UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



ý☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, ~~2017,~~2021, or



¨☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission file number 0-16125

FASTENAL COMPANY

(Exact name of registrant as specified in its charter)



Minnesota						41-0948415
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)



2001 Theurer Boulevard, Winona, Minnesota						55987-1500
(Address of principal executive offices)						(Zip Code)

~~(507) 454-5374~~


			(507) 454-5374
			(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $.01 per share	FAST	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files.) Yes ý No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See ~~definition~~the definitions of ~~“large~~"large accelerated ~~filer”~~filer", ~~“accelerated filer”~~"accelerated filer", ~~“smaller~~"smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

¨☐

Non-accelerated Filer

¨ ~~(Do not check if a smaller reporting company)~~

☐

Smaller Reporting Company

¨☐

Emerging Growth Company

¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No ý

~~Indicate the number~~As of October 11, 2021, there were approximately 575,163,354 shares ~~outstanding of each~~ of the ~~issuer's classes of~~registrant's common stock asoutstanding.

Table of ~~the last practicable date.~~Contents

FASTENAL COMPANY

INDEX


			Page
PART I		FINANCIAL INFORMATION

~~Class~~ ITEM 1.		FINANCIAL STATEMENTS	~~Outstanding at October 10, 2017~~
~~Common Stock, par value $.01 per share~~	~~287,390,374~~

~~Table of Contents~~

~~FASTENAL COMPANY~~

~~INDEX~~



	~~Page No.~~
~~Part I Financial Information:~~

Condensed Consolidated Balance Sheets ~~as of September 30, 2017 and December 31, 2016~~	1

		Condensed Consolidated Statements of Earnings ~~for the nine months and three months ended September 30, 2017 and 2016~~	2

		Condensed Consolidated Statements of Comprehensive Income ~~for the nine months and three months ended September 30, 2017 and 2016~~	3

		Condensed Consolidated Statements of Stockholders' Equity	4

		Condensed Consolidated Statements of Cash Flows ~~for the nine months ended September 30, 2017 and 2016~~	45

		Notes to Condensed Consolidated Financial Statements	56

~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~ITEM 2.		11MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12

~~Quantitative and Qualitative Disclosures About Market Risks~~ITEM 3.		18QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	22

~~Controls and Procedures~~ITEM 4.		18CONTROLS AND PROCEDURES	22

~~Part~~PART II ~~Other Information:~~		OTHER INFORMATION

~~Legal Proceedings~~ITEM 1.		18LEGAL PROCEEDINGS	24

~~Risk Factors~~ITEM 1A.		18RISK FACTORS	24

~~Unregistered Sales of Equity Securities and Use of Proceeds~~ITEM 2.		19UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	24

~~Exhibits~~ITEM 6.		19EXHIBITS
		24

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

FASTENAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Amounts in millions except share ~~and per share~~ information)


	(Unaudited)						(Unaudited)
Assets	September 30, 2017			December 31, 2016		Assets	September 30, 2021		December 31, 2020
Current assets:						Current assets:
Cash and cash equivalents	$	133.4		112.7		Cash and cash equivalents	$	250.5	245.7
Trade accounts receivable, net of allowance for doubtful accounts of $11.4 and $11.2, respectively	632.1			499.7
Trade accounts receivable, net of allowance for credit losses of $11.1 and $12.3, respectively						Trade accounts receivable, net of allowance for credit losses of $11.1 and $12.3, respectively	949.4		769.4
Inventories	1,047.0			993.0		Inventories	1,401.1		1,337.5
Prepaid income taxes	—			12.9		Prepaid income taxes	6.7		6.7
Other current assets	117.7			102.5		Other current assets	162.6		140.3
Total current assets	1,930.2			1,720.8		Total current assets	2,770.3		2,499.6

Property and equipment, net	889.3			899.7		Property and equipment, net	1,019.2		1,030.7
Operating lease right-of-use assets						Operating lease right-of-use assets	249.7		243.0
Other assets	82.1			48.4		Other assets	183.3		191.4

Total assets	$	2,901.6		2,668.9		Total assets	$	4,222.5	3,964.7

Liabilities and Stockholders' Equity						Liabilities and Stockholders' Equity
Current liabilities:						Current liabilities:
Current portion of debt	$	8.0		10.5		Current portion of debt	$	35.0	40.0
Accounts payable	147.1			108.8		Accounts payable	256.9		207.0
Accrued expenses	198.7			156.4		Accrued expenses	278.0		272.1
Income taxes payable	6.6			—
Current portion of operating lease liabilities						Current portion of operating lease liabilities	92.6		93.6
Total current liabilities	360.4			275.7		Total current liabilities	662.5		612.7

Long-term debt	432.0			379.5		Long-term debt	330.0		365.0
Deferred income tax liabilities	82.9			80.6
Operating lease liabilities						Operating lease liabilities	160.7		151.5
Deferred income taxes						Deferred income taxes	104.6		102.3

Stockholders' equity:						Stockholders' equity:
Preferred stock: $0.01 par value, 5,000,000 shares authorized, no shares issued or outstanding	—			—		Preferred stock: $0.01 par value, 5,000,000 shares authorized, no shares issued or outstanding	—		—
Common stock: $0.01 par value, 400,000,000 shares authorized, 287,383,174 and 289,161,924 shares issued and outstanding, respectively	2.9			2.9
Common stock: $0.01 par value, 800,000,000 shares authorized, 575,163,289 and 574,159,575 shares issued and outstanding, respectively						Common stock: $0.01 par value, 800,000,000 shares authorized, 575,163,289 and 574,159,575 shares issued and outstanding, respectively	2.9		2.9
Additional paid-in capital	1.3			37.4		Additional paid-in capital	90.6		61.9
Retained earnings	2,050.2			1,940.1		Retained earnings	2,900.8		2,689.6
Accumulated other comprehensive loss	(28.1		)	(47.3	)	Accumulated other comprehensive loss	(29.6)		(21.2)
Total stockholders' equity	2,026.3			1,933.1		Total stockholders' equity	2,964.7		2,733.2
Total liabilities and stockholders' equity	$	2,901.6		2,668.9		Total liabilities and stockholders' equity	$	4,222.5	3,964.7

See accompanying Notes to Condensed Consolidated Financial Statements.

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FASTENAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(Amounts in millions except earnings per share)


	(Unaudited)					(Unaudited)						(Unaudited)			(Unaudited)
	Nine Months Ended September 30,					Three Months Ended September 30,						Nine Months Ended September 30,			Three Months Ended September 30,
	2017			2016		2017			2016			2021		2020	2021		2020
Net sales	$	3,302.0		3,014.1		$	1,132.8		1,013.1		Net sales	$	4,479.0	4,289.3	$	1,554.2	1,413.3

Cost of sales	1,669.6			1,521.2		576.9			513.3		Cost of sales	2,414.7		2,340.3	834.0		772.7
Gross profit	1,632.4			1,492.9		555.9			499.8		Gross profit	2,064.3		1,949.0	720.2		640.6

Operating and administrative expenses	955.0			879.9		327.5			297.1		Operating and administrative expenses	1,147.8		1,071.6	401.8		350.5
Gain on sale of property and equipment	(1.1		)	(0.3	)	(0.1		)	(0.2	)
Operating income	678.5			613.3		228.5			202.9		Operating income	916.5		877.4	318.4		290.1

Interest income	0.3			0.3		0.1			0.1		Interest income	0.1		0.3	0.1		0.1
Interest expense	(6.5		)	(4.7	)	(2.6		)	(1.8	)	Interest expense	(7.3)		(7.2)	(2.4)		(2.6)

Earnings before income taxes	672.3			608.9		226.0			201.2		Earnings before income taxes	909.3		870.5	316.1		287.6
				��
Income tax expense	246.1			224.3		82.9			74.3		Income tax expense	215.5		207.5	72.6		66.1

Net earnings	$	426.2		384.6		$	143.1		126.9		Net earnings	$	693.8	663.0	$	243.5	221.5

Basic net earnings per share	$	1.48		1.33		$	0.50		0.44		Basic net earnings per share	$	1.21	1.16	$	0.42	0.39

Diluted net earnings per share	$	1.48		1.33		$	0.50		0.44		Diluted net earnings per share	$	1.20	1.15	$	0.42	0.38

Basic weighted average shares outstanding	288.5			288.9		287.5			289.0		Basic weighted average shares outstanding	574.6		573.7	575.0		573.9

Diluted weighted average shares outstanding	288.6			289.1		287.6			289.1		Diluted weighted average shares outstanding	576.9		575.5	577.3		576.1

See accompanying Notes to Condensed Consolidated Financial Statements.

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FASTENAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Amounts in millions)


	(Unaudited)			(Unaudited)					(Unaudited)			(Unaudited)
	Nine Months Ended September 30,			Three Months Ended September 30,					Nine Months Ended September 30,			Three Months Ended September 30,
	2017		2016	2017		2016			2021		2020	2021		2020
Net earnings	$	426.2	384.6	$	143.1	126.9		Net earnings	$	693.8	663.0	$	243.5	221.5
Other comprehensive income, net of tax:
Foreign currency translation adjustments (net of tax of $0.0 in 2017 and 2016)	19.2		9.3	8.2		(2.9	)
Other comprehensive (loss) income, net of tax:								Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments (net of tax of $0.0 in 2021 and 2020)								Foreign currency translation adjustments (net of tax of $0.0 in 2021 and 2020)	(8.4)		(3.4)	(10.8)		11.1
Comprehensive income	$	445.4	393.9	$	151.3	124.0		Comprehensive income	$	685.4	659.6	$	232.7	232.6

See accompanying Notes to Condensed Consolidated Financial Statements.

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FASTENAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity

(Amounts in millions except per share information)


	(Unaudited)				(Unaudited)
	Nine Months Ended September 30,				Three Months Ended September 30,
	2021		2020		2021		2020
Common stock
Balance at beginning of period	$	2.9	2.9		$	2.9	2.9
Balance at end of period	2.9		2.9		2.9		2.9
Additional paid-in capital
Balance at beginning of period	61.9		67.2		78.4		44.4
Stock options exercised	24.4		38.3		10.8		12.0
Purchases of common stock	—		(52.0)		—		—
Stock-based compensation	4.3		4.3		1.4		1.4
Balance at end of period	90.6		57.8		90.6		57.8
Retained earnings
Balance at beginning of period	2,689.6		2,633.9		2,818.3		2,788.6
Net earnings	693.8		663.0		243.5		221.5
Dividends paid in cash	(482.6)		(430.2)		(161.0)		(143.4)
Balance at end of period	2,900.8		2,866.7		2,900.8		2,866.7
Accumulated other comprehensive (loss) income
Balance at beginning of period	(21.2)		(38.4)		(18.8)		(52.9)
Other comprehensive (loss) income	(8.4)		(3.4)		(10.8)		11.1
Balance at end of period	(29.6)		(41.8)		(29.6)		(41.8)
Total stockholders' equity	$	2,964.7	2,885.6		$	2,964.7	2,885.6

Cash dividends paid per share of common stock	$	0.84	$	0.75	$	0.28	$	0.25

See accompanying Notes to Condensed Consolidated Financial Statements.

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FASTENAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in millions)


	(Unaudited)						(Unaudited)
	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2021		2020
Cash flows from operating activities:						Cash flows from operating activities:
Net earnings	$	426.2		384.6		Net earnings	$	693.8	663.0
Adjustments to reconcile net earnings to net cash provided by operating activities, net of acquisition:						Adjustments to reconcile net earnings to net cash provided by operating activities, net of acquisition:
Depreciation of property and equipment	92.3			74.5		Depreciation of property and equipment	119.0		114.0
Gain on sale of property and equipment	(1.1		)	(0.3	)	Gain on sale of property and equipment	(1.1)		(1.1)
Bad debt expense	6.2			6.6		Bad debt expense	0.8		5.8
Deferred income taxes	2.3			2.7		Deferred income taxes	2.3		3.5
Stock-based compensation	4.0			2.9		Stock-based compensation	4.3		4.3
Amortization of intangible assets	2.8			0.4		Amortization of intangible assets	8.1		6.4
Changes in operating assets and liabilities, net of acquisition:						Changes in operating assets and liabilities, net of acquisition:
Trade accounts receivable	(126.2		)	(80.4	)	Trade accounts receivable	(182.2)		(98.8)
Inventories	(31.2		)	(51.0	)	Inventories	(66.5)		22.8
Other current assets	(15.2		)	11.6		Other current assets	(22.3)		34.2
Accounts payable	35.9			(8.2	)	Accounts payable	49.9		17.6
Accrued expenses	42.3			3.8		Accrued expenses	5.9		6.7
Income taxes	19.5			39.8		Income taxes	—		2.1
Other	(1.9		)	(0.1	)	Other	1.7		0.3
Net cash provided by operating activities	455.9			386.9		Net cash provided by operating activities	613.7		780.8

Cash flows from investing activities:						Cash flows from investing activities:
Purchases of property and equipment	(82.7		)	(162.0	)	Purchases of property and equipment	(114.7)		(123.5)
Proceeds from sale of property and equipment	6.2			4.6		Proceeds from sale of property and equipment	7.7		8.6
Cash paid for acquisition	(58.7		)	—		Cash paid for acquisition	—		(125.0)
Other	(3.0		)	(0.2	)	Other	—		1.1
Net cash used in investing activities	(138.2		)	(157.6	)	Net cash used in investing activities	(107.0)		(238.8)

Cash flows from financing activities:						Cash flows from financing activities:
Proceeds from debt obligations	805.0			760.0		Proceeds from debt obligations	300.0		910.0
Payments against debt obligations	(750.0		)	(680.0	)	Payments against debt obligations	(340.0)		(850.0)
Proceeds from exercise of stock options	3.5			25.0		Proceeds from exercise of stock options	24.4		38.3
Purchases of common stock	(82.6		)	(59.5	)	Purchases of common stock	—		(52.0)
Payments of dividends	(277.1		)	(259.9	)	Payments of dividends	(482.6)		(430.2)
Net cash used in financing activities	(301.2		)	(214.4	)	Net cash used in financing activities	(498.2)		(383.9)

Effect of exchange rate changes on cash and cash equivalents	4.2			3.1		Effect of exchange rate changes on cash and cash equivalents	(3.7)		(1.2)

Net increase in cash and cash equivalents	20.7			18.0		Net increase in cash and cash equivalents	4.8		156.9

Cash and cash equivalents at beginning of period	112.7			129.0		Cash and cash equivalents at beginning of period	245.7		174.9
Cash and cash equivalents at end of period	$	133.4		147.0		Cash and cash equivalents at end of period	$	250.5	331.8

Supplemental disclosure of cash flow information:
Supplemental information:						Supplemental information:
Cash paid for interest	$	6.1		4.4		Cash paid for interest	$	7.6	5.9
Net cash paid for income taxes	$	223.8		181.2		Net cash paid for income taxes	$	210.7	201.4
Leased assets obtained in exchange for new operating lease liabilities						Leased assets obtained in exchange for new operating lease liabilities	$	83.4	76.1

See accompanying Notes to Condensed Consolidated Financial Statements.

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FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

September 30, ~~2017~~2021 and ~~2016~~2020

(Unaudited)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Fastenal Company and subsidiaries (collectively referred to as the ~~Company,~~company, Fastenal, or by terms such as we, our, or us) have been prepared in accordance with U.S. generally accepted accounting principles ~~('GAAP')~~(GAAP) for interim financial information. They do not include all information and footnotes required by U.S. GAAP for complete financial statements. However, except as described herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in our consolidated financial statements as of and for the year ended December 31, ~~2016.~~2020. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

~~Recently Adopted Accounting Pronouncements~~Impact of COVID-19

~~Effective January 1, 2017, we adopted~~The COVID-19 pandemic has likely influenced various trends the ~~Financial Accounting Standards Board ('FASB') Accounting Standards Update ('ASU') 2016-09,~~ ~~Improvements~~company is currently experiencing. These include supply chain disruptions and labor shortages, the presence of certain pandemic-specific personal protective equipment (PPE) in our inventory (although certain categories such as 3-ply masks are depleting quickly), and a modest shift in our mix to ~~Employee Share-Based Payment Accounting. The standard simplifies several aspects~~include more safety products and government customers. Evaluating the third quarter of 2021 is challenging given the dramatic impacts of the ~~accounting for employee share-based payment transactions, including accounting for income taxes, forfeitures, and statutory withholding requirements, as well as classification~~pandemic on the company in the ~~Condensed Consolidated Statements~~year-earlier period. However, in contrast to much of ~~Cash Flows. As~~the preceding 12 to 18 months, we are currently seeing a narrower impact on our business related directly to the COVID-19 pandemic, as economic activity has recovered and customer and product mix has reverted back to close to pre-pandemic levels. We believe current financial results are more reflective of traditional economic and marketplace dynamics than of pandemic-related issues such as facility restrictions, labor force illness, and PPE demand. The primary exception to this normalization trend is in the signings of our Onsite and Fastenal Managed Inventory (FMI), which have yet to recover to pre-pandemic levels. To the extent that COVID infections increase, as they did through the third quarter of 2021, this can, and is, either directly impacting or indirectly influencing access to customer facilities and decision-makers, and lengthens the sales cycle for certain of our solutions.

However, it is possible the COVID-19 pandemic, particularly in light of variant strains of the virus, could further impact our operations and the operations of our suppliers and vendors as a result of quarantines, facility closures, illnesses, and travel and logistics restrictions. The extent to which the ~~adoption,~~COVID-19 pandemic impacts our business, results of operations, and financial condition will depend on ~~a prospective basis, for the nine~~future developments, which are highly uncertain and three month periods ended September 30, 2017, we recognized $0.5 and $0.0, respectively, of excess tax benefits from stock-based compensation as a discrete item in our income tax expense. Historically, these amounts were recorded as additional paid-in capital. Upon adoption, we elected to apply the change retrospectively to our Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2016, which resulted in a reclassification of excess tax benefits from stock-based compensation of $5.5 offsetting cash flows used in financing activities to cash flows provided by operating activities. We electedcannot be predicted, including, but not ~~to change our policy on accounting for forfeitures and will continue to estimate a requisite forfeiture rate. Additional amendments~~limited to, the ~~accounting for income taxes~~resumption of high levels of infection and ~~minimum statutory withholding requirements had no~~hospitalization, the resulting impact on our ~~results of operations.~~customers, suppliers, and vendors, the remedial actions and stimulus measures adopted by federal, state, and local governments, and to what extent normal economic and operating conditions are impacted. The Company cannot reasonably estimate the future impact at this time.

Recently Issued Accounting Pronouncements

In ~~August 2015,~~March 2020, the ~~FASB~~Financial Accounting Standards Board (FASB) issued ~~ASU 2015-14,~~ ~~Revenue from Contracts with Customers~~Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic ~~606)~~848): ~~Deferral~~Facilitation of the ~~Effective Date,~~ Effects of Reference Rate Reform on Financial Reporting, which ~~defers~~provides temporary optional expedients and exceptions to U.S. GAAP on contract modifications, hedging relationships, and other transactions affected by reference rate reform to ease entities' financial reporting burdens as the market transitions from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The guidance was effective ~~date~~upon issuance and may be applied prospectively to contract modifications made, hedging relationships entered into, and other transactions affected by reference rate reform, evaluated on or before December 31, 2022, beginning during the reporting period in which the guidance has been elected. We are currently evaluating the impact of the new guidance on our condensed consolidated financial statements; however, we have determined that, of our current debt commitments as outlined in detail in Note 6 'Debt Commitments', only the obligations described under Unsecured Revolving Credit Facility in Note 6 would be impacted by ASU ~~2014-09~~2020-04. Our Senior Unsecured Promissory Notes Payable described in Note 6 each have fixed interest rates.

(2) Revenue

Revenue Recognition

Net sales include products and shipping and handling charges, net of estimates for ~~all entities by one year. This update~~product returns, and any related sales incentives. Revenue is ~~effective~~measured as the amount of consideration we expect to receive in exchange for ~~public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. Earlier application~~transferring products. All revenue is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. ASU 2014-09 was to become effective for us beginning January 2017; however, ASU 2015-14 defers our effective date until January 2018, which isrecognized when we ~~plan~~satisfy our performance obligations under the contract. We recognize revenue by transferring the promised products to ~~adopt this standard. The ASU permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively~~the customer, with the ~~cumulative effect~~majority of ~~initially applying the guidance~~revenue recognized at the ~~date of initial application (the cumulative catch-up transition method). The ASU also requires expanded disclosures relating to~~point in time the ~~nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required for~~ customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. While we are still in the process of evaluating the effect of adoption on our consolidated financial statements and are currently assessing our contracts with customers, we do not currently expect a material impact on our results of operations, cash flows or financial position. The majority of our revenue arrangements generally consist of a single performance obligation to transfer promised goods or services. We anticipate we will expand our consolidated financial statement disclosures in order to comply with the ASU. We have not yet decided on our transition method upon adoption, but plan to select a transition method in the fourth quarter of 2017.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~, which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those reporting periods, with early adoption permitted. The guidance will be applied on a modified retrospective basis with the earliest period presented. Based on the effective date, this guidance will apply beginning January 2019, which is when we plan to adopt this ASU. ~~While we are still in the process of evaluating the effect of adoption on our consolidated financial statements and are currently assessing our leases,~~ we expect the adoption will lead to a material increase in the assets and liabilities recorded on our Condensed Consolidated Balance Sheets. As part of our assessment, we will need to determine the impact of lease extension provisions provided in our facility and vehicle leases, which will impact the amountobtains control of the ~~right of use asset~~products. We recognize revenue for shipping and ~~lease liability recorded under~~handling charges at the ~~ASU.~~

time the products are delivered to or picked up

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FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

September 30, ~~2017~~2021 and ~~2016~~2020

(Unaudited)

~~(2) Acquisition~~

On March 31, 2017, we acquired certain assets and assumed certain liabilities of Manufacturers Supply Company (‘Mansco’). Mansco, based in Hudsonville, Michigan, is a distributor of industrial and fastener supplies with a particularly strong market position with commercial furniture original equipment manufacturers. As such, this acquisition gives us a presence in a market where we have not meaningfully contributed inby the ~~past, while providing Mansco with additional tools with which to service its customer base and reduce costs through economies of scale.~~

The total purchase price for this acquisition consisted of $57.9 paid in cash at closing, $0.8 paid in cash after closing pursuant to a post-closing purchase price adjustment, and a contingent consideration arrangement which requires us to pay the former owner up to a maximum of $2.5 (undiscounted) in cash after closingcustomer. We estimate product returns based on historical return rates. Using probability assessments, we estimate sales ~~growth~~incentives expected to be paid over the term of the ~~acquired business.~~contract. The ~~fair~~majority of our contracts have a single performance obligation and are short term in nature. Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Revenues are attributable to countries based on the selling location from which the sale occurred.

Disaggregation of Revenue

Our revenues related to the ~~contingent consideration arrangement~~following geographic areas were as of September 30, 2017, estimated by applying the income approach, which is a Level 3 measurement under the fair value hierarchy, was $0.6. Assuming payment of $0.6 of the contingent consideration arrangement, the total consideration for the acquisition will be $59.3. We funded the purchase price for the acquisition with the proceeds from the issuance during the first quarter of 2017 of a new series of senior unsecured promissory notes under our master note agreement in the aggregate principal amount of $60.0.

~~The fair value of the assets acquired and liabilities assumed is summarized below.~~

Current assets $ 21.7
Property and equipment 0.9
Identifiable intangible assets 20.1
Current liabilities (1.8 )
Total identifiable net assets 40.9
Goodwill 18.4
Total fair value of assets acquired and liabilities assumed $ 59.3

The identifiable intangible assets consist mainly of the value of the customer relationships that were acquired and the goodwill consists largely of the synergies and economies of scale expected from combining the Mansco operations with our existing operations. The identifiable intangible assets and goodwill are deductible for income tax purposes.

~~The amount of net sales and net earnings of the acquired business included in our condensed consolidated statement of earnings~~follows for the periods ended September ~~30, 2017,~~30:


	Nine-month Period			Three-month Period
	2021		2020	2021		2020
United States	$	3,753.6	3,681.6	$	1,307.5	1,205.8
Canada and Mexico	558.8		462.3	189.9		160.5
North America	4,312.4		4,143.9	1,497.4		1,366.3
All other foreign countries	166.6		145.4	56.8		47.0
Total revenues	$	4,479.0	4,289.3	$	1,554.2	1,413.3

The percentages of our sales by end market were as follows for the periods ended September 30:


	Nine-month Period				Three-month Period
	2021		2020		2021		2020
Manufacturing	68.6	%	61.7	%	68.9	%	62.7	%
Non-residential construction	11.2	%	11.4	%	11.3	%	11.2	%
Other	20.2	%	26.9	%	19.8	%	26.1	%
	100.0	%	100.0	%	100.0	%	100.0	%

The percentages of our sales by product line were as follows for the periods ended September 30:


		Nine-month Period				Three-month Period
Type	Introduced	2021		2020		2021		2020
Fasteners(1)	1967	33.2	%	29.7	%	33.4	%	30.5	%
Tools	1993	8.6	%	8.1	%	8.5	%	8.5	%
Cutting tools	1996	5.0	%	4.6	%	5.0	%	4.7	%
Hydraulics & pneumatics	1996	6.4	%	5.9	%	6.5	%	6.1	%
Material handling	1996	5.5	%	5.1	%	5.5	%	5.1	%
Janitorial supplies	1996	8.2	%	9.9	%	8.3	%	10.7	%
Electrical supplies	1997	4.3	%	4.1	%	4.3	%	3.9	%
Welding supplies	1997	3.8	%	3.5	%	3.8	%	3.5	%
Safety supplies	1999	21.2	%	26.1	%	21.1	%	23.8	%
Other		3.8	%	3.0	%	3.6	%	3.2	%
		100.0	%	100.0	%	100.0	%	100.0	%

(1) The fasteners product line represents fasteners and miscellaneous supplies.

(3) Stockholders' Equity

Dividends

On October 11, 2021, our board of directors declared a quarterly dividend of $0.28 per share of common stock to be paid in cash on November 23, 2021 to shareholders of record at the ~~pro forma net sales and net earnings~~close of ~~the combined entity had the acquisition occurred~~business on ~~January 1, 2016, are:~~October 26, 2021. Since 2011, we have paid

Nine-month Period Three-month Period
2017 2016 2017 2016
Net sales $ 40.4
36.7
$ 13.4
12.7
Net earnings $ 4.6
3.7
$ 1.4
1.2

Table of Contents

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

September 30, ~~2017~~2021 and ~~2016~~2020

(Unaudited)

~~(3) Stockholders' Equity~~

~~Dividends~~

~~On October 10, 2017, our board of directors declared~~quarterly cash dividends, and in 2020, we paid a special cash dividend ~~of $0.32 per share of common stock. This dividend is to be paid~~late in ~~cash on November 22, 2017 to shareholders of record at~~ the ~~close of business on October 25, 2017. Since 2011, we have paid quarterly dividends.~~year. Our board of directors ~~expects~~currently intends to continue paying quarterly cash dividends, provided ~~the~~that any future determination as to payment of dividends will depend on the financial ~~needs~~condition and results of operations of the ~~Company~~company and such other factors as are deemed relevant by the board of directors.

The following table presents the cash dividends either paid previously or declared by our board of directors for future payment on a per share basis:


	2017		2016		2021		2020
First quarter	$	0.32	0.30	First quarter	$	0.28	$	0.25
Second quarter	0.32		0.30	Second quarter	$	0.28	$	0.25
Third quarter	0.32		0.30	Third quarter	$	0.28	$	0.25
Fourth quarter	0.32		0.30	Fourth quarter	$	0.28	$	0.25
Fourth quarter (special)				Fourth quarter (special)			$	0.40
Total	$	1.28	1.20	Total	$	1.12	$	1.40

Stock Options

The following tables summarize the details of options granted under our stock option ~~plan~~plans that were ~~still~~ outstanding as of September 30, ~~2017,~~2021, and the assumptions used to value these grants. All such grants were effective at the close of business on the date of grant.


	Options Granted	Option Exercise (Strike) Price		Closing Stock Price on Date of Grant		September 30, 2021
Date of Grant						Options Outstanding	Options Exercisable
January 4, 2021	741,510	$	48.00	$	47.650	715,053	26,643
January 2, 2020	902,263	$	38.00	$	37.230	848,066	24,964
January 2, 2019	1,316,924	$	26.00	$	25.705	1,035,830	285,098
January 2, 2018	1,087,936	$	27.50	$	27.270	763,921	337,067
January 3, 2017	1,529,578	$	23.50	$	23.475	750,260	380,596
April 19, 2016	1,690,880	$	23.00	$	22.870	693,029	498,611
April 21, 2015	1,786,440	$	21.00	$	20.630	441,398	278,570
April 22, 2014	1,910,000	$	28.00	$	25.265	224,937	149,953
April 16, 2013	410,000	$	27.00	$	24.625	13,696	13,696
Total	11,375,531					5,486,190	1,995,198

Options
Granted

Option
Exercise
(Strike)
Price

Closing
Stock Price
on Date
of Grant
September 30, 2017
Date of Grant
Options
Outstanding

Options
Exercisable
January 3, 2017 764,789
$ 47.00
$ 46.95
725,542
—
April 19, 2016 845,440
$ 46.00
$ 45.74
757,522
—
April 21, 2015 893,220
$ 42.00
$ 41.26
700,746
—
April 22, 2014 955,000
$ 56.00
$ 50.53
572,500
116,250
April 16, 2013 205,000
$ 54.00
$ 49.25
104,250
57,250
April 17, 2012 1,235,000
$ 54.00
$ 49.01
957,938
776,103
April 19, 2011 410,000
$ 35.00
$ 31.78
72,550
47,550
April 20, 2010 530,000
$ 30.00
$ 27.13
107,800
82,800
April 21, 2009 790,000
$ 27.00
$ 17.61
221,650
221,650
Total 6,628,449
4,220,498
1,301,603


Date of Grant	Risk-free Interest Rate		Expected Life of Option in Years	Expected Dividend Yield		Expected Stock Volatility		Estimated Fair Value of Stock Option
January 4, 2021	0.4	%	5.00	2.0	%	29.17	%	$	9.57
January 2, 2020	1.7	%	5.00	2.4	%	25.70	%	$	6.81
January 2, 2019	2.5	%	5.00	2.9	%	23.96	%	$	4.40
January 2, 2018	2.2	%	5.00	2.3	%	23.45	%	$	5.02
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
April 21, 2015	1.3	%	5.00	2.7	%	26.84	%	$	3.68
April 22, 2014	1.8	%	5.00	2.0	%	28.55	%	$	4.79
April 16, 2013	0.7	%	5.00	1.6	%	37.42	%	$	6.33

All of the options in the tables above vest and become exercisable over a period of up to eight years. Generally, each option will terminate approximately ten years after the grant date.

Table of Contents

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

September 30, ~~2017~~2021 and ~~2016~~2020

(Unaudited)

Date of Grant
Risk-free
Interest Rate

Expected Life of
Option in Years

Expected
Dividend
Yield

Expected
Stock
Volatility

Estimated Fair
Value of Stock
Option
January 3, 2017 1.9 % 5.00 2.6 % 24.49 % $ 8.40
April 19, 2016 1.3 % 5.00 2.6 % 26.34 % $ 8.18
April 21, 2015 1.3 % 5.00 2.7 % 26.84 % $ 7.35
April 22, 2014 1.8 % 5.00 2.0 % 28.55 % $ 9.57
April 16, 2013 0.7 % 5.00 1.6 % 37.42 % $ 12.66
April 17, 2012 0.9 % 5.00 1.4 % 39.25 % $ 13.69
April 19, 2011 2.1 % 5.00 1.6 % 39.33 % $ 11.20
April 20, 2010 2.6 % 5.00 1.5 % 39.10 % $ 8.14
April 21, 2009 1.9 % 5.00 1.0 % 38.80 % $ 3.64

~~All of the options in the tables above vest and become exercisable over a period of up to eight years. Generally, each option will terminate approximately nine years after the grant date.~~

The fair value of each share-based option is estimated on the date of grant using a Black-Scholes valuation method that uses the assumptions listed above. The risk-free interest rate is based on the U.S. Treasury rate over the expected life of the option at the time of grant. The expected life is the average length of time over which we expect the employee groups will exercise their options, which is based on historical experience with similar grants. The dividend yield is estimated over the expected life of the option based on our current dividend payout, historical dividends paid, and expected future cash dividends. Expected stock volatilities are based on the movement of our stock price over the most recent historical period equivalent to the expected life of the option.

Compensation expense equal to the grant date fair value is recognized for all of these awards over the vesting period. The stock-based compensation expense for the nine-month periods ended September 30, ~~2017~~2021 and ~~2016~~2020 was ~~$4.0~~$4.3 and ~~$2.9,~~$4.3, respectively. Unrecognized stock-based compensation expense related to outstanding unvested stock options as of September 30, ~~2017~~2021 was ~~$15.9~~$14.0 and is expected to be recognized over a weighted average period of ~~4.37~~4.11 years. Any future changes in estimated forfeitures will impact this amount.

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:


	Nine-month Period		Three-month Period
Reconciliation	2021	2020	2021	2020
Basic weighted average shares outstanding	574,637,254	573,673,031	574,973,196	573,913,929
Weighted shares assumed upon exercise of stock options	2,291,000	1,797,201	2,286,643	2,203,402
Diluted weighted average shares outstanding	576,928,254	575,470,232	577,259,839	576,117,331

Nine-month Period Three-month Period
Reconciliation 2017 2016 2017 2016
Basic weighted average shares outstanding 288,451,470
288,907,934
287,456,943
288,995,492
Weighted shares assumed upon exercise of stock options 140,104
227,908
121,100
154,114
Diluted weighted average shares outstanding 288,591,574
289,135,842
287,578,043
289,149,606


	Nine-month Period			Three-month Period				Nine-month Period			Three-month Period
Summary of Anti-dilutive Options Excluded	2017		2016	2017		2016	Summary of Anti-dilutive Options Excluded	2021		2020	2021		2020
Options to purchase shares of common stock	3,881,605		3,061,217	3,848,126		3,335,439	Options to purchase shares of common stock	680,227		852,728	688,410		—
Weighted average exercise price of options	$	49.21	50.17	$	49.18	49.67
Weighted average exercise prices of options							Weighted average exercise prices of options	$	48.00	38.00	$	48.00	—

Any dilutive impact summarized above related to periods when the average market price of our stock exceeded the exercise price of the potentially dilutive stock options then outstanding.

~~Table of Contents~~

~~FASTENAL COMPANY AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions except share and per share information and where otherwise noted)~~

~~September 30, 2017 and 2016~~

~~(Unaudited)~~

(4) Income Taxes

~~Fastenal files~~We file income tax returns in the United States federal jurisdiction, all states, and various local and foreign jurisdictions. ~~With limited exceptions, we~~We are no longer subject to income tax examinations by taxing authorities for taxable years before ~~2015~~2017 in the case of United States federal ~~and foreign~~ examinations, and ~~2013~~with limited exceptions, before 2015 in the case of foreign, state, and local examinations.

As During the first nine months of ~~September 30, 2017 and 2016, liabilities recorded related to gross unrecognized tax benefits~~2021, there were $4.5 and $5.3, respectively. Included in these liabilities for gross unrecognized tax benefits is an immaterial amount for interest and penalties, both of which we classify as a component of income tax expense. We do not anticipate significantno material changes in ~~total unrecognized~~unrecognized tax ~~benefits~~benefits.

During 2020, we deferred approximately $30.0 in payroll taxes as allowed under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which was signed into law in March 2020 to help businesses navigate COVID-19 related challenges. The deferred payroll taxes were paid during the ~~next twelve months.~~third quarter of 2021.

(5) 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 is approximately ~~$78.7.~~$88.6. We believe the likelihood of funding the guarantee obligation under any provision of the operating lease agreements is ~~remote other than~~remote.

Table of Contents

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where ~~we have established an accrual for estimated losses, which is immaterial at~~ otherwise noted)

September 30, ~~2017. To the extent our fleet contains vehicles we estimate will settle at a gain, such gains on these vehicles will be recognized when we sell the vehicle.~~2021 and 2020

(Unaudited)

(6) Debt Commitments

Credit Facility, Notes Payable, and Commitments

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

September 30, 2017 December 31, 2016
Outstanding loans under unsecured revolving credit facility $ 300.0
305.0
2.00% senior unsecured promissory note payable 40.0
40.0
2.45% senior unsecured promissory note payable 35.0
35.0
3.22% senior unsecured promissory note payable 60.0
—
Note payable under asset purchase agreement 5.0
10.0
Total debt 440.0
390.0
Less: Current portion of debt (8.0 ) (10.5 )
Long-term debt $ 432.0
379.5

Outstanding letters of credit under unsecured revolving credit facility - contingent obligation $ 36.3
36.3


	Average Interest Rate at September 30, 2021			Debt Outstanding
			Maturity Date	September 30, 2021		December 31, 2020
Unsecured revolving credit facility	1.03	%	November 30, 2023	$	—	—
Senior unsecured promissory notes payable, Series A	2.00	%	July 20, 2021	—		40.0
Senior unsecured promissory notes payable, Series B	2.45	%	July 20, 2022	35.0		35.0
Senior unsecured promissory notes payable, Series C	3.22	%	March 1, 2024	60.0		60.0
Senior unsecured promissory notes payable, Series D	2.66	%	May 15, 2025	75.0		75.0
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		70.0
Senior unsecured promissory notes payable, Series G	2.13	%	June 24, 2026	25.0		25.0
Senior unsecured promissory notes payable, Series H	2.50	%	June 24, 2030	50.0		50.0
Total				365.0		405.0
Less: Current portion of debt				(35.0)		(40.0)
Long-term debt				$	330.0	365.0

Outstanding letters of credit under unsecured revolving credit facility - contingent obligation				$	36.3	36.3

Unsecured Revolving Credit Facility

We have a $700.0 committed unsecured revolving credit facility ~~('Credit Facility')~~(Credit Facility). The Credit Facility includes a committed letter of credit subfacility of $55.0. ~~The commitments under the Credit Facility will expire (and any~~Any borrowings outstanding under the Credit Facility ~~will become due and payable) on March 10, 2020. In the next twelve months,~~for which we have the ability and intent to ~~repay a portion of~~pay using cash within the ~~outstanding loans using cash; therefore, we have~~next twelve months, will be classified ~~this portion~~ as a current liability. The Credit Facility contains certain financial and other covenants, and our right to borrow under the Credit Facility is conditioned upon, among other things, our compliance with these covenants. We are currently in compliance with these covenants.

Borrowings under the Credit Facility generally bear interest at a rate per annum equal to ~~the London Interbank Offered Rate ('LIBOR')~~LIBOR for interest periods of various lengths selected by us, plus 0.95%~~. Based on the interest periods we have chosen, our weighted per annum interest rate at September 30, 2017 was approximately 2.2%~~. We pay a commitment fee for the unused portion of the Credit Facility. This fee is either 0.10% or 0.125% per annum based on our usage of the Credit Facility.

~~Table of Contents~~

~~FASTENAL COMPANY AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Amounts in millions except share and per share information and where otherwise noted)~~

~~September 30, 2017 and 2016~~

~~(Unaudited)~~

Senior Unsecured Promissory Notes Payable

~~On July 20, 2016 (the 'Effective Date'), we entered into a~~We have issued senior unsecured promissory notes under our master note agreement (the ~~'Master~~Master Note Agreement') with certain institutional lenders, pursuant to which, during the period commencing on the Effective Date and ending three years thereafter, we may issue at our discretion in private placements, and the institutional lenders may purchase at their discretion, senior unsecured promissory notes of the Company (the 'Notes')Agreement) in the aggregate principal amount ~~outstanding from time~~of $365.0 as of September 30, 2021. Our aggregate borrowing capacity under the Master Note Agreement is $600.0; however, none of the institutional investors party to ~~time~~that agreement are committed to purchase notes thereunder. There is no amortization of upthese notes prior to ~~$200.0.~~their maturity date and interest is payable quarterly. The ~~Notes will bear~~notes currently issued under our Master Note Agreement, including the maturity date and fixed interest ~~at either a fixed~~ rate ~~or a floating rate based on LIBOR for an interest period~~per annum of ~~one, three, or six months. The Notes will mature no later than 12 years after the date~~each series of ~~issuance thereof,~~note, are contained in the ~~case of fixed rate Notes, or 10 years after the date of issuance thereof, in the case of floating rate Notes. All of the Notes will be prepayable at our option in whole or in part.~~table above. The Master Note Agreement contains certain financial and other ~~covenants. We~~covenants and we are currently in compliance with these covenants.

Three series of senior unsecured Notes are currently outstanding under the Master Note Agreement. The first series of Notes ('Series A'), was issued on the Effective Date, is in an aggregate principal amount of $40.0, is due and payable in full on July 20, 2021, and bears interest at a fixed rate of 2.00% per annum. The second series of Notes ('Series B'), was issued on the Effective Date, is in an aggregate principal amount of $35.0, is due and payable in full on July 20, 2022, and bears interest at a fixed rate of 2.45% per annum. The third series of Notes ('Series C'), was issued on March 1, 2017, is in an aggregate principal amount of $60.0, is due and payable in full on March 1, 2024, and bears interest at a fixed rate of 3.22% per annum. There is no amortization of these Notes prior to their maturity dates. Interest on the Notes is payable quarterly in arrears on January 20, April 20, July 20, and October 20 of each year. The carrying value of the Notes approximates fair value. The fair value was based on available external pricing data and current market rates for similar debt instruments, among other factors, which are classified as a Level 2 measurement under the fair value hierarchy.

~~Note Payable Under Asset Purchase Agreement~~

On December 7, 2015, we signed an agreement to purchase, effective January 2, 2017 ('Asset Purchase Effective Date'), certain assets related to the collection and management of certain portions of our business and financial data from Apex Industrial Technologies, LLC ('Apex'), a provider of automated point-of-use dispensing and supply chain technologies. The agreement includes a transition arrangement which requires us to assume responsibility for certain software that is licensed by Apex. The total consideration for the assets is $27.0, of which $12.0 was paid in cash in December 2015 in advance of the Asset Purchase Effective Date. The remaining $15.0 is payable in installments pursuant to an unsecured note. The first $5.0 installment was paid in December 2016, the second $5.0 installment was paid in June 2017, and the final installment of $5.0 will be paid in December 2017. The note bears interest at an annual rate of 0.56%. Interest on the unpaid principal balance of the note is due and payable on the last day of each calendar quarter.

(7) Legal Contingencies

The nature of our potential exposure to legal contingencies is described in our ~~2016~~2020 annual report on Form 10-K in Note 911 of the Notes to Consolidated Financial Statements. As of September 30, ~~2017,~~2021, there were no litigation matters that we consider to be probable or reasonably possible to have a material adverse outcome.

Table of Contents

FASTENAL COMPANY AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Amounts in millions except share and per share information and where otherwise noted)

September 30, 2021 and 2020

(Unaudited)

(8) Subsequent Events

We evaluated all subsequent event activity and concluded that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements or disclosure in the Notes to Condensed Consolidated Financial Statements, with the exception of the dividend declaration disclosed in Note 3 'Stockholders' Equity'.

Table of Contents

ITEM 2 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion and analysis of certain significant factors which have affected our financial position and operating results during the periods included in the accompanying condensed consolidated financial statements. 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.

Business

Fastenal is a North American leader in the wholesale distribution of industrial and construction supplies. We distribute these supplies through a network of ~~approximately 2,400 company-owned branches.~~over 3,200 in-market locations. Most of our customers are in the manufacturing and non-residential construction markets. The manufacturing market includes sales of products for both original equipment ~~manufacturers~~manufacturing (OEM), where our products are consumed in the final products of our customers, and ~~maintenance,~~manufacturing, repair and operations (MRO)., where our products are consumed to support the facilities and ongoing operations of our customers. The non-residential construction market includes general, electrical, plumbing, sheet metal, and road contractors. Other users of our products include 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.

Our motto is ~~Growth through Customer Service~~^{Where Industry Meets Innovation®}.We are a customer and growth-centric organization focused on identifying ~~'drivers'~~unique technologies, capabilities, and supply chain solutions that ~~will allow~~get us ~~to get~~ closer to our customers and reduce the total cost of their global supply chain. We believe this close-to-the-customer, high touch partnership approach is differentiated in the marketplace and allows us to gain market share in what ~~we believe~~ remains a fragmented industrial distribution market.

Impact of COVID-19 on Our ~~growth drivers~~Business

Evaluating the company's financial performance in the third quarter of 2021 requires an appreciation for the variables which impacted financial results in the year earlier period.

In the second quarter of 2020, the COVID-19 pandemic dramatically impacted our business in two respects. First, local and national actions taken to mitigate the spread of the virus reduced business activity sharply, which produced a significant decline in the sale of products, such as fasteners, to our traditional manufacturing and construction customers. Second, social actions taken to mitigate the effects of the pandemic produced significant demand for personal protection equipment (PPE) and sanitation products, generating significant sales of such products to traditional customers, state and local government entities, and front line responders. This effect was illustrated by a significant increase in sales for our safety products. During that period, improved sales of PPE and sanitation products more than offset the general economic weakness.

During this period of time, consistent with broader social trends and in accordance with applicable local and federal regulations, we took steps to safeguard the health of our employees and customers. Such steps included: closing branch and corporate facilities to outside personnel, adjusting work schedules to maximize social distance, creating space between work areas, providing ample PPE and cleaning supplies, creating formal policies for mitigation in the event of cases of illness, utilizing technologies where work duties allowed to enable work from home capabilities, and utilizing technologies such as vending and mobility to create social distancing. These precautions allowed our operations to function effectively.

The pandemic continued to impact our business in the third and fourth quarters of 2020, when the marketplace broadly, and Fastenal specifically, continued to operate with certain modifications to balance re-opening with employee and customer safety. However, most of the markets in which we operate began to normalize in the second half of 2020. In the first half of 2021, the re-opening and recovery of the manufacturing and construction marketplace continued and accelerated, operating restrictions eased, and our ability to engage directly with customers, while not at pre-pandemic levels, improved. This resulted in improving performance in our traditional branch and Onsite business and normalization of our product and customer mix. In general, industrial and construction businesses have ~~evolved,~~learned to navigate COVID-19 while maintaining operations.

In the third quarter of 2021, the COVID-19 pandemic has likely influenced various trends that the company is currently experiencing. These include supply chain disruptions and labor shortages, the presence of certain pandemic-specific personal protective equipment (PPE) in our inventory (although certain categories such as 3-ply masks are depleting quickly), and a modest shift in our mix to include more safety products and government customers. However, in contrast to preceding periods, we are currently seeing less of an impact on our business related directly to the pandemic, as economic activity has recovered, customer access is normalizing, and customer and product mix has reverted back to close to pre-pandemic levels. We believe current financial results are more reflective of traditional economic and marketplace dynamics than of pandemic-related issues such as facility restrictions, labor force illness, and PPE demand. The primary exception to this normalization trend is in the signings of our Onsite and Fastenal Managed Inventory (FMI), which have yet to recover to pre-pandemic levels. To the extent that COVID infections increase, as they did through the third quarter of 2021, this can, ~~be expected~~and is, either directly impacting or

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indirectly influencing access to customer facilities and decision-makers and lengthens the sales cycle for certain of our solutions. Our financial controls over financial reporting functioned effectively throughout the pandemic and continue to ~~evolve, over~~do so.

It is possible the COVID-19 pandemic could further impact our operations and the operations of our suppliers and vendors, particularly in light of the potential of variant strains of the virus to cause a resumption of high levels of infection and hospitalization. Should that occur, factors that could negatively impact sales and gross margin in the future include, but are not limited to: limitations on the ability of our suppliers to manufacture, or procure from manufacturers, the products we sell, or to meet delivery requirements and commitments; limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring employees to remain at home; limitations on the ability of carriers to deliver our products to customers; limitations on the ability of our customers to conduct their business and purchase our products and services; and limitations on the ability of our customers to pay us on a timely basis.

The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be reasonably predicted at this time. However, we will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities, or that we determine are in the best interests of our employees, customers, suppliers, and shareholders. While we are unable to determine or predict the nature, duration, or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity, or capital resources, we believe that it is important to share where our company stands today, how our response to COVID-19 is progressing, and how our operations and financial condition may change as the fight against COVID-19 progresses.

Executive Overview

Net sales ~~increased $119.7,~~increased $140.9, or ~~11.8%~~10.0%, in the third quarter of 2021 when compared to the third quarter of 2020. The number of business days were the same in both periods. Our gross profit increased $79.6, or 12.4%, in the third quarter of ~~2017~~2021 relative to the third quarter of ~~2016. Our gross profit~~2020, and as a percentage of net ~~sales declined~~sales increased to ~~49.1%~~46.3% in the third quarter of ~~2017~~2021 from ~~49.3%~~45.3% in the third quarter of ~~2016.~~2020. Our operating income increased $28.3, or 9.8%, in the third quarter of 2021 relative to the third quarter of 2020, and as a percentage of net ~~sales improved to 20.2%~~sales was unchanged at 20.5% in thethe third quarter of ~~2017~~2021 from ~~20.0%~~ 20.5% in the third quarter of ~~2016.~~ 2020. Our net earnings during the third quarter of ~~2017~~2021 were ~~$143.1,~~ $243.5,an increase of ~~12.7% when compared~~9.9% compared to the third quarter of ~~2016.~~ 2020.Our diluted net earnings per share were ~~$0.50 during the third quarter of 2017 compared to $0.44~~ $0.42 during the third quarter of ~~2016.~~

~~We continue to focus on our growth drivers. During~~2021, which increased from $0.38 during the third quarter of ~~2017, we signed 42 new national account contracts (defined as new customer accounts with a multi-site contract). Additionally, we signed 81 new Onsite customer locations~~ ~~(defined as dedicated sales and service provided from within, or in close proximity to, the customer's facility)~~ an~~d 4,771 new industrial vending machines in the third quarter of 2017.~~2020.

The table below summarizes our ~~branch and Onsite~~total and FTE (based on 40 hours per week) employee ~~count and~~headcount, our total employee count at the end of the periods presented, and changes in that count from the end of the prior periods to the end of the most recent period. The final three items below summarize our cumulative investments in ~~branch~~in-market locations ~~Onsite locations, and industrial vending machines.~~

Change Since: Change Since:
Q3
2017 Q4
2016 Q4
2016 Q3
2016 Q3
2016
End of period total in-market units ⁽¹⁾ employee count
13,298
12,966
2.6 % 13,097
1.5 %
End of period total employee count 20,242
19,624
3.1 % 19,864
1.9 %

Number of public branch locations 2,418
2,503
-3.4 % 2,545
-5.0 %
Number of active Onsite locations 555
401
38.4 % 376
47.6 %
Number of in-market units ⁽¹⁾
2,973
2,904
2.4 % 2,921
1.8 %
Industrial vending machines (installed device count) ⁽²⁾
69,058
62,822
9.9 % 60,400
14.3 %
Ratio of industrial vending machines to in-market units 23:1
22:1
21:1

⁽¹⁾ ~~'In-market units' is defined~~(defined as the sum of the total number of public branch locations and the total number of active Onsite ~~locations.~~locations), and weighted FMI devices at the end of the periods presented and the percentage change compared to the end of the prior periods.

⁽²⁾ ~~In February 2016, we signed an agreement to lease a significant~~


			Change Since:			Change Since:			Change Since:
	Q3 2021	Q2 2021	Q2 2021		Q4 2020	Q4 2020		Q3 2020	Q3 2020
In-market locations - absolute employee headcount	12,347	12,446	-0.8	%	12,680	-2.6	%	12,708	-2.8	%
In-market locations - FTE employee headcount	11,104	11,390	-2.5	%	11,260	-1.4	%	11,302	-1.8	%
Total absolute employee headcount	20,231	20,317	-0.4	%	20,365	-0.7	%	20,336	-0.5	%
Total FTE employee headcount	17,860	18,253	-2.2	%	17,836	0.1	%	17,862	0.0	%

Number of public branch locations	1,859	1,921	-3.2	%	2,003	-7.2	%	2,033	-8.6	%
Number of active Onsite locations	1,367	1,323	3.3	%	1,265	8.1	%	1,236	10.6	%
Number of in-market locations	3,226	3,244	-0.6	%	3,268	-1.3	%	3,269	-1.3	%
Weighted FMI devices (MEU installed count) (1)	90,493	87,567	3.3	%	83,951	7.8	%	82,261	10.0	%

(1)This number ~~of industrial vending lockers to one~~excludes approximately 12,500 non-weighted devices that are part of our ~~customers. These devices do not generate product revenue and are excluded from the counts noted above.~~locker lease program.

During the last twelve months, we ~~have increased~~reduced our total FTE employee headcount by ~~201 people~~two. This reflects a decline in our in-market ~~units~~ and ~~378 people~~non-in-market selling FTE employee headcount of 44. We continue to see growth in ~~total. Our total~~non-in-market selling FTE headcount ~~includes 123 people related to our Mansco acquisition. The remaining increase is mostly a function of additions we have made~~ to support sales initiatives targeting customer ~~growth~~acquisition. Our in-market FTE headcount is down, however, reflecting both a challenging hiring environment and deliberate efforts to improve the productivity of our current in-market sales force. We have experienced a decrease in our distribution center FTE employee headcount of 78 reflecting the ~~field as well as~~challenging hiring environment. We had an increase in our remaining FTE employee headcount of 120 that relates primarily to personnel investments in ~~our growth drivers.~~information technology and operational support, such as purchasing and product development.

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We opened ~~5 branches and closed 36 branches~~one branch in the third quarter of ~~2017. Additionally, two~~2021 and closed 63 branches, ~~were converted from~~net of conversions. We activated 67 Onsite locations in the third quarter of 2021 and closed 23, net of conversions. In any period, the number of closings tend to reflect both normal churn in our business, whether due to redefining or exiting customer relationships, the shutting or relocation of customer facilities that host our locations, or a ~~public branch to a non-public location.~~customer decision, as well as our ongoing review of underperforming locations. Our ~~branch network~~in-market network forms the foundation of our business strategy, and we will continue to open or close ~~branches in 2017~~locations as is deemed necessary to sustain and improve our network, ~~and~~ support our growth ~~drivers.~~drivers, and manage our operating expenses.

Results of Operations

The following sets forth condensed consolidated statement of earnings information (as a percentage of net sales) for the periods ended September 30:


	Nine-month Period				Three-month Period					Nine-month Period				Three-month Period
	2017		2016		2017		2016			2021		2020		2021		2020
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Gross profit	49.4	%	49.5	%	49.1	%	49.3	%	Gross profit	46.1	%	45.4	%	46.3	%	45.3	%
Operating and administrative expenses	28.9	%	29.2	%	28.9	%	29.3	%	Operating and administrative expenses	25.6	%	25.0	%	25.9	%	24.8	%
Gain on sale of property and equipment	0.0	%	0.0	%	0.0	%	0.0	%
Operating income	20.5	%	20.3	%	20.2	%	20.0	%	Operating income	20.5	%	20.5	%	20.5	%	20.5	%
Net interest expense	-0.2	%	-0.2	%	-0.2	%	-0.2	%	Net interest expense	-0.2	%	-0.2	%	-0.2	%	-0.2	%
Earnings before income taxes	20.4	%	20.2	%	20.0	%	19.9	%	Earnings before income taxes	20.3	%	20.3	%	20.3	%	20.4	%

Note – Amounts may not foot due to rounding difference.									Note – Amounts may not foot due to rounding difference.

Net Sales

~~Note – Daily sales are defined as the total net sales for the period divided by the number of business days (in the United States) in the period.~~

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


	Nine-month Period					Three-month Period
	2021			2020		2021			2020
Net sales	$	4,479.0		4,289.3		$	1,554.2		1,413.3
Percentage change	4.4		%	5.7	%	10.0		%	2.5	%
Business days	191			192		64			64
Daily sales	$	23.5		22.3		$	24.3		22.1
Percentage change	5.0		%	5.2	%	10.0		%	2.5	%
Daily sales impact of currency fluctuations	0.8		%	-0.2	%	0.5		%	0.0	%

Note – Daily sales are defined as the total net sales for the period divided by the number of business days (in the United States) in the period.

Nine-month Period Three-month Period
2017 2016 2017 2016
Net sales 3,302.0
3,014.1
1,132.8
1,013.1
Percentage change 9.6 % 2.3 % 11.8 % 1.8 %
Business days 191
192
63
64
Daily sales 17.3
15.7
18.0
15.8
Percentage change 10.1 % 1.8 % 13.6 % 1.8 %
Impact of currency fluctuations 0.0 % -0.4 % 0.3 % -0.1 %
Impact of acquisitions 0.9 % 0.7 % 1.3 % 0.6 %

~~The increases in net sales in~~In the ~~periods noted above for 2017 and 2016, were driven primarily by higher unit sales. Price was not a material factor in the third quarter and~~ first nine months of ~~2017~~2021, our net sales of $4,479.0 increased $189.7, or 4.4%. Adjusted for one fewer selling day in the first quarter of 2021, our daily sales rate increased 5.0%. This increase is due to improved unit sales across most products to our traditional manufacturing and construction customers, resulting from continued improvement in business activity. This is partly offset by two factors. First, we had lower unit sales of pandemic-related PPE and sanitation products to traditional, state and local government, and health care customers relative to what we experienced in the first nine months of 2020. Second, certain of our North American regions were affected by severe weather in February 2021, which we believe reduced net and daily sales growth by 10 to 30 basis points in the first nine months of 2021 compared to the ~~same periods~~first nine months of ~~2016. The higher unit sales resulted primarily from two sources. The~~2020.

Reported growth for the first ~~is improvement in~~nine months of 2021 underrepresents the underlying market ~~demand. We believe~~strength our business is experiencing. In the improvement in general business activity is reflected in a number of metrics. For instance, the Purchasing Managers Index, published by the Institute for Supply Chain Management, averaged 57.0, 55.8, and 58.6 in the first, second and third quarters of ~~2017, respectively, well above 49.8, 51.5,~~2020, we realized significant sales of "surge"-related PPE and ~~51.2~~sanitizer sales to critical businesses, state and local governments, and healthcare companies, and these more than offset the severe economic weakness experienced by our traditional manufacturing and construction customers. While we have retained incremental sales from some customers that bought from us for the first time in the second quarter of 2021, when the effects of the pandemic first began to impact the marketplace, we have always viewed our surge sales as being specific to that period and unlikely to recur in future periods. With the worst effects of the pandemic on our marketplace having largely receded as we entered 2021, these sales did not recur, and their absence meaningfully reduced our growth in the first ~~second,~~nine months of 2021. This had the effect of masking otherwise very strong growth from our traditional manufacturing and ~~third quarters of 2016, respectively. Readings above 50 are indicative of growing demand, and~~construction customers. Indeed, we believe ~~this~~the best way to understand underlying economic trends is ~~favorably influencing~~through the performance of our ~~unit sales. Sales of fasteners, our most cyclical~~fastener product line, ~~continued to grow~~which reflects the economic trends, but not the surge buying that was brought on by the pandemic. Daily sales growth of our fastener product line in the first nine months and the third quarter of ~~2017. We also~~2021 was 17.1% and 20.2%, respectively, which we believe is more reflective of the strong underlying market environment we experienced ~~growth in sales to 64, 68, and 72~~through the period.

Table of ~~our top 100 customers in the first, second, and third quarters~~Contents

The overall impact of ~~2017, respectively. As recently as the fourth quarter of 2016, this count was 51. As business conditions strengthen, they tend to lift our~~product pricing on net sales ~~growth rates as well.~~

~~The second source is success within our growth initiatives. We signed 15,089 industrial vending machines~~was 120 to 150 basis points during the first nine months of ~~2017, an increase of 5.5% over the first nine months of 2016. We signed 4,771 industrial vending machines~~2021 and 230 to 260 basis points during the third quarter of ~~2017, which was comparable to the third quarter of 2016. Though the current period did not exhibit unit growth, the mix of machines improved with increases~~2021. This increase reflects actions we have taken in the signings of larger volume machines, such as the FAST5000, and declines in lower volume lockers. Further, sales through our vending machines continued to grow at or near a double-digit pace during each of the first three quarters of 2017. We signed 213 new Onsite locations during the first nine months ~~of 2017~~ and

~~had 555 active sites on September 30, 2017, an increase of 47.6% over September 30, 2016. We signed 81 new Onsite locations during the~~ third quarter of ~~2017, an increase~~2021 in response to inflationary pressures that we experienced in costs of ~~97.6% over~~products, particularly fasteners, and transportation services, particularly overseas shipping, through both periods. These pressures persist in the ~~third~~marketplace and are likely to require further organizational pricing actions in the fourth quarter of ~~2016. We signed 136 new national account contracts~~2021 in an effort to offset this impact.

From a product standpoint, fastener daily sales increased 17.1% in the first nine months of ~~2017; 42~~2021 from the first nine months of ~~these were signed in the third quarter~~2020 and accounted for 33.2% of ~~2017. Daily~~total sales, from 29.7% of sales ~~from our national account customers grew 13.2%~~ in the first nine months of ~~2017 over~~2020 and 34.3% of sales in the first nine months of ~~2016,~~2019. Safety daily sales, which includes PPE, fell 15.0% in the first nine months of 2021 from the first nine months of 2020 and ~~grew 17.3%~~accounted for 21.2% of total sales, from 26.1% of sales in the first nine months of 2020 and 17.6% of sales in the first nine months of 2019. Daily sales of other products, which includes sanitizer, increased 8.1% in the first nine months of 2021 from the first nine months of 2020 and accounted for 45.6% of total sales, from 44.2% of sales in the first nine months of 2020 and 48.1% of sales in the first nine months of 2019.

From a customer standpoint, daily sales to our manufacturing customers increased 16.7% in the first nine months of 2021 from the first nine months of 2020. Daily sales to our non-residential construction customers increased 2.9% in the first nine months of 2021 from the first nine months of 2020. Sales trends for our traditional manufacturing and construction customers reflected improvement in underlying economic trends against a relatively easy comparison in the first nine months of 2020, as well as favorable product pricing. Sales to government customers, which includes health care providers, decreased 39.6% and was 4.9% of sales in the first nine months of 2021, down from 8.5% of sales in the first nine months of 2020. Government customers represented 3.7% of our sales mix prior to the pandemic in 2019, below the level in the first nine months of 2021 which reflects that we have retained certain customers that bought from us for the first time during the pandemic. At the same time, government customers were significant buyers of surge PPE in the second and third quarters of 2020, and the absence of those purchases in the second and third quarters of 2021 produced the significant decline in sales experienced with these customers in the first nine months of 2021.

In the first nine months of 2020, the pandemic caused many of our customers to enact policies that limited access of outside personnel to their facilities and key decision-makers. This made it difficult to engage with customers directly in a way that most effectively allows us to promote growth drivers such as FMI (Fastenal Managed Inventory) and Onsites (defined as dedicated sales and service provided from within, or in close proximity to, the customer's facility), or implement agreements that have been signed. In the first nine months of 2021, the direct impact of the pandemic receded, but pressures around supply chain constraints and labor availability, which are likely being exacerbated by spikes in COVID infections in the third quarter of ~~2017 over~~2021, emerged. These variables have continued to impact customer access and have kept decision-makers focused on crisis management rather than strategic planning. The net effect of these issues is that while access has generally been better in the first nine months of 2021 than it was in the first nine months of 2020, it has not returned to pre-pandemic levels, which has continued to adversely affect our growth driver performance.

•During the first nine months of 2021, we signed 230 new Onsite locations. This included 68 signings in the first quarter of 2021, 87 in the second quarter of 2021, and 75 signings in the third quarter of ~~2016.~~2021. We had 1,367 active sites on September 30, 2021, which representedan increaseof 10.6% from September 30, 2020. Daily sales through our Onsite locations, excluding sales transferred from branches to new Onsites, grew at a better than 20% rate in the third quarter of 2021 over the third quarter of 2020. This growth is due to improved business activity from our Onsite customers and, to a lesser degree, contributions from the increase in the number of Onsites we operate. Our Onsite signings in the third quarter of 2021 were below the second quarter of 2021 level and the long-term rate of 375 to 400 annual signings we believe the market will support, as market conditions and access to customer facilities and decision-makers normalize. Based on the year-to-date signings and tendency for signings in fourth quarters to be seasonally lower, we anticipate signing between 285 and 325 Onsite locations in 2021, down from our prior expectation of 300 to 350 locations.

•Fastenal Managed Inventory (FMI) is comprised of our FASTVend (vending devices), FASTBin (infrared, RFID, and scaled bins), and FASTStock (scanned stocking locations) offering. FASTVend and FASTBin incorporate highly efficient and powerful embedded data tracking and fulfillment processing technologies, whereas FASTStock's fulfillment processing technology is not embedded, but is relatively inexpensive and highly flexible in application. Prior to 2021, we reported exclusively on the signings, installations, and sales of FASTVend. Beginning in the first quarter of 2021, and as detailed previously in our 2020 Form 10-K filing, we began disclosing certain statistics around our FMI offering. The first statistic is a weighted FMI measure which combines the signings and installations of FASTVend and FASTBin in a standardized machine equivalent unit (MEU) based on the expected output of each type of device. We do not include FASTStock in this measurement because scanned stocking locations can take many forms, such as bins, shelves, cabinets, pallets, etc., that cannot be converted into a standardized MEU. The second statistic is revenue through FMI devices which combines the net sales through FASTVend, FASTBin, and FASTStock. A portion of the growth in net sales experienced by FMI, particularly FASTBin and FASTStock, reflects the migration of products from less efficient non-digital stocking locations

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to more efficient, digital stocking locations. Figures prior to 2021 may differ slightly from those provided in our 2020 Form 10-K filing based on minor changes we made to the conversion of absolute devices to weighted devices.

The table below summarizes the signings and installations of, and sales through, our FMI devices.


	Nine-month Period								Three-month Period
	2021			2020			Change		2021			2020			Change
Weighted FASTVend/FASTBin signings (MEUs)	15,339			12,955			18.4	%	4,813			4,791			0.5	%
Signings per day	80			67					75			75
Weighted FASTVend/FASTBin installations (MEUs; end of period)									90,493			82,261			10.0	%

FASTVend/FASTBin net sales	$	981.1		$	783.6		25.2	%	$	352.4		$	269.3		30.9	%
% of net sales	21.7		%	18.1		%			22.4		%	18.8		%
FASTStock net sales	$	416.9		$	230.1		81.2	%	$	165.9		$	88.1		88.3	%
% of net sales	9.2		%	5.3		%			10.6		%	6.2		%
FMI net sales	$	1,398.0		$	1,013.7		37.9	%	$	518.3		$	357.4		45.0	%
FMI daily sales	$	7.3		$	5.3		38.6	%	$	8.1		$	5.6		45.0	%
% of net sales	30.9		%	23.4		%			33.0		%	25.0		%

•Our FMI signings in the third quarter and year-to-date 2021 trended below expectations. Similar to Onsites, we believe the near-term challenges posed to our customers by inflation, supply chain, labor, and an increase in COVID infections are lengthening the selling cycle. Based on year-to-date signings and the tendency for signings in fourth quarters to be seasonally lower, we anticipate weighted FASTVend and FASTBin device signings in 2021 of 20,500 to 22,000 MEUs, down from our prior expectations of 23,000 to 25,000 MEUs.

All metrics provided above exclude approximately 12,500 non-weighted vending devices that are part of a leased locker program.

•Our e-commerce business includes sales made through an electronic data interface (EDI) with our customers or through the web. Daily sales through e-commerce grew 44.1% in the first nine months of 2021 and grew 43.4% in the third quarter of 2021. Revenues attributable to e-commerce represented 13.9% of our total revenues in the third quarter of 2021.

We view our digital products and services to be comprised of sales through FMI (FASTVend, FASTBin, and FASTStock) plus that proportion of our e-commerce sales that do not represent billings of FMI services (collectively, our Digital Footprint). We believe the data that is created through our digital capabilities enhances product visibility, traceability, and control that reduces risk in operations and creates ordering and fulfillment efficiencies for both ourselves and our customers. As a result, we believe our opportunity to grow our business will be enhanced through the continued development and expansion of our digital capabilities.

Our Digital Footprint in the third quarter of 2021 represented 43.7% of our sales. We began to provide this figure in the first quarter of 2021, when we reported that our Digital Footprint represented 34.8% of our sales. We subsequently identified a calculation error. Using the same approach to calculating our Digital Footprint as we used in the second and third quarters of 2021, our Digital Footprint represented 39.1% of our sales in the first quarter of 2021.

Net sales increased $140.9, or 10.0%, in the third quarter of 2021 when compared to the third quarter of 2020. The number of business days were the same in both periods. The third quarter of 2021 continued to experience strong growth in underlying demand for manufacturing and construction equipment and supplies, which drove higher unit sales that contributed to the increase in net sales that we experienced in the period.This growth was slightly limited by slower growth or contraction in sales of certain products to certain end markets related to the COVID-19 pandemic when compared to the third quarter of 2020. While we did see an uptick in sales of certain COVID-related supplies in the third quarter of 2021, relative to the prior year the marketplace is more orderly and better supplied, while the unit price of many products is down significantly. As a result, the impact on our net sales of the current increase in infections and hospitalizations is significantly reduced from what was experienced in the year earlier period. For instance, daily sales to government and warehousing customers declined 40.5% and 13.6%, respectively, while sales of safety products and janitorial supplies (the latter being a subset of other products) declined 2.9% and 15.4%, respectively, in the third quarter of 2021.

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Sales by Product Line

The approximate mix of sales from ~~our fastener product line~~fasteners, safety supplies, and ~~from our~~all other product lines was as follows for the periods ended September 30:


										Nine-month Period				Three-month Period
	Nine-month Period				Three-month Period					2021		2020		2021		2020
	2017		2016		2017		2016
Fastener product line	35.8	%	36.9	%	35.6	%	36.1	%
Fasteners									Fasteners	33.2	%	29.7	%	33.4	%	30.5	%
Safety supplies									Safety supplies	21.2	%	26.1	%	21.1	%	23.8	%
Other product lines	64.2	%	63.1	%	64.4	%	63.9	%	Other product lines	45.6	%	44.2	%	45.5	%	45.7	%
	100.0	%	100.0	%	100.0	%	100.0	%		100.0	%	100.0	%	100.0	%	100.0	%

Gross Profit

In the first nine months of 2021, our gross profit, as a percentage of net sales, improved to 46.1%, or 70 basis points from 45.4% in the first nine months of 2020. We believe the increase in gross profit during this period is attributable primarily to three items. (1) Organizational/overhead leverage was favorable primarily due to stronger business conditions. This includes favorable customer and supplier net rebates due to a combination of stronger demand increasing our product purchasing activity and lower rebates to certain customers that had significant purchases of PPE product in the first nine months of 2020. (2) Product and customer mix was a benefit to our gross profit percentage in the first nine months of 2021. This was entirely due to product mix, as from the first nine months of 2020 to the first nine months of 2021 our daily sales of higher profit margin fastener products increased 17.1% while our daily sales of lower gross profit margin non-fastener products declined 0.5%. This was only partly offset by customer mix, which was impacted by the relatively fast growth of our Onsites, which tend to have a gross margin percentage well below the company average. (3) Product margins improved, primarily due to a higher gross profit percentage for our safety products, due to a decline in the mix of lower margin COVID-affected sales and, to a lesser extent, higher margins on non-COVID affected products. These positive contributors to our gross profit percentage were partly offset by the $7.8 write-down of the value of our inventory of 3-ply masks in the first quarter of 2021. The impact of higher product and transportation costs were largely offset by actions taken to mitigate this inflation, including product price increases, throughout the first nine months of 2021.

Our gross ~~profit,~~profit, as a percentage of net sales, increased 100 basis points to 46.3% in the third quarter of 2021 from 45.3% in the third quarter of 2020. This increase reflects several items. First, overhead/organizational leverage improved primarily due to stronger business conditions. This includes customer and supplier net rebates, as stronger demand has increased our product purchasing activity. Second, product margins improved, primarily due to a higher gross profit percentage for our safety products, due to both a decline in the mix of lower margin COVID-affected sales and improved margins for those products. The impact of product and customer mix was ~~49.4%~~immaterial in the third quarter of 2021. The impact of price/cost was similarly immaterial in the third quarter of 2021, as greater pricing contribution in the period largely offset higher material costs and significantly higher shipping costs.

Pricing actions taken during the first nine months of ~~2017~~2021 largely matched the product and ~~49.5%~~transportation inflation we experienced in the marketplace, and did not have a material impact on gross profit percentage in either the first nine months of 2016. The gross profit percentage for the first nine months of 2017 benefited from accelerating revenue growth rates, progress in our supply chain initiatives, as well as increased discipline in purchasing throughout the organization. This was offset by a roughly 30 basis point drag owing to two elements of mix. The first was a change in product and customer mix. Fasteners, which is currently our largest single product line at approximately 35.8% of sales, is our highest gross profit product line due to the high transaction cost surrounding the sourcing and supply of the product for customers. Any reduction in the mix of our sales attributable to fasteners, and particularly maintenance fasteners, may negatively impact gross profit. Larger customers (for which National Accounts are a good proxy), whose more focused buying patterns allow us to offer them better pricing, also influence gross profit. Branches typically achieve higher average net sales disproportionately by growth in the non-fastener product lines and with large customers, causing gross profit margin to decline as average net sales grow. From the first nine months of 2016 to the first nine months of 2017, our daily sales of fastener products grew 6.9% (of which 2.5 percentage points were attributable to Mansco) while our daily sales of non-fastener products grew 12.1%. The relatively slower growth that we experienced in the first nine months of 2017 in our fastener product line combined with relatively faster growth in sales to our largest customers partially offset the gross profit improvement we otherwise experienced in the period. The second element of mix was driven by the acquisition of Mansco. Mansco products carry a lower gross profit product mix than the Company.

Inor the third quarter of 2017, our gross profit, as a percentage of net sales, declined to 49.1% from 49.3% in the third quarter of 2016. Our gross profit over the period was adversely affected by roughly 30 to 40 basis points as a result of the same two elements of mix that affected the first nine months of 2017. We also believe the gross profit percentage was reduced by 10 to 20 basis points in the period from hurricanes that affected our Caribbean, Southeastern United States, and Gulf regions, the disruptions from which reduced net sales and gross profit dollars and resulted in an increase in sales of lower margin products. As with the first nine months of 2017, these factors were offset by accelerating revenue growth rates and progress in supply chain initiatives. During the third quarter of 2017, our daily sales of fastener products grew 12.1% (of which 3.8 percentage points were attributable to Mansco) and daily sales of non-fastener products grew 14.6% when compared to the third quarter of 2016.2021.

Operating and Administrative Expenses

~~Our~~In the first nine months of 2021 our operating and administrative expenses, ~~(including~~as a ~~gain on~~percentage of net sales, increased to 25.6% compared to 25.0% in the ~~sale~~first nine months of ~~property~~2020. In the third quarter of 2021 our operating and ~~equipment),~~administrative expenses, as a percentage of net sales, ~~improved~~increased to ~~28.9 %~~25.9% compared to 24.8% in the ~~first nine months~~third quarter of ~~2017 from 29.2% in the first nine months~~2020. In both periods this was primarily a result of ~~2016. The primary contributor to this improvement was relatively modest growth in occupancy-related expenses. Though~~ our employee-related expenses ~~grew more quickly~~growing faster than ~~our occupancy expenses, they also contributed to our~~sales, as we did leverage ~~through~~ the ~~first nine months of 2017.~~

~~Our~~collective change in occupancy-related and all other operating and administrative ~~expenses (including a gain on the sale of property and equipment), as a~~expenses.

The percentage ~~of net sales, improved to 28.9%~~change in ~~the third quarter of 2017 from 29.3% in the third quarter of 2016. The primary contributors to this improvement were relatively lower growth in~~employee-related, occupancy-related, and ~~selling transportation expenses. This was partially offset by sharper growth in employee-related expenses. The leverage achieved over our~~all other operating and administrative expenses ~~was diminished by one less selling day in the third quarter of 2017 versus the third quarter of 2016.~~

~~The growth in employee-related, occupancy-related, and selling transportation expenses (the three largest components of our operating and administrative expenses)~~ compared to the same periods in the preceding year, is outlined in the table below.


	Approximate Percentage of Total Operating and Administrative Expenses	Nine-month Period		Three-month Period
		2021		2021
Employee-related expenses	70%	10.0	%	16.8	%
Occupancy-related expenses	15% to 20%	2.7	%	3.3	%
All other operating and administrative expenses	10% to 15%	-2.1	%	19.9	%

Approximate Percentage of Total Operating and Administrative Expenses Nine-month Period Three-month Period
2017 2017
Employee-related expenses 65% to 70% 8.4 % 12.3 %
Occupancy-related expenses 15% to 20% 2.0 % 1.5 %
Selling transportation expenses 5% 8.4 % 2.7 %

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Employee-related expenses include: (1) payroll (which includes cash compensation, stock option expense, and profit sharing), (2) health care, (3) personnel development, and (4) social taxes. ~~Our~~

In the first nine months of 2021, our employee-related expenses increased when compared to the first nine months of 2020, primarily as a result of higher incentive pay stemming from strong growth and profits at our in-market locations, which account for the majority of our incentive dollars, a 25.4% increase in ~~the nine-month period. This was related to: (1) higher bonuses and commissions due~~profit sharing to ~~growth in net~~reflect a more favorable sales and ~~net earnings, as well as regulatory driven incremental compensation, (2) increased health care costs, (3) an~~profit outlook, and a 22.7% increase in our ~~profit sharing contribution, (4) an increase in stock option expense, (5) an increase in full-time equivalent ('FTE') headcount related to efforts to support growth in our business,~~healthcare expenses as employees and ~~(6) the inclusion of Mansco personnel. The increase in~~their families were more comfortable seeking health care. In the third quarter of ~~2017,~~2021, our employee-related expenses increased when compared to the third quarter of ~~2016, was driven by items 1, 2, 5,~~2020. We experienced an increase in employee base pay due to higher average FTE during the period, though this grew more slowly than sales, as well as higher wages. We also experienced a significant increase in bonus and ~~6 noted above for~~commission payments, reflecting improved business activity and financial performance versus the ~~nine-month period.~~year-ago period, as well as an increase of 45.1% in health insurance costs as employees and their families were more comfortable seeking health care.

The table below summarizes our FTE headcount at the end of the periods presented and ~~changes in such headcount from~~the percentage change compared to the end of the prior ~~periods to the end of the most recent period:~~periods:

Change Since: Change Since:
Q3 Q4 Q4 Q3 Q3
2017 2016 2016 2016 2016
Branch and Onsite based FTE headcount 11,480
10,797
6.3 % 11,175
2.7 %
Total selling (includes branch and Onsite) 13,118
12,325
6.4 % 12,725
3.1 %
Distribution 2,502
2,330
7.4 % 2,449
2.2 %
Manufacturing 604
571
5.8 % 573
5.4 %
Administrative 1,105
1,039
6.4 % 1,064
3.9 %
Total 17,329
16,265
6.5 % 16,811
3.1 %


			Change Since:			Change Since:			Change Since:
	Q3 2021	Q2 2021	Q2 2021		Q4 2020	Q4 2020		Q3 2020	Q3 2020
In-market locations (branches & Onsites)	11,104	11,390	-2.5	%	11,260	-1.4	%	11,302	-1.8	%
Non-in-market selling	2,049	2,021	1.4	%	1,923	6.6	%	1,895	8.1	%
Selling subtotal	13,153	13,411	-1.9	%	13,183	-0.2	%	13,197	-0.3	%
Distribution/Transportation	2,560	2,691	-4.9	%	2,591	-1.2	%	2,638	-3.0	%
Manufacturing	616	618	-0.3	%	607	1.5	%	618	-0.3	%
Administration	1,531	1,533	-0.1	%	1,455	5.2	%	1,409	8.7	%
Non-selling subtotal	4,707	4,842	-2.8	%	4,653	1.2	%	4,665	0.9	%
Total	17,860	18,253	-2.2	%	17,836	0.1	%	17,862	0.0	%

Occupancy-related expenses include: (1) building rent and depreciation, (2) building utility costs, (3) equipment related to our branches and distribution locations, and (4) industrial vending equipment (we consider the vending equipment, excluding leased locker equipment, to be a logical extension of our ~~branch operation~~in-market operations and classify the depreciation and repair costs as occupancy ~~expense)~~expenses). ~~The slight increase in occupancy-related expenses for~~

In the first nine months of ~~2017, when compared to the first nine months of 2016, was mainly driven by an increase in costs related to industrial vending equipment and an increase in automation equipment at~~2021, our distribution centers. The slight increase in the third quarter of 2017, when compared to the third quarter of 2016, was driven by the same factors as the nine-month period and was only partly offset by a decrease inoccupancy-related expenses ~~related to a reduction in our public branch counts.~~

Our selling transportation expenses consist primarily of our branch fleet as most of the distribution fleet costs are included in cost of sales. These costs include: (1) expenses for our fleet of vehicles, and (2) fuel expense. Selling transportation expenses for the first nine months of 2017 increased when compared to the first nine months of ~~2016. We increased the size of~~2020, as we experienced modest growth in costs associated with our ~~field-based vehicle fleet which resulted in~~facilities, with higher ~~expenses. However, the larger impact was a 15.3% increase in fuel expense due to higher fuel prices and consumption during the period. This was partially~~non-branch expenses being only partly offset by ~~improvements in gains on sales of leased vehicles. The increase in~~lower branch expenses, and our FMI devices. In the third quarter of ~~2017,~~2021, our occupancy-related expenses increased when compared to the third quarter of 2020, primarily due to the accumulation of modest increases in the cost of FMI equipment related to an increase in device installations, facility maintenance expenses, and facility rent and utility costs.

All other operating and administrative expenses include: (1) selling-related transportation, (2) information technology (IT) expenses, (3) general corporate expenses, which consists of legal expenses, general insurance expenses, travel and marketing expenses, etc., and (4) the gain on sales of property and equipment.

Combined, all other operating and administrative expenses decreased in the first nine months of 2021 when compared to the first nine months of 2020. This is largely due to a decline in general corporate expenses, with favorable bad debt trends and lower costs for non-healthcare-related insurance more than offsetting higher travel expense and legal fees. A modest reduction in selling-related transportation as a result of tight fleet maintenance expenses and efforts to rationalize our local pick-up fleet was offset by higher spending on information technology. Combined, all other operating and administrative expenses increased in the third quarter of 2021 when compared to the third quarter of ~~2016, was mainly driven by the~~2020. The period experienced a more than two-and-a-half times increase in travel-related costs as activity continues to normalize in contrast to pandemic-related restrictions that presided in the ~~size of~~year earlier period, higher non-healthcare-related insurance costs, rising fuel costs related to our ~~field-based vehicle fleet.~~

~~Aside from these larger impacts, our operating and administrative expenses were also affected by increases in~~local truck fleet, higher spending on information technology, ~~as well as~~and lower profits from the ~~absence~~sale of ~~supplier marketing incentives that existed in the first nine months of 2016 as part of our CSP 16 initiative.~~branch vehicles.

Net Interest Expense

Our net interest expense was ~~$6.2~~$7.2 and $2.3 in the first nine months ~~of 2017~~ and ~~$2.5 in~~ the third quarter of ~~2017,~~2021, respectively, compared to ~~$4.4~~$6.9 and $2.5 in the first nine months ~~of 2016~~ and ~~$1.7 in~~ the third quarter of ~~2016. These increases were mainly caused by higher average interest rates over both periods.~~2020, respectively.

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Income Taxes

~~Income~~We recorded income tax expense ~~as a percentage~~ of ~~earnings before income taxes, was approximately 36.6%~~$215.5 in the first nine months of ~~2017~~2021, or 23.7% of earnings before income taxes, and ~~36.7%~~$72.6 in the third quarter of ~~2017, versus 36.8% for~~2021, or 23.0% of earnings before income taxes. Income tax expense was $207.5 in the first nine months of ~~2016~~2020, or 23.8% of earnings before income taxes, and ~~36.9%~~$66.1 in the third quarter of ~~2016. The decline in the nine-month period resulted primarily from~~2020, or 23.0% of earnings before income taxes. We believe our ongoing tax rate, absent any discrete tax items or broader changes ~~in our reserve for uncertain~~to tax positions and the adoption of a new accounting standard (ASU 2016-09) in the first quarter of 2017. This standard addresses the accounting for excess tax benefits for share-based payments that were previously recorded in additional paid-in capital on the balance sheet and are now recognized in income tax expense on the income statement. Additional reductions arose from changes in our reserve for uncertain tax positions. A more detailed description of the impact of the adoption of ASU 2016-09 is included in Note 1 of the Notes to Condensed Consolidated Financial Statements.law, will be approximately 24.5%.

Net Earnings

Our net earnings during the first nine months of ~~2017~~2021 were ~~$426.2,~~$693.8, an increase of ~~10.8%~~4.7% when compared to the first nine months of ~~2016.~~ 2020. Our net earnings during the third quarter of ~~2017~~2021 were ~~$143.1,~~$243.5, an increase of ~~12.7%~~9.9% compared to the third quarter of ~~2016.~~ 2020.

Our diluted net earnings per share during the first nine months of 2021 were $1.20, an increase of 4.4% when compared to the first nine months of 2020. Our diluted net earnings per share were ~~$1.48~~$0.42 during the third quarter of 2021, which increased from $0.38 during the third quarter of 2020.

Results of Operations (Comparison to 2019 Periods)

Given the unusual nature of our marketplace over the last 18 months due to the COVID-19 pandemic, we believe that a comparison of net sales, gross profit, operating and administrative expenses, operating income, net earnings, and net cash provided by operating activities during the first nine months ~~of 2017 compared to $1.33 during the first nine months of 2016,~~ and ~~$0.50 during the~~ third quarter of ~~2017 compared~~2021 to ~~$0.44~~the same periods in 2019 provides further insight into sustainable trends and underlying performance of our business. As discussed earlier in this report, there were certain aspects of the COVID-19 pandemic that dramatically impacted our business during 2020. Given this, we believe that a comparison to the 2019 periods is helpful to demonstrate changes in financial condition and our results of operations during the ~~third quarter of 2016.~~most recently ended quarter. The table below provides such a comparison:


	Nine-month Period								Three-month Period
	2021			2019			Change		2021			2019			Change
Net sales	$	4,479.0		$	4,056.8		10.4	%	$	1,554.2		$	1,379.1		12.7	%
Gross profit	$	2,064.3		$	1,917.0		7.7	%	$	720.2		$	651.1		10.6	%
% of net sales	46.1		%	47.3		%			46.3		%	47.2		%
Operating and administrative expenses	$	1,147.8		$	1,098.7		4.5	%	$	401.8		$	369.2		8.8	%
% of net sales	25.6		%	27.1		%			25.9		%	26.8		%
Operating income	$	916.5		$	818.3		12.0	%	$	318.4		$	281.9		13.0	%
% of net sales	20.5		%	20.2		%			20.5		%	20.4		%
Net earnings	$	693.8		$	612.2		13.3	%	$	243.5		$	213.5		14.1	%

Net cash provided by operating activities	$	613.7		$	590.3		4.0	%	$	167.4		$	257.3		-34.9	%
% of net earnings	88.5		%	96.4		%			68.8		%	120.5		%

Liquidity and Capital Resources

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


	Nine-month Period
	2021			2020
Net cash provided by operating activities	$	613.7		780.8
Percentage of net earnings	88.5		%	117.8	%
Net cash used in investing activities	$	107.0		238.8
Percentage of net earnings	15.4		%	36.0	%
Net cash used in financing activities	$	498.2		383.9
Percentage of net earnings	71.8		%	57.9	%

Nine-month Period
2017 2016
Net cash provided by operating activities $ 455.9
386.9
Percentage of net earnings 107.0 % 100.6 %
Net cash used in investing activities $ 138.2
157.6
Net cash used in financing activities $ 301.2
214.4

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Net Cash Provided by Operating Activities

~~Net~~We produced operating cash ~~provided by operating activities increased~~flow of $613.7 in the first nine months of ~~2017 relative to~~2021, a decrease of 21.4% from the first nine months of 2020, representing 88.5% of the period's net earnings versus 117.8% in the first nine months of ~~2016,~~2020. The decline in our operating cash flow generated is primarily due to an increased need for working capital to support our ~~net earnings growth.~~customer's growth as business activity improves. Customer mix also contributes. Our traditional manufacturing and construction customers are a greater proportion of our sales mix in the first nine months of 2021 than was the case in the first nine months of 2020, and tend to have longer payment terms and retain more inventory on hand. We also paid approximately $30.0 in payroll taxes in the third quarter of 2021 that was deferred from 2020 as allowed under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act).

The dollar and percentage change in accounts receivable, net, inventories, and ~~inventories from~~accounts payable as of September 30, ~~2016~~2021 when compared to September 30, ~~2017~~2020 were as follows:


	September 30:			Twelve-month Dollar Change		Twelve-month Percentage Change			September 30			Twelve-month Dollar Change		Twelve-month Percentage Change
	2017		2016	2017		2017			2021		2020	2021		2021
Accounts receivable, net	$	632.1	543.7	$	88.3	16.2	%	Accounts receivable, net	$	949.4	834.5	$	114.9	13.8	%
Inventories	1,047.0		966.9	80.1		8.3	%	Inventories	1,401.1		1,342.6	58.5		4.4	%
Total	$	1,679.1	1,510.7	$	168.4	11.1	%
Trade working capital								Trade working capital	$	2,350.5	2,177.1	$	173.4	8.0	%

Accounts payable								Accounts payable	$	256.9	210.4	$	46.4	22.1	%

Trade working capital, net								Trade working capital, net	$	2,093.6	1,966.7	$	126.9	6.5	%

Net sales in last two months	$	782.8	703.2	$	79.6	11.3	%	Net sales in last two months	$	1,062.5	943.8	$	118.7	12.6	%

Note - Amounts may not foot due to rounding difference.

~~The~~Our accounts receivable balance increased due to two factors. First, our receivables are expanding as a result of improved business activity and resulting growth in our ~~net accounts receivable from September 30, 2016 to September 30, 2017 was attributable~~customers' sales. Second, in ~~part~~response to the ~~Mansco acquisition. Absent~~COVID-19 pandemic, customers that ~~receivables growth~~traditionally have shorter payment terms represented a smaller proportion of our sales mix in the first nine months of 2021 than was ~~broadly consistent with our net sales growth and~~the case in the first nine months of 2020.

Inventory was ~~attributable primarily to~~$1,401.1 at the end of the third quarter of 2021, an increase ~~in general business activity. In any given period and~~of $58.5, or 4.4%, over ~~time,~~ the ~~strong~~third quarter of 2020. This reflects the addition of inventory to support the growth of our ~~international~~manufacturing and construction customers as they expand production to meet improved business activity, as well as inflation in the value of stocked parts. This is being partly offset by a couple of factors. First, we have continued to close traditional branches, including 183 over the past 12 months, improve the match of branch stock to the needs of specific markets, reduce slow or non-moving inventory, and improve the flow of product through our internal logistics. Second, we have substantially reduced the supply of disposable masks that were brought into inventory in 2020 as part of our ~~large customer accounts can result~~response to COVID-19, a trend that accelerated in ~~faster growth in receivables relative to net sales growth.~~

~~The most significant contributors~~the third quarter of 2021 due to the increase in ~~inventory from September 30, 2016 to September 30, 2017 were~~ pandemic-related infections and hospitalizations.

Accounts payable were $256.9 at the ~~completion~~end of the ~~CSP 16 rollout~~third quarter of 2021, an increase of $46.4, or 22.1%, over the third quarter of 2020 due to our product purchases increasing to support the improvement in ~~2016, increased demand,~~business activity at our manufacturing and construction customers. Further, a greater proportion of our purchases in the ~~Mansco acquisition~~first nine months of 2021 were of products with traditional payment terms, whereas in ~~2017.~~the first nine months of 2020 some COVID-related products still required immediate payment and so produced no payable.

Net Cash Used in Investing Activities

Net cash used in investing ~~activities~~activities decreased ~~from~~by $131.8 in the first nine months of ~~2016~~2021 when compared to the first nine months of ~~2017~~2020. This was primarily due to ~~decreases~~the acquisition of certain industrial vending assets of Apex International Technologies LLC (Apex) in ~~net capital expenditures, which was partially offset by the cash paid for the Mansco acquisition.~~

~~During~~ the first ~~nine months~~quarter of ~~2017, our net capital expenditures~~2020; in contrast, there were $76.5 (or 17.9% of net earnings), which is a decrease of 51.4% from the first nine months of 2016. This reduction resulted from lower spending in 2017 to date related to: (1) vending equipment due to the 2016 leased locker rollout, (2) shelving and signageno outlays for ~~the CSP 16 initiative in 2016, (3) the expansion of our distribution fleet, and (4) timing associated with the addition of pickup trucks.~~

~~Capital expenditures~~acquisitions in the first nine months of ~~2017~~2021. A lesser contributor to the reduction in net cash used in investing activities were slightly lower net capital expenditures (property and ~~2016 consisted of:~~equipment net of proceeds from sales) in the first nine months of 2021 compared to in the first nine months of 2020.

Our capital spending will typically fall into five categories: (1) the addition of manufacturing and warehouse property and equipment, (2) the purchase of industrial vending and bin technology, (3) the purchase of software and hardware for our

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information processing systems, ~~(2)~~(4) the addition of fleet vehicles, ~~(3)~~and (5) the purchase of signage, shelving, and other fixed assets related to branch ~~openings~~ and ~~in 2016, our CSP 16 initiative, (4)~~Onsite locations. Proceeds from the addition of manufacturing and warehouse equipment, including automation systems equipment, (5) the expansion or improvement of certain owned or leased branch properties, and (6) purchases related to industrial vending. Of these factors, items (1), (2), (4), and (6) had the greatest impact to our capital expenditures in the first nine months of 2017. Disposalssales of property and equipment, ~~consisted of~~typically for the planned disposition of ~~certain~~ pick-up trucks as well as distribution vehicles and trailers in the normal course of ~~business.~~business, are netted against these purchases and additions. During the first nine months of 2021, our net capital expenditures were $107.0, which is a decrease of 6.9% from the first nine months of 2020. Of the factors described above, the largest reason for the decline in net capital expenditures in the first nine months of 2021 was lower spending on FMI devices to reflect a slow recovery in signings and installations following the pandemic, reduced vending equipment costs following the March 2020 acquisition of certain industrial vending assets of Apex, and an increase in the refurbishment and redeployment of FMI hardware as an alternative to buying new devices. Modest declines in most other spending categories were offset by higher spending on a non-hub construction project in Winona.

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. ~~Our 2017~~We now expect our net capital expenditures ~~spend expectation remains at approximately $127.0.~~(property and equipment net of proceeds from sales) in 2021 to be within a range of $155.0 to $175.0, down from our prior range of $170.0 to $200.0. Our net capital expenditures were $157.5 in 2020. Our current range continues to reflect increased spending for a non-hub construction project in Winona to support growth, land purchases to support future supply chain investment, an increase in manufacturing capacity, higher spending for equipment and facility upgrades, retrofits, and replacement, and lower anticipated proceeds from asset sales. However, previously anticipated spending for selling-related vehicles, branch development initiatives, and information technology hardware has moderated due to difficulties with global supply chains.

Net Cash Used in Financing Activities

Net cash used in financing activities increased $114.3 in the first nine months of ~~2017 consisted~~2021 when compared to the first nine months of ~~the payment of dividends, purchases of our common stock, and payments against~~2020. This is primarily due to a reduction in debt obligations which were partially offset by proceeds from the exercise of stock options and proceeds from debt obligations, including the issuance of a new series of senior unsecured promissory notes under our master note agreement in the aggregate principal amount of $60.0. The notes bear interest at a fixed rate of 3.22% per annum and are due and payable in full on March 1, 2024, and were issued to fund the purchase price of the Mansco acquisition. Net cash used in financing activitiesincurred in the first nine months of ~~2016 consisted~~2020 as part of ~~payments~~the acquisition of certain industrial vending assets of Apex.

We returned $482.6 to our shareholders in the first nine months of 2021 in the form of dividends, compared to $482.2 in the first nine months of 2020 in the form of dividends ($430.2) and purchases of our common stock ~~which were partially offset by proceeds from the exercise of stock options and borrowings.~~($52.0). During the first nine months of ~~2017,~~2021, we did not purchase any shares of our common stock. During the first nine months of 2020, we purchased ~~1,900,000~~1,600,000 shares of our common stock at an average price of approximately ~~$43.43~~$32.54 per ~~share. During the first nine months~~share, resulting in $52.0 of ~~2016, we purchased 1,600,000 shares of our common stock at an average price of approximately $37.15 per share. On July 11, 2017, our board of directors authorized purchases by us of 5,000,000~~cash used for share repurchase. We currently have authority to purchase up to 3,200,000 additional shares of our common stock. ~~We currently have authority to purchase up to 4,400,000 shares under this authorization.~~ An overview of our cash dividends paid or declared in ~~2017~~2021 and ~~2016~~2020 is contained in Note 3 of the Notes to Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates – A discussion of our critical accounting policies and estimates is contained in our ~~2016~~2020 annual report on Form 10-K.

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 Contractual Obligations – A discussion of the nature and amount of certain of our contractual obligations is contained in our ~~2016~~2020 annual report on Form 10-K. That portion of total debt outstanding under our Credit Facility and notes payable classified as long-term, and the maturity of that debt, is described earlier in Note 6 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. As such, they are considered 'forward-looking statements' that provide current expectations or forecasts of future events. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the use of terminology such as anticipate, believe, should, estimate, expect, intend, may, will, plan, goal, project, hope, trend, target, opportunity, and similar words or expressions, or by references to typical outcomes. Any statement that is not a purely historical fact, including estimates, projections, ~~future~~ 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, ~~and~~ our strategies, goals, mission and ~~vision.~~vision, and our expectations related to future capital expenditures, future tax rates, future inventory levels, pricing, Onsite and weighted FMI device signings, and the impact of price increases and surge sales on overall sales growth or margin performance. You should understand that forward-looking statements involve a variety of risks and uncertainties, known and unknown, and may be affected by inaccurate assumptions. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially. Factors that could cause our actual results to differ from those discussed in the forward-looking statements include, but are not limited to, the impact of the COVID-19 pandemic, economic downturns, weakness in the manufacturing or commercial construction industries, competitive pressure on selling prices, changes in our current mix of products, customers, or geographic locations, changes in

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our average branch size, changes in our purchasing patterns, changes in customer needs, changes in fuel or commodity prices, inclement weather, changes in foreign currency exchange rates, difficulty in adapting our business model to different foreign business environments, failure to accurately predict the market potential of our business strategies, the introduction or expansion of new business strategies,

weak acceptance or adoption of our ~~vending~~FMI offering or Onsite business models, increased competition in ~~industrial vending~~FMI or Onsite, ~~distribution,~~ difficulty in maintaining installation quality as our ~~industrial vending~~FMI business expands, the leasing to customers of a significant number of additional ~~industrial vending machines,~~FMI devices, the failure to meet our goals and expectations regarding branch openings, branch closings, or expansion of our ~~industrial vending~~FMI offering or Onsite operations, changes in the implementation objectives of our business strategies, our ability to retain certain government and other types of customers that bought product from us for the first time during the pandemic, difficulty in hiring, relocating, training, or retaining qualified personnel, difficulty in controlling operating expenses, difficulty in collecting receivables or accurately predicting future inventory needs, dramatic changes in sales trends, changes in supplier production lead times, changes in our cash position or our need to make capital expenditures, credit market volatility, changes in tax law or the impact of any such changes on future tax rates, changes in tariffs or the impact of any such changes on our financial results, changes in the availability or price of commercial real estate, changes in the nature, price, or availability of distribution, supply chain, or other technology (including software licensed from third parties) and services related to that technology, cyber-security incidents, potential liability and reputational damage that can arise if our products are defective, difficulties measuring the contribution of price increases on sales growth, and other risks and uncertainties detailed in our filings with the Securities and Exchange Commission, including our most recent annual and quarterly reports. Each forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any such statement to reflect events or circumstances arising after such date.

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET ~~RISKS~~RISK

We are exposed to certain market risks from changes in foreign currency exchange rates, commodity steel pricing, commodity energy prices, and interest rates. Changes in these factors cause fluctuations in our earnings and cash flows. We evaluate and manage exposure to these market risks as follows:

Foreign currency exchange rates – Foreign currency fluctuations can affect our net investments, our operations in countries other than the U.S., and earnings denominated in foreign currencies. Historically, our primary exchange rate exposure ishas been with the Canadian dollar against the United States dollar. ~~Our estimated net earnings~~We have not historically hedged our foreign currency risk given that exposure ~~for~~to date has not been material. In the first nine months of 2021, changes in foreign currency exchange rates ~~was not material at~~increased our reported net sales by $34.5 with the ~~end of the period.~~estimated effect on our net earnings being immaterial.

Commodity steel pricing – We buy and sell various types of steel products; these products consist primarily of different types of threaded ~~fasteners. In the first nine months of 2017, we have seen some inflation in overall steel pricing.~~fasteners and related hardware. We are exposed to the impacts of commodity steel pricing and our related ability to pass through the impacts to our end ~~customers.~~customers, though the timing of such exposure can be delayed due to our long supply chain. Through the first nine months of 2021, we have seen the price of commodity steel as reflected in many market indexes increase, which has produced inflation in our steel-based products. Based on our ability to pass these higher costs on, our estimated net earnings exposure for these changes was not material in the first nine months of 2021.

Commodity energy prices – We have market risk ~~for~~for changes in prices of oil, gasoline, diesel fuel, natural gas, and ~~electricity; however, this risk is~~electricity. Rising costs for these commodities can produce higher fuel costs for our hub and field-based vehicles and utility costs for our in-market locations, distribution centers, and manufacturing facilities. Fossil fuels are also often a key feedstock for chemicals and plastics that comprise a key raw material for many products that we sell. We believe that over time these risks are mitigated in part by our ability to pass freight and product costs to ~~our~~our customers, the efficiency of our trucking distribution network, and the ability, over time, to manage our occupancy costs related to the heating and cooling of our facilities through better efficiency. Through the first nine months of 2021, we have seen the price of commodity energy as reflected in many market indexes increase, which has produced an increase in our fuel expenses and inflation in products for which fossil fuels are an input. Based on our ability to pass these higher costs on, our estimated net earnings exposure for these changes was not material in the first nine months of 2021.

Interest rates - Loans under our Credit Facility bear interest at ~~floating~~floating rates tied to ~~LIBOR.~~LIBOR (or, if LIBOR is no longer available, at a replacement rate to be determined by the administrative agent for the Credit Facility and consented to by us). As a result, ~~changes~~changes in LIBOR can affect our operating results and liquidity to the extent we do not have effective interest rate swap arrangements in place. We have not historically used interest rate swap arrangements to hedge the variable interest rates under our Credit Facility. A 1%one percentage point increase in LIBOR in the first nine months of ~~2017~~2021 would have resulted in approximately ~~$2.1~~$0.1 of additional interest expense. A description of our Credit Facility is contained in Note 6 of the Notes to Condensed Consolidated Financial Statements.

ITEM 4 — CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures – As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ~~(the 'Securities~~

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(the Securities Exchange ~~Act')~~Act)). Based on this evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including the principal executive officer and principal financial officer, to allow for timely decisions regarding disclosure.

Changes in Internal Control Over Financial Reporting– There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1 — LEGAL PROCEEDINGS

A description of our legal proceedings, if any, is contained in Note 7 of the Notes to Condensed Consolidated Financial Statements. The description of legal proceedings, if any, in Note 7 is incorporated herein by reference.

ITEM 1A — RISK FACTORS

The significant factors known to us that could materially adversely affect our business, financial condition, or operating results are described in Item 2 of Part I above and in our most recently filed annual report on Form 10-K under Forward-Looking Statements and Item 1A – Risk Factors. ~~There has been no material change in those risk factors.~~

ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The table below sets forth information regarding purchases of our common stock during the third quarter of ~~2017:~~2021:

(a) (b) (c) (d)
Period
Total Number of
Shares
Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
Maximum Number (or
Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans or
Programs (1)
July 1-31, 2017 600,000 $43.03 600,000 4,400,000
August 1-31, 2017 0 $0.00 0 4,400,000
September 1-30, 2017 0 $0.00 0 4,400,000
Total 600,000 $43.03 600,000 4,400,000


	(a)		(b)		(c)		(d)
Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1-31, 2021		0		$0.00		0		3,200,000
August 1-31, 2021		0		$0.00		0		3,200,000
September 1-30, 2021		0		$0.00		0		3,200,000
Total		0		$0.00		0		3,200,000



(1)			On July 11, 2017, our board of directors established a new authorization for us to repurchase up to ~~5,000,000~~10,000,000 shares of our common stock. This repurchase program has no expiration date. As of September 30, ~~2017,~~2021, we had remaining authority to ~~repurchase 4,400,000~~repurchase 3,200,000 shares under this authorization.

ITEM 6 — EXHIBITS

INDEX TO EXHIBITS


Exhibit Number		Description of Document

~~Exhibit Number~~3.1		~~Description of Document~~

~~3.1~~	Restated Articles of Incorporation of Fastenal Company, as amended (incorporated by reference to Exhibit 3.1 to Fastenal Company's Form ~~10-Q for the quarter ended March 31, 2012 (file no. 000-16125)~~8-K dated as of April 22, 2019 )

3.2		Restated By-Laws of Fastenal Company (incorporated by reference to Exhibit 3.2 to Fastenal Company's Form 8-K dated as of ~~October 15, 2010 (file no. 000-16125)~~January 17, 2019 )

31		Certifications under Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification under Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS~~101		~~XBRL Instance Document~~The following financial statements from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Earnings, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.

~~101.SCH~~104		~~XBRL Taxonomy Extension Schema Document~~The cover page from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL.

~~101.CAL~~	~~XBRL Taxonomy Calculation Linkbase Document~~

~~101.DEF~~	~~XBRL Taxonomy Definition Linkbase Document~~

~~101.LAB~~	~~XBRL Taxonomy Label Linkbase Document~~

~~101.PRE~~	~~XBRL Taxonomy Presentation Linkbase Document~~

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


					FASTENAL COMPANY


			~~FASTENAL COMPANY~~


Date: October ~~16, 2017~~15, 2021	By:			/s/ Holden Lewis
					Holden Lewis
					Executive Vice President and Chief Financial Officer
					(Principal Financial Officer)



Date: October ~~16, 2017~~15, 2021		By:			/s/ Sheryl A. Lisowski
					Sheryl A. Lisowski
					~~Controller,~~Executive Vice President - Chief Accounting Officer and Treasurer
					~~Treasurer (Duly~~(Duly Authorized Officer and Principal Accounting Officer)

2025



Current assets	$	21.7
Property and equipment	0.9
Identifiable intangible assets	20.1
Current liabilities	(1.8		)
Total identifiable net assets	40.9
Goodwill	18.4
Total fair value of assets acquired and liabilities assumed	$	59.3



	Options Granted	Option Exercise (Strike) Price		Closing Stock Price on Date of Grant		September 30, 2017
Date of Grant	Options Granted	Option Exercise (Strike) Price		Closing Stock Price on Date of Grant		Options Outstanding	Options Exercisable
January 3, 2017	764,789	$	47.00	$	46.95	725,542	—
April 19, 2016	845,440	$	46.00	$	45.74	757,522	—
April 21, 2015	893,220	$	42.00	$	41.26	700,746	—
April 22, 2014	955,000	$	56.00	$	50.53	572,500	116,250
April 16, 2013	205,000	$	54.00	$	49.25	104,250	57,250
April 17, 2012	1,235,000	$	54.00	$	49.01	957,938	776,103
April 19, 2011	410,000	$	35.00	$	31.78	72,550	47,550
April 20, 2010	530,000	$	30.00	$	27.13	107,800	82,800
April 21, 2009	790,000	$	27.00	$	17.61	221,650	221,650
Total	6,628,449					4,220,498	1,301,603



	September 30, 2017			December 31, 2016
Outstanding loans under unsecured revolving credit facility	$	300.0		305.0
2.00% senior unsecured promissory note payable	40.0			40.0
2.45% senior unsecured promissory note payable	35.0			35.0
3.22% senior unsecured promissory note payable	60.0			—
Note payable under asset purchase agreement	5.0			10.0
Total debt	440.0			390.0
Less: Current portion of debt	(8.0		)	(10.5	)
Long-term debt	$	432.0		379.5

Outstanding letters of credit under unsecured revolving credit facility - contingent obligation	$	36.3		36.3



			Change Since:			Change Since:
	Q3 2017	Q4 2016	Q4 2016		Q3 2016	Q3 2016
End of period total in-market units ⁽¹⁾ employee count	13,298	12,966	2.6	%	13,097	1.5	%
End of period total employee count	20,242	19,624	3.1	%	19,864	1.9	%

Number of public branch locations	2,418	2,503	-3.4	%	2,545	-5.0	%
Number of active Onsite locations	555	401	38.4	%	376	47.6	%
Number of in-market units ⁽¹⁾	2,973	2,904	2.4	%	2,921	1.8	%
Industrial vending machines (installed device count) ⁽²⁾	69,058	62,822	9.9	%	60,400	14.3	%
Ratio of industrial vending machines to in-market units	23:1	22:1			21:1