My name is Will Overton, and I would like to welcome you to the 32nd Annual Meeting of the Shareholders of Fastenal Company. As a long held tradition, we would like to start the meeting with an invitation. For that, I would like to introduce Pastor Mark Dunkey of the Faith Lutheran Church here in Winona, Minnesota.
Hello, shareholders and friends. It's good to be with you once again to offer the invocation for today's meetings. Today's challenges remind me of a time long ago when God's people sheltered in place in a far country waiting to return to Jerusalem, their home. When they were tired of sheltering, God spoke words of promise and hope. I would like to read from Isaiah, Chapter 40.
The words may be familiar to many of you as they are the basis of the well known hymn on Eagle's Wings. Those who wait for the Lord will renew their strength. They will soar on wings like eagles. They will run and not grow weary. They will walk and not be faint.
I invite you to pause for a moment as we turn our attention to our Creator. Bring your blessing of strength to each and every member of the Blue team that with wings outstretched, we may adapt and soar into the wind of uncertainty with confidence, guided by the values that make us unique. Bring your blessing of endurance and hope to all who become tired in the fight against this pandemic. Bring your blessing of confidence to us as we meet. May our work today bring blessings to our customers, our employees, our suppliers and our shareholders.
Amen.
Thank you, Pastor Dunkey. This annual meeting of the shareholders of Fastenal Company is now convened. I am Willard D. Overton, Chairman of the Board of the company, and I will act as Chair of this meeting. Mr.
John Millich, who is Vice President and General Counsel for the company, will act as secretary of this meeting. But before we get started with the official business of the meeting, I'd like to take a minute and recognize some very important people here at Fastenal. I'd like to start by recognizing the founders, Robert A. Kerlin, Henry K. McKonnan, John V.
Remick, Stephen M. Sloggy and Michael M. Gostomski. They have done so much for the employees and the shareholders of the Fastenal Company and the communities we live in. Thank you very much for your vision and your leadership, gentlemen.
I'd like to also recognize the directors of the company, Michael J. Ancias, Michael J. Dolan, Stephen L. Eastman, Daniel L. Flores, Rita J.
Heisey, Darren R. Jackson, Daniel L. Johnson, Nicholas J. Lundquist, Scott A. Satterlee and Renee K.
Weiskop. This group of talented individuals is committed to Fastenal's strong culture and commitment to customer service. Thank you for the dedication and hard work. Another group I'd like to recognize are the employees themselves that we affectionately call the Blue Team. I want to thank everybody on the Blue Team, every single person on Blue Team for a great year.
2019 was a very, very good year. But more importantly, I want to take thank you for the extra effort that you have put in over the last several weeks. Your dedication and maybe more importantly, your creativity has made us so proud and we stand out as the best distributor in the world for industrial product, but just a great company. Thank you everybody on the Blue team. We're very, very proud of you.
And one last shout out before I move on to the guts of the meeting. I want to recognize a good friend of mine, Jean Du Bois. She is celebrating her 25th anniversary with Fastenal in this 25th day of April. And she's celebrating what like she spends most of her days here at the office. Jean, thank you for everything that you have done for this great company.
We really appreciate it. I will now ask Mr. Millich to report in the numbers of shares present at this meeting and conduct the voting on the proposals to be considered at this meeting. Following the vote, our Chief Executive Officer and President, Daniel L. Flores will report to you the company.
Mr. Millich? Thank you, Mr. Overton, and good morning, everyone. Before starting, as we publicly disclosed on March 24, 2020, due to the public health impact of the coronavirus outbreak, this meeting is being held in a virtual format.
In this virtual format, you are participating in this meeting virtually and the rules of our annual meeting are available on the meeting website. If you wish to participate, please submit your question in the manner set forth in the website in the space provided on the virtual meeting screen. There are 3 management proposals and 1 shareholder proposal to be voted on. A designee of the shareholder proponent is participating remotely and will have 3 minutes to introduce the proposal and make a statement in support. Management's position is already stated in the proxy statement that you received.
The record date for the determination of the holders of the company's common stock entitled to receive notice of and vote at this meeting was fixed by our Board of Directors as February 26, 2020. I also presented this meeting and asked David of a manager of Broadridge Financial Solutions Inc, attesting that the notice of a meeting, together with a proxy statement, a proxy card and certain other documents were mailed on or about March 16, 2020 to each holder of record of the company's common stock as of the close of business on the record day. In addition, on or about March 30, 2020, Broadridge mailed to each shareholder of record of the company's stock as of the close of business on the record date a notification of a change in the location of the meeting, as I previously discussed, due to the public health impact of the coronavirus. The
affidavit of mailing
of the notice of this meeting will be attached to the minutes of this meeting as Exhibit A. A certified list of holders of the company's common stock will be filed with books and records of the company. As of the close of business on the record date, there were outstanding entitled to vote at this meeting 574,396,214 shares of common stock. Each share of common stock is entitled to 1 vote. For a quorum to be present, a majority of the 574,396,214 votes entitled to be cast must be present in person at the virtual meeting or by proxy at this meeting.
On a preliminary count, they are represented at the meeting either by attending the virtual meeting or by proxy, a majority of
the votes entitled to be cast
at the 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 as proxies and of the shareholders voting via the meeting website will be filed with the books and records of the company. Alan Stoltz has been appointed to act as the 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.
Copies of the minutes of the last Annual Meeting of the company held on April 23, 2019 are available on the meeting website. All shareholders of record as of the close of business on February 26, 2020 may vote on the matters to be considered today. If you wish to vote at the virtual meeting, please follow the directions available on the meeting website. We will now take up the business of the meeting. We have 4 matters to be considered by our shareholders today.
The first is the election of directors for this coming year. The Board of Directors of the company has nominated the following 10 persons for election to the Board to serve until the next regular meeting of shareholders and or until their successors are elected and qualified. Willard D. Overton, Michael J. Ancias, Michael J.
Dolan, Stephen L. Eastman, Daniel L. Flores, Rita J. Heisey, Daniel L. Johnson, Nicholas J.
Lundquist, Scott A. Satterlee and Renee K. Weiskopf. I will now open the floor to a motion to formally place before this meeting the nomination of these individuals. I recognize Mr.
James Drury.
My name is James Drury, and I'm a shareholder of the company. I move to formally place before this meeting the nomination of the 10 individuals identified for election to the Board of Directors to serve until the next regular meeting of shareholders or until their successors are elected and qualified.
As there are no nominations, 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 consideration today is the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2020. Ms. Carrie Person, a partner of that firm is participating remotely and can answer any questions you may have during the Q and A portion of this meeting.
I will now open the floor to a motion to formally place before this meeting a resolution concerning the ratification of the employment of KPMG LLP as our independent registered public accounting firm for fiscal year 2020. I recognize Ms. Kayla Sternberg.
My name is Kayla Sternberg, and I am a shareholder of the company.
I'd like
to note that the following resolution be adopted: Resolve that the appointment of KPMG LLP as independent registered public accounting firm for the company for the fiscal year ending December 31, 2020 be and hereby is RAD effect?
Right. It has been moved that the appointment of KP and G 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 the meeting a resolution concerning the approval of executive compensation. I recognize Mr. Joseph Solheide.
My name is Joseph Solheide, and I am 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 directors as disclosed in the compensation discussion and analysis, compensation tables and related disclosures contained in the section of the proxy statement for the 2020 Annual Meeting of Shareholders captioned Executive Compensation.
It has been moved that the compensation of certain of our executive officers be approved. The next matter for consideration is a proposal relating to diversity reporting, if that proposal is duly presented at this meeting. Azusso has submitted a proposal on behalf of the Allen M. Ramo Trust, which was included in the proxy statement. The Board recommends that the shareholders vote against this proposal.
I understand that Mr. Paul Rissman is present by phone as designee for the sponsor of this proposal to present it. Mr. Rissman, please begin and limit your remarks to 3 minutes.
Thank you, Mr. Millich. Am I coming through? Yes, you are. Thank you.
This is Paul Rissman representing as you settle. We urge shareholders to vote yes on proposal 4 on the Fastenal proxy statement, which asks the company to provide metrics on workforce diversity. The proposal makes the following specific request: resolved, shareholders request that the Board of Directors issue a report to shareholders by 180 days after the 2020 Annual Meeting at reasonable expense and excluding confidential information assessing the diversity of our company's workforce. This is a resubmission of a 2019 proposal that received more than 41% support, yet our company refuses to implement the request. Diversity reporting is financially material for Fastenal's investors.
The Sustainability Accounting Standards Board has determined that workforce diversity and inclusion is a sustainability issue most likely to impact the operating performance or financial condition of the typical company in Fastenal's industry. Disclosure is the bedrock concept of federal securities law. The SEC has recognized the increasing materiality of human capital disclosures concerning diversity. Shareholder resolutions regarding diversity and those explicitly referencing EE01 category percentage disclosures received increasing support over time. In 2018 2019, 14 shareholder proposals requesting EEO-one disclosure received on average more than 40% support.
The Massachusetts Institute of Technology's loan management review teamed with CultureX and Glassdoor on the Culture 500 project to rank companies based on a series of cultural factors pulled from employee comments on the Glassdoor website. Based on an analysis of Glassdoor reviews, Fastenal ranks 478 out of 496 major corporations on the diversity dimension. In the supply chain and logistics industry grouping, Fastenal ranked 17 out of 18. One academic study discovered that firms with lower levels of job satisfaction as measured by employees on Glassdoor are more likely to be subjected to SEC fraud enforcement actions and securities class action lawsuits. Fastenal Company opposes issuing financially material disclosure that provides decision useful investor protection as it serves the public interest.
We therefore urge a yes vote for proposal 4 on the 2020 facts and all proxy statement. Thank you, Mr. Millich.
Great. Thank you, Mr. Rissman. I remind shareholders that the Board recommends that they vote against this proposal for the reasons described in the proxy statement. Now if you wish to vote on the motions, please vote in the matter described on the meeting website.
If you have appointed another person as proxy to vote your shares and have not terminated that proxy, you should not vote on the meeting website. The polls are now closed and the votes will be counted. While the votes are being counted, Mr. Dan Florness, our President and Chief Executive Officer, will report to you on the company. After the conclusion of his report, we will answer any questions that you may have relating to the company and its activities.
While the pre recorded video message from Mr. Flores plays on the webcast, the phone line will be silent for approximately 30 minutes for those dialed in only. When the video is complete, the audio will resume for today's Q and A portion of the meeting. Thank you.
Good day, everybody. Dan Flonus here and thank you for joining us for today's Annual Meeting. So I'm recording this video a few days early, recorded it on Monday, April 20. The reason being, a virtual meeting is a new thing for us. We wanted to have the opportunity to do a few test runs to make sure everything works okay.
And but I did have the opportunity over the weekend to hear Pastor Mark's Invocation recording. Invocation at an annual meeting is not a common event these days. It's a tradition that Bob Kirlin started years ago. And when we first talked about having a virtual annual meeting this year, we weren't going to do an invocation. More thought about it, thought, maybe a prayer is needed more this year than ever.
And when I reached out to Pastor Mark and Pastor Mark had retired last fall after 32 years at Faith Lutheran, reached out and asked him if he'd be willing to record something. I was very thankful that he was more than happy to do it. And to be honest with you, I listened to his invocation, it's nice hearing his voice again the better part of a year of not hearing it. If you think about our business and about most businesses, it's about priorities. How do you prioritize your efforts?
And one of the things we tried to lay out in this year's annual report similar to last year is the priorities that guide us. And they really center on 4 things: our customers in the marketplace, our employees that serve each other and our customers, our suppliers that provide us with both product and knowledge, and our shareholders who through their belief in us provides funding for us to invest in our future and in our today. One of the things we also laid out in our President's letter and in many ways given the COVID-nineteen pandemic that were in the middle of us, this seems less important today. But this is still, after all, the 2020 Annual Meeting, where we want to talk about what happened in 2019 and where our business is going. We'll talk a little bit about where we are today.
But this chart was laid out in our President's letter. And in it, we tried to make a comparison of 2 similar periods and similar from the standpoint of what was happening in our end markets. If you go back to 2015 and you look at what's known as the ISM Index, so it's an index of purchasing managers and their belief in the future based on the backlog or what they're seeing in day to day within their business. You saw a dramatic drop off in the ISM index in 2015. Similarly, you saw a big drop off this year, actually more severe in 2019.
And one thing that stood out for me personally was the fact that over the last 4 or 5 years, we have created a more resilient business at Fastenal by embracing more means with which to grow. We call them growth drivers. One of the big changes that we have in the organization is what we call on-site. Today, it represents about 30% of what we do. And that's where we move in with the customer, so to speak, and we engage with them in a much deeper and thorough process of being their supply chain partner.
And what you can see when you look at these numbers is that even though 2019 economically was worse than 2015, our business held up much better because of the relationships we have in the marketplace. This next slide, you would have seen at our annual meeting last year. And it's a depiction of our business at points in time. And while I realize 2,007 wasn't exactly 10 years ago, it's good to go back to a period before the Great Recession because you can look at peer numbers without the influence of that slowdown. But in that timeframe, we were primarily a U.
S. And Canadian distributor. We had some operations beyond that, but primarily in U. S. And Canada.
Principally a faster distributor, we did some safety sales and then all the other product lines you see laid out. We were starting to dabble in a thing called vending. And as you can see, we had some on sites, but it was more of an afterthought. It really wasn't a strategy per se. Now, flash forward to today.
So in 2019, we did just over $5,000,000,000 in revenue. Over 90% of that's still in U. S. And Canada, but the rest of the planet is growing rapidly. You see a change occurring in what products we're selling.
Fasters have continued to grow well for us, but as a percentage of business, they've contracted a little bit. Safety has really taken off. In a few minutes, I'll talk about vending. Vending is the game changer for safety, because 50% of our safety products go through a vending machine. The final is all the remaining product lines.
They've grown very well as themselves over the last decade. A piece of that, about 25% of that revenue also goes through the vending platform And you can see what's happened to our branch count, our on-site count. Branch count is largely the same. It peaked up over time, came back down, and all that business has been morphing into Onsites and we expect that to continue in the future. Finally, a $1,000,000,000 business going through vending, over 20% of our revenue.
We reinvented industrial distribution. Ironically enough, it was Bob's original idea back in 1967. So what do we look like in the future? When we're a $10,000,000,000 company, we're still going to be principally a U. S.
And Canadian entity because of the years of head start we have in that area. But you can see a dramatic change continuing to occur in the rest of the world as it relates to our business. You also can see a continued evolution of what we have in fastener business, safety business and all the remaining product lines. And that split is just a guess at this point, but I think it's a reasonable guess based on the progress we're making in the vending world. You can also notice that the on-site, which has become an ever more important piece of our business, we'll have more on-site locations, I believe, at $10,000,000,000 than regular branches.
And I believe close to half our business will be going through the on-site network. And then finally, I fully expect our vending to continue to grow in the future. Now typically, I'd be able to tell you a little bit about the customer show we just had, but this year isn't typical. So back on Friday, March 6, we made a decision and that was to cancel our annual customer event. So our customer event would have occurred a week and a half ago.
It would have been in Denver, Colorado. It would have involved about 6,000 people attending the Fastenal Industrial Expo over a course of about 3 days and people rotating in and out. And what it provides us the opportunity to do is engage with our customer in a fundamentally different way. Most of our customers' experience with Fastenal comes from the engagement locally. A typical branch for Fastenal has 4, 5, 6 employees, and it's really difficult to convey the true supply chain resources that Fast Home represents when you look at it from that local footprint.
But if you're at the Expo, you're able to take a step or 2 into the organization and you quickly realize the resources we can bring to bear for our customer and that's what the expo is all about. Unfortunately, we didn't have it this year. In exchange, we've had a disrupted world. We've had customers with businesses very much disruptive. I'm pleased to say that through it all, Fastenal has been able to demonstrate the efficiency and the importance and the reliance that you can see from a true supply chain partner.
That doesn't mean we have every product perfectly for every customer every day, because in a period like this where demand of certain products goes through the roof unexpectedly, there are disruptions, but you have solutions to bring to your customer table because you're a local business with a great supply chain behind it. The second thing that you would have seen at our show would be us talking about our commitment, talking about what supply chain is really about. In an era where most folks focus on their e commerce strategy and how they're creating a digital footprint and how they're handling fulfillment for customers. We do that too. However, we take it a big step deeper in that we talk about supply chain and the things we're trying to anticipate, the suggestions we're making to help your business and ours and ways we can improve together.
And one of that is use of technology and innovation. With that, I'll take a brief pause and we'll show you a quick video.
When it comes to inventory, we understand your vision. You want less of it on your books, fewer touches, faster access and more visibility and control. Above all, you want to focus on running your business, not managing parts and supplies. Fastenal is ready to help you get there with a simple value proposition. Great people, close to your business, empowered by technology.
That includes advanced supply chain, warehouse and transportation systems to keep product flowing to your facilities, mobility apps that allow us to check stock availability, provide quotes, process orders and update changes to your inventory anytime, anywhere and an ever evolving line up of automated supply devices, extending the Internet of Things to products of all shapes and sizes, from these to these and virtually anything in between. Track assets like tools, tablets and scanners, who's using each item and when it's overdue for return, or use the same technology as a 20 fourseven order pickup station, either at your local Fastenal branch or within your facility. When your order is ready, receive a unique code that allows you and only you to pick it up. Control who has access to MRO, safety and metal working consumables and capture the dynamics behind every item dispensed, who, what, where, when and why, combining point of use access with total traceability and electronically monitor your OEM faster inventory to remove risk from production. We're using RFID technology to reimagine the kanban concept.
When an empty bin is placed here, you'll see a change in inventory state here and an electronic order is automatically sent here, minimizing the timeframe between min level discovery and max level replenishment. Our infrared bins bring this peace of mind to the point of use. The bins are equipped with infrared emitting sensors and receivers. When stock falls below your target min level, a receptor is activated, signaling a change in inventory state while generating an order to your local Fastenal service team. Coils, pushers, weight sensors, infrared beams, RFID signals.
Today, we employ wide ranging techniques to automate your inventory. And we're exploring new frontiers for the future, including innovations in the areas of van management, customer managed inventory, asset tracking and inventory monitoring. Our high touch service and automated devices combine to produce unique insight into your business and our reporting solutions help you turn that insight into impact. A great example is vending. Every time an item is dispensed, the transaction is tagged to an individual user and other custom metrics, such as GL code or job number.
This information flows to your reporting dashboard, where you can apply the data to simplify job costing, identify overuse issues, and optimize the mix and levels products in your machines for maximum cost savings. Looking to track specific aspects of your Fastenal program? Your Fastenal service team can provide customer reporting aligned with your KPIs, including cost savings reports that apply concrete numbers to your TCO initiatives. Meanwhile, our Fast 360 portal gives you a live view of your Fastenal program. Visualize how inventory is organized in your binstock and vending solutions, as if you're standing in front of the device.
Search to see if a needed item is available within your 4 walls and exactly where it's located. And analyze your spend by time period, product category or individual part to discern trends and opportunities within your business. Looking for on demand visibility to your Fastenal national account partnership? Our Fast360 analytics portal makes it easy to visualize your program from multiple perspectives. View purchasing and supply chain management activity at the contract level or drill down to see what's happening at specific locations with a variety of reports, filters and visualization tools to help you understand your data story.
As important as technology is, for us, it's just one element of a total supply chain solution. Behind the devices and software are local experts to shoulder the burden of inventory management, a world class distribution machine to bring speed and agility to supply chain and a commitment to invest in your success with the fundamentals of effective customer service. Great people, close to your business, empowered by technology. Fastenal, where industry meets innovation.
If you were at our annual meeting last year, perhaps you remember watching a similar video. We show that video at breakfast at our show out in Denver each year. And each year, what we try to do is talk about something that is eighty-ten-ten. And what I mean by that, 80% of what you see in that video, we do every day with a big chunk of our customers. About 10% of what you're seeing in that video, we're doing with a subset of customers.
It's newer in our business. And part of the purpose of the event is to talk to customers about what it means and where are we trying to take things and how that can help your business. And sometimes that means talking to other customers that are using that 10%. The final 10% is things that are percolating, things that we're developing or have developed, and we're still searching out of how it should work. And part of that dialogue we get at the customer show is feedback from our customers directly with our IT folks, our supply chain folks, our vending teams, etcetera, on ideas to make it more applicable, more useful to their business.
Switching over, this is a slide that I borrowed, if you will, from Jeff Hicks, who leads our vending business. And it was something that he had shared in December with our leadership team as he looked at vending and really supply chain automation and how it relates to today and the future. So if you look at the chart on the left, about 20%, as I mentioned a few minutes ago, about 20% of our business goes through vending machine. On top of that, about another 10% goes through a bin stock. And most of the realm of what we do, the other 70% is other stuff that we're fulfilling for our customer.
Over time, we see that changing just like vending changed our business over the last decade. When I look out to the future, or better yet, when Jeff looks out to the future, he believes vending grows to be 30%. He believes on top of that, we'll do another 40% that is a bin stock or an extension of that automated supply chain and we will utilize technology to make that more efficient. Some of you may have noticed in late March, we acquired the technology of our vending partner to use internally in a captive way. The idea is we don't know where the line is between the 30 and the 40 and we want to be able to develop those 2 together as one ecosystem.
This allows us to do that. But as I mentioned earlier, so many companies think of a digital strategy as merely, hey, what percentage of my business is e commerce? We think of a digital strategy is what percentage of the business is repetitive and the customer shouldn't even be spending time ordering it. It's not how they order it, it's having the product in the quantities they need when they need it as part of their supply chain solution. That's what we believe is a better way to go to market and will allow us to grow for years into the future.
COVID-nineteen, you hear about it every day in the news. It's been a dramatic change to the world. It's devastated the economy, both in North America and around the planet. So let's talk about some things that were our priorities coming into it. Went through a number of these in our earnings call a week and a half ago, where we talked about our discussions back in January with our team in China, when we were learning firsthand what was happening there.
And we were starting the process of preparing our teams in North America and around the globe for what was going to come. We knew the pandemic was going to spread, we just didn't know the speed. We knew the pandemic was going to spread. We didn't know what all the disruptions would be, but we knew they'd be severe. And part of our obligation to our customer is to anticipate those events to the best we can.
We also have an obligation to our employees. So the first thing we did in mid March, we closed the front door to a branch, every branch within Fastenal. That's not an easy decision to make because a lot of our revenue goes out the front door as well as the back door. The front door in the hands of our customer, the back door in that we're delivering to customer locations. Most of our revenue, to be honest, goes out the back door.
And we wanted to be able to represent to our employees and to our customers that we were taking everything to keep their supply chain safe and to keep their employees safe. What we said to our customers in front, we're still open for business. Call ahead, order ahead, we will have the product picked and ready for you when you get here. And that's actually been working reasonably well. It's some disruption.
I'm sure we lost some revenue because of it. But I believe we've demonstrated a better supply chain solution for the marketplace because of the steps we took. Communication, third one. We talked with our customers and with our employees every week about steps we're taking, things to anticipate. The conversation keeps changing.
A lot of those conversations are local because what's relevant in Minnesota might be different in California, might be different in Georgia, might be different in New York. So having local decision ability to react to what's happening on the ground and react to our customers' need. A 4th point was preservation of talent. The first start of that was looking our employees in the eye and saying, we know this is going to be disruptive. We want to support retaining the talent in this organization.
The first step we took is we expanded the benefit programs we have in place as far as paid time off because of COVID-nineteen to get that concern out of the heads of our employees so they could focus on their family and their customer. But we did more than that. We had a discussion with our leaders. We asked our leaders to take a pay cut. That allows us to have the resources to retain more of our talent as we go through this.
And finally, we talked a lot about cash flow. Cash flow, a, to prepare ourselves for the investment in working capital we'll need as the economy emerges from this shutoff, if you will. But we also talked to our shareholders in our earnings release last week about the importance of maintaining a dividend. First off, our employees own about 4,300,000 shares of Fastenal stock in our 401. We're mindful of that.
We're also mindful of we're a supply chain partner. Sometimes that supply chain partner is supplying cash to our shareholders who in turn reinvest that in our local communities, which makes the fabric of our society ever more strong and we're going to do everything we can to maintain that dividend as we go through this. Let's move away from the customer show. Let's move away from 2019. Let's move away from COVID-nineteen and talk a little bit about the future.
The most important ingredient of our future is the people within Fastenal. When I started in this role as CEO late in 2015, my first President's letter talks strictly about the people difference within Fastenal. What brought me to Fastenal 25 years ago? What I believe brings people to Fastenal every day and what keeps people around. And that is within Fastenal, everybody exercises daily leadership.
Everybody is willing and able to make decisions. In an environment like this, it demonstrates the agility that is Fastenal and the resourcefulness that is Fastenal. We also endear an environment that welcomes and attracts and retains talent. We trust in each other to make great decisions, but we also have the courage to get under each other's skin every now and then, to challenge each other, to grow and expand, to develop oneself, to develop others around you. That's how we find strength together and strength with our leadership.
And here's but an example of leaders within Fastenal. One of the highlights we have each year in December, we have a company wide meeting, a leadership meeting, where we bring together about 500 people and then supplement that with another 1500 people that we bring in for an employee expo. So demonstration of products, training, etcetera. But one of the highlights of that meeting is where we recognize our 25 year employees. So this is a picture of the group on the stage back in December of 2019.
There's about 60 people that are on the stage. So this is our higher class, if you will, of 1994. I'm pleased to say that many faces on this picture, I know personally. I know them as friends. I know them as business associates.
In total, we have 339 employees within Fastenal that have been with us for 25 plus years. I consider that an incredibly strong gift given the size of organization we were when you go back to the early 1990s. 109 of those 339 have been with us for 30 years plus, 28 for over 35 years. And we have 5 employees today that have been with Fast Home more than 40 years. An honored tradition of find great people, ask them to join and give them a reason to stay and spend their career.
I believe that's a big piece of what Fastenal is about. Now, I'm going to go off in a different tact and talk a little bit about the history of Fastenal from the standpoint of where we operate and how that's evolved over time, what we do and geographically where we are. So let's talk about what we do. Fastenal, we started with that product line called Fasteners. When I joined the organization back in the mid-1990s, close to 85% of what we did was some type of threaded fastener.
But as you saw in that chart a few minutes ago, that's changed. Today, we have an expansive product offering and fasteners are merely a third of what we do. The organization I joined back in the mid-1990s and that these individuals joined in 1994 was a branch based industrial distribution outfit. Over time, we took supply chain ever more seriously and became better and better at it, better from a QC perspective, from a global sourcing perspective, from a manufacturing perspective, from a broad range of solutions perspective. And today, I can look at FastCo and say we offer a lot of products through either our branch or on-site network.
And again, branch is about 70% of our revenue today, on-site is about 30%. We started in the Midwest. We started in the community of Winona, Minnesota, a town of about 30,000 people, a 2 and a half hour drive down the Mississippi River from Minneapolis St. Paul. We expanded beyond that Midwestern route.
We went around the Great Lakes. We went to the coast and we went across North America. And eventually, we moved beyond the confines of North America. And today, we operate in 25 countries. Finally, from those from that start back in Winona, Minnesota, the organization that these individuals joined in 1994 was largely a rural organization.
In communities like Winona, like Rochester, an hour away, across Wisconsin, 30 minutes away. Communities that were looking for a good, reliable distribution partner. But we eventually went into some of the bigger cities. Today, about 55% of our people, locations and revenue, and I'm talking about our branch pace people, operate in the largest metropolitan areas. So if you look at the United States, there are 97 communities with more than 500,000 people.
Canada, there's 11 communities with more than 500,000 people. In Mexico, there's 31 communities with more than 500,000 people. Today, that represents about 55% of what we do. About 45% of our revenue is in communities a lot like Winona, Minnesota. When I look out to the future, that's going to change.
I suspect 70% of that $10,000,000,000 organization you saw a few minutes ago is probably going to be in the large metro areas because that's where the spend is. And 30% is going to be in local. So, that takes us a step into understanding our demographics a little bit. So at this year's annual meeting, same as last year, we're voting on diversity reporting. We're voting on by a third party has asked us to talk about things we would disclose.
Personally, I think that tactic is wrong. And as a board member, and I'm pleased the rest of the board members agreed, we've recommended you vote against that vote item because we don't believe that's the best tactic for improving the diversity of our organization, who we welcome in, who we promote, who grows with the organization. And but part of it you have to look at is understanding again, we started in a rural area. Our customer base is largely manufacturing construction and manufacturing, if you look at Department of Labor Statistics, is about 75% male, 25% female. If you look at construction, about 90% male, about 10% female.
And unfortunately, those statistics haven't changed much in the last 15 years. But let's look a little bit of what Fastenal has done in that same time frame. So what you see here is a discussion we held with our board a little over 2 years ago. So in the or about 2 years ago, excuse me. In the summer of 2018, several of our board members, we were talking about demographics within Fastenal.
And they asked, okay, what's happening within Fastenal and what are we seeing? So what this represents is the hiring that is occurring at our branch and on-site network, full time employees only. The reason we focused on that here is if you go to where our distribution centers are, if you go to where a bunch of our head office functions are, we typically recruit locally. So, if you're in Winona, Minnesota, our headcount in a lot of functions, distribution center, etcetera, looks like folks from that community. If you go to some of our other distribution centers that are in different parts of North America, you'd see a different population because of where we recruit.
Our branch network is different in that it's spread across. Our average branch has about 5 employees. So understanding who we're hiring is critical to understanding the progress we're making. So if I look at our business in the 5 year time frame from 2,003 to 2,007, about 83% of our hiring full time hiring was male, about 17% female. Feels a lot like that chart we just looked at from the standpoint of manufacturing and construction mix across North America or United States in that case, excuse me.
17% female and about 10% of who we were hiring was minority. Again, at that point in time, we still had a much heavier focus on rural parts of the United States and a little bit into Canada because we've been in Canada for about 10 years. 2,008 to 2012, numbers start changing a little bit, not a lot, about 81% male, about 19% female and 12% minority. In the 5 year period that is 2013 to 2017, about 61% of our full time employees that we hire are male, 39% female. That tells me the world is changing in that there's a broader range of people by gender interested in doing supply chain.
Now I don't know what's driven that change to be honest with you. I don't know if it's steps we've taken. Because I think we've always had a welcoming environment. Perhaps as we've gotten deeper into on-site and we've presented ourselves much more as a supply chain partner as opposed to a branch based distributor, maybe it appeals to a broader range of new applicants. The universities, typically we recruit at 4 year state colleges, 2 year technical colleges.
Perhaps the demographics of those organizations have changed and we're seeing that come through in our numbers. All I know is I'm pleased at the results because it tells me we have created an environment that welcomes a broader range of folks from a gender perspective and you will see that our minority hiring continues to grow. That's probably a function of having more of a presence in urban areas versus strictly rural, but I honestly don't know. I believe the best tactic for improving our diversity within Fastenal is approaching it by valuing the human character, by looking at folks we're hiring and say, what is the content of that person? What is their willingness and desire to lead, to be able to make decisions?
No gender, no race has a monopoly on that and I believe you're seeing it show through in Fastenal's numbers. But I would ask you to decide for yourself. At the time we're recording this, I don't know how the vote's going to turn out for this year's annual meeting. But I do feel really good about steps that we are taking within Fastenal to make sure we're creating a welcoming environment for a wide range of people that are looking for an opportunity and are willing to help solve problems. I'll close with the slide I started with.
Thank you for taking time to participate in this meeting today. Frankly, I hope this is the last time that we have a virtual annual meeting. I really value the tradition that is the open venue within Fastenal. Our goal is eventually to move it downtown back to where we started and continue to introduce the Fastenal story to folks in the local community or shareholders from around the world willing to learn a little bit about Fastenal. Thank you and have a good day.
Okay. It looks like we are back. I hope you enjoyed taking a little deeper dive into the Fastenal organization as well as getting an update on that technology video, which impresses me to no end, the talent we have in the organization to not only create that technology and use it, but the video we can pull together and how we can display that and tell our story ever better. At this point, we'll turn it over to the Q and A. And for those of you listening, this is Dan Flores, President and CEO.
I probably should identify myself. And our first question comes in from an individual here in Winona, Minnesota. Patricia Egan writes, would like to know what our plans are for moving forward regarding China. Do we plan to continue manufacturing there or bringing that back to the states? Also, are we planning to retain our sales and sourcing outlets in China?
I'll take that question in reverse order. We do have a sales effort in China as well as, as we mentioned earlier, in 25 countries in total. There we serve a lot of customers that we have in the United States or Canada or in North America in general that have operations over there. But in recent years, we've expanded beyond that. And our intention is to keep growing that business wherever customers value the supply chain benefits we bring to the table.
Our sourcing team, we have a team in Shanghai, we have a team in Southern Taiwan, handles a lot of our sourcing throughout the world. We have great people there and to be honest with you, if I think of the last several years as we were encountering tariffs in a lot of our product, I was ever impressed at the quality of the people we had there and their efforts they put forth to serve their fellow Blue Team members as well as customers in general. And we would continue to have a sourcing team there. The part about manufacturing, I do want to clarify something. And if I go back to the start of Fastenal back in 1967, we most of the manufacturing of Fastener product and that's the product line we started with, A lot of that production moved out of North America back in the 50s 60s.
The automotive industry took a lot of that to Asia at that point in time, always searching for a better cost, a better supply chain in their businesses to be able to produce a product in the marketplace that was competitive. And so while back in the 60s 70s when we were first starting out, we might have been sourcing product domestically, it was typically imported by somebody else. And as we moved into the 80s and really into the 90s 2000s, we just started to straighten the lines out and source it ever better and ever more directly to the source of manufacturing. In the case of manufacturing, back in 1982, we started our own manufacturing division. That's largely U.
S. Based, largely a North American entity, but we do have small presence in Europe and a small presence in Southeast Asia strictly for domestic consumption in that market. And one thing I do need to point out is about a decade ago, we acquired a manufacturer called Holochrome. And if I look at that entity, which is based in Connecticut, along with the rest of our manufacturing, I would say in the last decade, we've done as much as any organization to promote manufacturing of fasteners in North America, but most of the products do come from overseas. Only time will tell where the marketplace will dictate where that source of supply is.
The and it'll be interesting to see how that develops from the standpoint of having a diversity of supply regardless of the country it comes from rather than singling out in the individual market? The second question, I'll read it as it stated. Mr. Chairman, the Carpenter Union Pension Funds with combined assets of $70,000,000,000 have a collective ownership position of 330,414 shares of the company's common stock. We commend the company for its strong corporate governance structure with majority voting and direct elections at its core.
The issue of auditor independence is critically important to the integrity of financial reporting. Could you indicate how long KPMG has been the company's independent audit firm? And could the KPMG representative describe the lead partner rotation process periodically undertaken to protect audit firm independence? Thank you, Mr. Chairman.
I'll take the first part of that. I believe it's in our annual report in the auditors opinion. They disclosed in there that they've been our auditors since we went public back in 1987. So they've been our auditors, I guess, for roughly 32 years. And I will turn this over to Cary to answer the second part of the question.
And Carrie represents KPMG.
Thanks, Dan. This is Carrie Person. I'm a partner at QPMG. Our firm follows the rules of the public company accounting oversight board, which requires lead audit partner rotation every 5 years. So as a lead audit partner, I will sign Fastenal's independent auditors report for a 5 year period.
At that point in time, we rotate partners within KPMG to maintain as one aspect of maintaining our independence.
Thank you, Terry. The third question, are you planning on a share split again soon? I love that question. I honestly don't know. We did a split last spring Stock in the 2017, 2018, 2019 period had seen a nice improvement.
And our historical pattern had been to split the stock periodically. Time will tell. A split in the stock is less common today than it might have been 10, 20 30 years ago. But we will see ultimately the performance put up by the blue team and the recognition of that performance by our shareholders would dictate the timing. And so but we'd be open to the idea again, but only time will tell and the Board will make a decision at that point in time.
Are you planning on offering a virtual annual meeting in the future? To be honest with you, I hope not. As I mentioned in the video you saw a few minutes ago, I think the element of a local annual meeting attended by shareholders from close to Winona and far away is an endearing quality of our organization. And I look forward to next April having an in person meeting like we've done in the past. However, we will continue to publish it and show it on the webcast as we've done in the recent years.
But I like the idea of an in person meeting. Our next question. Mr. Chairman, the recent growth in the size of passive mutual fund corporate ownership interest in U. S.
Corporations has been dramatic. The Carpenter Funds believe the growing concentration of ownership raises important public policy and corporate governance issues. Currently, BlackRock holds 7.5% and Vanguard holds 12% of the company's outstanding shares. Our view indicates that BlackRock and Vanguard are investment managers for a portion of the assets of the company's 401 plan. Does the Board see this growing ownership concentration as positive or negative development as regards to long term corporate planning and performance?
And also are there potential conflicts of interest when a 5% holder in managing company's retirement plan assets? Thank you, Mr. Chairman. A few pieces to that. First off, I guess I we focus our planning, our corporate planning and our long term investment plans on what we see from the marketplace.
In the marketplace, I'm talking about our customers. Our priorities center on our ability to grow and take market share in an ever faster fashion over time and that will always play into it. We believe our most successful way to do that is to every day go out and find great people, encourage them to challenge their own ability to lead and make decisions. And another element of that is that we will exercise what probably referred to as conservative financial decisions in that we think that gives us the best opportunity to meet the needs of our employees and our customers long term, while serving the interest of both our suppliers and our shareholders. As far as the remaining part of that question, I'm not sure if I'm qualified to answer.
I will say that our investment team and the group of employees that oversee our 401 plan as well as anything as it relates to our employees always looks 1st and foremost at the interest of those constituents in making those decisions. If they come to a conclusion at some point in time that there appears to be a conflict, they would act accordingly. Next question. Can shareholders attend future FastNow expos? Will shareholders be notified of location and date?
Our next expo is next April and COVID-nineteen allowing or any other issue such issue, it will be held in Nashville, Tennessee. And we've held it in that venue before and we look forward to going back. We have had shareholders attend our event in the past, typically comes from their request. We would be open to shareholder attending provided that there's a space open because our first space goes to customers and but we would be open to it and would welcome a shareholder reaching out to inquire about it. But our next expo is next April of 2021.
The final one isn't a question, it's a compliment. Thank you for doing the invocation. It is another confirmation that Fastenal is a well run company that with sound ethics that I will continue to grow in my stock portfolio. Keep up the excellent job. I guess my only response to that is thank you.
And with that, I don't believe we have any more questions. So I'll turn over to the vote results. The votes have been counted and the report of the Inspector of Election indicates that Willard D. Overton, Michael J. Antheus, Michael J.
Dolan, Stephen L. Eastman, Daniel L. Flores, Rita J. Heisey, Daniel L. Johnson, Nicholas J.
Lundquist, Scott A. Satterly and Renee K. Weiskopf have received the required number of votes and are hereby elected directors of the company. The report of Inspector of Election also indicates that the resolution for the ratification of KPMG LLP as the independent registered public accounting firm for the company for the fiscal year ending December 31, 2020 has received the required number of votes and has been adopted. The resolution for the approval on an advisory basis of the compensation of certain of our executive officers have received the required number of votes and has been adopted.
The shareholder proposal related to a resolution to approve diversity reporting has received the required number of votes and has been adopted. All ballots 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. Before we adjourn the meeting, I just have 3 things I thought I would share with the group. Immediately after we adjourn, we have a short video.
It's a case study, if you will, of one of our customers and how we serve their business. I would invite you to stay online and enjoy the video. The second, I would like to share a recent story from the Blue team. And over the last two and a half months, we've been communicating maybe perhaps some would say over communicating with our employees on what we're seeing in the marketplace. And in every one of those weekly communications, we try to share a story or 2 of what we're seeing in the marketplace.
And to be honest with you, I'm really proud of some of the stories I've of all the stories I've heard and the actions of the Blue team to serve our customers. This is one that came across my desk several days ago and it relates to something that started on April 14, 2020. And I was driving home from work the other day and I grew up along the Mississippi River and accustomed to in this time of the year in some years as snow melts and depending on the weather in the spring, flooding is not an uncommon occurrence. And I've been very thankful of the fact that at least in the upper Midwest, we haven't had any flooding this year, at least that I'm aware of. And so in a COVID-nineteen environment, it's nice we didn't have mother nature dealing one more thing, but that's not true everywhere.
And so in Tennessee recently, there were some tornadoes and our team there did what our team does and they responded to customer needs. At 4:30 pm on April 14, we received a call from a customer and they were requesting 340 tarps and they needed them as soon as possible because storms were expected the next day. Immediately, Keith Diehl, our General Manager in Chattanooga and Chad Wempler, our government specialist in Tennessee began sourcing tarps that we would perhaps have in a distribution center and we were able to locate sufficient tarps in our Atlanta distribution center. At 5:15 pm, we were able to we told our customer, we had stocked, we had the product available, they immediately asked us for the product. At 6:15, there was a follow-up question, wondering if they could be delivered early tomorrow morning because the storms were expected to come in earlier than they realized earlier.
At 645, in addition to the sold request and that's our internal mechanism for requesting product, the team sent an email just titled AHUB, emergency poll Chattanooga tornado. 3 minutes later, an email came back. Rest assured, we'll have the product and we have the 11 pallets ready to go. And Greg Campbell, our manager in Atlanta, he and his team have a great track record of responding quickly to emergency situations like hurricanes. This was no different.
His e mail simply said, yes, we will make it happen. Who is our contact in the field? The next morning or later that evening, we sent a message to the customer and I'll read the quote. Your tarps will arrive at our Chattanooga store by 7 o'clock tomorrow morning. Keith and the team will load them up when received and delivered to your location.
They will give you a call on the way. Do you have any other immediate needs that we can assist with? Thank you for giving us the opportunity to assist. Chad? On April 15, branch employees arrived early, so they could get the pallets loaded on the 5 fastenal trucks.
Rain was expected in the forecast, so the tarps were critical. We were able to bring them delivery of some gloves as well. The message to the AHUB team from the local team in Chattanooga is simply this. Thank you so much for going above and beyond to make this happen. We are grateful for your hard work and support.
Just another proud moment of why I'm thankful to be on the Blue team. Our customer will receive this critical order in less than a day, extremely impressive. Thank you and be safe, Chad. I share that story because there's many, many I see, but I'm particularly proud of our Blue team to react to this emergency like they do each and every other one. The final item and for the Blue Team members, this will be a quite familiar one.
It's why I've been closing my videos for the last two and a half months. Do me a favor, to wash your hands 20 seconds warm, soapy water. Thank you again for joining us today. We look forward to seeing you in person next year. And please stick around for a short video regarding a customer on the Pacific Northwest.
Have a good day.
So OSW is a dump body manufacturing company. We build a variety of different kinds of equipment for the construction industry. We build pretty much anything you could think of that would haul rock or gravel. The thing that I would say is our biggest vision going forward is embracing technology. The new equipment that we brought on, the new state of the art 24 foot press brake, being able to bring on new technology with the paint department, being having a new paint facility.
Our customers want a quality product. And so we that's kind of our vision is how do we continue to increasing increase our throughput, but at the same time, make a better product. So the first step we made with Fastenal was really the vending machines. And so really, what we identified, and again, doing this for many years, one of the biggest challenges we've had in this industry is tracking and maintaining control of supplies.
Literally, employees walk up, they type in their employee number, a password, they pick what they want to vend just like in a normal vending machine, they take the product and walk away right then and there. At that point, I get a report once a week that tells me exactly
only do we know what they're getting, we know who's getting it, we know where it went, we can control it by clear down on individual job numbers if we want. And so, it really gives us the flexibility to just keep on top of the one of the biggest line items in manufacturing, which is supplies. So, we've grown a lot from the just initial start of the vending machines. And so, now Fastenal handles all of our bulk supplies to handle the kitting and hydraulic components to handle a variety of different other supply items, components that are for our manufacturing process. And so, the way that we accomplished that was by going to an on-site agreement with Fastenal and then they have added 2 full time people here to maintain and work directly with our team.
So, really, we look at our vendor with Fastenal as a partnership relationship where they've actually brought employees here to be involved in our day to day operations.
So think about the on-site program, it's an investment and a partnership on both parties. They've given us some space within their facility to operate within their four walls, but in return we've invested into 2 full time employees. We have about $170,000 worth of inventory on-site that would in the past be on their books, now it's on ours. It's kind of our consignment program with our on-site. We have deployed vending machines.
We've also implemented tubing kanbans throughout the facility.
So the on-site program is awesome. James comes and attends all of our morning meetings with us so that anytime if somebody has a question about a fitting, a hose, anything that they need coming up, he's right there taking notes, getting all of that taken care of right afterwards. They're always out there multiple times a day checking bins, refilling things, checking in with all the employees on the floor when they walk by making sure they don't need anything. And then inside the on-site, they have everything stock that we need. They do full crimping and hosing right on-site.
So when my guys need a custom hose or need something changed, they just bring it right to them and they can fix it right there.
When we first started the process of looking at our kits, we were making all of the hoses individually, 1 truck at a time. So you would have a person that would go out, measure the hoses, come back in the back, pull all the hose, cut the hose, take the fittings, put the fittings on, crimp everything. What we have today is Fastenal, working with our team, has developed an actual individual kit list. So, we're able to pull the parts, get the parts put into a kit and they're in a box and then they make the hoses, pre make the hoses, the kits are pre put together and then they're able to deliver those right to the floor when the truck rolls in, so that we're not having those guys walk off the job and go gather those parts up and make those holes and items. And so that's been one aspect of it.
The other aspect of that has been the quality, limited number of people making hoses. What we've run into in the past, we've had several different people making hoses at same time. They don't all make them to the same level and they maybe sometimes aren't trained properly to do it correctly. So by this way, we're able to control exactly who's making the holes and we have a lot less things.
My favorite part of this On-site besides the relationship we've developed is how we've engaged our services within this on-site from our custom chain links to really putting together a hose and fitting program where we're crimping on-site, we're doing a lot of that really value add stuff, not just filling bins, not just filling vending machines, but really getting deep within the business to make an impact.
Fastenal helps us be a better manufacturer by having all the parts that we need right when we need them at an amazing cost. We talk about the Power Phase connectors in general. Those have streamlined our process so much and they have saved us an incredible amount of money for the exact same price that we were paying before we've got a connector that's 3 times better. I know that since we switched to those, we have not had one failed connector go for it.
I think that OSW truly believes in partnership. And they don't just say it, they mean it, they show it, they communicate with that. If there's an issue they come to us and we work together. If we have an issue we can come to them and we can work through anything. And I think that's what a partnership is.
OSW very much is a family company and I think that when you partner with a company like that you can really get deep into true solutions that add value to both the OSW business as well as the Fastenal business.
I believe that Fastenal is the future of the supply chain business. Really, I see them in the direction that a lot of companies are going in the U. S. As far as better control of a big sector of the company that people just don't want to mess with.
So the next steps for the program is I'd love to take exactly what we've learned here, the pilot program here and roll it out to our other companies, allow Fastenal to do exactly what they did here in our new facilities and make it grow and blossom from there.