FASTENAL CO - 10-Q Summary (Period Ended September 30, 1995)
Business Context and Reporting Period
This is a quarterly report (Form 10-Q) for Fastenal Company, a distributor of fasteners and industrial supplies, for the period ended September 30, 1995. The company operates a network of Fastenal stores, FastTool stores, and combination locations. As of the end of the period, the company operated 356 Fastenal stores, 29 FastTool stores, and 5 combination stores.
Key Financial Metrics
| Metric | Nine Months Ended Sep 30, 1995 | Nine Months Ended Sep 30, 1994 | Three Months Ended Sep 30, 1995 | Three Months Ended Sep 30, 1994 |
|---|---|---|---|---|
| Net Sales | $164,559,000 | $116,878,000 | $57,993,000 | $43,508,000 |
| Gross Profit | $87,505,000 | $61,916,000 | $31,021,000 | $22,994,000 |
| Operating Income | $33,400,000 | $21,821,000 | $12,296,000 | $8,504,000 |
| Net Earnings | $20,190,000 | $13,158,000 | $7,386,000 | $5,154,000 |
| Earnings Per Share | $0.53 | $0.35 | $0.19 | $0.14 |
| Cash from Operations | $7,625,000 | $7,946,000 | N/A | N/A |
| Cash and Equivalents (End of Period) | $2,575,000 | $3,850,000 | $2,575,000 | $3,850,000 |
| Total Assets | $101,265,000 | $81,795,000 | $101,265,000 | $81,795,000 |
| Total Liabilities | $14,107,000 | $14,146,000 | $14,107,000 | $14,146,000 |
Margins (Nine Months 1995): Gross Margin was approximately 53.2%. Operating Margin was approximately 20.3%. Net Margin was approximately 12.3%.
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 40.8% for the nine-month period and 33.3% for the third quarter compared to the prior year. Growth was driven by a 27.5% increase in same-store sales and the addition of 83 new stores since October 1994.
- Profitability: Net earnings grew 53.4% for the nine-month period, outpacing revenue growth due to operating leverage. Operating and administrative expenses increased 34.9% (nine months) and 29.2% (quarter), which was lower than the rate of sales growth.
- Balance Sheet: Total assets increased by $19.5 million, primarily due to a $7.9 million increase in property and equipment (new manufacturing facilities and equipment) and a $9.6 million increase in trade accounts receivable.
- Cash Flow: Net cash provided by operating activities decreased slightly to $7.6 million from $7.9 million in the prior year, largely due to increased working capital requirements (receivables and inventory) to support sales growth. Investing activities used $7.4 million, primarily for capital expenditures.
Guidance, Outlook, and Risks
- Outlook: Management expects to generate sufficient excess cash flow in the fourth quarter of 1995 to maintain current expansion plans.
- Drivers: Sales growth is attributed to strength in the industrial construction segment and, to a lesser extent, the maintenance and repair segment.
- Capital Allocation: The company is actively expanding its store footprint, having added 83 stores in the trailing twelve months. Fixed costs are rising in correlation with the number of stores.
- Risks/Contingencies: The filing does not explicitly detail specific legal contingencies or unusual items beyond standard operational risks. The company notes that the increase in receivables is a direct result of higher sales volume.
Key Facts for Investor Verification
- Store Count Expansion: Verify the operational status and profitability of the 83 new stores added since October 1994, which represent a 27% increase in total store count.
- Working Capital Efficiency: Monitor the trend of trade accounts receivable and inventory, which grew significantly ($9.6M and $6.1M respectively in cash flow usage) to support sales; ensure collection periods remain stable.
- Capital Expenditures: Confirm the completion and utilization of the new manufacturing facilities in Winona, Minnesota, which contributed to the $12.5 million in net additions to property and equipment.
- Cash Position: Note the decrease in cash and cash equivalents from $3.1 million to $2.6 million during the period; verify that projected Q4 cash flows are sufficient to fund continued expansion without external financing.