What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-06 compared with 2023-02-07 · 50 added, 70 removed, 589 unchanged (17% of the section changed)

45 unchanged sentences

• Homogeneity of the locations;

• Historical inventory locations we have visited and the results of prior physical counts;

• Historical inventory locations we have visited and results of prior physical counts;

• Inventory dollars by location;

• The Company's inventory cycle count results, including the results of monitoring and compliance with the cycle counting program.

• The Company's inventory cycle count results, including the results of monitoring and compliance with cycle count program by in-market location.

We tested the existence and completeness of inventory by counting inventory quantities on a sample basis through in-market location visits during the year to evaluate the Company's perpetual inventory records.

67 unchanged sentences

Net earnings $ 1,155.0 1,086.9 925.0

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments (net of tax of $ 0.0 in 2023, 2022, and 2021)

4 unchanged sentences

Consolidated Statements of Stockholders' Equity

(Amounts in millions)

(Amounts in millions except per share information)

2023 2022 2021

15 unchanged sentences

Balance at end of year 3,356.9 3,218.7 2,970.9

Accumulated other comprehensive (loss) income

Accumulated other comprehensive income (loss)

Balance at beginning of year ( 64.8 ) ( 30.7 ) ( 21.2 )

Other comprehensive (loss) income ( 34.1 ) ( 9.5 ) 17.2

Other comprehensive income (loss) 10.0 ( 34.1 ) ( 9.5 )

Balance at end of year ( 54.8 ) ( 64.8 ) ( 30.7 )

11 unchanged sentences

Depreciation of property and equipment 166.6 165.9 159.9

Loss (gain) on sale of property and equipment 1.1 ( 1.1 ) ( 1.4 )

Bad debt (recoveries) expense ( 1.8 ) 2.5 7.5

(Gain) loss on sale of property and equipment ( 4.3 ) 1.1 ( 1.1 )

Bad debt expense (recoveries) 2.2 ( 1.8 ) 2.5

Deferred income taxes ( 10.7 ) ( 4.9 ) ( 13.7 )

13 unchanged sentences

Proceeds from sale of property and equipment 12.2 11.4 8.4

Cash paid for acquisition — — ( 125.0 )

Other ( 0.6 ) ( 0.6 ) ( 0.3 )

8 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents 1.4 ( 9.2 ) ( 4.0 )

Net (decrease) increase in cash and cash equivalents ( 6.1 ) ( 9.5 ) 70.8

Net decrease in cash and cash equivalents ( 8.8 ) ( 6.1 ) ( 9.5 )

Cash and cash equivalents at beginning of year 230.1 236.2 245.7

11 unchanged sentences

Collectively, we refer to our branches and Onsite locations as in-market locations.

We have approximately 3,300 in-market locations located primarily in North America.

We have more than 3,400 in-market locations located primarily in North America.

Principles of Consolidation

4 unchanged sentences

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.

47 unchanged sentences

The identifiable intangible assets are amortized on a straight-line basis over their estimated life.

On March 30, 2020, we purchased certain assets of Apex for $ 125.0 , including identifiable intangible assets totaling $ 123.8 , with a weighted average amortization period of approximately 19.4 years.

Accounting Estimates

33 unchanged sentences

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.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 , which extended the date to December 31, 2024.

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 those amendments, 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.

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which enhances reporting requirements under Topic 280.

The enhanced disclosure requirements include:

title and position of the Chief Operating Decision Maker (CODM), significant segment expenses provided to the CODM, extending certain annual disclosures to interim periods, clarifying single reportable segment entities must apply ASC 280 in its entirety, and permitting more than one measure of segment profit or loss to be reported under certain circumstances.

This change is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024.

This change will apply retrospectively to all periods presented.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740) , which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements.

The new guidance requires consistent categorization and greater disaggregation of information in the rate reconciliation, as well as further disaggregation of income taxes paid.

This change is effective for annual periods beginning after December 15, 2024.

This change will apply on a prospective basis to annual financial statements for periods beginning after the effective date.

However, retrospective application in all prior periods presented is permitted.

Fastenal Company and Subsidiaries

4 unchanged sentences

During 2023, 2022, and 2021, no single customer represented 5% or more of our consolidated net sales.

During 2020, we had a single customer that represented 5 % of our consolidated net sales, whereas all remaining customers fell below that threshold.

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

2 unchanged sentences

United States $ 6,139.8 5,867.1 5,033.3

% of revenues 83.6 % 84.0 % 83.7 %

Canada and Mexico 981.9 884.4 749.0

% of revenues 13.4 % 12.7 % 12.5 %

North America 7,121.7 6,751.5 5,782.3

% of revenues 97.0 % 96.7 % 96.2 %

All other foreign countries 225.0 229.1 228.6

% of revenues 3.0 % 3.3 % 3.8 %

Total revenues $ 7,346.7 6,980.6 6,010.9

56 unchanged sentences

Accrued expenses $ 241.0 241.1

Stockholders' Equity

On January 18, 2023, our board of directors declared a quarterly dividend of $ 0.35 per share of common stock to be paid in cash on March 2, 2023 to shareholders of record at the close of business on February 2, 2023.

We paid aggregate annual cash dividends per share of $ 1.24 and $ 1.12 in 2022 and 2021, respectively.

In 2020, we paid aggregate annual cash dividends per share of $ 1.40 , which included a special, one-time dividend of $ 0.40 per share.

Fastenal Company and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Stockholders' Equity

On January 17, 2024, our board of directors declared a quarterly dividend of $ 0.39 per share of common stock to be paid in cash on February 29, 2024 to shareholders of record at the close of business on February 1, 2024.

In 2023, we paid aggregate annual cash dividends per share of $ 1.78 , which included a special, one-time dividend of $ 0.38 per share.

We paid aggregate annual cash dividends per share of $ 1.24 and $ 1.12 in 2022 and 2021, respectively.

Stock Options

16 unchanged sentences

January 2, 2018 1,087,936 $ 27.50 $ 27.270 541,026 419,460

April 19, 2016 1,690,880 $ 23.00 $ 22.870 493,803 371,455

January 3, 2017 1,529,578 $ 23.50 $ 23.475 523,828 426,290

April 19, 2016 1,690,880 $ 23.00 $ 22.870 245,075 188,177

13 unchanged sentences

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

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

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

44 unchanged sentences

Earnings Per Share

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 calculation because they were anti-dilutive:

Reconciliation 2023 2022 2021

17 unchanged sentences

Earnings before income taxes $ 1,522.0 1,440.0 1,207.8

Fastenal Company and Subsidiaries

Notes to Consolidated Financial Statements—Continued

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

Current Deferred Total

Federal $ 267.6 ( 5.0 ) 262.6

State 58.0 ( 1.1 ) 56.9

Foreign 35.0 ( 1.4 ) 33.6

Income tax expense $ 360.6 ( 7.5 ) 353.1

Current Deferred Total

Federal $ 214.3 ( 11.4 ) 202.9

State 46.7 ( 1.7 ) 45.0

Foreign 34.1 0.8 34.9

Income tax expense $ 295.1 ( 12.3 ) 282.8

Current Deferred Total

2023 2022 2021

Current Deferred Total Current Deferred Total Current Deferred Total

Federal $ 273.3 ( 9.2 ) 264.1 267.6 ( 5.0 ) 262.6 214.3 ( 11.4 ) 202.9

4 unchanged sentences

2023 2022 2021

federal statutory income tax rate 21.0 % 21.0 % 21.0 %

federal income tax expense at statutory rate $ 302.4 253.6 237.9

Increase (decrease) attributed to:

Amount Percent Amount Percent Amount Percent

federal statutory income tax $ 319.6 21.0 % $ 302.4 21.0 % $ 253.6 21.0 %

State income taxes, net of federal benefit $ 45.1 3.0 % $ 45.6 3.2 % $ 34.9 2.9 %

Other, net $ 2.3 0.1 % $ 5.1 0.3 % $ ( 5.7 ) - 0.5 %

Total income tax expense $ 353.1 282.8 273.6

Effective income tax rate $ 367.0 24.1 % $ 353.1 24.5 % $ 282.8 23.4 %

2 unchanged sentences

The tax effects of temporary differences that give rise to deferred income tax assets and liabilities at year end consisted of the following:

2022 2021 (1)

Deferred income tax assets (liabilities):

Deferred income tax assets:

Inventory costing and valuation methods $ 5.6 6.7

Insurance reserves 8.3 8.6

Foreign net operating loss and credit carryforwards 3.0 2.6

Stock-based compensation 3.8 3.6

Operating lease liabilities 69.5 62.6

Foreign net operating loss and credit carryforwards 2.6 1.4

Foreign valuation allowances ( 1.8 ) ( 1.7 )

Prepaid royalty 0.3 5.9

Section 174 capitalization 7.4 3.4

1 unchanged sentence

Total deferred income tax assets 107.0 97.1

Valuation allowances ( 2.2 ) ( 1.8 )

Total net deferred income tax assets 104.8 95.3

Property and equipment ( 95.4 ) ( 102.6 )

Operating lease ROU assets ( 68.3 ) ( 61.5 )

Prepaid expenses ( 3.5 ) ( 3.5 )

Other, deferred tax liabilities ( 0.4 ) ( 1.3 )

Total deferred income tax liabilities ( 167.6 ) ( 168.9 )

Deferred income tax liabilities $ ( 73.6 ) ( 81.2 )

(1) The presentation of prior year deferred income tax assets and liabilities has been updated to conform to current period presentation.

Net deferred income tax liabilities $ ( 62.8 ) ( 73.6 )

A reconciliation of the beginning and ending amount of total gross unrecognized tax benefits is as follows:

5 unchanged sentences

Balance at end of year:

Included in the liability for gross unrecognized tax benefits is an immaterial amount for interest and penalties, both of which we classify as a component of income tax expense.

Included in the liability for gross unrecognized tax benefits is $ 3.8 as of December 31, 2023 and $ 0.7 as of December 31, 2022 for interest and penalties, both of which we classify as a component of income tax expense.

The amount of unrecognized tax benefits that would favorably impact the eff ective tax rate, if recognized, is $ 9.2 as of December 31, 2023 and $ 8.6 as of December 31, 2022.

15 unchanged sentences

The aggregate residual value guarantee related to these leases was ap proximately $ 118.4 .

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

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

The cost components of our operating leases were as follows for the periods ended December 31:

43 unchanged sentences

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

Average Interest Rate at December 31, 2022

Interest Rate at

Debt Outstanding

1 unchanged sentence

Unsecured revolving credit facility 6.36 % September 28, 2027 $ — 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

On September 28, 2022, we amended and restated our unsecured revolving Credit Agreement dated May 1, 2015.

The Credit Agreement was amended and restated to, among other things:

(1) increase the aggregate revolving credit commitment under the Credit Agreement, (2) extend the revolving credit maturity date to September 28, 2027, (3) provide a benchmark replacement for LIBOR with SOFR, and (4) make certain covenant changes.

After giving effect to the amendment and restatement described above, 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 amount of $ 1,200.0 .

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 amount of $ 1,200.0 .

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

6 unchanged sentences

Senior Unsecured Promissory Notes Payable

On September 28, 2022, we amended our Master Note Agreement dated July 20, 2016.

The Master Note Agreement was amended to, among other things:

(1) increase the aggregate principal amount of notes that may be issued under the agreement from time to time, (2) extend the issuance period to September 28, 2027, (3) replace the benchmark rate for any floating rate notes that may be issued in the future under the agreement from LIBOR to SOFR, and (4) make certain changes to covenants.

Fastenal Company and Subsidiaries

Notes to Consolidated Financial Statements—Continued

We have issued senior unsecured promissory notes under our master note agreement (the Master Note Agreement) in the aggregate principal amount of $ 260.0 as of December 31, 2023.

3 unchanged sentences

The notes currently issued under our Master Note Agreement, including the maturity date and fixed interest rate per annum of each series of note, are contained in the table above.

The Master Note Agreement contains certain financial and other covenants and we are in compliance with these covenants.

The Master Note Agreement contains certain financial and other covenants and we are currently in compliance with these covenants.

Fastenal Company and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Principal payments required on our outstanding indebtedness, based on the maturity dates defined within our long-term debt arrangements, for the succeeding five years, are displayed in the table below, as of December 31, 2023:

16 unchanged sentences

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-K

Item 8. Financial Statements and Supplementary Data