What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-06 compared with 2024-02-06 · 128 added, 60 removed, 579 unchanged (25% of the section changed)

4 unchanged sentences

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Fastenal Company and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of earnings, comprehensive income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement schedule II — valuation and qualifying accounts (collectively, the consolidated financial statements).

We have audited the accompanying consolidated balance sheets of Fastenal Company and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes and financial statement schedule II — valuation and qualifying accounts (collectively, the consolidated financial statements).

We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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Consolidated Balance Sheets

(Amounts in millions except share information)

(Amounts in millions except share and per share information)

Current assets:

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FASTENAL COMPANY AND SUBSIDIARIES

Consolidated Statements of Earnings

(Amounts in millions except earnings per share)

Consolidated Statements of Income

(Amounts in millions except income per share)

For the year ended December 31

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Gross profit 3,401.9 3,354.5 3,215.8

Operating and administrative expenses 1,825.8 1,762.2 1,559.8

Selling, general, and administrative expenses 1,891.9 1,825.8 1,762.2

Operating income 1,510.0 1,528.7 1,453.6

1 unchanged sentence

Interest expense ( 7.3 ) ( 10.8 ) ( 14.3 )

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

Income before income taxes 1,508.1 1,522.0 1,440.0

Income tax expense 357.5 367.0 353.1

Net earnings $ 1,155.0 1,086.9 925.0

Basic net earnings per share $ 2.02 1.89 1.61

Diluted net earnings per share $ 2.02 1.89 1.60

Net income $ 1,150.6 1,155.0 1,086.9

Basic net income per share $ 2.01 2.02 1.89

Diluted net income per share $ 2.00 2.02 1.89

Basic weighted average shares outstanding 572.7 571.3 573.8

6 unchanged sentences

2024 2023 2022

Net earnings $ 1,155.0 1,086.9 925.0

Other comprehensive income (loss), net of tax:

Net income $ 1,150.6 1,155.0 1,086.9

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustments (net of tax of $ 0.0 in 2024, 2023, and 2022)

17 unchanged sentences

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

Net earnings 1,155.0 1,086.9 925.0

Net income 1,150.6 1,155.0 1,086.9

Cash dividends paid ( 893.3 ) ( 1,016.8 ) ( 711.3 )

Translation adjustment upon merger of foreign subsidiary — 0.9 —

Translation adjustment upon closure of foreign subsidiary ( 0.7 ) — 0.9

Purchases of common stock — — ( 128.7 )

Balance at end of year 3,613.5 3,356.9 3,218.7

Accumulated other comprehensive income (loss)

Accumulated other comprehensive (loss) income

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

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

Other comprehensive (loss) income ( 36.7 ) 10.0 ( 34.1 )

Balance at end of year ( 91.5 ) ( 54.8 ) ( 64.8 )

8 unchanged sentences

Cash flows from operating activities:

Net earnings $ 1,155.0 1,086.9 925.0

Adjustments to reconcile net earnings to net cash provided by operating activities:

Net income $ 1,150.6 1,155.0 1,086.9

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property and equipment 164.7 166.6 165.9

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Effect of exchange rate changes on cash and cash equivalents ( 10.6 ) 1.4 ( 9.2 )

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

Net increase (decrease) in cash and cash equivalents 34.5 ( 8.8 ) ( 6.1 )

Cash and cash equivalents at beginning of year 221.3 230.1 236.2

31 unchanged sentences

The functional currency of our foreign operations is typically the applicable local currency.

The functional currency is translated into United States dollars for balance sheet accounts, except retained earnings, using current exchange rates as of the balance sheet date, for retained earnings at historical exchange rates, and for revenue and expense accounts using a weighted average exchange rate during the applicable period.

The functional currency is translated into U.S.

dollars for balance sheet accounts, except retained earnings, using current exchange rates as of the balance sheet date, for retained earnings at historical exchange rates, and for sales and expense accounts using a weighted average exchange rate during the applicable period.

The translation adjustments are deferred as a separate component of stockholders' equity captioned accumulated other comprehensive income (loss).

Gains or losses resulting from transactions denominated in foreign currencies are included in cost of sales or operating and administrative expenses.

Gains or losses resulting from transactions denominated in foreign currencies are included in cost of sales or SG&A expenses.

Cash and Cash Equivalents

We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Inventories, consisting of finished goods merchandise held for resale, are stated at the lower of cost (first in, first out method) or net realizable value.

Inventories, which consist of finished goods merchandise that is held for resale, are stated at the lower of cost (first in, first out method) or net realizable value.

We record valuation adjustments for excess, slow-moving, and obsolete inventory that are equal to the difference between the cost and estimated net realizable value for that inventory.

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The preparation of the consolidated financial statements in conformity with U.S.

GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent liabilities.

GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, sales and expenses, and the disclosure of contingent liabilities.

Actual results could differ from those estimates.

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Self-insurance liabilities are based on our estimate of reported claims and claims incurred but not yet reported.

We analyze historical trends, claims experience, and loss development patterns to ensure the appropriate loss development factors are applied to the incurred costs associated with the claims made.

Product Warranties

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We typically recoup these costs through product warranties we hold with the original equipment manufacturers.

Our warranty expense has historically been minimal.

Our warranty expense has historically been immaterial.

Stock-Based Compensation

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Stock-based compensation expense equal to the grant date fair value is recognized on a straight-line basis over the vesting period.

Our stock-based compensation expense is recorded in operating and administrative expenses.

Our stock-based compensation expense is recorded in SG&A expenses.

Fastenal Company and Subsidiaries

8 unchanged sentences

We record interest and penalties related to unrecognized tax benefits in income tax expense.

Earnings Per Share

Basic net earnings per share is calculated using net earnings available to common stockholders divided by the weighted average number of shares of common stock outstanding during the year.

Diluted net earnings per share is similar to basic net earnings per share except that the weighted average number of shares of common stock outstanding includes the incremental shares assumed to be issued upon the exercise of stock options considered to be 'in-the-money' (i.e., when the market price of our stock is greater than the exercise price of our outstanding stock options).

Segment Reporting

We have determined that for our North American regions we meet the aggregation criteria outlined in the accounting standards as these regions have similar:

(1) economic characteristics, (2) products and services, (3) customers, (4) distribution channels, and (5) regulatory environments.

Considering our operations outside of North America represent less than 10% of our net sales, net earnings, or assets, we report as a single business segment.

Recently Issued Accounting Pronouncements

Net Income Per Share

Basic net income per share is calculated using net income available to common stockholders divided by the weighted average number of shares of common stock outstanding during the year.

Diluted net income per share is similar to basic net income per share except that the weighted average number of shares of common stock outstanding includes the incremental shares assumed to be issued upon the exercise of stock options considered to be 'in-the-money' (i.e., when the market price of our stock is greater than the exercise price of our outstanding stock options).

Recently Adopted Accounting Pronouncements

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

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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.

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 Accounting Standards Codification 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.

We adopted ASU 2023-07 for the year ended December 31, 2024 and have applied the guidance retrospectively for all periods presented within the notes to the consolidated financial statements in this Form 10-K.

Recently Issued Accounting Pronouncements

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.

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

We are currently evaluating the impact that the adoption of ASU 2023-09 will have on our consolidated financial statements and disclosures and we anticipate adoption in our 2025 annual report on Form 10-K.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (DISE) , which specifies additional disclosure requirements.

The new guidance requires additional disclosures, including the composition of certain income expense line items (such as purchases of inventory, employee compensation, and 'other expenses') and a separate disclosure for selling expenses.

This change is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, however, early adoption is permitted.

We are currently evaluating the impact that the adoption of ASU 2024-03 will have on our consolidated financial statements and disclosures and we anticipate adoption in our 2027 annual report on Form 10-K.

Fastenal Company and Subsidiaries

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% of revenues 13.7 % 13.4 % 12.7 %

North America 7,121.7 6,751.5 5,782.3

% of revenues 97.0 % 96.7 % 96.2 %

All other foreign countries 237.3 225.0 229.1

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Canada and Mexico 101.3 87.2

North America 1,401.4 1,383.8

All other foreign countries 41.6 40.6

8 unchanged sentences

Customer promotions and marketing 64.2 63.3

Other 30.9 32.2

Occupancy (1)

Transportation (1)

Accrued expenses $ 225.6 241.0

(1) In 2024, we disaggregated certain accrual category designations and have conformed the prior period amounts to the current year presentation.

Fastenal Company and Subsidiaries

1 unchanged sentence

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.

On January 16, 2025, our board of directors declared a quarterly dividend of $ 0.43 per share of common stock to be paid in cash on February 28, 2025 to shareholders of record at the close of business on January 31, 2025.

In 2024, we paid aggregate annual cash dividends per share of $ 1.56 .

We paid aggregate annual cash dividends per share of $ 1.78 and $ 1.24 in 2023 and 2022, respectively.

In 2023, this included a special dividend of $ 0.38 per share paid in the fourth quarter.

Stock Options

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January 2, 2018 1,087,936 $ 27.50 $ 27.270 318,598 248,436

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

January 3, 2017 1,529,578 $ 23.50 $ 23.475 158,168 117,840

April 19, 2016 1,690,880 $ 23.00 $ 22.870 47,038 47,038

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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

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Notes to Consolidated Financial Statements (Continued)

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 per share calculation because they were anti-dilutive:

Net Income Per Share

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

Reconciliation 2024 2023 2022

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Retirement Savings Plan

The Fastenal Company and Subsidiaries 401(k) and Employee Stock Ownership Plan covers all of our employees in the United States.

The Fastenal Company and Subsidiaries 401(k) and Employee Stock Ownership Plan covers all of our employees in the U.S.

Our employees in Canada may participate in a Registered Retirement Savings Plan.

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The expense recorded under this profit sharing formula was approximately $ 20.8 , $ 23.1 , and $ 22.1 for 2024, 2023, and 2022, respectively.

Earnings before income taxes were derived from the following sources:

Income before income taxes were derived from the following sources:

2024 2023 2022

1 unchanged sentence

Foreign 117.5 129.3 104.3

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

Income before income taxes $ 1,508.1 1,522.0 1,440.0

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

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Amount Percent Amount Percent Amount Percent

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

United States federal statutory income tax $ 316.7 21.0 % $ 319.6 21.0 % $ 302.4 21.0 %

State income taxes, net of federal benefit 43.3 2.9 % 45.1 3.0 % 45.6 3.2 %

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Total net deferred income tax assets 107.3 104.8

Deferred income tax liabilities:

Property and equipment ( 90.9 ) ( 95.4 )

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Decrease related to statute of limitation lapses ( 1.8 ) ( 6.1 )

Settlements — ( 0.5 )

Balance at end of year:

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.

Included in the liability for gross unrecognized tax benefits i s $ 4.2 as of December 31, 2024 and $ 3.8 as of December 31, 2023 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 $ 9.1 as of December 31, 2024 and $ 9.2 as of December 31, 2023.

1 unchanged sentence

The 2024 and 2023 liability is included in deferred income taxes in the Consolidated Balance Sheets.

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 2020 in the case of United States federal examinations, and with limited exception, before 2018 in the case of foreign, state, and local examinations.

In general, it is our practice and intention to permanently reinvest the earnings of our foreign subsidiaries and repatriate earnings only when the tax impact is zero or very minimal.

Accordingly, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of our approximately $ 514.7 of undistributed earnings from foreign subsidiaries to the U.S.

as those earnings continue to be permanently reinvested.

We file income tax returns in the U.S.

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 2021 in the case of U.S.

federal examinations, and with limited exception, before 2019 in the case of foreign, state, and local examinations.

In general, it is our practice and intention to permanently reinvest the income of our foreign subsidiaries and repatriate income only when the tax impact is zero or very minimal.

Accordingly, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of our approximately $ 539.6 of undistributed income from foreign subsidiaries to the U.S.

as that income continues to be permanently reinvested.

Fastenal Company and Subsidiaries

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We also lease certain semi-tractors, pick-up trucks, and computer equipment under 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 was ap proximately $ 118.4 .

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 valu e of the leased vehicles is less than the guaranteed residual value.

The aggregate residual value guarantee related to these leases was approximately $ 127.3 .

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

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Senior unsecured promissory notes payable, Series E 2.72 % May 15, 2027 50.0 50.0

Senior unsecured promissory notes payable, Series F 1.69 % June 24, 2023 — 70.0

Senior unsecured promissory notes payable, Series G 2.13 % June 24, 2026 25.0 25.0

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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 amount of $ 1,200.0 .

We have an $ 835.0 committed unsecured revolving 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 .

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Total $ 200.0

Segment Reporting

Each of our geographic regions (U.S., Canada, Mexico, Central & South America, Europe, Africa, Asia, and SE Asia) is engaged in business activities for which it may earn sales and incur expenses.

Discrete financial information is available at the geographic region level through our internal Return on Asset (ROA) reporting.

The ROA reporting is ultimately a selling location income statement with a ROA calculation and the results are compiled by geographic region.

ROA pre-tax profit measures financial performance and drives compensation programs.

Our Chief Executive Officer and President/Chief Sales Officer are our Chief Operating Decision Maker (CODM).

We consider each geographic region to be an operating segment.

The CODM regularly reviews ROA pre-tax profit to make decisions about the allocation of resources at the geographic region level.

Operating segment significant expense categories and amounts are not regularly reviewed by or provided to our CODM.

Segment expenses represent the difference between net sales and ROA pre-tax profit and consist of cost of sales and SG&A expenses.

However, our CODM reviews consolidated expense information to manage the operations of the business.

Considering our operating segments outside of the U.S.

individually represent less than 10% of our total operating segment net sales, ROA pre-tax profit, and ROA assets, we do not consider them reportable segments.

Therefore, we report the results of the U.S.

reportable segment below.

Prior to the fourth quarter of 2024, we aggregated the U.S., Canada, and Mexico operating segments into one operating segment, which we referred to as North America.

In the fourth quarter of 2024, we discontinued aggregating the U.S., Canada, and Mexico operating segments into one operating segment.

We no longer meet the criteria to aggregate these operating segments as we no longer believe the operating segments to be economically similar.

Further details on our significant accounting policies can be found in Note 1 of our Form 10-K, which are applied company wide.

Our measure of profit or loss is ROA pre-tax profit and our measure of assets is ROA assets.

ROA pre-tax profit is not a financial measure calculated in accordance with GAAP and excludes inter-company transactions.

The following table presents a reconciliation of reportable segment net sales from external customers to consolidated net sales for the periods ended December 31:

2024 2023 2022

net sales from external customers $ 6,273.1 6,139.8 5,867.1

Other operating segment net sales (1)

1,272.9 1,206.9 1,113.5

Net sales $ 7,546.0 7,346.7 6,980.6

(1) Other operating segment net sales includes all other operating segments that are below the reportable segment quantitative threshold.

Fastenal Company and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The following table presents a reconciliation of reportable segment ROA pre-tax profit to consolidated income before income taxes for the periods ended December 31:

2024 2023 2022

ROA pre-tax profit $ 1,303.2 1,318.2 1,254.2

Other operating segment pre-tax profit (1)

204.9 203.8 185.8

Income before income taxes $ 1,508.1 1,522.0 1,440.0

(1) Other operating segment pre-tax profit includes ROA pre-tax profit for all other operating segments that are below the reportable segment quantitative threshold and immaterial allocations excluded from ROA pre-tax profit.

The following table presents a reconciliation of reportable segment ROA assets to consolidated total assets for the periods ended December 31:

ROA assets (1)

$ 2,189.6 2,103.0

Other operating segment ROA assets (2)

Other current assets (3)

Property and equipment 915.6 876.1

Intangibles and other assets 148.4 159.1

Operating lease right-of-use assets 279.2 270.2

Total assets $ 4,698.0 4,462.9

(1) Operating segment ROA assets primarily include accounts receivable, inventory, in-market location vehicles, and exclude certain centrally managed assets.

(2) Other operating segment ROA assets include all other operating segments that are below the reportable segment quantitative threshold.

(3) Other current assets includes cash and cash equivalents, the allowance for credit losses, inventories that are centrally managed, prepaid income taxes, and other current assets.

Other Segment Items

Interest revenue and interest expense included in the ROA pre-tax profit are not material.

The following table presents a reconciliation of reportable segment ROA pre-tax profit depreciation and amortization expense to consolidated depreciation and amortization expense for the periods ended December 31:

2024 2023 2022

ROA pre-tax profit depreciation and amortization expense $ 188.1 168.1 156.4

Other operating segment ROA pre-tax profit depreciation and amortization expense (1)

27.4 24.7 23.0

Other reconciling items (2)

( 40.1 ) ( 15.5 ) ( 2.8 )

Depreciation and amortization expense $ 175.4 177.3 176.6

(1) Other operating segment ROA pre-tax profit depreciation and amortization expense include all other operating segments that are below the reportable segment quantitative threshold.

(2) Other reconciling items includes depreciation and amortization expense for certain assets not allocated to the ROA and differences in allocations specific to the ROA that drive decisions in the field and compensation programs.

Fastenal Company and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Legal Contingencies

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The outcomes of these legal actions are not within our complete control and may not be known for prolonged periods of time.

In some actions, the claimants seek damages, as well as other relief, that could require significant expenditures or result in lost revenues.

In some actions, the claimants seek damages, as well as other relief, that could require significant expenditures or result in lost sales.

We record a liability for these legal actions when a loss is known or considered probable and the amount can be reasonably estimated.

8 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