10-KPeriod: FY2010

FASTENAL CO Annual Report, Year Ended Dec 31, 2010

Filed February 9, 2011For Securities:FAST

Summary

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 billion, 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 million, mitigating a potential protracted dispute.

Financial Statements
Beta

Key Highlights

  • 1Net 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.
  • 2The company operated 2,490 store locations at year-end 2010, with plans to open 150-200 new stores in 2011, signaling continued expansion strategy.
  • 3Profitability showed improvement, with net earnings increasing by 43.9% to $265.4 million in 2010, though operating and administrative expenses also rose.
  • 4Gross profit percentage increased in 2010 compared to 2009, showing a recovery from the deflationary impacts experienced in the prior year.
  • 5Fastenal 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.
  • 6The 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.
  • 7The company's stock price experienced growth throughout 2010, reaching a high of $60.11, demonstrating positive market sentiment.

Frequently Asked Questions

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.

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.

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.

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.