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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, 1998, 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
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(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. [ X ]
The aggregate market value of the Common Stock held by non-affiliates of the
registrant as of March 1, 1999 was $1,098,083,534. For purposes of determining
this number, all executive officers and directors of the registrant as of March
1, 1999 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 1, 1999, 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, 1998 are incorporated by reference in Part II. Portions of
the registrant's Proxy Statement for the annual meeting of shareholders to be
held April 20, 1999 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
new store and distribution center openings, markets for new stores, introduction
of existing and new product lines, foreign operations, technology conversions
and Year 2000 readiness, growth in manufacturing operations, leasing of new
stores 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, 1998 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, Fastenal Canada Company, and Fastenal Mexico, S. de R.L. de
C.V., collectively, "the Company") began as a partnership in 1967, and was
incorporated under the laws of Minnesota in 1968. As of December 31, 1998, the
Company had 766 store sites located in 48 states, Puerto Rico, and Canada and
3,025 people employed at these sites. Forty-nine of these sites were satellite
stores of an existing site.
The Company sells industrial supplies. These industrial supplies are grouped
into eight product lines described further below.
The Company operated eleven distribution centers as of December 31, 1998 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.
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 number of
Company store sites during each of the last ten years and the related
consolidated net sales for each year during that period:
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------
Number of
store sites
at year end 766 644 484 375 315 253 200 158 126 98
Net sales (in
thousands) $ 503,100 397,992 287,691 222,555 161,886 110,307 81,263 62,305 52,290 41,190
As of December 31, 1998, the Company operated 766 store sites located in:
Alabama 15 Iowa 17 Nebraska 6 Rhode Island 3
Arizona 4 Kansas 13 Nevada 4 South Carolina 11
Arkansas 13 Kentucky 12 New Hampshire 7 South Dakota 6
California 26 Louisiana 12 New Jersey 7 Tennessee 18
Colorado 8 Maine 6 New Mexico 5 Texas 55
Connecticut 9 Maryland 9 New York 19 Utah 8
Delaware 3 Massachusetts 10 North Carolina 23 Vermont 3
Florida 19 Michigan 34 North Dakota 7 Virginia 19
Georgia 23 Minnesota 22 Ohio 41 Washington 18
Idaho 7 Mississippi 9 Oklahoma 13 West Virginia 10
Illinois 34 Missouri 13 Oregon 14 Wisconsin 36
Indiana 29 Montana 7 Pennsylvania 30 Wyoming 3
Puerto Rico 4 Canada 42
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 intends to continue opening new
store sites; however, due to the slowdown in the market and general economic
conditions experienced by certain of the Company's customers, the Company has
decided to decrease the rate of store openings from the rate experienced over
the last several years.
The Company stocks all new stores with an inventory drawn from all of its
product lines. Subsequent to a site's opening, the site personnel customize the
inventory offering to that site's customer base. The Company has two types of
stores: (1) the stand-alone store and (2) the satellite store. The stand-alone
store is typically located in cities with a population in excess of 8,000. The
Company believes that approximately 1,000 markets in the United States and
Canada (including those in which existing stand-alone stores are already
located) have sufficient potential to justify this type store. Most of the
future potential markets for stand-alone stores are located in smaller
communities. The second type, the satellite store, operates as a satellite of a
stand-alone store. The satellite store is usually located within 30 miles of the
stand-alone (mother) store and is typically managed by personnel at the mother
store. The Company has satellite stores located in communities with a population
as small as 2,000. 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. Of the 122 stores opened
during 1998, 16 opened as satellite stores. 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.
Some of these satellite stores are expected to eventually become stand-alone
stores.
The Company opened seven store sites in Canada in 1996, 20 in 1997, and nine in
1998, and plans to open additional store sites in Canada in the future. The
Company opened one store site in Puerto Rico in 1997 and three in 1998, and
plans to open additional store sites in Puerto Rico in the future. The stores in
Canada and Puerto Rico contributed less than 5% of the Company's consolidated
net sales in 1998. In 1998 the Company sold products into Mexico from its
existing stores along the border between the United States and Mexico. The
Company also established a Mexican subsidiary in 1998. This subsidiary is
expected to employ sales personnel to sell directly into Mexico in the future.
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 46 stores opened in the first quarter of 1998, 16 were
profitable in the fourth quarter of 1998.
5
For 1998, annual sales volumes of store sites operating at least five years
ranged between approximately $300,000 and $4,400,000, with 75% of these store
sites having annual sales volumes within the range of approximately $600,000 to
$1,900,000. The data in the following table shows the growth in the average
sales of the Company's store sites from 1997 to 1998 based on each site's age.
The store sites opened in 1998 contributed approximately $17.6 million (or
approximately 3.5%) of the Company's consolidated net sales in 1998, with the
remainder coming from store sites opened prior to 1998.
Number of store
Age of store site as sites in group as of Average Average Percent
of December 31, 1998 December 31, 1998 sales 1997 sales 1998 change
- -------------------------------------------------------------------------------
0-1 year old 122 $ -- $ 144,000(1) --%
1-2 years old 160 113,000(1) 348,000 --
2-3 years old 109 361,000 500,000 38.5
3-4 years old 60 472,000 566,000 19.9
4-5 years old 62 534,000 596,000 11.6
5-6 years old 53 663,000 755,000 13.9
6-7 years old 42 843,000 887,000 5.2
7-8 years old 32 951,000 1,036,000 8.9
8-9 years old 28 1,119,000 1,218,000 8.9
9-10 years old 23 1,111,000 1,278,000 15.0
10-13 years old 40 1,353,000 1,529,000 13.0
13+ years old 35 1,918,000 1,981,000 3.3
(1) Average sales include sales of store sites open for less than the full
fiscal year.
As of December 31, 1998, the Company operated distribution centers in or near
Winona, Minnesota; Indianapolis, Indiana; Dallas, Texas; Atlanta, Georgia;
Scranton, Pennsylvania; Fresno, California; Lakewood, Washington; Akron, Ohio;
Salt Lake City, Utah; Winston-Salem, North Carolina; and Kansas City, Missouri.
Distribution centers are located so as to permit twice-a-week to five
times-a-week deliveries 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 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 central 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. The Company plans to convert a portion of this central processing
system in 1999 to a new computer software and operating system.
At the store level, the Company currently has two point-of-sale systems. The
first is a UNIX/terminal based computer system (legacy point-of-sale system) and
the second is a Microsoft Windows NT system (NT Point-of-sale system). The
development of the NT Point-of-sale system began in 1996. During 1997 and 1998
the Company tested its NT Point-of-sale system in a limited number of store
locations. At the end of 1998, approximately 120 stores were using the NT
Point-of-sale system. The Company plans to convert all but approximately 100
stores from the legacy point-of-sale system to the NT Point-of-sale system
during 1999.
6
Trademarks
The Company conducts its business in the United States and Canada under various
trademarks and service marks, including Fastenal(R), FastTool(R), SharpCut(R),
PowerFlow(TM), EquipRite(R), CleanChoice(R), PowerPhase(TM) and FastArc(TM).
Although the Company does not believe its operations are substantially dependent
upon any of its trademarks or service marks, the Company considers its
"Fastenal" name and other trademarks and service marks to be valuable to its
business.
Products
The Company's original product offering in 1967 was the Fastenal(R) product
line. Today, this product line consists of approximately 59,000 different stock
items. This product line 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 55%, 61%, and 64% of the Company's consolidated net
sales in 1998, 1997 and 1996, 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.
During the 1990's, the Company added seven additional product lines. These
product lines are sold through the same distribution channel as the original
Fastenal(R) product line and include the following:
Approximate
Year number of
Product line introduced stock items Product line consists of:
- ---------------- ---------- ------------- -------------------------------------
FastTool(R) 1993 30,000 Tools and safety supplies
SharpCut(R) 1996 16,000 Metal cutting tool blades
PowerFlow(TM) 1996 14,000 Fluid transfer components and
accessories for hydraulic and
pneumatic power
EquipRite(R) 1996 6,000 Material handling and storage products
CleanChoice(R) 1996 4,000 Janitorial and paper products
PowerPhase(TM) 1997 4,000 Electrical supplies
FastArc(TM) 1997 3,000 Welding supplies (excluding gas and
welding machines)
The Company plans to add other industrial product lines in the future.
7
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 stock item for the previous three years. Computers then convert this
data to typical store maximum-minimum inventory levels for each stock 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 1998 approximately 95.9% of the Company's consolidated net sales were
attributable to products manufactured by other companies to industry standards.
The remaining amount of approximately 4.1% of the Company's consolidated net
sales for 1998 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 136,000
standard stock items it distributes. Most items distributed by the Company can
be purchased from several sources, although preferred sourcing is used for some
stock items to facilitate quality control. No single supplier accounted for more
than 5.0% of the Company's purchases in 1998.
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, 1998, the
Company's total number of active customer accounts (defined as accounts having
purchase activity within the last 90 days) was approximately 99,000.
During each of the three years ended December 31, 1998, 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 is 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.
In January 1999, the Company began rolling out its new 1500+ page catalog. This
catalog includes standard product from all of the Company's product lines. It is
the second comprehensive catalog published by the Company, the first being an
824 page catalog which was initially rolled out in late 1997.
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, 1998, the Company employed a total of 4,549 full- and
part-time employees, 3,025 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.
9
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.
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. These facilities are as
follows:
Approximate
Purpose Square Feet
- -------------------------------------------------------------------- -----------
Distribution center and home office 213,000
Manufacturing facility 50,000
Winona store and regional training center 13,000
Rack and shelving storage 42,000
Multi-building complex which houses several support services
including, among others, the SharpCut(R) regrind department, the
FastTool(R) tool repair department and the fabrication department 30,000
The Company also owns the following facilities, excluding store locations,
outside of Winona, Minnesota:
Approximate
Purpose Location Square Feet
- ----------------------------- ---------------------------------- ---------------
Distribution center Indianapolis, Indiana 76,000
Distribution center Atlanta, Georgia 54,000
Distribution center Dallas, Texas 50,000 (1)
Distribution center Scranton, Pennsylvania 50,000 (2)
Distribution center Akron, Ohio 102,000
(1) The Dallas, Texas facility is currently being expanded to approximately
95,000 square feet.
(2) The Scranton, Pennsylvania facility is currently being expanded to
approximately 80,000 square feet.
10
In addition, 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 owned by the Company. As of December 1998, the
Company was in the process of purchasing store locations in Appleton, Wisconsin;
Muskegon, Michigan; and Rochester, Minnesota.
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 also leases the following distribution centers and packaging
facility:
Approximate Lease Lease Renewal Options
Purpose Location Square Feet Expiration Date
- --------------------- ------------------------------ ----------- ----------------- -----------------------
Distribution center Lakewood, Washington 40,000 February 2000 Two one-year periods(1)
Distribution center Fresno, California(2) 52,500 February 2002 Three one-year
periods(1)
Distribution center Salt Lake City, Utah 12,100 March 2000 None
Distribution center Winston-Salem, North Carolina 58,400 October 2000 Two one-year periods(1)
Packaging facility Memphis, Tennessee 115,000 December 2000 One two-year period(1)
Distribution center Kansas City, Missouri 40,000 April 2001 One two-year period(1)
(1) The lease renewals can be exercised at the Company's option.
(2) The Company moved to a new facility in February 1999. As of December 31,
1998 the warehouse space was approximately 21,500 square feet.
If economic conditions are suitable, the Company will, in the future, consider
purchasing store sites to house its older stores. It is anticipated that 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.
11
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Fastenal Company are:
Name Age Position
- -----------------------------------------------------------------------------
Robert A. Kierlin 59 Chairman of the Board,
President, Chief Executive
Officer and Director
Willard D. Oberton 40 Vice President and Chief
Operating Officer
Stephen M. Slaggie 59 Secretary and Director
Daniel L. Florness 35 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 senior manager from July
1992 through May 1996 with that firm.
The executive officers are elected by the Board of Directors, generally for a
term of one year, and serve until their successors are elected and qualified.
None of the above executive officers is related to any other such executive
officer or to any other director of Fastenal Company.
12
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, 1998, 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, 1998, Six-Year Selected
Financial Data on page 4.
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, 1998, Management's
Discussion & Analysis of Financial Condition & Results of Operations on pages
4-9.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Incorporated herein by reference is Fastenal Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1998, Market Risk Management
on page 8.
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, 1998, 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.
13
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", page 4, and "Section 16(a)
Beneficial Ownership Reporting Requirements", page 11, in Fastenal Company's
Proxy Statement dated March 16, 1999. 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 16, 1999.
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 2-3, in
Fastenal Company's Proxy Statement dated March 16, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
14
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, 1998 and 1997
Consolidated Statements of Earnings for the years ended December 31,
1998, 1997, and 1996
Consolidated Statements of Stockholders' Equity and Comprehensive
Income for the years ended December 31, 1998, 1997, and 1996
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997, and 1996
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, 1998)
2. Financial Statement Schedules:
Schedule II--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)
10.1 Description of bonus arrangement for Vice President
(incorporated by reference to Exhibit 10 to Fastenal Company's
Form 10-K for the year ended December 31, 1997)
10.2 Description of bonus arrangement for Treasurer
13 Annual Report to Shareholders for the fiscal year ended
December 31, 1998 (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
Fastenal Company filed no report on Form 8-K during the fourth quarter of
the fiscal year ended December 31, 1998.
15
Independent Auditors' Report on Schedule
The Board of Directors and Stockholders
Fastenal Company:
Under date of January 22, 1999, we reported on the consolidated balance sheets
of Fastenal Company and subsidiaries as of December 31, 1998 and 1997, 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, 1998, as contained in the 1998 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 1998.
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 consolidated 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 22, 1999
16
FASTENAL COMPANY
Schedule II--Valuation and Qualifying Accounts
Years ended December 31, 1998, 1997, and 1996
"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,
1998 allowance for
doubtful accounts $660,000 $3,493,000 $0 $3,413,000 $740,000
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
17
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 15, 1999
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 15, 1999 By /s/ Robert A. Kierlin
---------------------------------
Robert A. Kierlin, President
(Principal Executive Officer)
and Director
Date: March 15, 1999 By /s/ Daniel L. Florness
---------------------------------
Daniel L. Florness, Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: March 15, 1999 By /s/ Stephen M. Slaggie
---------------------------------
Stephen M. Slaggie, Director
Date: March 15, 1999 By /s/ Michael M. Gostomski
---------------------------------
Michael M. Gostomski, Director
Date: March 15, 1999 By /s/ Henry K. McConnon
---------------------------------
Henry K. McConnon, Director
Date: March 15, 1999 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).
10.1 Description of bonus arrangement for Vice
President (incorporated by reference to
Exhibit 10 to Fastenal Company's Form 10-K
for the year ended December 31, 1997)
10.2 Description of bonus arrangement for
Treasurer .........................................Electronically Filed
13 Annual Report to Shareholders for the fiscal
year ended December 31, 1998 (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