10-QPeriod: Q2 FY2009

FASTENAL CO Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 24, 2009For Securities:FAST

Summary

Fastenal Company (FAST) reported its second-quarter 2009 results, showcasing resilience amidst a challenging economic environment. While net sales saw a significant decline of 21.4% year-over-year for the quarter, and 17.6% for the first six months, the company demonstrated strong operational efficiency and robust cash flow generation. Management highlighted the impact of the weakened economy on its industrial production and non-residential construction segments, with sales to manufacturing customers down approximately 28% and non-residential construction sales down 23% in the second quarter. Despite the top-line pressures, Fastenal has effectively managed its costs, with operating and administrative expenses decreasing year-over-year. The company also maintained a strong balance sheet, with significant operating cash flow of $167.6 million for the first six months of 2009, an increase from the prior year, largely due to improved working capital management. This strong cash flow enabled the company to increase its dividend payments to shareholders, reflecting confidence in its financial position and future prospects.

Financial Highlights

42 data points
Beta

Revenue

$474.89M

51.1% Gross Margin

Net Income

$43.54M

9.2% Net Margin

EPS (Diluted)

$0.04

Total Assets

$1.33B

Cash & Equivalents

$173.67M

Free Cash Flow

$60.41M

Financial Statements
Beta
Revenue$474.89M
Cost of Revenue$232.39M
Gross Profit$242.50M
SG&A Expenses$172.14M
Operating Income$69.94M
Net Income$43.54M
EPS (Basic)$0.04
EPS (Diluted)$0.04
Shares Outstanding (Basic)1.19B
Shares Outstanding (Diluted)1.19B

Key Highlights

  • 1Net sales for the second quarter of 2009 decreased by 21.4% to $474.9 million compared to $604.2 million in the prior year quarter.
  • 2The company experienced a significant contraction in sales to manufacturing customers (-28%) and non-residential construction customers (-23%) in Q2 2009 due to the weakened economy.
  • 3Operating and administrative expenses decreased by 11.2% in the second quarter of 2009 compared to the prior year, reflecting effective cost management.
  • 4Net earnings for the second quarter of 2009 fell by 42.8% to $43.5 million ($0.29 per share) from $76.2 million ($0.51 per share) in Q2 2008.
  • 5Operating cash flow for the first six months of 2009 was strong at $167.6 million, an increase of over 46% from $114.7 million in the same period of 2008, driven by improved working capital management.
  • 6Capital expenditures were reduced in the first half of 2009 compared to 2008, reflecting a more cautious approach to investment amidst economic uncertainty.
  • 7The company increased its dividend payments, with the first dividend up 40% and the second up 37% year-over-year, demonstrating commitment to returning value to shareholders.

Frequently Asked Questions

The economic downturn significantly impacted Fastenal's sales. Net sales for the second quarter of 2009 decreased by 21.4% year-over-year. This was primarily driven by a substantial contraction in sales to the manufacturing sector (down approximately 28%) and the non-residential construction sector (down approximately 23%).

Fastenal implemented stringent cost management measures. Operating and administrative expenses decreased by 11.2% in the second quarter of 2009 compared to the prior year. This was achieved through reductions in sales commissions, bonuses, overtime hours, temporary labor, and profit sharing contributions, reflecting the performance-based nature of many of its employee compensation structures.

Despite the decline in net earnings, Fastenal demonstrated robust cash flow generation. Operating cash flow for the first six months of 2009 was $167.6 million, an increase from $114.7 million in the same period of 2008. This improvement was largely attributed to better working capital management, particularly in accounts receivable and inventory.

In response to the economic environment, Fastenal temporarily slowed its store opening rate to a range of 2% to 5% for 2009, down from its historical rate of 7% to 10%. Consequently, capital expenditures for the first six months of 2009 were reduced compared to the prior year. The company plans to resume its normal store opening rate starting in January 2010, assuming economic stability.