Fastenal FAST · USD

Note 10. Segment Reporting Each of our geographic regions (U.S., Canada, Mexico, Central & South America, Europe, Asia, and SE Asia) are engaged in business activities for which they may earn sales and incur expenses. Discrete financial information is available at the geographic region level through our internal Return on Asset (ROA) reporting. The ROA reporting is ultimately a selling location income statement with an ROA calculation and the results are compiled by geographic region. ROA pre-tax profit measures financial performance and drives compensation programs. Our Chief Operating Decision Maker (CODM) is a group consisting of our Chief Executive Officer and President/Chief Sales Officer. We consider each geographic region to be an operating segment. The CODM regularly reviews ROA pre-tax profit to make decisions about the allocation of resources at the geographic region level. Operating segment significant expense categories and amounts are not regularly reviewed by or provided to our CODM. Segment expenses represent the difference between net sales and ROA pre-tax profit and consist of cost of sales and SG&A expenses. However, our CODM reviews consolidated expense information to manage the operations of the business. Considering our operating segments outside of the U.S. individually represent less than 10% of our total operating segment net sales, ROA pre-tax profit, and ROA assets, we do not consider them reportable segments. Therefore, we report the results of our one reportable segment (U.S.) below. Further details on our significant accounting policies can be found in Note 1, which are applied company wide.Our segment measure of profit or loss is ROA pre-tax profit and our measure of assets is ROA assets. ROA pre-tax profit is not a financial measure calculated in accordance with GAAP and excludes inter-company transactions. The following table presents a reconciliation of reportable segment net sales from external customers to consolidated net sales for the periods ended December 31:202520242023U.S. net sales from external customers $6,818.9 6,273.1 6,139.8 Other operating segment net sales (1)1,381.6 1,272.9 1,206.9 Net sales$8,200.5 7,546.0 7,346.7 (1) Other operating segment net sales includes all other operating segments that are below the reportable segment quantitative threshold.

Note 2. RevenueDisaggregation of RevenueRevenues are attributed to countries based on the selling location from which the sale occurred. During 2025, 2024, and 2023, no single customer represented 5% or more of our consolidated net sales.Our revenues related to the following geographic areas were as follows for the periods ended December 31:Twelve-month Period202520242023United States$6,818.9 6,273.1 6,139.8 % of revenues83.2%83.1%83.6%Canada and Mexico1,110.2 1,035.6 981.9 % of revenues13.5%13.7%13.4%All other foreign countries271.4 237.3 225.0 % of revenues3.3%3.2%3.0%Total revenues$8,200.5 7,546.0 7,346.7 The percentages of our sales by end market were as follows for the periods ended December 31:Twelve-month Period202520242023Manufacturing75.9%75.0%74.3%Non-residential construction8.1%8.5%9.1%Other16.0%16.5%16.6%100.0%100.0%100.0%The percentages of our sales by product line were as follows for the periods ended December 31:Twelve-month PeriodTypeIntroduced202520242023Fasteners (1)196730.5%30.7%32.4%Tools19938.3%8.4%8.5%Cutting tools19965.2%5.3%5.3%Hydraulics & pneumatics19966.9%6.7%6.7%Material handling19965.7%5.6%5.6%Janitorial supplies19969.0%8.8%8.4%Electrical supplies19974.7%4.7%4.6%Welding supplies19974.3%4.2%4.1%Safety supplies199922.2%22.2%21.2%Other3.2%3.4%3.2%100.0%100.0%100.0%(1) The fastener product line represents fasteners and miscellaneous supplies.

Note 9. Debt CommitmentsCredit Facility, Notes Payable, and CommitmentsDebt obligations and letters of credit outstanding at year end consisted of the following:Average Interest Rate at December 31, 2025Debt OutstandingMaturity Date20252024Unsecured revolving credit facility4.73%September 28, 2027$— — Senior unsecured promissory notes payable, Series D2.66%May 15, 2025— 75.0 Senior unsecured promissory notes payable, Series E2.72%May 15, 202750.0 50.0 Senior unsecured promissory notes payable, Series G2.13%June 24, 202625.0 25.0 Senior unsecured promissory notes payable, Series H2.50%June 24, 203050.0 50.0 Total125.0 200.0 Less: Current portion of debt(25.0)(75.0)Long-term debt$100.0 125.0 Outstanding letters of credit under unsecured revolving credit facility - contingent obligation$29.7 31.2 Unsecured Revolving Credit Facility We have an $835.0 committed unsecured revolving Credit Facility with an uncommitted accordion option to increase the aggregate revolving commitment by an additional $365.0 for a total of $1,200.0. 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 12 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 Daily Simple SOFR plus a 0.10% spread adjustment 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 use 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 $125.0 as of December 31, 2025. Our aggregate borrowing capacity under the Master Note Agreement is $900.0; 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.

Note 7. Income TaxesIncome before income taxes were derived from the following sources:202520242023Domestic$1,515.2 1,390.6 1,392.7 Foreign139.8 117.5 129.3 Income before income taxes$1,655.0 1,508.1 1,522.0 Components of income tax expense (benefit) were as follows:202520242023CurrentDeferredTotalCurrentDeferredTotalCurrentDeferredTotalFederal$276.6 6.8 283.4 265.6 (3.0)262.6 273.3 (9.2)264.1 State63.5 0.7 64.2 56.1 (0.1)56.0 59.6 (1.3)58.3 Foreign50.3 (1.3)49.0 39.6 (0.7)38.9 44.9 (0.3)44.6 Income tax expense$390.4 6.2 396.6 361.3 (3.8)357.5 377.8 (10.8)367.0 Income taxes paid were as follows:202520242023Federal$276.4 269.6 276.8 State60.5 54.6 60.9 Foreign61.9 36.3 51.5 Total income taxes paid$398.8 360.5 389.2 Income taxes paid (net of refunds) exceeded five percent of total income taxes paid (net of refunds) in the following jurisdictions:202520242023Mexico36.5 *20.1 * Jurisdiction below the threshold for the period presented.Income tax expense in the accompanying consolidated financial statements differed from the expected expense as follows:2025 (1)2024 (2)2023 (3)AmountPercentAmountPercentAmountPercentU.S. federal income tax expense at statutory rate$347.5 21.0 %316.7 21.0 %319.6 21.0%Increase (decrease) attributed toState and local income taxes50.7 3.1 %43.4 2.9 %45.1 3.0%Foreign tax effects18.9 1.1 %14.2 0.9 %17.4 1.1%Effect of cross-border tax laws(6.4)-0.4 %(5.7)-0.4 %(5.6)-0.4%Tax credits(5.8)-0.4 %(5.2)-0.3 %(5.4)-0.4%Changes in valuation allowances0.2 0.0 %(0.2)0.0 %0.4 0.0%Nontaxable or nondeductible items(2.4)-0.1 %(10.4)-0.7 %(6.4)-0.4%Changes in unrecognized tax benefits(7.4)-0.4 %0.7 0.0 %1.4 0.1%Other, net1.3 0.1 %4.0 0.3 %0.5 0.0%Total income tax expense, Effective income tax rate$396.6 24.0 %357.5 23.7 %367.0 24.1%(1)In 2025, state taxes in Minnesota, Wisconsin, California, Illinois, New York, and Indiana made up the majority (greater than 50%) of the tax effect in this category. (2)In 2024, state taxes in Wisconsin, Minnesota, California, Illinois, New York, and Kansas made up the majority (greater than 50%) of the tax effect in this category.(3)In 2023, state taxes in Wisconsin, California, Minnesota, Illinois, New York, and Kansas made up the majority (greater than 50%) of the tax effect in this category.The tax effects of temporary differences that give rise to deferred income tax assets and liabilities at year end consisted of the following: 20252024Deferred income tax assetsInventory costing and valuation methods$6.8 5.

Note 8. Operating LeasesWe lease space under non-cancelable operating leases for several distribution centers, several manufacturing locations, and certain branch locations. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. Further, the leases do not contain contingent rent provisions. We also lease certain semi-tractors, pick-up trucks, and computer equipment under 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 was approximately $124.2. We believe the likelihood of funding the guarantee obligation under any provision of the operating lease agreements is remote. The cost components of our operating leases were as follows for the periods ended December 31: 202520242023Leased Facilities and EquipmentLeased VehiclesTotalLeased Facilities and EquipmentLeased VehiclesTotalLeased Facilities and EquipmentLeased VehiclesTotalOperating lease cost$103.5 24.6 128.1 101.1 22.0 123.1 99.4 18.2 117.6 Variable lease cost16.4 1.6 18.0 14.0 1.4 15.4 10.5 1.6 12.1 Short-term lease cost— 39.3 39.3 — 32.6 32.6 — 23.7 23.7 Total$119.9 65.5 185.4 115.1 56.0 171.1 109.9 43.5 153.4 Variable lease costs are excluded from ROU assets and lease liabilities and consist primarily of taxes, insurance, and common area or other maintenance costs for our leased facilities and equipment which are paid based on actual costs incurred by the lessor as well as variable mileage costs related to our leased vehicles.Maturities of our lease liabilities for all operating leases were as follows as of December 31, 2025:Leased Facilities and EquipmentLeased VehiclesTotal2026$92.6 19.7 112.3 202771.9 15.7 87.6 202850.9 13.0 63.9 202932.7 7.3 40.0 203018.2 3.2 21.4 2031 and thereafter19.7 0.7 20.4 Total lease payments$286.0 59.6 345.6 Less: Imputed interest(24.2)(4.5)(28.7)Present value of lease liabilities$261.8 55.1 316.9 The weighted average remaining lease terms and discount rates for all of our operating leases were as follows for the periods ended December 31: Remaining lease term and discount rate:20252024Weighted average remaining lease term (years) Leased facilities and equipment3.983.98 Leased vehicles3.583.

We have established processes and procedures for ensuring the confidentiality, integrity, and availability of data. These processes are in place to assess, identify, and manage material risks from cybersecurity threats. Annual risk assessments are performed and incorporated as part of our Enterprise Risk Management (ERM) organizational process, which is overseen by our Board of Directors (the Board) and the Audit Committee, along with Executive Leadership. Our information security management system (ISMS) program is aligned to ISO 27001, which is an international standard to manage information security. ISO 27001 is published by the International Organization for Standardization (ISO), the world's largest developer of voluntary standards, and the International Electrotechnical Commission.Our IT security department, led by our Senior Vice President (SVP) IT Infrastructure & Security, is tasked with monitoring cybersecurity and operational risks related to information security and system disruption. The team employs measures designed to protect against, detect, and respond to cybersecurity threats, and has implemented processes and procedures aligned with our ISMS to support and promote resilient programs. This includes:•Enterprise security framework and cybersecurity standards;•Cybersecurity awareness and training plans;•Security assessments and monitoring;•Restricted physical access to critical areas, servers, and network equipment;•Incident response, crisis management, business continuity, and disaster recovery plans; and•Third-party IT vendor risk management process to identify, assess, and manage risks presented by our IT vendors and business partners.Our IT security department maintains a playbook to respond to potential cybersecurity threats. We conduct tabletop exercises for tactical response readiness, perform regular security scans of our environment both from an external and internal perspective, as well as work with a qualified third-party vendor to perform penetration tests of our environment. Any identified risks are included in our overall risk management program, and internal auditors validate our IT controls on a regular basis.We conduct organization-wide cybersecurity training and compliance exercises in connection with our information security program. This training consists of educational material and compliance testing administered to all of our employees, which is shared with Executive Leadership, the Audit Committee, and the Board.

Note 4. Accrued ExpensesAccrued expenses at year end consisted of the following: 20252024Employee payroll and related taxes$18.0 17.9 Employee bonuses and commissions39.8 25.5 Profit sharing contribution23.5 20.8 Insurance reserves25.0 26.2 Indirect taxes53.1 32.7 Customer promotions and marketing66.5 64.2 Occupancy 4.6 8.5 Transportation 6.4 5.7 Other27.8 24.1 Accrued expenses$264.7 225.

Note 3. Long-Lived AssetsLong-lived assets consist of net property and equipment, operating lease ROU assets, prepaid deposits, goodwill, and definite-lived intangible assets.Property and equipment at year end consisted of the following:Depreciable Lifein Years20252024Land— $71.2 72.6 Buildings and improvements15 to 40622.7 563.6 Automated distribution and warehouse equipment5 to 30310.3 293.5 Shelving, industrial vending, and equipment3 to 101,524.6 1,436.3 Transportation equipment3 to 5107.8 103.3 Construction in progress— 135.5 117.2 2,772.1 2,586.5 Less accumulated depreciation(1,640.5)(1,529.9)Property and equipment, net$1,131.6 1,056.6 Our long-lived assets related to the following geographic areas at year end:20252024United States$1,421.6 1,343.2 Canada and Mexico112.9 101.3 All other foreign countries46.3 41.6 Total long-lived assets$1,580.8 1,486.