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Executives

Robert A. Kierlin - Founder and Executive Chairman

Willard D. Oberton - Chief Executive Officer, President and Executive Director

Todd Rachow -

Ken Nance -

Fastenal Company (FAST) Annual Meeting of Shareholders April 17, 2012 11:00 AM ET

Robert A. Kierlin

Welcome, everybody. Welcome to our new facility here. 25 years ago, we started out in the lunchroom. Then we moved to the truck bays. Now we're in the warehouse. Next year, it's either up on the roof or out by the barbecue tent. We're going to do things a little bit differently. I'm going to come down to Monsignor Habiger for the invocation. Monsignor has been with us since 1987 and always has done a great job with the invocation. It always seems to have helped with the stock price for the year. So, once again, I'll turn this over to Monsignor Habiger.

James Habiger

It's good for me to be here. In fact, at my age, it's good to be anywhere. Good morning, God. You reveal yourself to us in your creation. For this, we are grateful. We thank you for mother earth and our atmosphere. We thank you for our mountains and our meadows. We thank you for the forests and fields, for our oceans, lakes and rivers, and all the creatures therein. Help us to respect these sacraments of your presence and to use them for our needs with reverence and restraint. Grant that carelessness and greed may stop defacing your creation. Help us, creator of all the world and lover of each of us, to realize the beauty with which you surround us, the colors, the shades, the lights, the shadows, the shapes, the patterns, all the dazzling array of enchantments of the eye and ear, to which we imitate to a little intent. Help us to realize, endeavor not having [indiscernible] That we, men and women, are the crown of this beauty, His wonder. Male and female, He created us, in His image and likeness. We are grateful [indiscernible]. He didn't ask you why this [indiscernible]. All this through Jesus Christ. [indiscernible]. It would be nice to hear a rousing amen.

Robert A. Kierlin

The board had this meeting this afternoon to hasten a resolution, which I'll read to you, whereas Monsignor James D. Habiger, Father Jim, who's been a friend, order and spiritual adviser to the founder of this for over 50 years, whereas Father Jim has endured himself with all the members of the board and the rest of the shareholders of the company [indiscernible] that James D. Habiger hereby elect [indiscernible]. And we wanted to give Father Jim something special. And I think we all know sometimes when a nut comes off your toaster or your alarm clock, it's always nice to have a spare on hand. So we have [indiscernible] for Father Jim here.

The Annual Meeting of Shareholders of Fastenal Company is now convened. I am Robert A. Kierlin, Chairman of the Board of the company. Stephen M. Slaggie will act as Secretary of the meeting, and I will act as Chairman. Also present, please stand, are Michael M. Gostomski; Willard D. Oberton; Michael J. Dolan; Reyne K. Wisecup; Michael J. Ancius; Scott A. Satterlee, who are Directors of the company; and Hugh L. Miller, Director of the company, who's currently in China, and he's viewing this meeting via webcast. Hello, Hugh.

I would first like to welcome all of you to this annual meeting. And next, I'll report on the number of shares present at this meeting, conduct the voting and results to be considered at this meeting. I'll report to you on the company's [indiscernible].

The record date for the determination of the holders of the company's common stock entitled to those -- to receive notice of and to vote at this meeting was fixed by the Board of Directors at February 22, 2012. And over here, I present to the meeting a certified list of shareholders of the company issued an outstanding common stock as of the close of business on the record date. The list will be kept open and subject to the inspection of all shareholders during this meeting.

I also present to the meeting an affidavit of the Manager of Broadridge Finance Solutions, that's over here, attesting that the Notice of Meeting together with the proxy statement, proxy card and certain other documents are mailed on or about March 2, 2012 to each holder of record of the company's common stock as of the close of the business on the record date. The affidavit of mailing of the notice of this meeting will be attached to the minutes of this meeting as Exhibit A. The certified list of the holders of the company's common stock will be filed with the books and records of the company.

As of the close of business on the record date, there were outstanding and entitled to vote at this meeting 295,323,074 shares of common stock. And each share of the common stock is entitled to one vote. For a quorum to be present, the majority of the 295,323,074 votes entitled to be cast must be present in person or as a proxy at this meeting. And on a preliminary count, they are represented at the meeting either in person or by proxy as majority of the votes entitled to be cast at the meeting. Therefore, a quorum is present for the transaction of business.

Anybody here present who has not submitted a proxy or registration form? Thank you. A record of the proxy is submitted to the meeting and the ballots of the individuals appointed as proxies and of the shareholders voting in person at the meeting will be filed with the books and records of the company.

Tina Abrams [ph] and Kimberly McCrate [ph], which again, for this year, are hereby appointed to act as the inspectors of election with respect to all matters to be voted upon at the meeting or any adjournment thereof. The [indiscernible] of the inspectors of election will be administered and will be attached to the minutes of this meeting as Exhibit B, we hereby make available to the inspectors of election the list of shareholders, the registration forms and a record of all proxies submitted to this meeting. Copies of the minutes of the last annual meeting of the company held on April 19, 2011, are available at the right side of the room. We will therefore dispense with the reading of the minutes of that meeting.

All shareholders of record as of the close of business on February 22, 2012, may vote on the matters to be considered today. If you wish to vote by ballots, please raise your hand when I ask you to do so, and a ballot will be given to you. Shareholders who have appointed others as proxies to vote their shares whether in writing or by telephone or over the Internet and have not terminated those proxies should not vote by ballot. This procedure will be followed for all of the votes to be taken today and we'll now take up the business of the meeting.

And first, we'll proceed with the election of 9 directors for the coming year. I therefore open the floor for nomination for directors to serve until the next regular meeting of shareholders or until their successors are elected and shall qualify. And I'll recognize Mr. Nate Hansen.

Nathan Hansen

Mr. Chairman, my name is Nate Hansen, and I'm a shareholder of the company. I nominate the following 9 persons for election to the Board of Directors to serve until the next regular meeting of shareholders or until their successors are elected and qualified. Robert A. Kierlin, Stephen M. Slaggie, Michael M. Gostomski, Willard D. Oberton, Michael J. Dolan, Reyne K. Wisecup, Hugh L. Miller, Michael J. Ancius, Scott A. Satterlee.

Robert A. Kierlin

Thank you. The Chair recognize Mr. Zach Weiss [ph].

Unknown Shareholder

Mr. Chairman, my name is Zach Weiss [ph]. I'm a shareholder of the company, and I second the nominations.

Robert A. Kierlin

Thank you. Are there any other nominations? Hearing no other nominations, I declare the nominations to be closed. If you wish to vote for the election of directors by ballot, please raise your hand and the ballot will be given to you. And if you have appointed another person or proxy to vote your shares and have not terminated that proxy, you should not vote by ballot. After you've executed the ballot, it will be collected and then tabulated. Anybody needing a ballot to vote here? Thank you. The polls are now closed and the ballots for the election of directors will be counted.

And while the inspectors are completing the tally on the election of directors, we'll move onto the next matter for consideration today, ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2012. And I'd like to introduce Mr. Jeffrey Hahn. Is he here? There is Jeffrey. A partner of that firm is here today to answer any questions you may have, so load up your questions for him.

I will now open the floor to a motion concerning the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2012, and I'll recognize Dr. Robert Schell.

Robert Schell

Good morning, Mr. Chairman. My name is Bob Schell, and I am a shareholder of the company. And at this time, I'd like to move a motion to -- that the following resolution be adopted: resolved that the appointment of KPMG LLP as the independent registered public accounting firm for the company for the fiscal year ending December 31, 2012, be and hereby is ratified.

Robert A. Kierlin

Thank you. The Chair recognizes Mr. Roland Solver [ph].

Unknown Shareholder

Mr. Chairman, my name is Roland Solver [ph], I'm a shareholder of the company. I second the motion.

Robert A. Kierlin

Thank you. Any discussion on that motion? It has been moved and seconded that the appointment of KMPG LLP as independent registered public accounting firm for the company for the fiscal year ending December 31, 2012, must be ratified. If you wish to vote on this motion by ballot, please raise your hand, and the ballot will be given to you. If you have appointed another person to act as proxy to vote your shares and have not terminated that proxy, you should not vote by ballot. After you've executed your ballot, it will be collected and tabulated.

Anybody needing a ballot? Thank you. Polls are now closed and ballots for the motion to ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2012 will be accounted.

I will now open the floor to a motion concerning the approval of executive compensation. The Chair recognizes Mr. Robert Craig [ph].

Unknown Shareholder

Mr. Chairman, my name is Robert Craig [ph], and I'm a shareholder of the company. I move that the following resolution be adopted. Resolved that the shareholders of the company approve on an advisory basis the compensation of the company's named executive officers as disclosed in the compensation discussion and analysis, compensation tables and related disclosures contained in this section of the proxy statement for the 2012 annual meeting of shareholders captioned Executive Compensation.

Robert A. Kierlin

Thank you. The chair recognizes Ms. Elizabeth Halliber [ph].

Unknown Shareholder

Mr. Chairman, my name is Elizabeth Halliber [ph], and I'm a shareholder of the company. I second the motion.

Robert A. Kierlin

Thank you. Any discussion on that motion? It has been moved and seconded that the compensation of certain of our executive officers be approved. If you wish to vote on this motion by ballot, please raise your hand and a ballot will be given to you. If you have appointed another person as proxy to vote your shares and have not terminated that proxy, you should not vote by ballot. After you have executed your ballot, it will be collected and tabulated. The polls are now closed and the ballots for this motion to approve the compensation of certain of our executive officers will be counted.

I will now open the floor to a motion concerning the approval of an amended and restated Fastenal Company Incentive Plan. Under the Fastenal Company Incentive Plan, employees of the company and subsidiaries who participate in the plan will have an opportunity to receive awards under the plan payable in cash. The payout of these awards is contingent upon the degree of attainment of specified performance measures over applicable performance period.

Because 5 years have passed since the adoption of the Fastenal Company Incentive Plan Section 162(m) of the Internal Revenue Code requires us to obtain shareholders re-approval of the material terms of the plan in order to preserve our ability to deduct, for federal income tax purposes, performance-based incentive compensation paid to certain of our executive officers. In connection with the 5-year resubmission of the plan, our compensation committee has proposed and our Board of Directors has approved several changes to our incentive plan. The amended and restated plan reflecting those changes is described and discussed in detail in the proxy statement. And a copy of the amended and restated plan is attached as Appendix A to the proxy statement.

I will now open the floor to a motion concerning whether to approve the amended and restated Fastenal Company Incentive Plan. The Chair recognizes Mr. David Wickstrom.

David B. Wickstrom

Mr. Chairman, my name is David B. Wickstrom, and I am a shareholder of the company. I move that the following resolution be adopted. Resolved that the amended and restated Fastenal Company Incentive Plan in the form attached to the proxy statement for the 2012 Annual Meeting of Shareholders as Appendix A be and hereby is approved.

Robert A. Kierlin

Thank you. The chair recognizes Ms. Sue Savath [ph].

Unknown Shareholder

Mr. Chairman, my name is Sue Savath [ph], and I am shareholder of the company. I second the motion.

Robert A. Kierlin

Thank you. Any discussion on that motion? It has been moved and seconded that the amended and restated Fastenal Company Incentive Plan be approved. If you wish to vote on this motion by ballot, please raise your hand and a ballot will be given to you. If you have appointed another person as proxy to vote your shares and have not terminated that proxy, you should not vote by ballot. After you have executed your ballot, it will be collected and tabulated. Anybody needing a ballot? Thank you. Polls are now closed and ballots for the motion to be approve the amended and restated Fastenal Company Incentive Plan will be counted.

I will now open the floor to a motion concerning the approval of amendment to the restated articles of incorporation of the company. The Chair recognizes Ms. Madison Jansen [ph].

Unknown Shareholder

Mr. Chairman, my name is Madison Jansen [ph], and I am a shareholder of the company. I move that the following resolution be adopted. Resolved that the restated articles of incorporation of the company as heretofore amended are hereby further amended by adding thereto a new Article 11 in the form attached to the proxy statement for the 2012 Annual Meeting of Shareholders as Appendix B.

Robert A. Kierlin

Thank you. The Chair recognizes Ms Jen Northam [ph].

Unknown Shareholder

Mr. Chairman, my name is Jen Northam [ph], and I'm a shareholder of the company, and I second the motion.

Robert A. Kierlin

Thank you. Any discussion on that motion? It has been moved and seconded that an amendment for the restated articles of incorporation of the company be approved. If you wish to vote on this motion by ballot, please raise your hand, and a ballot will be given to you. If you have appointed another person as proxy to vote your shares, you should not vote by ballot. After you have executed your ballot, it will be collected and tabulated. The polls are now closed, and ballots for the motion to approve an amendment to the restated articles of the company will be counted.

While the ballots are being counted, Mr. Will Oberton, our President and Chief Officer, will report to you on the company. And after the conclusion of his report, we will answer any questions you may have related to the company and its activities. As Will is coming up here, somebody has pointed out to me that he's our birthday boy today. We will not be singing happy birthday because we don't want to pay the royalty on the music. But we will give Will a second brownie at lunch, and any -- there's probably 2 or 3 more birthdays out there. So if you have a birthday today, you get a second brownie. Will?

Willard D. Oberton

The only problem with the -- it is my birthday, but the boy problem is long gone. Before I get started, I'm going to -- the harbor statement, Safe Harbor. Before I get started with the highlights of 2011, we have a lot of Fastenal employees here today. But we have one group that's in for meeting, our Regional Vice Presidents, so I'd like to take a minute -- I'd like to ask all of you to stand, the Regional Vice Presidents. I'll just make a couple of comments about this group.

First thing I'd like to say is, this is a group of very good friends of mine, a great group of Fastenal people. If you look at the group, they manage businesses anywhere from about a low of around $50 million a year to a high of over $500 million a year. So every one of them runs a large business. The average age of this group is just over 40 years old. I talked to most of them last night. I had the opportunity to have dinner with them. So we have a group of people that are just over 40 years old and they have greater than 20 years tenure with our company. And it's really representative of our entire company, a bunch of people who started here at a young age, who've worked very hard and have performed at a very high level.

One of the reasons I am so confident that Fastenal will continue to grow well into the future is because we have groups of people like this that have been here for a long time, but have a long time left -- many years left to work, and they're just going to continue to get better. So I want to thank all of them for everything they do. And if you happen to see them here after lunch, if you could give them a thank you, give them a pat on the back.

I'd also like to mention that Bob Hopper, who's our Florida, one of newer Regional Vice Presidents, it's his birthday tomorrow, and I think he's going to be 40. Is that right, Bob? If you see Bob, you can give him a big 40th atta boy. Thank you very much, guys.

2011 was a very good year for Fastenal. I'm very proud of the results that we -- well, we are able to put up. As you see on the screen, we had 29 -- 21.9% sales growth, very nice sales growth. We are able to grow our earnings at almost 35%, 34.9%. We needed to learn to be a little bit better at rounding, that'd be at 22% and 35%, Dan, wherever you are. So, a little bit better. Our commission, our employees -- and this is an important part, our employee commission and bonuses grew by 28%. So not only are the shareholders being taken care of, our employees continue to do better every year as we move forward. I think that's very important.

One of the things that I'm most proud of is that we were able to add 1,883 people onto our team, a time when the economy is tough and unemployment is still higher than any of us would like, we're out there doing the right things, and it's about the people in the field servicing the customers and creating a greater need for more people. So we've been able to continue to add to the team and do our part with helping the economy. That's just -- I want to thank all the Fastenal employees for that. That's a great accomplishment.

Our dividends paid in 2011 has only grew 4.9%, but I have to make sure you understand, that's only because in 2010, we paid a special dividend, which pushed it way up. If you look at our normalized pattern, that would be over 20% growth if you took out the special dividend. So the employees are getting paid, and the shareholders are getting paid also. But more importantly, if you look at the market value added, we added more than $4 billion in market value to our company in one year. So that's another thing I think we should be very proud of, and I'm guessing it makes most of our shareholders extremely happy.

I'll get on to a couple of our growth drivers, our main growth drivers. We continue to add new stores. Stores are not our main growth driver as they were for the last 20 years, but we continue to find markets that can be supported or that will support a store, and we continue to add them. This year, the number will probably be down a little bit also. We will continue to look for the right markets and continue to add stores.

National Accounts Sales Specialists, Government Sales, Product Sales Specialists, mainly focusing on metalworking, which are cutting tools and safety products; FAST Solutions Sales Specialists, they're the people who are selling our industrial vending, all told, we added 120 people outside of the stores, all well-trained, focusing on either specific products or specific customer types. And this is the number that's kind of offsetting the growth we're losing from not opening as many stores. We're reinvesting that in outside sales people. These programs are working very well, hence, with almost 22% sales growth.

One of the things I have to talk about a little bit is our FAST Solutions, our industrial vending. We've been talking -- we've talked about it for the last 3 shareholder meetings, we had by far the best year with industrial vending in 2011 that we've ever had. And just this week, we signed our -- or excuse me, we installed our 10,000 industrial vending machine at a customer site. So that's a huge accomplishment for us. If that didn't sound like that much to you, but as hard as we have been working, as hard as our teams have been working, this is a big milestone. And the picture here just represents all the different types of machines that we have today. And my prediction is if we show this picture a year or 2 down the road, it will be a -- we'll need a wider screen or -- because there'll be more and more machines as we understand customer needs. We just continue to work hard to understand our customer needs.

These are the results of our industrial vending. Through the end of the year, the green number or the green bar is the number of machines that we've installed at customer sites, and the blue bar is the number that we're signing. We dropped off a little bit in the fourth quarter, as you can see by the last blue bar, but we roared back in the first quarter. So in the fourth quarter, we signed just under 2,100 machines, 2,084. In the first quarter, we came back with new motivation, and we signed more than 4,500 machines. We more than doubled our productivity in the first quarter from the fourth quarter. So, a great job by the blue team, going out there and we'll meet them with our customers.

In wrapping up my section, I use this slide all the time because I'm a very visual person or learner, and this really makes it out for me. And the way our -- the way the wheel turns for Fastenal, we go out and we hire people. If you look at the first chart, it's employee headcount. As you can see, it continued to ramp up over the last 10 years. When we do a good job, we put them and so we open stores -- if we do a good job hiring people, excuse me, we put them in stores, we open stores. If stores do a good job, the sales goes up. If sales goes up, it turns into earnings. And what do we do with the earnings? We reinvest it in new people. The visual is just like a big flywheel. If we continue to hire people, put them to work selling, create a sale, make money, reinvest, we should be able to continue to do this for a long time. Bob taught us how to do this a long time ago. We've taught thousands of people in the organization how they do it now. And that's really the story of Fastenal. Good people make money, and we reinvest. And we'll just continue to do that.

Today, I have the opportunity -- that will end my section for now, but I have the opportunity to have 2 guest speakers. I'm going to first introduce Todd Rachow. Todd is our store manager from Muskegon, Michigan, been with the company 14 years, I believe, 14 years, and he'll talk a little bit about that. But I had the opportunity to listen to Todd speak. I was at a managers meeting in Indianapolis, Indiana back in January, and Todd was one of the featured speakers. And I enjoyed his talk so much that I called him about a week later and said, "Todd, would you be willing to come to Winona for our annual meeting and tell your story about how he's built his store up in somewhat of a difficult time in Michigan."

With that, I'll introduce Todd, and we'll go from there. Thank you.

Todd Rachow

Thanks, Will. It's an honor and a privilege to stand up here in front of you, investors, today to speak a little bit about some of the successes we've had with the FAST Solutions Industrial Vending Program. To start off with, I've been employed with Fastenal for 14 years. The Muskegon store has been open since 1987. And a little history. In 2009, our store sales were averaging about $100,000 a month. At that time, we had one vending machine installed, and that was with Lakeshore Technologies.

To go into a little bit more history, in 2009, unemployment rate was at 15.7%. We had a bunch of companies going out, Sappi Fine Paper completely closed up. That was one of the staples of the community, had about 190 employees, been there for over 100 years. Lift-Tech International is another company, been there for over 100 years, closed up and moved. So it's kind of a grim time. And I can remember driving down, leaving a customer and wasn't getting a whole lot of success at. And when we left that customer, I had a National Account guy with me and I said, "There is something we're missing." And we have had the vending machine program, they had one installed. And the phrase sell more by selling less popped in my head. And I really started thinking about that, and it's like, what is selling more by selling less really mean?

Well, the whole concept of the Industrial Vending Solutions is to control cost for the customers. With the economy the way it was, they started thinking, "Hey, this economy is bad. They are looking for a way to cut costs. What a perfect time."

I guess I'll go into a little bit of a story. One of the customers I was having a real difficult time with selling the vending machine, I had went and did a plant tour. And we were walking through the plant, and I had rubbed my hand up against a machine, and I had grease on my hand. And one of the guys that was running me through said, "Hey, you can go in here in the employee bathroom and wash your hands." While I was in there washing my hands, I see these employees coming in and they were throwing these gloves into a trash receptacle, and it was huge. So I asked, what's the deal with this? Because all of that glove -- and I said, "Where do you get these gloves from?" And they said, "Well, we got a cabinet that slide open, and they just help themselves to gloves until they're done at the end of the day." And I thought, there might be something here.

So I went to the purchasing agent and started talking with him and I said, "Hey, do you have any way you control your costs on gloves?" And they're like, "What do you mean control your costs?" I said, "Well, I just noticed there's a receptacle full of gloves back there that are just getting wasted." And they said, "We have to supply gloves." And as long -- I'm not saying we're not taking gloves away. I said, "Let's control that." So I introduced the Vending Solutions Program to him, and it took about 6 months to convince him. And now that we put it in, they love the program. And according to their data, we're saving them over $70,000 a year just in cost-reduction of gloves.

Today, we have 8 customers with the FAST 5000 machines installed. This slide is old, I actually got 15 machines now installed. I just signed one last week, and we just signed one yesterday. In 2011, we achieved $430,000 in just vending sales alone, coming out of the vending machine. So it's been a real huge success for us. Our store average now is $250,000. So on 2-year period of time, we've grown from $100,000 to $250,000.

All the machines that we have installed have been, with the exception of one, have been through customers we did very little to no business with. And I put a couple of examples up here on the board showing some of the numbers. So we're opening up a new market for us. It's what we're really doing, getting in front of more customers and getting them a tool that promotes their growth.

I see the business environment changing. Everybody's probably heard of just in time. It's been a term throughout for about 20 years, getting products to the customer as they need it. I think that has shifted now. I think it's become right now. We've got customers demanding products right now. With this Fastenal Industrial Vending Solutions program we have, we are able to bridge that gap, and we've got the product in front of the customer right now available 24 hours a day, 7 days a week. And the customers love it.

If I could predict the future, and this is for my store, I can see our store having 50 to 75 machines installed, upward to 20 to 30 customers having these machines in the next 5 years. It's just -- it's only going to grow. I believe it is the best program in the industry. I've gone up against other competitors, and we won businesses based on that. And I believe we are the leaders in the market on this.

We've got case studies, and this is from my store, this is Lakeshore Technologies. And I'll read this real quick, just in case you can't read it. It essentially does the job of an inventory control manager. We've cut inventory by at least 75%, and we've seen a huge drop in consumption because people are accountable for what they are using. The biggest thing, from a reporting standpoint, is being able to clearly see that usage jibes with what it's supposed to be. That is huge for us. And that's from Ricardo Lopez, he is the VP Operations of Lakeshore Technologies. And we got another one, CWC Textron, they make camshafts in Muskegon, Michigan. "We are always looking for ways to cut costs and run more effectively and efficiently. The Fastenal vending machine has provided us with a way to work smarter, not harder." And that's from Pat Runyan, she's the Senior Buyer there.

These numbers here show our sales just in vending machines from 2009 all the way up to 2011. And as you can see, it's kind of a nice trend. I enjoy that trend, and I'm sure most of you enjoy that trend. There's this effect, and I call it the explosion effect. Once we put a machine -- have installed a machine, there's like an explosion effect. We seem to get more sales because that's there. Kind of like planting a flag. And this next slide represents that. This is sales that we have from just the vending machine customers. So the vending machine line is the dark blue and then the sales other than we get from them. So there is this explosion effect we get that has helped tremendously. And again, most of these customers we were selling nothing to back in the day. So it's been a huge success, and I thank Will for promoting this program. I'm a strong supporter of it. I can't say enough good about it. I really enjoy working for this company, and the programs that are put in front of us. And I thank you for your time.

Willard D. Oberton

If we had about 2,500 more stores with that graph, we'd be doing a little better. Thanks a lot, Todd, you did a wonderful job. Our next guest speaker is Ken Nance. Ken is a good friend of mine. He's in his 20th year at Fastenal. His position -- and Ken has lived all over the country for us, as far away as Puerto Rico. He's managed a lot of Fastenal at different points in his career, but today his job is a Regional Vice President. He covers the region out of Dallas, Texas. Runs a business that'll do about $270 million this year, is that what we're seeing? About $270 million business, so a big business. The way we measure our people, we call it a scorecard. It's an internal ranking system and each regional vice -- each store district and regional vice president has their own scorecard. Well in 2011, Ken won the scorecard competition. The people I introduced earlier, competitive group, great group of young leaders, Ken actually performed at the highest level of this group. So because of his great performance, we asked him to come here and speak today and kind of just give you some insight about what it takes to stay on top in a very competitive world with a very competitive group that he works with. Ken, if you'd like to take the stage.

Ken Nance

Thank you. I was glad to see Todd here from Muskegon. He's probably -- I've never been in a room outside of Michigan where there's another Detroit Lions fan.

Todd Rachow

And Red Wings.

Ken Nance

And Red Wings, yes. I've said it before, I'll say it again, what a great time to be working for Fastenal. I mean, it's just a phenomenal time. I said that 20 years ago when I came on with the company. I've been saying it ever since. And it is more exciting now than it was 20 years ago. It's also a great time to be buying from Fastenal. Some of the things that Todd was talking about, some of the other initiatives that we have going on. But from a customer standpoint, I'm visiting with customers all the time, they're more and more excited to be buying from Fastenal. And obviously, this is a shareholders meeting so it's -- over the past few years it's been a pretty good time to be owning shares in Fastenal.

So I started with Fastenal in Joplin, Missouri, and I went down to Dallas for a sales meeting, and I met some people down there. And matter fact, they're still with the company, and Nick Lundquist, I think I saw him around here, he was the regional manager. And it was a very small territory, and I met a couple of people down there, and I matter of fact after I got back to Joplin, I called the district manager and I said, "Hey, I really want to be part of the expansion of Texas." And I had never been to Texas, I have driven through there a couple of times, seen some cowboy hats and some steers and that sort of thing. I knew nothing about Texas. All I knew was that there was a lot of people there and a lot the business and a lot of opportunity.

My manager in Joplin, Missouri said I was an idiot. He said, "There's no way you're going to be successful down there. There's too much competition. They're not going to take to northern companies. You're not going to find good people." And all I can say is, "Wow, since then it's just been a great ride, and he was definitely wrong."

So I'm going to talk a little bit -- I'll go through a little bit, real quick about the history of the region and kind of where we've been and where we're going. If you look at the public stores, 1992 when I started we had 11 stores in the state of Texas. In 2007, we went up to 139. This year, we'll end up with 205 public stores, and that's without the customer-only sites or the in-plants and that sort of thing, but that's just phenomenal, phenomenal growth. We'll probably end up with about 250 total, 275. Dan likes to use windows, so I'll say 250 to 275 total stores in the state of Texas.

The next screen, I really like to look at. It really tells a story. And it tells -- it's actually -- it tells a lot of story. It looks -- you look at the dots that are coming up, and this is how we grew Texas and my region, which is Texas and New Mexico and a little bit of a couple of bordering states. But each dot shows a store closer to the customer. And really what that does, it gives us a competitive advantage over our national competitors. We have national competitors, we have local and regional competitors, but from a national standpoint, there's no one that has the footprint that we have. With each dot, basically, we're closer to the customer. But really, the biggest story is that each dot we also have given opportunity to an existing or a potential employee to come on with the company and start a career with Fastenal Company. And with that, obviously, they're buying houses, cars, saving for retirement and really building a career with a great organization. So I think that's just a phenomenal footprint.

This looks at the number of employees that we've had over the years, and this is just store employees. You can see in 1992, we had 25. I was one of them. And we still have a lot of the same employees in leadership positions down in the state of Texas and New Mexico, it's pretty impressive. This year, we'll end up with about 760 employees in the store. That does not include all the other employees that are within the region, and Will mentioned the sales specialists, the vending solutions people, the DC people, all in all we'll have about 1,000 people. So over the last 20 years, we've added about 970 people or 975 people, which is pretty impressive. And we're not done yet either. So we're going to continue to grow.

If you look at the next slide, shows our net sales. And you can see when Nick Lundquist was running the region, we only did $1.3 million. That's changed a lot since then. I saw him there somewhere. Once we got rid of him, we started to grow. But anyway, it's been a really good ride. And luckily the 2000 -- I did it in 5-year increments and luckily the 2009 number wasn't in there. But obviously, in 2007, we did about $146,000 -- or $146 million, and we'll almost double that this year to $270 million. That's our goal, and we like to overachieve. So we'll probably hit a little bit more than that. But really, we're not done. I mean we have the footprint, we have the infrastructure, we have the products, we have the Fastenal machine behind us, which is just incredible. But last but not least, we probably have some of the best people in the industry working in our stores in the company. Now I mean, obviously 5, 10, 15 years ago we had a lot people with very little experience running our stores. Now we have managers with 5, 10, 15 years of experience, district managers with 20, 25 years experience.

So in order to move forward, it just takes a clear focus, and that really involves a lot -- a few things. And again, there are other initiatives that we have in the company and so -- but for the purpose of this presentation, I wanted to narrow it down. But really it all is about personnel, and it starts and ends with good people. I mean, that's the bottom line. So return on assets; product development is huge; key accounts, our potential, how we're going to get them, our existing, what have you done lately; FAST Solutions is the big part of both of those factors; the basics of the branch business and again FAST Solutions and the company scorecard.

Todd did a great job talking about the company scorecard. As a matter fact, I was recruiting him earlier to come down to the state of Texas. And I don't know, we'll talk later, we'll exchange cards. But if you look at the last 4 in red, they're really -- they're related in pairs. And if you look at key accounts and FAST Solutions, they are related very, very closely and not really for existing accounts, but for potential accounts as well. I only have a limited amount of time, but I can go through a laundry list of accounts that we have gotten, we have able to close on in the last couple of years that we could not sniff over the last couple of decades. It's just been unbelievable. I mean, there's examples of accounts that we've been calling on for 10, 15 years, and they won't give us the time of day. We go by, we show them FAST Solutions. All of a sudden, we're in the door, we do $3,000. The next thing you know, we're doing $50,000, $60,000, $70,000 a month. What it has done is it's eliminated the me-too factor in the business. We're not just a commodity driven. We've always had services, but this really takes it to the next level. But really my presentation is about the company's scorecard, and that drives the basics of the business. So you have your key accounts and then you have your branch basics of the business, and that's the company's scorecard.

This is the company scorecard real quick. But obviously, you have your total points. Daily average growth is mission critical. We're a growth organization. Everybody knows that. Who own stock or works with the company. Margin, it's huge. Spreads -- freight spread, active growth, OSP is a big part of that. And basically that's in combination with our OSP scorecard and then dollars per FTE, and you can read the rest. And a big number at the bottom is vending. And what that is, is implemented vending. So this is the company's scorecard. What it is -- every branch has a scorecard, and then those scorecards combine into a district scorecard. And then those scorecards, the district scorecards compile into the regional scorecard, which is what I see.

Some people say, well a scorecard, it doesn't really help this or they think about, that's just a contest that you run every year. But really at the end of the day, the scorecard is the beginning of a good return on assets, and that's what it's all about at the end of day. Will talks about earnings, and that really is what it is about. I mean, you can sell till the end of tomorrow, but if you don't make any money and get a good return, then it doesn't matter. But when you have good branch scorecards, it leads up to good ROA. So I just wanted to give a couple of examples. The #1 district in March for the company just coincidentally was in Houston. His name is Steven Diekman. He had 53% sales growth for the quarter, 57% pretax growth and 295% performance factor. And the performance factor is a combination between your sales growth and your ROA. The #2 district in March was a person in Dallas, Ron Kitcher. His sales growth for the quarter was 37%, which is huge because he runs close to a $2 million district, a 58% pretax growth, and he had a performance factor of 232%, which is huge.

It really starts and ends with the branch. And what I did is I took the #1 branch in Dallas from last year, and this was a little buddy, a really good friend of mine who runs this branch, and it was one of these branches where we opened it up, it's out in podunk and basically there's some opportunity there, but it really came down to the individual running the branch. He wants to win, he hates to lose, and he has a great scorecard. And what that did is it emerged into a huge business. He had 59% sales growth in Q1. His ROA was almost 100%, and he had a 523% performance factor.

The #2 branch in Dallas last year, and again the branch scorecards lead up to the next year, that's really what it's all about. The #2 branch in 2011 had 121% sales growth, an ROA of 111% and over 1,000% performance factor. So when I get together with the branches, and I'll try to make this quick, I used to do this, and now they've caught onto my game. But I really -- I go around the room, I'd say, who's the competition? And I get different answers from different people. And you can only imagine, I get this person or this company, that company, this company. And I've listed a few, I've changed some of their names, I didn't want to infringe on any copyright deals, but I changed some of the name. Rainger, CSM, Flawson, Snowman, Spendries. And again, obviously you know some of these organizations. If you're within Fastenal, then you know exactly who I'm talking about. But those are our national competitors, and I look at the group and I say, you know what really it's not about those other competitors, because we don't have to worry about them because when we have the best -- when we have the right person in the right position, we dominate the market every single time. So really, it's about, let's stop looking at them and let's start looking at the people with the stores with the better scorecard down the street from you. So really, it's about anyone who's ahead you. If someone's ahead of you on the scorecard, call them up, find out what they're doing, find out where they're better than you on the scorecard, find out what that individual is doing, and so you can get to that level. And what that does is it makes everyone better.

So when I work with the branches, the spread between the #1 branch in the category and the #50 branch is microscopic. And so really it boils down to just a little bit extra everyday, and it comes down to literally, literally 2 more sales calls per day, 2 more points of margin, 3 days off of your days out, Dan would like that, 2 more new accounts, which is, doesn't sound like a lot, but that's what the difference is. If you look at the spread on the scorecard, that's really what the difference is. 3 more actives, 0.25% in charge backs -- 0.25% to 0.50%, and really what it boils down to is ownership and the desire to win. And that's what it really boils down to. So it's the little things. It's the branches that you call at 6:00 at night, and they're still there working it. It's the branches that you call at 5:30 or 6 in the morning for some unknown reason, and they just happened to be there working hard. Those are the branches that win, and those are the branches that the following year see the numbers that you saw earlier.

So the summary of effects of the scorecard really is when a branch in a district, in a region are doing well at the scorecard, it really does radiate pride throughout the branch, the district and the region, and it's a team effort. When the district is doing well, there's a lot of pride there. When the region is doing really well, there's a lot of pride there. And same goes within the branch. So -- and really, it's not about knowing that you're doing well. You know you're doing well against other branches in the best company in the industry, you're not doing well against Rainger or Spendries, you're doing really well against other branches in Fastenal, which is the best company in the industry. A positive scorecard shows that the branch is executing on the basic fundamentals of what we need to be doing that will move us forward into the future.

And last but not least, when you're going to compare your business or any other thing, if you're competitive you know that, but really when you're comparing your business to other businesses, you may as well start from the best and go from there. So thank you for your time, and have a nice day.

Willard D. Oberton

Ken will be holding a small tutorial upfront on acronyms when this is done. Let me hit 2 more slides, then we're going to open up to questions -- and we're going to open up for questions. I want to show this because this is our stock performance from 1987. I always like to show this. But there's a reason I'm showing it, and it's because of the business -- Bloomberg BusinessWeek article that came out February 27. I don't know if you saw that article, but it was an article. The person who wrote the article went back and looked at all the companies the 506 -- the S&P 500 companies from 1987 crash till 2012 and looked at the stock performance. When they boiled it all down, Fastenal was the #1 performing stock that they analyzed out of all the stocks out there. We beat Microsoft, we beat Apple, we beat the S&P by a mile. And so when I sit back and think about that, and I'm working, it makes me feel great. I'm proud. Everyone in the Fastenal team should be proud. But I started thinking about it and I'm going, okay let's look at that time period. We have about 25 years, there's 25 years. Manufacturing in the United States didn't -- in Canada didn't do very well over that period of time. It's been a kind of a slow time. A lot of companies have migrated to China. So it's been okay manufacturing environment. We haven't invented anything new. We haven't invented an iPad. We didn't invent a new software system. So we're kind of in a boring business. We're in a good business, industrial supplies are a good business. So the way we did it is we had a good plan, and we've hired great people, and the people got up every day and just went to work and moved the ball an inch further down the field. And that's probably what I'm most proud of, and that's why I'm so proud of our blue team is that we've been able to do it in a boring old industry. We've done it by working harder and working smarter and just coming to work and doing it. So for that I just -- I read the article a couple of times. I'm very, very proud of this because all of us have done it together, and thank you to the Fastenal people.

With that, there's a microphone down here. If you have a question, please raise your hand. I guess there's a few microphones in the room, and we'll try and take some questions before we go on to the balloting to see if we still have a job.

Question-and-Answer Session

Unknown Shareholder

My name is John Gyndell [ph]. I'm from Crystal, Minnesota. I'm thrilled that Fastenal is increasing its customer base and as a result it's also helping the shareholders. But I want you to know that the shareholders are also looking out for you. And here's it for instance. I wrote a letter a couple of years ago, even though it's dated in 2008, it still applies today. Written to Warren Buffett, the Chairperson of Berkshire Hathaway. So Dear Mr. Buffett, we are shareholders of Berkshire Hathaway. Because you made it known that you are seeking suggestions from the public in regards to possible further acquisitions of companies, we are taking the liberty to share with you the annual report and Forms 8-K, 10-K and 10-Q of Fastenal, the company headquartered in Winona. I'm going to skip down. It is our hope that you have an opportunity to review the enclosed material with the idea of possibly purchasing Fastenal as a new company under the Berkshire umbrella. He wrote back. Fastenal is a great company. I know the people, and we are a vendor, however, not for sale. I just wanted to let you know some of your shareholders are looking out for you.

Willard D. Oberton

Thank you.

Unknown Shareholder

I'm Marion Pease [ph] from Wisconsin. I've been a shareholder for a long time, and what I would like to know is, how are we doing in the world market, Asia, South America, Europe? Are we in there? I know we have to -- or you have to change the year to make metric and all that. But how are you there?

Willard D. Oberton

Now the question is, how are we doing in the international market? We're actually doing very well. And Steve, you rose that 40% last year, Steve? Our international business grew just over 40% last year. So double what the company grew. Our strongest countries where we're doing very, very well in Mexico, China, Malaysia, Singapore. Europe is doing well for several countries. I think we're in about 7 or 8 countries in Europe. We recently opened in Brazil. We've been in Panama for about 1.5 years. So we have a big effort. International business represents about 12% of our revenue at this point. So this year, it will be roughly a $350 million business.

Unknown Shareholder

I'm Herb Peter [ph]. Will, you stole my thunder because I was going to mention that 38,000% and that excludes dividends.

Willard D. Oberton

Oh, thank you.

Unknown Shareholder

My name is Dwayne Carlson [ph], and I'm a stockholder. The stock market hasn't been treating you very well the last few days. I'm assuming a bunch of short sellers are laying in wait for you. How are you going to cope with that one?

Willard D. Oberton

The question is, the market hasn't been trading us well for the last couple of weeks. A comment, which is correct. We're down a little bit from our high, and he's assuming -- thinking it might be a bunch of short sellers and how would we account for it. We really don't worry about the short sellers. It's a market condition. People have the right to short our stock and people have the right to buy it long. But if we do our job as individuals and as leaders, we should be able to grow the stock going forward. So even as Ken mentioned about our competition, we try to focus -- if we spend all of our time focusing on our customers, not the short sellers and not the competition. I think we'll be just fine for a long time. It's about focusing on the customers. We only have so much energy.

Unknown Attendee

My name is Duane Jacobs [ph]. I've been watching with interest your new facility to the left of this. What's going to happen to all of this space in here? Will all this material go over there?

Willard D. Oberton

As you can see or some of you saw, we're building a big automated warehouse off to the -- I guess it would the west side of our building. Actually, that's just going to cover our expansion. We've been very much squeezed into this building for a long time. If you talk to people in this building, we've made it -- waited a few years longer than we maybe should have. It's just about handling growth. We built a similar facility in Dallas, Texas and then in Indianapolis over the last several years. And what we found is we've become far more efficient. And what it allows us to do is it allows us to pull our orders over a shorter period of time, which means our trucks get to leave earlier, which means we service our customers earlier in the day. So instead of a truck maybe arriving in Fargo, North Dakota at 9:00 tomorrow morning, maybe it's there at 7:00, giving us an ability or providing the ability to give better service to those customers and just ship more product in less time. I think we have -- how many? 120,000 locations. We can put 120,000 different parts in that facility when it's done.

Unknown Attendee

My name is Barry Nelson [ph], and I'm interested in how well we might be doing in our activity in North Dakota if we are?

Willard D. Oberton

Yes. We're doing very well in North Dakota. But probably the -- there's 2 quick stories. Our store in Williston, which is really -- I'm guessing you're talking about fracking or oil business. Our business in Williston, which has been up there, I don't know when we opened, probably the late '80s, at least 15 to 20 years. Over the last 4 years is more than 5x bigger than it was 4 years ago. So the business is on fire. But Gary Polipnick, our Regional Vice President came in maybe a year ago and he said, Will, I'm opening a store in a town that I've never heard of. What's the name of it, Gary? Watford City. And I said, why are you telling me this? He said, because it's a population of about 300 people. And I said, why are we putting a store there? He said, just go with me, man. Gary and I have worked together forever. So I looked it up the other day and the store in -- brand new store did $200,000 last month. Had a very high profitability because we cannot keep up, basically as fast as we can bring product in we're shipping it out the other door. Well, we have other areas in the country that we're doing exceptionally well with oil too. If you look at the Williamsburg, Pennsylvania area, you look at Midland-Odessa, Texas, you look at Lafayette, Louisiana, the oil industry in the United States right now is doing well, and we're capitalizing on it. There's lots of cities I'm not thinking, but those are the big bold ones that I see on the report. It's the team in the field doing it. If we have no further questions, I'll turn it back over to Bob to read the results of the elections.

Robert A. Kierlin

Thank you, Will and gentlemen. Some of the statements as far as projections of plans and objectives are forward-looking statements and actual results could differ materially from those projected in the statements. The factors that could cause those results to differ are those mentioned in the company's annual report and Form 10-K.

The ballots have now been counted and reported the inspection -- the inspectors of election indicate that Robert A. Kierlin, Stephen M. Slaggie, Michael M. Gostomski, Willard D. Oberton, Michael J. Dolan, Reyne K. Wisecup, Hugh L. Miller and Michael J. Ancius, Scott Satterlee have received the required number of votes and hereby elected directors of the company. The report of the inspectors of election also in the case of number one, the resolution for the ratification of KPMG LLP as the independent registered public accounting firm for the company for fiscal year ending December 31, 2012 has received the required number of votes and has been adopted. Two, the resolution for the approval on an advisory basis of the compensation of certain of our executive officers has received the required number of votes and has been adopted. Three, the resolution approving the amended and restated Fastenal Company Incentive Plan has received the required number of votes and has been adopted. Four, the resolution approving an amendment to the restated articles of incorporation of the company has received the required number of votes and has been adopted. All ballots and the record of all proxies will be filed with the books and records of the company and the certificate of the inspectors of election will be attached to the minutes of the meeting as Exhibit C. I've been handed the names of the 2 lucky people who won the attendance prizes, which are still in the registration table, I believe. Robert Kennedy [ph], you are a winner. And second one, I believe, the name is George H. Spencey [ph]. Yes, very good. Congratulations. Before we have the final resolution here, remind you there's a free lunch by taking down the tarp here. There'll be 8 lines so you don't have to get in a single line. And the people over here mentioned that they were going to make a charge for the line, so stay out of the way. I will now entertain a motion for adjournment. The chair recognizes Mr. Michael Rusk [ph].

Unknown Shareholder

Mr. Chairman, I am Michael Rusk, a shareholder of the company, and I move that the meeting be adjourned.

Robert A. Kierlin

Thank you. Then the chair recognizes Ms. Don Rasmussen [ph].

Unknown Shareholder

Mr. Chairman, my name is Donna Rasmussen [ph], I'm a shareholder of the company and I second the motion.

Robert A. Kierlin

Thank you. It has been moved and seconded that the meeting be adjourned. All those favor, say aye.

[Voting]

Robert A. Kierlin

Those opposed? The meeting is adjourned. Thank you for coming.

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