On this page of StockholderLetter.com we present the 2/7/2023 shareholder letter from FASTENAL CO — ticker symbol FAST. Reading current and past FAST letters to shareholders can bring important insights into the investment thesis.

 •  2/7/2023 Letter Continued (Full PDF)
 •  2/6/2024 FAST Stockholder Letter
 •  2/6/2025 FAST Stockholder Letter
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 •  FAST Benford's Law Stock Score = 75

FAST 2/7/2023 Shareholder/Stockholder Letter Transcript:

Table of
C ONTENTS
1-3
Letters to Shareholders
and Employees
4-5
10-Year Selected
Financial Data and
Financial Highlights
6
Stock and
Financial Data
7
Stock Performance
Highlights
8
Widening Our Moat
Inside Back
Cover
Directors | Executive
Of   cers | Corporate
Information
Featured on the Cover
Clockwise from the top:
Antwanasia     Akron, Ohio
Glay     Shanghai, China
Randal     Indianapolis, Indiana
Kimberly and Adam     Hilo,
Hawaii
Nora     Para  so, Tabasco, Mexico

CREATING
RESILIENT AND
RESPONSIBLE
SUPPLY CHAINS
As illustrated in the numbers on the
right, Fastenal invests in personnel,
programs, and structures     locally
and around the world     to maintain
continuity of supply for our customers
even in times of global disruption. But
we don   t just help them keep running.
We help them move forward with
their most important business goals,
including those related to environmental,
social, and governance (ESG) aspects.
Our commitment to drive positive
change     in our business, for our
customers, and across global supply
chains     centers on three concepts:
A Journey of
by the Numbers
P E O P L E
22,386
Employees
71% directly serve our customers
781,000
Fastenal School of Business
Trainings Completed
22 hours of training per FT employee and 20
hours of training per PT employee (on average)
540+
Highly Trained Specialists:
engineering, safety, Lean Six Sigma, metalworking,
construction, solutions, national accounts
P R O X I M I T Y
3,306
Approximately
90%
58%
PEOPLE
Providing employees with an inclusive
and safe workplace while empowering
them to achieve their goals through
career-long training, decentralized
decision-making, and a philosophy of
promotion from within.
In-Market Selling Locations
(including 1,623 Onsite locations)
spanning 25 countries
PARTNERSHIP
Offering a portfolio of Sustainability
Solutions to help organizations
accelerate their own ESG initiatives,
including programs to reduce their
carbon footprint across the lifecycle of
manufacturing, transportation, usage,
and recycling & recovery.
How is Fastenal meeting the growing
market demand for resilient and
responsible supply chains?
Learn more by reading our
inaugural ESG report:
of Our $1.7 Billion in
Inventory is Staged Locally
reducing cost and enhancing service
for same-day ful   llment
S O L U T I O N S
PLANET
A total team effort to make our
operations more ef   cient and
environmentally sustainable, with a
focus on transportation, consumption,
energy use, waste reduction, and
recycling.
of Product Tonnage Ships on
Our Internal Trucking Fleet
102,151
Weighted FASTBin/FASTVend
Installations (MEUs)*
and ~6,500 leased check-in/check-out
lockers (non-weighted)
93%
49%
of Total Revenue
of Total Revenue
comes from customers utilizing more than
one of our sales channels and tools, with
70% of total revenue coming from customers
utilizing four or more**
comes from our Digital Footprint***
D I F F E R E N T I A T O R S
350+
Supply Chain Professionals
dedicated to sourcing, quality, and logistics
functions, including approximately 150 experts
positioned outside North America
410 Million
1,223
Products Manufactured,
Modi   ed, or Refurbished
Customer Site
Evaluations Performed
by our in-house manufacturing and
industrial services divisions
by our Lean Solutions team to uncover
sources of supply chain waste
* Machine Equivalent Units (MEUs).
** Sales channels and tools include branch, Onsite, Fastenal Managed Inventory (FMI  ), national accounts, and web.
*** Our Digital Footprint is a combination of our sales through FMI Technology (FASTStockSM, FASTBin  , and FASTVend  ) plus that portion of our eCommerce sales that do not represent billings of FMI services.

Thank you
FOR BEING A
It   s been just over seven years
since I stepped into this role (in mid-October
2015). The Blue Team made the transition
easier, but it wasn   t easy. If you recall, some
industrial headwinds had started earlier in the
year; however, we found our footing by focusing
on simple things: take care of our customers   
needs (and    nd more customers), take care of
our fellow Blue Team members (and    nd more
to join the team), watch our expenses with a
close eye (but continue to build for the future),
expand our investments in technology (we need
great technology to support our customers and
to become more productive), and enjoy what we
do! In 2015, our sales were $3.9 billion. In 2022,
our sales approached $7.0 billion. I hope you
are proud of every member of the Blue Team     I
certainly am.
We achieved successful growth in 2022. Our
sales grew 16.1%, and our operating income
grew 19.4%. However, behind these headline
numbers there   s a deeper story to tell.
From a cash    ow perspective, it   s helpful to
develop benchmarks and to understand the
counter-cyclical nature of our operating cash
   ow (i.e., the    Net cash provided by operating
activities    line in our cash    ow statement). We
believe the best cash    ow benchmark is the
relationship of our operating cash    ow to our
net earnings. For simplicity   s sake, we prefer our
annual operating cash    ow to be greater than
100% of our net earnings.
Shareholder
OF FASTENAL
Our markets experienced signi   cant in   ation
and supply chain disruption in 2022 and 2021.
These two issues consumed cash by causing
our inventory costs to increase and by prompting
us to expand the quantity of safety stock on the
shelf. Many organizations can simply shrug their
shoulders and say,    Sorry, we   re out of stock.   
However, we are a supply chain partner to our
customers. We don   t know how to shrug our
shoulders, but we do know how to operate a
reliable supply chain     something we believe is
central to our success.
our customers, to create opportunities for our
employees, and to provide an attractive return
for our shareholders.
In the    nal months of 2022, the in   ation began
to moderate and the reliability of supply chains
improved. Our fourth quarter operating cash
   ow bene   tted from this change and grew
93.0% over the same quarter in 2021.
In the interest of full transparency, and similar
to the last several years, we felt it helpful to
share a section from the Blue Team Report (our
internal annual report to employees). The next
two pages include the lead-in letter from the
current report. And yes, this year   s publication
once again includes an article by our retired
founder, Bob Kierlin. Bob typically stops in for
a weekly visit, and he always has something
insightful to share (he   s a very avid reader). On
a recent visit, Bob was a bit more comical and
suggested his gravestone could include a short
quote:    I   d rather be at Fastenal.    Rest assured,
Bob   s health is excellent, but we agree with his
sentiment.
The historical reliability of our strong cash
   ow generation has allowed us to invest in the
business for half a century. It has also allowed us
to step forward quickly and decisively to bene   t
our shareholders on three separate occasions in
the past 15 years.
For perspective on the cyclicality of our cash
   ow, let   s take a look at some recent years.
In the last seven, our operating cash    ow has
exceeded 100% of net earnings four times and
has fallen short three. The three sub-100%
years were 2022 (86.6%), 2021 (83.3%), and
2018 (89.7%).
The most recent example was a supplemental
dividend declaration late in 2020     the year
COVID-19 rapidly infected our global society.
We grew the size of our business, and our
operating cash    ow, relative to net earnings,
hit a 10-year high. The oldest example was
a supplemental dividend declaration late in
2008. I suspect most readers recall the global
   nancial crisis. In keeping with the countercyclical pattern, in 2009 our operating cash
   ow, relative to net earnings, also hit a 10-year
high. A third supplemental dividend declaration
occurred late in 2012; however, let   s credit this
dividend to political arguing within the United
States government about raising dividend
income tax rates.
Our business enjoyed robust growth in 2022
and 2018, and we needed cash to fund working
capital. We call this a good problem.
In short, we have used a strong balance sheet
and an ability to generate strong operating cash
   ow over the years to improve our service to
To reiterate recent letters, we hope you    nd this
annual report useful in explaining our business,
our future, and most importantly, the    something
special    that is the culture of the Blue Team.
We also hope you take the time to read our
Environmental, Social, and Governance (ESG)
Report. (See the QR code on the inside cover of
this annual report.)
As stated in prior years, we will always
approach things in a simple way at Fastenal:
believe in people; stay focused on a common
goal (Growth Through Customer Service ); and
enhance our ability to serve by    nding great
people, asking them to join, and then giving
them a reason to stay.
Good luck in 2023, and thank you for your
belief in the Blue Team at Fastenal. Go Blue!
DANIEL L. FLORNESS
President and Chief Executive Of   cer
2022 ANNUAL REPORT
1

GETTING REINTRODUCED TO THE
AN EXCERPT FROM THE 2022 BLUE TEAM REPORT
BLUE TEAM
Each year has its memories and themes. For me, 2022 was about getting reintroduced to an old friend     the Blue Team. Video technology, now a normal
part of our workdays, made many more conversations possible. Meanwhile, the return to more frequent travel made many more conversations in-person
and more impactful.
In regards to the Blue Team, several story lines emerged during the year. The    rst centers on our 240 district managers (DMs) scattered across 25 countries.
During the previous three years, a subset of this group, and their regional vice presidents (RVPs), shared an overview of our business in about 110 metro
markets across North America. This primarily included larger metro areas with populations greater than 500,000 people. In addition, the Blue Team outside
of North America shared their stories on select markets. Unfortunately, this left many DMs out of the conversation, those who operate in rural areas or in
smaller metro areas. (Please note: These two areas represent about 48% of our revenue.) To make the discussion more inclusive, we expanded the business
reviews to every district. This    project    has consumed about 15% to 20% of my time in 2022; however, it has been one of the best uses of my time in the
last decade.
To widen everyone   s comfort zone, these conversations typically start with three simple questions and two requests. The questions:    How did you    nd
Fastenal, or perhaps how did Fastenal    nd you?       What did you know about Fastenal before you started?       Did you expect Fastenal to become your career
when you joined?    And the requests:    Please share anything you   re comfortable sharing     this can be personal or professional.       After we    nish, please
share the story of your district with your local team     it will inspire them.   
As I discovered, most of the group found Fastenal through a friend or a teacher. Most didn   t know anything about Fastenal before they started, but they
typically needed a job while in school. Most had no plan to spend their career with Fastenal; however, the way they were challenged, trusted, and treated
kept them focused on building the Blue Team. Some general themes emerged, and they typically pointed to our cultural values (Ambition, Innovation,
Integrity, and Teamwork). If you   re curious about some statistics, here are a few: 36% of our DMs joined the organization as part-time employees, 79% have
been with the organization more than ten years, and 23% joined more than 20 years ago. If you do the math, the latter two numbers represent a much larger
percentage of the much smaller organization (and DM group) those individuals joined years ago. It   s a great example of creating opportunity and longevity!
Opportunity is ampli   ed when promotion from within is the norm. Here is a list of the    top 10 reasons to join Fastenal    that emerged from their
comments (and was later shared with our regional recruiters). They   re all pretty powerful; however, #10 is a great    nish to the list.
1. Belief in people. Everyone is welcome/opportunity for all.
6. Invest in lifelong education and building con   dence (risk taking).
2. Belief in decentralized leadership.
People make decisions and learn faster.
7. Demonstrated resilience. Supply chain is essential.
3. We operate in 26 countries (including 25 with in-market locations).
9. World-class information technology.
4. Operate in large metro markets (52%).
Small metro markets & rural markets (48%).
10. We promote from within.
We promote leaders.
8. Digital footprint (50%+). Illuminate the supply chain.
5. Build for the future every day.
From a business unit perspective, times have changed. Back in 2007,
our average DM led a business with annual revenues of $11.3 million.
In 2022, our average DM led a business with annual revenues of $26.9
million. It   s always fun to provide a DM with some historical context
regarding their role. Today, a DM leading an average size district in
Fastenal is the    CEO    of a business that is approximately 35% larger than
the entire Fastenal organization was when we went public in 1987. The
point of this observation is simple: Every district leader should view their
business on equal footing with our founder (and CEO in 1987), Bob Kierlin.
It   s not magic     just work hard every day, believe in people, and be willing
to grow and learn.
Midway through 2021, we resumed our in-person training classes within
the Fastenal School of Business (FSB). In so doing, we re-established an
important aspect of learning: direct engagement. Don   t get me wrong,
online and virtual training are great tools. They speed up the process for
knowledge acquisition, and they open new doors for delivering training
to a geographically dispersed audience. However, I believe leadership
training is best handled in a more engaging environment, and this
typically means in person. For those of you not familiar with Fastenal   s 24
Leadership Competencies, here you go:
2
24 LEADERSHIP
COMPETENCIES
DEVELOP SELF
1. Self-Awareness
2. Integrity
3. Openness to Learning
4. Resilience
5. Work-Life Balance
6. Professional Demeanor
DEVELOP OTHERS
7. Empathy
8. Effective Communication
9. Mentors and Coaches Employees
10. Empowers Employees
11. Works With a Variety of
Individuals
LEADING
DIRECTION
12. Strategic Planning
13. Change Management
14. Courage
15. Innovation
16. Sound Judgment
ALIGN PEOPLE AND
RESOURCES
17. Business Perspective
18. Systems Thinking
19. Builds Collaborative Relationships
20. Organized
INSPIRE
COMMITMENT
21. Results Oriented
22. Motivates
23. Addresses Problem Areas
24. Leads Dispersed Teams

DAN FLORNESS
President & Chief Executive Of   cer
2022 also saw a return to in-person events. In April, we held our 2022
Customer Expo, our    rst large-scale customer event since 2019. This included
a large group of customers visiting to learn about supply chain opportunities
from both our employees and our suppliers. In December, we gathered for
our 2022 Employee Expo, our    rst large-scale employee event since 2019.
This included approximately 2,000 employees from 22 countries, about 145
family members of the 25-year employees being recognized, and about 725
individuals representing our supplier base.
During the    kick off    for the Employee Expo, a challenge was extended to the
Blue Team in attendance: Please stop me (Dan) as you   re walking around the
show, and please share your story or share how someone helped your career.
One story was shared by a young employee who described her journey from
a support role to a sales role. She talked about her hesitation, and how she
found the courage to make the transition. Life is about taking some risk every
day. Our government sales team is fortunate to have people like her, and she
was fortunate to have some great mentors willing to invest in her.
Her story speaks to our    belief system.    Fastenal believes in people     this
is our    rst builder. Fastenal also believes in decentralized decision-making
    this is our second builder. However, this requires a two-way engagement,
and people need to take a risk (which can be very uncomfortable but will
become easier and more natural with practice). Building con   dence requires
several things: trust, the realization a decision can   t wait until it   s perfect
(because perfect never arrives), the realization it   s okay to make a mistake
and then solve it (or try again, but don   t give up), a supportive team (including
the leader), and an honest look in the mirror. The last item can lead to a
realization of how much you have changed in the previous    ve years. If you
haven   t changed much, you might need to get outside your comfort zone and
take some risk. Most people    nd the result worth the uncertainty.
There   s an old saying about two certainties in life (   death    and    taxes   );
but I think there is a third     the    opportunity    presented to those willing (or
pushed) to stretch themselves beyond what they believe to be possible. There
are a lot of great stories out there to challenge and inspire you. Please start
with the stories from (and about) your local team. Learn how we have found
success in your market, or in your area of expertise. Keep asking questions to
discover ten speci   c ways you can bring a new value to your customer, or to
someone in the supply chain you support.
As discussed in last year   s letter, we are becoming more comfortable
sharing elements of ESG (environmental, social, and governance) and
DEI (diversity, equity, and inclusion) in our organization. Becoming more
comfortable includes doing a little bit of bragging to highlight things we
do every day (which doesn   t come naturally to Fastenal). It also includes
challenging each other where we need to improve (this, on the other hand,
is a Fastenal strength). If you get a chance, please read through our 2022
ESG Report. It does an excellent job conveying the most recent chapter in
our story. The story has a consistent theme: The Blue Team at Fastenal is
both pragmatic and inspirational. Pragmatic people focus on    nding great
people, asking them to join, and giving them a reason to stay. Pragmatic
people also understand some simple truths: No single group (geography,
gender, ethnicity, or any other category) has a monopoly on talent; and
it always makes good sense, for all involved, to make our business more
ef   cient and sustainable. Progress in all things requires inspiration    
inspirational people believe anything is possible!
We hire locally, we promote from within, and we strive to create an environment
that is welcoming to anyone who is looking for an opportunity and is willing to
learn and change. We also understand the demographics of where we operate
and the outcomes achievable in our regional markets. We believe, after reading
our 2022 ESG Report, you will respect the sincerity and the results we convey.
We also believe you will share some ways we can improve.
In October, our eCommerce business hit 20% of total
sales. (This was an estimated 5% in 2015.)
Also in October, our eCommerce sales exceeded
$1 billion (year to date).
In October, our Digital Footprint hit 52% of total sales.
(This was approximately 36% before Covid-19 hit the
globe, and was 46% at the start of the year.)
In November, our international sales exceeded
$1 billion (year to date).
In 2022, our net income company-wide exceeded
$1 billion (year to date).
We signed 356 new Onsite relationships. (Technically
this isn   t a milestone     our signing record was 362 in
2019, the year before Covid-19 hit the globe     but it
shows how far we   ve bounced back. Let   s crush this
number in 2023.)
Before closing, please indulge me with a bit of Digital Footprint talk (and some
repetition). For background, our Digital Footprint is how we illuminate the
supply chain for our customers and bring greater ef   ciency in the process.
It includes eCommerce (transacting electronically using web verticals,
eProcurement, etc.) and FMI Technology (Fastenal Managed Inventory):
FASTStock, FASTBin, and FASTVend. As stated a year ago, we believe 85% of
our customers    spend could eventually become part of our Digital Footprint.
As highlighted in the milestone list, our Digital Footprint was about 36%
of sales three years ago and hit 52% of sales in October. (As noted in last
year   s letter, the 36% stat is an estimate; the reporting from our pre-mobility
scanning technology wasn   t as crisp as what we   re able to capture today
through our FASTStock solution.)
Also noted in last year   s letter, a large Digital Footprint provides incredible
amounts of usage information     what is being used, where it   s being used,
when it   s being used, and who   s using it. This knowledge allows us to be
more strategic with our customers about planning their supply chain, about
staging our supply chain assets to ef   ciently serve the market, and about
aligning with world-class supply partners to create the most resilient and
ef   cient supply chain.
Let me close by saying thank you. Thank you especially for preparing yourself
for our mutual future.
Good luck in 2023,
and GO BLUE!
DANIEL L. FLORNESS
President and Chief Executive Of   cer
2022 ANNUAL REPORT
3



 2/7/2023 Letter Continued (Full PDF)