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Fastenal Company Reports 2013 Second Quarter Earnings



Fastenal Company Reports 2013 Second Quarter Earnings

WINONA, Minn., July 10, 2013 (GLOBE NEWSWIRE) -- The Fastenal Company of
Winona, MN (Nasdaq:FAST) reported the results of the quarter ended June 30,
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 periods ended June 30:

                           Six-month period            Three-month period
                           2013       2012      Change 2013     2012    Change
Net sales                  $1,653,922 1,573,765 5.1%   $847,596 804,890 5.3%
Business days              127        128              64       64       
Daily sales                $13,023    12,295    5.9%   $13,244  12,576  5.3%
Pre-tax earnings           $367,551   340,168   8.0%   $192,379 179,039 7.5%
 % of sales                22.2%      21.6%            22.7%    22.2%    
Net earnings               $230,057   212,500   8.3%   $121,009 112,306 7.7%
Net earnings per share     $0.78      0.72      8.3%   $0.41    0.38    7.9%
(basic)

On June 30, 2013, we had 2,677 stores. During the first six months of 2013, we
opened 33 new stores, an increase of 1.2% since December 2012 (we increased
our store count by 1.6% since June 30, 2012). On June 30, 2013, we operated
29,549 FAST Solutions^SM (industrial vending) machines. During the first six
months of 2013, we installed 8,454 new machines, an increase of 40.1% since
December 2012 (we increased our machine count by 126.7% since June 30, 2012).
On June 30, 2013, we had 15,760 employees, an increase of 4.1% 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:

                  Six-month period     Three-month period
                  2013       2012      2013      2012
Net sales         $1,653,922 1,573,765 $847,596  804,890
Percentage change 5.1%       17.2%     5.3%      14.7%

The increase in net sales in the first six 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 with a subset of our customers
(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% and 0.3% in the first six months of 2013 and 2012,
respectively and by 0.1% and 0.4% in the three-month periods of 2013 and 2012.

Our sales growth of 5.1% in the first half of 2013 was impacted by the loss of
one business day versus the prior year (127 days versus 128). Our sales growth
adjusted to a daily basis was 5.9% in the first half of 2013. We believe our
sales growth was held back partially due to the global economic uncertainty
combined with economic policy uncertainty in the United States.

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%  4.8%  5.3%  6.0%                                 
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%  3.1%  3.5%  4.3%                                 
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%  2.0%  2.7%  3.4%                                 
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%, and in 2013 it lowered our growth by 0.1% in
both the first and second quarters.

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 began to experience
three 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 the impact of Hurricane
Sandy and 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). The third occurred in the spring of 2013. This involved our fastener
product line and our construction business (primarily non-residential
construction). This event, similar to the first two listed earlier, mirrors or
slightly led some softening in the PMI index (discussed later in this
document). The construction piece in 2013 was also hampered by poor weather
during the winter and spring time frame throughout many areas in North
America.

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
                                                                        change
         Jan.(1) Feb.  Mar.  Apr.  May   June  July  Aug.  Sept.  Oct.  from Jan.
                                                                        to June
Past    0.9%     3.3%  2.9%  -0.3% 3.4%  2.8%  -2.3% 2.6%  2.6%   -0.7% 13.7%
2013    -0.4%    2.0%  3.4%  -1.1% 1.0%  3.2%                           8.2%
13Delta -1.3%    -1.3% 0.5%  -0.8% -2.4% 0.4%                           -5.5%
2012    -0.3%    0.5%  6.4%  -0.8% 0.5%  2.5%  -2.7% 1.3%  4.3%   -4.8% 9.0%
12Delta -1.2%    -2.8% 3.5%  -0.5% -2.9% -0.3% -0.4% -1.3% 1.7%   -4.1% -4.7%
2011    -0.2%    1.6%  7.0%  0.9%  4.3%  1.7%  -1.0% 1.4%  3.4%   0.7%  16.1%
11Delta -1.1%    -1.7% 4.1%  1.2%  0.9%  -1.1% 1.3%  -1.2% 0.8%   1.4%  2.4%

(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/20758.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%  5.9%               
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%  1.9%               
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% 8.5%               
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 50.7 49.0 50.9                            
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 in the United
States. 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%  0.7%               
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 half of 2013, particularly in the non-residential construction market,
was amplified by the global economic uncertainty combined with economic policy
uncertainty in the United States and poor weather conditions.

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/20759.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 55
to 80 stores in 2013, or approximately 2.0% 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. These strategies
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 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 intend to expand our
store based inventory around select industries (with an emphasis on fasteners,
construction products, and safety products).

Also 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 and we are in the process of introducing automation into
our facilities located in Akron, OH, Atlanta, GA, and Scranton, PA. 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.

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 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 was
a very aggressive goal, and, in hindsight, we should keep very aggressive
goals to ourselves. In the first half of 2013, we have signed approximately
11,000 machines. We consciously slowed the pace in the second quarter to
promote a 'quality of install' mentality into our rapid approach. We think
this was a good move and will continue this practice. Despite this change, we
signed 20% more vending machines in the first half of 2013, when compared to
the first half of 2012.  

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

                                            Q1     Q2     Q3     Q4     Annual
Number of vending machines
in contracts signed during the         2013 5,728  5,357                 
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 29,549                
                                       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%  52.2%                 
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             2013 27.5%  30.0%                 
to 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 with   2013 23.9%  18.9%                 
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 second 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 June 30,                                Average store sales
2013                                                       = $91,947
$0 to $30,000                 4.8     220       8.2%       -10.3%
$30,001 to $60,000            7.9     731       27.3%      14.5%
$60,001 to $100,000           10.7    804       30.0%      23.2%
$100,001 to $150,000          12.6    451       16.9%      26.5%
Over $150,000                 15.6    344       12.9%      29.2%
Strategic Account/Overseas            127       4.7%        
Store
Company Total                         2,677     100.0%     22.7%
                                                            
Three months ended June 30,                                Average store sales
2012                                                       = $89,169
$0 to $30,000                 4.2     266       10.1%      -11.8%
$30,001 to $60,000            7.3     769       29.2%      12.6%
$60,001 to $100,000           10.0    757       28.7%      22.3%
$100,001 to $150,000          12.1    419       15.9%      26.1%
Over $150,000                 15.2    316       12.0%      29.3%
Strategic Account/Overseas            108       4.1%        
Store
Company Total                         2,635     100.0%     22.2%
                                                            
Three months ended June 30,                                Average store sales
2011                                                       = $80,191
$0 to $30,000                 3.6     338       13.2%      -12.8%
$30,001 to $60,000            7.1     842       32.9%      13.5%
$60,001 to $100,000           9.7     700       27.4%      22.6%
$100,001 to $150,000          11.9    352       13.8%      26.7%
Over $150,000                 15.2    243       9.5%       28.3%
Strategic Account/Overseas            83        3.2%        
Store
Company Total                         2,558     100.0%     21.4%

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 59.7% of our store base in the second
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       Q2       Q3       Q4       Q1       Q2
                2007     2008     2012     2012     2012     2013     2013
                                                                       
Total net sales $489,157 $625,037 $804,890 $802,577 $757,235 $806,326 $847,596
reported
Less: Non-store
sales           40,891   57,267   98,735   100,124  95,951   101,624  109,300
(approximate)
Store net sales $448,266 $567,770 $706,155 $702,453 $661,284 $704,702 $738,296
(approximate)
% change since           26.7%    57.5%    56.7%    47.5%    57.2%    64.7%
Q1 2007
% change                 17.5%    14.6%    10.1%    8.2%     4.2%     4.6%
(twelve months)
                                                                       
Percentage of
sales through a 92%      91%      88%      88%      87%      87%      87%
store
                                                                       
Average monthly $72      $82      $89      $88      $83      $88      $92
sales per store
(using ending                                                          
store count)
% change since           13.9%    23.6%    22.2%    15.3%    22.2%    27.8%
Q1 2007
% change                 9.3%     11.3%    6.0%     5.1%     2.3%     3.4%
(twelve months)
                                                                       
Company pre-tax 18.1%    18.8%    22.2%    21.9%    20.9%    21.7%    22.7%
earnings
                                                                       
                Q1       Q3       Q2       Q3       Q4       Q1       Q2 
                2007     2008     2012     2012     2012     2013     2013 
Store locations
- quarter end   2,073    2,300    2,635    2,650    2,652    2,660    2,677
count
% change since           11.0%    27.1%    27.8%    27.9%    28.3%    29.1%
Q1 2007
% change                 7.2%     3.0%     3.3%     2.6%     1.9%     1.6%
(twelve months)
                                                                       
Store personnel
- absolute      6,849    9,123    10,637   10,604   10,347   10,108   10,160
headcount
% change since           33.2%    55.3%    54.8%    51.1%    47.6%    48.3%
Q1 2007
% change                 17.9%    9.3%     5.4%     0.2%     -3.6%    -4.5%
(twelve months)
                                                                       
Store personnel 6,383    8,280    9,126    9,244    9,035    8,875    8,943
- FTE
Non-store
selling         616      599      1,054    1,066    1,070    1,121    1,174
personnel - FTE
Sub-total of
all sales       6,999    8,879    10,180   10,310   10,105   9,996    10,117
personnel - FTE
                                                                       
Distribution    1,646    1,904    1,881    1,887    1,872    1,819    1,867
personnel-FTE
Manufacturing
personnel -     316      340      545      544      544      565      572
FTE^1
Administrative  767      805      794      808      811      832      857
personnel-FTE
Sub-total of
non-sales       2,729    3,049    3,220    3,239    3,227    3,216    3,296
personnel - FTE
                                                                       
Total - average 9,728    11,928   13,400   13,549   13,332   13,212   13,413
FTE headcount
                                                                       
% change since                                                         
Q1 2007
Store personnel          29.7%    43.0%    44.8%    41.5%    39.0%    40.1%
- FTE
Non-store
selling                  -2.8%    71.1%    73.1%    73.7%    82.0%    90.6%
personnel - FTE
Sub-total of
all sales                26.9%    45.4%    47.3%    44.4%    42.8%    44.5%
personnel - FTE
                                                                       
Distribution             15.7%    14.3%    14.6%    13.7%    10.5%    13.4%
personnel-FTE
Manufacturing            7.6%     72.5%    72.2%    72.2%    78.8%    81.0%
personnel-FTE^1
Administrative           5.0%     3.5%     5.3%     5.7%     8.5%     11.7%
personnel-FTE
Sub-total of
non-sales                11.7%    18.0%    18.7%    18.2%    17.8%    20.8%
personnel - FTE
                                                                       
Total - average          22.6%    37.7%    39.3%    37.0%    35.8%    37.9%
FTE headcount
                                                                       
% change                                                               
(twelve months)
Store personnel          15.2%    10.6%    7.1%     4.0%     -0.3%    -2.0%
- FTE
Non-store
selling                  -2.4%    24.0%    15.9%    12.3%    12.3%    11.4%
personnel - FTE
Sub-total of
all sales                13.8%    11.8%    8.0%     4.9%     1.0%     -0.6%
personnel - FTE
                                                                       
Distribution             6.0%     7.1%     3.1%     2.9%     0.2%     -0.7%
personnel-FTE
Manufacturing
personnel -              1.8%     10.8%    6.0%     5.4%     7.2%     5.0%
FTE^1
Administrative           7.9%     1.4%     -0.4%    1.9%     4.5%     7.9%
personnel - FTE
Sub-total of
non-sales                6.0%     6.2%     2.7%     3.0%     2.5%     2.4%
personnel - FTE
                                                                       
Total - average          11.7%    10.4%    6.7%     4.4%     1.4%     0.1%
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 June 30:
                                                                       
                                           Six-month period Three-month period
                                           2013     2012    2013      2012
Net sales                                  100.0%   100.0%  100.0%    100.0%
Gross profit                               52.3%    51.4%   52.2%     51.6%
Operating and administrative expenses      30.1%    29.8%   29.6%     29.4%
Gain on sale of property and equipment     0.0%     0.0%    0.0%      0.0%
Operating income                           22.2%    21.6%   22.7%     22.2%
Interest income/expense (net)              0.0%     0.0%    0.0%      0.0%
Earnings before income taxes               22.2%    21.6%   22.7%     22.2%
                                                                       
Note – Amounts may not foot due to                                     
rounding difference.

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

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

     Q1    Q2    Q3    Q4
2013 52.3% 52.2%        
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. We lost some traction in the second quarter of 2013.
Our gross profit was strong, but we had anticipated an improvement from the
first quarter. The decrease was all related to the transactional gross profit.
This was driven by (1) a slip in habits, (2) weakness in our fastener product
line, and (3) weakness related to our construction business. The latter two
operate with higher gross margins.

Operating and administrative expenses - increased as a percentage of sales in
the second quarter of 2013 versus the second 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 or
contracted as follows for the periods ended June 30 (compared to the same
quarter in the preceding year):

                             Six-month period Three-month period
                             2013     2012    2013      2012
Employee related expenses    4.1%     12.9%   2.7%      11.0%
Occupancy related expenses   12.1%    3.2%    10.6%     6.3%
Selling transportation costs -0.8%    13.5%   -2.6%     8.3%

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 half 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% and 0.1% in the first and second
quarters, respectively, (2) sales commissions grew due to the gross profit
improvement, (3) bonus amounts related to our growth drivers grew (this
relates to our industrial vending bonuses which grew in the first quarter and
the six month period, but contracted in the second quarter due to changes in
the pace of the vending rollout), (4) our profit sharing contribution grew,
and (5) our health care costs grew. The increase in the first half of 2012 was
driven by the following factors: (1) average employee headcount, measured on a
full-time equivalent basis, grew 11.5%, (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
half 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) a nominal increase in the number of store locations, and (3) an
increased investment in our distribution infrastructure over the last several
years. In the first half of 2013, the industrial vending component represented
62% of the increase and utilities represented 17% 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
half 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 were
essentially flat in the first half of 2013, when compared to 2012. This was
helped by stronger sales patterns related to our used store truck fleet, which
lowered our vehicle ownership costs. The increase in the first half 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 each of the first and second quarters 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 3.90              
Gasoline                 $3.51 3.60              
                                                 
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%  -2.0%             
Gasoline                 -0.6% -3.5%             
                                                 
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 37.4% and 37.5% for the first half of 2013 and 2012,
respectively.  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 June 30:          Dollar Change Percentage
                                                                  Change
                       2013       2012      2011    2013   2012   2013  2012
Accounts receivable,   $436,452   399,993   357,195 36,459 42,798 9.1%  12.0%
net
Inventories            $725,107   662,689   608,657 62,418 54,032 9.4%  8.9%
Operational working    $1,161,559 1,062,682 965,852 98,877 96,830 9.3%  10.0%
capital^1
                                                                         
Sales in last two      $560,974   543,797   479,164 17,177 64,633 3.2%  13.5%
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 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 half 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 second quarter of 2013, we
generated $53,621 (or 44.3% of net earnings) of operating cash flow;
year-to-date, we generated $213,865 (or 93.0% 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.

Our dividends (per share basis) were as follows in 2013 and 2012:

               2013  2012
First quarter  $0.10 $0.17
Second quarter 0.20  0.17
Third quarter* 0.25  0.19
Fourth quarter       0.21
Sub-Total      0.55  0.74
Supplemental**       0.50
Total          $0.55 $1.24

*The third quarter dividend was declared on July 9, 2013, and is payable on
August 23, 2013 to shareholders of record at the close of business on July 26,
2013.

**Due to income tax rate uncertainties, we paid a supplemental dividend in
December 2012.

STOCK REPURCHASE:

We did not purchase any stock in the first half 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)   
                                                     June 30,     December 31,
 Assets                                              2013         2012
Current assets:                                                    
Cash and cash equivalents                            $122,853     79,611
Marketable securities                                437          354
Trade accounts receivable, net of allowance for      436,452      372,159
doubtful accounts of $7,608 and $6,728, respectively
Inventories                                          725,107      715,383
Deferred income tax assets                           14,593       14,420
Other current assets                                 105,876      97,361
Prepaid income taxes                                 —            7,368
Total current assets                                 1,405,318    1,286,656
                                                                   
Property and equipment, less accumulated             575,571      516,427
depreciation
Other assets, net                                    12,554       12,749
                                                                   
Total assets                                         $1,993,443   1,815,832
                                                                   
Liabilities and Stockholders' Equity                               
                                                                   
Current liabilities:                                               
Accounts payable                                     $89,753      78,019
Accrued expenses                                     139,290      126,155
Income taxes payable                                 7,097        —
Total current liabilities                            236,140      204,174
                                                                   
Deferred income tax liabilities                      51,251       51,298
                                                                   
Stockholders' equity:                                              
Preferred stock, 5,000,000 shares authorized         —            —
Common stock, 400,000,000 shares authorized,
296,860,119 and 296,564,382 shares issued and        2,969        2,966
outstanding, respectively
Additional paid-in capital                           73,344       61,436
Retained earnings                                    1,618,658    1,477,601
Accumulated other comprehensive income               11,081       18,357
Total stockholders' equity                           1,706,052    1,560,360
                                                                   
Total liabilities and stockholders' equity           $1,993,443   1,815,832

 
FASTENAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings
(Amounts in thousands except earnings per share)
                                                                       
                                       (Unaudited)          (Unaudited)
                                       Six months ended     Three months ended
                                       June 30,             June 30,
                                       2013       2012      2013      2012
                                                                       
Net sales                              $1,653,922 1,573,765 $847,596  804,890
                                                                       
Cost of sales                          789,321    764,437   404,875   389,739
Gross profit                           864,601    809,328   442,721   415,151
                                                                       
Operating and administrative expenses  498,084    469,508   250,750   236,538
Gain on sale of property and equipment (456)      (108)     (243)     (282)
Operating income                       366,973    339,928   192,214   178,895
                                                                       
Interest income                        615        240       168       144
Interest expense                       (37)       —         (3)       —
                                                                       
Earnings before income taxes           367,551    340,168   192,379   179,039
                                                                       
Income tax expense                     137,494    127,668   71,370    66,733
                                                                       
Net earnings                           $230,057   212,500   $121,009  112,306
                                                                       
Basic net earnings per share           $0.78      0.72      $0.41     0.38
                                                                       
Diluted net earnings per share         $0.77      0.72      $0.41     0.38
                                                                       
Basic weighted average shares          296,711    295,826   296,779   296,110
outstanding
                                                                       
Diluted weighted average shares        297,690    297,021   297,722   297,130
outstanding

 
FASTENAL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
                                                            (Unaudited) 
                                                            Six months ended
                                                            June 30,
                                                            2013     2012
                                                                      
Cash flows from operating activities:                                 
Net earnings                                                $230,057 212,500
Adjustments to reconcile net earnings to net cash provided            
by operating activities:
Depreciation of property and equipment                      30,969   25,712
Gain on sale of property and equipment                      (456)    (108)
Bad debt expense                                            4,336    4,791
Deferred income taxes                                       (220)    4,154
Stock based compensation                                    2,700    2,100
Excess tax benefits from stock based compensation           (2,093)  (8,103)
Amortization of non-compete agreements                      158      297
Changes in operating assets and liabilities:                          
Trade accounts receivable                                   (68,629) (66,190)
Inventories                                                 (9,724)  (16,537)
Other current assets                                        (8,515)  1,242
Accounts payable                                            11,734   7,464
Accrued expenses                                            13,135   7,317
Income taxes                                                16,558   16,023
Other                                                       (6,145)  (231)
Net cash provided by operating activities                   213,865  190,431
                                                                      
Cash flows from investing activities:                                 
Purchase of property and equipment                          (92,561) (50,980)
Proceeds from sale of property and equipment                2,904    1,325
Net increase in marketable securities                       (83)     (1)
Decrease (increase) in other assets                         37       (87)
Net cash used in investing activities                       (89,703) (49,743)
                                                                      
Cash flows from financing activities:                                 
Borrowings under line of credit                             30,000   —
Payments against line of credit                             (30,000) —
Proceeds from exercise of stock options                     7,118    20,201
Excess tax benefits from stock based compensation           2,093    8,103
Payment of dividends                                        (89,000) (100,529)
Net cash used in financing activities                       (79,789) (72,225)
                                                                      
Effect of exchange rate changes on cash                     (1,131)  (223)
                                                                      
Net increase in cash and cash equivalents                   43,242   68,240
                                                                      
Cash and cash equivalents at beginning of period            79,611   117,676
                                                                      
Cash and cash equivalents at end of period                  $122,853 185,916
                                                                      
Supplemental disclosure of cash flow information:                     
Cash paid during each period for interest                   $37      —
Cash paid during each period for income taxes               $120,716 113,810

CONTACT: Sheryl Lisowski
         Controller
         507.453.8550

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