10-K 1 d10k.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM 10-K (Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2001, or [_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____________________ to ______________________ Commission file number 0-16125 FASTENAL COMPANY ----------------------------------------------- (Exact name of registrant as specified in its charter) Minnesota 41-0948415 ------------------------------------ ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2001 Theurer Boulevard Winona, Minnesota 55987-1500 ------------------------------------------ ---------------- (Address of principal executive offices) (Zip Code) (507) 454-5374 ----------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of the Common Stock held by non-affiliates of the registrant as of February 22, 2002 was $2,069,201,600. For purposes of determining this number, all executive officers and directors of the registrant as of February 22, 2002 are considered to be affiliates of the registrant. This number is provided only for the purposes of this report on Form 10-K and does not represent an admission by either the registrant or any such person as to the status of such person. As of February 22, 2002, the registrant had 37,938,688 shares of Common Stock issued and outstanding. 2 DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Annual Report to Shareholders for the fiscal year ended December 31, 2001 are incorporated by reference in Part II. Portions of the registrant's Proxy Statement for the annual meeting of shareholders to be held April 16, 2002 are incorporated by reference in Part III. FORWARD LOOKING STATEMENTS This Form 10-K, including the sections in Part I hereof captioned "Item 1. Business - Development of the Business", "Item 1. Business - Products", "Item 1. Business - Manufacturing and Support Services Operations", and "Item 2. Properties", and the sections in Part II hereof captioned "Item 5. Market for Registrant's Common Equity and Related Stockholder Matters" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations", contains or incorporates by reference statements that are not historical in nature and that are intended to be, and are hereby identified as, "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, including statements regarding new store and distribution center openings, markets for new stores, expansion of foreign operations, technology conversions, introduction of new product lines, growth in manufacturing and support services, leasing of new stores, capital expenditures, funding of expansion plans, and dividends. A discussion of certain risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements is included in the registrant's Annual Report to Shareholders for the fiscal year ended December 31, 2001 in the section thereof captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations", which section has been incorporated in this Form 10-K by reference. The registrant assumes no obligation to update either such forward-looking statements or the discussion of such risks and uncertainties. PART I ITEM 1. BUSINESS Fastenal Company ("Fastenal Company" and, together with its wholly owned subsidiaries, Fastenal Company Services, Fastenal Company Purchasing, Fastenal Company Leasing, Fastenal Canada Company, Fastenal Mexico, S. de R.L. de C.V., Fastenal Mexico Services, S. de R.L. de C.V., and Fastenal Singapore P.T.E. Ltd., collectively, "the Company") began as a partnership in 1967, and was incorporated under the laws of Minnesota in 1968. As of December 31, 2001, the Company had 1,025 store sites located in 50 states, Puerto Rico, Canada, Mexico and Singapore and 4,263 people employed at these sites. The Company sells industrial and construction supplies. These industrial and construction supplies are grouped into eleven product lines described further below. The Company operated eleven distribution centers as of December 31, 2001 from which the Company distributes products to its store sites, and operates a facility in Memphis, Tennessee to receive and package goods coming from suppliers outside of the United States. The Company also operates two packaging/processing centers that support the business acquired in 2001 (discussed later in this section). 3 Development of the Business Fastenal Company began in 1967 with a marketing strategy of supplying threaded fasteners to customers in small to medium-sized cities. The Company believes its success can be attributed to its ability to offer such customers a full line of products at convenient locations, and to the high quality of the Company's employees. The Company opened its first store site in Winona, Minnesota, a city with a population of approximately 25,000. The following table shows the number of Company store sites during each of the last ten years and the related consolidated net sales for each year during that period:
2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 ---------------------------------------------------------------------------------------------------------------------------------- Number of store sites at year end/1/ 1,025 897 807 764 642 483 375 315 253 200 Net sales/2/ (in millions) $ 818.3 755.6 618.2 511.2 404.2 292.3 226.5 164.7 112.1 82.5
/1/ During 2000, two "in-plant" sites, previously included in the store site number, were reclassified to in-plant status. One of these "in-plant" sites opened in 1996 and the other opened in 1997. The 1999, 1998, 1997, and 1996 store numbers above were adjusted to reflect the reclassification. /2/ The net sales amounts for 2000 and prior years have been restated to reflect the reclassification of shipping and handling costs billed to customers and sales incentives paid to customers which were previously included in operating and administrative expenses. This reclassification reflects the adoption of Emerging Issues Task Force (EITF) 00-10, Accounting for Shipping and Handling Fees and Costs, and EITF 00-22, Accounting for "Points" and Certain Other Time-Based or Volume-Based Incentive Offers, and Offers for Free Product. As of December 31, 2001, the Company operated 1,025 store sites located in: Alabama 21 Indiana 40 Nebraska 11 South Carolina 15 Alaska 1 Iowa 22 Nevada 5 South Dakota 7 Arizona 6 Kansas 21 New Hampshire 9 Tennessee 24 Arkansas 14 Kentucky 17 New Jersey 12 Texas 63 California 43 Louisiana 15 New Mexico 7 Utah 11 Colorado 14 Maine 7 New York 29 Vermont 3 Connecticut 9 Maryland 11 North Carolina 33 Virginia 22 Delaware 4 Massachusetts 14 North Dakota 7 Washington 22 Florida 28 Michigan 41 Ohio 49 West Virginia 9 Georgia 29 Minnesota 39 Oklahoma 14 Wisconsin 44 Hawaii 1 Mississippi 12 Oregon 18 Wyoming 5 Idaho 9 Missouri 22 Pennsylvania 47 Illinois 37 Montana 7 Rhode Island 3 Puerto Rico 6 Canada 63 Mexico 2 Singapore 1
The Company has closed only four store sites in its history. 4 The Company selects new locations for its stores based on their proximity to the Company's distribution network, population statistics, and employment data for manufacturing and construction. The Company intends to continue opening new store sites and currently expects the rate of new store openings to be approximately 10 to 15% per year. The Company stocks all new stores with an inventory drawn from all of its product lines. Subsequent to a site's opening, the site personnel customize the inventory offering to that site's customer base. The Company has two types of stores: (1) the stand-alone store and (2) the satellite store. The stand-alone store is typically located in cities with a population in excess of 8,000. The second type, the satellite store, operates as a satellite of a stand-alone store. The satellite store is usually located within 30 miles of the stand-alone (mother) store and is typically managed by personnel at the mother store. The Company has satellite stores located in communities with a population as small as 2,000. In most cases, the Company was already doing business in this community from the mother store, but the addition of a physical presence in the community provided sales increases from that community. The Company believes, based on the demographics of the marketplace in the United States and Canada, that there is sufficient potential in those two countries to support approximately 2,000 to 2,200 total stores. Many of these stores would be in cities in which we currently operate. The Company believes most of the future stores will be stand-alone stores and that some of the satellite stores will eventually become stand-alone stores. Of the 128 stores opened during 2001, none opened as a satellite store. Of the 1,025 store sites operating at December 31, 2001, 954 stores were operating as stand-alone stores and 71 were operating as satellite stores. In addition to the stand-alone and satellite stores discussed above, the Company also operates "in-plant" sites. The "in-plant" site is a selling unit located in or near a customer's facility. These sites are not included in the store count numbers as they represent a customer subset of the two types of stores mentioned earlier. The Company opened the following store sites, outside the United States, in the last five years:
2001 2000 1999 1998 1997 ------------------------------------------------------------ Puerto Rico 1 1 -- 3 1 Canada 4 11 5 9 20 Mexico 2 -- -- -- -- Singapore 1 -- -- -- --
The Company plans to open additional store sites in Puerto Rico, Canada, Mexico, and Singapore in the future. The store sites located outside the United States contributed less than 5% of the Company's consolidated net sales in 2001. In all years presented, the Company also sold products into Mexico from its existing stores along the border between the United States and Mexico. No assurance can be given that any of the expansion plans described above will be achieved, or that new stores, once opened, will be profitable. It has been the Company's experience that near-term profitability has been adversely affected by the opening of new store sites, due to the related start-up costs and the time necessary to generate a customer base. A new store generates its sales from direct sales calls, a slow process involving repeated contacts. As a result of this process, sales volume builds slowly and it typically requires nine to 12 months for a new store to achieve its first profitable month. Of the 50 stores opened in the first quarter of 2001, 18 were profitable in the fourth quarter of 2001. 5 For 2001, annual sales volumes of store sites operating at least five years ranged between approximately $165,000 and $5,939,000, with 75% of these store sites having annual sales volumes within the range of approximately $477,000 to $1,745,000. The data in the following table shows the growth in the average sales of the Company's store sites from 2000 to 2001 based on each site's age. The store sites opened in 2001 contributed approximately $21.6 million (or approximately 2.6%) of the Company's consolidated net sales in 2001, with the remainder coming from store sites opened prior to 2001 and from the 2001 acquisition.
Number of store Average Age of store site as of Year sites in group as of sales Average Percent December 31, 2001 Opened December 31, 2001 2000/1/ sales 2001 Change ----------------------------------------------------------------------------------------------------------------------- 0-1 year old 2001 128 $ -- $ 169,000/2/ --% 1-2 years old 2000 90 96,000/2/ 399,000 -- 2-3 years old 1999 44 378,000 486,000 28.6 3-4 years old 1998 121 561,000 627,000 11.8 4-5 years old 1997 159 621,000 678,000 9.2 5-6 years old 1996 108 751,000 768,000 2.3 6-7 years old 1995 60 835,000 778,000 (6.8) 7-8 years old 1994 62 810,000 792,000 (2.2) 8-9 years old 1993 53 954,000 950,000 (0.4) 9-10 years old 1992 42 1,215,000 1,225,000 0.8 10-11 years old 1991 32 1,213,000 1,175,000 (3.1) 11-12 years old 1990 28 1,537,000 1,312,000 (14.6) 12-15 years old 1987-1989 53 1,770,000 1,681,000 (5.0) 15+ years old 1967-1986 45 2,340,000 2,293,000 (2.0)
/1/ The average sales amounts for 2000 have been restated to reflect the reclassification of shipping and handling costs billed to customers and sales incentives paid to customers which were previously included in operating and administrative expenses. This reclassification was in accordance with Emerging Issues Task Force (EITF) 00-10, Accounting for Shipping and Handling Fees and Costs, and EITF 00-22, Accounting for "Points" and Certain Other Time-Based or Volume-Based Incentive Offers, and Offers for Free Product. /2/ The average sales include sales of store sites open for less than the full fiscal year. As of December 31, 2001, the Company operated distribution centers in or near Winona, Minnesota; Indianapolis, Indiana; Dallas, Texas; Atlanta, Georgia; Scranton, Pennsylvania; Fresno, California; Lakewood, Washington; Akron, Ohio; Salt Lake City, Utah; Winston-Salem, North Carolina; and Kansas City, Missouri. Distribution centers are located so as to permit twice-a-week to five times-a-week deliveries to Company stores using Company trucks and overnight delivery by surface common carrier. As the number of stores increases, the Company intends to add new distribution centers. The Company also operates a packaging facility in Memphis, Tennessee. This facility receives freight containers from foreign suppliers and repackages the items in standard packages using high-speed equipment. On August 31, 2001, the Company acquired certain assets of two subsidiaries of Textron, Inc. These assets were used in their business of selling packaged fasteners to the retail market (Do-It-Yourself or DIY Business). The DIY Business was purchased after a prolonged period of contraction; therefore, the historical sales and earnings are not reflective of the DIY Business's current operations. The four months since the acquisition produced net sales of $8.5 million at approximately a break even level and represent, for the most part, the starting base of business. The business operates facilities in Rockford, Illinois and Goodlettsville, Tennessee (near Nashville). The Company operates a central UNIX/terminal-based computer system allowing automatic data exchange between the stores and the distribution centers. The use of client/server technology allows the Company's network of UNIX-based machines to serve networked personal computers and workstations. During the last three years, the Company converted a portion of this central processing system to a new computer software and operating system and plans to convert additional modules during 2002. At the store level, the Company operates a proprietary point-of-sale system. This system operates on a Microsoft Windows NT system. 6 Trademarks The Company conducts its business in the United States, Canada, Puerto Rico, Mexico, and Singapore under various trademarks and service marks, including Fastenal(R), FastTool(R), SharpCut(R), EquipRite(R), CleanChoice(R), PowerPhase(TM), FastArc(TM), FAS-N-IT(TM), and Anchor Wire(TM). Although the Company does not believe its operations are substantially dependent upon any of its trademarks or service marks, the Company considers its "Fastenal" name and other trademarks and service marks to be valuable to its business. Products The Company's original product offering in 1967 was fasteners and other industrial and construction supplies, many of which are sold under the Fastenal(R) product name. Today, this product line consists of approximately 78,000 different stock items. This product line may be divided into two broad categories: threaded fasteners, such as bolts, nuts, screws, studs, and related washers; and miscellaneous supplies, such as paints, various pins and machinery keys, concrete anchors, batteries, sealants, metal framing systems, wire rope, stainless strut, private label stud anchors, rivets, and related accessories. Threaded fasteners are used in most manufactured products and building projects, and in the maintenance and repair of machines and structures. Although some aspects of the threaded fastener market are common to all cities, the Company feels that each city's market is to some extent unique. Therefore, the Company opens each store with minimal base stocks of inventory and then tailors the growing inventory to the local market demand as it develops. Threaded fasteners accounted for approximately 49%, 51%, and 51% of the Company's consolidated net sales in 2001, 2000 and 1999, respectively. Concrete anchors make up the largest portion of the other supply items included in the Fastenal(R) product line. Most concrete anchors use threaded fasteners as part of the completed anchor assembly. During the last ten years, the Company added additional product lines. The product lines introduced during the 1990's are sold through the same distribution channel as the original Fastenal(R) product line. The retail packaged product line introduced in 2001 as the result of an acquisition is sold through both a retail distribution channel and through the Company's industrial store site distribution channel. The additional product lines include the following:
Approximate Year number of stock Private label Product line: introduced items product name ----------------------------------------------------------------------------------------------------------- Tools 1993 58,000 FastTool(R) Cutting tools 1996 25,000 SharpCut(R) Hydraulics and pneumatics 1996 24,000 Material handling 1996 9,000 EquipRite(R) Janitorial supplies 1996 5,000 CleanChoice(R) Electrical supplies 1997 8,000 PowerPhase(TM) Welding supplies/1/ 1997 12,000 FastArc(TM) Safety supplies 1999 29,000 Raw materials 2001 6,000 Retail packaged products 2001 26,000 FAS-N-IT(TM)and Anchor Wire(TM)
/1/ Excluding gas and welding machines. The Company plans to add other product lines in the future. 7 Inventory Control The Company controls inventory by using computer systems to determine desired stock levels. The data used for this purpose is derived from reports showing sales activity by stock item for the previous three years. Computers then convert this data to typical store maximum-minimum inventory levels for each stock item. Stores can deviate from preset inventory levels as deemed appropriate by their district managers. Inventories in distribution centers are established from computerized sales data for the stores served by the respective centers. Manufacturing and Support Services Operations In 2001 approximately 95.7% of the Company's consolidated net sales were attributable to products manufactured by other companies to industry standards. The remaining amount of approximately 4.3% of the Company's consolidated net sales for 2001 related to products manufactured, modified or repaired by either the Company's Manufacturing Division or its Support Services. The manufactured products consist primarily of non-standard sizes of threaded fasteners made to customers' specifications. The services provided by the Support Services group include, but are not limited to, items such as tool repair, band saw blade welding and light manufacturing. The Company engages in these activities primarily as a service to its customers and expects these activities in the future to continue to contribute in the range of 4% to 10% of the Company's consolidated net sales. Sources of Supply The Company uses a large number of suppliers for the approximately 280,000 standard stock items it distributes. Most items distributed by the Company can be purchased from several sources, although preferred sourcing is used for some stock items to facilitate quality control. No single supplier accounted for more than 5.0% of the Company's purchases in 2001. 8 Customers and Marketing The Company believes its success can be attributed to its ability to offer customers in small, medium, and large-sized cities a full line of products at convenient locations, and to the high quality of the Company's employees. Most of the Company's customers are in the construction and manufacturing markets. The construction market includes general, electrical, plumbing, sheet metal, and road contractors. The manufacturing market includes both original equipment manufacturers and maintenance and repair operations. Other users of the Company's products include farmers, truckers, railroads, mining companies, municipalities, schools, and certain retail trades. As of December 31, 2001, the Company's total number of active customer accounts (defined as accounts having purchase activity within the last 90 days) was approximately 147,000. During each of the three years ended December 31, 2001, no one customer accounted for a significant portion of the Company's sales. The Company believes that the large number of its customers together with the varied markets that they represent provide some protection to the Company from economic downturns in a particular market. Store personnel generate a significant portion of the Company's sales through direct calls on customers. Because of the nature of the Company's business, the Company does not use the more expensive forms of mass media advertising such as television, radio, and newspapers. Forms of advertising used by the Company include signs, catalogs, and direct mailings. Competition The Company's business is highly competitive. Competitors include both large distributors located primarily in large cities and smaller distributors located in many of the same cities in which the Company has stores. The Company believes that the principal competitive factors affecting the markets for the Company's products are customer service and convenience. Some competitors use vans to sell their products in markets away from their main warehouses, while others rely on mail order or telemarketing sales. The Company, however, believes that the convenience provided to customers by actually operating a number of stores in both small and large markets, each offering a wide variety of products, is a competitive selling advantage and that the large number of stores in a given area, taken together with the Company's ability to provide frequent deliveries to such stores from centrally located distribution centers, makes possible the prompt and efficient distribution of products. Having trained personnel at each store also enhances the Company's ability to compete (see "Employees" below). Employees As of December 31, 2001, the Company employed a total of 6,536 full and part-time employees, 4,263 being store managers and store employees, and the balance being employed in the Company's distribution centers, packaging facilities, manufacturing operations, service operations, packaging/processing centers, and home office. 9 The Company believes that the quality of its employees is critical to its ability to compete successfully in the markets it currently serves and to its ability to open new stores in new markets. The Company fosters the growth and education of skilled employees throughout the organization by operating training programs and by decentralizing decision-making. Wherever possible, promotions are from within the Company. For example, most new store managers are promoted from an assistant manager's position at another store and district managers (who supervise a number of stores) are usually former store managers. The Company's sales personnel participate in incentive bonus arrangements that place emphasis on achieving increased sales on a store and regional basis, while still attaining targeted levels of gross profit and collections. As a result, a significant portion of the Company's total employment cost varies with sales volume. The Company also pays incentive bonuses to other personnel for achieving pre-determined cost containment goals. None of the Company's employees is subject to a collective bargaining agreement and the Company has experienced no work stoppages. The Company believes its employee relations are excellent. ITEM 2. PROPERTIES The Company owns six facilities in Winona, Minnesota. These facilities are as follows:
Approximate Purpose Square Feet -------------------------------------------------------------------------------------------------------- Distribution center and home office 213,000 Manufacturing facility 100,000 Winona store and regional training center 13,000 Winona product support and support services 55,000 Rack and shelving storage 42,000 Multi-building complex which houses certain operations of its Manufacturing Division and its Support Services group 30,000
The Company also owns the following facilities, excluding store locations, outside of Winona, Minnesota:
Approximate Purpose Location Square Feet -------------------------------------------------------------------------------------------------------- Distribution center Indianapolis, Indiana 414,000 Distribution center Indianapolis, Indiana 76,000 Distribution center Atlanta, Georgia 54,000 Distribution center Dallas, Texas 95,000 Distribution center Scranton, Pennsylvania 160,000 Distribution center Akron, Ohio 102,000 Distribution center Kansas City, Kansas 200,000 Packaging/processing center Nashville, Tennessee/1/ 60,000
/1/ The Nashville facility was the result of a 2001 acquisition. 10 In addition, the Company owns 41 buildings that house the Company's store locations in various cities throughout the United States. All other buildings occupied by the Company are leased. Leased stores range from approximately 1,200 to 8,000 square feet, with lease terms of up to 48 months. The Company also leases the following distribution centers, packaging facility, and packaging/processing center:
Approximate Lease Expiration Remaining Lease Purpose Location Square Feet Date Renewal Options ------------------------------------------------------------------------------------------------------------------------------------ Distribution center Lakewood, Washington 55,000 February 2004 None Distribution center Fresno, California 52,500 February 2003 Two one-year periods/1/ Distribution center Salt Lake City, Utah 22,000 October 2002 None Distribution center Winston-Salem, North Carolina 58,400 October 2002 None Packaging facility Memphis, Tennessee 115,000 December 2003 None Packaging/ Rockford, Illinois/2/ 160,000 November 2006 None processing center
/1/ The lease renewals can be exercised at the Company's option. /2/ The Rockford facility was the result of a 2001 acquisition. If economic conditions are suitable, the Company will, in the future, consider purchasing store sites to house its older stores. It is anticipated that all sites for new stores will continue to be leased. It is the Company's policy to negotiate relatively short lease terms to facilitate relocation of particular store operations if deemed desirable by management. It has been the Company's experience that space suitable for its needs and available for leasing is more than sufficient. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. 11 ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of Fastenal Company are:
Name Age Position ------------------------------------------------------------------------------------------ Robert A. Kierlin 62 Chairman of the Board, Chief Executive Officer and Director Willard D. Oberton 43 President, Chief Operating Officer and Director Nicholas J. Lundquist 44 Vice President of Sales Daniel L. Florness 38 Treasurer, Chief Financial Officer and Chief Accounting Officer Stephen M. Slaggie 62 Secretary and Director
Mr. Kierlin has been the Chairman of the Board and Chief Executive Officer of Fastenal Company and has served as a director of Fastenal Company since Fastenal Company's incorporation in 1968. From 1968 through July 2001, Mr. Kierlin also served as President of Fastenal Company. Mr. Oberton has been President and Chief Operating Officer of Fastenal Company since July 2001. From June 2000 through July 2001, Mr. Oberton was Executive Vice President and Chief Operating Officer of Fastenal Company. From March 1997 through June 2000, Mr. Oberton held the position of Vice President and Chief Operating Officer of Fastenal Company. From June 1986 through March 1997, Mr. Oberton held the position of General Operations Manager of Fastenal Company. Mr. Oberton has also served as a director of Fastenal Company since June 1999. Mr. Lundquist has been Vice President of Sales of Fastenal Company since June 2000. From April 1997 through June 2000, Mr. Lundquist held the position of National Sales Manager of Fastenal Company. From January 1991 through March 1997, Mr. Lundquist was a Regional Manager of Fastenal Company. Mr. Florness has been the Treasurer, Chief Financial Officer and Chief Accounting Officer of Fastenal Company since June 1996. Mr. Slaggie has been the Secretary of Fastenal Company and has served as a director of Fastenal Company since 1970. He became a full-time employee of Fastenal Company in December 1987, at which time he assumed the additional duties of Shareholder Relations Director and Insurance Risk Manager. The executive officers are elected by the Board of Directors, generally for a term of one year, and serve until their successors are elected and qualified. None of the above executive officers is related to any other such executive officer or to any other director of Fastenal Company. 12 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Incorporated herein by reference is Fastenal Company's Annual Report to Shareholders for the fiscal year ended December 31, 2001, Common Stock Data on page 9. ITEM 6. SELECTED FINANCIAL DATA Incorporated herein by reference is Fastenal Company's Annual Report to Shareholders for the fiscal year ended December 31, 2001, Six-Year Selected Financial Data on page 4. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incorporated herein by reference is Fastenal Company's Annual Report to Shareholders for the fiscal year ended December 31, 2001, Management's Discussion & Analysis of Financial Condition & Results of Operations on pages 5-8. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Incorporated herein by reference is Fastenal Company's Annual Report to Shareholders for the fiscal year ended December 31, 2001, Market Risk Management on page 8. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Incorporated herein by reference is Fastenal Company's Annual Report to Shareholders for the fiscal year ended December 31, 2001, Selected Quarterly Financial Data (Unaudited) on page 9, and Consolidated Financial Statements, Notes to Consolidated Financial Statements, and Report of Management & Independent Auditors' Report on pages 10-20. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 13 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated herein by reference is the information appearing under the headings "Election of Directors--Nominees and Required Vote", pages 5 and 6, and "Section 16(a) Beneficial Ownership Reporting Compliance", page 16, in Fastenal Company's Proxy Statement dated March 5, 2002. See also Part I hereof under the heading "Item X. Executive Officers of the Registrant". ITEM 11. EXECUTIVE COMPENSATION Incorporated herein by reference is the information appearing under the headings "Election of Directors--Compensation of Directors", page 7, "Executive Compensation--Summary of Compensation", page 9, "Executive Compensation--Option/SAR Grants", pages 10 and 11, and "Executive Compensation--Compensation Committee Interlocks and Insider Participation", page 11, in Fastenal Company's Proxy Statement dated March 5, 2002. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated herein by reference is the information appearing under the heading "Security Ownership of Principal Shareholders and Management", pages 2-4, in Fastenal Company's Proxy Statement dated March 5, 2002. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. 14 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K a) 1. Financial Statements: Consolidated Balance Sheets as of December 31, 2001 and 2000 Consolidated Statements of Earnings for the years ended December 31, 2001, 2000, and 1999 Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended December 31, 2001, 2000, and 1999 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000, and 1999 Notes to Consolidated Financial Statements Report of Management & Independent Auditors' Report (Incorporated by reference to pages 10-20 of Fastenal Company's Annual Report to Shareholders for the fiscal year ended December 31, 2001) 2. Financial Statement Schedules: Schedule II--Valuation and Qualifying Accounts 3. Exhibits: 3.1 Restated Articles of Incorporation of Fastenal Company, as amended (incorporated by reference to Exhibit 3.1 to Fastenal Company's Form 10-Q for the quarter ended September 30, 1993) 3.2 Restated By-Laws of Fastenal Company (incorporated by reference to Exhibit 3.2 to Registration Statement No. 33-14923) 10.1 Description of bonus arrangement for President/Chief Operating Officer* 10.2 Description of bonus arrangement for Treasurer/Chief Financial Officer* 10.3 Description of bonus arrangement for Vice President of Sales* 10.4 Fastenal Company Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10.4 to Fastenal Company's Form 10-K for the year ended December 31, 2000)* 10.5 Amendment to Fastenal Company Stock Appreciation Rights Plan* 13 Annual Report to Shareholders for the fiscal year ended December 31, 2001 (only those portions specifically incorporated by reference herein shall be deemed filed with the Commission) 21 List of Subsidiaries 23 Consent of KPMG LLP Copies of Exhibits will be furnished upon request and payment of the Company's reasonable expenses in furnishing the Exhibits. * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c). b) Reports on Form 8-K Fastenal Company filed no reports on Form 8-K during the fourth quarter of the fiscal year ended December 31, 2001. 15 Independent Auditors' Report on Schedule The Board of Directors and Stockholders Fastenal Company: Under date of January 18, 2002 we reported on the consolidated balance sheets of Fastenal Company and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of earnings, stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2001, as contained in the 2001 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 2001. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP KPMG LLP Minneapolis, Minnesota January 18, 2002 16 FASTENAL COMPANY Schedule II--Valuation and Qualifying Accounts Years ended December 31, 2001, 2000, and 1999
"Additions" Balance at charged to Balance beginning costs and "Other" "Less" at end Description of year expenses additions deductions of year -------------------------------------------------------------------------------------------------------------------- Year ended December 31, 2001 allowance for doubtful accounts $ 2,238,000 $ 5,453,000 $ 294,000/1/ $ 4,511,000 $ 3,474,000 Year ended December 31, 2000 allowance for doubtful accounts $ 1,400,000 $ 4,496,000 $ -- $ 3,658,000 $ 2,238,000 Year ended December 31, 1999 allowance for doubtful accounts $ 740,000 $ 3,566,000 $ -- $ 2,906,000 $ 1,400,000
/1/ Represents opening allowance for doubtful accounts from 2001 acquisition. 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: March 5, 2002 FASTENAL COMPANY By /s/ Robert A. Kierlin ------------------------------------------- Robert A. Kierlin, Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Date: March 5, 2002 By /s/ Robert A. Kierlin ------------------------------------------- Robert A. Kierlin, Chief Executive Officer (Principal Executive Officer) and Director By /s/ Stephen M. Slaggie ------------------------------------------- Stephen M. Slaggie, Director By /s/ Henry K. McConnon ------------------------------------------- Henry K. McConnon, Director By /s/ Robert A. Hansen ------------------------------------------- Robert A. Hansen, Director By /s/ Reyne K. Wisecup ------------------------------------------- Reyne K. Wisecup, Director By /s/ Daniel L. Florness ------------------------------------------- Daniel L. Florness, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) By /s/ Michael M. Gostomski ------------------------------------------- Michael M. Gostomski, Director By /s/ John D. Remick ------------------------------------------- John D. Remick, Director By /s/ Willard D. Oberton ------------------------------------------- Willard D. Oberton, Director By /s/ Michael J. Dolan ------------------------------------------- Michael J. Dolan, Director INDEX TO EXHIBITS 3.1 Restated Articles of Incorporation of Fastenal Company, as amended (incorporated by reference to Exhibit 3.1 to Fastenal Company's Form 10-Q for the quarter ended September 30, 1993). 3.2 Restated By-Laws of Fastenal Company (incorporated by reference to Exhibit 3.2 to Registration Statement No. 33-14923). 10.1 Description of bonus arrangement for President/Chief Operating Officer......... Electronically Filed 10.2 Description of bonus arrangement for Treasurer/Chief Financial Officer......... Electronically Filed 10.3 Description of bonus arrangement for Vice President of Sales.................. Electronically Filed 10.4 Fastenal Company Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10.4 to Fastenal Company's Form 10-K for the year ended December 31, 2000) 10.5 Amendment to Fastenal Company Stock Appreciation Rights Plan................... Electronically Filed 13 Annual Report to Shareholders for the fiscal year ended December 31, 2001 (only those portions specifically incorporated by reference herein shall be deemed filed with the Commission)........................................... Electronically Filed 21 List of Subsidiaries........................................................... Electronically Filed 23 Consent of KPMG LLP............................................................ Electronically Filed