01—Abstract
Summary
Summary of the 10-K/A filed February 10, 2011. Cited figures are marked; the original filing is the authoritative source.
Fastenal's 2010 results show a strong rebound from the 2009 downturn.
Net sales rose 17.6% to $2,269.5 milliona, and net earnings rose 43.9% to $265.4 million, or $1.80 per share, versus $1.24 in 2009. Gross margin improved to 51.8% from 50.9%, and pre-tax earnings reached $430.6 million, or 19.0% of sales, up from 15.4%. Management attributes the gains to sales growth, expense control, and margin improvement.
Non-payroll expenses fell 1.8%, while total expenses grew 8.5%, well below sales growth. Growth drivers included the Fastenal Automated Supply Technology (FAST) vending program, national accounts, government sales, and international operations. International revenue grew 35% to more than $200 millionb, and the company entered Panama and the United Kingdom.
Manufacturing revenue grew 29% to $91 millionc. The company opened 127 stores in 2010 (45 in the first half and 82 in the second half), bringing the total to 2,490, and added more than 150 sales specialists. Inventory rose 9.6% to $557.4 million, slower than sales growth.
Management reaffirmed its 'pathway to profit' target of a 23% pre-tax margin, now expected by about 2013 at average monthly store sales of $100,000 to $110,000d. Capital returns were generous. Total 2010 dividends were $1.24 per share, including a $0.42 special dividend, and the company declared a $0.50 quarterly dividend in January 2011.
No shares were repurchased in 2010, leaving authority for 900,000 shares. This filing is Amendment No. 1 to the Form 10-K and was filed solely to add Exhibit 13 (the 2010 Annual Report to Shareholders), which was omitted from the original filing. It does not change the financial statements or other disclosures.
02—Key points
Key Highlights
- Net sales grew 17.6% to $2,269.5 million in 2010, up from $1,930.3 million in 2009.
- Net earnings increased 43.9% to $265.4 million, or $1.80 per diluted share, versus $1.24 in 2009.
- Gross margin expanded to 51.8% from 50.9%, and pre-tax margin rose to 19.0% from 15.4%.
- The FAST vending program gained significant traction, with exceptional growth at customer sites where FAST 5000 machines are placed.
- International revenue grew 35% to more than $200 million, with new locations in Panama and the United Kingdom.
- The company opened 127 stores in 2010, ending with 2,490 stores, and added more than 150 sales specialists.
- Total 2010 dividends were $1.24 per share, including a $0.42 special dividend; a $0.50 dividend was declared in January 2011, and no shares were repurchased in 2010.
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-K/AFY2010filed February 10, 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
What drove Fastenal's earnings growth in 2010?
Earnings growth came from sales growth of 17.6%, disciplined expense control (total expenses grew 8.5% and non-payroll expenses fell 1.8%), and gross margin improvement from 50.9% to 51.8%. Payroll costs rose 14.6%, largely because incentive pay is tied to performance.
What is the 'pathway to profit' strategy and is it on track?
Introduced in 2007, the plan slows store openings and redirects savings to hiring in-store salespeople, with the goal of raising pre-tax margin from 18% to 23% of sales. Management now expects the 23% target to be reached around 2013, earlier than the roughly 2015 timeline estimated during the recession, once average monthly store sales reach $100,000 to $110,000.
How significant is the FAST vending program?
Management describes 2010 as the year FAST gained real traction. The FAST 5000 industrial vending program places automated, locally replenished supply machines at customer sites, which reduces inventory and gives customers usage tracking. Management expects it to become an increasingly important part of the business in 2011 and beyond. The filing does not break out FAST revenue.
Are there concerns about inventory or working capital?
Inventory rose 9.6% to $557.4 million, which is slower than sales growth but still a build. Accounts receivable plus inventory rose 14.5% to $827.5 million. Management said days sales outstanding and write-offs declined, and it expects better inventory utilization in 2011.
What does the 10-K/A amendment change?
The amendment was filed solely to add Exhibit 13, the portions of the 2010 Annual Report to Shareholders that were inadvertently omitted from the original February 9, 2011 filing. It does not alter the financial statements or other disclosures in the original report.
06—Continue