - Manufacturing Operations", and "Item 2. Properties", and the section
in Part II hereof captioned "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations", contains or incorporates by
reference 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, including statements regarding
expected results of operations, new store and distribution center openings,
markets for new stores, introduction of existing and new product lines,
technology conversions, growth in manufacturing operations, occupancy of new
facilities and capital expenditures. 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 registrant's
Annual Report to Shareholders for the fiscal year ended December 31, 1997 in the
section thereof captioned "Management's Discussion and Analysis of Financial
Condition and Results of Operations", which section has been incorporated in
this Form 10-K by reference. The registrant assumes no obligation to update
either such forward-looking statements or the discussion of such risks and
uncertainties.
PART I
ITEM 1. BUSINESS
Fastenal Company ("Fastenal Company" and, together with its wholly owned
subsidiaries, Fastenal Company Services, Fastenal Company Purchasing, Fastenal
Company Leasing and Fastenal Canada Company, collectively, "the Company") began
as a partnership in 1967, and was incorporated under the laws of Minnesota in
1968. As of December 31, 1997, the Company had 644 store sites located in 48
states and Canada and 2,676 people employed at these sites. Forty-six of these
sites were satellite stores of an existing site. The Company has eight product
lines. The traditional Fastenal(R) product line(1) consists of approximately
51,000 different types of threaded fasteners and other industrial and
construction supplies. The FastTool(R) product line(1), which was introduced in
1993, consists of approximately 21,000 different types of tools and safety
supplies. The SharpCut(R), PowerFlow(TM), EquipRite(R) and CleanChoice(R)
product lines(1), which were introduced in 1996, consist of approximately 14,000
different types of metal cutting tool blades, approximately 11,000 different
types of fluid transfer components and accessories for hydraulic and pneumatic
power, approximately 4,000 different types of material handling and storage
products, and approximately 3,000 different types of janitorial and paper
products, respectively. The FastArc(TM) and PowerPhase(TM) product lines, which
were introduced in 1997, consist of approximately 1,000 different types of
welding supplies (excluding gas and welding machines) and approximately 1,000
different types of electrical supplies, respectively. The Company operated nine
distribution centers as of December 31, 1997 from which the Company distributes
products to its store sites, and operates a facility in Memphis, Tennessee to
receive and package goods coming from suppliers outside of the United States.
- ----------------
(1) Fastenal(R), FastTool(R), SharpCut(R), PowerFlow(TM), EquipRite(R),
CleanChoice(R), FastArc(TM) and PowerPhase(TM) are trademarks and/or service
marks of the Company.
3
DEVELOPMENT OF THE BUSINESS
Fastenal Company began in 1967 with a marketing strategy of supplying threaded
fasteners to customers in small- to medium-sized cities. The Company believes
its success can be attributed to its ability to offer such customers a full line
of products at convenient locations, and to the high quality of the Company's
employees.
The Company opened its first store site in Winona, Minnesota, a city with a
population of approximately 25,000. The following table shows the growth in the
number of Company store sites during the last ten years, and the related
increases in the Company's consolidated net sales during that period:
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- ------------------------------------------------------------------------------------------------------------------
Number of
store sites
at year end 75 98 126 158 200 253 315 375 484 644
Net sales (in
thousands) $30,441 41,190 52,290 62,305 81,263 110,307 161,886 222,555 287,691 397,992
As of December 31, 1997, the Company operated 644 store sites located in:
Alabama (12 sites) Nebraska (6 sites)
Arizona (4 sites) Nevada (3 sites)
Arkansas (11 sites) New Hampshire (6 sites)
California (17 sites) New Jersey (6 sites)
Colorado (8 sites) New Mexico (5 sites)
Connecticut (8 sites) New York (17 sites)
Delaware (2 sites) North Carolina (20 sites)
Florida (17 sites) North Dakota (6 sites)
Georgia (19 sites) Ohio (38 sites)
Idaho (6 sites) Oklahoma (10 sites)
Illinois (26 sites) Oregon (11 sites)
Indiana (23 sites) Pennsylvania (25 sites)
Iowa (15 sites) Rhode Island (2 sites)
Kansas (9 sites) South Carolina (11 sites)
Kentucky (11 sites) South Dakota (4 sites)
Louisiana (9 sites) Tennessee (14 sites)
Maine (4 sites) Texas (50 sites)
Maryland (9 sites) Utah (7 sites)
Massachusetts (10 sites) Vermont (2 sites)
Michigan (28 sites) Virginia (17 sites)
Minnesota (19 sites) Washington (16 sites)
Mississippi (7 sites) West Virginia (8 sites)
Missouri (13 sites) Wisconsin (31 sites)
Montana (6 sites) Wyoming (2 sites)
Puerto Rico (1 site) Canada (33 sites)
The Company has closed only three store sites in its history.
4
The Company selects new locations for its stores based on their proximity to the
Company's distribution network, population statistics, and employment data for
manufacturing and construction. The Company currently intends to continue
opening new store sites at or above the rate experienced over the last several
years, subject to market and general economic conditions.
In 1995 the Company opened nine experimental multi-product line `combination'
stores in communities which were smaller (populations of approximately 8,000 to
25,000) than those in which traditional stores selling one product line were
located. These stores, each of which started operations with two full-time
employees, combined the Fastenal(R) and FastTool(R) product lines in a single
store. The Company opened 71 of these combination stores in 1996, most of which
were located in smaller communities.
In 1997, the Company began to stock all new stores with an inventory drawn from
all of its product lines. This included sites in smaller communities as well as
larger communities. Subsequent to a site's opening, the site personnel customize
the inventory offering to that site's customer base. In addition, the Company
began to introduce selected product from all of the Company's product lines into
existing stores. Therefore, beginning in 1997 the Company ceased making a
distinction between a traditional Fastenal(R) store and a `combination' store.
The Company believes that approximately 1,000 markets in the United States and
Canada (including those in which Fastenal stores are already located) have
sufficient potential to justify this type of multi-product line store. Most of
the future potential markets are located in smaller communities.
In 1996, the Company opened eight experimental stores that operated as
satellites of existing stores. These satellites are located in communities as
small as 2,000 population and are usually located within a 30 mile radius of the
mother store. In most cases, the Company was already doing business in this
community from the mother store, but the addition of a physical presence in the
community provided sales increases from that community. The Company opened
additional satellite stores in 1997. Although the Company cannot be sure of the
success of these stores, the Company believes that their success could lead to
approximately 500 satellite store sites in the United States and Canada.
In 1997 the Company sold products into Mexico from its existing Brownsville, El
Paso and McAllen, Texas stores. The Company opened six store sites in Canada in
1995, seven in 1996, 20 in 1997, and plans to open additional store sites in
Canada in 1998. The Company opened one store site in Puerto Rico in 1997 and
plans to open additional store sites in Puerto Rico in 1998. The stores in
Canada and Puerto Rico contributed less than 5% of the Company's consolidated
net sales in 1997.
No assurance can be given that any of the expansion plans described above will
be achieved, or that new stores, once opened, will be profitable.
It has been the Company's experience that near-term profitability has been
adversely affected by the opening of new store sites, due to the related
start-up costs and the time necessary to generate a customer base. A new store
generates its sales from direct sales calls, a slow process involving repeated
contacts. As a result of this process, sales volume builds slowly and it
typically requires nine to 12 months for a new store to achieve its first
profitable month. Of the 44 stores opened in the first quarter of 1997, 18 were
profitable in the fourth quarter of 1997.
5
For 1997, annual sales volumes of store sites operating at least five years
ranged between approximately $300,000 and $5,200,000, with 75% of these store
sites having annual sales volumes within the range of approximately $700,000 to
$1,800,000. The data in the following table shows the growth in the average
sales of the Company's store sites from 1996 to 1997 based on each site's age.
The store sites opened in 1997 contributed approximately $18.1 million (or
approximately 4.5%) of the Company's consolidated net sales in 1997, with the
remainder coming from existing store sites.
Age of
store site
as of Number of store
December sites in group as of Average Average Percent
31, 1997 December 31, 1997 sales 1996 sales 1997 change
- --------------------------------------------------------------------------------
0-1 year old 160 $ -- $ 113,000(1) -- %
1-2 years old 109 88,000(1) 361,000 --
2-3 years old 60 299,000 472,000 57.9
3-4 years old 62 405,000 534,000 32.1
4-5 years old 53 509,000 663,000 30.3
5-6 years old 42 724,000 843,000 16.4
6-7 years old 32 821,000 951,000 15.8
7-8 years old 28 959,000 1,119,000 16.7
8-9 years old 23 947,000 1,111,000 17.3
9-10 years old 17 992,000 1,087,000 9.6
10-13 years old 30 1,244,000 1,477,000 18.7
13+ years old 28 1,734,000 2,088,000 20.4
(1) Average sales includes sales of store sites open for less than the full
fiscal year.
As of December 31, 1997, the Company operated distribution centers in or near
Winona, Minnesota; Indianapolis, Indiana; Dallas, Texas; Atlanta, Georgia;
Scranton, Pennsylvania; Fresno, California; Lakewood, Washington; Akron, Ohio;
and Salt Lake City, Utah. Distribution centers are located so as to permit
twice-a-week to five times-a-week delivery to Company stores using Company
trucks and overnight delivery by surface common carrier. As the number of stores
increases, the Company intends to add new distribution centers. The Company
opened a distribution center in Winston-Salem, North Carolina in January 1998
and plans to open two to four other distribution centers during 1998.
The Company also operates a packaging facility in Memphis, Tennessee. This
facility receives freight containers from foreign suppliers and repackages the
items in standard packages using high speed equipment.
The Company operates a UNIX/terminal-based computer system allowing automatic
data exchange between the stores and the distribution centers during regular
business hours. The use of client/server technology allows the Company's network
of UNIX-based machines to serve networked personal computers and workstations.
During 1997 the Company began testing its Microsoft Windows NT, client/server,
graphical user environment in a limited number of store locations (NT
Point-of-sale system). The Company plans to convert to the NT Point-of-sale
system during 1998.
6
PRODUCTS
Traditional Fastenal(R) Product Line
The Company's Fastenal(R) product line consists of approximately 51,000
different items, which may be divided into two broad categories: threaded
fasteners, such as bolts, nuts, screws, studs, and related washers; and other
industrial and construction supplies, such as paints, various pins and machinery
keys, concrete anchors, batteries, sealants, metal framing systems, wire rope,
stainless strut, private label stud anchors, rivets, and related accessories.
Threaded fasteners are used in most manufactured products and building projects,
and in the maintenance and repair of machines and structures. Although some
aspects of the threaded fastener market are common to all cities, the Company
feels that each city's market is to some extent unique. Therefore, the Company
opens each store with minimal base stocks of inventory, and then tailors the
growing inventory to the local market demand as it develops. Threaded fasteners
accounted for approximately 61%, 64%, and 65% of the Company's consolidated net
sales in 1997, 1996 and 1995, respectively.
Concrete anchors make up the largest portion of the other supply items included
in the Fastenal(R) product line. Most concrete anchors use threaded fasteners as
part of the completed anchor assembly.
FastTool(R) Product Line
In 1993 the Company began selling a new FastTool(R) product line. This product
line consists of power and hand tools, safety supplies and a tool repair
service. The inventory of tools and safety supplies is comprised of
approximately 21,000 different items. The Company uses its current distribution
system for the FastTool(R) product line.
SharpCut(R) Product Line
Late in 1995 the Company developed a new SharpCut(R) product line which it began
selling in 1996. This product line consists of metal cutting tool blades and a
resharpening service. The inventory related to the SharpCut(R) product line is
comprised of approximately 14,000 different items. The Company uses its current
distribution system for the SharpCut(R) product line.
PowerFlow(TM) Product Line
In 1996 the Company began selling a new PowerFlow(TM) product line. This product
line consists of fluid transfer components and accessories for hydraulic and
pneumatic power and a hose crimping service. The inventory related to the
PowerFlow(TM) product line is comprised of approximately 11,000 different items.
The Company uses its current distribution system for the PowerFlow(TM) product
line.
EquipRite(R) Product Line
In 1996 the Company began selling a new EquipRite(R) product line. This product
line consists of material handling and related storage products and a storeroom
layout design service. The inventory related to the EquipRite(R) product line is
comprised of approximately 4,000 different items. The Company uses its current
distribution system for the EquipRite(R) product line.
7
CleanChoice(R) Product Line
In 1996 the Company began selling a new CleanChoice(R) product line. This
product line consists of janitorial and paper products. The inventory related to
the CleanChoice(R) product line is comprised of approximately 3,000 different
items. The Company uses its current distribution system for the CleanChoice(R)
product line.
FastArc(TM) Product Line
In 1997 the Company began selling a new FastArc(TM) product line. This product
line consists of welding supplies (excluding gas and welding machines). The
inventory related to the FastArc(TM) product line is comprised of approximately
1,000 different items. The Company uses its current distribution system for the
FastArc(TM) product line.
PowerPhase(TM) Product Line
In 1997 the Company began selling a new PowerPhase(TM) product line. This
product line consists of electrical supplies. The inventory related to the
PowerPhase(TM) product line is comprised of approximately 1,000 different items.
The Company uses its current distribution system for the PowerPhase(TM) product
line.
Additional Product Lines
The Company plans to add other industrial product lines in the future.
INVENTORY CONTROL
The Company controls inventory by using computer systems to preset desired stock
levels. The data used for this purpose is derived from reports showing sales
activity by item for the previous three years. Computers then convert this data
to typical store maximum-minimum inventory levels for each item. Stores can
deviate from preset inventory levels as deemed appropriate by their district
managers. Inventories in distribution centers are established from computerized
sales data for the stores served by the respective centers.
MANUFACTURING OPERATIONS
In 1997 approximately 95.5% of the Company's consolidated net sales were
attributable to products manufactured by other companies to industry standards.
The remaining amount of approximately 4.5% of the Company's consolidated net
sales for 1997 related to products manufactured by, or modified in, the
Company's machining shop or repaired in a tool repair center. These manufactured
products consist primarily of non-standard sizes of threaded fasteners made to
customers' specifications. The Company engages in manufacturing activity
primarily as a service to its customers and does not expect any significant
growth in the foreseeable future in the proportion of the Company's consolidated
net sales attributable to manufacturing.
SOURCES OF SUPPLY
The Company uses a large number of suppliers for the approximately 106,000
standard items it distributes. Most items distributed by the Company can be
purchased from several sources, although preferred sourcing is used for some
items to facilitate quality control. No single supplier accounted for more than
5.0% of the Company's purchases in 1997.
8
CUSTOMERS AND MARKETING
The Company believes its success can be attributed to its ability to offer
customers in small- to medium-sized cities a full line of products at convenient
locations, and to the high quality of the Company's employees. Most of the
Company's customers are in the construction and manufacturing markets. The
construction market includes general, electrical, plumbing, sheet metal, and
road contractors. The manufacturing market includes both original equipment
manufacturers and maintenance and repair operations. Other users of the
Company's products include farmers, truckers, railroads, mining companies,
municipalities, schools, and certain retail trades. As of December 31, 1997, the
Company's total number of active customer accounts (defined as accounts having
purchase activity within the last 90 days) was approximately 84,000.
During each of the three years ended December 31, 1997, no one customer
accounted for a significant portion of the Company's sales. The Company believes
that the large number of its customers together with the varied markets that
they represent provide some protection to the Company from economic downturns in
a particular market.
A significant portion of the Company's sales are generated through direct calls
on customers by store personnel. Because of the nature of the Company's
business, the Company does not use the more expensive forms of mass media
advertising such as television, radio, and newspapers. Forms of advertising used
by the Company include signs and catalogs.
Late in December 1997 the Company began rolling out its new 824 page catalog.
This catalog includes standard product from all of the Company's product lines.
COMPETITION
The Company's business is highly competitive. Competitors include both large
distributors located primarily in large cities and smaller distributors located
in many of the same cities in which the Company has stores. The Company believes
that the principal competitive factors affecting the markets for the Company's
products are customer service and convenience.
Some competitors use vans to sell their products in communities away from their
main warehouses, while others rely on mail order or telemarketing sales. The
Company, however, believes that the convenience provided to customers by
actually operating a number of stores in smaller markets, each offering a full
line of products, is a competitive selling advantage and that the large number
of stores in a given area, taken together with the Company's ability to provide
frequent deliveries to such stores from centrally located distribution centers,
makes possible the prompt and efficient distribution of products. Having trained
personnel at each store also enhances the Company's ability to compete (see
"Employees" below).
EMPLOYEES
As of December 31, 1997, the Company employed a total of 4,075 full- and
part-time employees, 2,676 being store managers and store employees, and the
balance being employed in the Company's distribution centers, packaging
facility, manufacturing operations, service operations and home office.
The Company believes that the quality of its employees is critical to its
ability to compete successfully in the markets it currently serves and to its
ability to open new stores in new markets. The Company fosters the growth and
education of skilled employees throughout the organization by operating training
programs and by decentralizing decision making. Wherever possible, promotions
are from within the Company. For example, most new store managers are promoted
from an assistant manager's position at another store and district managers (who
supervise a number of stores) are usually former store managers.
9
The Company's sales personnel participate in incentive bonus arrangements that
place emphasis on achieving increased sales on a store and regional basis, while
still attaining targeted levels of gross profit. As a result, a significant
portion of the Company's total employment cost varies with sales volume. The
Company also pays incentive bonuses to other personnel for achieving
pre-determined cost containment goals.
None of the Company's employees is subject to a collective bargaining agreement
and the Company has experienced no work stoppages. The Company believes its
employee relations are excellent.
ITEM 2. PROPERTIES
The Company owns five facilities in Winona, Minnesota: a 173,000 square foot
distribution center and home office building, a 50,000 square foot manufacturing
facility, a 13,000 square foot building that houses the Company's Winona store
and regional training center, a 42,000 square foot building that houses rack and
shelving storage and a multi-building complex purchased in 1997 with
approximately 30,000 total square feet which houses several support services
including, among others, the SharpCut(R) regrind department and the fabrication
department. The Company also owns a 60,000 square foot distribution center in
Indianapolis, Indiana, a 54,000 square foot distribution center in Atlanta,
Georgia, a 50,000 square foot distribution center in Dallas, Texas, a 50,000
square foot distribution center near Scranton, Pennsylvania and a 102,000 square
foot distribution center in Akron, Ohio. The buildings that house the Company's
stores in Waterloo and Mason City, Iowa; St. Joseph, Missouri; Wichita Falls and
Texarkana, Texas; Topeka, Kansas; and Kokomo, Indiana are also owned by the
Company.
All other buildings occupied by the Company are leased. Leased stores range from
approximately 1,200 to 8,000 square feet, with lease terms of up to 48 months.
The Company's leases certain distribution centers as well as its packaging
facility in Tennessee. These leases are as follows:
Location Square Feet Lease Expiration Date Lease Renewal Options
- ------------------------------------------------------------------------------------------------------
Lakewood, Washington 40,000 February 2000 Two one-year periods*
Fresno, California 21,500 February 1999 One one-year period*
Salt Lake City, Utah 12,100 March 2000 None
Winston-Salem, North Carolina 58,400 October 2000 Two one-year periods*
Memphis, Tennessee** 115,000 December 2000 One two-year period*
* The lease renewals can be exercised at the Company's option.
** As of December 31, 1997, the Memphis packaging center was housed in a
37,500 square foot facility. The Company expects to move into a 115,000
square foot facility in February 1998.
If economic conditions are suitable, the Company will, in the future, consider
purchasing store sites to house its older stores. All sites for new stores will
continue to be leased. It is the Company's policy to negotiate relatively short
lease terms to facilitate relocation of particular store operations if deemed
desirable by management. It has been the Company's experience that space
suitable for its needs and available for leasing is more than sufficient.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
10
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Fastenal Company are:
Name Age Position
- ----------------------------------------------------------------------------
Robert A. Kierlin 58 Chairman of the Board, President, Chief
Executive Officer and Director
Willard D. Oberton 39 Vice President and Chief Operating
Officer
Stephen M. Slaggie 58 Secretary and Director
Daniel L. Florness 34 Treasurer, Chief Financial Officer and
Chief Accounting Officer
Mr. Kierlin has been the Chairman of the Board, President and Chief Executive
Officer of Fastenal Company and has served as a director since Fastenal
Company's incorporation in 1968.
Mr. Oberton has been the Vice President and Chief Operating Officer of Fastenal
Company since March 1997. From June 1986 through March 1997, Mr. Oberton held
the position of general operations manager of Fastenal Company.
Mr. Slaggie has been the Secretary of Fastenal Company and has served as a
director since 1970. He became a full-time employee of Fastenal Company in
December 1987, at which time he assumed the additional duties of Shareholder
Relations Director and Insurance Risk Manager. From 1970 through June 1996, Mr.
Slaggie also served as the Treasurer of Fastenal Company.
Mr. Florness has been the Treasurer, Chief Financial Officer and Chief
Accounting Officer of Fastenal Company since June 1996. From January 1987
through May 1996, Mr. Florness was employed by KPMG Peat Marwick LLP, a public
accounting firm. Mr. Florness served in the capacity of manager or senior
manager from July 1992 through May 1996 with that firm.
None of the above executive officers is related to any other such executive
officer or to any other director of Fastenal Company.
11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Incorporated herein by reference is Fastenal Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1997, Common Stock Data on
page 9.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference is Fastenal Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1997, page 2.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Incorporated herein by reference is Fastenal Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1997, pages 5-8.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference is Fastenal Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1997, Selected Quarterly
Financial Data (Unaudited) on page 9, and Consolidated Financial Statements,
Notes to Consolidated Financial Statements, and Independent Auditors' Report on
pages 10-20.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference is the information appearing under the headings
"Election of Directors--Nominees and Required Vote", pages 4-5, and "Section
16(a) Beneficial Ownership Reporting Requirements", page 10, in Fastenal
Company's Proxy Statement dated March 17, 1998. See also Part I hereof under the
heading "Item X. Executive Officers of the Registrant".
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference is the information appearing under the headings
"Election of Directors--Board and Committee Meetings", page 5, "Executive
Compensation--Summary of Compensation", page 6, and "Executive
Compensation--Compensation Committee Interlocks and Insider Participation", page
6, in Fastenal Company's Proxy Statement dated March 17, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference is the information appearing under the heading
"Security Ownership of Principal Shareholders and Management", pages 2-4, in
Fastenal Company's Proxy Statement dated March 17, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference is the information appearing under the heading
"Interests of Management in Certain Transactions", page 10, in Fastenal
Company's Proxy Statement dated March 17, 1998.
13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
a) 1. Financial Statements:
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Earnings for the years ended
December 31, 1997, 1996, and 1995
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997, 1996, and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996, and 1995
Notes to Consolidated Financial Statements
Independent Auditors' Report
(Incorporated by reference to pages 10-20 of Fastenal Company's
Annual Report to Shareholders for the fiscal year ended December
31, 1997)
2. Financial Statement Schedules:
Schedule VIII--Valuation and Qualifying Accounts
3. Exhibits:
3.1 Restated Articles of Incorporation of Fastenal Company, as
amended (incorporated by reference to Exhibit 3.1 to
Fastenal Company's Form 10-Q for the quarter ended September
30, 1993)
3.2 Restated By-Laws of Fastenal Company (incorporated by
reference to Exhibit 3.2 to Registration Statement
No. 33-14923)
10 Description of bonus arrangement for Vice President
13 Annual Report to Shareholders for the fiscal year ended
December 31, 1997 (only those portions specifically
incorporated by reference herein shall be deemed filed with
the Commission)
21 List of Subsidiaries
27 Financial Data Schedule
Copies of Exhibits will be furnished upon request and payment of
the Company's reasonable expenses in furnishing the Exhibits.
b) Reports on Form 8-K
No report on Form 8-K was filed by Fastenal Company during the fourth
quarter of the fiscal year ended December 31, 1997.
14
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
The Board of Directors and Stockholders
Fastenal Company:
Under date of January 23, 1998, we reported on the consolidated balance sheets
of Fastenal Company and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1997, as
contained in the 1997 annual report to shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year 1997. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related financial statement schedule as listed in the accompanying index. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 23, 1998
15
FASTENAL COMPANY
Schedule VIII--Valuation and Qualifying Accounts
Years ended December 31, 1997, 1996, and 1995
"Additions" "Additions"
Balance at charged to charged Balance
beginning costs and to other "Less" at end
Description of year expenses accounts deductions of year
- --------------------------------------------------------------------------------
Year ended
December 31, 1997
allowance for
doubtful accounts $540,000 $1,614,000 $0 $1,494,000 $660,000
Year ended
December 31, 1996
allowance for
doubtful accounts 460,000 917,000 0 837,000 540,000
Year ended
December 31, 1995
allowance for
doubtful accounts 300,000 519,513 0 359,513 460,000
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 16, 1998
FASTENAL COMPANY
By /s/ Robert A. Kierlin
---------------------------------
Robert A. Kierlin, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: March 16, 1998 By /s/ Robert A. Kierlin
-------------------------------------
Robert A. Kierlin, President
(Principal Executive Officer) and
Director
Date: March 16, 1998 By /s/ Daniel L. Florness
-------------------------------------
Daniel L. Florness, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Date: March 16, 1998 By /s/ Stephen M. Slaggie
-------------------------------------
Stephen M. Slaggie, Director
Date: March 16, 1998 By /s/ Michael M. Gostomski
-------------------------------------
Michael M. Gostomski, Director
Date: March 16, 1998 By /s/ Henry K. McConnon
-------------------------------------
Henry K. McConnon, Director
Date: March 16, 1998 By /s/ John D. Remick
-------------------------------------
John D. Remick, Director
INDEX TO EXHIBITS
3.1 Restated Articles of Incorporation of Fastenal Company, as amended
(incorporated by reference to Exhibit 3.1 to Fastenal Company's Form
10-Q for the quarter ended September 30, 1993).
3.2 Restated By-Laws of Fastenal Company (incorporated by reference to
Exhibit 3.2 to Registration Statement No. 33-14923).
10 Description of bonus arrangement
for Vice President .................................Electronically Filed
13 Annual Report to Shareholders for
the fiscal year ended December 31, 1997
(only those portions specifically
incorporated by reference herein shall
be deemed filed with the Commission)................Electronically Filed
21 List of Subsidiaries ...............................Electronically Filed
27 Financial Data Schedule.............................Electronically Filed