filings.toolsItem 1. FINANCIAL STATEMENTS
41K characters. Original on sec.gov ·
Item 1. FINANCIAL STATEMENTS
FASTENAL COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Amounts in millions except share information)
| (Unaudited) | |||||||||||
| Assets | September 30, 2021 | December 31, 2020 | |||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 250.5 | 245.7 | ||||||||
| Trade accounts receivable, net of allowance for credit losses of $11.1 and $12.3, respectively | 949.4 | 769.4 | |||||||||
| Inventories | 1,401.1 | 1,337.5 | |||||||||
| Prepaid income taxes | 6.7 | 6.7 | |||||||||
| Other current assets | 162.6 | 140.3 | |||||||||
| Total current assets | 2,770.3 | 2,499.6 | |||||||||
| Property and equipment, net | 1,019.2 | 1,030.7 | |||||||||
| Operating lease right-of-use assets | 249.7 | 243.0 | |||||||||
| Other assets | 183.3 | 191.4 | |||||||||
| Total assets | $ | 4,222.5 | 3,964.7 | ||||||||
| Liabilities and Stockholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of debt | $ | 35.0 | 40.0 | ||||||||
| Accounts payable | 256.9 | 207.0 | |||||||||
| Accrued expenses | 278.0 | 272.1 | |||||||||
| Current portion of operating lease liabilities | 92.6 | 93.6 | |||||||||
| Total current liabilities | 662.5 | 612.7 | |||||||||
| Long-term debt | 330.0 | 365.0 | |||||||||
| Operating lease liabilities | 160.7 | 151.5 | |||||||||
| Deferred income taxes | 104.6 | 102.3 | |||||||||
| Stockholders' equity: | |||||||||||
| Preferred stock: $0.01 par value, 5,000,000 shares authorized, no shares issued or outstanding | — | — | |||||||||
| Common stock: $0.01 par value, 800,000,000 shares authorized, 575,163,289 and 574,159,575 shares issued and outstanding, respectively | 2.9 | 2.9 | |||||||||
| Additional paid-in capital | 90.6 | 61.9 | |||||||||
| Retained earnings | 2,900.8 | 2,689.6 | |||||||||
| Accumulated other comprehensive loss | (29.6) | (21.2) | |||||||||
| Total stockholders' equity | 2,964.7 | 2,733.2 | |||||||||
| Total liabilities and stockholders' equity | $ | 4,222.5 | 3,964.7 |
See accompanying Notes to Condensed Consolidated Financial Statements.
FASTENAL COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Amounts in millions except earnings per share)
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net sales | $ | 4,479.0 | 4,289.3 | $ | 1,554.2 | 1,413.3 | |||||||||||||||||
| Cost of sales | 2,414.7 | 2,340.3 | 834.0 | 772.7 | |||||||||||||||||||
| Gross profit | 2,064.3 | 1,949.0 | 720.2 | 640.6 | |||||||||||||||||||
| Operating and administrative expenses | 1,147.8 | 1,071.6 | 401.8 | 350.5 | |||||||||||||||||||
| Operating income | 916.5 | 877.4 | 318.4 | 290.1 | |||||||||||||||||||
| Interest income | 0.1 | 0.3 | 0.1 | 0.1 | |||||||||||||||||||
| Interest expense | (7.3) | (7.2) | (2.4) | (2.6) | |||||||||||||||||||
| Earnings before income taxes | 909.3 | 870.5 | 316.1 | 287.6 | |||||||||||||||||||
| Income tax expense | 215.5 | 207.5 | 72.6 | 66.1 | |||||||||||||||||||
| Net earnings | $ | 693.8 | 663.0 | $ | 243.5 | 221.5 | |||||||||||||||||
| Basic net earnings per share | $ | 1.21 | 1.16 | $ | 0.42 | 0.39 | |||||||||||||||||
| Diluted net earnings per share | $ | 1.20 | 1.15 | $ | 0.42 | 0.38 | |||||||||||||||||
| Basic weighted average shares outstanding | 574.6 | 573.7 | 575.0 | 573.9 | |||||||||||||||||||
| Diluted weighted average shares outstanding | 576.9 | 575.5 | 577.3 | 576.1 |
See accompanying Notes to Condensed Consolidated Financial Statements.
FASTENAL COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Amounts in millions)
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net earnings | $ | 693.8 | 663.0 | $ | 243.5 | 221.5 | |||||||||||||||||
| Other comprehensive (loss) income, net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments (net of tax of $0.0 in 2021 and 2020) | (8.4) | (3.4) | (10.8) | 11.1 | |||||||||||||||||||
| Comprehensive income | $ | 685.4 | 659.6 | $ | 232.7 | 232.6 |
See accompanying Notes to Condensed Consolidated Financial Statements.
FASTENAL COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
(Amounts in millions except per share information)
| (Unaudited) | (Unaudited) | ||||||||||||||||||||||
| Nine Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Common stock | |||||||||||||||||||||||
| Balance at beginning of period | $ | 2.9 | 2.9 | $ | 2.9 | 2.9 | |||||||||||||||||
| Balance at end of period | 2.9 | 2.9 | 2.9 | 2.9 | |||||||||||||||||||
| Additional paid-in capital | |||||||||||||||||||||||
| Balance at beginning of period | 61.9 | 67.2 | 78.4 | 44.4 | |||||||||||||||||||
| Stock options exercised | 24.4 | 38.3 | 10.8 | 12.0 | |||||||||||||||||||
| Purchases of common stock | — | (52.0) | — | — | |||||||||||||||||||
| Stock-based compensation | 4.3 | 4.3 | 1.4 | 1.4 | |||||||||||||||||||
| Balance at end of period | 90.6 | 57.8 | 90.6 | 57.8 | |||||||||||||||||||
| Retained earnings | |||||||||||||||||||||||
| Balance at beginning of period | 2,689.6 | 2,633.9 | 2,818.3 | 2,788.6 | |||||||||||||||||||
| Net earnings | 693.8 | 663.0 | 243.5 | 221.5 | |||||||||||||||||||
| Dividends paid in cash | (482.6) | (430.2) | (161.0) | (143.4) | |||||||||||||||||||
| Balance at end of period | 2,900.8 | 2,866.7 | 2,900.8 | 2,866.7 | |||||||||||||||||||
| Accumulated other comprehensive (loss) income | |||||||||||||||||||||||
| Balance at beginning of period | (21.2) | (38.4) | (18.8) | (52.9) | |||||||||||||||||||
| Other comprehensive (loss) income | (8.4) | (3.4) | (10.8) | 11.1 | |||||||||||||||||||
| Balance at end of period | (29.6) | (41.8) | (29.6) | (41.8) | |||||||||||||||||||
| Total stockholders' equity | $ | 2,964.7 | 2,885.6 | $ | 2,964.7 | 2,885.6 | |||||||||||||||||
| Cash dividends paid per share of common stock | $ | 0.84 | $ | 0.75 | $ | 0.28 | $ | 0.25 |
See accompanying Notes to Condensed Consolidated Financial Statements.
FASTENAL COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Amounts in millions)
| (Unaudited) | |||||||||||
| Nine Months Ended September 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net earnings | $ | 693.8 | 663.0 | ||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities, net of acquisition: | |||||||||||
| Depreciation of property and equipment | 119.0 | 114.0 | |||||||||
| Gain on sale of property and equipment | (1.1) | (1.1) | |||||||||
| Bad debt expense | 0.8 | 5.8 | |||||||||
| Deferred income taxes | 2.3 | 3.5 | |||||||||
| Stock-based compensation | 4.3 | 4.3 | |||||||||
| Amortization of intangible assets | 8.1 | 6.4 | |||||||||
| Changes in operating assets and liabilities, net of acquisition: | |||||||||||
| Trade accounts receivable | (182.2) | (98.8) | |||||||||
| Inventories | (66.5) | 22.8 | |||||||||
| Other current assets | (22.3) | 34.2 | |||||||||
| Accounts payable | 49.9 | 17.6 | |||||||||
| Accrued expenses | 5.9 | 6.7 | |||||||||
| Income taxes | — | 2.1 | |||||||||
| Other | 1.7 | 0.3 | |||||||||
| Net cash provided by operating activities | 613.7 | 780.8 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment | (114.7) | (123.5) | |||||||||
| Proceeds from sale of property and equipment | 7.7 | 8.6 | |||||||||
| Cash paid for acquisition | — | (125.0) | |||||||||
| Other | — | 1.1 | |||||||||
| Net cash used in investing activities | (107.0) | (238.8) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from debt obligations | 300.0 | 910.0 | |||||||||
| Payments against debt obligations | (340.0) | (850.0) | |||||||||
| Proceeds from exercise of stock options | 24.4 | 38.3 | |||||||||
| Purchases of common stock | — | (52.0) | |||||||||
| Payments of dividends | (482.6) | (430.2) | |||||||||
| Net cash used in financing activities | (498.2) | (383.9) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (3.7) | (1.2) | |||||||||
| Net increase in cash and cash equivalents | 4.8 | 156.9 | |||||||||
| Cash and cash equivalents at beginning of period | 245.7 | 174.9 | |||||||||
| Cash and cash equivalents at end of period | $ | 250.5 | 331.8 | ||||||||
| Supplemental information: | |||||||||||
| Cash paid for interest | $ | 7.6 | 5.9 | ||||||||
| Net cash paid for income taxes | $ | 210.7 | 201.4 | ||||||||
| Leased assets obtained in exchange for new operating lease liabilities | $ | 83.4 | 76.1 |
See accompanying Notes to Condensed Consolidated Financial Statements.
FASTENAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Amounts in millions except share and per share information and where otherwise noted)
September 30, 2021 and 2020
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Fastenal Company and subsidiaries (collectively referred to as the company, Fastenal, or by terms such as we, our, or us) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. They do not include all information and footnotes required by U.S. GAAP for complete financial statements. However, except as described herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in our consolidated financial statements as of and for the year ended December 31, 2020. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
Impact of COVID-19
The COVID-19 pandemic has likely influenced various trends the company is currently experiencing. These include supply chain disruptions and labor shortages, the presence of certain pandemic-specific personal protective equipment (PPE) in our inventory (although certain categories such as 3-ply masks are depleting quickly), and a modest shift in our mix to include more safety products and government customers. Evaluating the third quarter of 2021 is challenging given the dramatic impacts of the pandemic on the company in the year-earlier period. However, in contrast to much of the preceding 12 to 18 months, we are currently seeing a narrower impact on our business related directly to the COVID-19 pandemic, as economic activity has recovered and customer and product mix has reverted back to close to pre-pandemic levels. We believe current financial results are more reflective of traditional economic and marketplace dynamics than of pandemic-related issues such as facility restrictions, labor force illness, and PPE demand. The primary exception to this normalization trend is in the signings of our Onsite and Fastenal Managed Inventory (FMI), which have yet to recover to pre-pandemic levels. To the extent that COVID infections increase, as they did through the third quarter of 2021, this can, and is, either directly impacting or indirectly influencing access to customer facilities and decision-makers, and lengthens the sales cycle for certain of our solutions.
However, it is possible the COVID-19 pandemic, particularly in light of variant strains of the virus, could further impact our operations and the operations of our suppliers and vendors as a result of quarantines, facility closures, illnesses, and travel and logistics restrictions. The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the resumption of high levels of infection and hospitalization, the resulting impact on our customers, suppliers, and vendors, the remedial actions and stimulus measures adopted by federal, state, and local governments, and to what extent normal economic and operating conditions are impacted. The Company cannot reasonably estimate the future impact at this time.
Recently Issued Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to U.S. GAAP on contract modifications, hedging relationships, and other transactions affected by reference rate reform to ease entities' financial reporting burdens as the market transitions from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made, hedging relationships entered into, and other transactions affected by reference rate reform, evaluated on or before December 31, 2022, beginning during the reporting period in which the guidance has been elected. We are currently evaluating the impact of the new guidance on our condensed consolidated financial statements; however, we have determined that, of our current debt commitments as outlined in detail in Note 6 'Debt Commitments', only the obligations described under Unsecured Revolving Credit Facility in Note 6 would be impacted by ASU 2020-04. Our Senior Unsecured Promissory Notes Payable described in Note 6 each have fixed interest rates.
(2) Revenue
Revenue Recognition
Net sales include products and shipping and handling charges, net of estimates for product returns, and any related sales incentives. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract. We recognize revenue by transferring the promised products to the customer, with the majority of revenue recognized at the point in time the customer obtains control of the products. We recognize revenue for shipping and handling charges at the time the products are delivered to or picked up
FASTENAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Amounts in millions except share and per share information and where otherwise noted)
September 30, 2021 and 2020
(Unaudited)
by the customer. We estimate product returns based on historical return rates. Using probability assessments, we estimate sales incentives expected to be paid over the term of the contract. The majority of our contracts have a single performance obligation and are short term in nature. Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Revenues are attributable to countries based on the selling location from which the sale occurred.
Disaggregation of Revenue
Our revenues related to the following geographic areas were as follows for the periods ended September 30:
| Nine-month Period | Three-month Period | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| United States | $ | 3,753.6 | 3,681.6 | $ | 1,307.5 | 1,205.8 | |||||||||||||||||
| Canada and Mexico | 558.8 | 462.3 | 189.9 | 160.5 | |||||||||||||||||||
| North America | 4,312.4 | 4,143.9 | 1,497.4 | 1,366.3 | |||||||||||||||||||
| All other foreign countries | 166.6 | 145.4 | 56.8 | 47.0 | |||||||||||||||||||
| Total revenues | $ | 4,479.0 | 4,289.3 | $ | 1,554.2 | 1,413.3 |
The percentages of our sales by end market were as follows for the periods ended September 30:
| Nine-month Period | Three-month Period | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Manufacturing | 68.6 | % | 61.7 | % | 68.9 | % | 62.7 | % | |||||||||||||||
| Non-residential construction | 11.2 | % | 11.4 | % | 11.3 | % | 11.2 | % | |||||||||||||||
| Other | 20.2 | % | 26.9 | % | 19.8 | % | 26.1 | % | |||||||||||||||
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
The percentages of our sales by product line were as follows for the periods ended September 30:
| Nine-month Period | Three-month Period | |||||||||||||||||||||||||
| Type | Introduced | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||
| Fasteners(1) | 1967 | 33.2 | % | 29.7 | % | 33.4 | % | 30.5 | % | |||||||||||||||||
| Tools | 1993 | 8.6 | % | 8.1 | % | 8.5 | % | 8.5 | % | |||||||||||||||||
| Cutting tools | 1996 | 5.0 | % | 4.6 | % | 5.0 | % | 4.7 | % | |||||||||||||||||
| Hydraulics & pneumatics | 1996 | 6.4 | % | 5.9 | % | 6.5 | % | 6.1 | % | |||||||||||||||||
| Material handling | 1996 | 5.5 | % | 5.1 | % | 5.5 | % | 5.1 | % | |||||||||||||||||
| Janitorial supplies | 1996 | 8.2 | % | 9.9 | % | 8.3 | % | 10.7 | % | |||||||||||||||||
| Electrical supplies | 1997 | 4.3 | % | 4.1 | % | 4.3 | % | 3.9 | % | |||||||||||||||||
| Welding supplies | 1997 | 3.8 | % | 3.5 | % | 3.8 | % | 3.5 | % | |||||||||||||||||
| Safety supplies | 1999 | 21.2 | % | 26.1 | % | 21.1 | % | 23.8 | % | |||||||||||||||||
| Other | 3.8 | % | 3.0 | % | 3.6 | % | 3.2 | % | ||||||||||||||||||
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
(1) The fasteners product line represents fasteners and miscellaneous supplies.
(3) Stockholders' Equity
Dividends
On October 11, 2021, our board of directors declared a quarterly dividend of $0.28 per share of common stock to be paid in cash on November 23, 2021 to shareholders of record at the close of business on October 26, 2021. Since 2011, we have paid
FASTENAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Amounts in millions except share and per share information and where otherwise noted)
September 30, 2021 and 2020
(Unaudited)
quarterly cash dividends, and in 2020, we paid a special cash dividend late in the year. Our board of directors currently intends to continue paying quarterly cash dividends, provided that any future determination as to payment of dividends will depend on the financial condition and results of operations of the company and such other factors as are deemed relevant by the board of directors.
The following table presents the cash dividends either paid previously or declared by our board of directors for future payment on a per share basis:
| 2021 | 2020 | ||||||||||
| First quarter | $ | 0.28 | $ | 0.25 | |||||||
| Second quarter | $ | 0.28 | $ | 0.25 | |||||||
| Third quarter | $ | 0.28 | $ | 0.25 | |||||||
| Fourth quarter | $ | 0.28 | $ | 0.25 | |||||||
| Fourth quarter (special) | $ | 0.40 | |||||||||
| Total | $ | 1.12 | $ | 1.40 |
Stock Options
The following tables summarize the details of options granted under our stock option plans that were outstanding as of September 30, 2021, and the assumptions used to value these grants. All such grants were effective at the close of business on the date of grant.
| Options Granted | Option Exercise (Strike) Price | Closing Stock Price on Date of Grant | September 30, 2021 | ||||||||||||||||||||||||||
| Date of Grant | Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||
| January 4, 2021 | 741,510 | $ | 48.00 | $ | 47.650 | 715,053 | 26,643 | ||||||||||||||||||||||
| January 2, 2020 | 902,263 | $ | 38.00 | $ | 37.230 | 848,066 | 24,964 | ||||||||||||||||||||||
| January 2, 2019 | 1,316,924 | $ | 26.00 | $ | 25.705 | 1,035,830 | 285,098 | ||||||||||||||||||||||
| January 2, 2018 | 1,087,936 | $ | 27.50 | $ | 27.270 | 763,921 | 337,067 | ||||||||||||||||||||||
| January 3, 2017 | 1,529,578 | $ | 23.50 | $ | 23.475 | 750,260 | 380,596 | ||||||||||||||||||||||
| April 19, 2016 | 1,690,880 | $ | 23.00 | $ | 22.870 | 693,029 | 498,611 | ||||||||||||||||||||||
| April 21, 2015 | 1,786,440 | $ | 21.00 | $ | 20.630 | 441,398 | 278,570 | ||||||||||||||||||||||
| April 22, 2014 | 1,910,000 | $ | 28.00 | $ | 25.265 | 224,937 | 149,953 | ||||||||||||||||||||||
| April 16, 2013 | 410,000 | $ | 27.00 | $ | 24.625 | 13,696 | 13,696 | ||||||||||||||||||||||
| Total | 11,375,531 | 5,486,190 | 1,995,198 |
| Date of Grant | Risk-free Interest Rate | Expected Life of Option in Years | Expected Dividend Yield | Expected Stock Volatility | Estimated Fair Value of Stock Option | ||||||||||||||||||||||||
| January 4, 2021 | 0.4 | % | 5.00 | 2.0 | % | 29.17 | % | $ | 9.57 | ||||||||||||||||||||
| January 2, 2020 | 1.7 | % | 5.00 | 2.4 | % | 25.70 | % | $ | 6.81 | ||||||||||||||||||||
| January 2, 2019 | 2.5 | % | 5.00 | 2.9 | % | 23.96 | % | $ | 4.40 | ||||||||||||||||||||
| January 2, 2018 | 2.2 | % | 5.00 | 2.3 | % | 23.45 | % | $ | 5.02 | ||||||||||||||||||||
| January 3, 2017 | 1.9 | % | 5.00 | 2.6 | % | 24.49 | % | $ | 4.20 | ||||||||||||||||||||
| April 19, 2016 | 1.3 | % | 5.00 | 2.6 | % | 26.34 | % | $ | 4.09 | ||||||||||||||||||||
| April 21, 2015 | 1.3 | % | 5.00 | 2.7 | % | 26.84 | % | $ | 3.68 | ||||||||||||||||||||
| April 22, 2014 | 1.8 | % | 5.00 | 2.0 | % | 28.55 | % | $ | 4.79 | ||||||||||||||||||||
| April 16, 2013 | 0.7 | % | 5.00 | 1.6 | % | 37.42 | % | $ | 6.33 |
All of the options in the tables above vest and become exercisable over a period of up to eight years. Generally, each option will terminate approximately ten years after the grant date.
FASTENAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Amounts in millions except share and per share information and where otherwise noted)
September 30, 2021 and 2020
(Unaudited)
The fair value of each share-based option is estimated on the date of grant using a Black-Scholes valuation method that uses the assumptions listed above. The risk-free interest rate is based on the U.S. Treasury rate over the expected life of the option at the time of grant. The expected life is the average length of time over which we expect the employee groups will exercise their options, which is based on historical experience with similar grants. The dividend yield is estimated over the expected life of the option based on our current dividend payout, historical dividends paid, and expected future cash dividends. Expected stock volatilities are based on the movement of our stock price over the most recent historical period equivalent to the expected life of the option.
Compensation expense equal to the grant date fair value is recognized for all of these awards over the vesting period. The stock-based compensation expense for the nine-month periods ended September 30, 2021 and 2020 was $4.3 and $4.3, respectively. Unrecognized stock-based compensation expense related to outstanding unvested stock options as of September 30, 2021 was $14.0 and is expected to be recognized over a weighted average period of 4.11 years. Any future changes in estimated forfeitures will impact this amount.
Earnings Per Share
The following tables present a reconciliation of the denominators used in the computation of basic and diluted earnings per share and a summary of the options to purchase shares of common stock which were excluded from the diluted earnings per share calculation because they were anti-dilutive:
| Nine-month Period | Three-month Period | ||||||||||||||||||||||
| Reconciliation | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Basic weighted average shares outstanding | 574,637,254 | 573,673,031 | 574,973,196 | 573,913,929 | |||||||||||||||||||
| Weighted shares assumed upon exercise of stock options | 2,291,000 | 1,797,201 | 2,286,643 | 2,203,402 | |||||||||||||||||||
| Diluted weighted average shares outstanding | 576,928,254 | 575,470,232 | 577,259,839 | 576,117,331 |
| Nine-month Period | Three-month Period | ||||||||||||||||||||||
| Summary of Anti-dilutive Options Excluded | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Options to purchase shares of common stock | 680,227 | 852,728 | 688,410 | — | |||||||||||||||||||
| Weighted average exercise prices of options | $ | 48.00 | 38.00 | $ | 48.00 | — |
Any dilutive impact summarized above related to periods when the average market price of our stock exceeded the exercise price of the potentially dilutive stock options then outstanding.
(4) Income Taxes
We file income tax returns in the United States federal jurisdiction, all states, and various local and foreign jurisdictions. We are no longer subject to income tax examinations by taxing authorities for taxable years before 2017 in the case of United States federal examinations, and with limited exceptions, before 2015 in the case of foreign, state, and local examinations. During the first nine months of 2021, there were no material changes in unrecognized tax benefits.
During 2020, we deferred approximately $30.0 in payroll taxes as allowed under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which was signed into law in March 2020 to help businesses navigate COVID-19 related challenges. The deferred payroll taxes were paid during the third quarter of 2021.
(5) Operating Leases
Certain operating leases for pick-up trucks contain residual value guarantee provisions which would generally become due at the expiration of the operating lease agreement if the fair value of the leased vehicles is less than the guaranteed residual value. The aggregate residual value guarantee related to these leases is approximately $88.6. We believe the likelihood of funding the guarantee obligation under any provision of the operating lease agreements is remote.
FASTENAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Amounts in millions except share and per share information and where otherwise noted)
September 30, 2021 and 2020
(Unaudited)
(6) Debt Commitments
Credit Facility, Notes Payable, and Commitments
Debt obligations and letters of credit outstanding at the end of each period consisted of the following:
| Average Interest Rate at September 30, 2021 | Debt Outstanding | ||||||||||||||||||||||
| Maturity Date | September 30, 2021 | December 31, 2020 | |||||||||||||||||||||
| Unsecured revolving credit facility | 1.03 | % | November 30, 2023 | $ | — | — | |||||||||||||||||
| Senior unsecured promissory notes payable, Series A | 2.00 | % | July 20, 2021 | — | 40.0 | ||||||||||||||||||
| Senior unsecured promissory notes payable, Series B | 2.45 | % | July 20, 2022 | 35.0 | 35.0 | ||||||||||||||||||
| Senior unsecured promissory notes payable, Series C | 3.22 | % | March 1, 2024 | 60.0 | 60.0 | ||||||||||||||||||
| Senior unsecured promissory notes payable, Series D | 2.66 | % | May 15, 2025 | 75.0 | 75.0 | ||||||||||||||||||
| Senior unsecured promissory notes payable, Series E | 2.72 | % | May 15, 2027 | 50.0 | 50.0 | ||||||||||||||||||
| Senior unsecured promissory notes payable, Series F | 1.69 | % | June 24, 2023 | 70.0 | 70.0 | ||||||||||||||||||
| Senior unsecured promissory notes payable, Series G | 2.13 | % | June 24, 2026 | 25.0 | 25.0 | ||||||||||||||||||
| Senior unsecured promissory notes payable, Series H | 2.50 | % | June 24, 2030 | 50.0 | 50.0 | ||||||||||||||||||
| Total | 365.0 | 405.0 | |||||||||||||||||||||
| Less: Current portion of debt | (35.0) | (40.0) | |||||||||||||||||||||
| Long-term debt | $ | 330.0 | 365.0 | ||||||||||||||||||||
| Outstanding letters of credit under unsecured revolving credit facility - contingent obligation | $ | 36.3 | 36.3 |
Unsecured Revolving Credit Facility
We have a $700.0 committed unsecured revolving credit facility (Credit Facility). The Credit Facility includes a committed letter of credit subfacility of $55.0. Any borrowings outstanding under the Credit Facility for which we have the ability and intent to pay using cash within the next twelve months, will be classified as a current liability. The Credit Facility contains certain financial and other covenants, and our right to borrow under the Credit Facility is conditioned upon, among other things, our compliance with these covenants. We are currently in compliance with these covenants.
Borrowings under the Credit Facility generally bear interest at a rate per annum equal to LIBOR for interest periods of various lengths selected by us, plus 0.95%. We pay a commitment fee for the unused portion of the Credit Facility. This fee is either 0.10% or 0.125% per annum based on our usage of the Credit Facility.
Senior Unsecured Promissory Notes Payable
We have issued senior unsecured promissory notes under our master note agreement (the Master Note Agreement) in the aggregate principal amount of $365.0 as of September 30, 2021. Our aggregate borrowing capacity under the Master Note Agreement is $600.0; however, none of the institutional investors party to that agreement are committed to purchase notes thereunder. There is no amortization of these notes prior to their maturity date and interest is payable quarterly. The notes currently issued under our Master Note Agreement, including the maturity date and fixed interest rate per annum of each series of note, are contained in the table above. The Master Note Agreement contains certain financial and other covenants and we are currently in compliance with these covenants.
(7) Legal Contingencies
The nature of our potential exposure to legal contingencies is described in our 2020 annual report on Form 10-K in Note 11 of the Notes to Consolidated Financial Statements. As of September 30, 2021, there were no litigation matters that we consider to be probable or reasonably possible to have a material adverse outcome.
FASTENAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Amounts in millions except share and per share information and where otherwise noted)
September 30, 2021 and 2020
(Unaudited)
(8) Subsequent Events
We evaluated all subsequent event activity and concluded that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements or disclosure in the Notes to Condensed Consolidated Financial Statements, with the exception of the dividend declaration disclosed in Note 3 'Stockholders' Equity'.
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