WINONA, Minn., Oct. 13 /PRNewswire-FirstCall/ -- The Fastenal
Company of Winona, MN (NASDAQ:FAST) reported the results of the
quarter ended September 30, 2008. Except as otherwise noted below,
dollar amounts are in thousands. Net sales for the three-month
period ended September 30, 2008 totaled $625,037, an increase of
17.1% over net sales of $533,750 in the third quarter of 2007. The
third quarter of 2008 benefited from one additional selling day (64
in 2008 versus 63 in 2007). Absent this additional selling day, our
sales growth would have been 15.3% for the quarter. Net earnings
increased from $62,142 in the third quarter of 2007 to $72,909 in
the third quarter of 2008, an increase of 17.3%. Basic and diluted
earnings per share increased from $.41 to $.49 for the comparable
periods. The third quarter of 2008 included a $10,000 legal
settlement. This is discussed in greater detail later in the
release. This settlement lowered our basic and diluted earnings per
share by just over $0.03 in the quarter. Net sales for the
nine-month period ended September 30, 2008 totaled $1,795,466, an
increase of 16.4% over net sales of $1,542,613 in the first nine
months of 2007. Net earnings increased from $176,431 in the first
nine months of 2007 to $217,169 in the first nine months of 2008,
an increase of 23.1%. Basic and diluted earnings per share
increased from $1.17 to $1.46 for the comparable periods. During
the first nine months of 2008, Fastenal opened 140 new stores
(Fastenal opened 147 new stores in the first nine months of 2007).
These 140 new stores represent an increase in stores since December
31, 2007 of 6.5%. There were 2,160 stores on December 31, 2007.
There were 13,417 total employees as of September 30, 2008, an
increase of 11.7% from December 31, 2007 and 12.7% from September
30, 2007. SALES GROWTH: Note -- Daily sales are defined as the
sales for the month divided by the number of business days in the
month. Stores opened greater than five years -- The impact of the
economy, over time, is best reflected in the growth performance of
our stores opened greater than five years (store sites opened as
follows: 2008 group -- opened 2003 and earlier, 2007 group --
opened 2002 and earlier, and 2006 group -- opened 2001 and
earlier). This store group is more cyclical due to the increased
market share they enjoy in their local markets. During each of the
twelve months in 2006 and 2007, and the first nine months of 2008,
the stores opened greater than five years had daily sales growth
rates of (compared to the comparable month in the preceding year):
Jan. Feb. Mar. Apr. May June 2006 13.9% 11.9% 10.8% 9.1% 9.6% 10.7%
2007 4.8% 3.8% 7.8% 4.5% 5.4% 6.2% 2008 8.9% 8.8% 9.9% 10.5% 10.4%
11.2% July Aug. Sept. Oct. Nov. Dec. 2006 9.9% 11.2% 8.1% 8.5% 8.0%
9.6% 2007 6.1% 5.3% 6.3% 6.3% 7.9% 9.6% 2008 9.7% 11.3% 8.5% Stores
opened greater than two years -- Our stores opened greater than two
years (store sites opened as follows: 2008 group -- opened 2006 and
earlier, 2007 group -- opened 2005 and earlier, and 2006 group --
opened 2004 and earlier) represent a consistent same-store view of
our business. During each of the twelve months in 2006 and 2007,
and the first nine months of 2008, the stores opened greater than
two years had daily sales growth rates of (compared to the
comparable month in the preceding year): Jan. Feb. Mar. Apr. May
June 2006 17.8% 15.0% 14.6% 12.3% 12.5% 14.0% 2007 7.3% 6.0% 9.4%
5.5% 6.7% 7.2% 2008 12.0% 11.1% 12.5% 13.1% 12.0% 12.0% July Aug.
Sept. Oct. Nov. Dec. 2006 12.8% 13.9% 9.2% 9.0% 9.4% 10.9% 2007
6.5% 5.9% 6.8% 7.6% 8.8% 10.9% 2008 10.9% 12.8% 10.5% All company
sales -- During each of the twelve months in 2006 and 2007, and the
first nine months of 2008, all the selling locations combined had
daily sales growth rates of (compared to the comparable month in
the preceding year): Jan. Feb. Mar. Apr. May June 2006 23.9% 21.3%
21.1% 19.1% 19.2% 20.6% 2007 12.6% 11.8% 15.5% 12.0% 13.2% 14.8%
2008 15.6% 15.0% 16.9% 17.1% 16.0% 15.9% July Aug. Sept. Oct. Nov.
Dec. 2006 19.7% 20.7% 16.1% 15.9% 16.3% 17.7% 2007 13.9% 13.4%
13.7% 14.7% 15.2% 16.8% 2008 14.8% 16.4% 14.3% The strong growth in
2006 generally represents a continuation of the strong environments
experienced in 2004 and 2005. The growth in 2007 generally
represents a weakening environment which began in late 2006. The
final three months of 2007 continued in the same variable fashion
as the previous nine months but showed consistent improvement from
the third quarter daily sales growth rate of 13.7%. This
improvement has remained in the first nine months of 2008. The
first and second quarters of 2008 were influenced by the timing of
Easter, which occurred in March 2008 versus April 2007. This had a
positive impact on growth in March 2008 and a negative impact on
growth in April 2008. The third quarter of 2008 was also influenced
by variations in the number of business days versus 2007. This was
most pronounced in September 2008 which had 21 business days versus
19 in September 2007. This had a dampening effect on September
2008's daily average sales growth as some of our customer's
purchases are based more on monthly budgets rather than daily
consumption. We believe the improvement in the final months of 2007
and the first nine months of 2008 were driven, in part, by our
'pathway to profit' initiative described below. PATHWAY TO PROFIT:
During April 2007 we disclosed our intention to alter the growth
drivers of our business. For most of the last decade, we have used
store openings as the primary growth driver of our business
(opening approximately 14% new stores each year). As announced in
April 2007, we intend to add outside sales personnel into existing
stores at a faster rate than historical patterns. We intend to fund
this sales force expansion with the occupancy savings generated by
opening stores at the rate of 7% to 10% per year (we opened
approximately 8.1% new stores in 2007 or 161 stores) versus the
historical rate of approximately 14%. Our goal is four-fold: (1) to
continue growing our business at a similar rate with the new
outside sales investment model, (2) to grow the sales of our
average store to $125 thousand per month in the five year period
from 2007 to 2012, (3) to enhance the profitability of the overall
business by capturing the natural expense leverage that has
historically occurred in our existing stores as their sales grow,
and (4) to improve the performance of our business due to the more
efficient use of working capital (primarily inventory) as our
average store size increases. Store Count and Full-Time Equivalent
(FTE) Headcount Growth -- In response to the 'pathway to profit',
we have increased our year-over-year store count (calculated using
the number of stores at the end of the quarter) and FTE head count
(calculated using the average FTE number during the quarter) as
follows: September June March December September 2008 2008 2008
2007 2007 Store count growth 7.2% 7.1% 6.8% 8.1% 9.7% Store
personnel - FTE 14.4% 17.5% 18.3% 18.0% 14.9% Distribution and
manufacturing personnel - FTE 4.6% 9.1% 8.8% 9.4% 9.5%
Administrative and sales support personnel - FTE 3.1% (3.0)% (3.4)%
2.3% 3.7% Total - FTE headcount growth 11.0% 13.0% 13.3% 14.0%
12.2% Store Size and Profitability -- Approximately 91% of our
sales in the third quarter of 2008 and 2007 were generated by our
stores included in the table set forth below. Our remaining sales
related to (1) our in-plant locations, (2) our direct Fastenal Cold
Heading business, or (3) our direct import business. Our average
store, excluding the business not sold through a store, had sales
of $75,100 per month in the third quarter of 2007. This average
grew to $82,200 per month in the third quarter of 2008. The average
age, number of stores and pre-tax margin(1) data by store size for
the third quarter of 2008 and 2007, respectively, were as follows:
Three months ended September 30, 2008 Proforma Pre- Percen- Pre-
Tax Average Number tage Tax Proforma Margin Age of of Margin
Adjust- Percen- Sales Per Month (Years) Stores Stores Percentage
ment(1) tage(1) $0 to 30,000 2.3 355 15.4% (26.2)% 1.3% (24.9)%
$30,001 to 60,000 4.7 733 31.9% 8.6% 1.3% 9.9% $60,001 to 100,000
7.1 577 25.1% 19.9% 1.3% 21.2% $100,001 to $150,000 9.6 366 15.9%
25.1% 1.3% 26.4% Over $150,000 12.7 269 11.7% 27.0% 1.3% 28.3%
Total 2,300 100.0% (1) The pre-tax margin percentage in the table
above excludes the impact of the legal settlement discussed later
in this release. We included a reconciliation of the impact of the
legal settlement to provide a comparative view to the 2007 table
below. Three months ended September 30, 2007 Average Pre-Tax Age
Number of Percentage Margin Sales Per Month (Years) Stores of
Stores Percentage $0 to 30,000 2.0 428 19.9% (18.9)% $30,001 to
60,000 4.6 661 30.8% 10.1% $60,001 to 100,000 7.2 511 23.8% 20.7%
$100,001 to $150,000 8.9 357 16.6% 24.4% Over $150,000 12.9 189
8.8% 26.0% Total 2,146 100.0% Note - Amounts may not foot due to
rounding difference. As we indicated in April 2007, our goal over
the five year period from 2007 to 2012 is to increase the sales of
our average store to approximately $125,000 per month. This will
shift the store mix emphasis from the first three categories ($0 to
$30,000, $30,001 to $60,000, and $60,001 to $100,000) to the last
three categories ($60,001 to 100,000, $100,001 to $150,000, and
over $150,000), and we believe will allow us to leverage our fixed
cost and increase our overall productivity. Note - Dollar amounts
in this section are presented in whole dollars, not thousands.
IMPACT OF FUEL PRICES: Rising fuel prices negatively impacted the
year ended December 31, 2007 and the first nine months of 2008.
During the first, second, and third quarters of 2007, total vehicle
fuel costs averaged approximately $2.1 million, $2.5 million, and
$2.4 million per month, respectively. During the first, second, and
third quarters of 2008, our total vehicle fuel costs averaged
approximately $2.9 million, $3.7 million, and $3.7 million per
month, respectively. The increase resulted from variations in fuel
costs, the freight initiative discussed below, increases in product
sales, and the increase in the number of vehicles necessary to
support additional sales personnel and to support additional store
locations. These fuel costs include the fuel utilized in our
distribution vehicles (semi-tractors, straight trucks, and sprinter
trucks) which is recorded in cost of goods and the fuel utilized in
our store delivery vehicles which is included in operating and
administrative expenses (the split is approximately 50:50 between
distribution and store use). In 2005, we introduced our new freight
model as a means to continue to improve our operating performance.
The freight model represents a focused effort to haul a higher
percentage of our products utilizing the Fastenal trucking network
(which operates at a substantial savings to external service
providers because of our ability to leverage our existing routes)
and to charge freight more consistently in our various operating
units. This initiative positively impacted the latter two-thirds of
2005, all of 2006, all of 2007, and the first nine months of 2008
despite the changes in average per gallon fuel costs shown in the
following table: 2007 - Quarter 1st 2nd 3rd 4th Diesel fuel $2.59
$2.85 $2.94 $3.25 Unleaded gasoline $2.31 $2.96 $2.86 $2.92 2008 -
Quarter 1st 2nd 3rd 4th Diesel fuel $3.47 $4.30 $4.38 Unleaded
gasoline $3.07 $3.65 $3.85 The average price of a gallon of diesel
fuel and a gallon of unleaded gasoline increased by 49.0% and
34.6%, respectively, from the third quarter of 2007 to third
quarter of 2008. Given the nature of our distribution business,
these fluctuations in fuel prices can have a meaningful impact on
our results. This impact is also covered later in our discussion
about gross margin and operating and administrative expenses. LEGAL
SETTLEMENT: On August 29, 2008 we announced that we had reached a
preliminary agreement to settle a purported class action lawsuit
relating to the classification of our Assistant General Managers as
exempt for purposes of the overtime provisions of the Fair Labor
Standards Act (FLSA) and California, Oregon, and Pennsylvania state
statutes. This suit also alleged that Assistant General Managers in
California did not receive sufficient meal breaks and paid rest
periods under the California Labor Code. (Note: This case was
originally reported on our Form 10-Q for the quarter ended
September 30, 2007, filed on October 31, 2007.) While we deny the
allegations underlying the lawsuit, we decided to enter into the
settlement agreement in order to avoid significant legal fees, the
uncertainty of a jury trial, distractions to our operations, and
other expenses and management time that would have to be devoted to
protracted litigation. The settlement, which is still subject to
court approval, fully resolves all claims brought by the plaintiffs
in this lawsuit. Pursuant to the settlement, we will make a cash
payment of $10 million to cover claims by eligible class members,
plaintiff attorneys' fees and costs, and payments to the named
plaintiffs. The expense for this settlement was recorded in the
results for the third quarter ending September 30, 2008. We do not
expect the settlement to have any material impact on our operating
results going forward. This expense negatively impacted our
earnings, and consequently, negatively impacted the incentive bonus
paid to our district, regional, and company leadership. The expense
related to this legal settlement lowered our bonus payout by
approximately $1.8 million for the third quarter of 2008. After
factoring in the reduction of our bonus payout, this legal
settlement resulted in a pre-tax expense of approximately $8.2
million for the quarter, or just over $0.03 per share (after-tax).
We have added comparisons to the following discussion regarding our
statement of earnings information to quantify the impact of this
settlement to the reported percentages. Our management believes
that providing such information permits investors to more easily
compare results for 2008 with those for prior periods and gives
investors a more accurate picture of our underlying operating
results before charges that are considered by management to be
non-recurring. STATEMENT OF EARNINGS INFORMATION (percentage of net
sales): Nine Months Ended Three Months Ended September 30,
September 30, 2008 2007 2008 2007 Net sales 100.0% 100.0% 100.0%
100.0% Gross profit margin 52.6% 50.8% 52.9% 51.0% Operating and
administrative expenses (1) 33.1% 32.3% 34.1% 32.4% Gain (loss) on
sale of property and equipment 0.0% 0.0% 0.0% 0.0% Operating income
(2) 19.5% 18.5% 18.8% 18.5% Interest income 0.0% 0.1% 0.0% 0.1%
Earnings before income taxes (3) 19.6% 18.5% 18.8% 18.6% Note -
Amounts may not foot due to rounding difference. Impact of Legal
Settlement: The percentages stated above for operating and
administrative expenses, operating income, and earnings before
income taxes were reduced by approximately 0.5 percentage points
for the nine months period ended September 30, 2008 and by
approximately 1.3 percentage points for the three month period
ended September 30, 2008. Adjusted for the impact the (1) operating
and administrative expenses would have been 32.6% (versus the
reported 33.1%) and 32.8% (versus the reported 34.1%) for the nine
and three months ended September 30, 2008, respectively; (2)
operating income would have been 20.0% (versus the reported 19.5%)
and 20.1% (versus the reported 18.8%) for the nine and three months
ended September 30, 2008, respectively; and (3) earnings before
income taxes would have been 20.1% (versus the reported 19.6%) and
20.1% (versus the reported 18.8%) for the nine and three months
ended September 30, 2008, respectively. Gross profit margins for
the first nine months and third quarter of 2008 increased over the
same periods in 2007. The improvement was driven by several
factors: (1) a focused effort to challenge our sales force to
increase the gross margin on business with a lower than acceptable
margin, (2) a focused effort to stay ahead of inflationary
increases in product cost, (3) improvements in our direct sourcing
operations, (4) continued focus on our freight initiative
(discussed earlier), and (5) continued focus on our product
availability within our network. This product availability focus
centers on our 'master stocking hub' in Indianapolis, Indiana, and
our efficient ability to pull product from store-to-store. Due to
the benefit of item (4) above, the rising fuel costs discussed
earlier had only a nominal negative impact on our gross margin
early in the first quarter of 2008 and this reversed to a positive
gross margin impact from late in the first quarter into the second
and third quarter. This impact could prove more challenging if fuel
costs continue to increase. Operating and administrative expenses
grew at a rate slightly faster than the rate of growth in net sales
in the third quarter of 2008. As noted in the 'pathway to profit'
discussion earlier in this release, we expect to see operating and
administrative expenses grow at a rate slower than sales growth due
to the added leverage that occurs as the size of our average store
increases. The legal settlement noted earlier negatively impacted
our ability to leverage our sales growth. As we have noted in the
past, almost 70% of our operating and administrative expenses
consist of payroll and payroll related costs. Our net payroll costs
for the third quarter increased approximately 14.2% and did
leverage. Absent the legal settlement, our net payroll would have
grown 15.9% in the third quarter due to a higher bonus payout and
would have still achieved positive leverage. This leverage did not
occur in the first two quarters because the commission and bonus
component of payroll grew faster than sales growth. Our employees
are rewarded for growth in gross profit dollars and pre-tax
earnings. The gross profit margin expansion discussed earlier drove
this reward faster than sales growth in each of the first three
quarters of 2008. The operating and administrative expenses for the
nine months of 2008 include $2,313 of additional compensation
expense related to the adoption of new stock option accounting
rules in early 2007. In the first nine months of 2007, this expense
was $1,234. We issued an additional grant of 275,000 shares in
April 2008. These options, like the options issued in 2007, vest
over a five to eight year period. The two option grants, when
combined, will result in compensation expense of approximately $300
per month for the next four years; and dropping slightly in the
remaining period. No other stock based compensation was outstanding
during these periods. During 2008 we have been able to leverage our
occupancy costs for the first time since earlier in the decade.
Occupancy expenses grew approximately 10.9%, 9.0%, 11.9% in the
first, second, and third quarter of 2008, respectively, and
approximately 10.6% for the first nine months of 2008. The
occupancy leverage was due to the decrease in the rate of store
openings pursuant to our 'pathway to profit' initiative. The other
component of operating and administrative expenses that experienced
meaningful de-leverage was transportation cost. These costs grew
approximately 25.6%, 28.5%, and 33.3% in the first, second, and
third quarter of 2008, respectively, and approximately 29.2% for
the first nine months of 2008. This increase was primarily driven
by the increase in fuel costs discussed earlier and by the increase
in the number of vehicles needed to support an expanded sales
force. Income taxes, as a percentage of earnings before income
taxes, were approximately 38.2% and 38.3% for the first nine months
of 2008 and 2007, respectively. During the first quarter of 2007,
we implemented FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (FIN No. 48). As defined in FIN No. 48,
we had a discrete event in each of the first and second quarters of
2007 which resulted in recognition of approximately $827 and $124
of additional tax, respectively, and an event in the third quarter
of 2007 which resulted in a reduction of income tax expense of
$767. Absent these events, our tax rate would have been 38.2% for
the first nine months of 2007. This rate fluctuates over time based
on the income tax rates in the various jurisdictions in which we
operate, and based on the level of profits in those jurisdictions.
WORKING CAPITAL: The year-over-year dollar and percentage growth
related to accounts receivable and inventories were as follows:
Twelve Month Twelve Month Year-over-year Balance at Dollar Change
Percentage Change change September 30, September 30, September 30,
2008 2007 2008 2007 2008 2007 Accounts receivable, net $309,184
258,738 $50,446 26,647 19.5% 11.5% Inventories $537,643 488,824
$48,819 70,129 10.0% 16.7% These two assets were impacted by our
initiatives to improve working capital. These initiatives include
(1) the establishment of a centralized call center to facilitate
accounts receivable management (this facility became operational
early in 2005) and (2) the tight management of all inventory
amounts not identified as either expected store inventory, new
expanded inventory, inventory necessary for upcoming store
openings, or inventory necessary for our 'master stocking hub'. The
accounts receivable increase of 19.5% from September 2007 to
September 2008 was driven by two extra selling days in September
2008 which resulted in a total sales increase of 26.4% for
September. The inventory increase from September 2007 to September
2008 of 10.0% is less than the rate of sales growth of 17.1% from
the third quarter of 2007 to the third quarter of 2008. This
improvement relates to our conscious decision to limit the growth
of inventory in the future, to halt growth or decrease inventory in
the short- term, to stock additional products in our Indianapolis,
Indiana distribution center, and then to continually resize the
existing store and distribution center inventory through a process
we call inventory re-distribution. As we indicated in earlier
communications, our short-term goals center on our ability to move
the ratio of annual sales to accounts receivable and inventory
(Annual Sales: AR&I) back to better than a 3.0:1 ratio (on
December 31, 2007, we had a ratio of 2.8:1). Historically, we have
been able to achieve a 20% after tax return on total assets (our
historical internal goal) when our Annual Sales: AR&I ratio is
at or above 3.0:1. STOCK REPURCHASE AND DIVIDENDS: On July 10,
2008, we issued a press release announcing our Board of Directors
had authorized purchases by us of up to an additional 1,000,000
shares of our common stock (over and above previously authorized
amounts). During the first nine months of 2008, we purchased
590,000 shares of our outstanding stock at an average price of
approximately $43.99 per share. With the new authorization in 2008,
we have remaining authority to purchase up to approximately
1,410,000 additional shares of our common stock. During the first
nine months of 2008 we paid dividends totaling $77,371 (or $0.52
per share) to our shareholders. ADDITIONAL INFORMATION: Additional
information regarding certain Fastenal Company statistics for the
current quarter is available on the Fastenal Company World Wide Web
site at http://www.fastenal.com/. The Company discloses sales and
store information on a monthly basis. This information is posted at
http://www.fastenal.com/ on the third business day following the
end of the first two months of a quarter and simultaneous with the
earnings release following the third month of a quarter. 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) working
capital goals and expected returns on total assets when working
capital is appropriately managed, (2) the outcome of our new long
term growth strategy 'pathway to profit', including planned
decreases in the 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, and our ability to capture leverage,
working capital efficiency, and improved productivity expected to
result from this strategy, (3) the expected settlement of our
current class action lawsuit, and (4) the expected amount of future
compensation expense resulting from stock options. 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: (i) an upturn or downturn in the
economy could cause store openings to change from that expected,
and could impact the rate at which additional sales personnel are
added, our ability to grow average store sales by adding sales
personnel, and our ability to capture leverage and manage support
labor, (ii) a change, from that projected, in the number of markets
able to support future store sites could impact the rate of new
store openings, (iii) our ability to successfully attract and
retain additional qualified sales personnel, the success of our
additional sales personnel, and our ability to successfully change
our sales process could adversely impact our ability to grow
average store sales, (iv) a change in accounts receivable
collections, a change in the economy from that currently being
experienced, a change in buying patterns, or a change in vendor
production lead times could cause us to fail to attain our goals
regarding working capital and rates of return on assets, (v) a
failure of the judge to approve the pending settlement of our class
action lawsuit could effect the costs of the proceedings and the
impact of the proceedings may effect our operations going forward,
(vi) an inadequate participation in the class for the pending
settlement of our class action lawsuit could cause us to rescind
the proposed settlement, and (vii) a change in accounting for
stock-based compensation or the assumptions used could change the
amount of stock-based compensation recognized. A discussion of
other risks and uncertainties is included in the Company's 2007
annual report on Form 10-K under the section captioned "Risk
Factors" and the Company's 2007 annual report to shareholders under
the section captioned "Management's Discussion and Analysis of
Financial Condition and Results of Operations". FAST-E FASTENAL
COMPANY AND SUBSIDIARIES Consolidated Balance Sheets (Amounts in
thousands except share information) (Unaudited) September 30,
December 31, Assets 2008 2007 Current assets: Cash and cash
equivalents $52,107 57,220 Marketable securities 228 159 Trade
accounts receivable, net of allowance for doubtful accounts of
$2,338 and $2,265, respectively 309,184 236,331 Inventories 537,643
504,592 Deferred income tax assets 16,020 14,702 Other current
assets 65,852 67,767 Total current assets 981,034 880,771
Marketable securities 1,463 1,950 Property and equipment, less
accumulated depreciation 322,657 276,627 Other assets, less
accumulated amortization 3,738 3,713 Total assets $1,308,892
1,163,061 Liabilities and Stockholders' Equity Current liabilities:
Accounts payable $74,699 55,353 Accrued expenses 90,184 75,565
Income taxes payable 7,123 6,873 Total current liabilities 172,006
137,791 Deferred income tax liabilities 15,109 15,109 Stockholders'
equity: Preferred stock, 5,000,000 shares authorized - - Common
stock, 200,000,000 shares authorized, 148,530,712 and 149,120,712
shares issued and outstanding, respectively 1,485 1,491 Additional
paid-in capital 625 227 Retained earnings 1,111,812 996,050
Accumulated other comprehensive income 7,855 12,393 Total
stockholders' equity 1,121,777 1,010,161 Total liabilities and
stockholders' equity $1,308,892 1,163,061 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, 2008
2007 2008 2007 Net sales $1,795,466 1,542,613 625,037 533,750 Cost
of sales 850,564 759,605 294,154 261,726 Gross profit 944,902
783,008 330,883 272,024 Operating and administrative expenses
593,771 498,290 213,310 173,178 Gain (loss) on sale of property and
equipment (199) 85 46 2 Operating income 350,932 284,803 117,619
98,848 Interest income 635 1,140 167 464 Earnings before income
taxes 351,567 285,943 117,786 99,312 Income tax expense 134,398
109,512 44,877 37,170 Net earnings $217,169 176,431 72,909 62,142
Basic and diluted net earnings per share $1.46 1.17 0.49 0.41 Basic
weighted average shares outstanding 148,933 150,878 148,573 150,462
Diluted weighted average shares outstanding 148,933 150,878 148,573
150,462 FASTENAL COMPANY AND SUBSIDIARIES Consolidated Statements
of Cash Flows (Amounts in thousands) (Unaudited) Nine months ended
September 30, 2008 2007 Cash flows from operating activities: Net
earnings $217,169 176,431 Adjustments to reconcile net earnings to
net cash provided by operating activities: Depreciation of property
and equipment 29,153 27,959 Loss (gain) on sale of property and
equipment 199 (85) Bad debt expense 5,527 4,313 Deferred income
taxes (1,318) 1,256 Stock based compensation 2,313 1,234
Amortization of non-compete agreement 50 50 Changes in operating
assets and liabilities: Trade accounts receivable (78,380) (53,519)
Inventories (33,051) (32,827) Other current assets 1,915 1,247
Accounts payable 19,346 13,598 Accrued expenses 14,619 7,687 Income
taxes payable 250 2,981 Other (4,062) 10,103 Net cash provided by
operating activities 173,730 160,428 Cash flows from investing
activities: Purchase of property and equipment (79,006) (36,592)
Proceeds from sale of property and equipment 3,624 5,460 Net
decrease in marketable securities 418 8,006 Increase in other
assets (75) (256) Net cash used in investing activities (75,039)
(23,382) Cash flows from financing activities: Purchase of common
stock (25,955) (37,078) Payment of dividends (77,371) (66,216) Net
cash used in financing activities (103,326) (103,294) Effect of
exchange rate changes on cash (478) 1,047 Net (decrease) increase
in cash and cash equivalents (5,113) 34,799 Cash and cash
equivalents at beginning of period 57,220 19,346 Cash and cash
equivalents at end of period $52,107 54,145 Supplemental disclosure
of cash flow information: Cash paid during each period for: Income
taxes $134,148 106,531 DATASOURCE: Fastenal Company CONTACT: Dan
Florness, EVP|CFO of Fastenal Company, +1-507-453-8211 Web site:
http://www.fastenal.com/
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Fastenal (NASDAQ:FAST)
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