Fastenal Company ($FAST)

Good morning, everybody, and welcome to Fastenal's 2026 Annual Meeting of Shareholders. My name is Scott Satterlee, Chair of the Board. And first off, I'd like to thank and appreciate the global Fastenal Blue Team for that intro video. Before we move on to official business, actually, I want to make sure I thank everybody here for taking the time as well as those watching and webcast. We appreciate your connection and your investment in Fastenal. So thank you very much. Before we move on to official business, I would like to introduce Pastor Mark Dumke, the retire passer of Faith Lutheran Church to lead the invocation.

Thank you, Scott, for the invitation. And friends, it's good to be here with you again this morning. I'm thinking of 2 words this morning, gratitude and confidence. Dan, I've known you since you moved to town in 1996. And with your wife, Jenny and your 4 wonderful kids who have now grown to be outstanding adults. It's been a pleasure to watch you and Fastenal and your family grow. Likewise, it's been a pleasure, along with all of you to watch the growth of Fastenal all of these years. I'm grateful for your integrity and for your leadership and stewardship of the Fastenal company, especially as CEO these past 10 years. Congratulations. I'm also confident I'm also confident in the ability of Fastenal to continually raise up leaders who are the best in the industry. I'm confident in your successor, Jeff Watts, who will build on your legacy of excellence, bringing out the very best of all the coworkers of Blue Team. I invite you all to reflect on your confidence and gratitude as we offer our prayer. Creator God, your goodness and bounty of your creation are the rich soil that blesses and nourishes and holds firm the roots of our gratitude and confidence -- as we gather to review our accomplishments, challenges and plans for the future, bless the work of this assembly and this corporation, bless the hands of those who labor, bless the minds of those who devise strategies and creative solutions, bless the vision of leaders who bring out the best in their coworkers, bless the faithfulness and trust of shareholders who provide encouragement and accountability, let our work be done not only for our gain but for the betterment of all [indiscernible].

Thank you, Paster. Okay. This Annual Meeting of Shareholders of Fastenal Company is now convened. Again, I'm Scott Sadterly, Chair of the Board of the company, and I will act as Chair of the meeting. Mr. John Millick, who is Vice President and General Counsel for the company, will act as the Secretary of the meeting. We'd like to recognize the founders of the company led by Robert A. Kierlin, Henry K. McConnon, John D. Remick, Stephen M. Slay and Michael M. Kustoski. We also have our entire Board of Directors here today, So I'd like to recognize them. We have Michael J. Ancius, Stephen L. Eastman, Brady D. Erickson, Daniel L. Florness; Rita J. Heise; Sang Hong Sam Su, Daniel L. Johnson, Sarah N. Nielsen; Irene A. [indiscernible] and Renee K. Wisecup. I will now ask Mr. Milek to report on the number of shares present at this meeting and to conduct the voting on the proposals to be considered at this meeting. Following the vote, our President and Chief Sales Officer, Jeffrey Watts; and our Chief Executive Officer, Daniel Florness, will report to you on the company. John?

Thank you, Mr. [indiscernible], and good morning, everyone. Before starting copies of which are available at the registration desk in the back. Most importantly, if you wish to speak, please raise your hand and microphone will be brought to you. Upon being recognized, please state your name clear and then limit your statements to no more than 3 minutes. There are 5 management proposals and 1 share of the proposal to be voted on. A designee of the sponsoring shareholder proponent is in attendance and will have 3 minutes to introduce the proposal and make a statement in support. The Board of Directors has already made available the position in this proxy statement that you have received. The record date for the determination of the holders of the company's common stock entitled to receive notice of and to vote at this meeting was fixed by our Board of Directors as February 23, 2026. I presented this meeting a certified list of the holders of shares of the company's issued and outstanding stock as of the close of business on the record date. This list will be kept open and subject to inspection by 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 a proxy statement, a proxy card and certain other documents were mailed on or about March 13, 2026, to each holder of record of the company's common stock as of the close of business on the rec day. The affidavit of mailing of the notice of this meeting will be attached in the minutes of this meeting as Exhibit A. The 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, they're outstanding and entitled to vote at this meeting 1,148,328,513 shares of common stock. Each share of common stock is entitled to 1 vote. For a quorum to be present, a majority of the 1,148,328,513 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. A record of the proxy submitted to this meeting and the ballots of the individuals appointed this [indiscernible] shareholders voting in person in this meeting will be filed with the books and records of the company. Ellen Stultz has been appointed to act as Inspector of Election, 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 are hereby available -- making available to the Inspector of Election the list of shareholders, the registration forms and the record of all proxies submitted to this meeting. Copies of the minutes of the last annual meeting of the company held on April 24, 2025, 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 23, 2026, are eligible to vote on the matters to be considered today. We will now take up the business of the meeting. We have 6 matters to be considered by our shareholders today. The first of it is the election of directors for this coming year. The Board of Directors of the company has nominated the following 11 persons for election to the Board to serve until the next regular meeting of shareholders or until their successors are elected, qualified Scott A. Sadly, Michael J. Ancius, Stephen L. Eastman; Brady D. Erickson, Daniel L. Florness; Rita J. Heise; Shenghong Sam Su, Daniel L. Johnson, Sarah N. Nielsen; Irene. Koshi and Renee K. Wesco. I will now open the floor to a motion to formally place before this meeting the nomination of these individuals. I recognize Mr. Pat Scholes.

[indiscernible] I place before the meeting the nomination of the 11 individuals identified for election to the Board of Directors to serve until the next regular meeting of shareholders and until their successors are elected and qualified. Thank you. As no other nominations have been made in accordance with the procedures established in the company's bylaws, I declare the nominations to be closed. The next matter for consider consideration today is the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2026. . I would like to introduce Mr. Ryan Lepper, a partner with PwC LLP and Ms. Lauren [indiscernible], a Director with PwC LLP who are here today to answer any questions that you may have. I will now open the floor to a motion to formally place before this meeting a resolution concerning the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2026. I recognize Mr. Ken Lyons.

My name is Ken Lyons. I'm a shareholder of the company. I move that the following resolution be adopted, resolved that the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for the company for the fiscal year ending December 31, 2026, be and hereby is ratified.

Thank you. Is there any discussion of this motion? It has been moved that the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for the company for the fiscal year ending December 31, 2020 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. Dan Norris. .

My name is Dan Norris, 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 2026 Annual Meeting of Shareholders couch and executive compensations.

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 approval of the Fastenal Company employee restricted stock unit plan. I recognize Ms. Kate Hazelton.

My name is Kate Hazelton. I am a shareholder of the company. and I move that the following resolution be adopted, resolved that the shareholders of the company approve the Fastenal Company employee restricted stock unit plan.

Thank you. Is there any discussion of this motion? It has been moved that the Fastenal Company employee restricted stock unit plan be approved. I will now open the floor to a motion concerning the approval of the Fastenal Company nonemployee director stock and restricted stock unit plan. I recognize Ms. Betsy [indiscernible]. .

My name is Betsy Derby, and I am a shareholder of the company. I move that the following resolution be adopted. -- resolved that the shareholders of the company approve the Fastenal Company nonemployee director stock and restricted stock unit plan.

Thank you. Is there any discussion of this motion? It has been moved that the Fastenal Company nonemployee director stock and restricted stock unit plan be approved. The last matter for consideration today is the share of the proposal relating to EEO-1 report disclosure policy if the share of the proposal is properly presented at this meeting. This shareholder proposal was submitted by the Comptroller of the City of New York, Mr. Brad Ladner on behalf of the New York City Employees Retirement System, the New York City Teachers' Retirement System, the New York City Policy Pension Fund and the New York City Board of Education Retirement System and was included in the proxy statement. The Board makes no recommendation on this proposal. I understand that the the sponsor of the proposal is in attendance and will present the shareholder proposal. Please begin and limit your remarks to 3 minutes.

Good morning, Mr. Chairman, members of the Board and fellow shareholders. My name is Andrew Alcock. I am the senior investment analyst for the New York City Controllers office. I'm presenting Proposal 6 on path of the New York City Controller and 4 New York City page funds, which are substantial long-term shareholders with roughly 1 million shares of the company were approximately $47 million. Proposal 6 exits the Board to adopt a policy requiring the company to disclose on this website a consolidated EU [indiscernible] report which is a comprehensive breakdown of its workforce by race efficacy and gender that the company is required to submit annually to the EEOC. Fastenal website states because we value people, we prioritize safety, we foster a culture of diversity, equity and inclusion, and we strive to improve communities and the planet. . We remain strongly committed to promotion from within creating pathways for employees to branch out, build rewarding careers and become leaders in our organization. We commend the company on its commitment to ratio and equity diversity. However, without robust and comparable disclosure of this workforce demographics, shareholders have no way to benchmark the company's diverse performance and holding accountable for its commitments. We appreciate our engagement with management this year, but we urge you to go further to provide shareholders with consistent and comparable decision useful information. I would like to point out also that the Board elected not to take a position on this proposal. We earn shareholders vote for Proposal #6. Thank you.

Thank you. I remind shareholders that the Board makes no recommendation in regards to voting on this proposal. Shareholders of record who wish to vote on these motions, but had an opportunity to vote in person at the registration desk. The polls are now closed and the ballots will be counted. While the ballots are being counted, Mr. Jeffrey M. Lotz, our President and Chief Sales Officer; and Mr. Daniel L. Florness, our 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 relating to the company and its activities. Thank you. Good morning, everyone. I'm Jeff Watt, Fastenal's President and Chief Sales Officer, and it's an honor to stand before you today to review our company's performance and share our vision for the road ahead. Let me first start by saying just how proud I am of what Fastenal achieved in 2025. We navigated a challenging environment, and we delivered remarkable results. But even more than that, I'm excited about where we're headed and the strong foundation we've built our future growth and our value. So getting started, if I had to sum up 2025 in 1 word, it would be execution. Now last year, it demanded discipline and focus. And throughout the year, we faced uneven industrial demand, continued tariff pressures and customers who are understandably cautious of trying to control their risk in their supply chains. The purchasing an index or the PMI, it ended the year, had spent 36 of the previous 38 months below 50, indicating contraction in the industrial sector. In other words, the environment was far from simple. And yet Fastenal rose to the challenge. We stayed close to our customers. We concentrated on the factors that we could control, and we executed our game plan with consistency across the organization. In a difficult climate, our disciplined execution it protected our margin and really position us to resume our growth, benefiting both our customers and our shareholders. Now our performance last year, it wasn't really just about the numbers. It was about how we delivered them and where we got to grow from. As you can see, Fastenal delivered approximately $8.2 billion in total sales, fueled by strong contributions from across our geographies, across our customer base and our product lines. United States remains our core market, accounting for $6.8 billion, roughly 83% of company sales. This business unit, it grew revenues over 9% and remains the engine driving our growth. Internationally, our business continues to expand. Canada and Mexico generated $1.1 billion or above 14% of sales in our other global markets, including Europe and Asia, it provided about $250 million or 3% of total revenues. Now our U.S. business is strong, these international gains, particularly in Canada and Mexico, it shows that Fastenal's value proposition it resonates globally. We have a significant runway for growth in our international markets. Now when we look at our customer site spend out, what really stands out is the scale and strength our customers spend here. We're accelerating our growth by deepening relationships with our largest customers. Last year, there were just over 19,000 customer sites each doing over 5 per month with Fastenal. Collectively, these larger accounts generated about $7.3 billion, 11% more than the previous year. But within this group, almost 2,700 sites spent over 50,000 per month, contributing to $4.3 billion to the company. The number of sites in the 50,000-plus tier grew by 12%, with revenue surpassing 15% growth. The takeaway is clear. Our largest customers are expanding with us and a strong indicator of customer trust and the value that we deliver. This consistent momentum across tiers, not just at the top, it shows strong durable demand and a healthy pipeline for our future expansion. Now when it comes to product lines, our mix spans both direct and indirect categories. Fastenal's product offering continues to diversify. And in 2025, almost 40% of our sales were direct materials. Those are like the production components and supplies that become part of our customers' finished goods or products directly consumed in that production like cats and abrasives. Manufacturer customers now represent about 76% of our sales and roughly 50% of that subset is direct materials. On the other side, indirect materials, the MRO type items like safety supplies and non-production type items, they make up 60% of our revenues. And this balanced mix between direct and indirect product shows how we've evolved into a broad spectrum supply chain partner. This diversification, its strategic strength. It expands our market opportunity and makes us more valuable to each customer by fulfilling a wider range of their needs. In summary, we succeeded by growing the right way, through trust, through partnership and delivering real value to our customers. Now let's take a step back and look at the year in a longer-term type context. Now this chart on this slide, it shows Fastenal's key financial metrics in 2015, 2020 and 2025. Alongside our future milestone $10 billion and $15 billion in revenues. These figures reflect 10 years of strong sustainable growth. In 2015, Fastenal's annual sales were $3.8 billion, by 2020, we'd reach $5.6 million and in '25, we'd reached $8.2 billion. That's an annual growth rate of approximately 8% over the past decade. Essentially, we doubled our revenue in 10 years, turning the vision we all had of an $8 billion Fastenal into reality. And this consistent growth, it reflects our ability to gain market share and expand our range of products and services. Our aspiration looking ahead is continue this trajectory towards $10 billion and eventually $15 billion in sales. hitting $10 billion will represent roughly a 22% increase from last year and reaching $15 billion with nearly double '25s revenues again. Now these are ambitious goals, but achievable with the large market opportunity that we see and our track record of growth. Now importantly, we've grown profitably. Operating income reached nearly double over the past decade, reaching $1.6 billion in 2025. Our operating margin has held steady at around 20% every year even as we scale. I think that's a testament to our productivity and our cost discipline. And return on invested capital rose 31 -- rose to 31% in '25, up from 25.6% in 15, demonstrating again how efficiently we're deploying capital to generate returns. And most importantly, for you, our shareholders. And we've returned significant value. In 2025, we paid over $1 billion in dividends, the first time a regular dividend cross that milestone. That's about 80% of our net income. For the past 5 years, we've generated $5.6 billion in net income and return more than $4.5 billion of that, over 80% through dividends and share repurchases, all while continuing to invest in our people, technology and inventory for future growth. This is what balanced growth looks like, expanding our business, maintaining strong margins and delivering meaningful returns to our shareholders. So how do we continue this momentum? Our strategy is built on a simple powerful idea from our founder, Bob Kierlin. Now organizations succeed to the extent that all their members pursue a common goal. Now that's a shared purpose of what drives us forward. supply chains grow more complex, our customers need more reliability, visibility and efficiency. We're meeting that challenge, not by reinventing Fastenal, but by sharpening how we win. We've aligned our entire organization around 3 core actives increased sales effectiveness, enhance our services, expand our total addressable market. These goals, they're supported by key accelerators that are already starting to deliver results like leveraging artificial intelligence to work smarter and more efficiently by expanding our reach through e-commerce, empowering our customers Fastenal 360, which is our digital front door for analytics and visibility and control, and scaling our on-site and Fastenal service models to embed Fastenal directly into customers' entire operations. This isn't just a strategy on paper, it's a living game plan. It's guided us through last year's challenges, and we will continue to shape how we grow it and invest and create value in the future. Now by deepening customer relationships, expanding our offerings and driving innovation, we're building a stronger more valuable Fastenal for our customers and for you, our shareholders. Before I close, I want to highlight an example of our strategy in action. It was his years the 2026 Customer Expo. With over 3,000 customers there, over 4,500 total attendees, and it was more than an event. It was a showcase of partnership and innovation and the value that we deliver. We hosted sessions tailored to evolving customer needs, and we created space for collaboration between customers and employees and our supplier partners. The focus wasn't on immediate sales. It was on deepening relationships and accelerating solution adoption and building long-term value. That's how we grow with our customers. We believe efforts like this will pay a dividend for years to come , fueling growth, strengthening loyalty and reinforcing Fastenal's role as a trusted supply chain partner. And with that, I want to finish up by saying thank you. Thank you for your continued trust and investment in Fastenal. We're proud of what we've accomplished, and we're even more excited about what's already -- or what's coming in the future. Now before I turn it over to Dan, as many of you know, this is Dan's last Annual Shareholder Meeting as the CEO with the planned leadership transition later this year. And before he begins, I want to say publicly, but I've told him privately and it's been extraordinary to work with you. Now thank you for your steady leadership through every challenge and opportunity and for your clarity of vision and for really guiding this company with integrity. It's truly an honor to have been your colleague into now following your footsteps. And -- so on behalf of our entire team and the shareholders, again, thank you. Congratulations on an incredible tenure.

Jeff, thank you for the comment. And I'll tell you, I don't know, there were moments and for what it were 30 years ago when I started, I did bar. So -- but I did want to address one of the first questions I heard today. And I was -- and I repeated the question to my team because I was -- I had the same question. There are chocolate chip cookies. I don't know what box they're in. The -- so the day started kind of interesting. My wife and I moved up to the Lake [indiscernible] area a couple of years ago after our youngest -- our daughter graduated. We still have a home here in Winona, so I stayed down here the last couple of days. And this morning, I get up and my wife is up in like Caponera. I get up. First off, I couldn't find the keys to my truck. I get in my truck and I'm driving to work, the low gas light comes on. And I'm thinking, boy, this is a great start to the day. And then I get a call from my wife, and she says, "Okay, [indiscernible], what suit are you wearing. Does it have wrinkles? And I can't see wrinkles. When we're 85 and 90 years old, that's a good thing. But I can't see wrinkles. So my wife did show up in my office at 8:00 with a steamer. And I do have a burn on my left leg because you should take your pants off when you use a steamer. As always, pass to Mark, thank you for the last 30 years. Thank you what you did to help Jen and I raise, I think, 4 great kids, and it's great to see you once again. And Mark, I'm not sure if I'm doing it because I'm trying to hit. So first off, one of the pleasures of this Annual Meeting and 1 of the pleasures of being in this role, I get to recognize folks that have given to the blue team over a long career. And as you can see, we were quite a much smaller organization, 25 and 30 and 40 years ago. The folks that joined saw something special and the people they met and they decided to stick around, and I'd like to start by recognizing 5 people who have been here for 40 years. And after I run through the list, if they would stand up, be recognized, I appreciate it. Dan Norris, Jim Stanik, Pat Joliff, Ken Lyons and John Beckman. To those 5 individuals, I would ask the room to recognize their guests. We are successful based on who we choose to surround ourselves with and we're blessed for that in life. So after -- when I talked about what else going to talk about this year, my wife reminding me [indiscernible], nobody is here to hear you talk. They're actually here for lunch. And -- but I thought I'd share a view of what these individuals have seen in their 40 years. So I went back to the first annual report I could find. It was from 1987. And I remember a comment to Bob when I first saw this annual many years ago when I joined the organization, [indiscernible] Bob, by 1987, you had the big uncovered because if you notice those states, that's the original big 10 states. And -- but I popped into Cs Miller this morning, and I said, Casey, I'd apologize the upfront. I know something, but I never mentioned the Bob, but there was an error in our 1987 annual report. We had 2 locations in Kentucky. And you can see them right there, South of the a River. And -- but in the years that I've been in this role, I've had the opportunity to discuss the business with a lot of individuals within the company because we're not an $8 billion organization. Jeff, with all due respect, I disagree. We're not in [indiscernible] billion organization. We're actually 240 [ district ] business units that average about $35 million a year. That's where our business -- the strength of our organization comes from. And 30% of my time over the last decade has been spent in one-on-one discussions with those district managers, understanding their business, how they go to market and how do they discover ways to be special for the customers in their market and how they grow. And I want to also thank it was a discussion back in 2019 before the world got weird in the COVID year. But in 2019, also having a conversation with our district manager in Southwestern Minnesota. And it was one of those light [indiscernible] moments. And -- because I was looking at this district and Jason, I don't know if you're in the room, but if you're listening, but Jason [indiscernible], thank you for that conversation, by the way. But I was looking at his district and he had moved from Nebraska up to Southwestern Minnesota around the the 2017 time frame. And quite frankly, that district, that area for Fastenal had grown 2% to 4% for a decade. It was nicely profitable. It was a nice business, but it wasn't special. And in a few short years, Jason turned that business into a business growing in the teens. And it really came from the standpoint he had about 30 customers doing more than $10,000 a month in that business. And over about a 5-, 6-year period, he grew that 30 to about 80. And that $20 million district became a $60-plus million district. And we discovered something that was really special in one of our oldest business units, yes, we can make a dirt for our customers. and be really successful by being a supply chain partner to them, not merely a purveyor good. And it has changed a lot of how the business has developed over since -- but getting to the premise. So back in 1987, this was the organization that these 5 individuals would have experienced back in the day. I want to show you how it's changed a little bit. And I normally don't have notes in front of me, I have the slide deck because when I'm up here, I really can't see what's on that screen with lights coming in. But back in 1987, we did about $20 million in revenue. And for Casey's benefit, I flagged that there was $1 million in Kentucky. We probably opened those 2 branches in December and probably $1,000 but round up. And -- but by 1985, that organization had grown to $223 million. And you can see, we had to kind of estimate because we didn't have the actual detail numbers by state. But you can see those 8 states that were the big 10 are Penn State joined. We had about $100 million in revenue in that area. It has grown fivefold in those 8 years. And then we added about another $120 million in the rest of the United States as we've expanded. But we expanded beyond the United States in that time frame. We opened up in 1994 in Southern Ontario, it was a couple of years later that Jeff Watts joined the organization in sell Ontario. And you see we grew to about a $1.5 billion organization, but look at the growth that's happening in those oldest business units. Even though, we've been there for years, the market was immense. We had to figure out how to tap into that market. And by 2015, we were a little over $3.5 billion. And here's what I look like last year. So again, $8.2 billion organization, almost $7 billion in the United States, $1.1 billion outside the United States and the rest of the Americas, and about a $250 million business between Europe and Asia. Incredible opportunity to grow the business, the market is immense. And the thing that's most important to me when I look at this is, to this day, we figure out how to grow in those original 8 states, which gives me confidence, and this isn't a forwarding statements so I don't want to get in trouble with the SEC here, but it gives me confidence in Fastenal's ability to grow in the future because the market exists. We have to decide if we're going to take it, but the market exists for us to keep expanding for years to come, we so choose. Also to -- I'd take a quick look at the business from the standpoint of -- in our earnings release last week, we mentioned that our return on invested capital is just over 30% in the first quarter. And for 2025, it was just over -- it was in the low 30s as well. When I had that 1987 annual report out, I looked at I wonder what it was back then. We were in high 20s. I was surprised it was that high because we weren't profitable back then, but we also didn't have as much capital deployed in the business. And so we had a really attractive business, probably one of the reasons the marketplace embraced us when we decided to go public back in 1987. And here's what it looks like in between. In the '90s, we actually expanded into the low 30s. Again, I'm surprised by that. But I learned from one of our Board members a number of years ago, and it's a Board member -- English as a second language. And he taught me a piece of the English language, I didn't appreciate. And it was a concept, it was strategy. And strategy is about choice. And we chose as we went through the '90s and into the 200 to expand the breadth of products that we distribute. We chose to expand the breadth of customers we sell to in the mid-'90s, we added national accounts. And that's a different game from what we were doing prior to that. We also decided to start sourcing more product directly, which meant we needed a lot more working capital because you're not buying weeks and months of supply, you're buying months, maybe a year of supply in order to source that item at a different cost point. And so we allowed the return on invested capital to move down into the mid-20s because that was the right long-term decision for Fastenal and its shareholders, its customers and its employees. Pleased to say in the last decade, we were able to, again, through choice, move the return on invested capital back up into the low 30s. And that's a testament to Bob [indiscernible] founders and the ability of the Blue team to execute and choose a path for them that was different than the path we had. It also required a lot of change in the organization time frame. And I'll touch on that in a few minutes. But if you're curious, here's a few more -- and again, this is my last time talk, so I always share some of this stuff because I find this fascinating. And I hope everybody is sitting on like [indiscernible] is guy going to shut up, so we can have lunch. But fixed assets to sales, we didn't have a lot back in the '80s and '90s. But we needed more distribution capacity to do the things we want to do. We needed more trucking capacity to do the things we wanted to do. And you can see how that third column in the middle section there sales, 10% of sales, 14%. We actually had, for every dollar in sales $0.20 in fixed capital a decade ago. Now I put that little 17% in there. A decade ago, we were really in the early innings of this thing we call Fast all managed inventory or vending is what it started as. And if you would have gone down to De Moines, Iowa, you would have found a warehouse full of vending machines because we had bought a bunch, and we weren't deploying them quite as fast as we thought we would. And we had about $130 million worth of vending machines stacked to the ceiling in this warehouse. And we were kind of looking around kind of like, oh, good, what do we do? We decided, again, strategy is about choice. We decided we need to pick up the pace and deployment. And I'm pleased to say we work that capital off. But if I remove that, we didn't really have 20% of sales. We had about 17%. But look how that number has dropped over the last decade because of the blue team going to market in a responsible way. You also made a choice to close about 40% of our branch locations over the last day because we moved where we do business, it wasn't strictly on a Fastenal branch. Today, over 50% of our business is with customers doing more than 50,000 in that location and most of that business goes to what we call an on-site where we're physically in their facility. And it changed our real estate needs and it allowed us to accomplish that. And then on the far right, you can see again our invested capital and what that is. It's kind of funny when I look back in 1987 to think our total invested capital in the organization was $7 million, and today, it's just over $4 billion. If you want an exercise and finance, that is the definition of compounding your growth over a long period of time. So what if the last 10 years taught me. And one of the things I tried to do in the president letter or -- and more recently the shareholders' letter in general, is try not to use the word or me, but if you were to allow me. I'd like to share a few things I've learned over the last 10 years. One of them was these 10 rules that Bob had carried a lot more meeting when you're the CEO, then when you're the CFO, especially rule #1, challenge rather than control. And the adversity of the situation really challenges to leaders to emerge. And I'm particularly impressed with the folks on the Blue Team on the leaders that have emerged over the last decade to assist me in the cause and to assist the organization in the cause. To get us through periods of uncertainty, Colin's a perfect example. And you're not sure if the step you're taking is the right step and you rely on the focus around you. Rule #9, let people learn. A key to a leader is what are you -- what is your habit every day to develop yourself and to develop those around you so you continually make the organization and everybody better and bring more ideas to the customer in the marketplace. That's what allows us to grow for the last 40 years. So this year, maybe you've seen this chart if you've participated in some of our earnings calls, it's there's index out there called the Purchasing Managers Index, and it's a service that's done on purchasing managers where they look at the backlog in their business. And being the blue team, we consider red bad. And these periods that you see that are red are bad. And I remember when stepping into the role back in the fall of 2015. You can see a few months there of red. We actually went negative in sales growth for the last 4 months of 2015. There was a lot of uncertainty. There was a lot of folks wondering sees what's happening to fast at all. And if you would allow me, I would like to add 5 rules to Bob's list that I learned over the last decade. Rule #1 don't be a victim. And I think Jeff's letter to shareholders this year sit it well. He said, "We didn't wait for the market to lift us. We leaned into our strengths, our people, our service and our ability to solve problems for our customers. The other thing about not being a victim is you need to have empathy, but you have to have a plan and you have to decide to execute on that plan. Then it's our destiny, not what we're victims of. Route #12 own everything that goes wrong, 1 share the rewards on everything that goes right. 14 always understand the math and the story behind it, and you can replicate success in many different places because you can share that story throughout the Fasco organization. And finally, a learns from Bob, believe in people. all else fails, believe in people. They'll surprise you and impress you every time. I have some special phrases. I'm wrong is a good phrase. I'm sorry, is a good phrase. If you don't have a phrase, maybe a simple smile because that is a phrase in and of itself, usually, it means hello or you're trying. I believe in you as a great phrase, but I don't think there's anything better than the phrase, thank you. So to the shareholders in the room, thank you for placing your trust in the Blue Team. Since 1987, for me more personally in the last decade. Thanks for cutting a slack on the things we messed up and believing that having a plan for the long term works for the long term. Although I do have to say every year when we're doing the vote, you get updates to the voting, and I saw the update this morning. And I was thinking in the final year. I wonder if the directors will get more votes than our external auditors. We didn't make it. And I guess that's just life. But I just thought I'd share that, but thank you for everything you've done as far as allowing us the opportunity to take the investment you entrusted us with and growing it into something special. [indiscernible] of myself there. To the Board and Scott, in particular, thank you for the partnership over the last decade. And thanks for allowing me to vent. I was probably a pain to have around most of the time. And -- but thank you for -- we all need a shoulder to cry on sometimes or vent with. And so thank you for providing that shoulder. From a mentors and peer standpoint, to that stand out, early in my career, Mike Dolan, 1 of our former directors. When I first was out of college, I worked for Mike. I learned a lot from Mike over the last 40 years of knowing him. So thank you for that. And for Bob Kurland, thank you for the opportunity of a lifetime and the mentorship you provided to me in the -- over the last 30 years. from a peer standpoint, when I first stepped into this role, Nick Lundquist [indiscernible], could have chosen to look at it and say, "Okay, we'll do our job, but we won't do more than that. And they did just the opposite. The figure -- they pushed me in pushed us in every way they could make Fastenal a better organization until the last day they were in the office. I thank them for that. A few of the Fastenal folks are going to laugh when I mentioned this next one. When I say selfless leader, because if you know the person, he has kind of an in your face persona. Maybe a little bit of an arrogant persona, but he's an incredible teacher of people. And that's Randy Miller. Randy joined us back in February of 1987. [indiscernible] been went on for a number of years, and then we asked him to relocate [indiscernible] to lead our business down there. Randy has developed more leaders within Fastenal. We often talk about our tree and who sprang from your tree. And if I think about our regional and district leaders nobody has developed and entered more people in this organization from Randy Miller. And Randy will be hitting 40 years next year. And I hope he comes to the annual meeting be recognized. I'm coming to see Randy recognized a year from now, but he's been an incredible person for me to talk to over the last decade of bouncing stuff off of and getting some very blunt feedback, which is well appreciated. So Randy, thank you for that. In the letter of shareholders this year, I generically mentioned 4 people, and I'd like to call those 4 people out by name. In 2014, I asked Bill Drazkowski to step out of a regional leadership role and lead our national accounts. Nothing was more eye-opening for me than working with Bill in that -- in roughly a year directly in national accounts. because we -- I really realized in a lot of discussions with customers, how truly big the opportunity was and what some of our priorities should be in the decade that followed. So Bill, thank you for that. First decision that was presented to me as I chose a leader for the Eastern United States. And Casey Miller was originally from Kentucky, I tapped him on the should I said, hey, Casey, can you move up to this cold area for a few years? What you've done in Kentucky and Tennessee is special in the organization, and we need to bring that special to more places. KC assisted from the standpoint of, if all my decisions over the last decade would have been as good as that. We've been a lot bigger today. But Casey made me look smarter than I actually am. And Casey, thank you for everything you've done for the Blue team in the last decade. In 2016, John Soderberg, John started in a branch for us in the East Coast. And John, once showed me this app on his phone, where you can look up at the sky, and I'll tell you what you're looking at. Hey, there's Jupiter, there's Mars. This is that constellation. So I came to John in the summer of 2016, I said, John, how would you like to run IT. And I said, we have great people in IT. They're not close enough to the business. And we need a great leader to bring them closer to the business. And John didn't say didn't give me the sideways look, he said, "What do you need me to do?" And John has led that group for the last decade and done amazing things. for Fastenal, Fastenal's employees, our shareholders and our customers. John, thank you for that. Jeff and I, we actually met in the late 1990s. He was a district manager out, I think, in British Columbia at the time. And we've had a close relationship ever since because he always asked really good questions, even if sometimes there were questions I didn't want to hear. And I'm really excited for what the next decade means with Jeff and this leadership team going after an incredibly large opportunity in the marketplace. And finally, to the 25,000 people on the Blue Team, thank you for cutting me slack on the dumb decisions and supporting me on the ones that were better and fixing again, the dumbest decision I made. Finally, what Fastenal has taught me over the last 30 years, recruiting is hard work. What's really simple. Just find great people, ask them to join and give them a reason to stay. And always remember, regardless of where you go in life, no culture or geography has a monopoly on talent or ambition. You can find it everywhere. In fact, if you were talking to a bunch of leaders here today, you discover a lot of them are native Spanish speakers. Not because we're trying to Spanish to everybody in the organization because we found some incredibly talented people down there as we did in every place else we went and we asked them to take a step forward and bring their leadership to more people with the organization. And finally, I've talked about quite a few people today, and hopefully, everybody is sitting here like, okay, this meeting is almost done because yes, it does mean I'm almost done. Surround yourself with people better than you. That's the biggest advice I can give to the leadership team for the next decade. And on that note, and I'll try to keep my composure on this one. Jon, thanks you for the last 30 years. My wife and I got married. I met Jenny Ann Gustafson in in late in 1993 time frame. We got married in the fall of 1995. We celebrated 30 years last year. Thanks, and thanks for our 4 great kits. And in case you're wondering, so we got to talk what chips covered. In case you get wondering what Fornas is doing next, I have a plan. So in February, you know we sponsor NASCAR. And in the NASCAR our team, Fenezlowski team gave me a fire suit. And that's the suit, the pit crew wears. When they're doing the things they do on that stop that takes a split second. So yes. I put my name in the joint, the Pitre, although I talked to them in February, and I haven't heard back yet. So I'm not sure what that means. With that, thank you, and I'll turn it back over to Scott.

So I promised Dan that we weren't going to some too much. But after that last slide, I realized he has no problem embarrassing himself. Dan Florness has had an exceptional career at Fastenal. For those of you who know, he joined the organization in 1996 in from the public accounting sector. And like most CFOs, Dan is great with numbers. In his case, he'll tell you a long story about them sometimes, but he's exceptional with numbers like most CFOs. But Dan did something very different. He embraced Fastenal's culture. And what I mean by that is, early on in his career as CFO, he started visiting offices, getting out to the field, going to distribution centers, interacting with customers. talking to employees at all levels. Understanding the business and then applying his financial acumen to be able to produce solutions that could be delivered out in the field. For that reason, he was promoted to CEO in 2016. The ability to be able to embrace the culture and learn the business and be part of the blue team. Now there are a number of key milestones, both financially and strategically, and I'm only going to touch on a couple for you actors because both Jeff and Dan mentioned a number of them. So doubling revenue, operating margin our operating income, providing the dividends, consistent dividends over the years, achieving market capitalization beyond $50 billion and a number of others as well as some strategic milestones that are critical. thinking about adjusting the network, like Dan said, there's been a shift. There's been an expansion of physical offices and on sites, mainly on sites and that infrastructure to get closer to customers and provide growth through customer service. As well, One of the things that wasn't mentioned is during this time period, things like e-commerce, the international business vending all surpassed $1 billion in revenue. But most importantly, and Dan alluded to it, Dan was critical in working with the leadership team to help shift Fastenal from a transactional distributor to a data-informed supply chain partner. So Dan has many skills, many achievements during his career, but I want to focus on one that I think goes a little bit underrated. One of his skills, one of the strongest skills, and you can see it when he presents. And if you spend enough time with them, you can see how we interact, but he has a tremendous ability to connect with people. I wrote down a number of comments as kind of [indiscernible] for this from employees that have interacted with. From a very start, Dan has prioritized the importance of customers and employees through interaction and recognition. One of the things he regularly does for the Board and for employees, is provide updates via video. And every single one of those videos outside of the information that he's presenting, recognizes key individuals just like he did for the 40-year employees. It's a signature component of Dan's leadership style. During COVID, as we all know, a very difficult time for society. His message always prioritized employees' health and safety, while also emphasizing that Fastenal's goal was helping customers to do the same. Dan believes in people and their ability to do great things when we give a chance. He also cares more about employee success and well-being than it is. It comes out when you listen to them. He also leads by example, with practical frugality that mean he's cheap. He's frugal practically. We also insisted that honesty and integrity, our nonnegotiable leadership qualities. The Founder of Fastenal, Bob Kierlin, wrote a book called the Power of Fastenal people. I'm probably guessing many have read it, it's an exceptional read. The book outlines the core cultural pillars that make Fastenal a special company. Within it, as you saw from Dan's slides, Bob outlines the key -- 10 key leadership characteristics, no, maybe 15, that embody the culture. Dan embraces these leadership characteristics. And it's one of the many reasons he so admired in the field and why he's going to be very missed, not only from the organization, but also at the Board. He's been an exceptional Board member and provided the same sort of integrity and guidance and cultural understanding to all of us. Dan is leaving the organization in the very capable hands of an exceptional leadership team, led by Jeff Watts, all of whom also embody the power of Fastenal people. Unfortunately, Bob Kierlin is no longer with us. But if you were, Bob would be very proud. Please join us in thanking Dan Florness for everything he has accomplished for Fastenal. So now with that, we're going to make Dan take some Q&A. Actually, no -- probably good if Jeff leads it right now. I think both of you are going to do it, right?

Over the tenure that you put in the 10 years, the revenues have grown about double.

Just over double. It was about [ 38 82 ].

What is the stock done in 10 years?

We're off a little bit in the last week. We were almost up fivefold, but a little bit more fourfold. Yes, we were about $11 billion in market cap back in the fall of 2015. And we're just over $50 billion today. Any other questions?

I have a question about the vending machines. Over the last 5 years, how has the projection been on the growth of the vending machines?

I'll take it -- I'll answer it in pieces. So if I go back to a decade ago, and then I'll kind of plug in halfway because I don't have the exact number from 5 years ago. But if I go back a decade ago, about 24% of of our revenue went through either a vending machine or through e-commerce. And it was probably about 18 and 6 make up that 24. Today, that number is 62, I think -- I think last October, we were about 62%, maybe we're 63% now. But -- and inside of that, the vending is about 46% -- 47%. So it's gone from about 18% of sales to about 47% Biggest piece of that increase is vending. So if I kind of walk that back, you're probably looking around 30% to -- well, 25% to about 45% is what the vending is as a percentage of our business. Not all of that is pure growth. A lot of it is growth. A lot of it is introduced into existing customer relationships, and it makes the business more efficient because one of the challenges in supply -- supply chain is knowing what's on the different shelves and what's close to the point of use, which is the person working in that manufacturing plant or that distribution center. And what the vending machine does as well as all the adjacent things we do like the RFID and all these different systems, it puts a gas gauge. -- on that supply of inventory that's inside your customers' facility. And it's like my car this morning. If I wouldn't have had a gas gauge, I wouldn't have made it to work. And I would have called my wife and I would have said, "Hey, Jen, when are you getting down here? I'm somewhere on county 17 out of gas. So by having that in our customers' facility, our replenishment becomes very efficient from a labor perspective, and we can actually lower the amount of inventory that our customer needs in their facility. But to get back to your question, it's gone from mid-20s to mid-40s as a percentage of our business. There's 1 question over here. There's a mic coming up right behind you.

I agree. Thank you for your service. This last year has been a lot of ups and downs with tariffs, and what's good and what's bad and what's been converted? What's the process for Fastenal with the tariffs that have been extended to you and what's the future going to hold.

The future changes about every 15 minutes. And so that one I can't expect -- I can say it will be interesting. As far as what we try to do as an organization, is we immediately -- we have a great team that goes about studying what was just announced. And we communicate as quickly as possible with our customer of what this means for their supply chain. And we try to give them as much time as possible to make decisions because when you do that, you create optionality for your customer. And I believe our customers really value that aspect of us because when tariffs come along, we're not raising prices. We're sharing with our customer, their supply chain has just become more expensive. And then we're giving them options of how to reduce some of that increase or eliminate it all together by modifying source supply by modifying the product selection by being creative with our solutions. And our team in the field are particularly good at that. And since 2018, they've had a lot of practice. But that's the biggest thing to do is give information so people can make decisions. Jeff, I don't know if you want to add anything to that? Any other questions? Before we switch it back over -- I'm going to close out the question part then. Before we switch it back over to the final part of the meeting building results. I do have a gift for Jeff. Now Jeff is Canadian. Now normally, I would say just Canadians when I talk to my small words, but I'm not going to say that today because we're good friends as well. But I don't have a baton to pass off to Jeff. So I thought I'd get something that resonated more for this circumstance. So give me one second. I don't know much about a hockey, but -- and Jeff will agree with that. But I'll make 2 comments. One is bullies are known for maybe being having a screw loose once in a while. And -- so it's okay to have some cranes once in a while, bet it with the team. Secondly, always remember, and this is as funny as I get the puck stops here. Thanks, everybody. .

Okay. The ballots have now been counted in the report of the Inspector of Elections indicates that Scott A. Stanley, Michael Janis, Stephen L. Eastman; Brady Ericson, Daniel L. Florness; [indiscernible]; Shenghong Sam Su, Daniel L. John, Sarah N. Nielsen, Irene A. [indiscernible] and Renee 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 1 solution for the ratification of PricewaterhouseCoopers LLP as the independent registered accounting firm for the company for the fiscal year ending December 31, 2026, has received the required number of votes and has been adopted. Two, the resolution for the approval on an advisory basis of the combination of certain of our executive officers has received the required number of votes and has been opted. Three, the resolution for the approval of the Fastenal Company employee restricted stock unit plan has received the required number of votes and has been adopted. And four, the resolution for the approval of the Fastenal Company nonemployee direct stock and restricted stock unit plan has received the required number of votes and has been adopted. And five, the resolution for the consideration of the shareholder proposal related to an EEO-1 report disclosure policy has not received the required number of votes and has not been approved. All balance and a 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. Thank you all for coming, and we invite you to join us for lunch, which is available outside in the tent. Thank you.