10-QPeriod: Q3 FY2015

FASTENAL CO Quarterly Report for Q3 Ended Sep 30, 2015

Filed October 16, 2015For Securities:FAST

Summary

Fastenal Company reported solid financial results for the nine months ended September 30, 2015, with net sales increasing by 5.0% to $2.95 billion and net earnings growing by 7.7% to $404.5 million compared to the same period in 2014. The third quarter also showed growth, with net sales up 1.5% to $995.3 million and net earnings increasing by 2.4% to $136.5 million. The company navigated a challenging economic environment, including a slowdown in the oil and gas industry and the impact of a strong U.S. dollar on its significant U.S. customer base. Despite these headwinds, Fastenal demonstrated strong operational execution, particularly in managing operating and administrative expenses. Investments in employee headcount and FAST Solutions® (industrial vending) continue to be key growth drivers. The company also continued its share repurchase program and maintained its dividend payments, reflecting a commitment to shareholder returns.

Financial Highlights

50 data points
Beta

Revenue

$995.25M

50.5% Gross Margin

Net Income

$136.49M

13.7% Net Margin

EPS (Diluted)

$0.12

Total Assets

$2.50B

Cash & Equivalents

$111.78M

Free Cash Flow

$109.39M

Financial Statements
Beta
Revenue$995.25M
Cost of Revenue$493.02M
Gross Profit$502.23M
SG&A Expenses$282.38M
Operating Income$220.01M
Interest Expense$942K
Net Income$136.49M
EPS (Basic)$0.12
EPS (Diluted)$0.12
Shares Outstanding (Basic)1.16B
Shares Outstanding (Diluted)1.16B

Key Highlights

  • 1Net sales for the nine months ended September 30, 2015, increased by 5.0% to $2.95 billion, while net earnings grew by 7.7% to $404.5 million year-over-year.
  • 2Third-quarter 2015 net sales rose 1.5% to $995.3 million, and net earnings increased 2.4% to $136.5 million compared to the same quarter in the prior year.
  • 3The company experienced a slowdown in its oil and gas-related business and the negative impact of a strong U.S. dollar on its predominantly U.S. customer base.
  • 4Investments in headcount (an 8.4% increase in total employees year-over-year) and FAST Solutions® (industrial vending machines, up 17.4%) are key strategic initiatives.
  • 5Operating and administrative expenses as a percentage of net sales improved to 28.5% for the nine months and 28.4% for the third quarter of 2015, demonstrating effective cost management.
  • 6Fastenal repurchased $273.5 million of its common stock during the nine months ended September 30, 2015, indicating confidence in its valuation and commitment to shareholder returns.
  • 7The company increased its quarterly dividend to $0.28 per share, continuing its history of consistent dividend payments.

Frequently Asked Questions

Fastenal faced challenges including a slowdown in business with customers in the oil and gas industry and the negative impact of a strong U.S. dollar on its predominantly U.S. customer base (approximately 89% of sales). Additionally, its end markets remained 'choppy' with weak sequential patterns.

Fastenal managed its expenses by reducing total operating and administrative expenses outside of payroll-related costs and by carefully managing working hours. This allowed them to fund the headcount expansion (an 8.4% increase in total employees over the last twelve months) while spending less in other areas.

FAST Solutions® is a key growth driver for Fastenal. The number of installed vending machines increased by 17.4% year-over-year. Customers using industrial vending represented 42.1% of net sales, and sales to these customers grew by 4.8% in the third quarter of 2015, demonstrating the program's importance and resilience.

While Fastenal has been closing some underperforming or strategically less advantageous stores, it plans to increase its pace of store openings in 2016, with a goal of opening 60 to 75 new stores. This represents a significant increase from the 13 stores opened in the first nine months of 2015.