Fastenal Company (FAST) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to Fastenal's 2023 Annual Meeting with the shareholders. My name is Scott Satterlee, I'm Chair of the Board. And first, I want to thank everybody for taking the time to brave the elements and join us here today. In keeping with tradition, the first thing that we're going to do before we get into the business portion of the meeting is I'd like to introduce Pastor Mark Dumke, retired pastor of Faith Lutheran Church to lead the invocation.

Thank you, Scott. On the past few months, 5 or 6 months or so, you may have noticed that there has been a lot of interest in artificial intelligence. And notably, something called ChatGPT, maybe you've heard of it or not, it's pretty amazing, you can have a conversation with it, you can answer your [indiscernible] questions, you can write poetry, and it'll break term papers and there I say sermons and invocations. While knowing that Fastenal is at the forefront of deploying technology, I decided despite the risk of being replaced by the IT department at next year's invocation, I ask ChatGPT to write an invocation for today's meeting. It started out like this. All great spirits of commerce and industry, and the rest of it wasn't too bad, a little dull, but not bad. But then my curiosity got to me and on a [ WAM ], I said, "Well, could you write an invocation for all, let's say, Goldman Sachs" and it gave me a rhyming prayer, let's see it. It says, a symbol we do in Goldman Sachs name with a mission to bring wealth and fame and then it went on some rhyming away, while I won't go any further. AI can create photos and works of art, but it cannot create people, each with his or her unique gifts and abilities. That remains always and only the work of our creator in whose image we are wonderfully and fearfully made always, all inspiring. It's with that sense of wonder and gratitude for every irreplaceable person here and each with your own unique set of gifts and abilities, and for all the people who comprise the Blue Team that I invite you to turn to the one who is the creator and sustainer of life. Creator God, we raise up to you each gifted person here together with their equally gifted coworkers and shareholders who comprise this unique corporation, inspire and die the work of our hands and our minds, unite us in our desire to serve customers, seek solutions and support coworkers as we gather to review our accomplishments, challenges and plans for the future, bless the work of this meeting and this corporation. May our shared purpose bring blessings to our customers, our coworkers, our shareholders and our community, lead us into a flourishing future. Amen.

Thank you, Pastor. Okay. This Annual Meeting of Shareholders of Fastenal Company is now convened. Again, I am Scott Satterlee, Chair of the Board of the company, and I will act as Chair of this meeting. Mr. John Milek, who is Vice President and General Counsel for the company, will act as Secretary of this meeting. Consistent with tradition as well, we have a couple of founders, I believe, here today, but we like to recognize the founders of the company. You see them up on the screen. Robert A. Kierlin; Henry K. McConnon, John D. Remick, Stephen M. Slaggie, and Michael M. Gostomski. I'd also like to recognize the directors as well that are in the room. And when I say your name, if you don't mind standing up and waving the crowd, please. Michael J. Ancius; Stephen L. Eastman; Daniel L. Florness; Rita J. Heise; Hsenghung Sam Hsu; Daniel L. Johnson; Nicholas J. Lundquist; Sarah N. Nielsen; and Reyne K. Wisecup. There's also somebody else I'd like to recognize. We have a former retired director here, somebody I'd like to call a friend and a mentor and impacted the company for a significant amount of years. You don't mind standing, Michael Dolan. Sorry, Mike, I didn't warn you that that was coming. I will now ask Mr. Milek to report on the number of shares present at this meeting and to conduct the voting on the proposal to be considered at this meeting. Following the vote, our Chief Executive Officer and President, Daniel L. Florness, together with other individuals from our organization, will report to you on the company. John?

Thank you, Mr. Satterlee, and good morning, everybody. Before starting, I want to remind shareholders of the rules of this meeting, copies of which are available at the registration table. More importantly, if you wish you speak, please raise your hand and a microphone will be provided to you. Upon being recognized, please state your name clearly and limit your statement to no more than 3 minutes. There are 4 management proposals to be voted upon today. Management's position is already stated in the proxy statement that you received. The record date for the determination of the holders of the company's common stock entitled to receive notice of and vote at this meeting was fixed by our Board of Directors as February 22, 2023. I present to this meeting a certified list of holders of the company's issued and outstanding common stock as of the close of business on the record date. This list will be kept open and subject to inspection of any shareholder during this meeting. I also present to this meeting an affidavit of a manager of Broadridge Financial Solutions, Inc., attesting that the notice of the meeting, together with the proxy statement, a proxy card and certain other documents were mailed on or about March 13, 2023, to each holder of record of the company's common stock as of the close of 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. A certified list of 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 are outstanding entitled to vote at this meeting, 570,960,683 shares of common stock. Each share of common stock is entitled to 1 vote. For a quorum to be present, a majority of the 570,960,683 votes entitled to be cast must be present in person or by proxy at this meeting. On a preliminary count, they are represented at this meeting either in person or by proxy, a majority of the votes entitled to be cast at this meeting. Therefore, a quorum is present for the transaction of business. Is there anyone present who has not submitted a proxy or a registration form? A record of the proxies submitted to the meeting and the ballots of the individuals appointed as proxies and of the shareholders voting in person at this meeting will be filed with the books and records of the company. Ellen Stolts has been appointed to act as Inspector of Elections with respect to all matters to be voted upon at this meeting or any adjournment thereof. The oath of the Inspector of Election has been administered and will be attached to the minutes of this meeting as Exhibit B. We hereby make available to the Inspector of Election of 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 23, 2022, are available at the registration desk. 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, 2023, may vote on the matters to be considered today. If you wish to vote by ballot, 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 their proxy should not vote by ballot. We will distribute 1 ballot covering all matters to be voted upon at this meeting rather than separate ballots for each matter. We will now take up the business of the meeting. We have 4 matters to be considered by our shareholders today. The first is the election of directors for this coming year. The Board of Directors of the company has nominated the following 10 persons for election to the Board to serve until the next regular meeting of shareholders or until their successors are elected and qualified. Scott A. Satterlee; Michael J. Ancius, Stephen L. Eastman; Daniel L. Florness; Rita J. Heise; Hsenghung Sam Hsu; Daniel L. Johnson, Nicholas J. Lundquist, Sarah N. Nielsen, and Reyne K. Wisecup. I will now open the floor to a motion to formally place before this meeting the nomination of these individuals. I recognize Mr. [ Dan Hampton ].

My name is Dan Hampton, and I'm a shareholder of the company. I move to formally place before this meeting the nomination of the 10 individuals identified for election to the Board of Directors to serve until the next regular meeting of shareholders until their successors are elected and qualified.

Thank you. As no other nominations have been made in accordance with the procedures established by the company's bylaws, I declare the nominations to be closed. The next matter for consideration today is the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2023. I would like to introduce Ms. Carrie Person, a partner of that firm, and Mr. [ Kyle Cushing ], Senior Manager of that firm, who are here today to answer any questions that you may have. Hearing none, I will now open the floor to a motion to formally place before this meeting a resolution concerning the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2023. I recognize Ms. [ Elizabeth Soderberg ].

My name is Elizabeth Soderberg, and I'm a shareholder of the company. I move that the following resolution be adopted, resolved with the appointment of KPMG LLP as an independent registered public accounting firm for the company for the fiscal year ending December 31, 2023, be and hereby is ratified.

Thank you. Is there any discussion of this motion? It has been moved that the appointment of KPMG LLP as independent registered public accounting firm for the company for the fiscal year ending December 31, 2023, be ratified. I will now open the floor to a motion to formally place before this meeting a resolution concerning the approval of executive compensation. I recognize Mr. [ Patrick Stines ].

My name is Patrick Stines, 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 the section of the proxy statement for the 2023 Annual Meeting of Shareholders captioned Executive Compensation.

Thank you. Is there any discussion of this motion? It has been moved that the compensation of certain of our executive officers be approved. I will now open the floor to a motion concerning the frequency of future advisory votes on the compensation of the company's named executive officers. I recognize Mr. [ Bruce Hilsgen ].

My name is [ Bruce Hilsgen ], and I'm a shareholder of the company. I move that the shareholders vote to determine on a nonbinding advisory basis, whether the frequency of the future advisory votes on the compensation of the company's named executive officers should be every year, every 2 years or every 3 years.

Thank you. It has been moved that the shareholders' nonbinding advisory vote be held for the shareholders of the company to determine the frequency of future advisory votes on the compensation of the company's named executive officers. Now if you wish to vote on the motions by ballot, please raise your hand and the 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 will be counted. While the ballots are being counted, Mr. Dan Florness, our President and Chief Executive Officer, will report to you on the company. After the conclusion of the report, we will answer any questions that you may have regarding the company and its activities. Thank you, everyone.

Thank you, John. Pastor Mark, it's good seeing you again. Thanks for making the trip back. Welcome to the annual meeting. Thanks for joining us on this beautiful spring day. As we welcome our second speaker today, a fellow from Canada, we want to make him feel at home. If you take a look at the organization, we have a wonderful history. We have learned how to celebrate our history, we have learned how to learn from our history, but we don't cling to it. And each year, as we're looking forward to what's next and what we're building towards, we do take a moment to celebrate some milestones. So I'd like to share 5 milestones with you that occurred in 2022. Nobody thinks of Fastenal as an e-commerce organization. We started with a branch footprint spread across the U.S. and the North in the Canada and South in New Mexico and beyond the shores of North America. But in 2022, we did over $1 billion through our e-commerce channel. And in the fall of '22, we exceeded 20% of sales for the first time ever. The second thing we measure is a cousin to that. Actually, it's an expansion of our way we think of electronic activities with our customers. We look at it what we call our digital footprint, and I have a slide to that later in the presentation. If I think back to 7, 8 years ago, we didn't really even measure it, but I ventured a guess we were in the low 20s as far as a percentage of our business that was digitally happening with our customer. And the bulk of that was through that little vending machine we had started deploying a few years earlier. In October, we hit 52% of our revenue going through that digital footprint, and it allows us to engage with a customer in a different way because we could show them what they're using, where they're using it, and we can approach the marketplace in a different fashion. Third, and it's appropriate that Jeff is here today, our international business eclipsed $1 billion in sales for the first time ever. We hit that mark at the end of November. Our net income exceeded $1 billion for the first time. And finally, one of the newer growth drivers, my newer [indiscernible] last decade, growth drivers of the business is on site. So instead of branch openings, it's really about opening up a branch inside our customers' facility. Last year, we signed 356. And that's the one number that we challenge each other on because our aspiration is can we drive that to 100 every quarter? And back in 2015, I think we signed 80 for the year. So you can see how far that's changed. But some great milestones, and I'm proud to report those to you, milestones we hit during 2022. As you can see, and I suspect most of you have had the opportunity to take a look at our annual report, perhaps our earnings release for the first quarter, we put out last week. We had a good 2022. Our sales grew about 16%. Operating income grew about 19%. As a percentage of sales from 2021 to 2022, our operating income margin expanded from 20.3% of sales to 20.8%. However, if you also looked at our earnings release last week, you would see something. Our business has slowed down. Since last November, the industrial economy in North America has been weakening. And we measure it with the ISM and ISM below 50 indicates there's contraction going on, and that's been going on for about 5 months, and it shined through a bit in our numbers in the first quarter, particularly in March. We operate in a cyclical industry. And you can see it if you look at our faster business, while it grew 18% last year, it grew 7% in the first quarter and it grew 3% in March. We operate in a cyclical industry, but we build for the future every day. We invest in the future every day. And one beautiful aspect of this business model is when the economy weakens, we actually generate more cash because we need to invest in the short term, less into working capital. That allows us to challenge our priorities, to challenge our strategy where we're going and invest, invest, invest for the future because we know the market potential is dramatic in North America. Jeff is going to talk a little bit about the rest of the planet. We know the opportunity is large, and we have something special to offer the market. We believe we can grow into the future and we invest for that growth every day even when the economy is weaker. A few months ago, I was sitting there looking at some of our old annual reports, and this is a wonky slide. I apologize. I do that to you every year. But this slide takes a look at Fastenal 10 years ago, 5 years ago, 2022, and then looks to the future. And my attorneys say I have to say this. So I will say the 2 columns on the right are just columns. There are numbers of what we believe we could look like in the future. It's not a prediction, but I believe in the team at Fastenal, and I believe this future can happen for us. If you look at that first set of numbers, and I think they can highlight it there for you, how fast is the business growing? So we grew 40% from 2012 to 2017. We were struggling a little bit during that time frame. Part of it, we were defining what we were doing, what we're going to do next. The economy gave us some fit, especially in 2015, we were 40% bigger, and we were growing about 7% a year. I'm pleased to say that the organization we invested for the future. We believed in each other and we believed in the future. And in the last 5 years, we've grown over 50%, and we've grown almost 10% a year. I wish that it had been much funner slide, if that had been 10.1%, but 9.7% is what it is. And don't forget, that includes a year plus with a little thing called COVID that kind of threw a monkey wrench into things. But your team found a way to survive and find success. The next set of numbers looks at it and says, okay, we're growing the speed, how fast our earnings growing. In that first 5-year period, we are growing about 5.5% a year. I'm pleased to say, in an environment where we were expanding our investments, we increased our investments in the technology by 1/3. We went from about 1.5% of sales to 2% of sales that we invest into technology every year. We made that decision back in 2016. Despite that, our ability to grow our earnings improved. And in the last 5 years, we've grown our earnings 10.5% a year on a compounded basis. Finally, and this is one where you can enjoy the successes, you have to acknowledge the places where we fell a little short. So if you look internally at Fastenal, we have a thing we talk about, and we call it our Drive to 35. And it's looking at the fast organization and saying, okay, we do $100 in sales a year. We do $1,000. You picked the number, but you do $100 in sales. We need about $35 of inventory and accounts receivable, historically to support that. Now as we've moved beyond the shores of North America, it's more difficult for us to leverage this great supplier network, this distribution network we built, and we need to pour more investment into supporting that business. And so as you can see here, in 2012, we were about 35%, 34.7% to be exact. By 2017, that had grown to almost 39%. And I'm sorry to say, in 2022, we're about there, there is a silver lining. It was about 40% a year ago. And during COVID and during all the congestion of the economy turning back on, we had to dramatically expand our inventory that we have in our network to honor our covenant with our customer. And that is we will not let you down. So if it's a product we're bringing from our on the planet and we did need stock an extra month's worth of inventory, we will do that because that's what we bring to our customers table. I believe when we're a 10 and $15 billion organization, we'll move back to that 35%. And you can see what that means as far as $3.5 billion working capital and a $5 billion plus working capital in the future. What that also tells me, and this is the financial side of me coming through. That tells me that our ability to generate cash you could flip to the next one, so we can highlight our ability to generate operating cash flow and our ability to invest in the capital infrastructure to support that business in the future has never been stronger. So if there is an objective out there that we believe is worth going after, we can invest in the capital. In the last decade, we've invested over $800 million into that little vending idea that Bob came up with back in 1967, into automating our warehouses, $700 million, adding inventory, all those things we've been able to do and bring something special to the marketplace. And I hope you believe it's special too. On the next slide, we look at our digital footprint. I alluded to that earlier, I said we broke 52% in the fourth quarter. If you think about that, when we look out to the future, that $10 billion, that $15 billion organization, we believe that most things that our customers do are actually repetitive if you understand the repetition mode, what's the frequency. And so when we talk about Fastenal managed inventory, our engagement with our customers is saying, we can understand what you're doing. We can illuminate it for you. We can bring it to the point of use. And so over time, and you can see all this is built. During COVID, we were able to expand this footprint. So it might be we're coming in and we're scanning bins with a handheld scanner. Today, that's almost 13% of our sales. It might be we've deployed either a bin system with embedded technology or our Fastenal vending machine that we've had for the last 15 years into your business to bring it to the point of use, a funny thing happens for our customers. It makes it easier for them to operate and they actually spend less money on supplies because things like hoarding and waste go away because stuff is readily available when you need it right where you need it. We think it's a great tool, and it allows us to find greater success in the marketplace with our customers. If you move down, the last piece is looking at in addition to where we're managing the stuff you're using every week, every day, make it easier for your customer to order from you 24 hours a day, 7 days a week. And that's become even more important in today's world where purchasers might not be working in the facility that we're operating in. They might be working remotely. And so providing them an easier way to engage with us, e-commerce is a nice one to pitch, In how we approach the market. We believe we'll get to 85% someday. I'm pleased to say we're at 54% today. And again, as I mentioned, before COVID, we were at about 35%. If you go back down to many years ago, it was in the low 20s. So it's 7 years, I've been in this role at 7.5 about. And one of the things early on in this role for me personally was figuring out a way to improve my own skill set to support this wonderful team at Fastenal. And I spent 6 months working with a coach, try to understand different things, and I'll share one element of that later when I talk about Reyne Wisecup. But I went to Pete Guidinger afterwards. I went to Reyne Wisecup and I said, "Hey, we have a lot of great leaders within Fastenal. I'd like to bring this coaching experience to everybody. How do we do that?" And so they worked and developed working with leaders within Fastenal, 24 competencies that we identified that are special. And you go through the list here. I don't know that there's things here unique to Fastenal. I think there are things here that are unique in the fact that Fastenal empowers everybody to be a leader. And so more people cherish what you're seeing on the screen here. But it really boils down into 5 broad categories. The first one is, as a leader, what are you doing every day to develop yourself because you owe that to others around you. Secondly, what are you doing every day to develop folks around you because you owe that to them to help find success in their lives and with the folks they are leading. The last 3 we affectionately refer to as DAC, direction, alignment and commitment. And it's really, are you painting the picture of where you're going for your team? Are you giving direction? Bob used to say, if you can get everybody pursuing a common goal, you can do wonderful things. He was right. Secondly, are you aligning the resources so you're making it easier. Here's what we're doing to invest in technology. Here's what we're doing to invest in training. Here's what we're doing to invest to make it easier, you're aligning resources. Then finally, you're making the commitment to everybody and you're saying it publicly, we're committed to this outcome. We're committed to being that 10 and $15 billion the organization. We're committed to how we manage the P&L, how we develop our people, how do we find people because it makes for a great organization where it's fun to be around. A few years ago, we had a vote at the annual meeting, and it was about sharing statistics. We've talked about these statistics within Fastenal for years we thought let's share it beyond. We would share it at our annual gathering. I share it with every group I speak to. One thing I've learned in life, there are no monopolies of talent. No geography, no gender, no race has a monopoly on talent. The key is you find great people, you ask them to join and you give them a reason to stay by how you treat each other. In 2019, that was the last year before COVID that we gathered and we honored our 25-year employees. I remember seeing the group on stage, it was a big group, the 60 people that joined us back in 1994. One thing that struck me was of that group of 60, most of them look like me because back in 1994, most of our business operated in rural America. Of that 60, 6 were female because that organization, highly faster organization didn't appeal to both genders the same way. And I was glad to see those 6 people still there celebrating 25 years. And you can see over the last decade, we've gone from about 18% to about 24% of our workforce is now female. The only thing on that chart I don't like is from 2019 on, COVID wreaked havoc on the female part of our society. You closed schools, you closed day care, it falls disproportionately on females. We see it in our numbers. Our numbers should be 28% right now. Instead, they're stuck at 24%. I believe they'll get to 30%, I believe they'll get to 35% and 40%. 50.2% of the working age population is female. I don't know if we get to 50.2%, but we're going to try because we want the most talented people in society, that means you include all. Secondly, you can see non-Caucasians, so folks that don't look like me, what percentage of our workforce is that involved? A decade ago, it was 12%. Today, it's 22.5%. In past years, when I looked at this chart, I've looked at it and said, yes, 52% of our business now is in metropolitan areas, that's driving that. That's what I believe, but I challenged our HR folks is what I believe, correct? Or am I full of it? I'm pleased to say I was full of it. About 1/3 of that improvement comes from changing demographics and where we operate. 2/3 of that is a combination of folks looking at Fastenal and saying, "Hey, I've heard great things about Fastenal. I want to join." And a piece of it is probably us being casting a broader net when we're recruiting. But I'm pleased to say it's happening and it's happening organically at Fastenal because we believe in people. And we believe there's talent in all. Let's find it and let it shine. Finally, last week, we had our customer expo, and we bring in thousands of customers from around the planet. We had folks from, I forget how many countries it was. But this year, we were coming from Europe, we were coming from Asia, we were coming from Canada, Mexico, Latin America and across the U.S. into a single venue, and we show everybody what we're about. And one of the things that we show is here's a video on Fastenal to help tell the best story. Please run the video. [Presentation]

Our next speaker was born and raised in Canada. So let's be nice to him today. his training, he's a civil engineer by training. And I suspect, in February of 1996, when he told his parents, he has joined this company called Canada that had a handful of employees in Canada, they were probably less than happy questioning his decision-making process. So he joined us. He worked in Burlington, Ontario, worked in a few of the branches in Ontario. 2 years later, he became a district manager and at some point, he moved to British Columbia. I believe that's when I first met Jeff when he was a district manager of British Columbia. And after that, we convinced them to move to Europe to start a business, help open Fastenal in Europe. And we're fortunate he did because we have a wonderful business there today. He's fortunate too because he met his wife and had 2 children, while he was living in Europe. And then some years later, we asked them to move back to North America and to lead our business in Canada, and he was our first Regional Vice President in a foreign country that was native to that country. And I'm pleased to say, in most of our foreign countries of all of our leaders, we only have one today that's American and the rest are from Canada, from Mexico, from businesses that we've established and built local talent. In 2015, he became our EVP of the international organization. And I think back when I first met Jeff, I figured, I'm from Wisconsin. so I have Iowa jokes, I have Minnesota jokes. I just changed the geography and I'll tell Canada jokes. And I became discouraged telling the Canadian jokes early on because of 3 things. One, you have to use little words. 2, you have to explain the joke. And it's no fun telling a joke when the person you're telling it to [indiscernible] in the reply. But with that said, I'm pleased to introduce Jeff Watts to the group.

That was a good one. Thank you, and good morning. I've known Dan now for almost 27 years. And over that time, as you can tell, there's been a lot of back-and-forth banner, Canada versus the U.S. And I think I have my own pretty well over that time, but some just dawned on me after hearing that. I'm vastly outnumbered here today. So if I respond in the awkward position of either winning and offending 99% of my audience or doing something that's very hard for me moving on and letting it go. So in the interest of self-preservation, I guess I'll just stick to my Canadian roots, do the polite thing and move on. So a few weeks ago, I was having a conversation with the new employee in the Netherlands, and the conversation started as a typical exchange of advice and storytelling. At the end of the exchange, he made a comment that kind of struck a chord with me. He said, "Jeff, thanks for the conversation, but I really wish I started back when you did. It seems like there was just so much more opportunity." And a couple of things stood out to me. First, when I started in the company, this gentleman wasn't even born yet, so that would have made it a little difficult. But second, as crazy it is to talk about our past and reflect on our amazing growth story, we need to be more diligent about sharing the vast growth opportunities that are available now and more importantly, into the future. So today, I thought I would share some of that conversation with you a bit about our growth internationally expansion over the years, but also look at the future and what's on the horizon for the organization. Now I have to warn you the conversation I had with that employee went on for the better part of 3 hours. So please get comfortable. I'm just kidding. So Fastenal finally earned the title as an international company back in 1994 when we opened our first branch in Stoney Creek, Ontario, Canada. Now there's a lot of reasons why companies choose to expand internationally. But I think for us, it had a lot to do with our model of growth through customer service. You see your customers weren't just in the Midwest or California or Texas. And when they came to us to see if we could support them in Canada, we saw an opportunity. We saw an opportunity to grow the relationships with those customers, but we also realized we're going to pick up a whole bunch of new customers along the way. So we moved north. Now Canada looks similar to Minnesota, parts of it. But there are some differences. I mean, outside of the obvious, we're much better at hockey, seeing how it did offend 99% of the audience. But I'm not going to stand up here and say things were smooth in the beginning when we opened because they weren't. But the learning curve took a little longer than we might have liked. There are some speed bumps, but I think the most important part is we learned and we kept moving forward. So not long after these same customers came back to us and said, "We love what you're doing first in the U.S. We love what you're doing first in Canada. But can you help us out in Mexico, Asia and Europe?" So again, we saw an opportunity to grow these relationships, expand our footprint. And in 2001, we opened our first locations in Mexico, Singapore, followed not long after in the Netherlands in 2004, in China in 2005. Now during the early years of this expansion, we mainly focused on supplying OEM production fasteners because to be honest with you, that was about the extent of what our international supply chain can handle at the time. However, as we continue to grow in these markets and become more ingrained in the culture, we started to notice something. We started to notice that our approach to customer service, it was quite different, unique, almost, pardon the pun, foreign in most countries. And realizing we had an opportunity, we began to invest more into building our supply chains, expanding our product lines, building a distribution model that would allow us to realize this opportunity. And it did. And over a 5-year period between 2009 and 2014, we opened 15 more countries across the globe to accommodate our customers' needs and bring our unique services to these new markets. Now this expansion resulted in our first major milestone. And in 2012, we surpassed $0.25 billion in revenues for the first time. Now admittedly, opening 15 countries in 5 years, it may have been a little too fast. Then again, our company's name is not slowing off. But during this expansion, we did face some obstacles that I believe were essential in our development. And we had to be smarter with our time, with our resources and investments. We had to be more strategic in our planning. And I think the important was we had to balance the needs and wants of our customers with our own capabilities. It wouldn't do us any good to open a country for an account and not be able to provide the high level of service they become accustomed to. But all in all, through everything, our efforts have been very successful. We've learned from our experiences, continue to move forward, adding new countries and new products and new technologies across the globe. Briefly, though, I would like to touch on our go-to-market strategies because I get that question a lot. In the Canadian business, other than the odd [ As and outs ], we are very similar. It's very similar to what you'd see here in the U.S. business. There's some small nuances, some differences, Quebec. But in general, the approach and offering is quite similar. Our business in Mexico, on the other hand, it's quite different. And it's really the model we've used to set for the rest of the International business unit. Mexico doesn't have storefronts like you'd be used to in the U.S. or Canada. And specifically, they only target large key account customers. So our goal is always to get as close to the customer as possible. And I think the success in Mexico is a great example of that. The on-site locations in Mexico far outnumber our street locations. And the reason is we've worked very hard at becoming the market leader in value creation across the country. Once we finish the customers' facilities analysis, there are very few companies, if any, that can compete with our systems and our efficiencies, our speed to implementation and more importantly, the value and cost savings that we can provide. Now because of the success of the model in Mexico, South America, Europe and Asia's go-to-market strategy is almost exactly the same. The only real difference is that the Mexico business unit, they can handle a little bit more of the customers' unplanned or nonrepetitive spend because today, they can utilize the full strength of the North American supply chain. Like I said earlier, our markets overseas, they started mainly their operations, supplying the OEM production fasteners. But as we've grown in these markets and taking advantage of our competition's lack of service capabilities, our product depth and services have expanded. And today, over 51% of our revenues overseas come from product lines other than fasteners, safety, PPE. That's the biggest portion after fasteners followed by tools electrical. I think it shows that we've made the right investments in our customers in our branches. As we review our global expansion, I think this is another question I get. It's really important to point out that we've grown this organically and not through acquisition. I'm often asked, Jeff, why didn't you just buy your way into these countries? And that's a valid question, and it was certainly an option, but our company culture and belief that we have in our people is so strong that we knew growing through acquisition could have a negative impact on accomplishing our long-term goals. See, Fastenal is a company, it's passionate about their people. We believe in the potential for our employees and giving them the support and the pathway they need to accomplish great things. And here's an example of just how passionate we are about giving employees new opportunities. So Dan mentioned a little bit in my career when I finally became a district manager, I thought I was doing a pretty good job. I got a phone call from our VP one day and then he was kind of odd. He's like, "Hey, Jeff, you ever been to Europe?" And I said, "Yes." He's like, "did you like it?" I mean I said, "Yes, I mean, I was 12, I guess." He said, "would you move there?" And after a few seconds when I finally realized that he was being serious, I said, "Thanks, but no thanks. I'm doing really good here. I appreciate the offer." I hung up the phone. I kind of thought it was over at that point. And the next morning, I was in a branch and the branch manager came back to me and he looked a little frazzled, and he's like, "Are your numbers good?" And I'm like, "yes, why?" He's like, "Will Oberton is on the phone, he wants to talk to you now." And Will was our CEO at the time, and I've never received a call from him at 8 o'clock in the morning, my time or 7 his time, and I was a little nervous too. I picked up the phone and he said, "Hey, Jeff, I heard about the opportunity in Europe. I think it would be good for you and it'd be great for the company. I want you to do it. Unless, of course, you're too scared." And I got to be honest with you, it really took me off. And a week later, I was in Amsterdam looking for apartments going, "Oh my God, what have I done? But I am thankful to Will for that subtle pushes. Without it, I probably never would have met my beautiful wife, Dan mentioned and lucky enough to have 2 amazing children that I need to point that out because yesterday was my 16-year wedding anniversary, so I really needed to add that part in somewhere. So I did. Okay. Back to our growth. As you can imagine, growing organically did present some challenges. But as an old hockey coach of mine used to say, if you want to be successful as a team, it's going to require perseverance. And perseverance is a continued belief and effort towards a common goal, even when it's difficult or takes a long period of time. And without perseverance, we probably would have stopped our expansion when we realize that not every government in the world use things the same way as the U.S. does, like health care benefits or the fluctuating Canadian dollar. It seems like on a daily basis. We may also stop to Mexico. We realized that the language barrier did present a lot more challenges than we first thought. But with great patience and the spirit of the Fastenal team, we persevered. So let's take a look quickly at the perseverance, what that perseverance has gotten us. Today, our international business is serviced from almost 600 locations, of which close to half are on-site locations. And I thought it was over 600 and then when I was doing this, I hadn't known is actually the number is 599. And if I had it known back in December that I was doing this presentation today, I would have forced my guys to have at least 1 or 1 or 2 more openings before the end of the year either way. We have over 4,400 employees spread out over 24 countries. Our FMI technology, mostly the vending platform has close to 16,000 devices in place today outside the United States and operates in all 24 countries that we're in today. And this past year, in 2022, as Dan mentioned, 28 years after opening our first international branch, we surpassed $1 billion in revenue. Now there's something Dan didn't mention. It took the U.S. 37 years to reach $1 billion. International did it 9 years faster. I'm just saying. From all these stats though, I think the one I'm most proud of actually is the 4,400-plus employees because when I started in the international team, I think we had 9, maybe 10 total and to realize that our journey of growth and perseverance and success has created opportunities for our employees and their families around the world. For me, at least, that's the real achievement. Now let's turn our page to the future. On the screen, you're going to see a map of the world. Now this map isn't a map of each country's GDP. What it is, it's a map of each country's manufacturing output. And as you can see in North America, including the United States, makes up about 18% of the world's manufacturing. Asia is still the largest at 52% followed by Europe at 22%. But let's just focus on Europe for a moment. Today, we have a strong foundation built in 5 of the top 6 countries listed, the exception being Russia, which at least at this point, I'm okay with. But within Germany, Italy, France, the U.K. and the Netherlands, we currently have 55 locations, over 400 employees, a distribution center, quality lab and a manufacturing site. Now if I look back on the U.S. business compared to a similar time of both revenues and footprint, that year would be 1992. It took Fastenal in the U.S. 55 years to get close to that $6 billion a year in sales. And considering the scale of the company today, I believe Europe could reach that in less than half the time. But how? Let me try and paint in picture. So imagine you're a Fastenal customer today and you're in Cleveland, Ohio, use that an example. And you're benefiting from this all Fastenal services like on-site, like everything that was in the video on-site vending access to Fast360 analytics, and you're experiencing these advantages of product consolidations, usage reduction, 24-hour lab reporting. However, things aren't going as great in your facilities in Poland, in Germany and the U.K. They're facing different challenges, they're facing fragmented supply chains, limited information reporting, product stockouts, poor quality, but you want them to have the same service reliability and consistency that you're getting in Cleveland, Ohio. So what are your options? And you want it with one partner, what are your options with that? Now to be honest with you, your options are pretty limited. So limiting in fact, that there's really just one, Fastenal. You see we're committed to providing the same customer experience in all of our locations, regardless of the geography. I mean there are other companies out there that can provide bits and pieces, but none of them can provide the same level in service and consistency across the globe. You see as our competitors continue to pull back, we continue to move forward, getting closer to our customer. We're no longer just a fastener distributor. We're a global supply chain partner that can provide our customers across the globe with something no one else can, consistency. More than ever, especially after the last 3 years, I think we've realized that the importance and the power consistency can have, a consistent supply chain, a consistent product, consistent service, ultimately, a consistent partner. To me, these are all crucial if you want to be successful today in today's global market. Now taking all of that into consideration, combined with our standard growth pattern, the international standard growth pattern, the International business unit will reach to 2022's U.S. revenue of just shy of $6 billion in under 10 years. And I'm being conservative with that number. So as we grow this international business toward that $6 billion number, it opens the doors for an enormous amount of opportunity. We'll continue to expand our geographic reach, opening new countries, new markets and getting new customers. Our FMI technology and on-site growth drivers will continue to lead the way, offering with new rollouts, new efficiencies. We'll add new product lines, new suppliers, new technology. And the number of employees needed to support this business will be significantly higher than the 4,400-plus we have today. creating an immense amount of new leadership opportunities and just opportunities in general for not only our current employees, but for all the new employees, we're going to need to add on. Now hopefully, you can see that in our industry and to a large extent, I believe, in any industry, we're truly unique and special. Fastenal is more than just a place to work or distributor of goods and services. It's a community of individuals who are committed to a common goal of growth through customer service. Now as I finish up, I'd like to go back to that conversation I had with a new employee. And as we near the end of our talk, I asked him, I'm like, after all of that, and it was 3 hours, not 15 minutes. But after all of that, "can you see now just the immense amount of opportunity you have at your fingertips?" And he said, "yes, absolutely." I'm like, "Okay, is there anything holding you back from attaining it?" He said, "Yes." Himself. Kind of shocking, like, "What do you mean?" He's like, "Well, I was always brought up with the thought that to be successful in business, you had to start with a company, learn, apply to another company, a little bit higher job, learn there and continue this process. And over a certain amount of years and a certain amount of different companies, hopefully you'll obtain that high-level job." He'd never been exposed to the idea that one company would allow you to learn and provide a pathway for endless opportunities as long as you had the perseverance to achieve them. But I believe this is what we've built a company of opportunities that believes in its people to provide true unmatched value creation across the world. Now on the screen, you're going to see a quote from Bob, I think he's here today [indiscernible] lights, and it's probably my favorite. It states the greatest resource in the world is a human individual with each individual having enormous potential to do wonderful things. Our people are at the heart and soul of our business, regardless of their country, the background or even the language they speak. Fastenal people all share the same passion, dedication and drive to succeed, working together as one team to achieve something I do believe is very special, becoming the world's largest and most respected supply chain partner. Thank you.

Thank you, Jeff. It's appropriate the message that Jeff ended on because I talked earlier about we cherish our history, we don't cling to it. We celebrate our milestones, and we recognize those who have given so much of their talents and quite frankly their soul to others to help others in life. And so I'd like to recognize a few people. The first one, I mentioned earlier back in, and when I stepped into this role, I worked with a coach for a while. And there's an individual at Fastenal that I didn't always see eye to eye with and sometimes we [indiscernible] this running. And I sat with the coach about it. And we talked through some stuff and he asked me some questions, made me really uncomfortable. And lo and behold, through this conversation, it was a 3-way conversation, it was the coach, my wife and me. And it dawned on me actually, they impressed upon me partway through, but it eventually dawned on me that I was 90% of the problem in why we didn't see eye to eye and stuff, why we didn't have a great relationship. And I modified things. I decided, you know what, we need to learn, we need to change, and I modified these few things. And our relationship blossomed. And several months ago, Reyne Wisecup decided she's going to move on to the next chapter in her life. I would like to sincerely thank her for the last chapter that she shared with Fastenal and everything she did for me in my career at Fastenal. And I'm glad she's agreed to stay on our Board for 5 more years, but I sincerely hope that she and John have a great next chapter of life. Reyne. The other thing we do every year, and this is an internal function as well as at our annual meeting, we recognize those that have given themselves for years. Now Reyne was at 34.5 years. I challenge here to stay until 35. I didn't use scared and I guess I should have. But on the far right on this slide, you see there are 17 individuals, 8 current employees that have been with Fastenal for 40 years. And so I think back in 1983 when they joined [indiscernible] college, economy wasn't very good, if I remember from the early '80s. And these 3 individuals decided they join this organization that was pretty small. And I believe all 3 are here today. I saw 2 before. I believe Jeff is here as well. But I'd like to recognize [ Bruce Hilsgen ], who joined us in June of 1983, [ Pat Stines ], who joined us in June of 1983, and [ Jeff Clint ], who joined us in December of 1983. Now I did warn Pat ahead of time that I was going to chastise him a little bit because I know he's from [indiscernible] and [indiscernible] if he would have moved to Bloomington, Indiana, one that have been a cool chart to see Bloomington, Illinois, Bloomington, Indiana, and Bloomington, Minnesota. maybe I'm the only one that thinks it. Plus he might have met [ John Krueger]. But would you 3 stand up and be recognized by the crowd. In that video you saw, one of the things that we're really impressive on our customers because there's a term out, an acronym out there called ESG, but it's really about how you're approaching your business from an environment, from social, from a governance perspective. When I think about Fastenal, one of the reasons I joined Fastenal is, a, I've got to know Bob Kierlin and he did offer me a job, so that really helped. But I jumped at the opportunity because the people I met were great people and an organization that is frugal, by definition, you're conservative with resources. And that's as environmental as it comes. And then you're willing to learn and change every day. And we impressed upon our customers how our solutions, how our supply chain is actually a better supply chain, and we can help you measure your own consumption and waste within the organization. But we're not always good at telling the story. And we're slowly getting better at telling the story. Obviously, in Winona, a lot of folks know about the good that Bob Kierlin and the other 4 founders of Fastenal have done in the community and in the area. But we're not always good at telling the story. So we've taken some steps to tell the story a little better. We're sharing some photos here. Last year, we talked about the BK, 5K and not just the one that we have posted here in Winona for 20-plus years, but the one we host in communities around the world in countries beyond the U.S. every year, they raise funds for youth programs in those local communities. But here are some pictures, some things that we do. And last fall, somebody said, "You know what, I was reading some stuff. And since COVID came along, the Red Cross is always struggling to get blood drives. But COVID really hammered that. Let's do a blue blood. Let's do a blue team blood drive, see if we can raise 1,000 units in the next 12 months." I'm pleased to say we did it in 5. And so we're going to keep that going and probably raise the bogey a little bit on challenging ourselves. And I'm excited to say it happened in communities around the world that we are doing this. Finally, I would like to say thank you to our customers. that have been willing to work with Fastenal over the years. Let us make mistakes, let us grow and learn and be a great partner to them. The employees of Fastenal that every day figure out new ways, new creative solutions and how to treat each other well and challenge each other to improve. Our suppliers who in event like last week, our suppliers are there to support us every day and then last week, they're supporting us directly as we engage with customers. And finally, to the shareholders in the room, who decided back in 1967 to put their part of their equity at risk with this group of kids at Fastenal. And then in 1987, we decided to go public, more people joined that calling and said, "You know what, we'll put our money at risk with you. We'll bet on you." I thank you for that. With that, I'd open it up if there are any questions. I'll try to answer. Now with the lights on up here, all I see is black in front of me. So I don't know if anybody's walk into a microphone...

[indiscernible] I'd like to know can you tell me how many, and then put it in write, when I go home I won't forget, but how many tractors, trailers, straight trucks [indiscernible] does Fastenal hold?

I don't know if Kevin Larson is here today, if he is, he could bail me out on this one. But I'm going to say it's 650-plus as far as tractors and straight trucks. It's 8,000 plus as far as pickups and local delivery vehicles, the [ Dodge Ram ] vehicles you see driving around town. And trailers, I honestly don't know, but it'd be a lot more than 600. I can tell you that. In fact, I saw pictures recently. I believe we have 250 that are being manufactured in Lafayette, Indiana this spring. And I was at the Wabash facility where they're being manufactured here about a month ago. My son was mad at me because he's a software [indiscernible] and I didn't stop and visit him and I'm like, "Hey, I'm talking to customers. I'll see you next time you're home." But I believe those are about the numbers. And I'd be happy to meet you afterwards and write them down and Kevin Larson is here, he'll correct every one of them, I guarantee it.

Thank you.

You bet.

Good morning, all. I'm a stockholder, My name is [ Tesla Hawkins ]. My question is when is Fastenal stock going to split?

I love that question. If you look at it over time, we split a couple of times back in the '90s. I think the first might have been '89, but a couple of times in the '90s. We split it couple of times in the 2000 to 2010 area. I'm pleased to say we split a couple of times between 2010 and 2020, first was 2011. The second was 2019. One hallmark I can say, and this is not an indication of a promise for the future because every decision is made at that point in time based on the facts at the time. But every time we've done it, the stock has been in the 60s, probably in the mid-60s for a period of time, such that it feels like that's kind of a new spot for the stock. We've stepped into it. And historically, the company has split, now we're in the mid-50s right now. I was glad to see, I believe our stock closed up yesterday, at least it was when I looked at it about 3 o'clock. It's always nice when you have the annual meeting, the stock has gone up that week. It makes for a much nicer meeting. But that's what history has demonstrated. I know when we did it in 2019, I reached out to the Board and I said, "I don't know if we're going to keep splitting the stock." I don't know if that's a thing to do. It's a nice reminder to our team internally that we've found success and you place a marker on it by splitting the stock, it's emotionally fun. Economically, it doesn't change anything. But how about we decide that in the 2020 is therefore going to keep doing it. But we've done it twice every decade since we went public since 2019, if we don't do it this year, we're going to miss our second time in this decade. We'll see what happens in the 2020s, but that's what history has told us.

I have a question. My name is [ Steve Gabrowski ] from La Crosse, and I grew up not too far from here [indiscernible]. And just wondering if Fastenal would consider having a larger footprint in the city of La Crosse and maybe even a bigger brick-and-mortar store and even possibly a business plan with Kwik Trip, maybe even having some of your vending machines in every Kwik Trip and there's a lot of Kwik Trips, so that might be a possible business management.

I don't know if everybody could hear the question. But he's talking about the La Crosse area and Fastenal having bigger presence in La Crosse area. We endeavor to have a bigger presence in every market we operate every day, every year. We actually have a great relationship with Kwik Trip. I believe we have an on-site, but if we don't, I know we have vending in their manufacturing facilities within the La Crosse market. But we have, in addition to our branch, one thing that's changed, if you look at us optically from just the street level, a lot of the change that's occurred in Fastenal in the last 10 years isn't always apparent because, and perhaps you know this, perhaps you don't, we've closed about 1,000 locations in the last decade. And because at some point, we looked at it and said, you know what, we don't need 40 locations to serve the market in Chicago. We believe that some of those customers were going to move in with them, and we can have a different type of relationship with them. So we closed, I don't know the exact number. I'd say we're just north of 20 locations in Chicago now in the Twin Cities. I think at one point, we were upper 20s, and now we're in the lower teens. But as those locations were closing over the last decade, they were moving over here, and we added over 1,000 onsites at that time. So we have a handful of on-sites in La Crosse market, most folks don't realize that and don't realize how substantial our business is in different communities because most of it's hidden inside a manufacturing plant or some type of processing plant in that community. But we endeavor every day. I'll pose a question to our team about should we have some conversations with Kwik Trip about different things we could do in business together. One challenging aspect is, Kwik Trip does a really nice job with how they operate their business. And I don't know if they need our vending in their locations. And we always like putting deploying energy into places, whether that be a human capital or fixed capital in the places where it brings value to the customer in their marketplace. And I'm not sure if it will. But if you think about Kwik Trip, they've introduced a lot of vending in their business. And what I mean by that is when I go to Kwik Trip, I put my card in the gas pump and it pumps gas, that's a vending machine. Not too many years ago, you had to go in and pay for it. But there's a lot of things like that where vending has been introduced, an ATM machine is a vending machine. But where vending or that type of thought process technology has been incorporated in the business. we will endeavor to keep growing our presence, but it might not always be apparent in what it looks like. For example, our business here in Winona is a lot bigger than that branch sometimes implies, but a successful market, all of them. Any other questions?

My name is [ Sue Durchy ] from La Crosse. I'm a shareholder. I don't have a question, but I just wanted to thank you guys for doing what you're doing, the way you're doing it to invest in people and the community and our world is a rare thing in a company, and we thank you.

Thank you for the comment. Given the silence, I'm going to assume, again, I'm looking at a black room in front of me. I'm going to assume we're done, and I'll turn it back over to Scott. Thanks, everybody. Enjoy lunch.

Thanks, Dan. Okay. The ballots have now been counted, and the report of the inspector of elections indicates that Scott A. Satterlee; Michael J. Ancius, Stephen L. Eastman; Daniel L. Florness; Rita J. Heise; Hsenghung Sam Hsu; Daniel L. Johnson, Nicholas J. Lundquist, Sarah N. Nielsen, and Reyne K. Wisecup have received the required number of votes and are hereby elected directors of the company. The report of the Inspector of Election also indicates that, one, the resolution for the ratification of KPMG LLP as the independent registered public accounting firm for the company for the fiscal year ending December 31, 2023, has received the required number of votes and has been adopted. And 2, the resolution for the approval on an advisory basis of the compensation of certain of the executive officers has received the required number of votes and has been adopted. And 3, every year, as a frequency with which shareholders of the company should be entitled to have an advisory vote on the compensation of the company's named executive officers has received the highest number of votes and therefore is the choice of the shareholders. All ballots and record of all proxies will be filed with the books and records of the company. The certificate of the Inspector of Election will be attached to the minutes of the meeting as Exhibit C. The meeting is now adjourned. Thank you all for coming again. Please stay seated for the announcement of the prize winners of today's meeting. Thank you all for coming.

All right. The moment you've all been waiting for the winners of the Raffle prize are [ Betsy Sembling ] and [ Mike Flynn ]. Come on down.