What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-07-17 compared with 2025-04-16 · 278 added, 91 removed, 231 unchanged (62% of the section changed)

2 unchanged sentences

Dollar amounts are stated in millions except for share and per share amounts and where otherwise noted.

Throughout this document, percentage and dollar change calculations, which are based on non-rounded dollar values, may not be able to be recalculated using the dollar values in this document due to the rounding of those dollar values.

All historical common stock share and per share information in this quarterly report on Form 10-Q have been retroactively adjusted to reflect the two-for-one stock split effective at the close of business on May 21, 2025.

Percentage and dollar change calculations, which are based on non-rounded dollar values, may not be able to be recalculated using the dollar values in this document due to the rounding of those dollar values.

References to daily sales rate (DSR) change may reflect either growth (positive) or contraction (negative) for the applicable period.

Fastenal is a North American leader in the wholesale distribution of industrial and construction supplies.

We distribute these supplies through a network of more than 3,500 in-market locations.

Prior to June 30, 2025, we disclosed the number of in-market locations which comprised the total number of branch and Onsite locations.

As our focus shifts from measuring metrics primarily addressing development of capabilities to measuring customer sites served by our selling locations, we will disclose only the number of branch locations.

Fastenal is a global leader in the wholesale distribution of industrial and construction supplies.

We distribute these supplies through a network of more than 1,500 branch locations.

Our largest end market is manufacturing.

Sales to these customers include products for both original equipment manufacturing (OEM), where our products are consumed in the final products of our customers, and manufacturing, repair, and operations (MRO), where our products are consumed to support the facilities and ongoing operations of our customers.

We also service general and commercial contractors in non-residential end markets as well as farmers, truckers, railroads, oil exploration companies, oil production and refinement companies, mining companies, federal, state, and local governmental entities, schools, and certain retail trades.

Geographically, our branches, Onsite locations, and customers are primarily located in North America, though we continue to grow our non-North American presence as well.

Geographically, our branch locations and customers are primarily in North America, though we continue to grow our non-North American presence as well.

Our motto is Growth Through Customer Service ® and our tagline is Where Industry Meets Innovation ™ .

1 unchanged sentence

We believe this close-to-the-customer, 'high-touch, high-tech' partnership approach is differentiated in the marketplace and allows us to gain market share in what remains a fragmented industrial distribution market.

The global economy continues to experience elevated levels of volatility and uncertainty, including within the commodity, labor, and transportation markets, driven by a combination of geopolitical developments and macroeconomic factors.

Recent imposition of new and expanded tariffs have further contributed to disruptions in global capital markets and global supply chains.

These developments may impact our operations, financial condition, and results of operations.

We are actively monitoring economic conditions in the U.S.

and internationally, including the potential ramifications of evolving trade policies, changes in interest rates, foreign currency exchange rate fluctuations, inflationary pressures, and the risk of a global or regional economic recession.

In response to these factors, we have implemented various strategies designed to mitigate certain adverse effects of changing inflationary conditions and supply chain challenges, while continuing to maintain market price competitiveness and price/cost neutrality.

Historically, our broad and diverse customer base combined with our ability to innovate with our customers have provided a degree of resilience during periods of economic contraction in the industrial market.

However, the ultimate impact of ongoing macroeconomic conditions, including recent tariff-related developments, remains uncertain and cannot be predicted at this time.

Executive Overview

The following table presents a performance summary of our results of operations for the three-month periods ended March 31, 2025 and 2024 .

Three-month Period

2025 2024 Change

The following table presents a performance summary of our results of operations for the six- and three-month periods ended June 30, 2025 and 2024 .

Six-month Period Three-month Period

2025 2024 Change 2025 2024 Change

Net sales $ 4,039.7 3,811.3 6.0 % $ 2,080.3 1,916.2 8.6 %

27 unchanged sentences

During the last twelve months, we increased our total FTE employee headcount by 558.

Our total FTE selling and sales support personnel increased by 172.

This increase reflects additions of FTE to support growth in our Onsite locations, partially offset by a reduction of personnel at our branch locations reflecting both shifts to Onsite locations and tight management of headcount given sluggish business conditions.

Our total FTE selling and sales support personnel increased by 319 to support growth and sales initiatives to target customer acquisition.

We had an increase in our distribution and transportation FTE personnel of 133 to support increased product throughput at our distribution facilities.

We had an increase in our remaining FTE personnel of 134 which related primarily to personnel investments in manufactur ing, quality control, IT, and business analytics.

FIRST QUARTER OF 2025 VERSUS FIRST QUARTER OF 2024

We had an increase in our remaining FTE personnel of 106, which related primarily to personnel investments in manufacturing, quality control, IT, and business analytics.

SECOND QUARTER OF 2025 VERSUS SECOND QUARTER OF 2024

Results of Operations

The following table sets forth condensed consolidated statements of income information (as a percentage of net sales) for the periods ended March 31:

The following table sets forth condensed consolidated statements of income information (as a percentage of net sales) for the periods ended June 30:

Three-month Period

3 unchanged sentences

Operating income 21.0 % 20.2 %

Net interest expense 0.0 % 0.0 %

Net interest 0.0 % 0.0 %

Income before income taxes 21.0 % 20.2 %

Note – Amounts may not foot due to rounding difference.

The table below sets forth net sales and daily sales for the periods ended March 31, and changes in such sales from the prior period to the more recent period:

The table below sets forth net sales and daily sales for the periods ended June 30, and changes in such sales from the prior period to the more recent period:

Three-month Period

5 unchanged sentences

Daily sales impact of currency fluctuations 0.1 % -0.2 %

Net sales increased $64.3, or 3.4%, in the first quarter of 2025 when compared to the first quarter of 2024.

There was one less selling day in the first quarter of 2025 relative to the prior year period and, taking this into consideration, our net daily sales increased 5.0% in the first quarter of 2025 compared to the first quarter of 2024.

This was helped by the absence of Good Friday in March of 2025.

Excluding these effects, results reflected contribution from improved customer contract signings over the past twelve months, which was partially offset by sluggish underlying business activity.

C hanges in foreign exchange rates negatively affected sales in the first quarter of 2025 by approximately 50 basis points as compared to having an immaterial impact in the first quarter of 2024.

We experienced an increase in unit sales in the first quarter of 2025.

Net sales increased $164.1, or 8.6%, in the second quarter of 2025 when compared to the second quarter of 2024.

Both periods had the same number of selling days.

The results largely reflect the contribution from improved customer contract signings over the past six quarters.

Market conditions remained sluggish, providing minimal contribution.

Chan ges in foreign exchange rates positively affected sales in the second quarter of 2025 by approximately 10 basis points and negatively affected sales in the second quarter of 2024 by approximately 20 basis points.

We experienced an increase in unit sales in the second quarter of 2025.

This was due to a growth in the number of customer sites spending $10K or more per month with Fastenal and, to a lesser degree, growth in average monthly sales per customer site across all customer spend categories.

The impact of product pricing on net sal es was not material in the first quarter of 2025 and 2024.

Price levels remained relatively stable in the first quarter of 2025.

The im pact of product pricing on net sal es in the second quarter of 2025 was an increase of 140 to 170 basis points , in contrast to the second quarter of 2024, which experienced a decline of 30 to 60 basis points.

From a product standpoint, we have three categories:

fasteners, including fasteners used in OEM and MRO, safety supplies, and other product lines, the latter of which includes eight smaller product categories, such as tools, janitorial supplies, and cutting tools.

With industrial production still sluggish in the first quarter of 2025, the performance of our fastener product line continued to lag ou r non-fastener product lines.

The fastener category experienced growth in the first quarter of 2025 after seven consecutive flat or declining quarters .

This was driven by easier comparisons and increased contribution from large customer signings.

We achieved growth in our safety category reflecting the lower volatility of PPE demand, which tends to be utilized in more MRO than OEM applications, growth of our vending installed base, and success with warehousing and data center customers.

Other produ ct lines experienced growth from MR O-oriented lines, such as electrical and janitorial, rather than from OEM-oriented lines, such as cutting tools and welding/abrasives, reflecting continued soft manufacturing demand.

With industrial production still sluggish in the second quarter of 2025, the performance of our fastener product line continued to lag our non-fastener product lines.

The fastener category experienced improved growth in the second quarter of 2025, as compared to the second quarter of 2024.

This was driven by easier comparisons, increased contribution from large customer signings, better product availability in our distribution centers, and pricing actions implemented in the second quarter of 2025.

We achieved growth in our safety category reflecting the lower volatility of PPE demand, which tends to be utilized in more MRO than OEM applications, growth of our vending installed b ase, and success with warehousing and data center customers.

Other product lines experienced higher growth from MRO-oriented lines, such as electrical and janitorial, rather than from OEM-oriented lines, such as cutting tools and welding/abrasives, reflecting continued soft manufacturing demand.

The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:

9 unchanged sentences

From an end market standpoint, we have four categories:

heavy manufacturing, other manufacturing, non-residential construction, and other, the latter of which includes reseller, government/education, and transportation/warehousing.

Our manufacturing end markets outperformed prim arily due to the relative strength we are experiencing with key account customers with significant managed spend where our service model and technology are particularly impactful.

heavy manufacturing, other manufacturing, non-residential construction, and other, the latter of which includes reseller, government/education, transportation, warehousing and storage, and data centers.

Our manufacturing end markets outperformed primarily due to the relative strength we are experiencing with key account customers with significant managed spend where our service model and technology are particularly impactful.

This disproportionately benefits manufacturing customers.

Other end market sales were favorably impacted by growth with warehousing and storage, and data center customers, which was partially offset by declining sales with resellers.

The non-residential construction end market experienced growth for the first time in ten consecutive quarters.

Other end market sales were favorably impacted by growth with warehousing and storage, and data center customers, which were partially offset by declining sales with resellers.

The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:

10 unchanged sentences

contracts, which include national multi-site, local and regional, and government customers with significant revenue potential, and non-contracts, which include all other customers.

Sales with our contract customers continue to outperform as we realize incremental sales from implementing strong customer signings that we have achieved over the last 12 months, which was partially offset by subdued business activity.

Non-contract customers tend to be smaller and utilize fewer of our tools and capabilities, providing fewer avenues for share gains and therefore more closely reflect business trends, which remain sluggish.

The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:

Sales with our contract customers continue to outperform as we realize incremental sales from implementing strong customer signings that we have achieved over the last six quarters, which was partially offset by subdued business activity.

Non-contract customers tend to be smaller and utilize fewer of our tools and capabilities, providing fewer avenues for share gains and therefore more closely reflect overall business trends, which remain sluggish.

The DSR change when compared to the same period in the prior y ear and the percent of sales in the period were as follows:

Three-month Period % of Sales

6 unchanged sentences

The data provided in the chart below measures the number of customer sites that are served throughout our in-market network, categorizing them by monthly customer spend categories and end market, and the sales and average sales per site.

We believe this supplemental information may be useful to investors in evaluating Fastenal's business trends and whether and to what degree we are being successful, and we intend to disclose this information quarterly going forward until management determines otherwise.

We believe this supplemental information may be useful to investors in evaluating Fastenal's business trends and whether and to what degree we are being successful.

Historical end market sales have been updated in the table below to categorize by customer site and may not be able to be recalculated due to the rounding of those dollar values.

The prior three years of quarterly customer site data can be found at the end of this document.

Three-month Period

11 unchanged sentences

— 2.7 — — 11.1 —

Total manufacturing sales 43,259 $ 1,493.0 $ 11,484 44,710 $ 1,441.1 $ 10,661

Total manufacturing 43,138 $1,575.4 $12,152 44,812 $1,460.9 $10,784

Non-manufacturing

5 unchanged sentences

— 11.5 — — 11.7 —

Total non-manufacturing sales 57,785 $ 466.4 $ 2,633 64,934 $ 454.0 $ 2,273

Total non-manufacturing 58,302 $504.9 $2,822 64,542 $455.3 $2,290

2,683 $1,094.1 $135,930 2,386 $955.8 $133,529

4 unchanged sentences

— 14.2 — — 22.8 —

Total net sales 101,044 $ 1,959.4 $ 6,422 109,644 $ 1,895.1 $ 5,694

Total 101,440 $2,080.3 $6,790 109,354 $1,916.2 $5,771

(1) Customer sites represent the number of customer locations served by our in-market network.

13 unchanged sentences

A portion of the growth in sales experienced by FMI, particularly FASTStock and FASTBin, reflects the migration of products from less efficient non-digital stocking locations to more efficient, digital stocking locations.

We signed 6,418 weighted FASTBin and FASTVend devices in the first quarter of 2025.

Our goal for weighted FASTBin and FASTVend device signings in 2025 remains between 28,000 to 30,000 M EUs.

We signed 6,458 weighted FASTBin and FASTVend devices in the second quarter of 2025.

Our goal for weighted FASTBin and FASTVend device signings in 2025 is 25,000 to 26,000 MEU (our previous goal was 28,000 to 30,000 MEUs).

The table below summarizes signings and installations of our FMI devices and sales through our FMI devices, eBusiness (1) tools, and Digital Footprint (2) .

21 unchanged sentences

(3) Weighted FASTBin/FASTVend signings and installations reflects the percent change compared to the same period in the prior year.

Our gross prof it, as a percentage of net sales, decreased to 45.1% in the first quarter of 2025 from 45.5% in the first quarter of 2024.

Our gross profit percentage was primarily impacted by three factors.

Our gross prof it, as a percentage of net sales, increased to 45.3% in the second quarter of 2025 from 45.1% in the second quarter of 2024.

Price/cost had a slightly favorable impact on our gross profit percentage.

Improved margin on fastener sales relating to the fastener expansion project and other supplier-focused initiatives contributed to the increase.

The aforementioned positive effects on our gross profit percentage were partly offset by a number of variables.

First, customer and product mix diluted our gross profit percentage.

This reflects relatively stronger growth from large customers, including Onsite-like customers, and non-fastener products, each of which tend to have a lower gross profit percentage than our business as a whole.

Second, we experienced higher fleet and transportation costs due to inflation in vehicle costs as we cycle our fleet and in third-party freight costs.

Third, the aforementioned negative effects on our gross profit percentage were partly offset by increases in supplier incentives due to expanding spend with key suppliers.

Second, we experienced higher import duty costs and higher fleet and transportation costs due to inflation in vehicle costs as we cycle our fleet and in third-party freight costs.

Third, customer and supplier incentives were a slight drag on our gross profit percentage.

SG&A Expenses

Our SG&A expenses, as a percentage of net sales, were 25.0% in the first quarter of 2025 versus 24.9% in the first quarter of 2024.

Our ability to leverage was impacted by having one less selling day in the first quarter of 2025 as compared to the first quarter of 2024, as operating expenses are not managed around monthly selling days.

We also experienced growth in SG&A of 3.9% in the first quarter of 2025 versus net sales growth of 3.4% in the same period.

Our SG&A expenses, as a percentage of net sales, were 24.4% in the second quarter of 2025 versus 24.9% in the second quarter of 2024.

This reflects growth in SG&A of 6.3% in the second quarter of 2025 versus net sales growth of 8.6% in the same period of 2025.

Th e percentage change in employee- related, occupancy-related, and all other SG&A expenses compared to the same period in the preceding year, is outlined in the table below.

5 unchanged sentences

(1) payroll (which includes cash compensation, stock option expense, and profit sharing), (2) health care, (3) personnel development, and (4) social taxes.

In the first quarter of 2025, our employee-relate d expenses increased when com pared to the first quarter of 2024.

We experienced a modest increase in employee base pay due to higher average FTE and, to a lesser degree, higher average wages during the period, as well as higher health insurance costs.

This was partly offset by lower incentive pay and profit sharing expense versus the first quarter of 2024.

In the second quarter of 2025, our employee-relate d expenses increased when com pared to the second quarter of 2024.

We experienced an increase in employee base pay, although at a rate below the growth in sales, due to higher average FTE during the period, and, to a lesser degree, higher average wages during the period.

Bonuses and commissions and profit sharing increased at a rate greater than sales as a result of improved business activity and financial performance versus the year-ago period.

Additionally, health insurance costs increased at a rate greater than sales.

The table below summarizes our FTE headcount at the end of the periods presented and the percentage change compared to the end of the prior periods:

16 unchanged sentences

(1) building rent and depreciation, (2) building utility costs, (3) equipment related to our branches and distribution locations, and (4) industrial vending equipment and bins utilized as part of FMI services (we consider this hardware to be a logical extension of our in-market operations and classify the depreciation and repair costs as occupancy expenses).

In the first quarter of 2025, our occupancy-related expenses increased when compared to the first quarter of 2024.

This was primarily a result of increases in a number of cost categories, including general inflation in branch rental costs and utilities, incremental depreciation and other costs associated with hub investments and upgrades, and slightly higher depreciation from an increase in the installed base of FMI hardware.

In the second quarter of 2025, our occupancy-related expenses increased when compared to the second quarter of 2024.

This was primarily a result of general inflation in branch rental costs and slightly higher depreciation from an increase in the installed base of FMI hardware.

All other SG&A expenses include:

(1) selling-related transportation, (2) IT expenses, (3) general corporate expenses, which consist of legal expenses, general insurance expenses, travel and marketing expenses, etc., and (4) sales of property and equipment.

Combined, all other SG&A expenses increased in the first quarter of 2025 when compared to the first quarter of 2024.

Selling-related transportation costs were higher, reflecting higher lease costs as we refreshed our fleet of pick-ups, which were partially offset by lower fuel expense.

We had relatively smaller increases in bad debt expense, IT expenses, sales-related travel expense, and realized losses on currency conversion, which were partially offset by increases in joint marketing efforts with our suppliers.

Combined, all other SG&A expenses decreased in the second quarter of 2025 when compared to the second quarter of 2024.

Sales-related travel and IT expenses increased slightly.

These increases were more than offset by an increase in supplier marketing credits and reductions in general insurance expense.

Operating Income

Our operating income, as a percentage of net sales, decreased to 20.1% in the first quarter of 2025 from 20.6% in the first quarter of 2024.

We ha d lower interest income reflecting a reduction in capital being invested in higher-earning short-term instruments during the period.

We had lower interest expense as a result of slightly lower borrowings through the first quarter of 2025.

The greater reduction in interest income relative to interest expense resulted in our generating net interest expens e of $0.8 in the first quarter of 2025, compared to $0.4 in the first quarter of 2024.

We recorded income tax expense of $94.4 in the first quarter of 2025, or 24.0% of income before income taxes.

Income tax expense was $92.1 in the first quarter of 2024, or 23.6% of income before income taxes.

Our operating income, as a percentage of net sales, increased to 21.0% in the second quarter of 2025 from 20.2% in the second quarter of 2024.

We ha d higher interest income earned during the second quarter of 2025.

We had higher interest expense as a result of higher borrowings through the second quarter of 2025.

The increase in interest income relative to interest expense resulted in our generating net interest income of $0.5 in the second quarter of 2025, which compared to net interest expense $0.5 in the second quarter of 2024.

We recorded income tax expense of $106.3 in the second quarter of 2025, or 24.4% of income before income taxes.

Income tax expense was $93.7 in the second quarter of 2024, or 24.2% of income before income taxes.

We believe our ongoing tax rate, absent any discrete tax items or broader changes to tax law, will be approximately 24.5%.

Our tax rate in the first quarter of 2025 and the first quarter of 2024 was below our expected ongoing tax rate due to the tax benefits associated with the exercise of stock options during each period.

Our net income during the first quarter of 2025 was $298.7, an increase of 0.3% compared to the first quarter of 2024.

Our diluted net income per share was $0.52 in the first quarter of 2025, compared to $0.52 in the first quarter of 2024.

On July 4, 2025, the U.S.

1 "A bill to provide for reconciliation pursuant to Title II of H.

14", commonly referred to as the One Big Beautiful Bill Act (OBBBA).

Changes in tax laws may affect recorded deferred tax assets and deferred tax liabilities and our effective tax rate in the future and we continue to evaluate the impacts the new legislation will have on the Condensed Consolidated Financial Statements.

As a result of the enactment of H.R.

1, we anticipate an impact to the deferred tax liability and the income tax payable related to the provisions for 100% bonus depreciation for assets placed in service after January 19, 2025 and full expensing of domestic research and experimental expenditures.

We do not expect any material change to our ongoing tax rate as a result of this legislation.

Our net income during the second quarter of 2025 was $330.3, an increase of 12.8% compared to the second quarter of 2024.

Our diluted net income per share was $0.29 in the second quarter of 2025, compared to $0.25 in the second quarter of 2024.

Liquidity and Capital Resources

Cash flow activity was as follows for the periods ended March 31:

Cash flow activity was as follows for the periods ended June 30:

Three-month Period

Five-Year Average (1)

2025 2024 Change

4 unchanged sentences

Net cash used in financing activities $ 216.4 185.5 16.6 %

(1) Five-year average includes 2020 to 2024.

Net Cash Provided by Operating Activities

Net cash provided by operating activities decreased $73.1 in the first quarter of 2025 when compared to the first quarter of 2024.

T he decrease in operating cash flow, as a percent of net income, primarily reflects our operating assets and liabilities being a more significant use of cash in the first quarter of 2025 as compared to a modest use of cash in the first quarter of 2024.

The dollar and percentage change in accounts receivable, net, inventories, and accounts payable as of March 31, 2025 when compared to March 31, 2024 were as follows:

March 31 Twelve-month Dollar Change Twelve-month Percentage Change

Net cash provided by operating activities increased $20.6 in the second quarter of 2025 when compared to the second quarter of 2024.

T he decrease in operating cash flow, as a percent of net income, primarily reflects our operating assets and liabilities being a greater use of cash in the second quarter of 2025 as compared to the second quarter of 2024.

The dollar and percentage change in accounts receivable, net, inventories, and accounts payable as of June 30, 2025 when compared to June 30, 2024 were as follows:

June 30 Twelve-month Dollar Change Twelve-month Percentage Change

2025 2024 2025 2025

6 unchanged sentences

Note - Amounts may not foot due to rounding difference.

The increase in our accounts receivable balance in the first quarter of 2025 was primarily attributable to growth in sales with our customers, including relative growth with larger customers that tend to carry longer payment terms.

The increase in our inventory balance in the first quarter of 2025 was primarily attributable to three factors.

The increase in our accounts receivable balance in the second quarter of 2025 was primarily attributable to growth in sales with our customers, including relative growth with larger customers that tend to carry longer payment terms.

The increase in our inventory balance in the second quarter of 2025 was primarily attributable to three factors.

First, we added inventory to support projected growth in our business and, to a lesser extent, the anticipated impact of tariffs.

1 unchanged sentence

Third, we added inventory to support our fastener expansion and optimal package quantity initiatives, which are intended to improve service to our in-market locations and generate efficiencies in our hubs.

The increase in our accounts payable balance in the first quarter of 2025 was primarily attributable to an increase in our product purchases as reflected in the growth in inventor ies.

The increase in our accounts payable balance in the second quarter of 2025 was primarily attributable to an increase in our product purchases as reflected in the growth in inventories.

Net Cash Used in Investing Activities

Net cash used in investi ng activities increased $5.5 in the first quarter of 2025 when compared to the first quarter of 2024.

This was due to an increase in purchases of property and equipment in the first quarter of 2025 compared to the first quarter of 2024.

Net cash used in investi ng activities increased $11.7 in the second quarter of 2025 when compared to the second quarter of 2024.

This was due to an increase in purchases of property and equipment in the second quarter of 2025 compared to the second quarter of 2024.

Our capital spending typically falls into five categories:

1 unchanged sentence

Proceeds from the sales of property and equipment, typically for the planned disposition of pick-up trucks as well as distribution vehicles and trailers in the normal course of business, are netted against these purchases and additions.

During the first quarter of 2025, our net capital expenditures (purchases of property and equipment, net of proceeds from sales of property and equipment) were $53.8, which was a slight increase from $48.3 in the first quarter of 2024.

This was primarily related to an increase in spending for facility construction and upgrades, FMI hardware to support growth in our installed base, IT and manufacturing.

During the second quarter of 2025, our net capital expenditures (purchases of property and equipment, net of proceeds from sales of property and equipment) were $64.3, which was a slight increase from $52.6 in the second quarter of 2024.

This was primarily related to an increase in spending for FMI hardware to support growth in our installed base, facility construction and upgrades, IT, and vehicles.

Cash requirements for capital expenditures were satisfied from cash generated from operations, available cash and cash equivalents, our borrowing capacity, and the proceeds of disposals.

For 2025, we continue to expect our net capital expenditures to be within a range of $265.0 to $285.0, an increase from $214.1 in 2024.

This increase reflects three items.

First, we expect higher distribution center spending to complete our upgraded Utah hub, begin construction on a new Atlanta hub, and improve our picking capacity and efficiency across our hub network.

For 2025, we expect our net capital expenditures to be within a range of $250.0 to $270.0, a decrease from our originally anticipated range ($265.0 to $285.0) and an increase from $214.1 in 2024.

The expected growth on a year-to-year basis reflects three items.

First, we expect higher distribution center spending to complete our replacement Utah hub facility, begin construction on a replacement Atlanta hub facility, and improve our picking capacity and efficiency across our hub network.

Second, we expect elevated IT spending as projects that were expected in 2024 experienced delays and will occur in 2025.

1 unchanged sentence

Net Cash Used in Financing Activities

Net cash used in financin g activities decreased $31.8 in the first quarter of 2025 when compared to the first quarter of 2024.

In the first quarter of 2024, we had higher average borrowings outstanding and were using capital to reduce those balances.

In contrast, in the first quarter of 2025, we had lower average borrowings and none of those balances were part of a facility that was eligible for repayment.

As a result, we used significantly less capital to reduce debt balances in the first quarter of 2025 relative to the first quarter of 2024.

This was partly offset by an increase in capital returned to shareholders through dividends in the period.

During the first quarter of 2025, we returned $246.7 to our shareholders in the form of dividends, compared to the first quarter of 2024 when we returned $223.2 to our shareholders in the form of dividends.

Net cash used in financin g activities increased $30.9 in the second quarter of 2025 when compared to the second quarter of 2024.

In the second quarter of 2025, we had higher average borrowings outstanding and were using capital to reduce those balances.

In contrast, in the second quarter of 2024, we had lower average borrowings.

As a result, we used significantly more capital to reduce debt balances in the second quarter of 2025 relative to the second quarter of 2024.

We also increased capital returned to shareholders through dividends in the period.

During the second quarter of 2025, we returned $252.5 to our shareholders in the form of dividends, c ompared to the second quarter of 2024 when we returned $223.3 to our shareholders in the form of dividends.

During the first six months of 2025, we returned $499.1 to our shareholders in the form of dividends, compared to the first six months of 2024 when we returned $446.5 to our shareholders in the form of dividends.

We did not repurchase any of our common stock in either period.

1 unchanged sentence

This authorization does not have an expiration date.

Total debt on our balance sheet was $200.0 at the end of the first quarter of 2025, or 5.1% of total capital (the sum of stockholders' equity and total debt).

This compares to $200.0, or 5.5% of total capital, at the end of the first quarter of 2024.

The lack of additional debt in the first quarter of 2025 versus the prior period reflects strong generation of net cash provided by operating activities over the last 12 months in excess of what was necessary to finance net capital expenditures, payment of dividends, and other investing and financing cash needs.

Total debt on our balance sheet was $230.0 at the end of the second quarter of 2025, or 5.7% of total capital (the sum of stockholders' equity and total debt).

This compares to $235.0, or 6.3% of total capital, at the end of the second quarter of 2024.

The slight reduction in debt at the end of the second quarter of 2025 versus the prior period reflects strong generation of net cash provided by operating activities over the last 12 months in excess of what was necessary to finance net capital expenditures, payment of dividends, and other investing and financing cash needs.

Our material cash requirements for known contractual ob ligations include capital exp enditures, debt, and lease obligations, each of which are discussed in more detail earlier in this report in the Notes to Condensed Consolidated Financial Statements and in our 2024 annual report on Form 10-K.

An overview of our cash dividends paid or declared in 2025 and 2024 is contained in Note 3 of the Notes to Condensed Consolidated Financial Statements.

SIX MONTHS ENDED JUNE 30, 2025 VERSUS SIX MONTHS ENDED JUNE 30, 2024

Results of Operations

The following table sets forth condensed consolidated statements of income information (as a percentage of net sales) for the periods ended June 30:

Six-month Period

Net sales 100.0 % 100.0 %

Gross profit 45.2 % 45.3 %

SG&A expenses 24.7 % 24.9 %

Operating income 20.5 % 20.4 %

Net interest 0.0 % 0.0 %

Income before income taxes 20.5 % 20.4 %

Note – Amounts may not foot due to rounding difference.

The table below sets forth net sales and daily sales for the periods ended June 30, and changes in such sales from the prior period to the more recent period:

Six-month Period

Net sales $ 4,039.7 3,811.3

Percentage change 6.0 % 1.8 %

Business days 127 128

Daily sales $ 31.8 29.8

Percentage change 6.8 % 1.8 %

Daily sales impact of currency fluctuations -0.2 % -0.1 %

Net sales increased $228.4, or 6.0%, in the first six months of 2025 when compared to the first six months of 2024.

The effect of adverse weather in the first six months of 2025 was a reduction in sales by 25 to 35 basis points compared to the first six months of 2024 when the effect of adverse weather was a reduction in sales by 15 to 35 basis points.

Changes in fore ign exchange rates negatively affected sales in the first six months of 2025 and 2024 by approximately 20 and 10 basis points, respectively.

We experienced an increase in unit sales in the first six months of 2025 when compared to the first six months of 2024.

This was primarily due to growth with large customers, both those operating out of Onsite locations that have been opened in the last two years and, to a lesser degree, those being serviced from traditional branch operations.

The impact of product pricing on net sales in the first six months of 2025 was an increase of 70 to 100 basis points, compared to the first six months of 2024, which experienced a decline of 10 to 40 basis points.

The increase reflects pricing actions implemented in the second quarter of 2025 to address additional tariffs enacted beginning in February 2025.

From a product standpoint, we have three categories:

With industrial production still sluggish in the first half of 2025, the performance of our fastener product line continued to lag our non-fastener product lines.

The fastener category experienced improved growth in the first half of 2025.

The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:

Six-month Period

2025 2024 2025 2024

OEM fasteners 6.2 % -3.2 % 19.4 % 19.6 %

MRO fasteners 0.0 % -4.7 % 11.0 % 11.7 %

Total fasteners 3.9 % -3.7 % 30.4 % 31.3 %

Safety supplies 8.9 % 7.7 % 22.1 % 21.7 %

Other product lines 7.9 % 3.4 % 47.5 % 47.0 %

Total non-fasteners 8.2 % 4.7 % 69.6 % 68.7 %

From an end market standpoint, we have four categories:

Our manufacturing end markets are outperforming primarily due to the relative strength we are experiencing with key account customers with significant managed spend where our service model and technology is particularly impactful.

This disproportionately benefits manufacturing customers.

Other end market sales are improving primarily as a result of strength with warehousing customers due to market share gains and product mix.

The DSR change when compared to the same period in the prior year and the percent of sales in the period were as follows:

Six-month Period

2025 2024 2025 2024

Heavy manufacturing 6.2 % 2.2 % 43.1 % 43.4 %

Other manufacturing 10.6 % 3.3 % 33.0 % 31.9 %

Total manufacturing 8.0 % 2.7 % 76.1 % 75.3 %

Non-residential construction -0.1 % -6.1 % 8.0 % 8.5 %

Other end markets 4.8 % 2.7 % 15.9 % 16.2 %

Total non-manufacturing 3.1 % -0.5 % 23.9 % 24.7 %

From a customer standpoint, we have two categories:

contracts, which include national multi-site, local and regional, and government customers with significant revenue potential, and non-contracts, which include all other customers.

The DSR change when compared to the same period in the prior y ear and the percent of sales in the period were as follows:

Six-month Period

2025 2024 2025 2024

Contract sales 9.8 % 7.1 % 73.1 % 70.9 %

Non-contract sales -0.5 % -8.9 % 26.9 % 29.1 %

We signed 12,875 weighted FASTBin and FASTVend devices in the first six months of 2025.

The table below summarizes signings and installations of our FMI devices and sales through our FMI devices, eBusiness (1) tools, and Digital Footprint (2) .

Six-month Period

2025 2024 DSR

Weighted FASTBin/FASTVend signings (MEUs) 12,875 13,914 -7.5 %

Signings per day 101 109

Weighted FASTBin/FASTVend installations (MEUs;

end of period) 132,174 119,306 10.8 %

FASTStock sales $ 502.3 484.2 4.6 %

% of sales 12.3 % 12.5 %

FASTBin/FASTVend sales $ 1,285.2 1,123.9 15.3 %

% of sales 31.4 % 29.1 %

FMI sales $ 1,787.5 1,608.1 12.0 %

FMI daily sales $ 14.1 12.6

% of sales 43.7 % 41.7 %

eBusiness sales $ 1,239.6 1,103.8 13.2 %

% of sales 30.3 % 28.6 %

eBusiness and FMI sales overlap $ 534.5 426.4 26.3 %

% of sales 13.1 % 11.1 %

Digital Footprint sales $ 2,492.6 2,285.5 9.9 %

% of sales 61.0 % 59.2 %

(1) Our eBusiness includes eProcurement activities, which are integrated transactions, including electronic data interchange (EDI), and eCommerce (transactional website sales).

(2) Digital Footprint is a combination of our sales through FMI (FASTStock, FASTBin, and FASTVend) plus that portion of our eBusiness sales that does not represent billings of FMI services.

(3) Weighted FASTBin/FASTVend signings and installations reflects the percent change compared to the same period in the prior year.

Our gross profit, as a percentage of net sales, decreased to 45.2% in the first six months of 2025, from 45.3% in the first six months of 2024.

The largest factor behind the decline in our gross profit percentage in the first six months of 2025 was customer and product mix.

We continued to experience relatively strong growth from Onsite customers and non-fastener products, each of which tend to have a lower gross profit percentage than our business as a whole.

We also experienced higher import duty costs and higher fleet and transportation costs due to inflation in vehicle costs as we cycle our fleet and in third-party freight costs.

These adverse impacts were partly offset by slightly favorable price-cost in the second quarter of 2025 and the ongoing fastener expansion project and other supplier-focused initiatives, which favorably impacted our gross profit percentage.

SG&A Expenses

Our SG&A expenses, as a percentage of net sales, were 24.7% in the first six months of 2025 down from 24.9% in the first six months of 2024.

Efforts to control growth in operating expenses in the first six months of 2025 produced a 5.1% expansion of total SG&A expenses in the period.

Growth in net sales was above growth in SG&A expenses, resulting in our leveraging of costs in the first six months of 2025.

Th e percentage change in employee- related, occupancy-related, and all other SG&A expenses compared to the same period in the preceding year, is outlined in the table below.

Approximate Percentage of Total SG&A Expenses Six-month Period

Employee-related expenses 70% to 75% 6.3 %

Occupancy-related expenses 15% to 20% 4.7 %

All other SG&A expenses 10% to 15% -0.8 %

In the first six months of 2025, our employee-related expenses increased when compared to the first six months of 2024.

Bonus and commission expense grew faster than the increase in net sales, as a result of improved sales and profit growth versus the prior year period.

We experienced an increase in employee base pay due to higher average FTE and average wages during the period.

Additionally, healthcare costs increased.

The table below summarizes our FTE headcount at the end of the periods presented and the percentage change compared to the end of the prior period:

Selling personnel (2)

15,660 15,014 4.3 %

Distribution/Transportation personnel 3,098 2,997 3.4 %

Manufacturing personnel 966 936 3.2 %

Organizational support personnel (3)

2,083 2,011 3.6 %

Total personnel 21,807 20,958 4.1 %

In the fourth quarter of 2024, we realigned certain employees as a result of a routine review of our organizational structure.

While there is no change to total absolute or total FTE headcount, it produces minor shifts between headcount categories.

Historical numbers have been adjusted to reflect this realignment.

Of our Selling personnel, 80%-85% are attached to a specific in-market location.

Organizational support personnel consists of:

(1) Sales Support personnel (37% to 42% of category), which includes sourcing, purchasing, supply chain, product development, etc.;

(2) IT personnel (35% to 40% of category);

and (3) Administrative Support personnel (22% to 27% of category), which includes human resources, Fastenal School of Business, accounting and finance, senior management, etc.

In the first six months of 2025, our occupancy-related expenses increased when compared to the first six months of 2024.

We had moderate increases in branch costs related to inflation, as well as non-branch expenses from incremental depreciation and other costs associated with hub investments and upgrades.

FMI FASTBin depreciation and expense increased, reflecting higher installations.

Combined, all other SG&A expenses decreased in the first six months of 2025 when compared to the first six months of 2024.

This reflects a number of items.

We experienced higher lease costs in our selling-related vehicle fleet due to an increase in the mix of larger truck types and higher prices on newer vehicles which were only partly offset by reductions in fuel expense.

IT, sales-related travel, and supplies expense also increased.

These increases were more than offset by increased supplier marketing credits and a reduction in general insurance expense.

Operating Income

Our operating income, as a percentage of net sales, increased to 20.5% in the first six months of 2025 from 20.4% in the first six months of 2024.

We had higher interest income in the first six months of 2025 .

The increase in interest income relative to interest expense resulted in our generating net interest expense of $ 0.2 in the first six months of 2025, compared to $0.9 in the first six months of 2024.

We recorded income tax expense of $200.9 in the first six months of 2025, or 24.2% of income before income taxes.

Income tax expense was $185.8 in the first six months of 2024, or 23.9% of income before income taxes.

We believe our ongoing tax rate, absent any discrete tax items or broader changes to tax law, will be approximately 24.5%.

Our net income during the first six months of 2025 was $628.9, an increase of 6.5% compared to the first six months of 2024.

Our diluted net income per share was $0.55 in the first six months of 2025, compared to $0.51 in the first six months of 2024.

Liquidity and Capital Resources

Cash flow activity was as follows for the periods ended June 30:

Six-month Period

Five-Year Average (1)

2025 2024 Change

Net cash provided by operating activities $ 540.8 593.6 -8.8 %

% of net income 99.2 % 86.0 % 100.5 %

Net cash used in investing activities $ 118.3 101.1 17.0 %

% of net income 21.2 % 18.8 % 17.1 %

Net cash used in financing activities $ 451.8 452.9 -0.2 %

(1) Five-year average includes 2020 to 2024.

Net Cash Provided by Operating Activities

Net cash provided by op erating activities decreased $52.8 in the first six months of 2025 when compared to the first six months of 2024 .

T he decrease in operating cash flow, as a percent of net income, primarily reflects our operating assets and liabilities being a more significant use of cash in the first six months of 2025 as compared to the first six months of 2024.

Net Cash Used in Investing Activities

Net cash used in investing activities increased $17.2 in the first six months of 2025 when compared to the first six months of 2024.

During the first six months of 2025, our net capital expenditures were $118.1, which was an increase from $100.9 in the first six months of 2024.

This was primarily related to an increase in spending on FMI hardware to support growth in our installed base, facility construction and upgrades, IT, and vehicles.

Net Cash Used in Financing Activities

Net cash used in financing activities decreased $1.1 in the first six months of 2025 when compared to the first six months of 2024.

This was primarily due to reducing our net indebtedness less in the first six months of 2025 than we did in the first six months of 2024.

This was partly offset by an increase in capital returned to shareholders through dividends in the period.

During the first six months of 2025, we returned $499.1 to our shareholders in the f orm of dividends, compared to the first six months of 2024 when we returned $446.5 to our shareholders in the form of dividends.

We did not repurchase any of our common stock in either period.

Critical Accounting Policies and Estimates – A discussion of our critical accounting policies and estimates is contained in our 2024 annual report on Form 10-K.

1 unchanged sentence

Recently Issued and Adopted Accounting Pronouncements – A description of recently issued and adopted accounting pronouncements, if any, is contained in Note 1 of the Notes to Condensed Consolidated Financial Statements.

Certain Risks and Uncertainties – Certain statements contained in this document do not relate strictly to historical or current facts.

Forward-Looking Statements – Certain statements contained in this quarterly report on Form 10-Q do not relate strictly to historical or current facts.

As such, they are considered 'forward-looking statements' that provide current expectations or forecasts of future events.

2 unchanged sentences

Any statement that is not a purely historical fact, including estimates, projections, trends, and the outcome of events that have not yet occurred, is a forward-looking statement.

Our forward-looking statements generally relate to our expectations and beliefs regarding the business environment in which we operate, our projections of future performance, our perceived marketplace opportunities, our strategies, goals, mission and vision, our expectations related to future capital expenditures, future investment in property and equipment, future tax rates, future inventory levels, pricing, weighted FMI device signings, the impact of inflation on our cost of goods or SG&A expenses, the impact of price increases on overall sales growth or margin performance, and our ability to grow our business through the enhancement of sales through our Digital Footprint.

Our forward-looking statements generally relate to our expectations and beliefs regarding the business environment in which we operate, our projections of future performance, our perceived marketplace opportunities, our strategies, goals, mission and vision, our expectations related to future capital expenditures, future investment in property and equipment, future tax rates, including anticipated tax impacts from recent legislation, future inventory levels, the declaration and payment of dividends, pricing, weighted FMI device signings, the impact of inflation on our cost of goods or SG&A expenses, the impact of price increases on overall sales growth or margin performance, and our ability to grow our business through the enhancement of sales through our Digital Footprint.

You should understand that forward-looking statements involve a variety of risks and uncertainties, known and unknown, and may be affected by inaccurate assumptions.

3 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-Q

Item 2. Management’s Discussion and Analysis