01—Abstract
Summary
Summary of the 10-K filed February 9, 2011. Cited figures are marked; the original filing is the authoritative source.
Fastenal Company's 2010 10-K filing reveals a company in recovery mode following the 2009 economic downturn.
Net sales rebounded significantly, growing by 17.6% to $2.27 billiona, driven by increased unit sales at older store locations and partially offset by a continued decrease in construction market sales. The company's 'Pathway to Profit' strategy, focusing on leveraging cost structures and optimizing store operations, appears to be gaining traction as profitability improved from the previous year. Despite the recovery in sales, the company faced challenges including a decrease in gross profit margins compared to 2008, attributed to deflationary price changes in 2009 that impacted inventory valuation.
However, margins began to recover in 2010. Fastenal also continued its expansion efforts, planning to open 150-200 new stores in 2011, indicating a strategic push for future growth. The company also settled a significant legal matter with the DOJ for $6.25 millionb, mitigating a potential protracted dispute.
02—Key points
Key Highlights
- Net sales increased by 17.6% to $2.27 billion in 2010, recovering from a 17.5% decline in 2009, indicating a rebound from the economic downturn.
- The company operated 2,490 store locations at year-end 2010, with plans to open 150-200 new stores in 2011, signaling continued expansion strategy.
- Profitability showed improvement, with net earnings increasing by 43.9% to $265.4 million in 2010, though operating and administrative expenses also rose.
- Gross profit percentage increased in 2010 compared to 2009, showing a recovery from the deflationary impacts experienced in the prior year.
- Fastenal settled a legal dispute with the Department of Justice (DOJ) concerning a government contract for $6.25 million in Q4 2010, avoiding further protracted legal proceedings.
- The company's 'Pathway to Profit' strategy, which includes slowing new store openings and investing in outside sales personnel, continues to be a core focus for improving long-term profitability and operational efficiency.
- The company's stock price experienced growth throughout 2010, reaching a high of $60.11, demonstrating positive market sentiment.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Fastenal Co kept $0.12.
- Revenue$2.27B100.0%
- Cost of revenue−$1.09B48.2%
- Gross profit$1.17B51.8%
- Operating costs−$745.1M32.8%
- Operating income$429.7M18.9%
- Interest, other & tax−$164.3M7.2%
- Net income$265.4M11.7%
Where FY2010 revenue went
$2.27B- Cost of revenue: $1.09B, 48% of revenue
- SG&A: $745.1M, 33% of revenue
- Net income: $265.4M, 12% of revenue
- Interest, other & tax: $164.3M, 7.2% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 9, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $2.27B$1.93B | +17.6% |
| Cost of Revenue | $1.09B$946.89M | +15.6% |
| Gross Profit | $1.17B$983.43M | +19.5% |
| SG&A Expenses | $745.11M$686.79M | +8.5% |
| Operating Income | $429.69M$295.79M | +45.3% |
| Net Income | $265.36M$184.36M | +43.9% |
| EPS (Basic) | $0.23$0.15 | +45.2% |
| EPS (Diluted) | $0.23$0.15 | +45.2% |
| Shares Outstanding (Basic) | 1.18B1.19B | −0.6% |
| Shares Outstanding (Diluted) | 1.18B1.19B | −0.6% |
05—Questions
Frequently Asked Questions
How did Fastenal perform financially in 2010 compared to 2009?
Fastenal experienced a significant recovery in 2010. Net sales increased by 17.6% to $2.27 billion, and net earnings grew by 43.9% to $265.4 million, rebounding from declines in 2009. This indicates a positive trend following the economic challenges of the previous year.
What is Fastenal's strategy for future growth?
Fastenal's growth strategy centers on its 'Pathway to Profit' initiative, which involves a balanced approach of strategically opening new stores (planning 150-200 in 2011) while optimizing existing store operations and investing in sales personnel. The company also focuses on expanding its product lines and improving operational efficiency.
Were there any significant legal or regulatory issues disclosed?
Yes, Fastenal settled a legal matter with the Department of Justice (DOJ) concerning a government contract for $6.25 million. While the company believed it had complied with its obligations, it chose to settle to avoid a protracted legal dispute. Another legal matter with a California fastener supplier alleging damages of $180 million was ongoing, with Fastenal believing the prospect of material liability to be remote.
How has the company managed its costs and margins?
Fastenal's gross profit percentage improved in 2010 compared to 2009, recovering from deflationary pressures. The company's 'Pathway to Profit' strategy has also focused on structurally lowering its cost base, making a higher proportion of operating costs variable, which aids in managing through economic fluctuations. Operating and administrative expenses also improved relative to sales in 2010.
06—Continue