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Fastenal Company Reports 2012 Third Quarter Earnings

Note – Dollar amounts in this section are presented in whole dollars, not thousands.

Store Count and Full-Time Equivalent (FTE) Headcount – The table that follows highlights certain impacts on our business of the 'pathway to profit' since its introduction in 2007.  Under the 'pathway to profit' we increased both our store count and our store FTE headcount during 2007 and 2008. However, the rate of increase in store locations slowed and our FTE headcount for all types of personnel was reduced when the economy weakened late in 2008. In the table that follows, we refer to our 'store' net sales, locations, and personnel. When we discuss 'store' net sales, locations, and personnel, we are referring to (1) 'Fastenal' stores and (2) strategic account stores. 'Fastenal' stores are either a 'traditional' store, the typical format in the United States or Canada, or an 'overseas' store, which is the typical format outside the United States and Canada. This is discussed in greater detail in our 2011 annual report on Form 10-K. Strategic account stores are stores that are focused on selling to a group of large customers in a limited geographic market. The sales, outside of our 'store' group, relate to either (1) our in-plant locations, (2) the portion of our internally manufactured product that is sold directly to a customer and not through a store (including our Holo-Krome business acquired in December 2009), or (3) our direct import business. 

The breakdown of our sales, the average monthly sales per store, the number of stores at quarter end, the average headcount at our stores during a quarter, the average FTE headcount during a quarter, and the percentage change were as follows for the first quarter of 2007 (the last completed quarter before we began the 'pathway to profit'), for the third quarter of 2008 (our peak quarter before the economy weakened), and for each of the last five quarters:

  Q1 2007 Q3 2008 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
               
Total net sales reported $ 489,157 $ 625,037 $ 726,742 $ 697,804 $ 768,875 $ 804,890 $ 802,577
Less: Non-store sales (approximate) 40,891 57,267 88,500 86,737 92,459 98,735 100,124
Store net sales (approximate) $ 448,266 $ 567,770 $ 638,242 $ 611,067 $ 676,416 $ 706,155 $ 702,453
% change since Q1 2007   26.7% 42.4% 36.3% 50.9% 57.5% 56.7%
% change (twelve months)   17.5% 21.1% 21.0% 20.2% 14.6% 10.1%
               
Percentage of sales through a store 92% 91% 88% 88% 88% 88% 88%
               
Average monthly sales per store $ 72 $ 82 $ 83 $ 79 $ 86 $ 89 $ 88
 (using ending store count)              
% change since Q1 2007   13.9% 15.3% 9.7% 19.4% 23.6% 22.2%
% change (twelve months)   9.3% 15.3% 16.2% 16.2% 11.3% 6.0%
               
   Q1 2007  Q3 2008  Q3 2011  Q4 2011  Q1 2012  Q2 2012  Q3 2012
               
Store locations - quarter end count 2,073 2,300 2,566 2,585 2,611 2,635 2,650
% change since Q1 2007   11.0% 23.8% 24.7% 26.0% 27.1% 27.8%
% change (twelve months)   7.2% 4.6% 3.8% 3.5% 3.0% 3.3%
               
Store personnel - absolute headcount 6,849 9,123 10,057 10,328 10,486 10,637 10,604
% change since Q1 2007   33.2% 46.8% 50.8% 53.1% 55.3% 54.8%
% change (twelve months)   17.9% 16.4% 14.1% 12.2% 9.3% 5.4%
               
Store personnel - FTE 6,383 8,280 8,629 8,684 8,900 9,126 9,244
Non-store selling personnel - FTE 616 599 920 953 998 1,054 1,066
Sub-total of all sales personnel - FTE 6,999 8,879 9,549 9,637 9,898 10,180 10,310
               
Distribution personnel-FTE 1,646 1,904 1,830 1,820 1,815 1,881 1,887
Manufacturing personnel - FTE 1 316 340 513 516 527 545 544
Administrative personnel-FTE 767 805 811 796 796 794 808
Sub-total of non-sales personnel - FTE 2,729 3,049 3,154 3,132 3,138 3,220 3,239
               
Total - average FTE headcount 9,728 11,928 12,703 12,769 13,036 13,400 13,549
               
% change since Q1 2007              
Store personnel - FTE   29.7% 35.2% 36.0% 39.4% 43.0% 44.8%
Non-store selling personnel - FTE   -2.8% 49.4% 54.7% 62.0% 71.1% 73.1%
Sub-total of all sales personnel - FTE   26.9% 36.4% 37.7% 41.4% 45.4% 47.3%
               
Distribution personnel-FTE   15.7% 11.2% 10.6% 10.3% 14.3% 14.6%
Manufacturing personnel-FTE 1   7.6% 62.3% 63.3% 66.8% 72.5% 72.2%
Administrative personnel-FTE   5.0% 5.7% 3.8% 3.8% 3.5% 5.3%
Sub-total of non-sales personnel - FTE   11.7% 15.6% 14.8% 15.0% 18.0% 18.7%
               
Total - average FTE headcount   22.6% 30.6% 31.3% 34.0% 37.7% 39.3%
               
% change (twelve months)              
Store personnel - FTE   15.2% 15.8% 14.1% 13.7% 10.6% 7.1%
Non-store selling personnel - FTE   -2.4% 44.0% 33.8% 28.1% 24.0% 15.9%
Sub-total of all sales personnel - FTE   13.8% 18.0% 15.8% 15.0% 11.8% 8.0%
               
Distribution personnel-FTE   6.0% 16.1% 14.1% 12.9% 7.1% 3.1%
Manufacturing personnel - FTE 1   1.8% 19.0% 16.2% 14.3% 10.8% 6.0%
Administrative personnel - FTE   7.9% 11.7% 7.0% 4.7% 1.4% -0.4%
Sub-total of non-sales personnel - FTE   6.0% 15.4% 12.5% 10.9% 6.2% 2.7%
               
Total - average FTE headcount   11.7% 17.4% 15.0% 14.0% 10.4% 6.7%
  1The distribution and manufacturing headcount was impacted by the addition of 92 employees with the acquisition of Holo-Krome in December 2009.

STATEMENT OF EARNINGS INFORMATION (percentage of net sales) for the periods ended September 30:

  Nine-month period Three-month period
  2012 2011 2012 2011
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 51.5% 52.1% 51.6% 51.9%
Operating and administrative expenses 29.8% 31.1% 29.8% 30.6%
(Gain) loss on sale of property and equipment 0.0% 0.0% 0.0% 0.0%
Operating income 21.7% 21.0% 21.9% 21.4%
Interest income 0.0% 0.0% 0.0% 0.0%
Earnings before income taxes 21.7% 21.0% 21.9% 21.4%
Note – Amounts may not foot due to rounding difference.

Gross profit – percentage for the first nine months of 2012 decreased from the same period in 2011. Sequentially, the gross profit percentage was unchanged from the second quarter of 2012.

The gross profit percentage in the first, second, third, and fourth quarters was as follows:

  Q1 Q2 Q3 Q4
2012 51.3% 51.6% 51.6%  
2011 52.0% 52.2% 51.9% 51.2%
2010 51.1% 52.1% 51.8% 52.0%

The fluctuations in our gross profit percentages are typically driven by changes in: (1) transactional gross profit, (2) organizational gross profit, and (3) vendor incentive gross profit. The transactional gross profit represents the gross profit realized from the day-to-day fluctuations in customer pricing relative to product and freight costs. The organizational gross profit represents the component of gross profit we attribute to buying scale and efficiency gains. The third component relates to vendor volume allowances. In the short-term, periods of inflation or deflation can influence the first two categories, while sudden changes in business volume can influence the third.

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