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Earnings Highlights and Summary

For the second quarter of the fiscal year 2018, Fastenal's net sales increased 13.1% to $1.27 billion compared to $1.12 billion in Q2 2017, driven by higher unit sales, primarily related to a continued strength in underlying market demand and contribution from the Company's growth drivers. Fastenal's revenue numbers beat analysts' estimates of $1.26 billion.

During Q2 2018, Fastenal's fastener products represented 35.4% of sales, and its daily sales grew 11.1%. The Company's sales of non-fastener products represented 64.6% of sales in the reported quarter and grew 14.8% on a daily basis.

For Q2 2018, Fastenal's gross profit as a percentage of net sales declined 110 basis points (bps) to 48.7% from 49.8% in Q2 2017. The Company's operating income as a percentage of net sales was 21.2% in both the reported quarter and the prior year's same quarter.

Fastenal's operating and administrative expenses as a percentage of net sales improved to 27.5% in Q2 2018 compared to 28.6% in Q2 2017, primarily attributed to the Company's ability to leverage employee-related, occupancy-related, and general corporate expenses. Fastenal's employee-related expenses, which represented 65% to 70% of operating and administrative expenses, increased 10.0% on a y-o-y basis.

During Q2 2018, Fastenal's net earnings were $211.2 million, or $0.74 per diluted share, compared to $148.9 million, or $0.52 per diluted share, in Q2 2017. The Company stated that the combined effects of discrete tax items and the lower tax rate resulting from the impact of the Tax Act benefited its basic and diluted earnings per share (EPS) by approximately $0.15 in the reported quarter. Fastenal's earnings numbers beat Wall Street's estimates of $0.66 per share.

Growth Driver Performance

During Q2 2018, Fastenal signed 5,537 industrial vending devices, reflecting an increase of 13.4% on a y-o-y basis. The Company's installed device count was 76,069 on June 30, 2018, reflecting an increase of 14.3% compared to June 30, 2017.

Fastenal's sales through its vending devices continued to grow at a pace over 20% in Q2 2018, due to the increase in the installed base; and to a lesser degree, an increase in revenue per device. The Company signed 81 new onsite locations in the reported quarter compared to 68 signings in Q2 2017, representing an increase of 19.1% on a y-o-y basis. Fastenal had 761 active sites on June 30, 2018, which represented an increase of 56.6% from June 30, 2017.

During Q2 2018, Fastenal signed 43 new national account contracts, and revenues attributable to national account customers represented 50.7% of the Company's total revenues in the reported period. Fastenal's daily sales to its national account customers grew 19.1% in Q2 2018. Sales to the Company's non-national account customers continued to grow at a mid- to high-single digit rate in the reported quarter.

Balance Sheet and Cash Flow

Fastenal produced an operating cash flow of $311.6 million in the first six months of 2018, representing 80.8% of the period's net earnings versus 103.6% in H1 FY17. The decline in the Company's operating cash flow as a percentage of net earnings largely reflected working capital trends.

Fastenal invested $53.8 million for property and equipment, net of proceeds from sales, in H1 2018 compared to $52.8 in H1 2017. The Company paid $212.7 million in dividends during H1 FY18 compared to $185.1 million in H1 FY17. During Q2 2018, Fastenal purchased 800,000 shares of its common stock at an average price of approximately $50.51 per share.

Fastenal's total debt on its balance sheet was $425.0 million at the end of Q2 2018, or 16.0% of total capital, compared to $445.0 million, or 18.3% of total capital, at the end of Q2 2017. The Company's accounts receivables were $733.7 million at the end of the reported quarter, reflecting an increase of $120.2 million, or 19.6%, on a y-o-y basis.

Stock Performance Snapshot

July 17, 2018 - At Tuesday's closing bell, Fastenal's stock slightly rose 0.92%, ending the trading session at $55.94.

Volume traded for the day: 2.16 million shares.

Stock performance in the last month ? up 6.17%; previous three-month period ? up 10.71%; past twelve-month period ? up 31.62%; and year-to-date ? up 2.29%

After yesterday's close, Fastenal's market cap was at $16.09 billion.

Price to Earnings (P/E) ratio was at 24.40.

The stock has a dividend yield of 2.65%.

The stock is part of the Services sector, categorized under the Industrial Equipment Wholesale industry. This sector was up 0.3% at the end of the session.

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