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, 2004, 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 incorporation or organization)	(I.R.S. Employer Identification No.)
2001 Theurer Boulevard Winona, Minnesota	55987-0978
(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.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  x    No  ¨

The aggregate market value of the Common Stock held by non-affiliates of the registrant as of June 30, 2004, the last business day of the registrant’s most recently completed second fiscal quarter, was $3,483,233,566, based on the closing sale price of the Common Stock on that date. For purposes of determining this number, all executive officers and directors of the registrant as of June 30, 2004 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 1, 2005, the registrant had 75,877,376 shares of Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Annual Report to Shareholders for the fiscal year ended December 31, 2004 are incorporated by reference in Parts I and II. Portions of the registrant’s Proxy Statement for the annual meeting of shareholders to be held April 19, 2005 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, Related Stockholder Matters, and Issuer Purchases of Equity Securities” 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, the typical time period for new stores to achieve their first profitable month, technology conversions, introduction of new product lines, growth in manufacturing and support services, protection from economic downturns provided by the number and type of the Company’s customers, expected leasing of new stores, retention of gross profit margin improvements, the implementation of the Company’s Customer Service Project (CSP) and its anticipated impact on the Company’s inventory stocking model, inventory turns, and cash flows, the leveling off of sales growth and the variability of sales at older stores, growth in inventory, capital expenditures, expected purchases of additional store locations, 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, 2004 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.

PRESENTATION OF DOLLAR AMOUNTS

All dollar amounts in this Form 10-K are presented in thousands unless otherwise noted.

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., Fastenal Singapore P.T.E. Ltd., Fastenal Asia Pacific, Limited., FASTCO (Shanghai) Trading Co., Ltd., and Fastenal Europe, B.V., collectively, “the Company”) began as a partnership in 1967, and was incorporated under the laws of Minnesota in 1968. As of December 31, 2004, the Company had 1,533 store sites located in 50 states, Puerto Rico, Canada, Mexico, Singapore, and the Netherlands, and 5,502 people employed at these sites.

The Company sells industrial and construction supplies in a wholesale and retail fashion. As of December 31, 2004 these industrial and construction supplies were grouped into ten product lines described further below.

2

The Company operated twelve distribution centers as of December 31, 2004 from which the Company distributes products to its store sites.

Development of the Business

Fastenal Company began in 1967 with a marketing strategy of supplying threaded fasteners to customers in small, medium-sized, and, in subsequent years, large cities. The Company believes its success can be attributed to its ability to offer its 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 at the end of each of the last ten years and the related consolidated net sales for each year during the last ten years:

	2004		2003	2002	2001	2000	1999	1998	1997	1996	1995
Number of store sites at year end		1,533	1,314	1,169	1,025	897	807	764	642	483	375
Net sales (in millions)	$	1,238.5	994.9	905.4	818.3	755.6	618.2	511.2	404.2	292.3	226.5

As of December 31, 2004, the Company operated store sites in:

Geographic location	Number
United States	1,421
Puerto Rico	8
Canada	95
Mexico	7
Singapore	1
Netherlands	1

The Company has closed only ten stores in its history; three of these locations were subsequently reopened when the expansion of the Company’s product line or the expansion of the Company’s distribution network improved the profitability of the locations.

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 13 to 18% per year.

The Company stocks all new stores with an inventory drawn from all of its product lines. Subsequent to opening, the store personnel may supplement the inventory offering to customize the selection to the needs of its customer base.

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 at least 2,500 total stores. Many of the new store sites would be in cities in which the Company currently operates. The Company has not operated outside of the United States and Canada long enough to assess the market potential of those markets.

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In addition to the stores discussed above, the Company also operates “in-plant” sites. An “in-plant” site is a selling unit located in or near a customer’s facility that sells product solely to that customer. These sites are not included in the store count numbers as they represent a customer subset of a store.

The Company opened the following store sites, outside the United States, in the last five years:

	2004	2003	2002	2001	2000
Puerto Rico	1	—	1	1	1
Canada	16	9	7	4	11
Mexico	3	2	—	2	—
Singapore	—	—	—	1	—
Netherlands	1	—	—	—	—

During 2002, the Company began operating an “in-plant” site in the Dominican Republic. The Company plans to open additional store sites in Puerto Rico, Canada, Mexico, Singapore, and the Netherlands in the future. The store sites located outside the United States contributed approximately 6% of the Company’s consolidated net sales in 2004.

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 49 stores opened in the first quarter of 2004, 21 were profitable in the fourth quarter of 2004.

For 2004, annual sales volumes of stores operating at least five years ranged between approximately $137 and $7,290, with 75% of these stores having annual sales volumes within the range of approximately $449 to $1,760. The data in the following table shows the growth in the average sales of the Company’s stores from 2003 to 2004 based on the age of each store. The stores opened in 2004 contributed approximately $31,500 (or approximately 2.5%) of the Company’s consolidated net sales in 2004, with the remainder coming from store sites opened prior to 2004.

Age of store site as of December 31, 2004	Year opened	Number of store sites in group as of December 31, 2004		Average sales 2003			Average sales 2004			Percent Change
0–1 year old	2004	219		$	—		$	143	1	—	%
1–2 years old	2003	151			129	1		430		—
2–3 years old	2002	143	2		416			551		32.7
3–4 years old	2001	128			558			708		27.0
4–5 years old	2000	89	2		576			659		14.3
5–6 years old	1999	44			632			764		20.9
6–7 years old	1998	120	2		727			864		18.9
7–8 years old	1997	157	2		745			885		18.7
8–9 years old	1996	107	2		834			951		14.0
9–10 years old	1995	60			855			989		15.7
10–11 years old	1994	62			812			917		13.0
11–12 years old	1993	53			930			1,094		17.5
12–16 years old	1989-1992	125			1,280			1,416		10.6
16+ years old	1967-1988	75			2,121			2,465		16.6

¹ The average sales include sales of store sites open for less than the full fiscal year.

² The company closed six stores in 2003. Each age group closed one store in 2003, except the 1997 group, which closed two stores. The 2003 average is calculated assuming the store number existed half of the year. No stores were closed during 2004.

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As of December 31, 2004, the Company operated distribution centers in or near Winona, Minnesota; Indianapolis, Indiana; Dallas, Texas; Atlanta, Georgia; Scranton, Pennsylvania; Fresno, California; Seattle, Washington; Akron, Ohio; Salt Lake City, Utah; Winston-Salem, North Carolina; Kansas City, Kansas; and Toronto, Ontario. 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.

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 were not reflective of the DIY Business’s operations at the time it was acquired by the Company. The DIY Business was subsequently sold to The Hillman Group, Inc. on October 3, 2002. The DIY Business produced net sales of $16,974 and $8,526 during the approximately nine months and four months, respectively, that it was operated by the Company in 2002 and 2001 (or approximately 1.9% and 1.0% of total net sales in each year, respectively).

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 six years, the Company has been converting a portion of this central processing system to a new computer software and operating system and plans to convert additional modules during 2005. At the store level, the Company operates a proprietary point-of-sale system. This system operates on a Microsoft Windows operating system.

Trademarks

The Company conducts its business in the United States, Canada, Puerto Rico, Mexico, Singapore, and the Netherlands under various trademarks and service marks, including Fastenal®, EquipRite®, CleanChoice®, PowerPhase^™, and FastArc^™. During 2002 and 2001, the Company also operated the DIY Business under the trademarks FAS-N-IT^™ and Anchor Wire^™. The Anchor Wire^™ trademark was sold with the sale of the DIY Business in October 2002. 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.

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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® product name. Today, the fastener product line consists of approximately 251,000 different stock items. This product line consists of 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, 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. Many aspects of the threaded fastener market are common to all cities; variations from city to city that do exist typically relate to the types of businesses operating in a market or to the environmental conditions in a market. Therefore, the Company opens each store with a broad selection of base stocks of inventory and then allows the local store and district leaders to tailor the additional inventory to the local market demand as it develops. Threaded fasteners accounted for approximately 46%, 45%, and 46% of the Company’s consolidated net sales in 2004, 2003, and 2002, respectively.

Concrete anchors make up the largest portion of the miscellaneous supply items included in the Fastenal® product line. Most concrete anchors use threaded fasteners as part of the completed anchor assembly.

Since 1993, the Company added additional product lines. These product lines are sold through the same distribution channel as the original Fastenal® product line. The additional product lines include the following:

Product line1:	Year introduced	Approximate number of stock items	Private label product name
Tools	1993	85,000	FastTool
Cutting tools	1996	70,000	SharpCut
Hydraulics and pneumatics	1996	37,000	Fastenal®
Material handling	1996	10,000	EquipRite®
Janitorial supplies	1996	9,000	CleanChoice®
Electrical supplies	1997	13,000	PowerPhase™
Welding supplies2	1997	21,000	FastArc™
Safety supplies	1999	11,000	Fastenal®
Raw materials (metals)	2001	8,000	Fastenal®

¹ During 2002 and 2001, the Company sold product in an eleventh product line called ‘Retail packaged product’. This product line was added with the 2001 acquisition of the DIY Business. The DIY Business was sold in 2002. This product line is now included in the other product lines and represents a subset of the type of products included in our CSP conversion.

² The Company does not sell welding gases.

The Company plans to add other product lines in the future.

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Inventory Control

The Company determines its inventory stocking levels through its computer systems, its sales personnel at the store, district, and region levels, and its product managers. The data used for this determination is derived from sales activity from all of Company’s stores, from individual stores, and from geographic areas; it is also derived from vendor information and from customer demographic information. The computer system monitors the inventory level for all stock items and triggers replenishment, or prompts a buyer to purchase, as necessary based on an established minimum-maximum level. All stores stock a base inventory and may expand beyond preset inventory levels as deemed appropriate by their district managers. Inventories in distribution centers are established from computerized data for the stores served by the respective centers.

Manufacturing and Support Services Operations

In 2004 approximately 94.8% of the Company’s consolidated net sales were attributable to products manufactured by other companies to industry standards. The remaining 5.2% of the Company’s consolidated net sales for 2004 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, third-party logistics, 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 515,000 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% of the Company’s purchases in 2004.

Geographic Information

Information regarding the Company’s revenues and certain of the Company’s assets by geographic location is set forth in note 11 to the Notes to Consolidated Financial Statements contained in Fastenal Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2004, which is incorporated herein by reference. Foreign currency fluctuations, changes in trade relations, or fluctuations in the relative strength of foreign economies could impact the Company’s ability to procure products overseas at competitive prices and the Company’s foreign sales.

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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, federal, state and local governmental entities, schools, and certain retail trades. As of December 31, 2004, the Company’s total number of active customer accounts (defined as accounts having purchase activity within the last 90 days) was approximately 204,000.

During each of the past three years ended December 31, 2004, 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 makes limited use of 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 operating stores in small, medium, 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, 2004, the Company employed a total of 7,946 full and part-time employees, 5,502 being store managers and store employees, and the balance being employed in the Company’s distribution centers, manufacturing operations, service operations, and home office.

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.

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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 its leadership personnel based on one or more of the following factors: sales growth, profit growth, profitability, and return on assets, and to its 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.

Posting of Periodic and Current Reports

Fastenal Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge on or through the Company’s website at www.fastenal.com as soon as reasonably practicable after such reports have been filed with or furnished to the Securities and Exchange Commission.

ITEM 2. PROPERTIES

The Company owns six facilities in Winona, Minnesota. These facilities are as follows:

Purpose	Approximate Square Feet
Distribution center and home office	213,000
Manufacturing facility	100,000
Winona store	13,000
Winona product support and support services facility	55,000
Rack and shelving storage	42,000
Multi-building complex which houses certain operations of the Manufacturing Division and the Support Services group	30,000

The Company also owns the following facilities, excluding store locations, outside of Winona, Minnesota:

Purpose	Location	Approximate Square Feet
Distribution center	Indianapolis, Indiana	414,000
Distribution center	Atlanta, Georgia	198,000
Distribution center	Dallas, Texas	95,000
Distribution center	Scranton, Pennsylvania	160,000
Distribution center	Akron, Ohio	102,000
Distribution center	Kansas City, Kansas	300,000
Distribution center	Toronto, Ontario, Canada	62,000
Distribution center	Greensboro, North Carolina	250,000

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In addition, the Company owns 169 buildings that house the Company’s store locations in various cities throughout North America and is currently in the process of building or renovating another 27 owned store locations for future use.

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:

Purpose	Location	Approximate Square Feet	Lease Expiration Date	Remaining Lease Renewal Options
Distribution center	Seattle, Washington	55,000	March 2008	None
Distribution center	Fresno, California	52,500	February 2006	None
Distribution center	Salt Lake City, Utah	22,000	March 2005	None

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.

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ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of Fastenal Company are:

Name	Age	Position
Willard D. Oberton	46	Chief Executive Officer, President, and Director
Nicholas J. Lundquist	47	Executive Vice-President and Chief Operating Officer
Daniel L. Florness	41	Executive Vice-President and Chief Financial Officer
Steven L. Appelwick	45	Vice-President – Product Procurement, Marketing, and Logistics

Mr. Oberton has been Chief Executive Officer and President of Fastenal Company since December 2002. From July 2001 through December 2002, Mr. Oberton was President and Chief Operating Officer of Fastenal Company. 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. Mr. Oberton has also served as a director of Fastenal Company since June 1999.

Mr. Lundquist has been Executive Vice-President and Chief Operating Officer of Fastenal Company since December 2002. From June 2000 through December 2002, Mr. Lundquist was Vice-President of Sales of Fastenal Company. From April 1997 through June 2000, Mr. Lundquist held the position of National Sales Manager of Fastenal Company.

Mr. Florness has been Executive Vice-President and Chief Financial Officer of Fastenal Company since December 2002. From June 1996 to November 2002, Mr. Florness was the Chief Financial Officer of Fastenal Company.

Mr. Appelwick has been Vice-President – Product Procurement, Marketing, and Logistics of Fastenal Company since December 2002. From August 2001 through December 2002, Mr. Appelwick was Operations Manager of Fastenal Company. From August 1999 through July 2001, Mr. Appelwick held the position of Business Development/Logistics Manager of Fastenal Company.

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.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Incorporated herein by reference is Fastenal Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2004, Common Stock Data on page 6.

ITEM 6. SELECTED FINANCIAL DATA

Incorporated herein by reference is Fastenal Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2004, Six-Year Selected Financial Data on page 5.

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, 2004, Management’s Discussion & Analysis of Financial Condition & Results of Operations on pages 8 to 16.

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, 2004, Market Risk Management on page 14.

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, 2004, Selected Quarterly Financial Data (Unaudited) on page 6, Consolidated Financial Statements and Notes to Consolidated Financial Statements on pages 17 to 31, and Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements and Supplemental Schedule on page 33.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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ITEM 9A. CONTROLS AND PROCEDURES

Incorporated herein by reference is Fastenal Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2004, Management Report on Internal Control over Financial Reporting on page 32 and Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting on page 34.

As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer of Fastenal Company, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms.

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 6 to 7, “Election of Directors—Committee Matters”, page 8, and “Section 16(a) Beneficial Ownership Reporting Compliance”, page 18, in Fastenal Company’s Proxy Statement dated February 28, 2005. See also Part I hereof under the heading “Item X. Executive Officers of the Registrant”.

On January 19, 2004, the Board of Directors of Fastenal Company adopted a supplement to the Company’s existing Standards of Conduct designed to qualify the Standards of Conduct as a code of ethics within the meaning of Item 406(b) of Regulation S-K promulgated by the Securities and Exchange Commission (“Code of Ethics”). The Standards of Conduct, as supplemented, apply to all directors, officers, and employees of the Company, including without limitation the chief executive officer, chief financial officer, principal accounting officer, and controller (if any) of Fastenal Company, and persons performing similar functions (“Senior Financial Officers”). Those portions of the Standards of Conduct, as supplemented, that constitute a required element of a Code of Ethics are available without charge by submitting a request to the Company pursuant to the directions detailed on the Company’s website at www.fastenal.com. In the event the Company amends or waives any portion of the Standards of Conduct, as supplemented, that constitutes a required element of a Code of Ethics and such amendment or waiver applies to any of the Senior Financial Officers, the Company intends to post on its website, within four business days after the date of such amendment or waiver, a brief description of such amendment or waiver, the name of each Senior Financial Officer to whom the amendment or waiver applies, and the date of the amendment or waiver.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated herein by reference is the information appearing under the headings “Election of Directors—Compensation of Directors and Committee Members”, page 10, “Executive Compensation—Summary of Compensation”, pages 13 to 14, “Executive Compensation—Option/SAR Grants”, page 14, and “Executive Compensation—Compensation Committee Interlocks and Insider Participation”, page 14, in Fastenal Company’s Proxy Statement dated February 28, 2005.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Incorporated herein by reference is the information appearing under the heading “Security Ownership of Principal Shareholders and Management”, pages 3 to 5, in Fastenal Company’s Proxy Statement dated February 28, 2005.

Executive Compensation Plan Information

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excludes Securities Reflected in Column (a))
	(a)	(b)		(c)
Equity Compensation Plans Approved by Security Holders	420,000	$	40.00	3,373,865
Equity Compensation Plans Not Approved by Security Holders	0		0	0
Total	420,000	$	40.00	3,373,865

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

14

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Incorporated herein by reference is the information appearing under the heading “Independent Auditors’ Fees and Services”, pages 11 to 12, in Fastenal Company’s Proxy Statement dated February 28, 2005.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a	)	1.	Financial Statements:
			Consolidated Balance Sheets as of December 31, 2004 and 2003
			Consolidated Statements of Earnings for the years ended December 31, 2004, 2003, and 2002
			Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended December 31, 2004, 2003, and 2002
			Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003, and 2002
			Notes to Consolidated Financial Statements
			Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements and Supplemental Schedule
			(Incorporated by reference to pages 17 to 31 and page 33 of Fastenal Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2004)
		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	Articles of Amendment to Restated Articles of Incorporation of Fastenal Company effective May 10, 2002 (incorporated by reference to Exhibit 4.2 to Registration Statement No. 333-88170)
			3.3	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 Chief Executive Officer and President, Executive Vice-President and Chief Financial Officer, Executive Vice-President and Chief Operating Officer, and Executive Vice-President – Product Procurement, Marketing, and Logistics *

15

3.	Exhibits (continued):
	10.2	Fastenal Company Stock Option Plan (incorporated by reference to Exhibit A to Fastenal Company’s Proxy Statement for the Annual Meeting of Shareholders held on April 15, 2003)*
	13	Annual Report to Shareholders for the fiscal year ended December 31, 2004 (only those portions specifically incorporated by reference herein shall be deemed filed with the Commission)
	21	List of Subsidiaries
	31	Certifications under Section 302 of the Sarbanes-Oxley Act of 2002
	32	Certification under Section 906 of the Sarbanes-Oxley Act of 2002
	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 15(c).

16

FASTENAL COMPANY

Schedule II—Valuation and Qualifying Accounts

Years ended December 31, 2004, 2003, and 2002

(Amounts in thousands)

Description	Balance at beginning of year		“Additions” charged to costs and expenses		“Other” additions (deductions)		“Less” deductions		Balance at end of year
Year ended December 31, 2004
Allowance for doubtful accounts	$	4,070	6,931		—		5,820		5,181
Insurance reserves	$	3,829	23,481	1	—		20,842	3	6,468
Year ended December 31, 2003
Allowance for doubtful accounts	$	3,543	5,857		—		5,330		4,070
Insurance reserves	$	5,963	19,723	1	—		21,857	3	3,829
Year ended December 31, 2002
Allowance for doubtful accounts	$	3,474	5,189		(219	)2	4,901		3,543
Insurance reserves	$	2,371	24,732	1	—		21,140	3	5,963

¹ Includes costs and expenses incurred for premiums and claims related to health and general insurance.

² Represents ending allowance for doubtful accounts from the sale of the DIY Business in 2002.

³ Includes costs and expenses paid for premiums and claims related to health and general insurance.

* See accompanying Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements and Supplemental Schedule incorporated herein by reference.

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: February 28, 2005

FASTENAL COMPANY
By	/s/ Willard D. Oberton
	Willard D. Oberton, 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: February 28, 2005

By	/s/ Willard D. Oberton	By	/s/ Daniel L. Florness
	Willard D. Oberton, Chief Executive Officer		Daniel L. Florness, Chief Financial Officer
	(Principal Executive Officer) and		(Principal Financial Officer and
	Director		Principal Accounting Officer)
By	/s/ Robert A. Kierlin	By	/s/ Michael M. Gostomski
	Robert A. Kierlin, Director		Michael M. Gostomski, Director
By	/s/ Stephen M. Slaggie	By	/s/ John D. Remick
	Stephen M. Slaggie, Director		John D. Remick, Director
By	/s/ Henry K. McConnon	By	/s/ Robert A. Hansen
	Henry K. McConnon, Director		Robert A. Hansen, Director
By	/s/ Reyne K. Wisecup	By	/s/ Michael J. Dolan
	Reyne K. Wisecup, Director		Michael J. Dolan, Director

18

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	Articles of Amendment to Restated Articles of Incorporation of Fastenal Company effective May 10, 2002 (incorporated by reference to Exhibit 4.2 to Registration Statement No. 333-88170)
3.3	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 Chief Executive Officer and President, Executive Vice-President and Chief Financial Officer, Executive Vice-President and Chief Operating Officer, and Executive Vice-President - Product Procurement, Marketing, and Logistics	Electronically Filed
10.2	Fastenal Company Stock Option Plan (incorporated by reference to Exhibit A to Fastenal Company’s Proxy Statement for the Annual Meeting of Shareholders held on April 15, 2003)
13	Annual Report to Shareholders for the fiscal year ended December 31, 2004 (only those portions specifically incorporated by reference herein shall be deemed filed with the Commission)	Electronically Filed
21	List of Subsidiaries	Electronically Filed
31	Certifications under Section 302 of the Sarbanes-Oxley Act of 2002	Electronically Filed
32	Certification under Section 906 of the Sarbanes-Oxley Act of 2002	Electronically Filed

EX-10.1

Exhibit 10.1

Bonus Arrangement for Chief Executive Officer and President, Executive Vice-President and Chief Financial Officer, Executive Vice-President and Chief Operating Officer, and Vice-President – Product Procurement, Marketing, and Logistics

Fastenal Company’s Chief Executive Officer and President, Executive Vice-President and Chief Operating Officer, and Vice-President – Product Procurement, Marketing, and Logistics are paid a bonus under individual bonus arrangements. Under these arrangements, the bonus for any quarter is calculated based on the amount by which the Company’s consolidated pre-tax income for such quarter exceeds the Company’s consolidated pre-tax income for the same quarter in the prior year.

Fastenal Company’s Executive Vice-President and Chief Financial Officer is paid a bonus under an individual bonus arrangement. Under that arrangement, the bonus for any quarter is calculated based on the amount by which the Company’s consolidated net income for such quarter exceeds a percentage of such quarter’s consolidated net sales.

EX-13

Exhibit 13

2004 ANNUAL REPORT

FASTENAL®

INDUSTRIAL & CONSTRUCTION SUPPLIES

2004 Profile of Fastenal Company

Fastenal Company was founded in 1967. As of December 31, 2004, the Company operated 1,533 store sites located in 50 states, Puerto Rico, Canada, Mexico, Singapore, and the Netherlands and employed 5,502 people at these sites. In addition, there were 2,444 people employed in various support positions. The Company sells approximately 515,000 different types of industrial and construction supplies in ten product categories. These include (approximately): 251,000 different types of threaded fasteners and miscellaneous supplies; 85,000 different types of tools; 70,000 different types of metal cutting tool blades; 37,000 different types of fluid transfer components and accessories for hydraulic and pneumatic power; 10,000 different types of material handling and storage products; 9,000 different types of janitorial and paper products; 13,000 different types of electrical supplies; 21,000 different types of welding supplies (excluding welding gases); 11,000 different types of safety supplies; and 8,000 different types of raw materials (metals). As of December 31, 2004, the Company operated twelve distribution centers located in Minnesota, Indiana, Ohio, Pennsylvania, Texas, Georgia, Washington, California, Utah, North Carolina, Kansas, and Ontario, Canada. Approximately 94.8% of the Company’s 2004 sales were attributable to products manufactured by others, and approximately 5.2% related to items manufactured, modified or repaired by either the Company’s Manufacturing Division or one of its Support Services. Since December 31, 2004, the Company has opened additional store sites.

Quincy, IL store before & after its Customer Service Project (CSP) conversion

This Annual Report, including the sections captioned “President’s Letter to Shareholders,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Stock and Financial Data,” contains 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 (the “Reform Act”), including statements regarding technology conversions, anticipated cash growth, retention of gross profit margin improvement, the implementation of the Company’s Customer Service Project (CSP) and its anticipated impact on the Company’s inventory stocking model, inventory turns and cash flow, the leveling off of sales growth and the variability of sales at older stores, growth in inventory, the expansion of foreign operations, capital expenditures, expected purchases of store locations, 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 section of this Annual Report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Company assumes no obligation to update either such forward-looking statements or the discussion of such risks and uncertainties.

2004 Table of Contents

	Page
PRESIDENT’S LETTER TO SHAREHOLDERS	2-4
SIX-YEAR SELECTED FINANCIAL DATA	5
STOCK AND FINANCIAL DATA	6
STOCK PERFORMANCE HIGHLIGHTS	7
MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS	8-16
CONSOLIDATED BALANCE SHEETS	17
CONSOLIDATED STATEMENTS OF EARNINGS	18
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME	19
CONSOLIDATED STATEMENTS OF CASH FLOWS	20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	21-31
MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING	32
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE	33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING	34
Inside Back Cover
EXECUTIVE OFFICERS & DIRECTORS
CORPORATE INFORMATION

FASTENAL COMPANY’S EXPANDED PRODUCT OFFERING

2004 President’s Letter to Shareholders

Helped by a growing national economy, Fastenal had a very good year in 2004. Our 2004 net sales of $1.238 billion represented a 24.5% increase over the 2003 level. Our net earnings of $131 million represented a 55.7% increase over the 2003 level. Earnings per share increased from $1.11 in 2003 to $1.72 in 2004. This is the highest level of earnings growth we have produced since 1994 and the second best year since we went public in 1987.

The earnings growth was helped by the stronger sales growth but is more attributable to the efficiencies we are experiencing from our store upgrade project. We refer to the store upgrade project as the Customer Service Project, or CSP. Since the beginning of the CSP in May 2002, the sales per store employee has grown by more than 30%. This improvement has allowed us to improve our compensation structure, while also lowering our overall labor costs relative to the size of the Company.

In 2004, we experienced the most significant inflation in product cost that we have seen in many years. This inflation was caused by the steel shortage from China. A large portion of our fastener product line we sell is imported from Asia. In these product areas we saw price increases during the year ranging from 5 to 40%. Approximately 40% of our fasteners are imported. Our product buyers worked hard to stay ahead of the increases to minimize the impact on our customers. The store personnel also had to work hard explaining this increase to the customers and had to raise prices. Although it is never easy to raise prices, it was made somewhat easier because of all the media coverage the steel shortage received.

Our sales growth in 2004 was driven by many factors. One of the most important is our new store openings. In 2004 we opened 219 stores compared to our previous record of 151 stores opened in 2003, an increase in store openings of 45%. We opened 127 stores in the first half of the year and 92 in the second half. Opening the stores earlier in the year helped to contribute to our improved sales growth in the second half of the year. This milestone was made possible by the strong leadership of our regional managers. They challenged their district managers to open as many stores as possible in the first half of the year and they worked to find better locations and better buildings. During my travels throughout the year, I found that most of them fit the criteria. We believe this effort has helped, and will continue to help, our business grow faster.

The Customer Service Project was Fastenal’s biggest focus in 2004 as it was in 2003 and the last half of 2002. To date, we have converted approximately 90% of our stores to this new open format. In 2005, we will complete the initial roll out of the project and continue to upgrade existing CSP stores. Our merchandising people have been very aggressive in improving the layout and merchandising of our stores. We are currently on the fourth version of CSP.

During 2004, we re-set more than 200 existing CSP stores. These were stores converted to the CSP format early in the project. The results show that the new format is far more efficient. A key ingredient is prepackaged product, which allows customers to serve themselves. We have also been able to negotiate better prices with our suppliers by committing to stock their product in all of our stores. This has allowed us to improve the gross profit margins in the CSP stores.

Because of the success of the CSP project, we developed a product test program to identify other products that should: 1) sell well in the new store format, and 2) produce above average returns on the inventory investment. In December 2003, we began this test program at 100 stores. Our marketing department selected the 100 locations to get a good cross section of stores with different age, size, and geographic characteristics. The product development managers each identified what they believed were good candidate products; next, they presented their suggestions to a small group of senior managers (I also participated). As a group, we decided which products should be tested. For the first test, we decided on 44 product groups which represented approximately $20,000 in additional inventory per store. Each product was monitored on a monthly basis and by November we were prepared to make stocking decisions. Of the 44 product groups

2004 ANNUAL REPORT – PAGE 2

2004 President’s Letter to Shareholders

tested, 11 were dropped and 17 were left in the test for one more year to get more information. The remaining 16 product groups are being added as standard stock in the CSP stores.

The product development managers have selected a second group of products that will be tested using the same process and same test stores in 2005.

The inventory investment for CSP continues to be high. Our inventory grew 32% in 2004. This is one area we did not do as well as we had planned in 2004. One factor we had not fully anticipated was the impact inflation would have on our ending inventory. This was caused by replacing our existing import fastener inventory with new inventory at a higher cost. We also made a decision to buy import fasteners more heavily in an effort to reduce the fill-in buys caused by stock outs. This decision increased our inventory of fasteners but also contributed to our higher gross margins. I still believe it was a good decision. The rest of the growth had been planned for new stores and CSP conversions.

Sourcing products continues to be a major focus for our Company. Our Asian trading company (FASTCO) is growing very rapidly. The FASTCO team has identified several new suppliers for products we are currently sourcing through other trading companies. We have experienced significant savings, and in many cases improved quality. Our purchasing volume through this company grew 54% from 2003 to 2004. We currently have 28 employees in Asia.

On the sales front, all of our sales personnel did a great job. The government sales team, however, should get the MVP award this year. Because of their hard work and persistence, Fastenal was awarded a five year $89 million contract to supply the United States Air Force with maintenance and shop supplies. I was very excited when we received the contract, but once I visited Hill Air Force Base and was able to see the enthusiasm from both our people and the people working at the base, I was not only excited but also very proud of our people and what they had accomplished. Our sales to the government grew by 74% in 2004 and contributed $47 million to our total sales.

Our national construction team also saw strong growth in 2004. They signed 24 new supply contracts and contributed approximately $19.8 million to our total sales, nearly doubling their sales over 2003. Our national accounts team, which concentrates on the large industrial accounts, signed 60 new agreements and contributed $270 million to our total sales. This represents 22% of our 2004 sales. Our national accounts team continues to identify market opportunities that creates opportunities for our local stores.

Fastenal’s manufacturing division also had a very good year in 2004. They continue to meet the needs of our customers and produce the special parts that many of our competitors would walk away from. They produce parts in hundreds of different material types and thousands of different shapes. Almost every day they receive orders from customers who need the part before it was ordered, and in most cases they produce and ship the part the same day so that the customer can get their plant or construction site back on track. We currently have 219 highly trained and dedicated people working four shifts to meet customer needs.

Distribution continues to be an important part of our business model. We have a strong commitment to giving our customer the best service possible. Without great distribution, meeting that commitment is not possible. Our distribution and transportation managers are using the latest technology to improve the movement of product from our suppliers to the customer. Over 50% of our product is processed steel. This creates a challenge of high shipping costs relative to the selling price. Our distribution model is efficient and provides us with a competitive advantage.

2004 ANNUAL REPORT – PAGE 3

2004 President’s Letter to Shareholders

Having great technology is critical to our success. Without well designed systems it is impossible to provide our customers with the high level of service they need and expect. Our information systems people continued to work on improving all of our systems in 2004, with the main focus being the store system. They began the process of migrating to a new version of the windows operating system which has proven to be faster and more reliable. They have also developed and tested dozens of enhancements that we felt were necessary to meet the needs of our customers along with working on a new warehouse management system that we expect to begin testing in 2005.

I have written about many areas of our Company and all of the great things we are doing, but none of this would be possible without dedicated and well trained people. The Fastenal School of Business (FSB) had another record year in 2004. The FSB Team trained more than 2,400 people in 16 different programs. The programs they offer range in time from 2 days to 5 weeks with most courses being one to two weeks. The biggest program introduced in 2004 was a 3 week program for new district managers. I have received great reviews from the people who participated in this program. Three weeks is a big commitment from the employee, but everyone who I have spoken with has said it was well worth it. We added 10 people to our FSB staff in 2004, ending the year with 28 people.

For us to continue growing, it is important that we maintain a strong balance sheet. The inventory buildup and the increased dividend payment did not allow us to grow our cash position in 2004. We believe our strong focus on both accounts receivable and inventory will allow us to both support our dividend payments, and be a net producer of cash in 2005.

In December 2004, we had a national product show in Orlando, Florida. This is the fourth year we have had this show. The first three years were held in Clearwater, Florida. However, our growth and the increases in the number of suppliers that wanted to attend the show forced us to move to a larger facility. We alternate each year bringing the store managers one year and the assistant managers the next. This year the assistant managers attended, and over 1,700 employees made the trip. The show is designed to give our suppliers a chance to present their products to our people without the normal day-to-day distractions. The show gives me the opportunity to personally meet with hundreds of employees over a three-day period, some I have known for many years and others I have never met before. I learn a lot about what is going on in the Company and gather ideas on things we could be or should be working on. It also reinforces to me, and I think all attendees, the power of Fastenal people and their ability to excel in an organization that values entrepreneurship. The suppliers who attend the show continue to tell me how professional, energetic, and enthusiastic our people are. The question I am always asked is, “where do you find all of these people”? I always tell them that it is the employees in the field who do the recruiting, and it is much easier to recruit talent when you believe in your Company. So I believe if we continue to create a work environment where people can make decisions and create opportunities for themselves, they will continue to find the high quality people we need to grow our business.

In closing, I want to thank all of our shareholders for your continued support. I commit to continue leading the employees of Fastenal to achieve our common goal of “growth through customer service” and will always keep in mind Fastenal’s core values of ambition, innovation, integrity, and teamwork.

Thank you,

Willard D. Oberton

CEO and President

2004 ANNUAL REPORT – PAGE 4

2004 Six – Year Selected Financial Data

(Amounts in Thousands Except Per Share Information)

Operating Results

Years Ended December 31	2004			Percent Change		2003			2002		2001	2000	1999
Net sales	$	1,238,492		24.5	%	$	994,928		905,438		818,283	755,618	618,191
Gross profit		624,333		27.7	%		489,067		448,476		412,427	388,118	319,460
Earnings before income taxes		208,336		52.8	%		136,336		121,207	2	113,634	131,430	106,479
Net earnings		130,989		55.7	%		84,120		75,542	3	70,112	80,730	65,455
Basic earnings per share		1.73		55.9	%		1.11		1.00	3	.92	1.06	.86
Diluted earnings per share		1.72		55.0	%		1.11		1.00	3	.92	1.06	.86
Dividends per share	$	.40		90.5	%	$	.21		.05		.045	.04	.02
Basic-weighted average shares outstanding		75,877					75,877		75,877		75,877	75,877	75,877
Diluted-weighted average shares outstanding		75,986	1				75,892	1	75,877		75,877	75,877	75,877
Financial Position
December 31
Net working capital	$	466,883		18.7	%	$	393,255		349,422		300,680	247,876	193,744
Total assets		770,234		18.2	%		651,543		559,008		475,244	402,464	318,621
Total stockholders’ equity	$	684,369		18.7	%	$	576,740		499,871		424,888	359,258	281,960

Operating Results

Years Ended December 31 (as a percentage of sales)	2004		2003		2002		2001		2000		1999
Gross Profit	50.4	%	49.2	%	49.5	%	50.4	%	51.4	%	51.7	%
Earnings before income taxes	16.8	%	13.7	%	13.4	%	13.9	%	17.4	%	17.2	%
Net earnings	10.6	%	8.5	%	8.3	%	8.6	%	10.7	%	10.6	%

All information contained in this Annual Report reflects the 2-for-1

stock spliteffected in the form of a stock dividend in 2002.

¹ Reflects impact of stock options issued in May 2003 that were in-the-money during the period outstanding.

² Amount includes a gain on the sale of the DIY Business of $5,934.

³ Amount includes an extraordinary gain, net of tax, of $716, or $.01 per basic and diluted share.

2004 ANNUAL REPORT – PAGE 5

2004 Stock and Financial Data

Common Stock Data

The Company’s shares are traded on The Nasdaq Stock Market under the symbol “FAST”. The following table sets forth, by quarter, the high and low closing sale price of the Company’s shares on The Nasdaq Stock Market for 2004 and 2003.

2004:	High		Low
First quarter	$	54.31	43.87
Second quarter	$	56.97	48.46
Third quarter	$	64.50	53.50
Fourth quarter	$	64.15	51.13
2003:	High		Low
First quarter	$	38.91	27.51
Second quarter	$	37.15	27.80
Third quarter	$	43.74	32.90
Fourth quarter	$	50.99	37.65

As of February 1, 2005, there were approximately 1,686 recordholders of the Company’s Common Stock, which includes nominees or broker dealers holding stock on behalf of an estimated 25,297 beneficial owners.

In 2004, the Company paid a $.15 and $.25 dividend per share and in 2003 the Company paid a $.06 and $.15 dividend per share. On January 17, 2005, the Company announced a $.31 semi-annual dividend per share to be paid on March 4, 2005 to shareholders of record at the close of business on February 21, 2005. The Company expects that it will continue to pay comparable semi-annual cash dividends in the foreseeable future, provided that any future determination as to payment of dividends will depend upon the financial condition and results of operations of the Company and such other factors as are deemed relevant

by the board of directors.

Selected Quarterly Financial Data (Unaudited)

(Amounts in thousands except per share information)

2004:	Net sales		Gross profit	Net earnings	Basic earnings per share1
First quarter	$	284,206	142,979	28,147	.37
Second quarter		310,143	157,207	34,832	.46
Third quarter		325,678	163,560	34,741	.46
Fourth quarter		318,465	160,587	33,269	.442
Total	$	1,238,492	624,333	130,989	1.732
2003:	Net sales		Gross profit	Net earnings	Basic earnings per share1
First quarter	$	235,843	116,697	19,041	.25
Second quarter		249,112	123,374	21,927	.29
Third quarter		258,330	126,507	23,262	.31
Fourth quarter		251,643	122,489	19,890	.26
Total	$	994,928	489,067	84,120	1.11

¹ Earnings per share amounts may not equal the total annual earnings per share due to rounding differences.

² Diluted earnings per share result in a reduction of $.01 in earnings in the fourth quarter and total numbers for 2004.

2004 ANNUAL REPORT – PAGE 6

2004 Stock Performance Highlights

Fastenal Stock Performance

Initial Public Offering (IPO)

On August 27, 1987 (date of the Company’s Initial Public Offering), 1,000 shares of Fastenal’s stock sold for $9,000. Approximately 17 years later, on December 31, 2004, those 1,000 shares, having split 5 times, were 24,000 shares worth $1,476,000, for a gain of 16,300 percent (or approximately 30.8% compounded annually).

Ten Years

On December 31, 1994, 1,000 shares of Fastenal’s stock sold for $40,880. Ten years later, on December 31, 2004, those 1,000 shares, having split 2 times, were 4,000 shares worth $246,240, for a gain of 502 percent (or approximately 19.7% compounded annually).

Five Years

On December 31, 1999, 1,000 shares of Fastenal’s stock sold for $44,940. Five years later, on December 31, 2004, those 1,000 shares, having split once, were 2,000 shares worth $123,120, for a gain of 174 percent (or approximately 22.3% compounded annually).

Dividends

Fastenal has paid dividends in every year since 1991.

2004 ANNUAL REPORT – PAGE 7

2004 Management’s Discussion & Analysis of Financial Condition & Results of Operations

(Dollar Amounts in Millions except Per Share Information and as Otherwise Noted)

Results of Operations

Business Overview— Fastenal is a North American leader in the wholesale distribution of industrial and construction supplies. The Company operates stores sites primarily located in North America. On December 31, 2004, the Company operated 1,533 Company-owned or leased store sites.

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 (OEM) and maintenance and repair operations (MRO). Other users of the Company’s products include farmers, truckers, railroads, mining companies, federal, state, and local governmental entities, schools, and certain retail trades. Geographically, our customers are primarily located in North America.

Financial Overview— During 2004 and the latter half of 2003, the strength of the global industrial environment positively impacted the Company’s performance. During the first half of 2003 and all of 2002, the recession in the global industrial environment negatively impacted the Company’s performance, and that of the industry as a whole. The impact of the economy is best reflected in the growth performance of our stores greater than five years old (2004 group reflects stores sites opened in 1999 and earlier). These stores are more cyclical due to the increased market share they enjoy in their local markets. The net sales growth rate of store sites more than five years old was as follows:

2004		2003		2002
15.3	%	3.3	%	0.5	%

Our stores that are two to five years old (2004 group reflects store sites opened in 2002, 2001, or 2000) are also impacted by the economy, but to a lesser degree. The net sales growth rate of our store sites that are two to five years old was as follows:

2004		2003		2002
24.9	%	16.5	%	16.6	%

Combined, these two groups represent a consistent same-store view of our business. These stores, which are more than two years old (2004 group reflects store sites opened in 2002 and earlier), had net sales growth rates as follows:

2004		2003		2002
17.1	%	5.3	%	3.2	%

Net sales— Net sales and growth rates in net sales were as follows:

	2004			2003		2002
Net sales	$	1,238.5		994.9		905.4
Percent change		24.5	%	9.9	%	10.7	%

During August 2001, the Company acquired a business which sold packaged fasteners to the retail market (Do-It-Yourself or DIY Business). During October 2002 this business was sold. The DIY Business had net sales of approximately $17.0 during 2002 (or approximately 1.9% of the consolidated net sales for the year). Excluding the sales related to the DIY Business, net sales and growth rates in net sales would have been as follows:

	2004			2003		2002
Net sales	$	1,238.5		994.9		888.5
Percentage change		24.5	%	12.0	%	9.7	%

2004 ANNUAL REPORT – PAGE 8

2004 Management’s Discussion & Analysis of Financial Condition & Results of Operations

(Dollar Amounts in Millions except Per Share Information and as Otherwise Noted)

Management included the net sales (excluding DIY Business) and the corresponding growth rate above because we believe it provides a consistent presentation of the growth experienced in Fastenal’s organic store-based business and ongoing operations.

The 2004 and 2003 net sales growth rate percentages reflect the strengthening of the North American market in the period since July 2003. The increase in net sales in 2004 and 2003 came primarily from unit sales growth in existing stores more than two years old, growth in the newer product lines, and new site openings. The 2004 growth was increased by 3.0% to 4.0% due to an inflationary increase in pricing during the year, while the 2003 growth was tempered by a deflationary impact to pricing during the year.

Stores sites opened in 2004 contributed approximately $31.5 (or 2.5%) to 2004 net sales. Store sites opened in 2003 contributed approximately $64.9 (or 5.2%) to 2004 net sales and approximately $19.5 (or 2.5%) to 2003 net sales. The rate of growth in sales of store sites generally levels off after they have been open for five years, and, as stated earlier, the sales of older store sites typically vary more with the economy than do the sales of younger store sites.

Monthly Daily Sales Growth— Our business had daily sales growth rates of (compared to the comparable month in the preceding year):

Month	2004		2003		2002
January	16.1	%	10.2	%	5.6	%
February	20.1	%	7.9	%	7.1	%
March	19.1	%	11.5	%	8.9	%
April	22.1	%	7.2	%	12.0	%
May	25.6	%	6.7	%	12.3	%
June	25.7	%	6.0	%	13.7	%
July	27.0	%	8.2	%	11.6	%
August	24.9	%	8.8	%	13.1	%
September	26.2	%	8.4	%	11.0	%
October	27.6	%	13.7	%	10.2	%
November	25.0	%	14.5	%	14.3	%
December	27.4	%	16.9	%	7.8	%

Note: Daily sales are defined as the sales for a period divided by the number of business days in a period.

Excluding sales related to the DIY Business, daily sales growth rates would have been (compared to the comparable month in the preceding year):

Month	2004		2003		2002
January	16.1	%	13.3	%	2.7	%
February	20.1	%	10.3	%	4.8	%
March	19.1	%	14.5	%	6.0	%
April	22.1	%	9.9	%	9.3	%
May	25.6	%	9.5	%	9.4	%
June	25.7	%	8.5	%	11.0	%
July	27.0	%	11.0	%	8.7	%
August	24.9	%	11.4	%	10.4	%
September	26.2	%	10.8	%	12.5	%
October	27.6	%	13.9	%	13.3	%
November	25.0	%	14.5	%	17.9	%
December	27.4	%	16.9	%	11.6	%

The first table reflects daily sales growth rates of the entire organization. The second table reflects daily sales growth rates of Fastenal excluding the impact of the DIY Business. As discussed earlier, the DIY Business was sold in October 2002 and represented approximately 1.9% of net sales that year.

Management included the second table above because we believe it provides a consistent presentation of the organic store-based business and ongoing operations before, during, and after the period in which the DIY Business was owned and operated.

The daily sales growth rates in the two tables above represent several trends. There was a downward trend in the first eleven months of 2001 which reflected the overall weakening of the industrial economy we service in North America. This trend reversed itself from December 2001 to June 2002, partly due to changing comparisons in the prior year and partly due to stronger month-to-month (i.e. April to May and May to June) growth rates compared to 2001. During July 2002, the daily sales growth rate decreased, began to improve again in August 2002 through November 2002, and slipped in December 2002, the final month of the year. The first six months of 2003 continued the choppy trend in net sales growth experienced in the second half of 2002. The July 2003 to December 2004 time frame represents

2004 ANNUAL REPORT – PAGE 9

2004 Management’s Discussion & Analysis of Financial Condition & Results of Operations

(Dollar Amounts in Millions except Per Share Information and as Otherwise Noted)

improvement and stabilization in the growth rates experienced. The choppy trend, which the Company experienced from July 2002 until June 2003, reflects the alternating strengthening and weakening in the industrial economy during that period, while the July 2003 to December 2004 improvement and stabilization reflects continued strengthening in the economy as it relates to the customers we sell to in North America and the impact of the CSP initiative (discussed below).

Sales by Product Line— The following table indicates, by product line: (1) the products sold by the Company, (2) the year of introduction, and (3) the percentage of net sales.

		2004		2003		2002
Fastenal1	1967	55.6	%	54.8	%	55.6	%
Tools	1993	10.9	%	11.4	%	11.1	%
Cutting Tools	1996	5.0	%	5.4	%	5.4	%
Hydraulics & Pneumatics	1996	6.1	%	6.3	%	6.0	%
Material Handling	1996	6.8	%	7.0	%	6.7	%
Janitorial Supplies	1996	3.5	%	3.6	%	3.2	%
Electrical Supplies	1997	3.2	%	2.9	%	2.6	%
Welding Supplies	1997	3.3	%	3.1	%	2.8	%
Safety Supplies	1999	4.8	%	4.8	%	4.1	%
Raw Materials	2001	0.5	%	0.3	%	0.1	%
Retail Packaged Products2	2001	—		—		1.9	%
Other		0.3	%	0.4	%	0.5	%
		100	%	100	%	100	%

¹ Fastenal product line represents fasteners and miscellaneous supplies.

² The Retail Packaged Product line related to the DIY Business acquisition, which was sold in October 2002. This product line has been merged into the Company’s other product lines.

Threaded fasteners accounted for approximately 46%, 45%, and 46% of the Company’s net sales in 2004, 2003, and 2002, respectively.

Gross Profit Margins— Gross profit as a percent of net sales was as follows:

2004	50.4	%
2003	49.2	%
2002	49.5	%

The improvement in the gross profit margin in 2004 resulted from several factors. Rising steel prices had the largest impact on Fastenal’s gross profit margin. As a reseller of industrial products, primarily steel-based industrial products, Fastenal was forced to increase its selling prices. These increases resulted in approximately 3.0% to 4.0% of additional sales dollars in 2004. To date, the increases relate primarily to CSP (defined below) products, to changes in our wholesale (or list) pricing, and, to a lesser degree, to increases in the selling prices to our key account customers; the latter being less immediate. The short-term gross profit margin benefited from these changes as the increased cost of new inventory, still on the shelf, is included in ending inventory, and is relieved through cost of goods over the three to six month ‘turn’ period between purchase and sale of the product. Some of this short-term benefit has been eliminated during 2004; however, Fastenal’s ability to continue raising its prices in reaction to inbound product cost increases should allow us to retain some of the increased gross profit margin. The second factor impacting gross profit margins was the strength of our fastener products in the current economy. These products enjoy the highest gross profit margin percentage. The third factor was vendor incentive programs, including vendor freight allowances, early payment discounts, and rebates. The fourth factor was improvements in freight costs, primarily inbound. The fifth factor was the benefit of inventory depth discussed below. We expect the current economic activity to continue positively impacting our growth rates and the strength in our fastener business. This should allow us to maintain a portion of the improvements related to the first two factors, and should allow us to maintain most of the improvements related to vendor incentives, freight costs, and inventory depth.

2004 ANNUAL REPORT – PAGE 10

2004 Management’s Discussion & Analysis of Financial Condition & Results of Operations

(Dollar Amounts in Millions except Per Share Information and as Otherwise Noted)

The decrease in the gross margin percent in 2003 resulted from several factors. The DIY Business operated at a lower gross margin, approximately 30%, so the sale of this business caused an improvement in the overall gross margin. This improvement was more than offset by (1) the influence of increases in sales to certain large accounts and to certain large one time sales, which were made at lower margins, (2) the influences of changes in product mix, and (3) the slowdown in the growth of inventories since May 2003, which also lowered the savings to Fastenal related to vendor incentive programs, including vendor freight allowances and rebates.

Operating and Administrative Expenses— Operating and administrative expenses as a percent of net sales was as follows:

2004	33.6	%
2003	35.5	%
2002	37.0	%

The changes each year are primarily due to changes in payroll and related costs, changes in occupancy costs, and fluctuations in growth of net sales in store sites greater than five years old. The latter drives the Company’s ability to leverage its operating expenses.

Payroll and related costs represent approximately 69%, 69%, and 71% of operating and administrative expenses in 2004, 2003, and 2002, respectively. In 2004 and 2003, payroll and related costs increased at a rate which was less than the rate of increase in net sales.

The changes in payroll and related costs were due to the following increases (decreases) in the average number of employees:

	2004		2003		2002
Sales personnel	13.8	%	1.6	%	6.1	%
Support personnel	21.2	%	(13.2	)%	11.4	%

The 2004 increase in the average number of support people was due to an increase in the overall store count and the increasing sales growth. The 2003 drop in the average number of support employees was amplified by two events: (1) the sale of the DIY Business, which resulted in a drop of approximately 194 employees (or 8.0%) and (2) tight management of employee head count. The 2002 increase in the average number of support employees was amplified by the DIY Business acquisition.

In 2004, 2003, and 2002, the rate of increase in occupancy costs was greater than the rate of increase in net sales. Occupancy costs increased due to (1) a 16.7%, 12.4% and 14.0% increase in the number of store locations in 2004, 2003, and 2002, respectively, and (2) the upgrade of store locations in connection with the CSP initiative.

The loss on sale of property and equipment in all years came primarily from the sale of used vehicles. The gain on sale of the DIY Business in 2002 of $5.9, before taxes, was from the sale of the business acquired in 2001. The extraordinary gain of $0.7, net of tax, in 2002 resulted from the negative goodwill recognized on the DIY Business acquisition.

Net earnings—Net earnings, growth rates in net earnings, and net earnings per share (EPS), were as follows:

	2004			2003		2002
Net earnings	$	131.0		84.1		75.5
Percentage change		55.7	%	11.4	%	7.7	%
Basic EPS	$	1.73		1.11		1.00
Diluted EPS	$	1.72		1.11		1.00

As indicated earlier, the net earnings in 2002 included a gain on disposal of the DIY business, before tax, of $5.9 and an extraordinary gain on acquisition, net of tax, of $0.7. The net earnings growth rate before the gain on disposal of the DIY Business and before the extraordinary gain on acquisition was 18.2% and 1.5% in 2003 and 2002, respectively.

2004 ANNUAL REPORT – PAGE 11

2004 Management’s Discussion & Analysis of Financial Condition & Results of Operations

(Dollar Amounts in Millions except Per Share Information and as Otherwise Noted)

Management included the net earnings growth rate information excluding the gain on disposal of the DIY Business and excluding the extraordinary gain on acquisition because we believe it provides a consistent presentation of the growth experienced in Fastenal’s ordinary course operations.

During 2004 and 2003, the net earnings growth rate was greater than that of net sales primarily because of the earlier mentioned impact of payroll and related costs, and, in the case of 2004 only, the improvements in gross profit margins. During 2002, the net earnings growth rate was lower than that of net sales primarily because of the earlier mentioned impact of operating and administrative costs.

Effects of Inflation— Price inflation related to certain products positively impacted net sales in 2004. Price deflation related to certain products negatively impacted net sales in 2003 and 2002.

Critical Accounting Policies— The Company’s estimates related to certain assets and liabilities are an integral part of the consolidated financial statements. These estimates are considered critical to the consolidated financial statements because they require subjective and complex judgments.

Allowance for doubtful accounts – This reserve is for accounts receivable balances that are potentially uncollectible. The reserve is based on (1) an analysis of customer accounts and (2) the Company’s historical experience with accounts receivable write-offs. The analysis includes the aging of accounts receivable, the financial condition of a customer or industry, and general economic conditions. Historically, results have reflected the reserves previously recorded. Management believes the results could be materially different if historical trends do not reflect actual results or if economic conditions worsened for the Company’s customers.

Inventory reserves – This reserve is for shrinkage. The reserve is based on an analysis of inventory trends. The analysis includes inventory levels, physical inventory counts, cycle count adjustments, and the on-hand quantities relative to the sales history for the product. Historically, results have reflected the reserves previously recorded. Management believes the results could be materially different if historical trends do not reflect actual results.

Health insurance reserves – This reserve is for incurred but not reported and reported and unpaid health claims. The reserve is based on an analysis of external data related to the Company’s historical claim reporting trends. Historically, results have reflected the reserves previously recorded. Management believes the results could be materially different if historical trends do not reflect actual results.

General insurance reserves – This reserve is for general claims related to worker’s compensation, property and casualty losses, and other self-insured losses. The reserve is based on an analysis of external data related to the Company’s historical general claim trends. Management believes the results could be materially different if historical trends do not reflect actual results.

Liquidity and Capital Resources

Net cash provided by operating activities was:

2004	$	57.4
2003	$	90.6
2002	$	17.6

The 2004 decrease in net cash provided by operating activities was primarily due to the increase in inventories. The 2003 increase in net cash provided by operating activities was primarily due to the increase in net earnings and the impact of lower growth in inventories when compared to 2002, and, to a lesser degree, the impact of effective accounts payable management and of the strengthening Canadian dollar when compared to the United States dollar. The 2003 increase was partially offset by expected increases in trade accounts receivable.

2004 ANNUAL REPORT – PAGE 12

2004 Management’s Discussion & Analysis of Financial Condition & Results of Operations

(Dollar Amounts in Millions except Per Share Information and as Otherwise Noted)

During 2002, the Company began its Customer Service Project (CSP). This project centers on stocking a broader inventory in each of our stores and displaying it so our customers can service themselves. The Company believes the CSP will shift our inventory-stocking model from its historical mix of approximately 60% store and 40% distribution center to approximately 75% store and 25% distribution center (DC). We believe this can be accomplished by expanding the inventory in the stores to the CSP format (discussed below), and then by subsequently reducing the distribution center inventory. This would allow us to operate in the future with inventory turns similar to, or just slightly lower than, the periods before the CSP, and would have a lower impact on cash flows from operations in the future.

The mix of inventory stocked at the store versus the distribution center locations was as follows:

	2004		2003		2002
Store	64	%	67	%	53	%
DC	36	%	33	%	47	%
Total	100	%	100	%	100	%

The inventory stocked under the CSP format consists of a core stocking level of approximately $62 thousand per location. Existing stores which have not yet converted to the CSP format stock some, but not all, of the inventory stocked under the CSP format. Existing stores converted to the CSP format have experienced increases in their inventory levels as they fill out the product selection. New stores, prior to commencement of the CSP, opened with approximately $25 thousand of inventory per location, and would grow this amount to approximately $50 thousand after operating for twelve months. The Company currently intends to convert approximately 40 stores per month to the CSP format and to continue opening all new stores with the CSP format.

We added $74 to the existing inventories in 2004. The growth was primarily driven by four factors. The first factor was the growth of the Company’s sales, and the inventory necessary to support the business; this resulted in approximately $19 of additional inventory. The second factor was the aforementioned price inflation on inbound product; this resulted in approximately $13 of additional inventory. The third factor was the combined impact of the number of store locations opened (new stores) and the number of existing stores converted to the CSP format (converted stores). Combined, the new stores and converted stores resulted in approximately $19 of additional inventory. The final factor was expansion of our manufacturer direct purchasing. Inventory purchased in this fashion turns slower than if purchased thru other suppliers, and resulted in approximately $23 of additional inventory. While the inventory growth has impacted the Company’s working capital model, the added depth of inventory allowed the Company to avoid certain ‘fill in’ buys during the year. These ‘fill in’ buys, while a necessary component of our supply chain, are typically at a premium and adversely impact gross margins. The Company expects the factors cited above will cause inventory to grow in 2005.

Net cash used in investing activities was:

2004	$	43.5
2003	$	39.7
2002	$	46.8

The 2004 increase in net cash used in investing activities resulted primarily from the increase in purchases of capital equipment and the reduction in marketable securities. The 2003 decrease in net cash used in investing activities resulted primarily from the reduction in marketable securities, which more than offset the absence of the proceeds from the DIY Business sale which the Company received in 2002.

The Company had future commitments for leased facilities and for leased vehicles at December 31, 2004. The Company had $9.7 and $6.5 of long-term debt related to an Industrial Revenue Bond (IRB) at December 31, 2004 and 2003, respectively. The future contractual cash obligations related to the commitments are as follows:

	Total	2005	2006 & 2007	2008 & 2009	After 2009
Facilities	98.9	34.4	45.9	18.6	—
Vehicles	17.3	11.0	6.3	—	—
IRB	9.7	—	—	—	9.7
Total	125.9	45.4	52.2	18.6	9.7

2004 ANNUAL REPORT – PAGE 13

2004 Management’s Discussion & Analysis of Financial Condition & Results of Operations

(Dollar Amounts in Millions except Per Share Information and as Otherwise Noted)

The Company has a letter of credit issued on its behalf to its insurance carrier. The future commercial commitment related to the letter of credit is $10. See notes 9 and 10 of the Notes to Consolidated Financial Statements for additional information related to these obligations and to our current line of credit.

The Company declared a semi-annual dividend of $.31 per share on January 17, 2005. The Company paid an annual dividend per share of $.40, $.21, and $.05 in 2004, 2003, and 2002, respectively.

The Company expects to incur approximately $52 in total capital expenditures in 2005, consisting of approximately $14 for manufacturing, warehouse and packaging equipment and facilities, $4 for shelving and related supplies for the Company’s CSP implementation, $14 for data processing equipment, $12 for store buildings and improvement to store buildings, and $8 for vehicles. The Company has expanded the number of owned store locations over the last several years, and expects to purchase additional locations in the future. As of December 31, 2004, the Company had no material outstanding commitments for capital expenditures.

Management anticipates funding its current expansion plans with cash generated from operations, from available cash and cash equivalents, and, to a lesser degree, from its borrowing capacity. In addition to opening new sites in the United States, the Company plans to continue opening additional store locations in Canada, Puerto Rico, Mexico, Singapore, and the Netherlands.

Market Risk Management

The Company is exposed to certain market risks from changes in interest rates and foreign currency exchange rates. Changes in these factors cause fluctuations in the Company’s earnings and cash flows. The Company evaluates and manages exposure to these market risks as follows:

(1) Interest Rates – The Company has a $10 line of credit of which $0 was outstanding at December 31, 2004. The line bears interest at .9% over the LIBOR rate.

(2) Foreign Currency Exchange Rates – Foreign currency fluctuations can affect the Company’s net investments and earnings denominated in foreign currencies. The Company’s primary exchange rate exposure is with the Canadian dollar against the United States dollar. The Company’s estimated net earnings exposure for foreign currency exchange rates was not material at December 31, 2004.

(3) Commodities – Fluctuations in pricing of certain commodities like steel can affect the Company’s cost structure and pricing.

2004 ANNUAL REPORT – PAGE 14

2004 Management’s Discussion & Analysis of Financial Condition & Results of Operations

(Dollar Amounts in Millions except Per Share Information and as Otherwise Noted)

Geographic Information

Information regarding the Company’s revenues, long-lived assets, and deferred tax assets by geographic area is set forth in note 11 to the Notes to Consolidated Financial Statements. Risks attendant to the Company’s foreign operations are described under “Certain Risks and Uncertainties” below

Certain Risks and Uncertainties

Certain statements in this Annual Report, in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, in future filings by the Company with the Securities and Exchange Commission, in the Company’s press releases and in oral statements made by or with approval of the Company’s executive officers constitute or will constitute “forward-looking statements” under the Reform Act. The following factors are among those that could cause the Company’s actual results to differ materially from those predicted in such forward-looking statements: (i) an upturn or downturn in the economy could impact sales at existing stores, the rates of new store openings, additions of new employees, and the time it typically takes a new store to achieve profitability, (ii) an upturn or downturn in the economy, a change in product mix, a change in inbound inventory costs, the ability to increase selling prices in response to increased inventory costs, and a change in expected inventory buying patterns could impact gross margins, (iii) a change, from that projected, in the number of markets able to support future store sites could impact the rates of new store openings and additions of new employees, (iv) the ability of the Company to develop product expertise at the store level, to identify future product lines that complement existing product lines, to transport and store certain hazardous products and to otherwise integrate new product lines into the Company’s existing stores and distribution network could impact sales and margins, (v) increases or decreases in fuel and utility costs could impact distribution and occupancy expenses of the Company, (vi) the ability of the Company to successfully attract and retain qualified personnel to staff the Company’s stores could impact sales at existing stores and the rate of new store openings, (vii) changes in governmental regulations related to product quality or product source traceability could impact the cost to the Company of regulatory compliance, (viii) inclement weather could impact the Company’s distribution network, (ix) foreign currency fluctuations, changes in trade relations, or fluctuations in the relative strength of foreign economies could impact the ability of the Company to procure products overseas at competitive prices and the Company’s foreign sales, (x) disruptions caused by the implementation of the Company’s new management information systems infrastructure could impact sales, (xi) changes in the rate of new store openings could impact expenditures for computers and other capital equipment, (xii) changes in the stocking and buying patterns related to product, both domestic and imported, could result in the Company being unable to reduce its distribution center inventories to the extent anticipated and the Company failing to achieve inventory turns in the future similar to those before the CSP initiative began and have a negative impact on cash flows from investing activities, (xiii) changes in the availability of suitable land and buildings could impact expenditures for additional owned locations which house our stores, which in turn could alter the Company’s plans to increase the number of owned locations, and (xiv) actions of competitors, suppliers, and customers could impact the Company’s ability to raise prices.

2004 ANNUAL REPORT – PAGE 15

2004 Management’s Discussion & Analysis of Financial Condition & Results of Operations

(Dollar Amounts in Millions except Per Share Information and as Otherwise Noted)

New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 123R, Share-Based Compensation, which supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services through share-based payment transactions. SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for the award of equity investments based on the fair value of the award at the date of grant. The cost will be recognized over the period during which an employee is required to provide services in exchange for the award. SFAS No. 123R is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. The impact on net earnings as a result of the adoption of SFAS No. 123R, from a historical perspective, can be found in Note 1 to the Consolidated Financial Statements of this Annual Report. We are currently evaluating the provisions of SFAS No. 123R and will adopt it on July 1, 2005, as required.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, which amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. SFAS No. 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, SFAS No. 151 requires allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. We do not have any idle facility expense or wasted material expense as of December 31, 2004. We will continue to apply the requirements of SFAS No. 151 in future periods.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets. SFAS No. 153 is an amendment to APB Opinion No. 29, Accounting for Nonmonetary Transactions. SFAS No. 153 eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. We are currently evaluating the provisions of SFAS No. 153 and will adopt it on July 1, 2005, as required.

2004 ANNUAL REPORT – PAGE 16

2004 Consolidated Balance Sheets

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

	2004		2003
Assets
Current assets:
Cash and cash equivalents	$	33,503	49,750
Marketable securities		5,496	21,142
Trade accounts receivable net of allowance for doubtful accounts of $5,181 and $4,070, respectively		162,500	128,756
Inventories		307,333	232,884
Deferred income tax asset		6,494	4,154
Other current assets		22,740	17,446
Refundable income taxes		—	64
Total current assets		538,066	454,196
Marketable securities		35,468	24,725
Property and equipment, less accumulated depreciation		193,446	169,553
Other assets, net		3,254	3,069
Total assets	$	770,234	651,543
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	39,276	40,124
Accrued expenses		31,633	20,817
Income taxes payable		274	—
Total current liabilities		71,183	60,941
Deferred income tax liability		14,682	13,862
Stockholders’ equity:
Preferred stock, 5,000 shares authorized		—	—
Common stock, 100,000 shares authorized 75,877 shares issued		759	759
Additional paid-in capital		13,693	9,445
Retained earnings		662,517	561,878
Accumulated other comprehensive income		7,400	4,658
Total stockholders’ equity		684,369	576,740
Commitments (notes 5, 9, and 10)
Total liabilities and stockholders’ equity	$	770,234	651,543

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

2004 ANNUAL REPORT – PAGE 17

2004 Consolidated Statements of Earnings

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

	2004		2003	2002
Net sales	$	1,238,492	994,928	905,438
Cost of sales		614,159	505,861	456,962
Gross profit		624,333	489,067	448,476
Operating and administrative expenses		416,524	353,613	334,875
Loss on sale of property and equipment		652	317	304
Gain on sale of DIY Business		—	—	(5,934	)
Operating income		207,157	135,137	119,231
Interest income		1,179	1,199	1,976
Earnings before income taxes and extraordinary gain		208,336	136,336	121,207
Income tax expense		77,347	52,216	46,381
Net earnings before extraordinary gain		130,989	84,120	74,826
Extraordinary gain on DIY Business acquisition, net of tax		—	—	716
Net earnings	$	130,989	84,120	75,542
Basic earnings per share before extraordinary gain	$	1.73	1.11	.99
Diluted earnings per share before extraordinary gain	$	1.72	1.11	.99
Basic extraordinary gain per share, net of tax		—	—	.01
Diluted extraordinary gain per share, net of tax		—	—	.01
Basic earnings per share	$	1.73	1.11	1.00
Diluted earnings per share	$	1.72	1.11	1.00
Basic-weighted average shares outstanding		75,877	75,877	75,877
Diluted-weighted average shares outstanding		75,986	75,892	75,877

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

2004 ANNUAL REPORT – PAGE 18

2004 Consolidated Statements of Stockholders’ Equity and Comprehensive Income

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

	Common Stock			Additional Paid-in Capital	Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Shares	Amount
Balances as of December 31, 2001	75,877	$	759	4,044	421,945		(1,860	)	424,888
Dividends paid in cash	—		—	—	(3,794	)	—		(3,794	)
Tax benefit from exercise of stock options	—		—	3,428					3,428
Net earnings for the year	—		—	—	75,542				75,542
Translation adjustment	—		—	—	—		(193	)	(193	)
Total comprehensive income									75,349
Balances as of December 31, 2002	75,877		759	7,472	493,693		(2,053	)	499,871
Dividends paid in cash	—		—	—	(15,935	)	—		(15,935	)
Tax benefit from exercise of stock options	—		—	1,973	—		—		1,973
Net earnings for the year	—		—	—	84,120		—		84,120
Translation adjustment	—		—	—	—		6,711		6,711
Total comprehensive income									90,831
Balances as of December 31, 2003	75,877		759	9,445	561,878		4,658		576,740
Dividends paid in cash	—		—	—	(30,350	)	—		(30,350	)
Tax benefit from exercise of stock options	—		—	4,248	—		—		4,248
Net earnings for the year	—		—	—	130,989		—		130,989
Change in marketable securities							63		63
Translation adjustment	—		—	—	—		2,679		2,679
Total comprehensive income									133,731
Balances as of December 31, 2004	75,877	$	759	13,693	662,517		7,400		684,369

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

2004 ANNUAL REPORT – PAGE 19

2004 Consolidated Statements of Cash Flows

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

	2004			2003		2002
Cash flows from operating activities:
Net earnings	$	130,989		84,120		75,542
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation of property and equipment		23,643		20,444		16,945
Loss on sale of property and equipment		652		317		304
Gain on sale of DIY Business		—		—		(5,934	)
Bad debt expense		6,931		5,857		5,189
Deferred income taxes		(1,520	)	3,503		1,106
Tax benefit from exercise of stock options		4,248		1,973		3,428
Amortization of non-compete agreement		67		67		67
Changes in operating assets and liabilities, net of acquisition and sale of the DIY Business:
Trade accounts receivable		(40,675	)	(29,060	)	(13,025	)
Inventories		(74,449	)	(15,622	)	(71,738	)
Other current assets		(5,294	)	(2,839	)	(1,893	)
Accounts payable		(848	)	14,341		6,949
Accrued expenses		10,816		(464	)	5,205
Income taxes, net		338		1,774		(4,326	)
Other		2,539		6,212		(207	)
Net cash provided by operating activities		57,437		90,623		17,612
Cash flows from investing activities:
Purchases of business and property and equipment		(52,687	)	(50,246	)	(42,683	)
Proceeds from sale of property and equipment		4,499		4,184		2,693
Proceeds from sale of DIY business		—		—		14,935
Proceeds of Industrial Revenue Bond		3,200		—		—
Purchase of Industrial Revenue Bond		(3,200	)	—		—
Net decrease (increase) in marketable securities		4,903		6,535		(21,770	)
Decrease (increase) in other assets		(252	)	(206	)	25
Net cash used in investing activities		(43,537	)	(39,733	)	(46,800	)
Cash flows from financing activities:
Payment of dividends		(30,350	)	(15,935	)	(3,794	)
Net cash used in financing activities		(30,350	)	(15,935	)	(3,794	)
Effect of exchange rate changes on cash		203		499		14
Net increase (decrease) in cash and cash equivalents		(16,247	)	35,454		(32,968	)
Cash and cash equivalents at beginning of year		49,750		14,296		47,264
Cash and cash equivalents at end of year	$	33,503		49,750		14,296
Supplemental disclosure of cash flow information:
Cash paid during each year for income taxes	$	74,281		50,442		46,573

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

2004 ANNUAL REPORT – PAGE 20

2004 Notes to Consolidated Financial Statements

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

1 Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Fastenal Company and its wholly-owned subsidiaries (collectively referred to as the Company). All material intercompany balances and transactions have been eliminated in consolidation.

Revenue Recognition and Accounts Receivable

Net sales include products, services, and freight and handling costs billed; net of any related sales incentives paid to customers and net of an estimate for product returns. The Company recognizes revenue when persuasive evidence of an arrangement exists, title and risk of ownership have passed, the sales price is fixed or determinable, and collectibility is probable. Generally, these criteria are met at the time the product is shipped to, or picked up by, the customer. The Company recognizes billings for freight and handling charges at the time the products are shipped to, or picked up by, the customer. The Company recognizes services at the time the service is provided to the customer. The Company estimates product returns based on historical return rates. Accounts receivable are stated at their estimated net realizable value.

Financial Instruments

All financial instruments are carried at amounts that approximate estimated fair value.

Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly-liquid debt instruments purchased with original maturities of three months or less to be cash equivalents.

Inventories

Inventories, consisting of merchandise held for resale, are stated at the lower of cost (first in, first out method) or market.

Marketable Securities

Marketable securities as of December 31, 2004 and 2003 consist of debt securities. The Company classifies its debt securities as available-for-sale. Available-for-sale securities are recorded at fair value based on current market value. Unrealized holding gains and losses on available-for-sale securities are excluded from earnings, but are included in comprehensive income, and are reported as a separate component of stockholders’ equity until realized, provided that a decline in the market value of any available-for-sale security below cost that is deemed other than temporary is charged to earnings resulting in the establishment of a new cost basis for the security.

Property and Equipment

Property and equipment are stated at cost. Depreciation on buildings and equipment is provided for using the straight line method over the anticipated economic useful lives of the related property.

2004 ANNUAL REPORT – PAGE 21

2004 Notes to Consolidated Financial Statements

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

Summary of Significant Accounting Policies, continued

Other Assets and Long-Lived Assets

Other assets consist of prepaid security deposits, goodwill and a non-compete agreement.

Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Net goodwill was $1,400 in all three years. The non-compete is amortized on a straight-line basis over 15 years. Net non-compete was $558, $625, and $692 on December 21, 2004, 2003, and 2002, respectively. Total non-compete amortization costs were $67 per year in 2004, 2003, and 2002.

Goodwill and other tangible and identifiable intangible long-lived assets are reviewed whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, or on an annual basis if no event or change occurs, to determine that the unamortized balances are recoverable. Recoverability is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset, and, in the case of goodwill, by also looking at an adverse change in legal factors or the business climate, a transition to a new product or services strategy, a significant change in the customer base, and/or a realization of failed marketing efforts. If the asset is deemed to be impaired, the amount of impairment is charged to earnings as a part of operating and administrative expenses in the current period. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.

Accounting Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

Insurance Reserves

The Company is self-insured for certain losses relating to medical, worker’s compensation, and other casualty losses. Specific stop loss coverage is provided for catastrophic claims in order to limit exposure to significant claims. Losses and claims are charged to operations when it is probable a loss has been incurred and the amount can be reasonably estimated. Accrued insurance liabilities are based on claims filed and estimates of claims incurred but not reported.

Product Warranties

The Company offers a basic limited warranty for certain of its products. The specific terms and conditions of those warranties vary depending upon the product sold. The Company typically recoups these costs through product warranties it holds with its original equipment manufacturers. The Company’s warranty expense has historically been minimal.

2004 ANNUAL REPORT – PAGE 22

2004 Notes to Consolidated Financial Statements

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

Summary of Significant Accounting Policies, continued

Stockholders’ Equity and Stock-Based Compensation

During 2004, the Company had two stock option employee compensation plans. Certain employees of the Company have been granted options to purchase Common Stock of the Company under either the Fastenal Company Stock Option Plan (Fastenal Option Plan) or the Robert A. Kierlin Stock Option Plan (RAK Option Plan). The Fastenal Option Plan was approved by the shareholders of the Company in April 2003. The Company granted options under the Fastenal Option Plan in May 2003. The RAK Option Plan was sponsored by one of the Company’s founders, Robert A. Kierlin, and does not involve a commitment by the Company. Mr. Kierlin granted options under the RAK Option Plan in 2002, 2001, and 2000. All options granted by Mr. Kierlin under the RAK Option Plan not previously exercised have expired, and Mr. Kierlin has indicated that he does not intend to grant any additional options under the RAK Option Plan in the future.

The Company accounts for both the RAK Option Plan and the Fastenal Option Plan under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The Company has adopted the disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. SFAS No. 148 amends the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation.

No stock-based employee compensation cost is reflected in net income as all options to purchase Common Stock of the Company granted under these two plans had an exercise price equal to, or greater than, the market value of the underlying Common Stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 for all awards:

	2004		2003	2002
Net earnings, as reported	$	130,989	84,120	75,542
Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects		891	1,754	2,674
Pro forma net earnings	$	130,098	82,366	72,868
Basic earnings per share	$	1.73	1.11	1.00
Diluted earnings per share	$	1.72	1.11	1.00
Pro forma basic earnings per share	$	1.71	1.09	.96
Pro forma diluted earnings per share	$	1.71	1.09	.96

The fair value of each stock option is estimated as of the grant date using the Black-Scholes option-pricing model. The assumptions used and the estimated fair values are as follows:

Year of grant	Risk-free interest rate		Expected life of option in years	Expected dividend yield		Expected stock volatility		Estimated fair value of stock option
2003	4.5	%	3.42	0.2	%	30.33	%	$	7.56
2002	4.5	%	2.66	0.2	%	27.03	%	$	6.65
2001	5.0	%	2.75	0.2	%	37.66	%	$	8.07
2000	6.0	%	2.75	0.2	%	42.29	%	$	5.77

2004 ANNUAL REPORT – PAGE 23

2004 Notes to Consolidated Financial Statements

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

Summary of Significant Accounting Policies, continued

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Comprehensive Income

The Company complies with the provisions of SFAS No. 130, Reporting Comprehensive Income, which establishes standards for the reporting of comprehensive income and its components. The components of comprehensive income are as follows:

	2004		2003	2002
Net earnings, as reported	$	130,989	84,120	75,542
Change in marketable securities		63	—	—
Translation adjustment		2,679	6,711	(193	)
Comprehensive income	$	133,731	90,831	75,349

Earnings Per Share

Basic net earnings per share is calculated using net earnings available to common stockholders divided by the weighted average number of shares of Common Stock outstanding during the year. Diluted net earnings per share is similar to basic net earnings per share except that the weighted average number of shares of Common Stock outstanding plus the assumed issuance of contingent shares is increased to include the number of additional shares of Common Stock that would have been outstanding assuming the issuance of all potentially dilutive shares, such as Common Stock to be issued upon exercise of options. The following table presents a reconciliation of the denominators used in the computation of basic and diluted earnings per share related to the Fastenal Option Plan:

	2004	2003	2002
Basic—weighted shares outstanding	75,877	75,877	75,877
Weighted shares assumed upon exercise of stock options	109	15	—
Diluted—weighted shares outstanding	75,986	75,892	75,877

Segment Reporting

The Company has reviewed SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, and determined the Company meets the aggregation criteria outlined as the various operations of the Company have similar (1) economic characteristics, (2) products and services, (3) customers, (4) distribution channels, and (5) regulatory environments. Therefore the Company reports as a single business segment.

2004 ANNUAL REPORT – PAGE 24

2004 Notes to Consolidated Financial Statements

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

2 Investments

Available-for-sale securities at December 31 consist of the following:

2004:	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
Federal mortgage backed security	$	10,000	—	(120	)	9,880
State and municipal bonds		14,901	80	—		14,981
Corporate bonds		13,034	104	—		13,138
Certificates of deposit or money market		2,966	—	(1	)	2,965
Total available-for-sale securities	$	40,901	184	(121	)	40,964
2003:	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
Federal mortgage backed security	$	11,000	49	—		11,049
State and municipal bonds		12,555	—	—		12,555
Corporate bonds		7,858	—	(100	)	7,758
Certificates of deposit or money market		14,505	—	—		14,505
Total available-for-sale securities	$	45,918	49	(100	)	45,867

The Company recorded gains related to the Company’s available-for-sale securities. These gains were immaterial in 2004 and 2003.

Maturities of the Company’s available for sale securities at December 31, 2004 consist of the following:

	Less than 12 months			Greater than 12 months
	Amortized Cost		Fair Value	Amortized Cost	Fair Value
Federal mortgage backed security	$	—	—	10,000	9,880
State and municipal bonds		—	—	14,901	14,981
Corporate bonds		2,515	2,531	10,519	10,607
Certificates of deposit or money market		2,966	2,965	—	—
Total available-for-sale securities	$	5,481	5,496	35,420	35,468

3 Property and Equipment

Property and equipment as of December 31 consists of the following:

	Depreciable life in years	2004			2003
Land	—	$	15,968		12,904
Buildings and improvements	31 to 39		83,628		69,224
Equipment and shelving	3 to 10		171,068		148,935
Transportation equipment	3 to 5		18,995		17,553
Construction in progress	—		21,865		17,709
			311,524		266,325
Less accumulated depreciation			(118,078	)	(96,772	)
Net property and equipment		$	193,446		169,553

2004 ANNUAL REPORT – PAGE 25

2004 Notes to Consolidated Financial Statements

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

4 Accrued Expenses

Accrued expenses as of December 31 consist of the following:

	2004		2003
Payroll and related taxes	$	9,385	7,586
Bonuses and commissions		7,350	4,881
Insurance		6,698	3,829
Sales and real estate taxes		4,266	2,469
Other		3,934	2,052
	$	31,633	20,817

5 Stockholders’ Equity

Preferred Stock has a par value of $.01 per share. There were 5,000 shares authorized and no shares issued as of December 31, 2004 and 2003. Common Stock has a par value of $.01 per share. There were 100,000 shares authorized and 75,877 shares issued and outstanding as of December 31, 2004 and 2003.

Dividends

On January 17, 2005, the Company’s board of directors declared a dividend of $.31 per share of Common Stock to be paid in cash on March 4, 2005 to shareholders of record at the close of business on February 21, 2005.

Stock Options

In 2003, options were granted, under the Fastenal Option Plan, to purchase shares of Common Stock. In 2002, 2001, and 2000, options were granted, under the RAK Option Plan, to purchase shares of Common Stock owned by one of the Company’s founders, Robert A. Kierlin. The individuals eligible to receive options in all years included those employees with three or more years of service, or employed as a district manager or a store manager, on the last business day of December of the previous year. The options were granted with an exercise price equal to or greater than fair market value on the date of grant. The RAK Option Plan was sponsored by one of the Company’s founders and does not involve a commitment by the Company.

Stock option activity under all plans is as follows:

Year of grant	Exercise price per share		Number of options granted	Options cancelled since grant		Options exercised	Year options vest3
20031	$	40.00	465	(45	)	—	2006
20022	$	35.00	820	(308	)	512	2004
20012	$	27.50	700	(239	)	461	2003
20002	$	27.50	1,451	(388	)	1,063	2002

¹ Granted by the Company under the Fastenal Option Plan.

² Granted by Robert A. Kierlin under the RAK Option Plan.

³ The options vest during the year indicated. The participants have six months to exercise, or forfeit, the vested options. All unused vested options expire no later than December 31 of the vesting year.

6 Retirement Savings Plan

The Fastenal Company and Subsidiaries 401(k) Plan covers all employees of the Company in the United States. The general purpose of this plan is to provide additional financial security during retirement by providing employees with an incentive to make regular savings. The Company made no contributions to the plan in 2004, 2003, or 2002. The Company intends to provide a contribution in 2005.

2004 ANNUAL REPORT – PAGE 26

2004 Notes to Consolidated Financial Statements

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

7 Income Taxes

Earnings before income taxes were derived from the following sources:

	2004		2003	2002
Domestic	$	204,045	134,567	119,977
Foreign		4,291	1,769	1,230
		208,336	136,336	121,207

Components of income tax expense (benefit) are as follows:

2004:	Current		Deferred		Total
Federal	$	66,732	(463	)	66,269
State		9,709	(118	)	9,591
Foreign		1,959	(472	)	1,487
	$	78,400	(1,053	)	77,347
2003:	Current		Deferred		Total
Federal	$	41,767	3,004		44,771
State		6,313	454		6,767
Foreign		633	45		678
	$	48,713	3,503		52,216
2002:	Current		Deferred		Total
Federal	$	38,953	949		39,902
State		5,870	146		6,016
Foreign		452	11		463
	$	45,275	1,106		46,381

Income tax expense in the accompanying consolidated financial statements differs from the expected expense as follows:

	2004			2003	2002
Federal income tax expense at the “expected” rate of 35%	$	72,918		47,718	42,422
Increase (decrease) attributed to:
State income taxes, net of federal benefit		6,234		4,399	3,910
Resolution of state tax matters		(1,821	)	—	—
Other, net		16		99	49
Total income tax expense	$	77,347		52,216	46,381

As of December 31, 2004, the Company has approximately $7,400 of basis differences in subsidiaries outside of the United States that are considered to be reinvested indefinitely. No deferred tax liability has been provided for such differences.

2004 ANNUAL REPORT – PAGE 27

2004 Notes to Consolidated Financial Statements

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

Income Taxes, continued

The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31 are as follows:

	2004			2003
Deferred tax asset (liability):
Inventory costing and valuation methods	$	2,465		1,781
Allowance for doubtful accounts receivable		2,080		1,559
Insurance claims payable		1,975		841
Fixed assets		(15,156	)	(13,862	)
Other, net		448		(27	)
Net deferred tax liability	$	(8,188	)	(9,708	)

No valuation allowance for deferred tax assets was necessary as of December 31, 2004 and 2003. The character of the deferred tax assets is such that they can be realized through carryback to prior tax periods or offset against future taxable income.

During 2004, 2003, and 2002, $4,248, $1,973, and $3,428, respectively, were added to additional paid-in capital reflecting the permanent book to tax difference in accounting for tax benefits related to employee stock option transactions.

8 Acquisition and Disposal of Business

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 purchase price consisted of a cash payment and the assumption of certain liabilities at closing. The acquisition was not material to the financial statements of the Company. The purchase price was finalized during the second quarter of 2002. The final purchase price resulted in tangible assets in excess of the cash paid and liabilities assumed, or negative goodwill. The negative goodwill, net of tax, of $716 was recognized in earnings during the second quarter of 2002 as an extraordinary gain.

The net sales from the DIY Business totaled $8,526 from August 31, 2001 through December 31, 2001. The DIY Business was sold to The Hillman Group, Inc. on October 3, 2002. The net sales from the DIY Business totaled $16,974 from January 1, 2002 through October 3, 2002. The Company recognized a gain, before tax, of $5,934 from the sale of the DIY Business during the fourth quarter of 2002.

2004 ANNUAL REPORT – PAGE 28

2004 Notes to Consolidated Financial Statements

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

9 Operating Leases

The Company leases space under non-cancelable operating leases for its California, Utah, and Washington distribution centers, and certain store sites with initial terms of one to 48 months. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. Any such terms are recognized as rent expense over the term of the lease. Further, the leases do not contain contingent rent provisions. Leasehold improvements, with a net book value of $994 at December 31, 2004, on operating leases are amortized over a 36-month period. The Company leases certain semi-tractors and pick-ups under operating leases. The semi-tractor leases typically have a 36-month term. The pick-up leases typically have a 72-month term and include an early buy out clause the Company generally exercises, thereby giving the leases an effective term of 12-15 months. Future minimum annual rentals for the leased facilities and the leased vehicles are as follows:

	Leased Facilities		Leased Vehicles	Total
2005	$	34,393	11,035	45,428
2006		26,401	5,762	32,163
2007		19,478	488	19,966
2008		13,018	—	13,018
2009 and thereafter		5,564	—	5,564
	$	98,854	17,285	116,139

Rent expense under all operating leases is as follows:

	Leased Facilities		Leased Vehicles	Total
2004	$	33,557	13,674	47,231
2003	$	26,438	12,912	39,350
2002	$	22,127	10,770	32,897

Certain operating leases for vehicles contain residual value guarantee provisions which would become due at the expiration of the operating lease agreement if the fair value of the leased vehicles is less than the guaranteed residual value. The aggregate residual value at lease expiration, of the leases that contain residual value guarantees, is approximately $7,789. The Company believes the likelihood of funding the guarantee obligation under any provision of the operating lease agreements is remote.

10 Lines of Credit and Commitments

The Company has a line of credit arrangement with a bank which expires December 1, 2005. The line allows for borrowings of up to $10,000 at .9% over the LIBOR rate. On December 31, 2004 there was $0 outstanding on the line. The Company currently has a letter of credit issued on its behalf to its insurance carrier. As of December 31, 2004, the total undrawn balance of this letter of credit was $10,000.

During 2001, the Company completed the construction of a new building for its Kansas City warehouse, and completed an expansion of this warehouse in 2004. The Company was required to obtain financing for the construction and expansion of this facility under an Industrial Revenue Bond (IRB). The Company subsequently purchased 100% of the outstanding bonds under the IRB at par. In addition to purchasing the outstanding obligations, the Company has a right of offset included in the IRB debt agreement. Accordingly, the Company has netted the impact of the IRB in the accompanying consolidated financial statements. The outstanding balance of the IRB was $9,733 and $6,533 at December 31, 2004 and 2003, respectively.

2004 ANNUAL REPORT – PAGE 29

2004 Notes to Consolidated Financial Statements

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

11 Geographic Information

The Company’s revenues, long-lived assets, and deferred income tax asset relate to the following geographic areas:

Revenues	2004		2003	2002
United States	$	1,173,422	949,925	872,877
Canada		52,546	36,695	27,984
Other foreign countries		12,524	8,308	4,577
	$	1,238,492	994,928	905,438
Long-Lived Assets	2004		2003	2002
United States	$	188,637	166,650	144,486
Canada		7,547	5,722	2,547
Other foreign countries		516	250	149
	$	196,700	172,622	147,182
Deferred Income Tax Asset	2004		2003	2002
United States	$	6,494	4,154	5,868
Canada		—	—	—
Other foreign countries		—	—	—
	$	6,494	4,154	5,868

Accounting policies of the operations in the various geographic areas are the same as those described in the summary of significant accounting policies. Long-lived assets consist of property and equipment, location security deposits, goodwill, and other intangibles. Revenues are attributed to countries based on the location of the store from which the sale occurred. No single customer represents more than 10% of our consolidated net sales.

12 Sales by Product Line

The percentage of the Company’s net sales by product line were as follows:

	Introduced	2004		2003		2002
Fastenal Product Line	1967	55.6	%	54.8	%	55.6	%
Tools	1993	10.9	%	11.4	%	11.1	%
Cutting Tools	1996	5.0	%	5.4	%	5.4	%
Hydraulics & Pneumatics	1996	6.1	%	6.3	%	6.0	%
Material Handling	1996	6.8	%	7.0	%	6.7	%
Janitorial Supplies	1996	3.5	%	3.6	%	3.2	%
Electrical Supplies	1997	3.2	%	2.9	%	2.6	%
Welding Supplies	1997	3.3	%	3.1	%	2.8	%
Safety Supplies	1999	4.8	%	4.8	%	4.1	%
Raw Materials	2001	0.5	%	0.3	%	0.1	%
Retail Packaged Products	2001	—		—		1.9	%
Other		0.3	%	0.4	%	0.5	%
		100.0	%	100.0	%	100.0	%

2004 ANNUAL REPORT – PAGE 30

2004 Notes to Consolidated Financial Statements

(Dollar and Share Amounts in Thousands except Per Share Information and as Otherwise Noted)

13 Recent Accounting Pronouncements

New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 123R, Share-Based Compensation, which supersedes Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services through share-based payment transactions. SFAS No. 123R requires a public entity to measure the cost of employee services received in exchange for the award of equity investments based on the fair value of the award at the date of grant. The cost will be recognized over the period during which an employee is required to provide services in exchange for the award. SFAS No. 123R is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. The impact on net earnings as a result of the adoption of SFAS No. 123R, from a historical perspective, can be found in Note 1 to the Consolidated Financial Statements of this Annual Report. We are currently evaluating the provisions of SFAS No. 123R and will adopt it on July 1, 2005, as required.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, which amends the guidance in Accounting Research Bulletin (ARB) No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. SFAS No. 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, SFAS No. 151 requires allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. We do not have any idle facility expense or wasted material expense as of December 31, 2004. We will continue to apply the requirements of SFAS No. 151 in future periods.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets. SFAS No. 153 is an amendment to APB Opinion No. 29, Accounting for Nonmonetary Transactions. SFAS No. 153 eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. We are currently evaluating the provisions of SFAS No. 153 and will adopt it on July 1, 2005, as required.

2004 ANNUAL REPORT – PAGE 31

2004 Management Report on Internal Control over Financial Reporting

The Board of Directors and Stockholders Fastenal Company:

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a15-(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii) provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision of our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission. Based on our assessment and those criteria, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2004. There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

KPMG LLP, the independent registered public accounting firm that audited the financial statements in this Annual Report, has issued an attestation report on management’s assessment of the effectiveness of our internal control over financial reporting, which report is included in this Annual Report.

Chief Executive Officer & President	Executive Vice-President & Chief Financial Officer
Winona, Minnesota
February 18, 2005

2004 ANNUAL REPORT – PAGE 32

2004 Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements and Supplemental Schedule

The Board of Directors and Stockholders Fastenal Company:

We have audited the accompanying consolidated balance sheets of Fastenal Company and subsidiaries as of December 31, 2004 and 2003, 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, 2004. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedule II—Valuation and Qualifying Accounts. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Fastenal Company and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related 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.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Fastenal Company’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 18, 2005 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

Minneapolis, Minnesota

February 18, 2005

2004 ANNUAL REPORT – PAGE 33

2004 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

The Board of Directors and Stockholders Fastenal Company:

We have audited management’s assessment, included in the accompanying Management Report on Internal Control over Financial Reporting, that Fastenal Company maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Fastenal Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Fastenal Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Fastenal Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Fastenal Company and subsidiaries as of December 31, 2004 and 2003, 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, 2004, and our report dated February 18, 2005 expressed an unqualified opinion on those consolidated financial statements.

Minneapolis, Minnesota

February 18, 2005

2004 ANNUAL REPORT – PAGE 34

EXECUTIVE OFFICERS

Willard D. Oberton

Chief Executive Officer and President

Nicholas J. Lundquist

Executive Vice-President and

Chief Operating Officer

Daniel L. Florness

Executive Vice-President and

Chief Financial Officer

Steven L. Appelwick

Vice-President–Product Procurement,

Marketing, and Logistics

DIRECTORS

Robert A. Kierlin

Chairman of the Board

Minnesota State Senator

Former Chief Executive Officer and President

Fastenal Company

Michael M. Gostomski

President

Winona Heating & Ventilating Company

(sheet metal and roofing contractor)

Michael J. Dolan

Self Employed Business Consultant,

Former Executive Vice-President and Chief

Operating Officer

The Smead Manufacturing Company

(document management company)

Robert A. Hansen

Associate Professor of Marketing and Logistics Management,

Carlson School of Management, University of Minnesota

Henry K. McConnon

President

Wise Eyes, Inc.

(eyeglass retailer and wholesaler)

Willard D. Oberton

John D. Remick

President and Chief Executive Officer

Rochester Athletic Club, Inc.

(health club)

Stephen M. Slaggie

Retired

Former Secretary, Shareholder Relations

Director, and Insurance Risk Manager

Fastenal Company

Reyne K. Wisecup

Human Resource Manager

Fastenal Company Services

CORPORATE INFORMATION

Annual Meeting

The annual meeting of shareholders

will be held at 10:00 a.m.,

Tuesday, April 19, 2005,

at Corporate Headquarters,

2001 Theurer Boulevard,

Winona, Minnesota

Corporate Headquarters

Fastenal Company

2001 Theurer Boulevard

Winona, Minnesota 55987-0978

Phone: (507) 454-5374

Fax: (507) 453-8049

Legal Counsel

Faegre & Benson LLP

Minneapolis, Minnesota

Streater & Murphy, PA

Winona, Minnesota

Form 10-K

A copy of the Company’s 2004 Annual Report on Form 10-K to the Securities and Exchange Commission is available without charge to shareholders upon written request to the Assistant Controller of the Company at the address listed on this page for the Company’s corporate headquarters.

Copies of our latest press release, unaudited supplemental Company information and monthly sales information (beginning with October 2000 sales) are available at the Fastenal Company World Wide Web site at: www.fastenal.com

Auditors

KPMG LLP

Minneapolis, Minnesota

Transfer Agent

Wells Fargo Bank Minnesota, National Association

Minneapolis, Minnesota

2004 ANNUAL REPORT – PAGE 36

Growth Through Customer Service!

EX-21

Exhibit 21

Subsidiaries of Fastenal Company.

Subsidiary name	Doing business as	Year incorporated	Jurisdiction of incorporation
Fastenal Canada Company	Same	1993	Minnesota
Fastenal Company Services	Same	1997	Minnesota
Fastenal Company Purchasing	Same	1997	Minnesota
Fastenal Company Leasing	Same	1997	Minnesota
Fastenal Mexico Services S. de R.L. de C.V.	Same	1999	Monterrey, Mexico
Fastenal Mexico S. de R.L. de C.V.	Same	1999	Monterrey, Mexico
Fastenal Singapore P.T.E. Ltd.	Same	2000	Singapore
Fastenal Asia Pacific, Limited.	Same	2003	Hong Kong, China
FASTCO (Shanghai) Trading Co., Ltd.	Same	2003	Shanghai, China
Fastenal Europe, B.V.	Same	2003	Rotterdam, Netherlands

EX-31

Exhibit 31

CERTIFICATIONS

I, Willard D. Oberton, certify that:

1. I have reviewed this annual report on Form 10-K of Fastenal Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date    February 28, 2005

/s/ Willard D. Oberton

Willard D. Oberton

Chief Executive Officer

(Principal Executive Officer)

Exhibit 31 (Continued)

I, Daniel L. Florness, certify that:

1. I have reviewed this annual report on Form 10-K of Fastenal Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date    February 28, 2005

/s/ Daniel L. Florness

Daniel L. Florness

Chief Financial Officer

(Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned certifies that this periodic report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this periodic report fairly presents, in all material respects, the financial condition and results of operations of Fastenal Company.

A signed original of this written statement required by Section 906 has been provided to Fastenal Company and will be retained by Fastenal Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date    February 28, 2005

/s/ Willard D. Oberton	/s/ Daniel L. Florness
Willard D. Oberton	Daniel L. Florness
Chief Executive Officer	Chief Financial Officer
(Principal Executive Officer)	(Principal Financial Officer)