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Fastenal Company Reports 2010 Third Quarter Earnings

BALANCE SHEET AND CASH FLOW:

Our balance sheet continues to be very strong and our operations have good cash generating characteristics. During the third quarter of 2010, we generated $46,766 (or 62.4% of net earnings) of operating cash flow; year-to-date, we generated $166,293 (or 83.1% of net earnings) of operating cash flow. Our first quarter typically has stronger cash flow characteristics due to the timing of tax payments; this benefit reverses itself in the second, third, and fourth quarters as income tax payments go out in April, June, September, and December. The remaining amounts of cash flow from operating activities are largely linked to the pure dynamics of a distribution business and its strong correlation to working capital as discussed above.

The strong free cash flow (operating cash flow less net capital expenditures) during 2009 and 2010 allowed us to increase our first dividend payment (declared January 2010 and paid in February 2010) by 14.3% (from $0.35 per share in 2009 to $0.40 per share in 2010) and to increase our second dividend payment (declared July 2010 and paid in September 2010) by 13.5% (from $0.37 per share in 2009 to $0.42 per share in 2010). Year-to-date, we have paid total dividends of $120,893, or 60.4% of net earnings. 

STOCK REPURCHASE:

In July 2009, we announced our Board of Directors had authorized purchases by us of up to 2,000,000 shares of our common stock. This authorization replaced any unused authorization previously approved by our Board of Directors. During 2009, we purchased 1,100,000 shares of our outstanding stock at an average price of approximately $37.37 per share. These purchases occurred in the fourth quarter of 2009. We did not purchase any stock in the first nine months of 2010.

CONFERENCE CALL TO DISCUSS QUARTERLY EARNINGS:

As we previously disclosed, we will host a conference call today to review the quarterly results, as well as current operations. This conference call will be broadcast live over the Internet at 9:00 am, central time. To access the webcast, please go to the Fastenal Company Investor Relations Website at http://investor.fastenal.com/events.cfm .

ADDITIONAL INFORMATION:

This press release contains statements that are not historical in nature and that are intended to be, and are hereby identified as, "forward looking statements" as defined in the Private Securities Litigation Reform Act of 1995, including statements regarding (1) our anticipated sales growth and our goals regarding sales growth, (2) the goals of our long-term growth strategy, 'pathway to profit', including the anticipated rate of new store openings, planned additions to our outside sales personnel, the expected funding of such additions out of cost savings resulting from the slowing of the rate of new store openings, the growth in average store sales expected to result from this strategy, our ability to capture leverage and working capital efficiency expected to result from this strategy, and our ability to increase overall productivity as a result of this strategy, (3) our ability to manage our employee related costs in the short-term while maintaining our sales, (4) our expectations regarding our gross profit percentage in the remainder of 2010, (5) our intent to increase our range of store openings commencing in the second half of 2010, and (6) our expectations regarding inventory growth in 2010. The following factors are among those that could cause the Company's actual results to differ materially from those predicted in such forward‑looking statements: (1) a prolonged downturn in the economy, a significant decline in industrial production, or a change, from that projected, in the number of North American markets able to support new stores could cause store openings to change from that expected and could impede our sales growth, (2) a prolonged downturn in the economy, changes in the expected rate of new store openings, difficulties in successfully attracting and retaining additional qualified outside sales personnel, and difficulties in changing our sales process could adversely impact our ability to achieve the goals of our 'pathway to profit' initiative, (3) a worsening trend in the economy, or changes in government regulations, could make it difficult to effectively manage our employee related costs in the short-term while maintaining sales, (4) a significant improvement or deterioration in the economy, additional inflation or deflation, or a change in our purchasing patterns could affect our expectations regarding our gross profit percentage in the remainder of 2010, (5) a prolonged downturn in the economy could affect our ability to increase our range of store openings commencing in 2010, and (6) an unexpected dramatic increase or decrease in sales, or inflation related to the price of steel could impact our expectations regarding inventory growth in 2010. We assume no obligation to update any forward looking statement or any discussion of risks and uncertainties related to such forward looking statements. A discussion of other risks and uncertainties which could cause our operating results to vary from anticipated results or which could materially adversely effect our business, financial condition, or operating results is included in our 2009 annual report on Form 10-K under the sections captioned Certain Risks and Uncertainties and Item 1A – Risk Factors. FAST-E

The Fastenal Company logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6432
FASTENAL COMPANY AND SUBSIDIARIES
     
Consolidated Balance Sheets
(Amounts in thousands except share information)
     
   (Unaudited)   
   September 30,   December 31, 
Assets 2010 2009
     
Current assets:    
Cash and cash equivalents $ 172,565  164,852
Marketable securities  24,641  24,400
Trade accounts receivable, net of allowance for doubtful accounts of $4,354 and $4,086, respectively  301,721  214,169
Inventories  546,063  508,405
Deferred income tax assets  14,710  12,919
Prepaid income taxes -- 11,657
Other current assets  57,103  45,962
Total current assets  1,116,803  982,364
     
Marketable securities  5,166  6,238
Property and equipment, less accumulated depreciation  343,848  335,004
Other assets, net  3,520  3,752
     
Total assets $ 1,469,337  1,327,358
     
     
Liabilities and Stockholders' Equity    
     
Current liabilities:    
Accounts payable $ 73,605  53,490
Accrued expenses  95,225  66,019
Income taxes payable  8,313  --
Total current liabilities  177,143  119,509
     
Deferred income tax liabilities  16,819  17,006
     
Stockholders' equity:    
Preferred stock, 5,000,000 shares authorized  --  --
Common stock, 200,000,000 shares authorized, 147,430,712 shares issued and outstanding 1,474 1,474
Additional paid-in capital  3,348  333
Retained earnings  1,254,943  1,175,641
Accumulated other comprehensive income  15,610  13,395
Total stockholders' equity  1,275,375  1,190,843
     
Total liabilities and stockholders' equity $ 1,469,337  1,327,358
         
FASTENAL COMPANY AND SUBSIDIARIES
         
Consolidated Statements of Earnings
(Amounts in thousands except earnings per share)
   
   (Unaudited)   (Unaudited) 
   Nine months ended   Three months ended 
   September 30,   September 30, 
  2010 2009 2010 2009
         
         
Net sales $ 1,695,705  1,453,580  603,750  489,339
         
Cost of sales  819,486  707,860  291,102  244,772
Gross profit  876,219  745,720  312,648  244,567
         
         
Operating and administrative expenses  553,333  520,171  192,140  168,119
Loss (gain) on sale of property and equipment  103  790  (2)  38
Operating income  322,783  224,759  120,510  76,410
         
Interest income  713  1,312  192  592
         
Earnings before income taxes  323,496  226,071  120,702  77,002
         
Income tax expense  123,301  86,250  45,708  29,413
         
Net earnings $ 200,195  139,821  74,994  47,589
         
         
         
Basic net earnings per share  $ 1.36  0.94  0.51  0.32
         
Diluted net earnings per share   $ 1.36  0.94  0.51  0.32
         
Basic weighted average shares outstanding  147,431  148,531  147,431  148,531
         
Diluted weighted average shares outstanding  147,431  148,531  147,431  148,531
 
     
FASTENAL COMPANY AND SUBSIDIARIES
     
Consolidated Statements of Cash Flows
(Amounts in thousands)
     
   (Unaudited) 
   Nine months ended 
   September 30, 
  2010 2009
     
Cash flows from operating activities:    
Net earnings $ 200,195  139,821
Adjustments to reconcile net earnings to net cash provided by operating activities:    
Depreciation of property and equipment  30,432  30,147
Loss on sale of property and equipment  103  790
Bad debt expense  6,004  7,300
Deferred income taxes  (1,978)  (3,104)
Stock based compensation  3,015  2,850
Amortization of non-compete agreement  50  50
Changes in operating assets and liabilities:    
Trade accounts receivable  (93,556)  (1,683)
Inventories  (37,658)  66,141
Other current assets  (11,141)  16,938
Accounts payable  20,115  (3,925)
Accrued expenses  29,206  (11,328)
Income taxes  19,970  4,676
Other  1,536  4,511
Net cash provided by operating activities  166,293  253,184
     
Cash flows from investing activities:    
Purchase of property and equipment  (42,643)  (40,128)
Proceeds from sale of property and equipment  3,264  4,264
Net decrease (increase) in marketable securities  831  (5,149)
Net decrease (increase) in other assets  182  (18)
Net cash used in investing activities  (38,366)  (41,031)
     
Cash flows from financing activities:    
Purchase of common stock  --  --
Payment of dividends  (120,893)  (106,943)
Net cash used in financing activities  (120,893)  (106,943)
 
Effect of exchange rate changes on cash  679  2,642
     
Net increase in cash and cash equivalents  7,713  107,852
     
Cash and cash equivalents at beginning of period  164,852  85,892
Cash and cash equivalents at end of period $ 172,565  193,744
     
Supplemental disclosure of cash flow information:    
Cash paid during each period for income taxes $ 105,309  81,574
 
CONTACT: Fastenal Company
         Dan Florness, EVP and Chief Financial Officer
         507.454.5374

Fastenal Company Logo

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