UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September~~June 30, ~~2020,~~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

(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 every Interactive Data File required to be submitted 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 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 the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

☐

Non-accelerated Filer

☐

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

As of ~~October~~July 12, ~~2020,~~2021, there were approximately ~~574,053,293~~574,739,393 shares of the ~~registrants~~registrant's common stock outstanding.

Table of Contents

FASTENAL COMPANY

INDEX

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

FASTENAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Amounts in millions except share information)


		(Unaudited)				(Unaudited)
Assets	Assets	September 30, 2020		December 31, 2019	Assets	June 30, 2021		December 31, 2020
Current assets:	Current assets:				Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	331.8	174.9	Cash and cash equivalents	$	321.8	245.7
Trade accounts receivable, net of allowance for credit losses of $11.8 and $10.9, respectively		834.5		741.8
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	908.9		769.4
Inventories	Inventories	1,342.6		1,366.4	Inventories	1,327.9		1,337.5
Prepaid income taxes	Prepaid income taxes	14.6		16.7	Prepaid income taxes	0		6.7
Other current assets	Other current assets	123.2		157.4	Other current assets	146.7		140.3
Total current assets	Total current assets	2,646.7		2,457.2	Total current assets	2,705.3		2,499.6

Property and equipment, net	Property and equipment, net	1,023.7		1,023.2	Property and equipment, net	1,015.8		1,030.7
Operating lease right-of-use assets	Operating lease right-of-use assets	244.4		243.2	Operating lease right-of-use assets	259.6		243.0
Other assets	Other assets	193.8		76.3	Other assets	185.9		191.4

Total assets	Total assets	$	4,108.6	3,799.9	Total assets	$	4,166.6	3,964.7

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity				Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:				Current liabilities:
Current portion of debt	Current portion of debt	$	40.0	3.0	Current portion of debt	$	40.0	40.0
Accounts payable	Accounts payable	210.4		192.8	Accounts payable	236.1		207.0
Accrued expenses	Accrued expenses	258.2		251.5	Accrued expenses	277.9		272.1
Current portion of operating lease liabilities	Current portion of operating lease liabilities	94.4		97.4	Current portion of operating lease liabilities	94.8		93.6
Income taxes payable					Income taxes payable	1.4		0
Total current liabilities	Total current liabilities	603.0		544.7	Total current liabilities	650.2		612.7

Long-term debt	Long-term debt	365.0		342.0	Long-term debt	365.0		365.0
Operating lease liabilities	Operating lease liabilities	152.1		148.2	Operating lease liabilities	167.6		151.5
Deferred income taxes	Deferred income taxes	102.9		99.4	Deferred income taxes	103.0		102.3

Stockholders' equity:	Stockholders' equity:				Stockholders' equity:
Preferred stock: $0.01 par value, 5,000,000 shares authorized, 0 shares issued or outstanding	Preferred stock: $0.01 par value, 5,000,000 shares authorized, 0 shares issued or outstanding	0		0	Preferred stock: $0.01 par value, 5,000,000 shares authorized, 0 shares issued or outstanding	0		0
Common stock: $0.01 par value, 800,000,000 shares authorized, 574,049,821 and 574,128,911 shares issued and outstanding, respectively		2.9		2.9
Common stock: $0.01 par value, 800,000,000 shares authorized, 574,704,880 and 574,159,575 shares issued and outstanding, respectively					Common stock: $0.01 par value, 800,000,000 shares authorized, 574,704,880 and 574,159,575 shares issued and outstanding, respectively	2.9		2.9
Additional paid-in capital	Additional paid-in capital	57.8		67.2	Additional paid-in capital	78.4		61.9
Retained earnings	Retained earnings	2,866.7		2,633.9	Retained earnings	2,818.3		2,689.6
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(41.8)		(38.4)	Accumulated other comprehensive loss	(18.8)		(21.2)
Total stockholders' equity	Total stockholders' equity	2,885.6		2,665.6	Total stockholders' equity	2,880.8		2,733.2
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	4,108.6	3,799.9	Total liabilities and stockholders' equity	$	4,166.6	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,					Six Months Ended June 30,			Three Months Ended June 30,
		2020		2019	2020		2019		2021		2020	2021		2020
Net sales	Net sales	$	4,289.3	4,056.8	$	1,413.3	1,379.1	Net sales	$	2,924.7	2,876.0	$	1,507.7	1,509.0

Cost of sales	Cost of sales	2,340.3		2,139.8	772.7		728.0	Cost of sales	1,580.6		1,567.6	807.0		837.4
Gross profit	Gross profit	1,949.0		1,917.0	640.6		651.1	Gross profit	1,344.1		1,308.4	700.7		671.6

Operating and administrative expenses	Operating and administrative expenses	1,072.7		1,099.5	351.5		369.2	Operating and administrative expenses	746.0		721.1	382.9		355.6
Gain on sale of property and equipment		(1.1)		(0.8)	(1.0)		0
Operating income	Operating income	877.4		818.3	290.1		281.9	Operating income	598.1		587.3	317.8		316.0

Interest income	Interest income	0.3		0.3	0.1		0.1	Interest income	0.0		0.2	0.0		0.1
Interest expense	Interest expense	(7.2)		(11.3)	(2.6)		(3.6)	Interest expense	(5.0)		(4.6)	(2.6)		(2.4)

Earnings before income taxes	Earnings before income taxes	870.5		807.3	287.6		278.4	Earnings before income taxes	593.1		582.9	315.2		313.7

Income tax expense	Income tax expense	207.5		195.1	66.1		64.9	Income tax expense	142.8		141.4	75.5		74.8

Net earnings	Net earnings	$	663.0	612.2	$	221.5	213.5	Net earnings	$	450.3	441.5	$	239.7	238.9

Basic net earnings per share	Basic net earnings per share	$	1.16	1.07	$	0.39	0.37	Basic net earnings per share	$	0.78	0.77	$	0.42	0.42

Diluted net earnings per share	Diluted net earnings per share	$	1.15	1.07	$	0.38	0.37	Diluted net earnings per share	$	0.78	0.77	$	0.42	0.42

Basic weighted average shares outstanding	Basic weighted average shares outstanding	573.7		572.9	573.9		573.5	Basic weighted average shares outstanding	574.5		573.6	574.6		573.2

Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	575.5		574.0	576.1		574.4	Diluted weighted average shares outstanding	576.8		575.1	577.0		575.0

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

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,					Six Months Ended June 30,			Three Months Ended June 30,
		2020		2019	2020		2019		2021		2020	2021		2020
Net earnings	Net earnings	$	663.0	612.2	$	221.5	213.5	Net earnings	$	450.3	441.5	$	239.7	238.9
Other comprehensive (loss) income, net of tax:	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 2020 and 2019)		(3.4)		(4.2)	11.1		(9.6)
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)	2.4		(14.5)	6.8		10.5
Comprehensive income	Comprehensive income	$	659.6	608.0	$	232.6	203.9	Comprehensive income	$	452.7	427.0	$	246.5	249.4

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)							(Unaudited)				(Unaudited)
		Nine Months Ended September 30,						Three Months Ended September 30,							Six Months Ended June 30,				Three Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Common stock	Common stock									Common stock
Balance at beginning of period	Balance at beginning of period	$	2.9	2.9		$	2.9	2.9		Balance at beginning of period	$	2.9	2.9		$	2.9	2.9
Balance at end of period	Balance at end 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	Additional paid-in capital									Additional paid-in capital
Balance at beginning of period	Balance at beginning of period	67.2		3.0		44.4		46.0		Balance at beginning of period	61.9		67.2		70.0		24.2
Stock options exercised	Stock options exercised	38.3		43.0		12.0		2.9		Stock options exercised	13.6		26.3		7.0		18.9
Purchases of common stock	Purchases of common stock	(52.0)		0		0		0		Purchases of common stock	0		(52.0)		0		0
Stock-based compensation	Stock-based compensation	4.3		4.3		1.4		1.4		Stock-based compensation	2.9		2.9		1.4		1.3
Balance at end of period	Balance at end of period	57.8		50.3		57.8		50.3		Balance at end of period	78.4		44.4		78.4		44.4
Retained earnings	Retained earnings									Retained earnings
Balance at beginning of period	Balance at beginning of period	2,633.9		2,341.6		2,788.6		2,494.2		Balance at beginning of period	2,689.6		2,633.9		2,739.4		2,692.9
Net earnings	Net earnings	663.0		612.2		221.5		213.5		Net earnings	450.3		441.5		239.7		238.9
Dividends paid in cash	Dividends paid in cash	(430.2)		(372.3)		(143.4)		(126.2)		Dividends paid in cash	(321.6)		(286.8)		(160.8)		(143.2)
Balance at end of period	Balance at end of period	2,866.7		2,581.5		2,866.7		2,581.5		Balance at end of period	2,818.3		2,788.6		2,818.3		2,788.6
Accumulated other comprehensive (loss) income	Accumulated other comprehensive (loss) income									Accumulated other comprehensive (loss) income
Balance at beginning of period	Balance at beginning of period	(38.4)		(44.8)		(52.9)		(39.4)		Balance at beginning of period	(21.2)		(38.4)		(25.6)		(63.4)
Other comprehensive (loss) income	Other comprehensive (loss) income	(3.4)		(4.2)		11.1		(9.6)		Other comprehensive (loss) income	2.4		(14.5)		6.8		10.5
Balance at end of period	Balance at end of period	(41.8)		(49.0)		(41.8)		(49.0)		Balance at end of period	(18.8)		(52.9)		(18.8)		(52.9)
Total stockholders' equity	Total stockholders' equity	$	2,885.6	2,585.7		$	2,885.6	2,585.7		Total stockholders' equity	$	2,880.8	2,783.0		$	2,880.8	2,783.0

Cash dividends paid per share of common stock	Cash dividends paid per share of common stock	$	0.750	$	0.650	$	0.250	$	0.220	Cash dividends paid per share of common stock	$	0.56	$	0.50	$	0.28	$	0.25

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

FASTENAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in millions)


		(Unaudited)						(Unaudited)
		Nine Months Ended September 30,						Six Months Ended June 30,
		2020		2019		2021		2020
Cash flows from operating activities:	Cash flows from operating activities:				Cash flows from operating activities:
Net earnings	Net earnings	$	663.0	612.2	Net earnings	$	450.3	441.5
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:				Adjustments to reconcile net earnings to net cash provided by operating activities, net of acquisition:
Depreciation of property and equipment	Depreciation of property and equipment	114.0		107.8	Depreciation of property and equipment	78.9		75.6
Gain on sale of property and equipment	Gain on sale of property and equipment	(1.1)		(0.8)	Gain on sale of property and equipment	(1.3)		(0.1)
Bad debt expense	Bad debt expense	5.8		4.9	Bad debt expense	(0.1)		4.0
Deferred income taxes	Deferred income taxes	3.5		2.2	Deferred income taxes	0.7		0.9
Stock-based compensation	Stock-based compensation	4.3		4.3	Stock-based compensation	2.9		2.9
Amortization of intangible assets	Amortization of intangible assets	6.4		3.0	Amortization of intangible assets	5.4		3.7
Changes in operating assets and liabilities, net of acquisition:	Changes in operating assets and liabilities, net of acquisition:				Changes in operating assets and liabilities, net of acquisition:
Trade accounts receivable	Trade accounts receivable	(98.8)		(108.0)	Trade accounts receivable	(138.0)		(147.2)
Inventories	Inventories	22.8		(76.9)	Inventories	10.6		(40.8)
Other current assets	Other current assets	34.2		9.8	Other current assets	(6.4)		35.6
Accounts payable	Accounts payable	17.6		21.6	Accounts payable	29.1		1.3
Accrued expenses	Accrued expenses	6.7		0.5	Accrued expenses	5.8		(13.3)
Income taxes	Income taxes	2.1		8.6	Income taxes	8.1		119.0
Other	Other	0.3		1.1	Other	0.3		8.7
Net cash provided by operating activities	Net cash provided by operating activities	780.8		590.3	Net cash provided by operating activities	446.3		491.8

Cash flows from investing activities:	Cash flows from investing activities:				Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(123.5)		(184.3)	Purchases of property and equipment	(67.3)		(90.0)
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	8.6		5.0	Proceeds from sale of property and equipment	5.8		5.1
Cash paid for acquisition	Cash paid for acquisition	(125.0)		0	Cash paid for acquisition	0		(125.0)
Other	Other	1.1		0.2	Other	0.1		1.2
Net cash used in investing activities	Net cash used in investing activities	(238.8)		(179.1)	Net cash used in investing activities	(61.4)		(208.7)

Cash flows from financing activities:	Cash flows from financing activities:				Cash flows from financing activities:
Proceeds from debt obligations	Proceeds from debt obligations	910.0		745.0	Proceeds from debt obligations	165.0		870.0
Payments against debt obligations	Payments against debt obligations	(850.0)		(800.0)	Payments against debt obligations	(165.0)		(810.0)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	38.3		43.0	Proceeds from exercise of stock options	13.6		26.3
Purchases of common stock	Purchases of common stock	(52.0)		0	Purchases of common stock	0		(52.0)
Payments of dividends	Payments of dividends	(430.2)		(372.3)	Payments of dividends	(321.6)		(286.8)
Net cash used in financing activities	Net cash used in financing activities	(383.9)		(384.3)	Net cash used in financing activities	(308.0)		(252.5)

Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(1.2)		(2.9)	Effect of exchange rate changes on cash and cash equivalents	(0.8)		(4.0)

Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	156.9		24.0	Net increase in cash and cash equivalents	76.1		26.6

Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	174.9		167.2	Cash and cash equivalents at beginning of period	245.7		174.9
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	331.8	191.2	Cash and cash equivalents at end of period	$	321.8	201.5

Supplemental information:	Supplemental information:				Supplemental information:
Cash paid for interest	Cash paid for interest	$	5.9	11.3	Cash paid for interest	$	5.0	4.1
Net cash paid for income taxes	Net cash paid for income taxes	$	201.4	182.6	Net cash paid for income taxes	$	132.7	21.3
Leased assets obtained in exchange for new operating lease liabilities	Leased assets obtained in exchange for new operating lease liabilities	$	76.1	87.6	Leased assets obtained in exchange for new operating lease liabilities	$	65.6	33.7

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~~June 30, ~~2020~~2021 and ~~2019~~2020

(Unaudited)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Fastenal Company and subsidiaries (collectively referred to as the 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, ~~2019.~~2020. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Impact of COVID-19

The COVID-19 pandemic has ~~impacted~~likely influenced various trends the company is experiencing today. These include supply chain disruptions and labor shortages, the ongoing presence of certain pandemic-specific personal protective equipment (PPE) in our inventory, and a modest but likely sustainable shift in our mix to include more safety products and government customers. Evaluating the second quarter of 2021 is challenging given the dramatic impacts of the pandemic on the company in the year-earlier period. However, in contrast to much of the preceding 12 to 15 months, we are currently seeing a limited impact on our business related directly to the COVID-19 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.

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 COVID-19 pandemic impacts our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the ~~duration, spread, severity,~~resumption of high levels of infection and ~~impact of~~hospitalization, the ~~COVID-19 pandemic, the effects of the COVID-19 pandemic~~resulting impact on our customers, suppliers, and vendors, ~~and~~ the remedial actions and stimulus measures adopted by federal, state, and local governments, and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future. Therefore, theare impacted. The Company cannot reasonably estimate the future impact at this time.

~~Stock Split~~

On April 17, 2019, the board of directors approved a 2-for-one stock split of the company's outstanding common stock. Holders of the company's common stock, par value $0.01 per share, at the close of business on May 2, 2019, received 1 additional share of common stock for every share of common stock they owned. The stock split took effect at the close of business on May 22, 2019. All historical common stock share and per share information for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been retroactively adjusted to reflect the stock split.

~~Recently Adopted~~Recently Issued Accounting Pronouncements

~~Effective January 1,~~In March 2020, ~~we adopted~~the Financial Accounting ~~Standard~~Standards Board ~~('FASB')~~(FASB) issued Accounting Standards Update ~~('ASU') 2016-13,~~(ASU) 2020-04, ~~Measurement~~Reference Rate Reform (Topic 848): Facilitation of ~~Credit Losses~~the Effects of Reference Rate Reform on Financial ~~Instruments~~Reporting, which ~~changed~~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 ~~way entities recognize impairment~~market transitions from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The guidance was effective 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 ~~most financial assets. Short-term and long-term financial assets, as defined by~~ the standard, are impacted by immediate recognition of estimated credit losses in the financial statements, reflecting the net amount expected to be collected. The adoption of this standard had an immaterial impactnew guidance on our condensed consolidated financial ~~statements.~~

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition~~statements; however, we have determined that, of ~~a Business, which provides guidance to assist entities~~our current debt commitments as outlined in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 requires that, to be a business, an acquired set must include, at a minimum, an input and a substantive process that together significantly contributes to the ability to create outputs. The company adopted this guidance during the first quarter of 2020 when evaluating the transaction discussed furtherdetail in Note ~~2, '~~6 ~~Asset Acquisition'~~'Debt Commitments.', only the obligations described under Unsecured Revolving Credit Facility in Note 6 would be impacted by ASU 2020-04. Our Senior Unsecured Promissory Notes Payable described in Note 6 each have fixed interest rates.

(2) ~~Asset Acquisition~~

On March 30, 2020, we purchased certain assets of Apex Industrial Technologies LLC ('Apex') that have contributed to the development, design, and scalability of the vending delivery platform utilized since 2008 within our industrial vending business to dispense product and lease devices to our customers. In connection with this transaction, we purchased a perpetual and unfettered use of key patents, designs, software and licenses, as well as direct access to the vending equipment supply chain.

The total purchase price of the assets acquired consisted of $125.0 paid in cash at closing. We funded the purchase price with available cash and proceeds from borrowings on our unsecured revolving credit facility. We accounted for the purchase as an asset acquisition as substantially all of the fair value of the gross assets acquired is concentrated in the identifiable intangible assets used in the vending delivery platform for our industrial vending business. On a relative fair value basis, the allocated identifiable intangible assets total $123.8 and tangible property and equipment total $1.2. The weighted average amortization period of the identifiable intangible assets is approximately 19.4 years.

~~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, 2020 and 2019~~

~~(Unaudited)~~

~~(3)~~ Revenue

Revenue Recognition

Net sales include products and shipping and handling charges, net of estimates for product returns, and any related sales incentives. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract. We recognize revenue by transferring the promised products to the customer, with the majority of revenue recognized at the point in time the customer obtains control of the products. We recognize revenue for shipping and handling charges at the time the products are delivered to or picked up by the customer. We estimate product returns based on historical return rates. Using probability assessments, we estimate sales incentives expected to be paid over the term of the contract. The 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

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Notes to Condensed Consolidated Financial Statements

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

June 30, 2021 and 2020

(Unaudited)

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 following geographic areas were as follows for the periods ended ~~September~~June 30:


		Nine-month Period					Three-month Period					Six-month Period			Three-month Period
		2020		2019	2020		2019		2021		2020	2021		2020
United States	United States	$	3,681.6	3,479.7	$	1,205.8	1,182.0	United States	$	2,446.1	2,475.7	$	1,258.2	1,309.0
Canada and Mexico	Canada and Mexico	462.3		458.4	160.5		157.2	Canada and Mexico	368.9		301.8	192.0		143.5
North America	North America	4,143.9		3,938.1	1,366.3		1,339.2	North America	2,815.0		2,777.5	1,450.2		1,452.5
All other foreign countries	All other foreign countries	145.4		118.7	47.0		39.9	All other foreign countries	109.7		98.5	57.5		56.5
Total revenues	Total revenues	$	4,289.3	4,056.8	$	1,413.3	1,379.1	Total revenues	$	2,924.7	2,876.0	$	1,507.7	1,509.0

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


		Nine-month Period						Three-month Period							Six-month Period				Three-month Period
		2020		2019		2020		2019			2021		2020		2021		2020
Manufacturing	Manufacturing	61.7	%	67.5	%	62.7	%	67.5	%	Manufacturing	68.5	%	61.2	%	68.9	%	55.2	%
Non-residential construction	Non-residential construction	11.4	%	12.9	%	11.2	%	13.0	%	Non-residential construction	11.1	%	11.4	%	11.4	%	10.7	%
Other	Other	26.9	%	19.6	%	26.1	%	19.5	%	Other	20.4	%	27.4	%	19.7	%	34.1	%
		100.0	%	100.0	%	100.0	%	100.0	%		100.0	%	100.0	%	100.0	%	100.0	%

~~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, 2020 and 2019~~

~~(Unaudited)~~

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


			Nine-month Period						Three-month Period								Six-month Period				Three-month Period
Type	Type	Introduced	2020		2019		2020		2019		Type	Introduced	2021		2020		2021		2020
Fasteners⁽¹⁾	Fasteners⁽¹⁾	1967	29.7	%	34.3	%	30.5	%	33.7	%	Fasteners(1)	1967	33.1	%	29.3	%	33.6	%	26.0	%
Tools	Tools	1993	8.1	%	10.0	%	8.5	%	10.2	%	Tools	1993	8.6	%	7.9	%	8.6	%	6.6	%
Cutting tools	Cutting tools	1996	4.6	%	5.8	%	4.7	%	5.7	%	Cutting tools	1996	5.0	%	4.6	%	5.1	%	3.9	%
Hydraulics & pneumatics	Hydraulics & pneumatics	1996	5.9	%	6.9	%	6.1	%	6.8	%	Hydraulics & pneumatics	1996	6.4	%	5.8	%	6.4	%	5.0	%
Material handling	Material handling	1996	5.1	%	5.9	%	5.1	%	5.9	%	Material handling	1996	5.5	%	5.0	%	5.6	%	4.4	%
Janitorial supplies	Janitorial supplies	1996	9.9	%	7.7	%	10.7	%	8.0	%	Janitorial supplies	1996	8.2	%	9.5	%	7.9	%	10.6	%
Electrical supplies	Electrical supplies	1997	4.1	%	4.7	%	3.9	%	4.6	%	Electrical supplies	1997	4.4	%	4.3	%	4.4	%	4.0	%
Welding supplies	Welding supplies	1997	3.5	%	4.2	%	3.5	%	4.2	%	Welding supplies	1997	3.8	%	3.4	%	3.8	%	2.9	%
Safety supplies	Safety supplies	1999	26.1	%	17.6	%	23.8	%	18.2	%	Safety supplies	1999	21.3	%	27.3	%	21.0	%	34.0	%
Other	Other		3.0	%	2.9	%	3.2	%	2.7	%	Other		3.7	%	2.9	%	3.6	%	2.6	%
			100.0	%	100.0	%	100.0	%	100.0	%			100.0	%	100.0	%	100.0	%	100.0	%

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

~~(4)~~(3) Stockholders' Equity

Dividends

On ~~October~~July 12, ~~2020,~~2021, our board of directors declared a quarterly dividend of $0.28 per sh ~~of $0.25 per sha~~are of common stock to be paid in cash on ~~November~~August 24, ~~2020~~2021 to shareholders of record at the close of business on ~~October~~July 27, ~~2020.~~2021. Since 2011, we have paid quarterly ~~dividends.~~cash dividends, and in 2020, we paid a special cash dividend late in the year. Our board of directors currently intends to continue paying quarterly cash dividends, provided that any future determination as to payment of dividends will depend on the financial condition and results of operations of the company and such other factors as are deemed relevant by the board of directors.

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

2020 2019
First quarter $ 0.250 0.215
Second quarter 0.250 0.215
Third quarter 0.250 0.220
Fourth quarter 0.250 0.220
Total $ 1.000 0.870

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Notes to Condensed Consolidated Financial Statements

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

~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

(Unaudited)

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:


	2021		2020
First quarter	$	0.28	$	0.25
Second quarter	$	0.28	$	0.25
Third quarter	$	0.28	$	0.25
Fourth quarter			$	0.25
Fourth quarter (special)			$	0.40
Total	$	0.84	$	1.40

Stock Options

The following tables summarize the details of options granted under our stock option plans that were outstanding as of ~~September~~June 30, ~~2020,~~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, 2020					Options Granted			Option Exercise (Strike) Price			Closing Stock Price on Date of Grant		June 30, 2021
Date of Grant	Date of Grant								Options Outstanding		Options Exercisable			Options Granted			Option Exercise (Strike) Price		Closing Stock Price on Date of Grant		Options Outstanding	Options Exercisable
January 4, 2021									January 4, 2021	741,510		$	48.00		$	47.650		724,219		26,643
January 2, 2020	January 2, 2020	902,263	$	38.00	$	37.230	878,190	24,964	January 2, 2020	902,263		$	38.00		$	37.230		855,563		24,964
January 2, 2019	January 2, 2019	1,316,924	$	26.00	$	25.705	1,222,784	25,010	January 2, 2019	1,316,924		$	26.00		$	25.705		1,079,070		321,940
January 2, 2018	January 2, 2018	1,087,936	$	27.50	$	27.270	898,184	281,144	January 2, 2018	1,087,936		$	27.50		$	27.270		806,121		376,785
January 3, 2017	January 3, 2017	1,529,578	$	23.50	$	23.475	996,285	385,821	January 3, 2017	1,529,578		$	23.50		$	23.475		860,329		486,483
April 19, 2016	April 19, 2016	1,690,880	$	23.00	$	22.870	957,561	460,857	April 19, 2016	1,690,880		$	23.00		$	22.870		842,593		645,649
April 21, 2015	April 21, 2015	1,786,440	$	21.00	$	20.630	607,209	360,577	April 21, 2015	1,786,440		$	21.00		$	20.630		540,418		377,234
April 22, 2014	April 22, 2014	1,910,000	$	28.00	$	25.265	342,000	187,000	April 22, 2014	1,910,000		$	28.00		$	25.265		251,372		175,138
April 16, 2013	April 16, 2013	410,000	$	27.00	$	24.625	40,466	21,728	April 16, 2013	410,000		$	27.00		$	24.625		18,771		18,771
April 17, 2012		2,470,000	$	27.00	$	24.505	92,748	92,748
Total	Total	13,104,021					6,035,427	1,839,849	Total	11,375,531								5,978,456		2,453,607


Date of Grant	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		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											January 4, 2021	0.4	%	5.00	2.0	%	29.17	%	$	9.57
January 2, 2020	January 2, 2020	1.7	%	5.00	2.4	%	25.70	%	$	6.81	January 2, 2020	1.7	%	5.00	2.4	%	25.70	%	$	6.81
January 2, 2019	January 2, 2019	2.5	%	5.00	2.9	%	23.96	%	$	4.40	January 2, 2019	2.5	%	5.00	2.9	%	23.96	%	$	4.40
January 2, 2018	January 2, 2018	2.2	%	5.00	2.3	%	23.45	%	$	5.02	January 2, 2018	2.2	%	5.00	2.3	%	23.45	%	$	5.02
January 3, 2017	January 3, 2017	1.9	%	5.00	2.6	%	24.49	%	$	4.20	January 3, 2017	1.9	%	5.00	2.6	%	24.49	%	$	4.20
April 19, 2016	April 19, 2016	1.3	%	5.00	2.6	%	26.34	%	$	4.09	April 19, 2016	1.3	%	5.00	2.6	%	26.34	%	$	4.09
April 21, 2015	April 21, 2015	1.3	%	5.00	2.7	%	26.84	%	$	3.68	April 21, 2015	1.3	%	5.00	2.7	%	26.84	%	$	3.68
April 22, 2014	April 22, 2014	1.8	%	5.00	2.0	%	28.55	%	$	4.79	April 22, 2014	1.8	%	5.00	2.0	%	28.55	%	$	4.79
April 16, 2013	April 16, 2013	0.7	%	5.00	1.6	%	37.42	%	$	6.33	April 16, 2013	0.7	%	5.00	1.6	%	37.42	%	$	6.33
April 17, 2012		0.9	%	5.00	1.4	%	39.25	%	$	6.85

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.

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

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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)

June 30, 2021 and 2020

(Unaudited)

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~~six-month periods ended ~~September~~June 30, 2021 and 2020 was $2.9 and ~~2019 was $4.3 and $4.3,~~$2.9, respectively. Unrecognized stock-based compensation expense related to outstanding unvested stock options as of ~~September~~June 30, ~~2020~~2021 was ~~$13.8~~$15.3 and is expected to be recognized over a weighted average period of ~~4.01~~4.27 years. Any future changes in estimated forfeitures will impact this amount.

~~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, 2020 and 2019~~

~~(Unaudited)~~

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				Six-month Period		Three-month Period
Reconciliation	Reconciliation	2020	2019	2020	2019	Reconciliation	2021	2020	2021	2020
Basic weighted average shares outstanding	Basic weighted average shares outstanding	573,673,031	572,934,475	573,913,929	573,452,002	Basic weighted average shares outstanding	574,465,377	573,550,730	574,592,653	573,197,303
Weighted shares assumed upon exercise of stock options	Weighted shares assumed upon exercise of stock options	1,797,201	1,042,830	2,203,402	914,771	Weighted shares assumed upon exercise of stock options	2,289,356	1,577,540	2,359,005	1,754,697
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	575,470,232	573,977,305	576,117,331	574,366,773	Diluted weighted average shares outstanding	576,754,733	575,128,270	576,951,658	574,952,000


		Nine-month Period					Three-month Period					Six-month Period			Three-month Period
Summary of Anti-dilutive Options Excluded	Summary of Anti-dilutive Options Excluded	2020		2019	2020		2019	Summary of Anti-dilutive Options Excluded	2021		2020	2021		2020
Options to purchase shares of common stock	Options to purchase shares of common stock	852,728		460,824	0		553,366	Options to purchase shares of common stock	688,058		893,428	696,951		895,566
Weighted average exercise prices of options	Weighted average exercise prices of options	$	38.00	27.55	$	0	27.59	Weighted average exercise prices of options	$	48.00	38.00	$	48.00	38.00

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.

~~(5)~~(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 2017 in the case of United States federal examinations, and with limited exceptions, before 2015 in the case of foreign, state, and local examinations. During the first ~~nine~~six months of ~~202~~2021~~0, there~~, there were 0 material changes in unrecognized tax benefits.

During ~~the second quarter of~~ 2020, we deferred ~~$111.5~~approximately $30.0 in ~~federal and state income and~~ payroll ~~tax payments~~taxes as allowed under the Coronavirus Aid, Relief, and Economic Security Act (the ~~'CARES'~~CARES Act), which was signed into law in March 2020 to help businesses navigate COVID-19 related challenges. The deferred ~~federal and state income tax payments, which constituted $103.9 of the deferred value, were made in the third quarter of 2020, while the deferred~~ payroll taxes will be paid induring the third quarter of 2021.

~~(6)~~(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 ~~$85.4.~~$88.7. We believe the likelihood of funding the guarantee obligation under any provision of the operating lease agreements is remote.

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Notes to Condensed Consolidated Financial Statements

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

~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

(Unaudited)

~~(7)~~(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:


		Average Interest Rate at September 30, 2020				Debt Outstanding								Average Interest Rate at June 30, 2021					Debt Outstanding
					Maturity Date			September 30, 2020		December 31, 2019			Average Interest Rate at June 30, 2021		Maturity Date			June 30, 2021		December 31, 2020
Unsecured revolving credit facility	Unsecured revolving credit facility	1.10	%	November 30, 2023		$	0		210.0	Unsecured revolving credit facility	1.05	%		November 30, 2023		$	0		0
Senior unsecured promissory notes payable, Series A	Senior unsecured promissory notes payable, Series A	2.00	%	July 20, 2021		40.0			40.0	Senior unsecured promissory notes payable, Series A	2.00	%		July 20, 2021		40.0			40.0
Senior unsecured promissory notes payable, Series B	Senior unsecured promissory notes payable, Series B	2.45	%	July 20, 2022		35.0			35.0	Senior unsecured promissory notes payable, Series B	2.45	%		July 20, 2022		35.0			35.0
Senior unsecured promissory notes payable, Series C	Senior unsecured promissory notes payable, Series C	3.22	%	March 1, 2024		60.0			60.0	Senior unsecured promissory notes payable, Series C	3.22	%		March 1, 2024		60.0			60.0
Senior unsecured promissory notes payable, Series D	Senior unsecured promissory notes payable, Series D	2.66	%	May 15, 2025		75.0			0	Senior unsecured promissory notes payable, Series D	2.66	%		May 15, 2025		75.0			75.0
Senior unsecured promissory notes payable, Series E	Senior unsecured promissory notes payable, Series E	2.72	%	May 15, 2027		50.0			0	Senior unsecured promissory notes payable, Series E	2.72	%		May 15, 2027		50.0			50.0
Senior unsecured promissory notes payable, Series F	Senior unsecured promissory notes payable, Series F	1.69	%	June 24, 2023		70.0			0	Senior unsecured promissory notes payable, Series F	1.69	%		June 24, 2023		70.0			70.0
Senior unsecured promissory notes payable, Series G	Senior unsecured promissory notes payable, Series G	2.13	%	June 24, 2026		25.0			0	Senior unsecured promissory notes payable, Series G	2.13	%		June 24, 2026		25.0			25.0
Senior unsecured promissory notes payable, Series H	Senior unsecured promissory notes payable, Series H	2.50	%	June 24, 2030		50.0			0	Senior unsecured promissory notes payable, Series H	2.50	%		June 24, 2030		50.0			50.0
Total	Total					405.0			345.0	Total						405.0			405.0
Less: Current portion of debt	Less: Current portion of debt					(40.0)			(3.0)	Less: Current portion of debt						(40.0)			(40.0)
Long-term debt	Long-term debt					$	365.0		342.0	Long-term debt						$	365.0		365.0

Outstanding letters of credit under unsecured revolving credit facility - contingent obligation	Outstanding letters of credit under unsecured revolving credit facility - contingent obligation					$	36.3		36.3	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. Any borrowings outstanding under the Credit Facility for which we have the ability and intent to pay using cash within the next twelve months, will be classified 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%. 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.

Senior Unsecured Promissory Notes Payable

We have issued senior unsecured promissory notes under our master note agreement (the ~~'Master~~Master Note ~~Agreement')~~Agreement) in the aggregate principal amount of $405.0. Our aggregate borrowing capacity under the Master Note Agreement is $600.0; however, none of the institutional investors party to that agreement are committed to purchase notes thereunder. There is no amortization of these notes prior to their maturity date and interest is payable quarterly. The notes currently issued under our Master Note Agreement, including the maturity date and fixed interest rate per annum of each series of note, are contained in the table above. The Master Note Agreement contains certain financial and other covenants and we are currently in compliance with these covenants.

(7) Legal Contingencies

The nature of our potential exposure to legal contingencies is described in our 2020 annual report on Form 10-K in Note 11 of the Notes to Consolidated Financial Statements. As of June 30, 2021, there were no litigation matters that we consider to be probable or reasonably possible to have a material adverse outcome.

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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~~June 30, ~~2020~~2021 and ~~2019~~2020

(Unaudited)

(8) ~~Legal Contingencies~~

~~The nature of our potential exposure to legal contingencies is described in our 2019 annual report on Form 10-K in Note 10 of the Notes to Consolidated Financial Statements. As of September 30, 2020, there were no litigation matters that we consider to be probable or reasonably possible to have a material adverse outcome.~~

~~(9)~~ 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 43 'Stockholders' Equity'.

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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. ~~Share and per share information in this 10-Q has been adjusted to reflect the two-for-one stock split effective at the close of business on May 22, 2019.~~ 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 ~~networ~~knetwork of over 3,200 in-market locations. Most of our customers are in the manufacturing and non-residential construction markets. The manufacturing market includes ~~producers who incorporate our~~sales of products ~~into final goods, called~~for both original equipment manufacturing (OEM), ~~and/or utilize~~where our ~~supplies~~products are consumed in the ~~maintenance,~~final products of our customers, and manufacturing, repair and ~~operation~~operations (MRO) ~~of their~~, where our products are consumed to support the facilities and ~~equipment.~~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 (the United States, Canada, and Mexico), though our presence outside of North America continues to grow as well.~~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 ~~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. ~~Our growth drivers have evolved and changed, and can be expected to continue to evolve and change, over time.~~

Impact of COVID-19 on Our Business

Evaluating the company's financial performance in the second 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 ~~impacts of the~~ COVID-19 pandemic ondramatically impacted our business ~~were dramatic~~ in two respects. First, local and national actions taken ~~such as stay-at-home mandates,~~to mitigate the spread of the virus reduced business activity sharply, ~~as many customers either closed their locations or operated at significantly diminished capacity. This effect was illustrated in~~which produced a significant decline in ~~sales for~~the sale of products, such as fasteners, to our ~~fastener products.~~traditional manufacturing and construction customers. Second, social actions taken to mitigate the effects of the pandemic produced significant demand for personal protection equipment ~~('PPE')~~(PPE) and sanitation products, generating significant sales of such products ~~not only~~ to ~~certain~~ traditional customers, ~~but also to~~ state and local government entities, ~~as well as~~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 ~~dynamics affected~~precautions allowed our ~~business throughout the second quarter of 2020, but the effects were greatest in April, with sequential improvements in May and June as business restrictions gradually eased.~~

operations to function effectively.

The pandemic continued to ~~have a significant~~ impact on our business in the third ~~quarter~~and fourth quarters of ~~2020. The~~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 ~~third~~second half of 2020. In the first quarter of ~~2020. This improved~~2021, the ~~outlook~~re-opening and recovery of the manufacturing and construction marketplace continued and accelerated, operating restrictions eased, and our ability to engage directly with customers, ~~that support~~while not at pre-pandemic levels, improved. This resulted in improving performance in our traditional branch and Onsite business and ~~moderated the level~~normalization of ~~demand for PPE~~our product and ~~sanitation products that we experienced at the onset of the pandemic. We believe that the sequential gains in economic activity that we experienced in the latter part of~~customer mix. In general, industrial and construction businesses have learned to navigate COVID-19 while maintaining operations.

In the second quarter of ~~2020 continued through~~2021, the ~~third quarter~~COVID-19 pandemic has likely influenced various trends that the company is currently experiencing. These include supply chain disruptions and labor shortages, the ongoing presence of ~~2020, although~~certain pandemic-specific PPE in our inventory, and a modest but likely sustainable 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 ~~rate~~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 ~~improvement remains gradual~~traditional economic and ~~the overall activity level remains below pre-pandemic levels.~~

~~Consistent with broader social trends,~~marketplace dynamics than of pandemic-related issues such as facility restrictions, labor force illness, and PPE demand. While we ~~have taken steps~~continue to ~~safeguard the health of our employees. This includes closing branch and corporate facilities~~provide employees supplemental leave to ~~outside personnel, enabling through technology significant workfrom home capabilities for many employees, and where employees remain in the workplace creating space between work areas, providing ample~~manage any COVID-related issues that arise, make PPE and cleaning supplies broadly available in all of our locations, and ~~having formal policies for mitigation in~~require employees to follow local regulations, at this time most operating restrictions related to the ~~event of cases of illness. Due to these precautions, our operations~~pandemic have ~~continued to function effectively, including internal~~been removed. Our financial controls over financial ~~reporting.~~reporting functioned effectively throughout the pandemic and continue to do so.

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InIt is possible the COVID-19 pandemic could further impact our operations and the operations of our suppliers and vendors, particularly in light of ~~a continued high rate~~the potential of ~~viral infections that exists as of this date, there remains significant uncertainty concerning the magnitude~~variant strains of the ~~impact~~virus to cause a resumption of high levels of infection and ~~duration of the COVID-19 pandemic. Factors deriving from the COVID-19 response~~hospitalization. Should that ~~have or may~~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. ~~With respect~~

The extent to ~~liquidity,~~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 continue to evaluate and limit costs and spending across our organization. This includes reduced headcount, a reduction in discretionary spending, and lower anticipated spending on capital investment projects. As of the end of the third quarter of 2020, we have substantially all of our $700.0 bank revolver available for use in the event that the need arises.

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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 ~~sal~~saes ~~increased $34.2,~~les decreased $1.3, or ~~2.5%~~0.1%, in the ~~third~~ second quarter of 2021 relative to the second quarter of 2020. Our gross profit increased $29.1, or 4.3%, in the second quarter of 2021 relative to the second quarter of 2020, ~~relative to the third quarter of 2019. Our gross profit~~and as a percentage of nnet sales~~et sales declined~~increased to ~~45.3%~~46.5% in the ~~third~~second quarter of 2021 from 44.5% in the second quarter of 2020. Our operating income increased $1.7, or 0.5%, in the second quarter of 2021 relative to the second quarter of 2020, ~~from 47.2% in the third quarter of 2019. Our operating income,~~and as a percentage of net sales increased to ~~20.5%~~21.1% in the second quarter of 2021 from 20.9% in the ~~third~~second quarter of ~~2020 from 20.4% in the third quarter of 2019.~~ 2020. Our net earnings during the ~~third~~second quarter of ~~2020~~2021 were ~~$221.5,~~ $239.7, an increase of ~~3.7%~~0.4% when compared to the ~~third~~second quarter of ~~2019.~~2020. Our diluted net earnings per share were ~~$0.38 during~~$0.42 during the ~~third~~second quarter of ~~2020 compared to $0.37~~2021, which was unchanged from $0.42 during ~~the third quarter of 2019, an increase of~~ ~~3.4%.~~

~~Our results in the third quarter of 2020 were affected by the impacts of the COVID-19 pandemic throughout the period, though these impacts were generally not as severe as was experienced in~~ the second quarter of 2020. Based on trends in vending dispenses and hub picks during the period, we believe there was gradual sequential improvement in general business activity each month of the quarter. Sales of COVID-related products (masks, shields, sanitizer, etc.) remained elevated in the third quarter of 2020 relative to the third quarter of 2019, but moderated relative to the second quarter of 2020. At the same time, underlying business conditions remained weak, although not as difficult as was experienced in the second quarter of 2020. While signings for Onsites (defined as dedicated sales and service provided from within, or in close proximity to, the customer's facility) and vending devices remain below pre-pandemic levels, our customers are beginning to re-engage in discussions involving our growth drivers as business conditions have begun to normalize.

The table below summarizes our total and FTE (based on 40 hours per week) employee headcount, our investments in in-market locations (defined as the sum of the total number of public branch locations and the total number of active Onsite locations), and ~~industrial vending~~weighted FMI devices at the end of the periods presented and the percentage change compared to the end of the prior periods.


				Change Since:			Change Since:			Change Since:					Change Since:			Change Since:			Change Since:
		Q3 2020	Q2 2020			Q4 2019			Q3 2019				Q2 2021	Q1 2021			Q4 2020	Q4 2020		Q2 2020
In-market locations- absolute employee headcount	In-market locations- absolute employee headcount	12,708	12,982	-2.1	%	13,977	-9.1	%	14,128	-10.1	%	In-market locations - absolute employee headcount	12,446	12,683	-1.9	%	12,680	-1.8	%	12,982	-4.1	%
In-market locations - FTE employee headcount												In-market locations - FTE employee headcount	11,390	11,323	0.6	%	11,260	1.2	%	11,310	0.7	%
Total absolute employee headcount	Total absolute employee headcount	20,336	20,667	-1.6	%	21,948	-7.3	%	21,938	-7.3	%	Total absolute employee headcount	20,317	20,532	-1.0	%	20,365	-0.2	%	20,667	-1.7	%
Total FTE employee headcount												Total FTE employee headcount	18,253	18,094	0.9	%	17,836	2.3	%	17,814	2.5	%

Number of public branch locations	Number of public branch locations	2,033	2,060	-1.3	%	2,114	-3.8	%	2,146	-5.3	%	Number of public branch locations	1,921	1,959	-1.9	%	2,003	-4.1	%	2,060	-6.7	%
Number of active Onsite locations	Number of active Onsite locations	1,236	1,212	2.0	%	1,114	11.0	%	1,076	14.9	%	Number of active Onsite locations	1,323	1,285	3.0	%	1,265	4.6	%	1,212	9.2	%
Number of in-market locations	Number of in-market locations	3,269	3,272	-0.1	%	3,228	1.3	%	3,222	1.5	%	Number of in-market locations	3,244	3,244	0.0	%	3,268	-0.7	%	3,272	-0.9	%
Industrial vending devices (installed count) ⁽¹⁾		94,395	92,615	1.9	%	89,937	5.0	%	88,327	6.9	%
Ratio of industrial vending devices to in-market locations		29:1	28:1			28:1			27:1
Ratio of in-market location FTE headcount to in-market locations												Ratio of in-market location FTE headcount to in-market locations	4:1	3:1			3:1			3:1
Weighted FMI devices (MEU installed count) (1)												Weighted FMI devices (MEU installed count) (1)	87,567	85,157	2.8	%	83,951	4.3	%	80,124	9.3	%
Ratio of weighted FMI devices to in-market locations												Ratio of weighted FMI devices to in-market locations	27:1	26:1			26:1			24:1

⁽¹⁾ This number ~~primarily represents~~excludes approximately 13,000 non-weighted devices ~~which principally dispense product and produce product revenues, and excludes slightly more~~ ~~than 15,000 devic~~es that are part of our locker lease ~~program where the devices are principally used for the check-in/check-out of equipment.~~program.

During the last twelve months, wwe increased~~e reduced~~ our a~~bsolute~~total FTE employee headcount by ~~1,420 people in our in-market locations and 1,602 people in total. The reduction in our absolute employee headcount~~439. This reflects an increase in our in-market and non-in-market selling FTE employee headcount of 225 to support growth in the marketplace and sales initiatives targeting customer acquisition. We had an increase in our distribution center ~~locations reflects efforts~~FTE employee headcount of 76 to ~~control expenses in response to weaker demand. The decrease~~support increasing product throughput at our facilities. We had an increase in our ~~total absolute~~remaining FTE employee ~~count is mostly from~~headcount of 138 that relates primarily to personnel ~~reductions~~investments in ~~our in-market locations, distribution centers,~~information technology, purchasing, and manufacturing operations, and was only partly offset by additions in non-branch selling and support roles. The latter reflects the addition of certain employees from our acquisition of the mostly intangible assets of Apex Industrial Technologies LLC, our historical vending technology partner, as well as roles to support customer acquisition and implementation, particularly as it relates to our growth drivers and to support general corporate functions.product development.

We opened ~~three~~five branches in the ~~third~~second quarter of ~~2020~~2021 and closed 3043 branches, net of conversions. We activated 5762 Onsite locations in the ~~third~~second quarter of ~~2020~~2021 and closed ~~33,~~24, net of conversions. ~~The~~In any period, the number of closings ~~reflects~~tend to reflect both normal churn in our business, whether due to redefining or exiting customer relationships, the shutting or relocation of a customer ~~facility,~~facilities that host our locations, or a customer decision, as well as our ongoing review of underperforming locations. ~~Our in-market network forms the foundation of~~

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Our in-market network forms the foundation of our business strategy, and we will continue to open or close locations as is deemed necessary to sustain and improve our network, support our growth 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~~June 30:


		Nine-month Period						Three-month Period							Six-month Period				Three-month Period
		2020		2019		2020		2019			2021		2020		2021		2020
Net sales	Net sales	100.0	%	100.0	%	100.0	%	100.0	%	Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Gross profit	Gross profit	45.4	%	47.3	%	45.3	%	47.2	%	Gross profit	46.0	%	45.5	%	46.5	%	44.5	%
Operating and administrative expenses	Operating and administrative expenses	25.0	%	27.1	%	24.9	%	26.8	%	Operating and administrative expenses	25.5	%	25.1	%	25.4	%	23.6	%
Gain on sale of property and equipment		0.0	%	0.0	%	-0.1	%	0.0	%
Operating income	Operating income	20.5	%	20.2	%	20.5	%	20.4	%	Operating income	20.5	%	20.4	%	21.1	%	20.9	%
Net interest expense	Net interest expense	-0.2	%	-0.3	%	-0.2	%	-0.3	%	Net interest expense	-0.2	%	-0.2	%	-0.2	%	-0.2	%
Earnings before income taxes	Earnings before income taxes	20.3	%	19.9	%	20.4	%	20.2	%	Earnings before income taxes	20.3	%	20.3	%	20.9	%	20.8	%

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

Net Sales

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

Nine-month Period Three-month Period
2020 2019 2020 2019
Net sales $ 4,289.3 4,056.8 $ 1,413.3 1,379.1
Percentage change 5.7 % 8.7 % 2.5 % 7.8 %
Business days 192 191 64 64
Daily sales $ 22.3 21.2 $ 22.1 21.5
Percentage change 5.2 % 8.7 % 2.5 % 6.1 %
Daily sales impact of currency fluctuations -0.2 % -0.4 % 0.0 % -0.2 %
Daily sales impact of acquisitions 0.0 % 0.1 % 0.0 % 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.


	Six-month Period					Three-month Period
	2021			2020		2021			2020
Net sales	$	2,924.7		2,876.0		$	1,507.7		1,509.0
Percentage change	1.7		%	7.4	%	-0.1		%	10.3	%
Business days	127			128		64			64
Daily sales	$	23.0		22.5		$	23.6		23.6
Percentage change	2.5		%	6.6	%	-0.1		%	10.3	%
Daily sales impact of currency fluctuations	0.9		%	-0.3	%	1.2		%	-0.4	%

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.

In the first ~~nine~~six months of ~~2020,~~2021, our net sales of $2,924.7 increased $48.7, or 1.7%. Adju ~~of $4,289.3 increased $232.5, or 5.7%. Adjusted~~sted for ~~an extra~~one fewer selling day in the first quarter of ~~2020,~~2021, our daily sales rate increased ~~5.2%~~2.5%. This increase is due to ~~higher~~improved unit sales across most products to our traditional manufacturing and construction customers, resulting from continued improvement in business activity. This is only partly offset by lower unit sales of pandemic-related PPE and sanitation products to ~~global governments, healthcare providers,~~traditional, state and ~~businesses as they have addressed~~local government, and health care customers. These favorable factors were partly offset by severe weather in February 2021, which we believe reduced net and daily sales growth by 30 to 50 basis points in the first six months of 2021 compared to the ~~increase in COVID-19 infections and the need to re-open economies and businesses safely.~~first six months of 2020.

~~The calendar year 2020 to date has been marked by three distinct phases:~~

•Reported growth for the first six months of 2021 underrepresents the underlying market strength our business is experiencing. In ~~January and February~~the second quarter of 2020, ~~underlying business conditions were sluggish, an extension~~we reported sales growth as significant sales of ~~what~~"surge"-related PPE and sanitizer sales to critical businesses, state and local governments, and healthcare companies more than offset the severe economic weakness experienced by our traditional manufacturing and construction customers. While we ~~experienced at the end of 2019. The Purchasing Managers Index ('PMI'), published by the Institute for Supply Chain Management, averaged~~ ~~50.5 during this period, just barely above a reading of 50 that is indicative of growing demand. However, we were able to grow our daily sales by 4.1% over this period, due largely to unit~~have retained incremental sales from ~~our vending and Onsite growth initiatives and, to a lesser extent, product pricing as a result of pricing actions taken in mid-2019. These conditions carried into~~some customers that bought from us for the first ~~part of March.~~

•~~Beginning~~time in the second ~~half~~quarter of ~~March, global governments~~2021, we have always viewed our surge sales as being specific to that period and ~~businesses began~~unlikely to ~~respond aggressively to~~recur in future periods. With the ~~COVID-19 pandemic, resulting in weaker business activity. This produced two effects. First, underlying business conditions turned sharply negative as stay-at-home orders in many~~worst effects of the ~~geographic markets~~pandemic on our marketplace having passed as of the second quarter of 2021, these sales did not recur, and their absence meaningfully reduced our growth in ~~which we operate caused businesses to close or operate at significantly reduced levels.~~the first six months of 2021. This ~~was captured by~~had the ~~PMI, which averaged 45.7~~effect of masking otherwise very strong growth from~~April to June, with readings below 50 being indicative of declining demand. During this period, sales through our branches to~~ our traditional manufacturing and construction customers. Indeed, we believe the best way to understand underlying economic trends is through the performance of our fastener product line, 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 six months and ~~walk-in customers fell,~~the second quarter of 2021 was 15.4% and 28.4%, respectively, which we believe is more ~~than offsetting~~reflective of the ~~unit gains~~strong underlying market environment we ~~had~~experienced through the period.

The overall impact of product pricing on net sales was 70 to 100 basis points during the first six months of 2021 and 80 to 110 basis points during the second quarter of 2021. This increase reflects actions we have taken in the first six months and second quarter of 2021 in response to inflationary pressure that we experienced in January, February, and early March. This effect was most pronounced in April, but we did experience some sequential improvement in business conditions in May and June. This was best illustrated by our daily sales rate trend of fasteners, which is our most cyclical product ~~category and which was unaffected by surge activity. In April 2020, fastener~~and transportation costs through both

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periods. These pressures persist in the marketplace and are likely to require further organizational pricing actions in the second half of 2021 in an effort to offset this impact.

From a product standpoint, fastener daily sales ~~were down 22.5%. In May, the rate of decline moderated to down 15.3% and in June, it moderated again to down 11.4%~~. Second, we saw a surge in PPE and sanitation orders as governments, front line responders, and critical infrastructure customers sought to protect their employees as they worked to mitigate the effects of the pandemic. This resulted in a meaningful increase in our s~~ales of PPE and sanitation products that began late in March and is best illustrated by daily growth in our safety line in April of 119.7%, in May of 136.3%, and in June of 94.9%. Sales~~ ~~of "surge" product during this period, which we estimate to have been in a range of $350.0 to $360.0, more than offset weakness in our traditional customer base, and our second quarter 2020 daily sales grew 10.3%.~~

•~~We believe the third quarter of 2020 reflects a gradual normalization of business activity, although still at levels below those that existed~~increased 15.4% in the first ~~quarter~~six months of 2020. The sequential improvements we experienced in May and June continued throughout the period, albeit at a much more gradual pace as our manufacturing and non-residential construction customers continued to address low demand as well as supply chain and labor force challenges. This was again captured by the PMI, which improved2021 from the ~~second quarter of 2020 to average 55.2 from July to September, as well as our sales of fastener products, the decline in daily sales of which moderated further to 6.9% in the peri~~od. On the other hand, sales of PPE and sanitizer products, while still elevated relative to pre-pandemic levels, eased as supply chains and customer purchasing patterns stabilized. Daily sales of safety products, a good proxy for these trends, increased 34.4% in the third quarter of 2020. Weak, but improving, activity in our traditional business and strong, but moderating, sales of pandemic-related supplies largely offset each other to produce total daily sales growth in the third quarter of 2020 of 2.5%.

Product pricing was a stable, albeit minimal, contributor throughout the nine month period and was immaterial in the third quarter of 2020. We estimate the contribution of price increases to sales growth in the first ~~nine months and third quarter of 2020~~ ~~was 30 to 60 basis points and 10 to 40 basi~~s points, respectively. In the third quarter of 2020 specifically, the impact of pricing became immaterial as the inflationary environment has become subdued, and we are now comparing to the price increases that were instituted in the third quarter of 2019. We estimate the contribution of price increases to sales growth in the first nine months and third quarter of 2019 was 80 to 110 basis points and 90 to 120 basis points, respectively.

Pandemic-related events also produced significant shifts in the mix of our business through the first nine months of 2020. This impact was most pronounced in the second quarter of 2020, but even in the third quarter of 2020, as business conditions began to normalize, we saw our mix of safety products remain elevated relative to pre-pandemic levels. From a product standpoint, fastener daily sales declined 8.7% in the first ninesix months of 2020 ~~from the first nine months of 2019~~ and accounted for ~~29.7%~~33.1% of ~~total sales, down~~total sales, from ~~34.3%~~29.3% of sales in the ~~prior year. Fasteners tend~~first six months of 2020 and 34.7% of sales in the first six months of 2019. The fastener product line tends to behave our highest ~~margin product line.~~gross profit margin. In contrast, ~~safety~~safety daily sales, which ~~includes~~includes PPE, ~~grew 56.5%~~fell 20.2% in the first ~~nine~~six months of 2021 from the first six months of 2020 ~~from the first nine months of 2019~~ and ~~accounted~~accounted for ~~26.1%~~21.3% of total sales, up from ~~17.6%~~27.3% of sales in the ~~prior year.~~first six months of 2020 and 17.4% of sales in the first six months of 2019. Daily sales of other products, which includes sanitizer, ~~decreased 2.8%~~increased 7.5% in the first ~~nine~~six months of 2021 from the first six months of 2020 ~~from the first nine months of 2019~~ and accounted for ~~44.2%~~45.6% of total sales, ~~down~~ from ~~48.1%~~43.4% of sales in the first six months of 2020 and 47.9% of sales in the ~~prior year.~~first six months of 2019. Safety and other products tend to have gross profit margins below our company average.

From a customer standpoint, daily sales ofto our manufacturing ~~custome~~customers increased 14.6% in rsthe first six months of 2021 from the first six months of 2020. Daily sales to our non-residential construction customers declined ~~3.7%~~0.8% in the first six months of 2021 from the first six 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~~six months of 2020 from the first nine months of 2019. Daily sales of our non-residential construction customers declined 7.5% in the first nine months of 2020 from the first nine months of 2019. These reflected the challenging underlying business environ~~ment through the period. In contrast, sales~~2020. Sales to government customers, which includes health care providers, ~~increased 139.7%~~decreased 39.2% and was ~~8.5% of our sales mix in the first nine months of 2020, up from 3.7%~~5.0% of sales in the first ~~nine~~six months of ~~2019~~2021, down f.

~~Pandemic-related events also reduced activity around our growth drivers, as customers shifted their energies to managing short term disruption rather than long-term strategic planning. For instance:~~

•~~We signed 12,961 industrial vending devices during the first nine months~~rom 8.4% of ~~2020 and 4,680 industrial vending devices during the third quarter of 2020, down 22.4% and 17.5%, respectively, from the year earlier periods. On a business day basis, we signed 75~~sales in the first ~~quarter~~six months of ~~2020, 54~~2020. Government customers represented 3.7% of our sales mix prior to the pandemic in 2019, below the level in the first six months of 2021, which may suggest retention of certain customers that bought from us for the first time during the pandemic. However, government customers were significant buyers of surge PPE in the second quarter of 2020, and 73the absence of those purchases in the ~~third~~second quarter of ~~2020, still below our pre-pandemic goal of 100 device signings daily. Our installed device count on September 30, 2020 was 94,395, an increase of 6.9% over September 30, 2019. Daily~~2021 produced the significant decline in sales ~~through our vending devices~~ ~~declined at a low single-digit pac~~eexperienced with these customers in the first ~~nine~~six months of ~~2020~~2021.

During the pandemic, many of our customers enacted 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 ~~low-to-mid single-digit pace~~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 ~~third quarter~~customer's facility), or implement agreements that have been signed. While access was not quite at pre-pandemic levels during the first six months of ~~2020~~2021, it improved meaningfully through the period and its ability to negatively influence our growth driver performance is diminishing as ~~lower revenue per machine more than offset the increase in the installed base in each period. These device counts do not include slightly more than 15,000 vending devices deployed as part of~~ a ~~lease locker program.~~result.

•~~We signed 187 new~~During the first six months of 2021, we signed 155 new Onsite locations ~~during the first nine months of 2020.~~. This included 8568 signings in the first quarter of ~~2020, 40~~2021 and 87 in the second quarter of ~~2020, and 62 in the third quarter of 2020.~~2021. We had ~~1,236~~1,323 active sites on ~~September~~June 30, ~~2020,~~2021, which representedan increaseof ~~14.9%~~9.2% from ~~September~~June 30, ~~2019.~~2020. Daily sales through our Onsite locations, excluding sales transferred from branches to new ~~Onsites, declined~~Onsites, grew at a ~~low single-digit pace~~better than 25% rate in ~~both~~ the ~~first nine months~~second quarter of ~~2020 and~~2021 over the ~~third~~second quarter of 2020. ~~Weaker activity resulted~~This growth is due to improved demand from our Onsite customers against relatively easy comparisons, as many customers with Onsites were idled by COVID-19 or operating at significantly reduced utilization in ~~weaker sales at more mature sites~~the second quarter of 2020. A lesser contributor to the growth was the increase in our installed base. Our Onsite signings in the second quarter of 2021 were the highest since the pandemic began, and represent further progress toward 375 to 400 annual Onsite signings, which ~~more than offset~~we believe the ~~contribution of newer active~~market will support as market conditions and access to customer facilities and decision makers continue to normalize. We continue to believe signings in 2021 will be between 300 and 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 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.

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~~In April 2020, we retracted~~The table below summarizes the signings and installations of, and sales through, our ~~2020 signing goals~~FMI devices.


	Six-month Period								Three-month Period
	2021			2020			Change		2021			2020			Change
Weighted FASTVend/FASTBin signings (MEUs)	10,526			8,165			28.9	%	5,843			3,473			68.2	%
Signings per day	83			64					91			54
Weighted FASTVend/FASTBin installations (MEUs; end of period)									87,567			80,124			9.3	%

FASTVend/FASTBin net sales	$	628.7		$	514.3		22.3	%	$	327.7		$	233.4		40.4	%
% of net sales	21.5		%	17.9		%			21.7		%	15.5		%
FASTStock net sales	$	251.0		$	142.1		76.7	%	$	140.5		$	56.8		147.5	%
% of net sales	8.6		%	4.9		%			9.3		%	3.8		%
FMI net sales	$	879.7		$	656.3		34.0	%	$	468.2		$	290.1		61.4	%
FMI daily sales	$	6.9		$	5.1		35.1	%	$	7.3		$	4.5		61.4	%
% of net sales	30.1		%	22.8		%			31.1		%	19.2		%

Our goal for weighted FASTVend and FASTBin device signings in 2021 remains in a range of 23,000 to 25,000 MEUs.

All metrics provided above exclude approximately 13,000 non-weighted vending devices ~~and Onsites based on~~that are part of a ~~marketplace that had begun to weaken sharply and a customer environment that had begun to divert its energies to near-term challenges over strategic planning. In~~leased locker program.

•Our e-commerce business includes sales made through an electronic data interface (EDI) with our customers or through the ~~case of both vending devices and Onsites, signings bottomed in April and have improved since, with signings higher for both vending devices and Onsites~~web. Daily sales through e-commerce grew 44.5% in the ~~third~~first six months of 2021 and grew 53.3% in the second quarter of ~~2020 than we achieved~~2021. Revenues attributable to e-commerce represented 13.2% of our total revenues in the second quarter of 2020. Further, customers are beginning to re-engage in discussions involving our growth drivers. However, this improvement remains gradual and signings remain below our pre-pandemic level of expectations. 2021.

We view our digital footprint to be a combination of our 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 ~~favorable long-term outlook~~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 ~~growth drivers as unchanged relative to pre-pandemic levels. However, the timing of such normalization remains uncertain, and as~~customers. As a result, we ~~have not re-instituted guidance for vending~~believe our opportunity to grow our business will be enhanced through the continued development and ~~Onsite signings for 2020.~~expansion of our digital capabilities.

Our Digital Footprint in the second quarter of 2021 represented 41.7% 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 identified a calculation error and determined that, using the same approach to calculating our Digital Footprint as we used in the second quarter of 2021, our Digital Footprint represented 39.1% of our sales in the first quarter of 2021.

Net sa~~les increased $34.2,~~les decreased $1.3, or ~~2.5%~~0.1%, in the ~~third~~second quarter of ~~2020~~2021 when compared to the ~~third~~second quarter of ~~2019. This increase~~2020. The second quarter of 2021 was ~~driven primarily~~heavily influenced by ~~higher unit sales of safety products, where volume moderated relative to the pandemic-driven level of "surge" sales~~two trends. First, in the second quarter of 2020 ~~but remained elevated relative~~we sold significant quantities of PPE and sanitation products as a result of actions taken by governments and businesses around the world to address the ~~third~~onset of the COVID-19 pandemic. In the second quarter of ~~2019. Re-opening~~2021, the ability of governments and businesses to manage the ~~economy~~pandemic has ~~been accompanied by greater demand for PPE, hand sanitizer,~~improved, as reflected in lower infection and ~~related products, which more than offset continued softness~~higher vaccination rates. As a result, the "surge"-type volumes that we experienced in ~~underlying business activity owing to a generally weak industrial marketplace for products unrelated to mitigating~~ the ~~effects of COVID-19. The impact of product pricing on net sales was immaterial, as price levels were broadly comparable to those of the third~~second quarter of ~~2019.~~2020 did not recur in the second quarter of 2021. Second, demand from our traditional manufacturing and construction customers in the second quarter of 2021 was significantly stronger than in the year earlier period, when measures to address the pandemic resulted in a sharp and broad drop in economic activity. The net effect on sales of these two trends - reduced sales of surge-related product, but improved manufacturing and construction demand - were mostly offsetting.

Sales by Product Line

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

Nine-month Period Three-month Period
2020 2019 2020 2019
Fasteners 29.7 % 34.3 % 30.5 % 33.7 %
Safety supplies 26.1 % 17.6 % 23.8 % 18.2 %
Other product lines 44.2 % 48.1 % 45.7 % 48.1 %
100.0 % 100.0 % 100.0 % 100.0 %

~~Gross Profit~~

~~In the first nine months of 2020, our gross profit, as a percentage of~~ ~~net sales, declined~~ ~~to 45.4%, or 190 basis points from 47.3% in the first nine months of 2019. We believe the decline in gross profit during this period is primarily due to three items.~~ (1) Product and customer mix have adversely affected our gross profit percentage, the most significant of which is product mix. From the first nine months of 2019 to the first nine months of 2020, our daily sales of fastener product~~s decreased 8.7% while our daily sales of non-fastener products grew 13.2%. Fasteners are our highest gross profit margin product line du~~e to the high transaction cost surrounding the sourcing and supply of the product for our customers, and relative weakness from this line can push our gross profit margin lower. The drag from customer mix has been relatively minor through the first nine months of 2020, as the disproportionate impact of pandemic-related shutdowns on Onsite activity has narrowed the growth rates between our lower margin Onsite and National Account customers and our higher margin non-National Account customers versus what we had achieved in prior periods. (2) Our product margins for safety and, to a lesser degree, other products declined. In the second quarter of 2020, this was due to our purchasing large volumes of pandemic-related products quickly from non-traditional sources and non-optimized supply chains. In the third quarter, it is because supply chains have become flush with these products, creating margin pressure for pandemic-related products. (3) Organizational factors resulted in us not being able to leverage near- and intermediate-term fixed costs, such as our manufacturing operations and captive fleet, as well as period costs flowing through our operation due to slower growth in the period. Rebates and import costs also represented a drag to gross profit in the period. These factors were only slightly offset by lower fuel costs and fleet expense management efforts.

In the third quarter of 2020, our gross profit, as a percentage of net sales, declined to 45.3% or 190 basis points from 47.2% in the third quarter of 2019. The decline is primarily attributable to the same factors that influenced the first nine months, as described in the preceding paragraphs.

~~Operating and Administrative Expenses~~

~~Our operating and administrative expenses (including the gain on sales of property and equipment), as a percentage of net sales,~~ ~~improved to 25.0% in the first nine months of 2020 compared to 27.1% in the first nine months of 2019, and improved to 24.8% in the third quarter o~~f 2020 compared to 26.8% in the third quarter of 2019. During the first nine months of 2020, we achieved leverage by generating relatively lower growth in employee-related, occupancy-related, and all other operating and administrative costs than we experienced in sales. In the third quarter of 2020, we achieved leverage by generating relatively lower growth in employee-related and all other operating and administrative costs than we experienced in sales.


	Six-month Period				Three-month Period
	2021		2020		2021		2020
Fasteners	33.1	%	29.3	%	33.6	%	26.0	%
Safety supplies	21.3	%	27.3	%	21.0	%	34.0	%
Other product lines	45.6	%	43.4	%	45.4	%	40.0	%
	100.0	%	100.0	%	100.0	%	100.0	%

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~~The~~Gross Profit

In the first six months of 2021, our gross profit, as a percentage of net sales, improved to 46.0%, or 50 basis points from 45.5% in the first six 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. (2) Product and customer mix was a benefit to our gross profit percentage in the first six months of 2021. This was entirely due to product mix, as from the first six months of 2020 to the first six months of 2021 our daily sales of higher profit margin fastener products increased 15.4% while our daily sales of lower gross profit margin non-fastener products grew 7.5%. 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) Net rebates were more favorable on 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 six months of 2021. 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.

In the second quarter of 2021, our gross profit, as a percentage of net sales, improved to 46.5%, or ~~contraction~~200 basis points from 44.5% in the second quarter of 2020. As was the case in the first six months of 2021, this improvement was driven by product and customer mix, organizational/overhead leverage, and favorable net rebates. We also achieved a higher product margin due to a higher gross profit percentage for our safety products as a result of more favorable customer mix within the safety category. These positive contributors to our gross profit percentage were partly offset by higher freight expense due to higher shipping costs and increased use of external shippers as a means of managing tight product and transportation supply chains.

Pricing actions taken during the first six months of 2021 largely matched the product and transportation inflation we experienced in the marketplace, and did not have a material impact on gross profit percentage in either the first six months or the second quarter of 2021.

Operating and Administrative Expenses

In the first six months of 2021 our operating and administrative expenses, as a percentage of net sales, increased to 25.5% compared to 25.1% in the first six months of 2020. In the second quarter of 2021 our operating and administrative expenses, as a percentage of net sales, increased to 25.4% compared to 23.6% in the second quarter of 2020. In both periods this was primarily a result of our employee-related expenses growing faster than sales, as we did leverage the collective change in occupancy-related and all other operating and administrative ~~expenses (including the gain on sales of property~~expenses.

The percentage change in employee-related, occupancy-related, and ~~equipment)~~all other 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			Approximate Percentage of Total Operating and Administrative Expenses	Six-month Period			Three-month Period
					2020			2020		Approximate Percentage of Total Operating and Administrative Expenses		2021			2021
Employee-related expenses	Employee-related expenses	65% to 70%	-2.9	%		-4.9	%	Employee-related expenses	70%				11.5	%
Occupancy-related expenses	Occupancy-related expenses	15% to 20%	0.6	%		0.7	%	Occupancy-related expenses	15% to 20%	2.4	%		4.7	%
All other operating and administrative expenses	All other operating and administrative expenses	10% to 15%	-4.5	%		-13.6	%	All other operating and administrative expenses	10% to 15%	-12.0	%		-8.8	%

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.

In the first ~~nine~~six months of ~~2020,~~2021, our employee-related expenses ~~decreased~~increased when compared to the first ~~nine~~six months of ~~2019~~2020 primarily as a result of ~~lower average FTE during the period, reduced~~higher incentive pay ~~due mostly~~stemming from strong growth and profits at our in-market locations, which account for the majority of our incentive dollars, higher profit sharing to ~~slower~~reflect a more favorable sales and ~~earnings growth,~~profit outlook, and a 13.1% increase in our healthcare expenses as employees and ~~reduced spending on the Fastenal School of Business as pandemic-related policies eliminated in-person training programs.~~their families were more comfortable seeking health and dental care. In the ~~third~~second quarter of ~~2020,~~2021, our employee-related ~~expenses decreased~~ expenses increased when compared to the ~~third~~second quarter of ~~2019,~~2020, primarily as a result of ~~lower average FTE during the period and reduced~~higher incentive pay ~~due mostly~~stemming from strong growth and profits at our in-market locations, which account for the majority of our incentive dollars, a 25.1% increase in our healthcare expenses, and to ~~slower sales and earnings growth, which was partially offset by~~a lesser extent an increase in ~~employer profit sharing expense.~~base pay reflecting an increase in the proportion of our employees that are full-time and higher part-time wages.

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

Change
Since: Change Since: Change
Since:
Q3
2020 Q2
2020 Q2
2020 Q4
2019 Q4
2019 Q3
2019 Q3
2019
In-market locations 11,302 11,310 -0.1 % 12,236 -7.6 % 12,417 -9.0 %
Total selling (includes in-market locations) 13,197 13,186 0.1 % 14,060 -6.1 % 14,226 -7.2 %
Distribution 2,638 2,615 0.9 % 2,895 -8.9 % 2,821 -6.5 %
Manufacturing 618 625 -1.1 % 674 -8.3 % 684 -9.6 %
Administrative 1,409 1,388 1.5 % 1,339 5.2 % 1,329 6.0 %
Total 17,862 17,814 0.3 % 18,968 -5.8 % 19,060 -6.3 %


			Change Since:			Change Since:			Change Since:
	Q2 2021	Q1 2021	Q1 2021		Q4 2020	Q4 2020		Q2 2020	Q2 2020
In-market locations (branches & Onsites)	11,390	11,323	0.6	%	11,260	1.2	%	11,310	0.7	%
Non-in-market selling	2,021	1,977	2.2	%	1,923	5.1	%	1,876	7.7	%
Selling subtotal	13,411	13,300	0.8	%	13,183	1.7	%	13,186	1.7	%
Distribution/Transportation	2,691	2,695	-0.1	%	2,591	3.9	%	2,615	2.9	%
Manufacturing	618	613	0.8	%	607	1.8	%	625	-1.1	%
Administration	1,533	1,486	3.2	%	1,455	5.4	%	1,388	10.4	%
Non-selling subtotal	4,842	4,794	1.0	%	4,653	4.1	%	4,628	4.6	%
Total	18,253	18,094	0.9	%	17,836	2.3	%	17,814	2.5	%

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

In the first ~~nine~~six months of 2021, our occupancy-related expenses increased when compared to the first six months of 2020, as a result of modest increases in both non-branch facility expenses and FMI equipment costs, primarily vending devices. In the second quarter of 2021, our occupancy-related expenses increased ~~when c~~whe~~ompared~~n compared to the ~~first nine months of 2019. In the third~~second quarter of 2020, ~~our occupancy-related costs increased when compared to the third quarter~~as a result of ~~2019. In both periods, the major components of our occupancy expense - our distribution centers, branches,~~ vending ~~device~~equipment costs and ~~equipment - all had individually very small changes that collectively produced the slight~~modest increases in ~~occupancy~~non-branch facility expenses ~~during both periods.~~.

All other operating and administrative expenses include: (1) selling-related transportation, (2) information technology (IT) expenses, (3) ~~net event costs, (4)~~ general corporate expenses, ~~including~~which consists of legal expenses, general insurance expenses, ~~and~~ travel and marketing expenses, etc., and (~~5) gains~~(4) the gain on sales ofof property and equipment.

Combined, all other operating and administrative expenses decreased in the ~~first nine~~ first six months of ~~2020~~2021 when compared to the first ~~nine~~six months of ~~2019. This was primarily~~2020. Expenses related to selling transportation decreased, with a ~~function of lower non-selling transportation expenses, reduced spending on travel,~~favorable demand and ~~generally tight cost control, only~~pricing environment in which to market excess branch vehicles more than offsetting rising fuel expenses. We also experienced more favorable conditions for net marketing, general insurance, and bad debt expenses. These were partly offset by ~~slight increases for~~higher spending on information ~~technology and higher net event costs.~~ technology. Combined, all other operating and administrative ~~expenses~~expenses decreased in the ~~third~~second quarter of ~~2020~~2021 when compared to the ~~third~~second quarter of 2019. Lower costs for selling-related transportation due to lower fuel prices and lower expenses due to minimal travel and tight cost control more than offset higher spending on information technology.2020. The period was impacted by the same variables that influenced the first six months of 2021.

Net Interest Expense

Our net interest expense was ~~$6.9~~$5.0 and $2.6 in the first ~~nine~~six months of 2021 and the second quarter of 2021, respectively, compared to $4.4 in the first six months of 2020 and ~~$2.5~~$2.4 in the ~~third~~second quarter of 2020, ~~compared to $11.1~~respectively.

Income Taxes

We recorded income tax expense of $142.8 in the first ~~nine~~six months of ~~2019~~2021, or 24.1% of earnings before income taxes, and ~~$3.5~~$75.5 in the ~~third~~second quarter of ~~2019. The decrease~~2021, or 24.0% of earnings before income taxes. Income tax expense was $141.4 in ~~both periods~~ ~~was caused by lower average interest rates~~the first six months of 2020, or 24.3% of earnings before income taxes, and ~~a lower average debt balance during~~$74.8 in the ~~period.~~

second quarter of 2020, or 23.8% of earnings before income taxes. We believe our ongoing tax rate, absent any discrete tax items or broader changes to tax law, will be in the 24.5% to 25.0% range.

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~~Income Taxes~~

We recorded income tax expense of $207.5 in the first nine months of 2020, or 23.8% of earnings before income taxes, and $66.1 in the third quarter of 2020, or 23.0% of earnings before income taxes. We recorded income tax expense of $195.1 in the first nine months of 2019, or 24.2% of earnings before income taxes, and $64.9 in the third quarter of 2019, or 23.3% of earnings before income taxes. We continue to believe our ongoing tax rate, absent any discrete tax items, will be in the 24.5% to 25.0% range.

Net Earnings

Our net earnings during the first ~~nine~~six months of ~~2020~~2021 were ~~$663.0,~~ $450.3, an increase of ~~8.3%~~2.0% when compared to the first ~~nine~~six months of ~~2019.~~2020. Our net earnings during the ~~third~~second quarter of ~~2020~~2021 were ~~$221.5,~~$239.7, an increase of ~~3.7%~~0.4% when c~~ompared~~compared to the ~~third~~second quarter of ~~2019.~~2020.

Our diluted net earnings per share during the first ~~nine~~six months of ~~2020 were $1.15,~~2021 were $0.78, an increase of ~~8.0%~~1.7% when compared to the first ~~nine~~six months of ~~2019.~~2020. Our diluted net earnings per share during the ~~third~~second quarter of ~~2020~~2021 were ~~$0.38, an increase~~$0.42, which was unchanged from $0.42 during the second quarter of ~~3.4%~~2020. ~~when compared~~

Results of Operations (Comparison to 2019 Periods)

Given the unusual nature of our marketplace over the last 15 months due to the ~~third~~COVID-19 pandemic, we believe that a comparison of net sales, gross profit, operating and administrative expenses, operating income, net earnings, and operating cash flow during the first six months and second quarter of ~~2019.~~2021 to 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 most recently ended quarter. The table below provides such a comparison:


	Six-month Period								Three-month Period
	2021			2019			Change		2021			2019			Change
Net sales	$	2,924.7		$	2,677.7		9.2	%	$	1,507.7		$	1,368.4		10.2	%
Gross profit	$	1,344.1		$	1,265.9		6.2	%	$	700.7		$	641.2		9.3	%
% of net sales	46.0		%	47.3		%			46.5		%	46.9		%
Operating and administrative expenses	$	746.0		$	729.5		2.3	%	$	382.9		$	366.2		4.6	%
% of net sales	25.5		%	27.3		%			25.4		%	26.8		%
Operating income	$	598.1		$	536.4		11.5	%	$	317.8		$	275.0		15.5	%
% of net sales	20.5		%	20.0		%			21.1		%	20.1		%
Net earnings	$	450.3		$	398.7		13.0	%	$	239.7		$	204.6		17.2	%

Net cash provided by operating activities	$	446.3		$	333.0		34.0	%	$	171.5		$	128.1		33.9	%
% of net earnings	99.1		%	83.5		%			71.6		%	62.6		%

Liquidity and Capital Resources

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


		Nine-month Period									Six-month Period
		2020			2019			2021			2020
Net cash provided by operating activities	Net cash provided by operating activities	$	780.8		590.3		Net cash provided by operating activities	$	446.3		491.8
Percentage of net earnings	Percentage of net earnings	117.8		%	96.4	%	Percentage of net earnings	99.1		%	111.4	%
Net cash used in investing activities	Net cash used in investing activities	$	238.8		179.1		Net cash used in investing activities	$	61.4		208.7
Percentage of net earnings	Percentage of net earnings	36.0		%	29.3	%	Percentage of net earnings	13.6		%	47.3	%
Net cash used in financing activities	Net cash used in financing activities	$	383.9		384.3		Net cash used in financing activities	$	308.0		252.5
Percentage of net earnings	Percentage of net earnings	57.9		%	62.8	%	Percentage of net earnings	68.4		%	57.2	%

Net Cash Provided by Operating Activities

~~Net~~We produced operating cash ~~provided by operating activities increased~~flowof $446.3 in the first ~~nine~~six months of 2021, a decrease of 9.3% from the first six months of 2020, ~~relative to~~representing 99.1% of the period's net earnings versus 111.4% in the first ~~nine~~six months of ~~2019.~~2020. The ~~most significant contributors to the increase~~decline in our operating cash flow ~~were an increase~~is due to a resumption of the typical pattern of making two income tax payments in ~~our net earnings and reduced~~the second quarter of 2021. In 2020, we did not make these payments in the second quarter as the federal government passed legislation in response to the COVID-19 pandemic that allowed companies to defer these payments into the third quarter. This more than offset a reduction in cash used to build working capital needs, especially as it relates to inventory. In contrast to last year, our supply chain for fasteners has caught up with weak demand. Combined with lower Onsite signings and sales and a general soft demand environment that traditionally requires less inventory and receivables on the part of our customers, our working capital needs in the first ~~nine~~six months of ~~2020 have been lower than in~~2021 versus the first ~~nine~~six months of ~~2019.~~2020.

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The dollar and percentage change in accounts receivable, net, inventories, and accounts payable ~~from September~~as of June 30, ~~2019~~2021 when compared to ~~September~~June 30, 2020 were as follows:


		September 30							Twelve-month Dollar Change			Twelve-month Percentage Change		June 30				Twelve-month Dollar Change	Twelve-month Percentage Change
		2020		2019	2020		2020			2021			2020	2021		2021
Accounts receivable, net	Accounts receivable, net	$	834.5	817.3	$	17.3	2.1	%	Accounts receivable, net	$	908.9		881.5	$	27.4	3.1	%
Inventories	Inventories	1,342.6		1,354.7	(12.1)		-0.9	%	Inventories	1,327.9			1,401.5	(73.6)		-5.3	%
Trade working capital	Trade working capital	$	2,177.1	2,172.0	$	5.2	0.2	%	Trade working capital	$	2,236.8		2,283.0	$	(46.2)	-2.0	%

Accounts payable	Accounts payable	$	210.4	215.2	$	(4.8)	-2.2	%	Accounts payable	$	236.1		194.1	$	42.0	21.6	%

Trade working capital, net	Trade working capital, net	$	1,966.7	1,956.7	$	10.0	0.5	%	Trade working capital, net	$	2,000.7		2,088.9	$	(88.2)	-4.2	%

Net sales in last two months	Net sales in last two months	$	943.8	921.5	$	22.3	2.4	%	Net sales in last two months	$	1,010.6		1,017.6	$	(7.0)	-0.7	%

Note - Amounts may not foot due to rounding difference.

~~Table~~Our accounts receivable balance increased due to customer mix, as our mix of ~~Contents~~

sales shifted away from faster payment surge-related product to sales with more typical terms.

The decrease in inventory as of June 30, 2021 when compared to June 30, 2020 was due to several factors. First, in the second quarter of 2020, we built up our inventory of critical PPE and sanitation supplies in anticipation of the economy re-opening in the second half of 2020. Given the re-opening, we have reduced that inventory. Second, the rapid slowdown in the economy in the second quarter of 2020, including the slowdown or idling of many Onsites, left inventories artificially high in that period. Third, the current period is being affected by supply chain disruption, which is limiting our ability to build inventories to levels that would normally be justified by current economic activity. Fourth, we have continued to close traditional branches, including 150 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.

We had an increase in accounts payable as of June 30, 2021 when compared to June 30, 2020. In the second quarter of 2020, our sales growth was from high-demand surge-related products that required immediate payment, meaning our accounts payable declined as a result of weaker activity with our traditional suppliers with a more typical product mix. The increase in our payables balance in the second quarter of 2021 largely reflects the return to strong growth in our ~~net accounts receivable from September 30, 2019 to September 30, 2020 reflects the~~ ~~growth in our sales.~~

~~The~~ ~~decrease in inventory~~ ~~from September 30, 2019 to September 30, 2020 was primarily due to inventory needs being generally reduced by the low levels of activity among our customer base~~traditional manufacturing and ~~lower-than-expected signings of vending devices and Onsites.~~

Th~~e decrease in accounts payable from September 30, 2019 to September 30, 2020 was primarily due to the effect of lower customer demand on our purchasing activity.~~construction business.

Net Cash Used in Investing Activities

Net cash used in investing ~~activities increased from~~activities decreased in the first ~~nine~~six months of ~~2019~~2021 when compared to the first ~~nine~~six months of 2020. ~~This was due to~~There were two factors behind this decrease. First, in the ~~acquisition~~first quarter of ~~certain~~2020, we acquired the industrial vending assets of Apex Industrial Technologies LLC ~~during~~(Apex) for $125.0. That outlay did not recur in the first quarter of ~~2020. This was slightly offset by lower~~2021. Second, our net capital ~~expenditures.~~expenditures (property and equipment net of proceeds from sales) were lower in the first six months of 2021 compared to in the first six months of 2020.

Our capital spending ~~will~~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 information processing systems, (4) the addition of fleet vehicles, and (5) the purchase of signage, shelving, and other fixed assets related to branch and Onsite locations. Proceeds from the sales of property and equipment, typically for the planned disposition of pick-up trucks as well as distribution vehicles and trailers in the normal course of business, are netted against these purchases ~~and~~and additions. During the first ~~nine~~six months of ~~2020,~~2021, our net capital expenditures ~~were $114.9,~~were $61.5, which is a decrease of ~~35.9% from~~27.6% from the first ~~nine~~six months of ~~2019.~~2020. Of the factors described above, ~~lower spending to develop and expand certain distribution center assets, reduced spend on vending devices owing to lower signings, and reduced fleet vehicle investment primarily explains~~the largest reason for the decline in ~~our net~~net capital expenditures in the first ~~nine~~six months of ~~2020.~~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 the industrial vending assets of Apex, and an increase in the refurbishment and redeployment of FMI hardware as an alternative to buying new devices.

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 expectations for~~We continue to expect our net capital ~~spending~~expenditures (property and equipment net of proceeds from sales) in ~~2020 is unchanged in~~2021 to be within a range of ~~$155.0~~$170.0 to ~~$180.0,~~$200.0, an increase from $157.5 in 2020. This increase relates to increased spending for a ~~decrease from $239.8~~non-hub construction project in ~~2019. This decline reflects anticipated reductions~~Winona to support growth, land

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purchases to support future supply chain investment, an increase in ~~projects that would develop~~manufacturing capacity, higher spending for equipment and ~~expand certain distribution center assets, reduced fleet vehicle investment,~~facility upgrades, retrofits, and replacement, and lower ~~vending spend due to a reduction in expected signings and, to a lesser degree, the impact on the cost of our vending equipment following the Apex~~anticipated proceeds from asset ~~purchase.~~sales.

Net Cash Used in Financing Activities

Net cash used in financing activities in the first ~~nine~~six months of 2021 consisted of payments of dividends, which were partially offset by proceeds from the exercise of stock options. Net cash used in financing activities in the first six months of 2020 ~~consiste~~dconsisted of payments of dividends and purchases of our common stock, which were partially offset by net proceeds from debt obligations and from the ~~exercise of stock options. Net~~ ~~cash used in financing activities in the first nine months of 2019 consisted of payments of dividends and net payments against debt obligations, which were partially offset by proceeds from~~ the exercise of stock options.

During the first ~~nine~~six months of 2021, we returned $321.6 to shareholders all in the form of dividends, compared to $338.8 in the first six months of 2020 ~~we returned $430.2 in dividends to shareholders, compared to $372.3 in dividends~~ in the ~~first nine months~~form of ~~2019~~dividends ($286.8) and purchases of our common stock ($52.0). During the first ~~nine~~six months of 2021, we did not purchase any shares of our common stock. During the first six months of 2020, we purchased ~~1,600,000~~1,600,000 shares of our common stock at an average price of approximately $32.54 per ~~share, resulting in $52.0 of cash used for share repurchase. During the first nine months of 2019, we did not purchase any shares of our common stock.~~share. We currently have authority to ~~purchase~~purchase up to 3,200,000 additional shares of our common stock. An overview of our cash dividends paid or declared in ~~2020~~2021 and ~~2019~~2020 is contained in Note 43 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 ~~2019~~2020 annual report on Form 10-K.

Recently Issued and Adopted Accounting Pronouncements – A description of recently 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 ~~2019~~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 76 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, trends, and the outcome of events that have not yet occurred, is a forward-looking statement. Our forward-looking statements generally relate to our

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expectations and beliefs regarding the business environment in which we operate, our projections of future performance, our perceived marketplace opportunities, our strategies, goals, mission and vision, and our expectations related to future capital expenditures, future tax rates, future inventory levels, pricing, Onsite and ~~industrial vending~~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 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, ~~or the impact of surge sales on our overall net sales,~~ 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, difficulty in maintaining installation quality as our ~~industrial vending~~FMI business expands, the leasing to customers of a significant number of additional ~~industrial vending~~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

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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.

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ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

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 has been with the Canadian dollar against the United States dollar. We have not historically hedged our foreign currency risk given that exposure to date has not been material. In the first ~~nine~~six months of ~~2020,~~2021, changes in foreign currency exchange ~~rates reduced~~rates increased our reported net sales by ~~$8.7~~$26.8 with the estimated effect on our net ~~earnings~~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 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~~six months of ~~2020,~~2021, we have seen the price of commodity steel as reflected in many market indexes increase, which has ~~been stable.~~produced inflation in our steel-based products. Our estimated net earnings exposure for these changes was not material in the first ~~nine~~six months of ~~2020.~~2021.

Commodity energy prices – We have market risk ~~for~~for changes in prices of oil, gasoline, diesel fuel, natural gas, and 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 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. ~~The effect~~Through the first six months of 2021, we have seen the price of commodity energy ~~prices on~~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. Our estimated net earnings exposure for these changes was not material in the first ~~nine~~six months of ~~2020.~~2021.

Interest rates - Loans under our Credit Facility bear interest at ~~floating~~floating rates tied to 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. ADue to limited borrowing activity during the first six months of 2021, a one percentage point increase in LIBOR ~~in the first nine months of 2020~~ would have resulted in ~~approximately $1.3 of additional~~an immaterial increase in interest expense. A description of our Credit Facility is contained in Note 76 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~~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 87 of the Notes to Condensed Consolidated Financial Statements. The description of legal proceedings, if any, in Note 87 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~~, except for the addition of the following risk factor.~~

~~Industry and General Economic Risks~~

~~The COVID-19 pandemic has significantly impacted worldwide economic conditions and could have a material adverse effect on our operations and business.~~ The COVID-19 pandemic began to impact our operations late in the first quarter of 2020 and may continue to affect our business, particularly should government authorities impose mandatory closures, work-from-home orders and/or social distancing protocols, seek voluntary facility closures and/or impose other restrictions. Should such actions be taken, it could materially adversely affect our ability to adequately staff and maintain our operations, impair our ability to sustain sufficient financial liquidity, and impact our financial results. The COVID-19 pandemic has had some favorable impacts on our financial results through much of 2020. However, as supply chains adapt to the environment, it is not certain that those favorable impacts will recur in the future to offset any resumption of public access restrictions we might impose on our branches or reductions in capacity by our customers, including facility closures. The COVID-19 pandemic has also produced shifts in the mix of our business resulting from a decrease in sales of our fasteners and increases in sales through our safety business. Based on the traditionally lower gross profit margin percentage of our safety business, these shifts have contributed to a lower gross profit margin percentage for us. This impact on our gross profit margin percentage may persist in the short term until the impacts of COVID-19 start to moderate. It is also possible that the impact on our gross profit margin percentage will be long term in the event that COVID-19 alters customer purchasing patterns to include a sustainably higher mix of safety and sanitation products. As we cannot predict the duration or scope of the COVID-19 pandemic, the net financial impact to our operating results cannot be reasonably estimated, but it could be material and last for an extended period of time..

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~~second quarter of ~~2020:~~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, 2020 0 $0.00 0 3,200,000
August 1-31, 2020 0 $0.00 0 3,200,000
September 1-30, 2020 0 $0.00 0 3,200,000
Total 0 $0.00 0 3,200,000


	(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)
April 1-30, 2021		0		$0.00		0		3,200,000
May 1-31, 2021		0		$0.00		0		3,200,000
June 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 10,000,000 shares of our common stock. This repurchase program has no expiration date. As of ~~September~~June 30, ~~2020,~~2021, we had remaining authority to repurchase 3,200,000 shares under this authorization.

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ITEM 6 — EXHIBITS

INDEX TO EXHIBITS


Exhibit Number						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 8-K dated as of April 22, 2019 ~~(file no. 000-16125)~~)

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 January 17, 2019 ~~(file no. 000-16125)~~)

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						The following financial statements from the Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2020,~~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.

104						The cover page from the Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2020,~~2021, formatted in Inline XBRL.

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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

Date: ~~October~~July 16, ~~2020~~2021

By:

/s/ Holden Lewis

Holden Lewis

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: ~~October~~July 16, ~~2020~~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)

2524


		Page
PART I	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Earnings	2

	Condensed Consolidated Statements of Comprehensive Income	3

	Condensed Consolidated Statements of Stockholders' Equity	4

	Condensed Consolidated Statements of Cash Flows	5

	Notes to Condensed Consolidated Financial Statements	6

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1312

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS	22

ITEM 4.	CONTROLS AND PROCEDURES	22

PART II	OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	23

ITEM 1A.	RISK FACTORS	23

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	23

ITEM 6.	EXHIBITS	2423