01—Abstract
Summary
Summary of the 10-K/A filed February 10, 2022. Cited figures are marked; the original filing is the authoritative source.
Fastenal Company (FAST) filed Amendment No. 1 on Form 10-K/A on February 10, 2022, for fiscal year 2021.
The amendment's stated purpose was to add the 2021 Annual Report to Shareholders as Exhibit 99.1, which was omitted from the original 10-K filed February 7, 2022, and to update Exhibit 10.4 (Non-Employee Director Stock Option Plan). The amendment itself contains no financial statements, so the financial results below come from the Annual Report exhibit. Fiscal 2021 was a solid year: net sales rose 6.4% to $6.01 billiona, gross margin expanded to 46.2% from 45.5%, operating income grew 6.6% to $1.22 billion (20.3% margin), and net earnings increased 7.7% to $925.0 million, or $1.60 per diluted share.
Cash generation weakened. Operating cash flow fell 30.1% to $770.1 millionb, and free cash flow declined 24.2% to $621.6 million, as working capital rose. Operational working capital assets (receivables and inventory) grew 15% to $2.42 billion, and the company did not repurchase any shares in 2021.
Cash dividends totaled $643.7 millionc ($1.12 per share), about 70% of net earnings. Balance sheet strength remains high: total debt was $390 million against $3.04 billion of stockholders' equity and $4.30 billion of total assets. Management reported that the company's market capitalization exceeded $30 billion during the year.
Strategically, management's focus is on its "Digital Footprint" (FMI Technology plus eCommerce), which reached 46.4% of sales in Q4 2021, up from 37.2% a year earlier. The company targets roughly 85% of sales from the Digital Footprint at $10 billiond in annual revenue, and it is migrating U.S. branches to Customer Fulfillment Center (CFC) and Customer Service Branch (CSB) formats, with CFCs representing 66.8% of U.S. branches at year-end. Investors should weigh these productivity initiatives against the cash flow decline and the reduced buybacks.
02—Key points
Key Highlights
- Net sales grew 6.4% to $6,010.9 million, and the company surpassed $6 billion in annual sales for the first time.
- Gross margin expanded to 46.2% from 45.5%, and operating margin rose to 20.3% from 20.2%, with operating income up 6.6% to $1,217.4 million.
- Net earnings increased 7.7% to $925.0 million, and diluted EPS rose 7.4% to $1.60.
- Operating cash flow fell 30.1% to $770.1 million and free cash flow fell 24.2% to $621.6 million, reflecting higher working capital needs.
- Digital Footprint (FMI Technology plus eCommerce) reached 46.4% of Q4 2021 sales, up from 37.2% in Q4 2020, with a long-term target of about 85% of sales at $10 billion in revenue.
- Cash returns: $643.7 million in dividends ($1.12 per share, about 70% of net earnings); no share repurchases in 2021 versus $52.0 million in 2020. A quarterly dividend of $0.31 was declared for Q1 2022.
- Filing note: this 10-K/A was filed to add the 2021 Annual Report (Exhibit 99.1) omitted from the February 7, 2022 original filing, and it contains no financial statements of its own.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Fastenal Co kept $0.15.
- Revenue$6.01B100.0%
- Cost of revenue−$3.23B53.8%
- Gross profit$2.78B46.2%
- Operating costs−$1.56B25.9%
- Operating income$1.22B20.3%
- Interest, other & tax−$292.4M4.9%
- Net income$925.0M15.4%
Where FY2021 revenue went
$6.01B- Cost of revenue: $3.23B, 54% of revenue
- SG&A: $1.56B, 26% of revenue
- Net income: $925.0M, 15% of revenue
- Interest, other & tax: $292.4M, 4.9% of revenue
Kept 15% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2021filed February 10, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $6.01B$5.65B | +6.4% |
| Cost of Revenue | $3.23B$3.08B | +5.0% |
| Gross Profit | $2.78B$2.57B | +8.2% |
| SG&A Expenses | $1.56B$1.43B | +9.4% |
| Operating Income | $1.22B$1.14B | +6.6% |
| Interest Expense | $9.70M$9.70M | 0.0% |
| Net Income | $925.00M$859.10M | +7.7% |
| EPS (Basic) | $0.81$0.75 | +7.3% |
| EPS (Diluted) | $0.80$0.74 | +7.4% |
| Shares Outstanding (Basic) | 1.15B1.15B | +0.2% |
| Shares Outstanding (Diluted) | 1.15B1.15B | +0.3% |
05—Questions
Frequently Asked Questions
How did Fastenal perform financially in 2021?
Fastenal grew net sales 6.4% to $6.01 billion, expanded gross margin to 46.2%, and increased net earnings 7.7% to $925.0 million ($1.60 diluted EPS). Operating income rose 6.6% to $1.22 billion, showing the company maintained profitability while growing revenue.
Why did operating cash flow decline in 2021?
Operating cash flow fell 30.1% to $770.1 million even though earnings rose. Operational working capital assets (accounts receivable and inventory) increased 15% to $2.42 billion, consuming cash as sales grew and supply chain conditions required more inventory. Free cash flow declined 24.2% to $621.6 million as a result.
Is Fastenal's dividend secure, and did it buy back shares?
Dividends paid totaled $643.7 million in 2021, or $1.12 per share, about 70% of net earnings. The board announced a $0.31 quarterly dividend for Q1 2022 and intends to continue paying quarterly dividends, though future payments depend on financial condition and results. Fastenal made no share repurchases in 2021, compared with $52.0 million (1.6 million shares) in 2020.
What is the Digital Footprint and why does management care about it?
The Digital Footprint combines sales through FMI Technology (FASTStock, FASTBin, FASTVend) and eCommerce that are not FMI service billings. It reached 46.4% of Q4 2021 sales, up from 37.2% a year earlier. Management believes it improves customer inventory visibility, supports proactive replenishment, and lowers Fastenal's labor and asset costs, with a target of about 85% of sales at $10 billion in annual revenue.
Why was this 10-K/A filed, and does it change the financial results?
The amendment was filed to add the 2021 Annual Report to Shareholders as Exhibit 99.1, which was omitted from the original 10-K filed February 7, 2022, and to update Exhibit 10.4 for the amended Non-Employee Director Stock Option Plan. It does not change any other disclosures or financial results, and it contains no financial statements, which are presented in the Annual Report exhibit and the original filing.
06—Continue