10-QPeriod: Q1 FY2015

FASTENAL CO Quarterly Report for Q1 Ended Mar 31, 2015

Filed April 17, 2015For Securities:FAST

Summary

Fastenal Company reported a solid first quarter for 2015, demonstrating continued revenue growth and improved profitability. Net sales increased by 8.8% year-over-year to $953.3 million, driven by higher unit sales. The company's operating income saw a significant increase of 14.0%, reaching $203.8 million, with a corresponding expansion in operating margin to 21.4% from 20.4% in the prior year's quarter. This improvement was fueled by better leverage of operating and administrative expenses against higher sales. Despite a slight decrease in gross profit margin to 50.8% from 51.2%, the company's effective cost management, particularly in operating and administrative expenses, led to enhanced overall profitability. The company also generated strong operating cash flow of $180.1 million, an increase of 25.7% from the prior year, underscoring its efficient working capital management and healthy financial position. Management remains optimistic about continued growth, supported by initiatives like FAST Solutions® industrial vending and a focus on customer service.

Financial Highlights

47 data points
Beta

Revenue

$953.32M

50.8% Gross Margin

Net Income

$127.61M

13.4% Net Margin

EPS (Diluted)

$0.11

Total Assets

$2.42B

Cash & Equivalents

$120.79M

Free Cash Flow

$136.18M

Financial Statements
Beta
Revenue$953.32M
Cost of Revenue$469.27M
Gross Profit$484.05M
SG&A Expenses$280.39M
Operating Income$203.77M
Interest Expense$358K
Net Income$127.61M
EPS (Basic)$0.11
EPS (Diluted)$0.11
Shares Outstanding (Basic)1.18B
Shares Outstanding (Diluted)1.18B

Key Highlights

  • 1Net sales increased by 8.8% to $953.3 million in Q1 2015 compared to Q1 2014.
  • 2Operating income grew by 14.0% to $203.8 million, with operating margin expanding to 21.4%.
  • 3Gross profit margin slightly decreased to 50.8% from 51.2%, primarily due to changes in product and customer mix.
  • 4Operating and administrative expenses as a percentage of net sales decreased to 29.4% from 30.8%, indicating improved cost control.
  • 5Net earnings increased by 14.0% to $127.6 million, resulting in diluted EPS of $0.43, up from $0.38 in the prior year.
  • 6Operating cash flow saw a significant increase of 25.7% to $180.1 million.
  • 7The company repurchased 2 million shares of its common stock in the quarter.

Frequently Asked Questions

Fastenal reported a net sales increase of 8.8% to $953.3 million for the first quarter ended March 31, 2015, compared to $876.5 million in the same period of 2014. This growth was primarily driven by higher unit sales.

Fastenal's profitability improved significantly. Operating income increased by 14.0% to $203.8 million, and net earnings rose by 14.0% to $127.6 million. Diluted earnings per share increased to $0.43 from $0.38 in the prior year's quarter. This was achieved despite a slight decline in gross profit margin due to effective management of operating and administrative expenses.

The company's strategy remains focused on 'Growth through Customer Service®,' emphasizing local store proximity and efficient operations. Key growth drivers include expanding the FAST Solutions® (industrial vending) program and diversifying product lines. Management highlighted investments in distribution automation and a continued focus on supporting the store-based sales machine. They expect to continue paying quarterly dividends and are authorized to repurchase shares.

Fastenal generated strong operating cash flow of $180.1 million in Q1 2015, a 25.7% increase year-over-year. This was attributed to growth in net earnings, improved management of certain current assets and liabilities, and the timing of income tax payments. The company defines operational working capital as accounts receivable and inventories, which both saw increases consistent with sales growth.