What changed in this filing

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Item 1A. Risk Factors

2026-02-05 compared with 2025-02-06 · 39 added, 32 removed, 232 unchanged (23% of the section changed)

16 unchanged sentences

It is also possible that we are unable to improve, upgrade, maintain, and expand our information systems.

Our ability to process orders, maintain proper levels of inventories, collect accounts receivable, pay expenses, and maintain the security of Fastenal and customer data, as well as the success of our growth drivers, is dependent in varying degrees on the effective and timely operation and support of our information technology systems.

If critical information systems fail or these systems or related software or services are otherwise unavailable, if we experience extended delays or unexpected expenses in securing, developing, and otherwise implementing technology solutions to support our growth and operations, or if certain insurance coverages are limited in their capabilities or affordability, it could adversely affect our profitability and/or ability to grow.

We may not be successful in adopting and integrating emerging technologies.

Our ability to maintain and enhance our competitive position depends in part on our capacity to adopt and integrate emerging technologies, including AI and advanced analytics, into our operations, customer solutions, and supply chain management.

If we fail to identify, develop, or implement relevant technologies in a timely and cost-effective manner, or if such technologies do not deliver the anticipated benefits, our business operations, customer experience, and financial performance could be adversely affected.

Additionally, our competitors may leverage these technologies more effectively, which could result in a loss of market share.

The evolving regulatory landscape surrounding AI and data usage may also introduce compliance risks and additional costs.

These factors could materially and adversely impact our business, financial condition, and results of operations.

The ability to adequately protect our intellectual property or successfully defend against infringement claims by others may have an adverse impact on operations.

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Our ability to successfully attract, develop, and retain qualified personnel to staff our selling locations could impact labor costs, sales at existing selling locations, and the successful execution of our growth drivers.

Our success depends in part on our ability to attract, motivate, and retain a sufficient number of qualified employees, including inside and outside branch associates, Onsite managers, national account sales representatives, and logistical and administrative support personnel, who understand and appreciate our culture and are able to adequately represent this culture to our customers.

Our success depends in part on our ability to attract, motivate, and retain a sufficient number of qualified employees, including inside and outside branch associates, Onsite managers, contract account sales representatives, and logistical and administrative support personnel, who understand and appreciate our culture and are able to adequately represent this culture to our customers.

Qualified individuals of the requisite caliber and number needed to fill these positions may be in short supply in some areas, and the turnover rate in the industry is high, particularly for less tenured employees.

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Privacy security laws and regulations, including the European Union General Data Protection Regulation 2016, the California Consumer Protection Act, and other similar privacy laws, pose increasingly complex compliance challenges, which may increase compliance costs, and any failure to comply with data privacy laws and regulations could result in significant penalties.

Changes in customer or product mix, downward pressure on sales prices, and changes in volume or timing of orders have caused and could continue to cause our gross profit percentage to fluctuate or decline in the future.

Changes in customer or product mix, downward pressure on sales prices, an inability to capture price increases in response to increased costs associated with tariffs, and changes in volume or timing of orders have caused and could continue to cause our gross profit percentage to fluctuate or decline in the future.

Changes in our customer and product mix have caused our gross profit percentage to decline and could cause our gross profit percentage to further fluctuate or decline.

For example, we have experienced a sustained increase in the proportion of our sales attributable to both non-fastener products and national accounts and Onsite customers.

For example, we have experienced a sustained increase in the proportion of our sales attributable to both non-fastener products and contract accounts and Onsite customers.

Non-fastener products typically have a lower gross profit percentage than fasteners because in many cases non-fastener products are less technical, have shorter supply chains, and are easier to transport.

Similarly, national accounts and Onsite customers typically have a lower gross profit percentage than smaller customers by virtue of their scale, available business, and broader offering of products which typically have lower gross profit percentages.

Similarly, contract accounts and Onsite customers typically have a lower gross profit percentage than smaller customers by virtue of their scale, available business, and broader offering of products which typically have lower gross profit percentages.

Whether and to what extent this adverse mix impact will result in a decline of our gross profit percentage in any given year or period will depend on the extent to which they are offset by positive impacts to gross profit percentage during such year or period.

Setting aside the circumstances of any given year or period, however, customer and product mix have contributed to the decline of our gross profit percentage over time and, based on the anticipated sources of our future growth, will likely continue to reduce our gross profit percentage into the foreseeable future.

In 2025, tariff rates increased on many of the parts we sell.

Additionally, new tariffs were enacted.

There are other variables that could cause our gross profit percentage to decline, including downward pressure on sales prices due to deflation, increases in overseas freight charges, the inability of freight sales to leverage the expenses associated with our captive trucking fleet, pressure from customers to reduce costs, or increased competition.

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We may not be able to pass higher product costs along to customers if those customers have ready product or supplier alternatives in the marketplace.

We experienced a number of these variables in 2024.

A softer manufacturing economy caused relative weakness in our more cyclical and higher gross margin fastener product line versus our non-fastener product lines.

Similarly, we continued to execute initiatives aimed at accelerating key account penetration, which resulted in relative growth in our lower gross margin national account and Onsite customers.

In 2025, the softer manufacturing economy continued to cause relative weakness in our more cyclical and higher gross margin fastener product line versus our non-fastener product lines.

Similarly, we continued to execute initiatives aimed at accelerating key account penetration, which resulted in relative growth in our lower gross margin contract accounts.

The combination of these two events produced pressure on our product gross profit percentage in 2025 from product and customer mix.

Our SG&A expenses could grow more rapidly than net sales, which could result in failure to achieve our goals related to leveraging sales growth into higher net income.

Over time, we have generally experienced an increase in our SG&A expenses, including costs related to payroll, occupancy, freight, and information technology, among others, as our net sales have grown.

Over time, we have generally experienced an increase in our SG&A expenses, including costs related to payroll, occupancy, freight, and IT, among others, as our net sales have grown.

However, historically, a portion of these expenses has not increased at the same rates as net sales, allowing us to leverage our growth and sustain or expand our operating profit margins.

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In addition, market variables, which include but are not exclusive of labor rates, energy costs, legal costs, and health care costs, could move in such a way as to cause us to not be able to manage our SG&A expenses so as to leverage our sales growth into higher net income.

We experienced a number of these variables in 2024.

Specifically, a softer manufacturing economy and our continued investment in personnel to support Onsite growth caused our SG&A to grow faster than sales, resulting in pressure on our operating margin percentage.

In 2025, our incentive compensation programs did not leverage during the year due to increased sales and pretax profit growth compared to contraction or very low growth in most periods of 2024.

Our inability to attract or transition key executive officers may divert the attention of other members of our senior leadership and adversely impact our existing operations.

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In addition, difficulties in smoothly implementing any transition to new members of our executive team, or recruiting suitable replacements, could divert the attention of other members of our senior leadership team from our existing operations.

In December 2024, our Chief Financial Officer disclosed his intention to resign from Fastenal effective April 16, 2025.

The process of filling this role is underway.

However, failure to develop, attract, and retain a suitable replacement may have an adverse effect on our senior leadership team and our existing operations.

As previously disclosed, on December 19, 2025, Mr.

Florness informed our board of directors of his decision to voluntarily step out of his role as our chief executive officer, effective as of the CEO Transition Date, and his decision to resign from our board of directors, effective as of the CEO Transition Date.

On December 19, 2025, our board of directors also appointed Mr.

Watts, our current president and chief sales officer, as the next chief executive officer of Fastenal, effective as of the CEO Transition Date.

If we are unable to manage this transition effectively, our operations may be disrupted.

Our competitive advantage in FMI solutions, which includes industrial vending (FASTVend) and bin stock (FASTStock and FASTBin) tools, could be eliminated and, in the case of FASTVend and FASTBin, the loss of key suppliers of equipment and services could be impactful and result in failure to deploy devices.

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Our sales growth is dependent primarily on our ability to attract new customers and increase our activity with existing customers within North America and abroad.

In recent years, we have increased the resources devoted to developing a multi-dimensional, differentiated service offering, including our Digital Footprint (which incorporates our FMI and eBusiness capabilities), Onsites, national accounts, international capabilities, and process and consumption analytics.

In recent years, we have increased the resources devoted to developing a multi-dimensional, differentiated service offering, including our Digital Footprint (which incorporates our FMI and eBusiness capabilities), contract accounts, international capabilities, and process and consumption analytics.

While we have taken steps to build momentum in the growth drivers of our business, we cannot assure you those steps will lead to sales growth.

Failure to achieve any of our goals regarding our Digital Footprint, Onsites, national accounts, international capabilities, analytics, or other growth drivers could negatively impact our long-term sales and profit growth.

Failure to achieve any of our goals regarding our Digital Footprint, contract accounts, international capabilities, analytics, or other growth drivers could negatively impact our long-term sales and profit growth.

In addition, failure to identify appropriate targets for the growth drivers of our business or failure to persuade the appropriate targets to adopt these offerings once identified may adversely impact our internally developed and/or externally communicated deployment objectives.

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In addition, although our board of directors has authorized share purchase programs and we purchased shares in 2022, 2020, and prior years through these programs, we may discontinue doing so at any time.

Any decision to continue to pay quarterly dividends on our common stock, to increase those dividends, or to purchase our common stock in the future will be based upon our financial condition and results of operations, the price of our common stock, credit conditions, and such other factors as are deemed relevant by our board of directors.

Any decision to continue to pay quarterly dividends on our common stock, to increase those dividends, or to purchase our common stock in the future will be based upon our financial condition and results of operations, the price of our common stock, credit conditions, recommendations of management, and such other factors as are deemed relevant by our board of directors.

General Economic and Operating Risks

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• other matters that influence customer confidence and spending.

A downturn in either the national or local economies where we operate, or in the principal markets served by us, or changes in any of the other factors described above, could negatively impact sales at our in-market locations, sales through our other selling channels, and the level of profitability of those in-market locations and other selling channels.

The primary variable affecting our results in 2024 was a softening in manufacturing sector business conditions.

A downturn in either the national or local economies where we operate, or in the principal markets served by us, or changes in any of the other factors described above, could negatively impact sales at our selling locations, sales through our other selling channels, and the level of profitability of those selling locations and other selling channels.

In 2025, our results continued to be impacted by soft manufacturing sector business conditions.

Trade policies could make sourcing product from overseas more difficult and/or more costly, and could adversely impact our gross and/or operating profit percentage.

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China represents a significant source of product for North America.

addition, we move and source products within North America.

In addition, we move and source products within North America.

Any trading disruption (tariffs, product restrictions, etc.) between Canada, the U.S., and Mexico, or disruption in their respective trading relationships with other nations can adversely impact our business.

On February 1, 2025, the White House issued three executive orders directing the U.S.

to impose an increase of the duty on imports from Canada and Mexico and China and empowering the U.S.

president to raise the tariffs further should any country retaliate.

On February 3, 2025, the prospective tariffs on Canada and Mexico were deferred for 30 days, though the execution of these tariff increases remain possible beyond the current short-term reprieve.

The 10% additional tariff on all imports from China went into effect, and on February 4, 2025 China retaliated with various levels of tariffs on certain products imported into that country from the U.S.

We are closely monitoring these actions, which could have an adverse impact on our business and financial results.

Since February 2025, the U.S.

government has imposed additional duties and tariffs in an effort to promote U.S.

production of goods and improved trade balance with our global trading partners.

This environment has been very fluid, resulting in several changes to the duties and tariffs enacted throughout the year.

Certain of the duties and tariffs enacted are being challenged from a legal perspective.

We are closely monitoring these developments, which could have an adverse impact on our business and financial results.

There can be no assurances that these disruptions will not continue or increase in the future, with the previously mentioned countries or additional countries with which we do business.

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Further, our future effective tax rates in any of these jurisdictions could be affected, positively or negatively, by changing tax priorities, changes in statutory rates, and/or changes in tax laws or the interpretation thereof, including any changes resulting from the new presidential administration in the U.S.

In 2022, the Inflation Reduction Act was passed, which contained tax-related provisions.

In 2025, the One Big Beautiful Bill Act was passed, which contained tax-related provisions.

We did not experience, and do not anticipate experiencing in the near future, any meaningful impact to our tax rates from the legislation.

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As of December 31, 2025, we had $125.0 of outstanding debt obligations, all in the form of senior unsecured promissory notes issued under our master note agreement (the Master Note Agreement).

The notes issued under our Master Note Agreement carry a fixed interest rate and consist of four series and are described in further detail in Note 9 of the Notes to Consolidated Financial Statements in this Form 10-K.

The notes issued under our Master Note Agreement carry a fixed interest rate and consist of three series and are described in further detail in Note 9 of the Notes to Consolidated Financial Statements in this Form 10-K.

We also have borrowing capacity under our revolving credit facility (the Credit Facility) of $835.0, but no loans were outstanding as of December 31, 2025.

Loans under the Credit Facility generally bear interest at a rate per annum equal to Daily Simple Secured Overnight Financing Rate (SOFR), the rate on which may vary daily, and mature on September 28, 2027.

We currently have the capacity under our Credit Facility and Master Note Agreement to increase borrowings in the future to finance stock purchases, dividends, capital expenditures, working capital additions, acquisitions, or other investments.

Should we seek to increase our borrowings during periods of volatility and disruption in the U.S.

credit markets, financing may become more costly and more difficult to obtain.

We currently have the capacity under the Credit Facility and Master Note Agreement to increase borrowings in the future to finance stock purchases, dividends, capital expenditures, working capital additions, acquisitions, or other investments.

Should we seek to increase our borrowings during periods of volatility and disruption in the financial and credit markets, financing may become more costly and more difficult to obtain.

This was not a material consideration in 2025.

The cost of servicing any existing balances on our Credit Facility could increase if interest rates increase due to the SOFR-based interest rate provided for under our Credit Facility.

The cost of servicing any existing balances on the Credit Facility could increase if interest rates increase due to the SOFR-based interest rate provided for under the Credit Facility.

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 1A. Risk Factors