What changed in this filing

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Item 1. Financial Statements

2023-04-18 compared with 2022-10-18 · 62 added, 95 removed, 265 unchanged (37% of the section changed)

3 unchanged sentences

(Amounts in millions except share information)

Assets September 30,

Assets March 31,

2023 December 31,

17 unchanged sentences

Current portion of operating lease liabilities 91.4 91.9

Income taxes payable 75.8 —

Total current liabilities 863.2 789.8

17 unchanged sentences

(Amounts in millions except earnings per share)

(Unaudited) (Unaudited)

Nine Months Ended

September 30, Three Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended

Net sales $ 1,859.1 1,704.1

16 unchanged sentences

(Amounts in millions)

(Unaudited) (Unaudited)

Nine Months Ended

September 30, Three Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended

Net earnings $ 295.1 269.6

Other comprehensive loss, net of tax:

Other comprehensive income, net of tax:

Foreign currency translation adjustments (net of tax of $ 0.0 in 2023 and 2022)

( 56.4 ) ( 8.4 ) ( 32.7 ) ( 10.8 )

Comprehensive income $ 299.4 271.9

3 unchanged sentences

(Amounts in millions except per share information)

(Unaudited) (Unaudited)

Nine Months Ended

September 30, Three Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended

Balance at beginning of period $ 5.7 5.8

3 unchanged sentences

Stock options exercised 5.9 3.9

Purchases of common stock ( 105.6 ) — ( 56.3 ) —

Stock-based compensation 1.9 1.5

3 unchanged sentences

Net earnings 295.1 269.6

Dividends paid in cash ( 534.4 ) ( 482.6 ) ( 177.5 ) ( 161.0 )

Cash dividends paid ( 199.8 ) ( 178.4 )

Translation adjustment upon merger of foreign subsidiary — 0.9

Purchases of common stock ( 39.0 ) — ( 39.0 ) —

Balance at end of period 3,314.0 3,063.0

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Balance at beginning of period ( 64.8 ) ( 30.7 )

Other comprehensive loss ( 56.4 ) ( 8.4 ) ( 32.7 ) ( 10.8 )

Other comprehensive income 4.3 2.3

Balance at end of period ( 60.5 ) ( 28.4 )

5 unchanged sentences

(Amounts in millions)

(Unaudited) (Unaudited)

Nine Months Ended

September 30, Three Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended

Cash flows from operating activities:

2 unchanged sentences

Depreciation of property and equipment 41.8 41.2

Loss (gain) on sale of property and equipment 1.2 ( 1.1 ) ( 1.1 ) 0.2

Bad debt expense ( 0.9 ) 0.8 ( 1.3 ) 0.9

(Gain) loss on sale of property and equipment ( 0.6 ) 3.5

Bad debt recoveries ( 1.4 ) ( 0.3 )

Deferred income taxes 0.3 1.0

19 unchanged sentences

Proceeds from exercise of stock options 5.9 3.9

Purchases of common stock ( 144.6 ) — ( 95.3 ) —

Payments of dividends ( 534.4 ) ( 482.6 ) ( 177.5 ) ( 161.0 )

Cash dividends paid ( 199.8 ) ( 178.4 )

Net cash used in financing activities ( 348.9 ) ( 199.5 )

Effect of exchange rate changes on cash and cash equivalents 1.1 0.7

Net (decrease) increase in cash and cash equivalents ( 4.7 ) 4.8 ( 16.4 ) ( 71.3 )

Net increase (decrease) in cash and cash equivalents 9.7 ( 2.0 )

Cash and cash equivalents at beginning of period 230.1 236.2

4 unchanged sentences

Leased assets obtained in exchange for new operating lease liabilities $ 25.9 23.9

83.4 $ 18.4 17.8

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(Amounts in millions except share and per share information and where otherwise noted)

September 30, 2022 and 2021

March 31, 2023 and 2022

(1) Basis of Presentation

5 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Immaterial Revision

The prior period balances for additional paid-in capital and common stock have been updated in the Condensed Consolidated Statements of Stockholders' Equity to reflect the impact of an immaterial correction which reclassified $ 2.9 from additional paid-in capital to common stock in connection with the 2019 stock split.

Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional expedients and exceptions to U.S.

GAAP on contract modifications, hedging relationships, and other transactions affected by reference rate reform to ease entities' financial reporting burdens as the market transitions from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.

The guidance was effective upon issuance and may be applied prospectively to contract modifications made, hedging relationships entered into, and other transactions affected by reference rate reform, evaluated on or before December 31, 2022, beginning during the reporting period in which the guidance has been elected.

We do not have any receivables, hedging relationships, lease agreements, or debt agreements that reference LIBOR or another reference rate expected to be discontinued.

On September 28, 2022, we amended and restated our unsecured revolving credit agreement.

At the same time, we also amended our master note agreement.

As a result of the various changes made, our floating rate debt no longer references a LIBOR based benchmark rate.

Therefore, we will not be electing the optional practical expedients associated with this ASU.

We have implemented all new accounting pronouncements that are in effect and that may impact our financial statements and do not believe that there are any other new pronouncements that have been issued that might have a material impact on our financial position or results of operations.

Revenue Recognition

1 unchanged sentence

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products.

All revenue is recognized when we satisfy our performance obligations under the contract.

All revenue is recognized when or as we satisfy our performance obligations under the contract.

We recognize revenue by transferring control of the promised products to the customer, with the majority of revenue recognized at the point in time the customer obtains control of the products.

5 unchanged sentences

Revenues are attributable to countries based on the selling location from which the sale occurred.

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

September 30, 2022 and 2021

Disaggregation of Revenue

Our revenues related to the following geographic areas were as follows for the periods ended September 30:

Nine-month Period Three-month Period

2022 2021 2022 2021

Our revenues related to the following geographic areas were as follows for the periods ended March 31:

Three-month Period

United States $ 1,558.7 1,431.7

% of revenues 83.8 % 84.0 %

Canada and Mexico 243.9 213.4

% of revenues 13.1 % 12.5 %

North America 1,802.6 1,645.1

% of revenues 96.9 % 96.5 %

All other foreign countries 56.5 59.0

% of revenues 3.1 % 3.5 %

Total revenues $ 1,859.1 1,704.1

The percentages of our sales by end market were as follows for the periods ended September 30:

Nine-month Period Three-month Period

2022 2021 2022 2021

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

March 31, 2023 and 2022

The percentages of our sales by end market were as follows for the periods ended March 31:

Three-month Period

Manufacturing 74.6 % 71.2 %

2 unchanged sentences

100.0 % 100.0 %

The percentages of our sales by product line were as follows for the periods ended September 30:

Nine-month Period Three-month Period

The percentages of our sales by product line were as follows for the periods ended March 31:

Three-month Period

Type Introduced 2023 2022

13 unchanged sentences

(3) Stockholders' Equity

On October 12, 2022, our board of directors declared a quarterly dividend of $ 0.31 per share of common stock to be paid in cash on November 23, 2022 to shareholders of record at the close of business on October 27, 2022.

Since 2011, we have paid quarterly cash dividends, and in 2020, we paid a special cash dividend late in the year.

Future determination as to payment of dividends will depend on the financial condition and results of operations of the company and such other factors as are deemed relevant by the board of directors.

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

September 30, 2022 and 2021

On April 12, 2023, our board of directors declared a quarterly dividend of $ 0.35 per share of common stock to be paid in cash on May 25, 2023 to shareholders of record at the close of business on April 27, 2023.

The following table presents the cash dividends either paid previously or declared by our board of directors for future payment on a per share basis:

4 unchanged sentences

Total $ 0.70 $ 1.24

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

March 31, 2023 and 2022

Stock Options

The following tables summarize the details of options granted under our stock option plans that were outstanding as of September 30, 2022, and the assumptions used to value these grants.

The following tables summarize the details of options granted under our stock option plans that were outstanding as of March 31, 2023, and the assumptions used to value those grants.

All such grants were effective at the close of business on the date of grant.

Granted Option Exercise

(Strike) Price Closing Stock Price on Date

of Grant September 30, 2022

Price Closing Stock Price on Date

of Grant March 31, 2023

Date of Grant Options

6 unchanged sentences

January 2, 2018 1,087,936 $ 27.50 $ 27.270 658,540 527,626

January 3, 2017 1,529,578 $ 23.50 $ 23.475 651,325 547,059

April 19, 2016 1,690,880 $ 23.00 $ 22.870 478,231 356,861

14 unchanged sentences

January 2, 2018 2.2 % 5.00 2.3 % 23.45 % $ 5.02

January 3, 2017 1.9 % 5.00 2.6 % 24.49 % $ 4.20

April 19, 2016 1.3 % 5.00 2.6 % 26.34 % $ 4.09

2 unchanged sentences

All of the options in the tables above vest and become exercisable over a period of up to eight years .

Generally, each option will terminate approximately ten years after the grant date.

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

September 30, 2022 and 2021

Generally, each option will terminate approximately 10 years after the grant date.

The fair value of each share-based option is estimated on the date of grant using a Black-Scholes valuation method that uses the assumptions listed above.

1 unchanged sentence

Treasury rate over the expected life of the option at the time of grant.

The expected life is the average length of time over which we expect the employee groups will exercise their options, which is based on historical experience with similar grants.

The expected life is the average length of time over which we expect the employee groups will exercise their options, net of forfeitures, which is based on historical experience with similar grants.

The dividend yield is estimated over the expected life of the option based on our current dividend payout, historical dividends paid, and expected future cash dividends.

Expected stock volatilities are based on the movement of our stock price over the most recent historical period equivalent to the expected life of the option.

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

March 31, 2023 and 2022

Compensation expense equal to the grant date fair value is recognized for all of these awards over the vesting period.

The stock-based compensation expense for the nine-month periods ended September 30, 2022 and 2021 was $ 4.4 and $ 4.3 , respectively, and the third quarter of 2022 and 2021 was $ 1.4 and $ 1.4 , respectively.

Unrecognized stock-based compensation expense related to outstanding unvested stock options as of September 30, 2022 was $ 15.8 and is expected to be recognized over a weighted average period of 4.23 years.

The stock-based compensation expense for the three-month periods ended March 31, 2023 and 2022 was $ 1.9 and $ 1.5 , respectively.

Unrecognized stock-based compensation expense related to outstanding unvested stock options as of March 31, 2023 was $ 22.3 and is expected to be recognized over a weighted average period of 4.67 years.

Any future changes in estimated forfeitures will impact this amount.

1 unchanged sentence

The following tables present a reconciliation of the denominators used in the computation of basic and diluted earnings per share and a summary of the options to purchase shares of common stock which were excluded from the diluted earnings per share calculation because they were anti-dilutive:

Nine-month Period Three-month Period

Three-month Period

Reconciliation 2023 2022

2 unchanged sentences

Diluted weighted average shares outstanding 572,632,589 577,618,806

Nine-month Period Three-month Period

Three-month Period

Summary of Anti-dilutive Options Excluded 2023 2022

2 unchanged sentences

Any dilutive impact summarized above related to periods when the average market price of our stock exceeded the exercise price of the potentially dilutive stock options then outstanding.

Translation Adjustment Upon Merger of Foreign Subsidiary

Retained earnings for the nine-month period ended September 30, 2022, includes $ 0.9 of historical cumulative translation upon the merger of a foreign subsidiary recognized in March 2022.

(4) Income Taxes

We file income tax returns in the United States federal jurisdiction, all states, and various local and foreign jurisdictions.

We are no longer subject to income tax examinations by taxing authorities for taxable years before 2018 in the case of United States federal examinations, and with limited exceptions, before 2017 in the case of foreign, state, and local examinations.

During the first nine months of 2022, there were no material changes in unrecognized tax benefits.

During 2020, we deferred approximately $ 30.0 in payroll taxes as allowed under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which was signed into law in March 2020 to help businesses navigate COVID-19 related challenges.

The deferred payroll taxes were paid during the third quarter of 2021.

We are no longer subject to income tax examinations by taxing authorities for taxable years before 2019 in the case of United States federal examinations, and with limited exception, before 2017 in the case of foreign, state, and local examinations.

During the first quarter of 2023, there were no material changes in unrecognized tax benefits.

(5) Operating Leases

Certain operating leases for pick-up trucks contain residual value guarantee provisions which would generally become due at the expiration of the operating lease agreement if the fair value of the leased vehicles is less than the guaranteed residual value.

The aggregate residual value guarantee related to these leases is approximately $ 86.6 .

The aggregate residual value guarantee related to these leases was approximately $ 87.4 .

We believe the likelihood of funding the guarantee obligation under any provision of the operating lease agreements is remote.

2 unchanged sentences

(Amounts in millions except share and per share information and where otherwise noted)

September 30, 2022 and 2021

March 31, 2023 and 2022

(6) Debt Commitments

1 unchanged sentence

Debt obligations and letters of credit outstanding at the end of each period consisted of the following:

Average Interest Rate at September 30, 2022

Average Interest Rate at March 31, 2023

Debt Outstanding

Date September 30,

Date March 31,

2023 December 31,

Unsecured revolving credit facility 5.85 % September 28, 2027 $ 70.0 225.0

Senior unsecured promissory notes payable, Series B 2.45 % July 20, 2022 — 35.0

Senior unsecured promissory notes payable, Series C 3.22 % March 1, 2024 60.0 60.0

9 unchanged sentences

Unsecured Revolving Credit Facility

We have an $ 835.0 committed unsecured revolving credit facility (Credit Facility) with an uncommitted accordion option to increase the aggregate revolving commitment by an additional $ 365.0 for a total commitment of $ 1,200.0 .

The Credit Facility includes a committed letter of credit subfacility of $ 55.0 .

Any borrowings outstanding under the Credit Facility for which we have the ability and intent to pay using cash within the next twelve months will be classified as a current liability.

Any borrowings outstanding under the Credit Facility for which we have the ability and intent to pay using cash within the next 12 months will be classified as a current liability.

The Credit Facility contains certain financial and other covenants, and our right to borrow under the Credit Facility is conditioned upon, among other things, our compliance with these covenants.

4 unchanged sentences

Senior Unsecured Promissory Notes Payable

We have issued senior unsecured promissory notes under our master note agreement (the Master Note Agreement) in the aggregate principal amount of $ 330.0 as of September 30, 2022.

We have issued senior unsecured promissory notes under our master note agreement (the Master Note Agreement) in the aggregate principal amount of $ 330.0 as of March 31, 2023.

Our aggregate borrowing capacity under the Master Note Agreement is $ 900.0 ;

5 unchanged sentences

The nature of our potential exposure to legal contingencies is described in our 2022 annual report on Form 10-K in Note 10 of the Notes to Consolidated Financial Statements.

As of September 30, 2022, there were no litigation matters that we consider to be probable or reasonably possible to have a material adverse outcome.

As of March 31, 2023, there were no litigation matters that we consider to be probable or reasonably possible to have a material adverse outcome.

FASTENAL COMPANY AND SUBSIDIARIES

1 unchanged sentence

(Amounts in millions except share and per share information and where otherwise noted)

September 30, 2022 and 2021

March 31, 2023 and 2022

(8) Subsequent Events

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements