10-QPeriod: Q3 FY2017

FASTENAL CO Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 16, 2017For Securities:FAST

Summary

Fastenal Company's (FAST) third-quarter 2017 10-Q filing shows a robust performance with net sales increasing by 11.8% year-over-year to $1,132.8 million. This growth was primarily driven by a 13.6% increase in daily sales, reflecting improved market demand indicated by a strong Purchasing Managers Index, and successful execution of the company's growth initiatives. Profitability remained strong, with operating income increasing by 12.7% to $228.5 million, and net earnings rising by 12.7% to $143.1 million, translating to diluted EPS of $0.50, up from $0.44 in the prior year's quarter. While gross profit margin slightly decreased to 49.1% due to product and customer mix shifts and the impact of hurricanes, operating and administrative expenses as a percentage of sales improved, demonstrating effective cost management. The company also completed a strategic acquisition of Manufacturers Supply Company (Mansco) in March 2017, which contributed positively to sales and earnings.

Financial Statements
Beta

Key Highlights

  • 1Net sales for the third quarter of 2017 grew by 11.8% to $1,132.8 million, indicating strong top-line performance.
  • 2Diluted earnings per share (EPS) increased to $0.50 in Q3 2017, a 13.6% rise from $0.44 in Q3 2016.
  • 3Operating income saw a healthy increase of 12.7% to $228.5 million, demonstrating efficient operations.
  • 4The company acquired Manufacturers Supply Company (Mansco) on March 31, 2017, for $59.3 million, which contributed $40.4 million in net sales and $4.6 million in net earnings for the nine months ended September 30, 2017.
  • 5Growth initiatives, including National Account contracts, Onsite locations, and industrial vending machines, are showing strong traction, contributing to sales growth.
  • 6Net cash provided by operating activities increased significantly to $455.9 million for the nine months ended September 30, 2017, up from $386.9 million in the prior year.
  • 7The company maintained a strong balance sheet with total assets of $2,901.6 million and total stockholders' equity of $2,026.3 million as of September 30, 2017.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in unit sales. This was attributed to an improvement in underlying market demand, as indicated by a strong Purchasing Managers Index, and successful execution of the company's growth initiatives, including the signing of new national account contracts, expansion of Onsite locations, and increased installations of industrial vending machines.

The acquisition of Mansco, completed on March 31, 2017, contributed positively to Fastenal's financial results. For the nine months ended September 30, 2017, Mansco added $40.4 million in net sales and $4.6 million in net earnings. The acquisition also contributed to increases in accounts receivable and inventory.

Fastenal has a consistent history of paying quarterly dividends and expects to continue doing so. In October 2017, the board declared a dividend of $0.32 per share. Regarding share repurchases, the company's board authorized the repurchase of up to 5,000,000 shares, and as of September 30, 2017, there was remaining authority to repurchase 4,400,000 shares.

Operating and administrative expenses, as a percentage of net sales, improved to 28.9% in the third quarter of 2017 from 29.3% in the prior year's quarter. This improvement was primarily driven by relatively lower growth in occupancy-related and selling transportation expenses, despite sharper growth in employee-related expenses.