10-QPeriod: Q1 FY2011

FASTENAL CO Quarterly Report for Q1 Ended Mar 31, 2011

Filed April 21, 2011For Securities:FAST

Summary

Fastenal Company (FAST) reported strong revenue growth in the first quarter of 2011, with net sales increasing by 23.0% year-over-year to $640.6 million. This growth was primarily driven by higher unit sales, indicating a recovery from the economic downturn experienced in 2009. The company also saw a significant improvement in operating income, which rose to $128.7 million, reflecting better gross profit margins and improved operating expense management. Financially, the company demonstrated robust cash flow generation, with net cash provided by operating activities at $74.3 million. While inventory levels increased to support growing sales, accounts receivable also rose, partly due to the growth in national account and international business. Fastenal also announced a two-for-one stock split and an increase in its dividend payout, signaling confidence in its future performance and commitment to returning value to shareholders.

Financial Highlights

46 data points
Beta

Revenue

$640.58M

52.0% Gross Margin

Net Income

$79.55M

12.4% Net Margin

EPS (Diluted)

$0.07

Total Assets

$1.52B

Cash & Equivalents

$124.85M

Free Cash Flow

$53.08M

Financial Statements
Beta
Revenue$640.58M
Cost of Revenue$307.20M
Gross Profit$333.38M
SG&A Expenses$204.69M
Operating Income$128.66M
Net Income$79.55M
EPS (Basic)$0.07
EPS (Diluted)$0.07
Shares Outstanding (Basic)1.18B
Shares Outstanding (Diluted)1.18B

Key Highlights

  • 1Net sales increased by 23.0% to $640.6 million for the three months ended March 31, 2011, compared to $520.8 million in the prior year.
  • 2Gross profit increased by 25.3% to $333.4 million, with gross margin improving to 52.0% from 51.1% in the prior year period.
  • 3Operating income saw a substantial increase of 42.2%, reaching $128.7 million, driven by higher sales and improved gross margins.
  • 4Net earnings grew by 42.0% to $79.5 million, resulting in diluted earnings per share of $0.54, up from $0.38 in the first quarter of 2010.
  • 5Net cash provided by operating activities was $74.3 million, demonstrating strong cash generation capabilities.
  • 6The company declared a two-for-one stock split and increased its dividend by 25.0%, reflecting confidence in its financial health.
  • 7Inventory levels increased by 13.6% year-over-year, reflecting anticipated sales growth and some inflationary pressures.

Frequently Asked Questions

The primary driver of Fastenal's sales growth in the first quarter of 2011 was higher unit sales, indicating a recovery and increased demand following the economic downturn of 2009. While some inflationary price changes contributed, the impact was limited. Growth in sales at older, established store locations was particularly strong.

Fastenal's profitability significantly improved in Q1 2011. Gross profit increased by 25.3%, and gross margin expanded to 52.0%. Operating income surged by 42.2%, and net earnings rose by 42.0%, leading to a higher diluted EPS of $0.54 from $0.38 in the prior year's quarter.

Fastenal's board of directors declared a two-for-one stock split, effective May 20, 2011, and also expressed their intention to move towards quarterly dividend payments. The company increased its regular dividend by 25.0% and declared a supplemental second-quarter dividend, underscoring a commitment to returning value to shareholders.

Inventory levels increased by 13.6% year-over-year, driven by expanding sales growth trends, confidence in their sustainability, an increase in store openings, and recent inflation. Accounts receivable also grew by 24.1%, exceeding sales growth, largely due to the significant expansion of national account and international businesses, which typically have slower payment cycles.