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FASTENAL CO Annual Report, Year Ended Dec 31, 2012

Filing Date
Filed February 7, 2013
Period End
December 31, 2012
Security
FAST
One revenue dollarkept$0.13
In the record · 2016–202610-K1210-Q348-K100

FAST filed 12 annual reports (10-K), 34 quarterly reports (10-Q) and 100 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Jul ’16Jul ’16
  2. FY2018 annual report10-K · Feb ’19Feb ’19
  3. Leadership change8-K · Aug ’21Aug ’21
  4. Leadership change8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed February 7, 2013. Cited figures are marked; the original filing is the authoritative source.

Fastenal's 2012 10-K shows a company that grew sales 13.3% to $3.13 billiona and net earnings 17.5% to $420.5 million, with pre-tax margin reaching 21.5%, the highest in company history.

Growth was driven mainly by higher unit sales at older stores and by the rapid expansion of FAST Solutions industrial vending, which reached 20,162 machines signed in 2012, up from 7,842 in 2011. Gross margin slipped slightly to 51.5%b from 51.8%, so the profit gain came from expense control: operating and administrative expenses rose only 9.5% against 13.3% sales growth. Management said the 2012 margin gain was made possible entirely by that expense discipline.

The company is pursuing its 'pathway to profit' strategy, which slows new store openings (about 3% growth in 2012, with 65 to 80 planned for 2013) while adding sales specialists. Management now believes its 23% pre-tax margin goal can be reached at average store sales of $100,000 to $110,000c per month, down from the original $125,000 target, with the timeline shortened to 2013. The company's 2012 average monthly store sales were $83,098 in Q4, so this remains a meaningful execution hurdle.

Sales growth slowed sharply from about 20% in early 2012 to single digits by late 2012, and the filing attributes part of the weakness to political uncertainty and Hurricane Sandy. Capital intensity and cash returns rose in 2012. Net capex was $133.9 milliond, with 2013 guidance of about $186.5 million, mainly for vending equipment and distribution automation.

Dividends totaled $367.3 million, or $1.24 per share, including a $0.50 special dividend paid in December. Management signaled a smaller quarterly dividend in early 2013 ($0.10 declared), and it opened a $125 million credit facility to fund the cash needs of expansion and the large year-end payout. Operating cash flow was $396.3 million, and the balance sheet remained strong with $1.56 billion of equity.

02—Key points

Key Highlights

  1. Net sales rose 13.3% to $3,133.6 million; net earnings rose 17.5% to $420.5 million, and diluted EPS was $1.42 versus $1.21 in 2011.
  2. Pre-tax earnings reached 21.5% of sales, a record for the company, driven by operating expense control even as gross margin dipped to 51.5% from 51.8%.
  3. FAST Solutions (industrial vending) signed 20,162 machines in 2012 (up about 157%), with over 20,000 machines installed; the company's internal goal for 2013 is 30,000 signings.
  4. Same-store daily sales growth decelerated through 2012, from about 21% in January to roughly 10% by December for total company, with a notable slowdown in Q4 for industrial production and non-residential construction.
  5. Shareholder returns were heavy: $367.3 million in dividends ($1.24 per share including a $0.50 special), and no share repurchases were made in 2012.
  6. Capital spending increased to $133.9 million net, with 2013 estimated at $186.5 million for vending equipment, warehouse automation, and fleet, and a new $125 million unsecured credit facility was established in December 2012.
  7. Operating cash flow was $396.3 million (94% of net earnings), but operational working capital rose 10.4% as receivables and inventory grew faster in late 2012 and inventory was built for vending and metalworking.

03—One dollar

Follow one dollar

Of each $1.00 of revenue in FY2012, Fastenal Co kept $0.13.

  1. Revenue$3.13B100.0%
  2. Cost of revenue−$1.52B48.5%
  3. Gross profit$1.61B51.5%
  4. Operating costs−$940.8M30.0%
  5. Operating income$673.7M21.5%
  6. Interest, other & tax−$253.2M8.1%
  7. Net income$420.5M13.4%
Computed from 10-KFY2012filed February 7, 2013Computed from this filing’s revenue, gross profit, operating income and net income · right columngrey figure: share of revenue

Where FY2012 revenue went

$3.13B
  • Cost of revenue: $1.52B, 48% of revenue
  • SG&A: $941.2M, 30% of revenue
  • Net income: $420.5M, 13% of revenue
  • Interest, other & tax: $253.2M, 8.1% of revenue

Kept 13% as net income

Full revenue history →

04—Financials

Financial Highlights

Figures from 10-KFY2012filed February 7, 2013
Revenue$3.13B51.5% Gross MarginNet Income$420.54M13.4% Net MarginEPS (Diluted)$0.35Total Assets$1.82BCash & Equivalents$79.61MFree Cash Flow$257.89M

Financial Statements

FY2012 against FY2011

Line itemFY2012FY2011Change
Revenue$3.13B$2.77B+13.3%
Cost of Revenue$1.52B$1.33B+14.0%
Gross Profit$1.61B$1.43B+12.6%
SG&A Expenses$941.24M$859.37M+9.5%
Operating Income$673.69M$574.61M+17.2%
Interest Expense$0$0—
Net Income$420.54M$357.93M+17.5%
EPS (Basic)$0.35$0.30+17.4%
EPS (Diluted)$0.35$0.30+17.4%
Shares Outstanding (Basic)1.18B1.18B+0.4%
Shares Outstanding (Diluted)1.19B1.18B+0.4%

05—Questions

Frequently Asked Questions

  1. Why did net earnings grow faster than sales in 2012?

    Operating and administrative expenses grew only 9.5% against 13.3% sales growth, and operating expenses fell to 30.0% of sales from 31.1% in 2011. Gross margin slightly declined to 51.5% from 51.8%, so the earnings lift came from cost control rather than pricing or mix. A slightly lower tax rate (37.6% versus 37.8%) also contributed.

  2. How much does the company's growth depend on opening new stores?

    Less than in the past. Management is slowing store openings (about 3% growth in 2012, 65 to 80 planned for 2013) and redirecting spending to sales specialists, industrial vending, and existing store productivity. Growth at older stores has been the main driver of sales, and new stores typically take 10 to 12 months to become profitable.

  3. What are the main risks to the 23% pre-tax margin goal?

    The goal depends on average store sales reaching $100,000 to $110,000 per month. Q4 2012 averaged $83,098, and sales growth slowed during 2012. Risks include a weak manufacturing or construction economy, difficulty hiring and retaining sales staff, gross margin pressure from customer or product mix, and competition, including rivals replicating the industrial vending model. The company explicitly cautions that the timeline could slip.

  4. Is the dividend sustainable at 2012 levels?

    Probably not at that level. The $1.24 total for 2012 included a special $0.50 payout, and dividends consumed 87% of 2012 earnings. Management guided to a smaller quarterly dividend in early 2013 ($0.10 declared) and will reassess each quarter based on the economy, free cash flow, dividend tax changes, and other factors. The new credit facility gives added liquidity, but the company is spending heavily on capex.

06—Continue

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