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Fastenal Company Reports 2013 First Quarter Earnings



Fastenal Company Reports 2013 First Quarter Earnings

WINONA, Minn., April 10, 2013 (GLOBE NEWSWIRE) -- The Fastenal Company of
Winona, MN (Nasdaq:FAST) reported the results of the quarter ended March 31,
2013. Except for per share information, or as otherwise noted below, dollar
amounts are stated in thousands.


Net sales (and the related daily sales), pre-tax earnings, net earnings, and
net earnings per share were as follows for the period ended March 31:

                               Three-month period
                               2013       2012    Change
Net sales                       $ 806,326 768,875 4.9%
Business days                  63         64      -1.6%
Daily sales                     $ 12,799  12,014  6.5%
Pre-tax earnings                $ 175,172 161,129 8.7%
 % of sales                    21.7%      21.0%    
Net earnings                    $ 109,048 100,194 8.8%
Net earnings per share (basic)  $ 0.37    0.34    8.8%

On March 31, 2013, we had 2,660 stores. During the first three months of 2013,
we opened 11 new stores, an increase of 0.4% since December 2012 (we increased
our store count by 1.9% since March 31, 2012). On March 31, 2013, we operated
25,447 FAST Solutions^SM (industrial vending) machines. During the first three
months of 2013, we installed 4,352 new machines, an increase of 20.6% since
December 2012 (we increased our machine count by 159.7% since March 31, 2012).
On March 31, 2013, we had 15,339 employees, an increase of 1.3% since December
2012.

Similar to previous quarters, we have included comments regarding several
aspects of our business:

 1. Monthly sales changes, sequential trends, and end market performance – a
    recap of our recent sales trends and some insight into the activities with
    different end markets.
 2. Growth drivers of our business – a recap of how we grow our business.
 3. Profit drivers of our business – a recap of how we increase our profits.
 4. Statement of earnings information – a recap of the components of our
    income statement.
 5. Operational working capital, balance sheet, and cash flow – a recap of the
    operational working capital utilized in our business, and the related cash
    flow.

While reading these items, it is helpful to appreciate several aspects of our
marketplace: (1) it's big, the North American marketplace for industrial
supplies is estimated to be in excess of $160 billion per year (and we have
expanded beyond North America), (2) no company has a significant portion of
this market, (3) many of the products we sell are individually inexpensive,
(4) when our customer needs something quickly or unexpectedly our local store
is a quick source, (5) the cost to manage and procure these products can be
significant, and (6) the cost to move these products, many of which are bulky,
can also be significant.

Our motto is Growth through Customer Service. This is important given the
points noted above. We believe in efficient markets – to us, this means we can
grow our market share if we provide the greatest value to the customer. We
believe our ability to grow is amplified if we can service our customer at the
closest economic point of contact. 

The concept of growth is simple–find more customers every day and increase
your activity with them. However, execution is hard work. First, we recruit
service minded individuals to support our customers and their
business. Second, we operate in a decentralized fashion to help identify the
greatest value for our customers. Third, we build a great machine behind the
store to operate efficiently and to help identify new business
solutions. Fourth, we do these things every day. Finally, we strive to
generate strong profits; these profits produce the cash flow necessary to fund
the growth and to support the needs of our customers.

SALES GROWTH:

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

                  Three-month period
                  2013       2012
Net sales          $ 806,326 768,875
Percentage change 4.9%       20.0%

The increase in net sales in the first three months of 2013 and 2012 came
primarily from higher unit sales. Our growth in net sales was impacted by
inflationary price changes in our non-fastener products and some price
deflation in our fastener products, but the net impacts were limited. Our
growth in net sales was not meaningfully impacted by the introduction of new
products or services, with one exception, our FAST Solutions^SM (industrial
vending) initiative did stimulate faster growth (discussed later in this
document). The higher unit sales resulted primarily from increases in sales at
older store locations (discussed below and again later in this document) and
to a lesser degree the opening of new store locations in the last several
years. The growth in net sales at the older store locations was due to the
growth drivers of our business (discussed later in this document), and, in the
case of 2012, the moderating impacts of the recessionary environment. The
change in currencies in foreign countries (primarily Canada) relative to the
United States dollar lowered our daily sales growth rate by 0.1% in the first
three months of 2013 and 2012.

Our sales growth of 4.9% in the first quarter of 2013 was impacted by the loss
of one business day versus the prior year (63 days versus 64). Our sales
growth adjusted to a daily basis was 6.5% in the first quarter of 2013. We
believe our sales growth was held back partially due to the global economic
policy uncertainty.

MONTHLY SALES CHANGES, SEQUENTIAL TRENDS, AND END MARKET PERFORMANCE

Note – Daily sales are defined as the sales for the period divided by the
number of business days (in the United States) in the period. 

This section focuses on three distinct views of our business – monthly sales
changes, sequential trends, and end market performance. The first discussion
regarding monthly sales changes provides a good mechanical view of our
business based on the age of our stores. The second discussion provides a
framework for understanding the sequential trends (that is, comparing a period
to the immediately preceding period) in our business. Finally, we believe the
third discussion regarding end market performance provides insight into
activities with our various types of customers.

MONTHLY SALES CHANGES:

All company sales – During the months in 2013, 2012, and 2011, all of our
selling locations, when combined, had daily sales growth rates of (compared to
the same month in the preceding year):

     Jan.  Feb.  Mar.  Apr.  May   June  July  Aug.  Sept. Oct.  Nov.  Dec.
2013 6.7%  8.2%  5.1%                                                   
2012 21.3% 20.0% 19.3% 17.3% 13.1% 14.0% 12.1% 12.0% 12.9% 6.8%  8.2%  9.7%
2011 18.8% 21.5% 22.8% 23.2% 22.6% 22.5% 22.4% 20.0% 18.8% 21.4% 22.2% 21.2%

Stores opened greater than two years – Our stores opened greater than two
years (store sites opened as follows: 2013 group – opened 2011 and earlier,
2012 group – opened 2010 and earlier, and 2011 group – opened 2009 and
earlier) represent a consistent 'same-store' view of our business. During the
months in 2013, 2012, and 2011, the stores opened greater than two years had
daily sales growth rates of (compared to the same month in the preceding
year):

     Jan.  Feb.  Mar.  Apr.  May   June  July  Aug.  Sept. Oct.  Nov.  Dec.
2013 5.0%  6.5%  3.4%                                                   
2012 18.8% 17.1% 16.8% 14.5% 10.1% 11.1% 9.1%  8.6%  9.8%  3.8%  5.1%  6.6%
2011 16.0% 18.4% 19.4% 19.6% 19.2% 19.1% 18.7% 16.5% 15.2% 18.0% 18.5% 17.5%

Stores opened greater than five years – The impact of the economy, over time,
is best reflected in the growth performance of our stores opened greater than
five years (store sites opened as follows: 2013 group – opened 2008 and
earlier, 2012 group – opened 2007 and earlier, and 2011 group – opened 2006
and earlier). This group is more cyclical due to the increased market share
they enjoy in their local markets. During the months in 2013, 2012, and 2011,
the stores opened greater than five years had daily sales growth rates of
(compared to the same month in the preceding year):

     Jan.  Feb.  Mar.  Apr.  May   June  July  Aug.  Sept. Oct.  Nov.  Dec.
2013 3.2%  5.6%  2.3%                                                   
2012 17.4% 15.8% 15.7% 13.7% 9.0%  10.2% 8.3%  7.9%  8.5%  2.6%  4.6%  5.6%
2011 15.3% 17.9% 19.2% 19.1% 17.9% 18.2% 17.3% 15.2% 14.5% 17.0% 17.4% 16.9%

There are three distinct influences to our growth: (1) execution, (2) currency
fluctuations, and (3) economic fluctuations. This discussion centers on (2)
and (3). First off, currency – the change in currencies in foreign countries
(primarily Canada) relative to the United States dollar impacted our growth
over the last several years. During 2011 it lifted our growth by 0.7%, in 2012
it lowered our growth by 0.1% (by quarter the impact was down 0.1%, 0.4%, and
0.2% in the first, second, and third quarters, respectively, and then up in
the fourth quarter by 0.2%) and in the first quarter of 2013 it lowered our
growth by 0.1%.

Regarding economic fluctuations, in 2011 we enjoyed strong growth. This
reflected the strengthening economic environment being experienced by our
customers. While the strength did not apply to all customers and to all
geographies we serve, it was strong enough to produce acceptable results.
During 2012, the growth in the first three and a half months generally
continued the relative strength we saw in 2011. Then we experienced two
distinct economic slowdowns. The first occurred in the late April/May time
frame, and then moderated until September. The second occurred in the
October/November time frame. This was exaggerated by an unusual business day
comparison in October (23 days in 2012 versus 21 days in 2011 - the
maintenance portion of our business is often linked to monthly spend patterns,
which are not as business day dependent, this can dilute the daily growth
picture given the change in business day divisor) and the impact of Hurricane
Sandy. During the first three months of 2013, the weakness has continued. Both
January and February experienced some negative impact from weather, and
January experienced a very weak start due to extended holiday shutdown.
However, with the benefit of hindsight, we believe the economic activity of
our customers slowed from January to February and slowed further from February
to March. This is evident in the two and five year comparisons above.

SEQUENTIAL TRENDS:

We find it helpful to think about the monthly sequential changes in our
business using the analogy of climbing a stairway – This stairway has several
predictable landings where there is a pause in the sequential gain (i.e.
April, July, and October to December), but generally speaking, climbs from
January to October. The October landing then establishes the benchmark for the
start of the next year.

History has identified these landings in our business cycle. They generally
relate to months with impaired business days (certain holidays). The first
landing centers on Easter, which alternates between March and April (Easter
occurred in March in 2013, and in April in 2012 and 2011), the second landing
centers on July 4th, and the third landing centers on the approach of winter
with its seasonal impact on primarily our construction business and with the
Christmas / New Year holidays. The holidays we noted impact the trends because
they either move from month-to-month or because they move around during the
week.

The table below shows the pattern to our sequential change in our daily
sales. The line labeled 'Past' is an historical average of our sequential
daily sales change for the period 1998 to 2003. We chose this time frame
because it had similar characteristics, a weaker industrial economy in North
America, and could serve as a benchmark for a possible trend line. The '2013',
'2012', and '2011' lines represent our actual sequential daily sales
changes. The '13Delta', '12Delta', and '11Delta' lines indicate the difference
between the 'Past' and the actual results in the respective year.

                                                                     Cumulative
        Jan.(1) Feb.  Mar. Apr.  May   June  July  Aug.  Sept. Oct.  change
                                                                     from Jan.
                                                                     to Mar.
Past    0.9%    3.3%  2.9% -0.3% 3.4%  2.8%  -2.3% 2.6%  2.6%  -0.7% 6.2%
2013    -0.4%   2.0%  3.4%                                           5.4%
13Delta -1.3%   -1.3% 0.5%                                           -0.8%
2012    -0.3%   0.5%  6.4% -0.8% 0.5%  2.5%  -2.7% 1.3%  4.3%  -4.8% 7.0%
12Delta -1.2%   -2.8% 3.5% -0.5% -2.9% -0.3% -0.4% -1.3% 1.7%  -4.1% 0.8%
2011    -0.2%   1.6%  7.0% 0.9%  4.3%  1.7%  -1.0% 1.4%  3.4%  0.7%  8.7%
11Delta -1.1%   -1.7% 4.1% 1.2%  0.9%  -1.1% 1.3%  -1.2% 0.8%  1.4%  2.5%

(1)           The January figures represent the percentage change from the
previous October, whereas the remaining figures represent the percentage
change from the previous month.

A graph of the sequential daily sales change pattern discussed above, starting
with a base of '100' in the previous October and ending with the next October,
would be as follows:

http://media.globenewswire.com/cache/11647/file/18996.pdf

END MARKET PERFORMANCE:

Fluctuations in end market business – The sequential trends noted above were
directly linked to fluctuations in our end markets. To place this in
perspective – approximately 50% of our business has historically been with
customers engaged in some type of manufacturing. The daily sales to these
customers grew, when compared to the same period in the prior year, as
follows:

     Q1    Q2    Q3    Q4    Annual
2013 7.0%                     
2012 20.3% 15.8% 14.0% 9.7%  14.9%
2011 15.5% 18.5% 18.3% 21.0% 20.0%

Our manufacturing business consists of two subsets: the industrial production
business (this is business where we supply products that become part of the
finished goods produced by our customers) and the maintenance portion (this is
business where we supply products that maintain the facility or the equipment
of our customers engaged in manufacturing). The industrial business is more
fastener centered, while the maintenance portion is represented by all product
categories. 

The best way to understand the change in our industrial production business is
to examine the results in our fastener product line.  From a company
perspective, sales of fasteners grew, when compared to the same period in the
prior year, as follows (note: this information includes all end markets):

     Q1    Q2    Q3    Q4    Annual
2013 1.7%                     
2012 15.4% 8.0%  6.0%  2.6%  7.8%
2011 15.4% 18.1% 13.6% 15.9% 15.7%

By contrast, the best way to understand the change in the maintenance portion
of the manufacturing business is to examine the results in our non-fastener
product lines.  From a company perspective, sales of non-fasteners grew, when
compared to the same period in the prior year, as follows (note: this
information includes all end markets):

     Q1    Q2    Q3    Q4    Annual
2013 10.8%                    
2012 25.1% 21.1% 18.0% 13.6% 19.2%
2011 26.5% 27.3% 26.9% 27.4% 27.0%

The non-fastener business demonstrated greater relative resilience when
compared to our fastener business and to the distribution industry in general,
due to our strong FAST Solutions^SM (industrial vending) program; this is
discussed in greater detail later in this document. However, this business has
not been immune to the impact of a weakening industrial environment.

The patterns related to the industrial production business, as noted above,
are influenced by the movements noted in the Purchasing Manufacturers Index
('PMI') published by the Institute for Supply Management (http://www.ism.ws/),
which is a composite index of economic activity in the manufacturing
sector. The PMI in 2013, 2012, and 2011 was as follows:

     Jan. Feb. Mar. Apr. May  June July Aug. Sept. Oct. Nov. Dec.
2013 53.1 54.2 51.3                                           
2012 53.7 51.9 53.3 54.1 52.5 50.2 50.5 50.7 51.6  51.7 49.9 50.2
2011 59.2 59.6 59.3 59.4 53.5 55.8 52.3 53.2 53.2  51.5 52.3 52.9

For background to readers not familiar with the PMI index, it is a monthly
indicator of the economic health of the manufacturing sector. Five major
indicators that influence the PMI index are new orders, inventory levels,
productions, supplier deliveries, and the employment environment. When a PMI
of 50 or higher is reported, this indicates expansion in the manufacturing
industry compared to the previous month. If the PMI is below 50, this
represents a contraction in the manufacturing sector. (Note – the Institute
for Supply Management made annual adjustments to reflect seasonal factors for
the PMI index effective for the January 2013 report. This table represents the
updated PMI index.)

Our non-residential construction customers have historically represented 20%
to 25% of our business. The daily sales to these customers grew, when compared
to the same period in the prior year, as follows:

     Q1    Q2    Q3    Q4    Annual
2013 2.9%                     
2012 17.1% 12.7% 8.2%  4.2%  10.3%
2011 17.7% 15.8% 15.8% 17.4% 17.1%

We believe the weakness in the economy in the fourth quarter of 2012 and the
first quarter of 2013, particularly in the non-residential construction
market, was amplified by the economic policy uncertainty in the United States.

A graph of the sequential daily sales trends to these two end markets in 2013,
2012, and 2011, starting with a base of '100' in the previous October and
ending with the next October, would be as follows:

http://media.globenewswire.com/cache/11647/file/18997.pdf

GROWTH DRIVERS OF OUR BUSINESS

We grow by continuously adding customers and by increasing the activity with
each customer. We believe this growth is enhanced by our close proximity to
our customers, which allows us to provide a range of services and product
availability that our competitors can't easily match. Historically, we
expanded our reach by opening stores at a very fast pace. These openings were
initially in the United States, but expanded beyond the United States
beginning in the mid 1990's. 

In our first ten years of being public (1987 to 1997), we opened stores at a
rate approaching 30% per year.  In the next ten years, we opened stores at an
annual rate of approximately 10% to 15% and, over the last five years, at a
rate of approximately 3% to 8% (we currently expect to open approximately 65
to 80 stores in 2013, or approximately 2.5% to 3.0%).  As we gained proximity
to more customers, we continued to diversify our growth drivers. This was done
to provide existing store personnel with more tools to grow their business
organically, and the results of this are reflected in our earlier discussion
on sales growth at stores opened greater than five years. In the early 1990's,
we began to expand our product lines, and we added new product knowledge to
our bench. This was our first big effort to diversify our growth drivers. The
next step began in the mid to late 1990's when we began to add sales personnel
with certain specialties or focus. This began with our National Accounts group
in 1995, and, over time, has expanded to include individuals dedicated to: (1)
sales related to our internal manufacturing division, (2) government sales,
(3) internet sales, (4) specific products (most recently metalworking), and
(5) FAST Solutions^SM (industrial vending).  Another step occurred at our
sales locations (this includes Fastenal stores as well as strategic account
stores and in-plant locations) and at our distribution centers, and began with
a targeted merchandising and inventory placement strategy that included our
'Customer Service Project' approximately ten years ago and our 'Master
Stocking Hub' initiative approximately five years ago. This strategy allowed
us to better target where to stock certain products (local store, regional
distribution center, master stocking hub, or supplier) and allowed us to
improve our fulfillment, lower our freight costs, and improve our ability to
serve a broader range of customers. During 2013, we intend to expand our store
based inventory around select industries (with an emphasis on fasteners and
safety products).

Our FAST Solutions^SM (industrial vending) operation is a rapidly expanding
component of our business.  We believe industrial vending is the next logical
chapter in the Fastenal story; we also believe it has the potential to be
transformative to industrial distribution, and that we have a 'first mover'
advantage. We are investing aggressively to maximize this advantage. At our
investor day in May 2011, we discussed our progress with industrial
vending. In addition to our discussion regarding progress, we discussed our
goals with the rollout of the industrial vending machines. One of the goals we
identified related to our rate of 'machine signings' (the first category
below) – our goal was simple, sign 2,500+ machines per quarter (or an
annualized run rate of 10,000 machines). In 2012, we hit our annual goal of
10,000 machines during July, and the momentum has continued as we finished the
year. We intend to continue our aggressive push with FAST Solutions^SM
(industrial vending) and, to this end, established an internal goal to sign
30,000 machines in 2013, or 2,500 per month rather than per quarter. This is
an aggressive goal, but we believe we can hit this run rate during 2013. In
addition, during 2012 we developed plans to (1) reinvigorate our fastener
growth and (2) improve the performance (i.e. sales growth) at under-performing
locations. These plans centered on expanding our sales team for our industrial
production business, improving our delivery systems for our other fastener
business, and expanding the team that supports under-performing stores and
districts. 

During 2013 we have several distribution initiatives. The first centers on a
multi-year initiative to add significant automation. Currently, our facilities
in Indianapolis, IN, Denton, TX, and Winona, MN contain the most extensive
automation. In addition, we have plans to begin utilizing a new 'highly
automated' distribution facility adjacent to our existing Indianapolis
facility for replenishing our industrial vending machines. It may seem odd to
see these initiatives listed under the category of 'growth drivers' versus
'efficiency or profit drivers'; however, we see these changes as enhancing our
fill rates and as freeing up time at the store, both of which help drive sales
growth.

The following table includes some statistics regarding our industrial vending
business.

                                            Q1     Q2     Q3     Q4     Annual
Number of vending machines in          2013 5,728                        
 contracts signed during the period^1  2012 4,568  4,669  5,334  5,591  20,162
                                       2011 1,405  2,107  2,246  2,084  7,842
Cumulative machines installed^2        2013 25,447                       
                                       2012 9,798  13,036 17,013 21,095  
                                       2011 2,659  3,867  5,642  7,453   
Percent of installed machines that are 2013 54.3%                        
a FAST 5000
(our most common helix vending         2012 70.1%  66.2%  60.2%  57.2%   
machine)^3
                                       2011 78.6%  76.0%  74.7%  72.8%   
Percent of total net sales to          2013 27.5%                        
 customers with vending machines^4     2012 17.8%  20.8%  23.2%  25.8%   
                                       2011 8.9%   10.5%  13.1%  15.7%   
Daily sales growth to customers        2013 23.9%                        
 with vending machines^5               2012 33.9%  34.3%  32.9%  28.6%   
                                       2011 50.6%  43.9%  42.5%  40.7%   

^1 This represents the gross number of machines signed during the quarter, not
the number of contracts.

^2 This represents the number of machines installed and dispensing product on
the last day of the quarter.

^3 This information is intended to highlight the mix change in the machines
deployed as our business expands beyond the flagship FAST 5000 machine.

^4 The percentage of total sales (vended and traditional) to customers
currently using a vending solution.

^5 The growth in total sales (vended and traditional) to customers currently
using a vending solution compared to the same period in the preceding year.

PROFIT DRIVERS OF OUR BUSINESS

We grow our profits by continuously working to grow sales and to improve our
relative profitability. We also grow our profits by allowing our inherent
profitability to shine through – we refer to this as the 'pathway to
profit.' The distinction is important. 

We achieve improvements in our relative profitability by increasing our gross
margin, by structurally lowering our operating expenses, or both. We advance
on the 'pathway to profit' by increasing the average store size (measured in
terms of monthly sales), and by allowing the changing store mix to improve our
profits. This is best explained by comparing the varying profitability of our
'traditional' stores in the table below. The average store size for the group,
and the average age, number of stores, and pre-tax earnings data by store size
for the first quarter of 2013, 2012, and 2011, respectively, were as follows:

                                                                              
                          Average                      Pre-Tax
                          Age     Number of Percentage Earnings
Sales per Month           (Years) Stores    of Stores  Percentage
Three months ended March                               Average store
31, 2013                                               sales = $88,267
$0 to $30,000             5.4     261       9.8%       -11.6%
$30,001 to $60,000        8.2     771       29.0%      13.9%
$60,001 to $100,000       10.9    765       28.8%      22.5%
$100,001 to $150,000      12.8    437       16.4%      25.5%
Over $150,000             16.0    305       11.5%      29.0%
Strategic                         121       4.5%        
Account/Overseas Store
Company Total                     2,660     100.0%     21.7%
                                                        
Three months ended March                               Average store
31, 2012                                               sales = $86,449
$0 to $30,000             4.4     289       11.1%      -17.4%
$30,001 to $60,000        7.6     795       30.4%      11.9%
$60,001 to $100,000       9.9     719       27.5%      21.5%
$100,001 to $150,000      12.5    419       16.0%      24.9%
Over $150,000             15.6    287       11.0%      28.4%
Strategic                         102       3.9%        
Account/Overseas Store
Company Total                     2,611     100.0%     21.0%
                                                        
Three months ended March                               Average store
31, 2011                                               sales = $74,421
$0 to $30,000             4.2     397       15.7%      -12.2%
$30,001 to $60,000        7.5     874       34.7%      12.6%
$60,001 to $100,000       10.2    668       26.5%      22.2%
$100,001 to $150,000      12.4    310       12.3%      25.5%
Over $150,000             15.7    193       7.7%       27.5%
Strategic                         80        3.2%        
Account/Overseas Store
Company Total                     2,522     100.0%     20.1%

Note – Amounts may not foot due to rounding difference.

When we originally announced the 'pathway to profit' strategy in 2007, our
goal was to increase our pre-tax earnings, as a percentage of sales, from 18%
to 23%. This goal was to be accomplished by slowly moving the mix from the
first three categories ($0 to $30,000, $30,001 to $60,000, and $60,001 to
$100,000, these groups represented 76.5% of our store base in the first three
months of 2007, the last quarter before we announced the 'pathway to profit')
to the last three categories ($60,001 to $100,000, $100,001 to $150,000, and
over $150,000, these groups represented 56.7% of our store base in the first
quarter of 2013) and by increasing the average store sales to approximately
$125,000 per month. The weak economic environment in 2009 caused our average
store size to decrease, and consequently lowered our level of profitability;
however, subsequent to this period we improved our gross margin and
structurally lowered our operating expenses. This improvement allowed us to
amplify the 'pathway to profit' and effectively lowered the average store size
required to hit our 23% goal. Today we believe we can accomplish our 'pathway
to profit' goal with average store sales of approximately $100,000 to $110,000
per month.

Note – Dollar amounts in this section are presented in whole dollars, not
thousands.

Store Count and Full-Time Equivalent (FTE) Headcount – The table below
highlights certain impacts on our business of the 'pathway to profit' since
its introduction in 2007.  Under the 'pathway to profit' we increased both our
store count and our store FTE headcount during 2007 and 2008. However, the
rate of increase in store locations slowed and our FTE headcount for all types
of personnel was reduced when the economy weakened late in 2008. In the table
that follows, we refer to our 'store' net sales, locations, and
personnel. When we discuss 'store' net sales, locations, and personnel, we are
referring to (1) 'Fastenal' stores and (2) strategic account
stores. 'Fastenal' stores are either a 'traditional' store, the typical format
in the United States or Canada, or an 'overseas' store, which is the typical
format outside the United States and Canada. This is discussed in greater
detail in our 2012 annual report on Form 10-K. Strategic account stores are
stores that are focused on selling to a group of large customers in a limited
geographic market. The sales, outside of our 'store' group, relate to either
(1) our in-plant locations, (2) the portion of our internally manufactured
product that is sold directly to a customer and not through a store (including
our Holo-Krome business acquired in December 2009), or (3) our direct import
business. 

The breakdown of our sales, the average monthly sales per store, the number of
stores at quarter end, the average headcount at our stores during a quarter,
the average FTE headcount during a quarter, and the percentage change were as
follows for the first quarter of 2007 (the last completed quarter before we
began the 'pathway to profit'), for the third quarter of 2008 (our peak
quarter before the economy weakened), and for each of the last five quarters:

                Q1       Q3       Q1       Q2       Q3       Q4       Q1
                2007     2008     2012     2012     2012     2012     2013
                                                                       
Total net sales $489,157 $625,037 $768,875 $804,890 $802,577 $757,235 $806,326
reported
Less: Non-store
sales           40,891   57,267   92,459   98,735   100,124  95,951   101,624
(approximate)
Store net sales $448,266 $567,770 $676,416 $706,155 $702,453 $661,284 $704,702
(approximate)
% change since           26.7%    50.9%    57.5%    56.7%    47.5%    57.2%
Q1 2007
% change                 17.5%    20.2%    14.6%    10.1%    8.2%     4.2%
(twelve months)
                                                                       
Percentage of
sales through a 92%      91%      88%      88%      88%      87%      87%
store
                                                                       
Average monthly $72      $82      $86      $89      $88      $83      $88
sales per store
(using ending                                                          
store count)
% change since           13.9%    19.4%    23.6%    22.2%    15.3%    22.2%
Q1 2007
% change                 9.3%     16.2%    11.3%    6.0%     5.1%     2.3%
(twelve months)
                                                                       
                Q1       Q3       Q1       Q2       Q3       Q4       Q1
                 2007    2008     2012      2012     2012     2012     2013
Store locations
- quarter end   2,073    2,300    2,611    2,635    2,650    2,652    2,660
count
% change since           11.0%    26.0%    27.1%    27.8%    27.9%    28.3%
Q1 2007
% change                 7.2%     3.5%     3.0%     3.3%     2.6%     1.9%
(twelve months)
                                                                       
Store personnel
- absolute      6,849    9,123    10,486   10,637   10,604   10,347   10,108
headcount
% change since           33.2%    53.1%    55.3%    54.8%    51.1%    47.6%
Q1 2007
% change                 17.9%    12.2%    9.3%     5.4%     0.2%     -3.6%
(twelve months)
                                                                       
Store personnel 6,383    8,280    8,900    9,126    9,244    9,035    8,875
- FTE
Non-store
selling         616      599      998      1,054    1,066    1,070    1,121
personnel - FTE
Sub-total of
all sales       6,999    8,879    9,898    10,180   10,310   10,105   9,996
personnel - FTE
                                                                       
Distribution    1,646    1,904    1,815    1,881    1,887    1,872    1,819
personnel-FTE
Manufacturing
personnel -     316      340      527      545      544      544      565
FTE^1
Administrative  767      805      796      794      808      811      832
personnel-FTE
Sub-total of
non-sales       2,729    3,049    3,138    3,220    3,239    3,227    3,216
personnel - FTE
                                                                       
Total - average 9,728    11,928   13,036   13,400   13,549   13,332   13,212
FTE headcount
                                                                       
% change since                                                         
Q1 2007
Store personnel          29.7%    39.4%    43.0%    44.8%    41.5%    39.0%
- FTE
Non-store
selling                  -2.8%    62.0%    71.1%    73.1%    73.7%    82.0%
personnel - FTE
Sub-total of
all sales                26.9%    41.4%    45.4%    47.3%    44.4%    42.8%
personnel - FTE
                                                                       
Distribution             15.7%    10.3%    14.3%    14.6%    13.7%    10.5%
personnel-FTE
Manufacturing            7.6%     66.8%    72.5%    72.2%    72.2%    78.8%
personnel-FTE^1
Administrative           5.0%     3.8%     3.5%     5.3%     5.7%     8.5%
personnel-FTE
Sub-total of
non-sales                11.7%    15.0%    18.0%    18.7%    18.2%    17.8%
personnel - FTE
                                                                       
Total - average          22.6%    34.0%    37.7%    39.3%    37.0%    35.8%
FTE headcount
                                                                       
% change                                                               
(twelve months)
Store personnel          15.2%    13.7%    10.6%    7.1%     4.0%     -0.3%
- FTE
Non-store
selling                  -2.4%    28.1%    24.0%    15.9%    12.3%    12.3%
personnel - FTE
Sub-total of
all sales                13.8%    15.0%    11.8%    8.0%     4.9%     1.0%
personnel - FTE
                                                                       
Distribution             6.0%     12.9%    7.1%     3.1%     2.9%     0.2%
personnel-FTE
Manufacturing
personnel -              1.8%     14.3%    10.8%    6.0%     5.4%     7.2%
FTE^1
Administrative           7.9%     4.7%     1.4%     -0.4%    1.9%     4.5%
personnel - FTE
Sub-total of
non-sales                6.0%     10.9%    6.2%     2.7%     3.0%     2.5%
personnel - FTE
                                                                       
Total - average          11.7%    14.0%    10.4%    6.7%     4.4%     1.4%
FTE headcount

^1 The manufacturing headcount was impacted by the addition of 92 employees
with the acquisition of Holo-Krome in December 2009.

STATEMENT OF EARNINGS INFORMATION (percentage of net sales) for the periods
ended March 31:

                                              Three-month period
                                              2013      2012
Net sales                                     100.0%    100.0%
Gross profit                                  52.3%     51.3%
Operating and administrative expenses         30.7%     30.3%
(Gain) loss on sale of property and equipment 0.0%      0.0%
Operating income                              21.7%     20.9%
Interest income/expense (net)                 0.0%      0.0%
Earnings before income taxes                  21.7%     21.0%

Note – Amounts may not foot due to rounding difference.

Gross profit – percentage for the first quarter of 2013 increased from the
same period in 2012. Sequentially, the gross profit percentage increased from
the fourth quarter of 2012.

The gross profit percentage in the first, second, third, and fourth quarters
was as follows:

     Q1    Q2    Q3    Q4
2013 52.3%              
2012 51.3% 51.6% 51.6% 51.6%
2011 52.0% 52.2% 51.9% 51.2%

The fluctuations in our gross profit percentages are typically driven by
changes in: (1) transactional gross profit, (2) organizational gross profit,
and (3) vendor incentive gross profit. The transactional gross profit
represents the gross profit realized from the day-to-day fluctuations in
customer pricing relative to product and freight costs. The organizational
gross profit represents the component of gross profit we attribute to buying
scale and efficiency gains. The third component relates to vendor volume
allowances. In the short-term, periods of inflation or deflation can influence
the first two categories, while sudden changes in business volume can
influence the third.

We believe a normal gross profit percentage range for our business is 51% to
53%. This is based on our current mix of products, geographies, end markets,
and end market uses (such as industrial production business versus maintenance
business). The following narrative may be more detail than you want; however,
we believe it is an important recap to understanding the dynamics surrounding
our gross margin patterns. Our business operated below our expected gross
profit range at the end of 2009, and expanded into the low end of this range
during 2010. In the second quarter of 2010, we moved into the middle of the
range as the three components of gross profit improved, the contribution being
split fairly evenly between the three components. We remained in the middle of
the range until the fourth quarter of 2011. In the fourth quarter of 2011, our
gross margin felt pressure and dropped to the lower end of the range. This
drop was primarily due to changes in our transactional margin (primarily due
to changes in product and customer mix), lower vendor incentive gross profit,
and lower freight utilization. The latter two items created half of the gross
margin drop and are more of a seasonal issue. In the first quarter of 2012,
our gross margin improved nominally over the previous quarter. This was
primarily caused by the seasonal improvement of vendor volume allowances as
rising fuel prices offset our improvements in freight utilization. In the
second, third, and fourth quarters of 2012, our gross margin improved when
compared to the first quarter. Most of this improvement related to
improvements in our transactional gross margin. The improvement was partially
offset by the weakening of our selling prices in certain foreign markets due
to changes in the exchange rate. One item of note, in the fourth quarter of
2012 we experienced a drop off in the freight component of our gross margin
due to lower freight utilization, a typical pattern due to the seasonal drop
off in business; this gross margin decline was offset by an improvement in the
remaining portion of our transactional gross margin that centers on product
transactional cost and customer pricing. The first quarter of 2013 experienced
a strong improvement in gross margin. A piece of this related to the seasonal
impact of improving freight utilization, but this improvement was constrained
due to the weak sales growth. The real driver of improvement related to
improved pricing habits largely resulting from store personnel exercising
great judgment that is guided by better information in our newly implemented
price guidance system.

Operating and administrative expenses - increased as a percentage of sales in
the first quarter of 2013 versus the first quarter of 2012. This was primarily
a function of slowing sales growth versus our original expectations.

Historically, our two largest components to operating and administrative
expenses have consisted of employee related expenses (approximately 65% to
70%) and occupancy related expenses (approximately 15% to 20%). The remaining
expenses cover a variety of items with selling transportation typically being
the largest.

The three largest components of operating and administrative expenses grew as
follows for the periods ended March 31 (compared to the same quarter in the
preceding year):

                             Three-month period
                             2013      2012
Employee related expenses    5.5%      14.9%
Occupancy related expenses   13.6%     0.3%
Selling transportation costs 0.9%      19.3%

Employee related expenses include: (1) payroll (which includes cash
compensation, stock option expense, and profit sharing), (2) health care, (3)
personnel development, and (4) social taxes. Performance bonuses were down in
the first quarter of 2013; however, this decrease was offset by increases
related to the following factors: (1) average employee headcount, measured on
a full-time equivalent basis, grew 1.4% (2) sales commissions grew due to the
gross profit improvement, (3) bonus amounts related to our growth drivers grew
(this includes items such as industrial vending bonuses which grew due to the
strength in the vending rollout), (4) our profit sharing contribution grew,
and (5) our health care costs grew. The latter two items drove 21% of the
increase. The increase in the first quarter of 2012 was driven by the
following factors: (1) average employee headcount, measured on a full-time
equivalent basis, grew 14.0%, (2) sales commissions grew, (3) bonus amounts
related to our growth drivers grew (this includes items such as industrial
vending bonuses and manager minimum pay adjustments), and (4) our profit
sharing contribution grew.

Occupancy related expenses include: (1) building rent and depreciation, (2)
building utility costs, (3) equipment related to our stores and distribution
locations, and (4) FAST Solutions^SM (industrial vending) equipment (we
consider the vending equipment to be a logical extension of our store
operation and classify the expense as occupancy). The increase in the first
quarter of 2013 was driven by (1) a dramatic increase in the amount of FAST
Solutions^SM (industrial vending) equipment as discussed earlier in this
document, (2) an increase in the number of locations, and (3) an increased
investment in our distribution infrastructure over the last several years. In
the first quarter of 2013, the industrial vending component represented 62% of
the increase and utilities represented 18% of the increase. The utility
increase was due to a more severe winter and increases in natural gas prices
during the heating season. Almost all of our occupancy increase in the first
quarter of 2012 related to the increase in the amount of FAST Solutions^SM
(industrial vending) equipment, as our energy savings offset most of the
increase relating to items (1) and (3). The energy savings were driven by our
efforts to lower energy consumption, a mild winter, and a drop in natural gas
prices during the heating season.

Our selling transportation costs consist primarily of our store fleet as most
of the distribution fleet costs are included in the cost of sales. Selling
transportation costs included in operating and administrative expenses
increased in the first quarter of 2013; however, they increased at a rate much
less than sales growth. The increase in the first quarter of 2012 was
primarily related to the increase in per gallon fuel costs discussed below and
the expansion of our fleet related to additions to our non-store sales
personnel, particularly FAST Solutions^SM (industrial vending) vehicles.

The last several years have seen some variation in the cost of diesel fuel and
gasoline – During the first quarter of 2013, our total vehicle fuel costs were
approximately $10.6 million. During the first, second, third, and fourth
quarters of 2012, our total vehicle fuel costs were approximately $10.6,
$10.8, $10.8, and $10.3 million, respectively. The changes resulted from
variations in fuel costs, variations in the service levels provided to our
stores from our distribution centers, changes in the number of vehicles at our
store locations, and changes in the number of other sales centered vehicles as
a result of store openings and the expansion of our non-store sales
force. These fuel costs include the fuel utilized in our distribution vehicles
(semi-tractors, straight trucks, and sprinter trucks) which is recorded in
cost of sales and the fuel utilized in our store delivery and other sales
centered vehicles which is included in operating and administrative expenses
(the split in the last several years has been approximately 50:50 between
distribution and store and other sales centered use). 

The average per gallon fuel costs (in actual dollars) and the percentage
change (on a year-over-year basis) for the last three years was as follows:

                                                  Annual
Per gallon average price Q1      Q2    Q3    Q4   Average^1
                                                   
2013 price                                         
Diesel fuel               $ 4.02                   
Gasoline                  $ 3.51                   
                                                   
2012 price                                         
Diesel fuel               $ 3.92 3.98  3.88  4.05 3.96
Gasoline                  $ 3.53 3.73  3.61  3.53 3.60
                                                   
2011 price                                         
Diesel fuel               $ 3.60 4.04  3.90  3.87 3.85
Gasoline                  $ 3.22 3.78  3.62  3.37 3.50
                                                   
Per gallon price change  Q1      Q2    Q3    Q4   Annual^1
                                                   
2013 change                                        
Diesel fuel              2.6%                      
Gasoline                 -0.6%                     
                                                   
2012 change                                        
Diesel fuel              8.9%    -1.5% -0.5% 4.7% 2.9%
Gasoline                 9.6%    -1.3% -0.3% 4.7% 2.9%

^1 Average of the four quarterly figures contained in the table.

Income taxes – Incomes taxes, as a percentage of earnings before income taxes,
were approximately 37.8% for the first quarter of 2013 and 2012.  As our
international business and profits grow over time, the lower income tax rates
in those jurisdictions, relative to the United States, have begun to lower our
effective tax rate. 

OPERATIONAL WORKING CAPITAL:

The year-over-year comparison and the related dollar and percentage changes
related to accounts receivable and inventories were as follows:

                                                   Twelve Month   Twelve Month
                    Balance at March 31:           Dollar         Percentage
                                                   Change         Change
                    2013         2012      2011    2013   2012    2013  2012
Accounts             $ 418,733   386,882   325,685 31,851 61,197  8.2%  18.8%
receivable, net
Inventories          $ 700,484   647,886   576,451 52,598 71,435  8.1%  12.4%
Operational working  $ 1,119,217 1,034,768 902,136 84,449 132,632 8.2%  14.7%
capital^1
                                                                         
Sales in last two    $ 531,460   522,905   437,773 8,555  85,132  1.6%  19.4%
months

^1 For purposes of this discussion, we are defining operational working
capital as accounts receivable, net and inventories.

The growth in accounts receivable noted above was driven by our sales growth
in the final two months of the period. The strong growth in recent years of
our international business and of our large customer accounts has created
meaningful difficulty with managing the growth of accounts receivable relative
to the growth in sales. The timing of month end and the Easter holiday in late
March also impacted normal payment patterns.

Our growth in inventory balances over time does not have as direct a
relationship to our monthly sales patterns as does our growth in accounts
receivable. This is impacted by other aspects of our business. For example,
the dramatic economic slowdown in late 2008 and early 2009 caused our
inventory to spike. This occurred because the lead time for inventory
procurement is typically longer than the visibility we have into future
monthly sales patterns. Over the last decade, we increased our relative
inventory levels due to the following: (1) new store openings, (2) expanded
stocking breadth at individual stores, (3) expanded stocking breadth at our
distribution centers (for example, our master stocking hub in Indianapolis
expanded its product breadth over six fold from 2005 to 2011), (4) expanded
direct sourcing, (5) expanded exclusive brands (private label), and (6)
expanded industrial vending solutions. Items (4), (5), and (6) created most of
our inventory growth in the first quarter of both 2013 and 2012.

BALANCE SHEET AND CASH FLOW:

Our balance sheet continues to be very strong and our operations have good
cash generating characteristics. During the first quarter of 2013, we
generated $160,244 (or 146.9% of net earnings) of operating cash flow. Our
first quarter typically has stronger cash flow characteristics due to the
timing of tax payments; this benefit reverses itself in the second, third, and
fourth quarters as income tax payments go out in April, June, September, and
December. The remaining amounts of cash flow from operating activities are
largely linked to the pure dynamics of a distribution business and its strong
correlation to working capital as discussed above.

STOCK REPURCHASE:

We did not purchase any stock in the first quarter of 2013. We currently have
authority to purchase up to 1,800,000 shares of our common stock.

CONFERENCE CALL TO DISCUSS QUARTERLY EARNINGS:

As we previously disclosed, we will host a conference call today to review the
quarterly results, as well as current operations. This conference call will be
broadcast live over the Internet at 9:00 a.m., central time. To access the
webcast, please go to the Fastenal Company Investor Relations Website at
http://investor.fastenal.com/events.cfm.

The Fastenal Company logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=6432.

ADDITIONAL INFORMATION:

This press release 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, including statements regarding (1) the goals of our long-term growth
strategy, 'pathway to profit', including the growth in average store sales and
profitability expected to result from that strategy (including our belief that
we can achieve targeted profitability due to an improvement in our gross
margins and a lowering of our operating expenses even if our average store
sales do not grow as originally expected), (2) the expected rate of new store
openings, (3) our belief in the transformative nature of FAST Solutions^SM
(industrial vending) and our advantage as a first mover in this area, and our
expectations regarding expansion of that business, including our goals
regarding our rate of 'machine signings', (4) our expected gross profit range,
(5) our intention to expand store based inventory around certain industries,
and (6) our plans to reinvigorate our fastener growth and improve sales at
under-performing locations. The following factors are among those that could
cause our actual results to differ materially from those predicted in such
forward looking statements: (1) a downturn or continued weakness in the
economy or in the manufacturing or commercial construction industries, changes
in the expected rate of new store openings, difficulties in successfully
attracting and retaining additional qualified sales personnel, an inability to
realize or sustain improvements in our gross margins and savings from lowering
our operating expenses, and difficulties in changing our sales process could
adversely impact our ability to achieve the goals of our 'pathway to profit'
initiative, (2) a downturn or continued weakness in the economy or in the
manufacturing or commercial construction industries, a change from that
projected in the number of North American markets able to support stores, or
an inability to recruit and retain qualified employees could cause the rate of
new store openings to change from that expected, (3) a weaker level of
industry acceptance or adoption of the vending technology from what we are
currently experiencing could cause us to fail to meet our goals from
industrial vending business including those regarding our rate of 'machine
signings', or cause industrial vending to be less transformative than
expected, (4) our competitors could choose, over time, to open additional
locations and to develop their own vending platform which could allow our
competitors to replicate our local storefront combined with industrial vending
business model mitigating our first mover advantage, (5) a downturn or
continued weakness in the economy or in the manufacturing or commercial
construction industries, a change in our current mix of products, customers,
or geographic locations, a change in our purchasing patterns, a significant
change in commodity prices, or increased competitive pressure on our selling
prices could impact our ability to achieve gross margins within the range we
expect, (6) changes in customer mix could cause us to alter our plans to
expand store based inventory around certain industries, and (7) difficulties
in hiring, relocating, or training qualified personnel could adversely impact
our ability to reinvigorate our fastener growth and improve sales at
under-performing locations. We assume no obligation to update any forward
looking statement or any discussion of risks and uncertainties related to such
forward looking statements. A discussion of other risks and uncertainties
which could cause our operating results to vary from anticipated results or
which could materially adversely affect our business, financial condition, or
operating results is included in our 2012 annual report on Form 10-K under the
sections captioned Certain Risks and Uncertainties and Item 1A – Risk Factors.

                                                                              
                                                                              
FASTENAL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands except share information)
                                                                              
                                                     (Unaudited)              
                                                     March 31,    December 31,
Assets                                               2013         2012        
Current assets:                                                               
Cash and cash equivalents                             $ 159,240   79,611      
Marketable securities                                417          354         
Trade accounts receivable, net of allowance for      418,733      372,159     
doubtful accounts of $6,728
Inventories                                          700,484      715,383     
Deferred income tax assets                           14,079       14,420      
Other current assets                                 83,883       97,361      
Prepaid income taxes                                 —            7,368       
Total current assets                                 1,376,836    1,286,656   
                                                                              
Property and equipment, less accumulated             555,734      516,427     
depreciation
Other assets, net                                    12,726       12,749      
                                                                              
Total assets                                          $ 1,945,296 1,815,832   
                                                                              
Liabilities and Stockholders' Equity                                          
                                                                              
Current liabilities:                                                          
Accounts payable                                      $ 75,327    78,019      
Accrued expenses                                     126,091      126,155     
Income taxes payable                                 51,679       —           
Total current liabilities                            253,097      204,174     
                                                                              
Deferred income tax liabilities                      51,336       51,298      
                                                                              
Stockholders' equity:                                                         
Preferred stock, 5,000,000 shares authorized         —            —           
Common stock, 400,000,000 shares authorized,
296,686,427 and 296,564,382 shares issued and        2,967        2,966       
outstanding, respectively
Additional paid-in capital                           66,560       61,436      
Retained earnings                                    1,556,987    1,477,601   
Accumulated other comprehensive income               14,349       18,357      
Total stockholders' equity                           1,640,863    1,560,360   
                                                                              
Total liabilities and stockholders' equity            $ 1,945,296 1,815,832   

                                                          
                                                          
FASTENAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings
(Amounts in thousands except earnings per share)
                                                          
                                              (Unaudited) 
                                              Three months ended
                                              March 31,
                                              2013       2012
                                                          
Net sales                                      $ 806,326 768,875
                                                          
Cost of sales                                 384,446    374,698
Gross profit                                  421,880    394,177
                                                          
Operating and administrative expenses         247,334    232,970
(Gain) loss on sale of property and equipment (213)      174
Operating income                              174,759    161,033
                                                          
Interest income                               447        96
Interest expense                              (34)       —
                                                          
Earnings before income taxes                  175,172    161,129
                                                          
Income tax expense                            66,124     60,935
                                                          
Net earnings                                   $ 109,048 100,194
                                                          
Basic net earnings per share                   $ 0.37    0.34
                                                          
Diluted net earnings per share                 $ 0.37    0.34
                                                          
Basic weighted average shares outstanding     296,643    295,538
                                                          
Diluted weighted average shares outstanding   297,652    296,927

                                                                       
                                                                       
FASTENAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
                                                                       
                                                           (Unaudited) 
                                                           Three months ended
                                                           March 31,
                                                           2013       2012
                                                                       
Cash flows from operating activities:                                  
Net earnings                                                $ 109,048 100,194
Adjustments to reconcile net earnings to net cash provided  
by operating activities:
Depreciation of property and equipment                     15,152     12,415
(Gain) loss on sale of property and equipment              (213)      174
Bad debt expense                                           2,045      2,329
Deferred income taxes                                      379        1,863
Stock based compensation                                   1,350      1,050
Excess tax benefits from stock based compensation          (954)      —
Amortization of non-compete agreements                     26         148
Changes in operating assets and liabilities:                           
Trade accounts receivable                                  (48,619)   (50,617)
Inventories                                                14,899     (1,734)
Other current assets                                       13,478     15,536
Accounts payable                                           (2,692)    2,334
Accrued expenses                                           (64)       1,134
Income taxes                                               60,001     44,941
Other                                                      (3,592)    2,421
Net cash provided by operating activities                  160,244    132,188
                                                                       
Cash flows from investing activities:                                  
Purchase of property and equipment                         (55,513)   (28,212)
Proceeds from sale of property and equipment               1,267      985
Net increase in marketable securities                      (63)       (29)
Increase in other assets                                   (3)        (57)
Net cash used in investing activities                      (54,312)   (27,313)
                                                                       
Cash flows from financing activities:                                  
Borrowings under line of credit                            20,000     —
Payments against line of credit                            (20,000)   —
Proceeds from exercise of stock options                    2,821      18,285
Excess tax benefits from stock based compensation          954        7,697
Payment of dividends                                       (29,662)   (50,197)
Net cash used in financing activities                      (25,887)   (24,215)
                                                                       
Effect of exchange rate changes on cash                    (416)      542
                                                                       
Net increase in cash and cash equivalents                  79,629     81,202
                                                                       
Cash and cash equivalents at beginning of period           79,611     117,676
                                                                       
Cash and cash equivalents at end of period                  $ 159,240 198,878
                                                                       
Supplemental disclosure of cash flow information:                      
Cash paid during each period for interest                   $ 34      —
Cash paid during each period for income taxes               $ 6,502   21,828

CONTACT: Sheryl Lisowski
         Controller
         507.453.8550

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