10-QPeriod: Q1 FY2017

FASTENAL CO Quarterly Report for Q1 Ended Mar 31, 2017

Filed April 17, 2017For Securities:FAST

Summary

Fastenal Company reported solid first-quarter 2017 results, with net sales increasing by 6.2% year-over-year to $1,047.7 million and net earnings growing 6.3% to $134.2 million. Diluted earnings per share rose to $0.46 from $0.44 in the prior year's first quarter. This growth was driven by a combination of improved sales at existing store locations, supported by a strengthening industrial economy as indicated by the Purchasing Managers Index, and the success of the company's growth initiatives, including industrial vending machines, Onsite customer locations, and national account contracts. The company also completed a strategic acquisition of Manufacturers Supply Company (Mansco) on March 31, 2017, for $57.9 million. This acquisition is expected to enhance its product and service offerings. Despite a slight decrease in gross profit margin due to changes in product and customer mix, and increased freight and inventory system expenses, the company managed to improve its operating and administrative expenses as a percentage of net sales. Cash flow from operations remained strong, reflecting both earnings growth and effective working capital management.

Financial Highlights

51 data points
Beta

Revenue

$1.05B

49.4% Gross Margin

Net Income

$134.20M

12.8% Net Margin

EPS (Diluted)

$0.12

Total Assets

$2.79B

Cash & Equivalents

$134.30M

Free Cash Flow

$189.20M

Financial Statements
Beta
Revenue$1.05B
Cost of Revenue$529.70M
Gross Profit$518.00M
SG&A Expenses$305.90M
Operating Income$212.50M
Interest Expense$1.70M
Net Income$134.20M
EPS (Basic)$0.12
EPS (Diluted)$0.12
Shares Outstanding (Basic)1.16B
Shares Outstanding (Diluted)1.16B

Key Highlights

  • 1Net sales increased by 6.2% to $1,047.7 million in Q1 2017 compared to Q1 2016.
  • 2Net earnings rose by 6.3% to $134.2 million, with diluted EPS growing to $0.46 from $0.44.
  • 3Acquired Manufacturers Supply Company (Mansco) for $57.9 million on March 31, 2017, funded by a $60.0 million debt issuance.
  • 4Gross profit margin slightly decreased by 40 basis points to 49.4%, influenced by product/customer mix and increased operational costs.
  • 5Operating and administrative expenses as a percentage of net sales improved to 29.2% from 29.4%.
  • 6Net cash provided by operating activities increased significantly to $210.4 million from $166.5 million, driven by earnings growth and improved working capital management.
  • 7The company's growth initiatives, including industrial vending machines (up 17.0% in installations) and Onsite locations (up 51.2% active sites), continue to show strong performance.

Frequently Asked Questions

The increase in net sales was driven by higher unit sales, attributed to both improved sales at existing store locations, benefiting from a strengthening industrial economy, and the success of growth initiatives like industrial vending machines, Onsite customer locations, and national account contracts.

The Mansco acquisition, completed on March 31, 2017, for $57.9 million, contributed to an increase in trade accounts receivable and inventories on the balance sheet. It was funded by a $60.0 million debt issuance. The acquisition did not impact net sales in the first quarter of 2017 as it occurred on the last day of the quarter, but it added $39.8 million in intangible assets and goodwill.

The gross profit margin decreased by 40 basis points primarily due to a change in product and customer mix, with fasteners (a higher-margin product) growing slower than other product lines, and faster growth from larger customers who receive better pricing. Additionally, higher freight expenses and costs related to a new inventory tracking system also impacted the margin.

Fastenal has a $700.0 million unsecured revolving credit facility and has issued senior unsecured promissory notes. In Q1 2017, the company issued $60.0 million in new notes to fund the Mansco acquisition. Net cash provided by operating activities increased significantly, indicating strong liquidity and the ability to manage its financial resources effectively.