10-QPeriod: Q3 FY2014

FASTENAL CO Quarterly Report for Q3 Ended Sep 30, 2014

Filed October 15, 2014For Securities:FAST

Summary

Fastenal Company reported strong top-line growth in the third quarter and the first nine months of 2014, with net sales increasing by 14.3% and 11.7% respectively, compared to the prior year periods. This growth was primarily driven by higher unit sales, particularly in established store locations, and the company's strategic initiatives like FAST Solutions (industrial vending). Profitability remained robust, with operating income showing a healthy increase. The company is actively managing its operational working capital, with notable increases in both accounts receivable and inventories, reflecting sales growth and strategic inventory management. Fastenal also demonstrated strong operating cash flow generation, reinforcing its solid financial position. The company continues to focus on its 'pathway to profit' strategy, emphasizing growth in average store sales and efficiency improvements.

Financial Highlights

48 data points
Beta

Revenue

$980.81M

50.8% Gross Margin

Net Income

$133.31M

13.6% Net Margin

EPS (Diluted)

$0.11

Total Assets

$2.37B

Cash & Equivalents

$116.33M

Free Cash Flow

$64.03M

Financial Statements
Beta
Revenue$980.81M
Cost of Revenue$482.12M
Gross Profit$498.69M
SG&A Expenses$286.13M
Operating Income$212.87M
Interest Expense$271K
Net Income$133.31M
EPS (Basic)$0.11
EPS (Diluted)$0.11
Shares Outstanding (Basic)1.19B
Shares Outstanding (Diluted)1.19B

Key Highlights

  • 1Net sales increased by 14.3% in the third quarter of 2014 and 11.7% for the first nine months of 2014, driven by higher unit sales.
  • 2Gross profit margin was reported at 50.8% for both the three-month and nine-month periods, slightly below the historical target of 51%-52% due to product mix and focus on average store sales growth.
  • 3Operating income grew by 12.9% for the third quarter and 7.7% for the first nine months, demonstrating effective cost management alongside sales growth.
  • 4The company generated substantial operating cash flow, totaling $332.9 million for the first nine months of 2014.
  • 5FAST Solutions (industrial vending) continues to be a significant growth driver, with a growing installed base of vending devices and increasing sales to customers utilizing the program.
  • 6Inventories and accounts receivable increased by 10.6% and 15.1% respectively year-over-year, reflecting increased sales and inventory management strategies.
  • 7Fastenal declared a quarterly dividend of $0.25 per share, maintaining its history of returning capital to shareholders.

Frequently Asked Questions

Fastenal reported a significant increase in net sales, with a 14.3% rise in the third quarter of 2014 compared to the same period in 2013, reaching $980.8 million. This growth was primarily attributed to an increase in unit sales, with particularly strong performance in stores opened greater than five years.

Fastenal's operational working capital, defined as accounts receivable and inventories, increased by 12.3% year-over-year. Accounts receivable grew by 15.1% due to sales growth, while inventories increased by 10.6% reflecting strategies for new store openings, expanded stocking breadth, direct sourcing, and growth in industrial vending and national accounts.

The FAST Solutions initiative continues to be a key growth driver. The company reported a significant increase in the number of installed vending devices, reaching 45,596 by the end of Q3 2014. Sales to customers utilizing industrial vending also showed strong growth, with daily sales growth of 21.9% in the third quarter for this segment.

Fastenal declared a quarterly dividend of $0.25 per share, continuing its policy of regular dividend payments. The company also has an ongoing share repurchase program and has authority to purchase up to an additional 1,000,000 shares of its common stock.