On this beautiful day. I know some of you perhaps have traveled here from the South. And on a beautiful day like this, you may be surprised even to hear that when it hits 60 degrees at this time of year, we in Minnesota, we head outside in our T shirts and shorts, we grill some burgers, we ride bikes and read a book. And if you're a person of a certain age, maybe listen to some Jimmy Buffett. So in that spirit, I would like to offer a word from the Song of Solomon, a book of full of hope and promise.
For low the winter is past, the snow is over and gone, the flowers appear on the earth, the time of the singing of birds is come. Let us pray. Beautiful creator, there are many blessings that each new spring brings. You can see it in the flowers and hear the song it sings. Sustain us with joy in our work.
Grant us wisdom and vision to see possibilities and create opportunity. May our common purpose bring benefits to our customers, blessings to our employers, leaders, shareholders and the communities in which we live and serve. Amen.
Thank you very much, Pastor Dunke. This annual meeting of shareholders of Fastenal Company is now convened. I am Willard D. Oberton, Chairman of the Board of the Company, and I will act as Chair of this meeting. Mr.
John Millich, who is General Counsel for the company, will act as Secretary of this meeting. But before we start, I'd like
to recognize some people that are very, very important in the
success in the long recognize some people that are very, very important in the success and the
long history of this company. I'd like to introduce our founders
that are here. I'll mention all of their names, but not all of them are able to join us today. Please stand as I read your name. Robert A. Kirlin, to join us today.
Please stand as I read your name. Robert A. Kirlin, Henry K. McKonnan, John D. Remick, Stephen M.
Sloggy and Michael M. Gustomski. Let's have a round of applause. I'd also like to introduce our very dedicated Board members. We have a fantastic Board, a group of people that represent you on the Board, and they do a very good job, and all of them are here today.
Please stand as I read your name. Michael J. Ancias, Michael J. Dolan, Stephen L. Eastman, Daniel L.
Flores, Rita J. Heisey, Darren R. Jackson, Daniel L. Johnson, Scott A. Satterlee and Renee K.
Weiskopf. Thank you very much. Moving forward with the meeting, I will now ask John Mr. Millich, John Millich to report on the numbers of shares present at this meeting and conduct the voting on the proposals to be considered at this meeting. Following the vote of our following the vote, our Chief Executive Officer and President, Dan L.
Flores, together with other individuals from our organization, will report on progress within the company. Thank you.
Thank you, Will, and good morning, everyone. 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 held by our fixed by our Board of Directors as February 23, 2018. I present to this meeting a certified list of the holders of shares of the companies issued and outstanding common stock as of the close of business on a record date. This list will be kept open and subject to inspection by any shareholder during this meeting. I also present to this meeting an affidavit of a manager of Broadridge Financial Solutions Inc, attesting that the notice of the meeting together with a proxy statement, a proxy card and certain other documents were mailed on or about March 13, 2018 to each holder of record of the company's common stock as of the close of business on the record date.
The affidavit of mailing of this notice of the meeting was attached to the minutes of this meeting as Exhibit A. The certified list of holders of the company's common stock will be filed with the books and records of the company. As of the close of business on the record date, there are outstanding entitled to vote at this meeting, 287,647,000,000, 564 shares of common stock. Each share of common stock is entitled to one vote. For a quorum to be present, a majority of the 287,000,000 647,000 560 votes entitled to be cast must be present in person or by proxy at this meeting.
On the preliminary count that were represented at this meeting, either in person or by proxy, a majority of the votes entitled to be cast at this meeting. Therefore, a quorum is present for the transaction of business here today. There anyone present who has not submitted a proxy or registration form? A record of the proxies submitted to the meeting and the ballots of the individual appointed as proxies and of the shareholders voting in person at the meeting will be filed with the books and records of the company. Jan DeGalleier has been appointed to act as the Inspector of Election with respect to all matters to be voted upon today or any adjournment thereof.
The oath of the Inspector of Election has been administered and will attached to the minutes of this meeting as Exhibit B. We hereby make available to the Inspector of Election the list of shareholders, the registration forms and the record of all proxies submitted to this meeting. Copies of the minutes of the last annual meeting of the company held on April 25, 2017, are available at the registration desk over there. We will therefore dispense with the reading of the minutes of that meeting. All shareholders of record as of the close of business on February 23, 2018, may vote on the matters to be considered today.
If you wish to vote by ballot, please raise your hand when I ask you to do so, and the ballot will be provided to you. Sheryls appointed others as proxies to vote their shares, whether in writing or by telephone or over the Internet, and have not terminated their proxies, should not vote by ballot. We will distribute one ballot covering all matters to be voted upon at this meeting rather than separate ballots for each matter. We will now take up the business of the meeting. We have 4 matters to be considered by our shareholders today.
First is the election of directors for this coming year. The Board of Directors of the company has nominated the following 10 persons for election to the Board to serve until the next regular meeting of shareholders or until their successors are elected and qualified: Willard D. Overton, Michael J. Ancias, Michael J. Dolan, Stephen L.
Eastman, Daniel L. Flores, Rita J. Hyze, Darren R. Jackson, Daniel L. Johnson, Scott A.
Satterlee, and Renee K. Y. Scott.
I will now open the floor to
a motion to formally place before this meeting the nomination of these individuals. I recognize Mr. David Hunt, Jr.
My name is David Hunt Jr, and I'm a proud 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.
Thank you. I recognize Mr. Brian Buchholz.
I am Brian Buchholz. I am a shareholder of the company, and I second the motion.
As no other nominations have been made in accordance with the procedures established by the company 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 2018. I would like to introduce Ms. Angela Dossedel. Angela?
She is a partner of that firm who is here today to answer any questions that you may have. No questions? Thank you, Angela.
I will now open the floor
to a motion to formally place before this meeting a resolution concerning the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal year 2018. I recognize Mr. Craig Barenek.
My name is Craig Barenak, and I am a shareholder of the company. I move that the following resolution be adopted, resolved that the appointment of KPMG LLP as the independent registered public accounting firm for the company for the fiscal year ending December 31, 2018, be here and hereby as ratified.
Thank you. I also recognize Mr. David Barry.
My name is David Barry. I'm a shareholder of the company, and I second this motion.
Is there any discussion of this motion? It has been moved and seconded that the appointment of KPMG LLP as independent registered public accounting firm for the company for the fiscal year ending December 31, 2018, be ratified. I will now open the floor to a motion to formally place before this meeting a resolution concerning the approval of executive compensation. I recognize Mr. Chris Kret.
My name is Chris Kret, and I'm a shareholder of the company. I move that the following resolution be adopted: Resolve that the shareholders of the company
approve on an advisory basis
the compensation of the company's named executive officers, advisory basis the compensation of the company's named executive officers as disclosed in the compensation discussion and analysis, compensation tables and related disclosures contained in the section of the proxy statement for the 2018 meeting of shareholders captioned Executive Compensation.
Thank you. I recognize Mr. Mike Kret.
My name is Mike Kret, and I am a shareholder of the company. I second the motion.
Is there any discussion of this motion? It has been moved and seconded that the compensation of certain of our executive officers be approved.
I will now open the floor to
a motion to formally place before this meeting a resolution concerning the approval of the Non Employee Director Stock Option Plan. I recognize Ms. Denise Halvorsen.
My name is Denise Halverson, and I am a shareholder of the company. I move that the following resolution be adopted: resolved that the Fastenal Company non employee director stock option plan in the form attached to the proxy statement for the 2018 Annual Meeting of the Shareholders as Appendix A, B and hereby is approved.
Thank you. I recognize Mr. John Broadwater.
My name is John Broadwater, and I'm a shareholder of the company. I second the motion.
Is there any discussion of this motion? It has been moved and seconded that the Fastenal Company non employee director stock option plan be approved. Now if you wish to vote on these motions by ballot, please raise your hand and the ballot will be given to you. If you have appointed another person as proxy to vote your shares and have not turned into that proxy, you should not vote by ballot. After you have executed your ballot, it will be collected and tabulated.
The polls are now closed, and the ballots will be counted. I will turn the podium back over to Mr. Overton to continue with the meeting. Thank you, everyone.
Thank you, John. While the ballots are being counted, Mr. Nick Lundquist, our Senior Executive Vice President of Operations and Mr. Daniel Florness, our President and Chief Executive Officer, will report to you on the company. After the conclusion of this report, we will answer any questions you may have, excuse me, relating to the company and activities.
I'm going to introduce Mr. Lundquist. Nick has been with the company since 1979. I believe if I'm correct, you're the number 3 person for tenure in the company. So he has been getting up and working hard for this group, for us, for almost 40 years.
In January or in next year, Nick will be a 40 year employee, one of very few that we have. Nick and I have a long history together, and at least 90% of it's good. Is that fair? So most of it has been really good. We've been friends for many, many years and have worked on almost every major project the company has undertaken over the last 30 years, and he's been a joy to work with.
But I'd like to give him some time to talk a little bit about what he's doing with distribution at Fastenal today. Nick?
Thank you, Will. At least 92% or 93% has been good. I'm here to talk a little bit about our distribution. But before I do talk about distribution, it was great to get over double digit growth last year. And I'd like to commend all of the people in our sales that helped us do that, whether they're in national accounts or whether they're industry specialists or whether they're in government or vending sales or district managers, everybody that has contact with the customers on day to day helped us get to double digit growth.
And I think we need to recognize the fact that double digit growth is achievable with this company. And last year, we proved it, and they did a great job. No one is more important than the other. However, I want to personally congratulate all the branch managers and the on-site managers for everything that they do because they're the ones who pick up the phone and when there's a problem or an issue or concern, they're the ones who have to get out and talk to the customers who we love dearly. So congratulations to those as well.
My talk is really about supply chain, and I'm going to talk a little bit about the team behind the machine. The machine is our same day delivery sales force, but there's a machine behind the machine. I call it the team behind the machine. So I'd like to run a video real quick. Thanks.
Same day service. This is what separates Fastenal in the marketplace and this is what it looks like. More than 2,000 local branches, hundreds of on-site locations bringing dedicated Fastenal experts and inventory within our customers' 4 walls, and thousands of additional customer sites that utilize Fastenal's vending and bin stock solutions moving beyond same day to supply the product need right now. While our national competitors react and ship remotely, our distribution system is designed to plan and serve locally, shortening the customer supply chain to a matter of a few miles or even few yards. The focal points are our 3,000 plus in market servicing locations, the branches and on sites that tailor their inventory to meet the unique needs of local customers, drawing on resources like our global trading company, our in house manufacturing and industrial service divisions, and our close partnerships with the best suppliers in a range of industries, bringing a world of product solutions into the local market.
This footprint gives us a crucial head start in the race to same day fulfillment. If it's a plan need, it's immediately available in the backroom of our local branch within the customer's on-site location or by extension in a point of use vending or bin stock solution on the customer's floor. And if it's an unplanned need, there's a good chance we have a same day solution front room of the local branch, home to 10,000 high demand SKUs spanning 20 product categories. Same day service requires constant planning and motion behind the scenes, continually analyzing sales activity on a national, regional and local level, working with our supplier partners to fill in emerging customer needs and fine tuning the inventory models in our distribution centers to mirror and anticipate local demand. This never ending evolution takes place at 14 regional distribution centers spanning North America, each located at the nexus of efficient delivery routes to surrounding branches and on sites they service.
Our systems monitor sales activity on an hourly basis. As our local teams supply customers throughout the day, those products are automatically backfilled at the DC to maintain optimal inventory levels within our branches, on sites and solutions. The process is streamlined by the latest warehouse technology, including automated storage and retrieval systems, a symphony of conveyors and robotic cranes that store and pull product on command, as well as our pick to light systems for high moving prepackaged items that lend themselves to a grab and go process for even faster pick rates. By matching the product to the right picking solution, we're able to fill orders with greater accuracy and speed, get our trucks out on the road earlier in the evening, and deliver needed supplies to our branches and on sites early the next morning, typically well before the workday begins. That brings us to the lifeblood of our local distribution model, Our captive fleet of semis, box trucks, sprinter vans and local delivery trucks, more than 7,000 vehicles in all, one in our industry operates as many vehicles and no one on earth moves heavy industrial materials more efficiently.
To give you a sense of the scope and scale of our operations, last year we processed more than 37,000,000 orders and our vehicles traveled 143,000,000 miles to deliver 8 £34,000,000 of product. To anticipate our customers needs, we currently stock more than $1,000,000,000 worth of inventory. And the majority of that inventory value is immediately available in a local branch or on-site, poised for same day fulfillment. In the world of industrial supply, delivery speed is a function of distance and the shortest supply chain wins. We've built our distribution system accordingly with a network of regional distribution centers, company owned vehicles, in market servicing locations and supply chain solutions that continuously stage the right amount of the right products when and where our customers need them.
Fastenal, today's needs today.
There's nothing like a good video. Come a long way, Bob, from the White Knight. The team behind the machine. The company's motto is growth through customer service. But in our supply chain, our strategy is to continue to improve service to the customer, making sure that we have the right product in the right place at the right time.
And we're continually doing that throughout our organization, and everybody on our supply chain team is on the same page. So if you look at we have in our distribution center, I'm going to give them a little recognition here, 3,575 people. They did last year, they did 38,000,000 picks. Now that's not just material handling, that's not including that. All of our receiving, that's how we measure the workload.
We have 6 19 semi drivers that drove 47,000,000 miles, and I'm very proud of their safety record. It's very, very clear. They do a fantastic job. One thing that we do is we leave it up to our drivers. If the weather looks bad, you don't have to go.
We leave our let our drivers make that decision, and it keeps our safety records extremely clean. They do a great job. 154 people in our service centers, which is really repair tools, band saws, all of that. I did it 139,000 work orders. We have 372 people that work in our purchasing, product development and our FASCO, which is over in Asia.
And they manage and make sure that the right product in the right is in the right place at the right time on about $2,000,000,000 worth of cost of goods. And then on our vending solution, that's the machine behind the machine we talked about a few years ago. We have 83 people, and we installed over 8,600 machines that does not include all the maintenance that they have to do. They're always out picking up machines, maintaining machines. That's just actually the installs.
So a great group of people there doing great things. Again, our focus in supply chain is to make sure that we put the right product in the right place at the right time. I also want to thank our suppliers as well. We have about 2,000 suppliers that we work with on a regular basis, negotiating pricing, negotiating rebates, negotiating freight contracts. These suppliers up here are very small.
There's only about 27 of them, but they help us with our racing program, which gives us a lot of national and international exposure on our racing. So they participate in our racing program. This small group of suppliers, we buy over $400,000,000 worth of product from that group right there. So again, we have great people and we have these people are doing great things. Thank you.
Thanks, Nick. Good morning, everybody, and thanks for joining us today for our Annual Meeting. It was about a little over 2 years ago, I stepped into this role. And back in 2015, the firm took a punch right in the gut. When the price of a barrel of oil dropped dramatically from north of $100 to under $40, We saw a piece of our businesses shrink up, and we experienced kind of a not unheard of, but unusual thing in Fastenal.
Our growth really slowed, and we ended the year in 2015 with 3, 4 months of negative growth. And I think a lot of us were looking around wondering, hey, what hit us? And 2, maybe there's something different. But we have the advantage of when we come to work every day, we get to see those around us, and we realize this is a pretty special place. And we start to remember what are things about us, what are the structural things that Nick talked about, the relationship things that Will spoke about when he introduced Nick, what are the things special here and why do our customers come to us in the 1st place?
And we started to believe in ourselves again. And in 2017, that started to shine through. So if you look at Mark, if you could advance that. Thank you. Here's a quick recap of 2017 since the intent of this meeting, I guess, is to cover a bit of 'seventeen and talk about the future.
We experienced double digit growth. We grew our sales about 11%. Our earnings followed suit pretty closely. We were investing pretty heavily in a number of things. Net earnings grew a little faster.
That was given a little late in the year by the Tax Reform Act. And when you're an organization where 85% of your business is in the U. S, having the tax rate change is pretty meaningful, and it allows us to invest in a different type of way in our future. Our Fastener business, which about 50% of our Fastener business is tethered to industrial production, it's OEM fasteners. That's a hard thing to move if the economy is sluggish.
The economy has also been picking up in the last 12 to 14 months, And we saw that shining through in our FASTERS. Our FASTERS had been stuck with down 1%, the growth of 1% for quite some time. We moved that up into the upper single digits. Our non faster business, which was a new thing for us 20 some years ago, went double digit and it demonstrated the resiliency that we have in our ability to grow that's more Fastenal driven, whereas the Fasteners need a little help from the economy. Combine those two things together, fasteners are about onethree of our business and the rest, the other twothree.
We enjoyed a nice year in 2017. So what do you do with that, the profits you generate from that? First thing we do is we reinvest back into the business. And if there's some dollars left over, we share it with the folks in this room. So let's run through a quick recap.
Working capital, which is the lifeblood of our future, inventory and accounts receivable, things that we invest in our customers, our first investment went there. It was about $150,000,000 invested to support our future with our customer. The second piece is about capital infrastructure. That trucking fleet, those distribution center, our vehicles, you drive by our branch here in Winona, you see that Dodge, that white Dodge Ram pickup. We have 6,500 of those scattered around our branch network throughout North America.
You invest in those types of things, and that was about $113,000,000 in the last 12 months. We realized we have some dollars left over. We shared some of that with you, our shareholders, in the form of the dividend. So 64% of our earnings last year were paid out in dividend. And we went back, and there's a few times periodically where stock goes on sale, and we bought some.
We bought about $83,000,000 just to round out the year. But let's talk about our business, and let's talk about our future. There's 3 hallmarks when I think of our business model that Bob started some 50 years ago. The first one centers on service. The model for FastCo for many years has been growth through customer service.
We learned early on with Fasteners, it's a very intimate relationship, and it created something in our DNA about serving the customer in a different way, being a different type of partner in their business. As we moved beyond Winona, proximity became that second step. The service model works if you can get close to your customer. What happens when you get close to the customer, it's an expensive business model. Those locations we have scattered around the planet require a fair amount of business to make the math work.
So we learned early on also from Bob to have a very frugal culture. Yesterday, I was talking to a group of new employees that were here, and I shared with them some thoughts about the frugality of our culture. And 20 years ago,
there was
an article written on Bob Perlin about Fastenal, and it described him as the cheapest CEO in America. I still chuckle when I think of that article because they really miss the mark. Cheap is not the word I'd use to describe. Frugal is the word I'd use to describe. And it just and the less money you spend in the noise doesn't benefit your customer, the more energy you can dedicate to the supply chain of your customer and you create a different organization, a service minded organization.
You put those two things together, you get growth. And in 2017 and the Q1 of 2018, we've enjoyed some of that. So what comes of that service? So last week, we had our annual customer expo in Nashville, Tennessee. We had roughly 4,000 customers at a trade show event.
There was about 1700 Fastenal employees and another 1300, 1400 suppliers there to talk about supply chain needs, ways we could serve customers better, this was a slide that I included at breakfast. And it talked about the example of 1 customer. And this customer, we started doing business with them a number of years ago in rural Tennessee. Those folks in rural Tennessee saw something special in Fastenal, and they did us the biggest favor they could do. They told others, others in their organization about Fastenal.
This particular customer has roughly 40 locations in North America. Our business has grown with this customer. Today, we have about 400 vending machines across their facilities. 8 of those facilities are large enough to go on-site. And for some of you, you've heard the term on-site mentioned a few times.
You might not know what that is. Think of that branch down the street here in Winona. We pair it down, and we move in with 1 of our customers with a pared down inventory that's there just for them and provide that same type of service, but instead of being a 10 minute drive away, we're a 30 second walk or better yet, we're out and engaged in their business. In this case, because of going on-site and introducing vending, this customer removed $3,000,000 of inventory from their business. Some of that inventory in our Cagedon area, our on-site.
Most of it is we improved the supply chain. We took risk out of their supply chain. They have better ability to anticipate their needs. That means you need lower safety stock. You're more comfortable and you're buying better.
So that example was an example of a customer in a small market. Let's think about Communities for a second across the U. S. And Canada. Again, a big piece of our business is there.
And if I think of communities that exist, there's really 3 types. The first is a major metro. There's roughly 100 markets across North America, U. S. And Canada, with a population of over 500,000 people.
You go up to the Minneapolis, St. Paul market, you go down to Chicago, Dallas, Fort Worth, etcetera. We've been operating in those markets for years, but they're one community we serve. A second one is the small metro. And when I was describing this at the customer show last week, I always have to grin when I get to this second group because Winona, Minnesota is one of the markets in the 170 small metros in the United States, and I don't think of Winona, Telema 25,000 as being a small metro.
But when you combine it with La Crosse, Wisconsin, Holman on Alaska, this combined area, roughly 170,000 to 200,000 people, is a small metro. We go to market in that small metro. The final, the non metro. I was born in Red Wing, Minnesota, an example of a non metro. I think of a market like Red Wing as a market that is ignored by others.
Albert Lea is another good example. Market is kind of off by itself. It's a nice market, but National Distributors don't serve that. And so you tend to have, if you're a company, an organization with multiple locations across the U. S, you might find a good supplier partner in a major metro.
But to find it in a small metro and a non metro, it doesn't exist. We bring that to our customers' table. And part of the reason for our show is to share that. If you think about proportionality, this next slide takes a look at the relative pieces of our business. About 55% of our revenue is in those 100 large metros.
It's 55 roughly 55% of our branch network, our on-site network, our vending network, our capacity. The second, the Winona's of the world, this is about 15% of our revenue. You can see it's 17%, excuse me, but about 15% of our business, similar with branch count, on-site count and vending count. The 3rd and final talks to nonmetros, again, the Red Wings of the world. It's 30% of our business.
It's not necessarily 30% of our opportunity, but it's 30% of our business because customers in that market realize there's something really special because we get the capabilities of a national footprint, an international supply chain in our local community, and that's about 30% of our revenue, our branch network, our vending network, our on-site network. The thing that's exciting for me when I look at a slide like this is it tells me the Fastenal business model works in all three, and we can be a different type of partner with our customer. So if you take a look at that proximity footprint, again, most of you are familiar with the branch network and now you've been introduced to the on-site network. In the context of what it means for our customer, it's about how we're forward deploying our resources. We have vending in thousands of customers, about 15,000 locations scattered across North America.
We have bin stocks. With On-site, we move in with inventory and we make more intimate that footprint and again are able to go to market in a fundamentally different way. Let's talk about the team because that proximity means our team, the Fastenal resource is close to the customer. And I remember the organization that I joined, and I'm not up to almost 40 years. I'm at 22 in my 23rd yes, 20 2nd year, 23rd year of marriage, 22nd year was fast and all.
Got to keep those straight. The organization I joined, I remember Bob and Will talking about 2 to 1, 2 to 1. We always had to maintain that 2 to 1. So it was 2 people in our branch network, 1 person supporting that branch network. And over time, as our branch network became more dense, we and the average branch has continued to grow in revenue, we've been able to slowly morph that.
Today, it's 3:one. So about 75% of our employee base is right there either in a branch or an on-site interacting with our customers every day. Most organizations would break the bank trying to do that. Because of our frugality, we're able to make it work. And again, the service that comes with it is unbeatable in the marketplace.
About 17% of our employee base is involved in the active moving product, whether that be working in a distribution center like this or driving one of those trucks you see going down the road. So our energy is really dedicated to that supply chain locally and nationwide, continent wide for our customer. About 3% of our business is involved in manufacturing division down the street in sister locations like that around the country, around the planet. The video that we showed to, in all honesty, quiet the room down a little bit before the annual meeting started, was a video that I'm particularly proud of. And I'm proud of it for a number of reasons, but oftentimes in society, there is a certain level of anger or obligation somebody has to me, and we don't think about that within Fastenal.
We think about obligations we have to each other. So the City of Indianapolis approached us because they know we're a growing organization. We've purchased some properties around our distribution center, and we have 1,000,000 square feet under roof in Indianapolis, so about 4x the size of this building. So we have a massive footprint there. This location was less than a mile from our facility, and I remember Dana Johnson coming in and talking to me about it and talking to a few of us about it and kind of looked at them, I saw pictures of the building.
And as you saw in that video, it was not a pretty sight. The building had been vacant since 2000 and 8, 2009 time frame, and you know how it is when you have a vacant property. Only bad things happen. Nobody comes to fix windows or fix the property. Only bad things happen.
Trees grow up, and it will become a blight in the neighborhood. We said to the city, tell you what, we will buy the property from you, but we don't need it for a number of years. We will keep it mowed. We'll keep the lights on outside. We'll have security there at night, but we might not need it for 3, 4, 5 years.
Citi was thankful to have us willing to do that. It turned out 2.5 years later, we did need it. And our manufacturing operation, we moved it out of our D. C. And moved it into there, added training center, added office areas for our national comp folks, turned what was a blight into a wonderful asset in the community.
Recently, one of our employees was coming through the Indianapolis airport, and one of the TSA officials stopped him at the airport, noticed the Fastenal logo on the shirt and said, You're with Fastenal? And the young man said, Yes. I just want to thank you. I live up near Ryan Road. What you did for our community in that building was remarkable, and thank you for that.
And then the last 6%, I'm in that 6%. We're overhead. Our role every day is to help make life easier for the other 94%, to help people be more successful in what they do. But this is a quick snapshot of the team within Fastenal. We've built that team dramatically over time.
30 years ago, we had roughly 400 employees in Fastenal. The organization I joined in 1996 had about 2,000 employees. Today, we have 21,000 employees. One of the things that's been a hallmark of Fasten over the years is our obligations to each other about helping each other get better to improve. About 20 years ago, we started the Fasten School of Business.
When I look at that organization today, we spent last year about $14,000,000 helping develop the future of our employees. On top of that, we actually invested about $11,000,000 in their future and the contribution to our 401. So about $25,000,000 of investments we make into our employees right now to benefit their career and their futures because we know their futures and their career are tethered to us. If we make it better for them, it serves us all quite well in the long term. Thought I'd give a quick snapshot.
I did a slide like this last year, but a quick snapshot of the business and how it's evolved over time. So the organization that you'd have come and visited 10 years ago was about a $2,000,000,000 distributor. All but $30,000,000 of that $2,000,000,000 was either in the U. S. Or Canada.
We were about 50% fasteners, 50% non fasteners. Branches, almost 2,200. Onsites, that was kind of a dabbling thing for us. It's usually had been created out of necessity. We couldn't find a building large enough in that market to either rent or buy And our customer said, I have some room in the corner, why don't you move in?
Because of the lower footprint cost of that facility, we could broaden the way we thought about the relationship with the customer. We saw something special there, and we let it grow. Vending, I remember that business 10 years ago. We had 200 vending machines roughly, 80% of them was 1 customer. They frankly were an awful device.
They were overengineered. They were expensive. We found a partner in that vending business, and we've grown that business wonderfully. And you can see how that looks today. So today, we're about a $4,500,000,000 company.
It felt good to break $4,000,000,000 this year because it felt like we've been stuck at just below 4,000,000,000 dollars for a number of years. Partly, we got stuck there. The economy got stuck there, and we broke out of that this year. With our 10% growth, we emerged above 4,000,000,000 dollars for the first time, a nice milestone for the organization. If you look at our business today, about 93% is in U.
S. And Canada. So the rest of world is growing wonderfully. And it's growing with the types of companies we saw last week at that show, companies that see something special with Fastenal, and they want to create that specialness in a whole bunch of places beyond the United States and Canada. If you look at that, that business, rest of the world is tenfold the size it was just a decade ago.
Fasteners continues to grow nicely for us. It's 50% bigger than it was a decade ago, but it's only a third of our revenue today. And that really speaks to the transformation that's occurred in our non fastener business primarily because of that little device called the vending machine. About 25% of our non fastener revenue goes through one of those vending devices. They allow us to bring a different level of service to our customer.
Our customers recognize that. Finally, you notice the branch count really hasn't changed much. In fact, our branch count in the U. S. And Canada has actually dropped in the last 5 years.
Slowly, we've been morphing some of those locations into Onsites. My wife and I, we have 2 kids in college. Now I've made it very clear to those kids, I know a way kids could save money after college as they move in with their parents, save on the occupancy and made it very clear to our 2 boys, say, guys, that's just not going to happen. But it can happen in a business relationship. It can happen from the standpoint we move in, our customers free up working capital, they free up some expenses, and they have a better supply chain.
And so that business has exploded for us. In fact, at the end of 20 15, we had 200 Onsites. Today, we're approaching 700. And I think by the end of the year, we will approach 1,000. Finally, vending, that's been a wonderful business for us.
I have a couple more slides to touch on that, but it's exploded in the last decade and it's about 20% of our revenue today. So here's a quick look at our how the vending business has been growing, about 15% growth rate on average per year of additional units. You'll notice a spike in 2016 2017 of that gray layer on top. That's where the blue is about machines that are vending Fastenal product, so product that we're supplying to our customer. The blue gray shading above is examples of machines where we actually lease them to the customer, and they use them for asset management.
So they recognize, geez, if I have this locker system, I can do check-in, check out of equipment my maintenance folks use. Usually, you're trying to find a tester or some piece of equipment in a large facility. You don't know who has it last or the darn thing just disappears. With a check incheck out system, if I check it out at 10 o'clock in the morning and Will's looking for it at 11 and it's not there, he just needs to find me and he finds that device. And when I'm done, I put it back.
So we've seen a nice lift in that. So we actually have about 86,000 devices deployed around the planet today. On-site, as I mentioned, our branch network has actually been contracting some over time, but we've been replacing every bit of that transaction. And we think about it, what is our local market footprint? How do we engage with our customer?
And you are seeing that morphing. I personally believe if I'm looking out 7, 8 years into the future, we have more Onsites businesses than we have branch locations scattered around the planet. So service is our strategy. Proximity is our priority. Growth is our focus.
I believe I have a video now. Is that correct? When I think of the Fastenal business model, I first have to think of growth through customer service, because that's what we've been about since 1967. And for us, what that means is, we've worked to get closer and closer to our customer because we believe that's the best place to engage with our customer. By getting close, it also allows us to do things that our competitors just can't do.
It's not just a box showing up at the door. It's a name of someone that you know, somebody that you can count on and somebody that you should trust. And so what gets me excited and what I see is nationally, so many folks are running away from the customer and I think Fastenal today is running towards customer.
We have customers that when they're needing a product within their facility to keep it running, they're needing it today. Fastenal saw the opportunity to meet that need. Therefore, we took the time, money, investment to focus on that local inventory model and what opportunities and products we could offer our customers. Anything from construction products, safety products, MRO, OEM, built out our fastener center even more, really look to see what it was that our customers were needing today and that's where our focus was.
When I take a look at e commerce specific to Fastenal, it's really about leveraging and capitalizing on our branch based model. When we look within the space itself or the landscape, right, this race to same day fulfillment. Well, because of those 2,400 branches and the investment we made within rightsizing our front rooms last year, This allows us to provide same day service on over 10,000 SKUs across 20 different categories. It really is about providing that same day fulfillment for online orders.
So really what sets Fastenal Company apart from other distributors in the marketplace is our ability to invest in the non core type activities. Today, we have over 11 industrial service locations and we have 8 manufacturing locations ranging from multitude of functions from tour repair to rigging to hose fitting to weld to length band saws to all of our individual manufacturing options. It really comes back to partnering with a strong company that's willing to make the investment in things that take time away from you doing your job for your company.
And when it comes to inventory management, customers today have really been asking us for a few things. They want less of it in their facility. They want to lower their cost of capital. They want to lower their amount of touches they have internally at the plant. And they want to do that in a way that it doesn't cost them anymore on a per piece price basis.
What we do is we create programs that allow those customers to get that inventory in a way that the only cost they have associated with it is the actual cost of the product itself. And having that local footprint allows us the ability to manage inventory in that way. That's something a lot of our competitors simply cannot do.
If you're truly a service organization, a service minded organization, you need to listen to your customer every day to understand their pain points, to understand the things that would help them be more successful. Because if you approach the business that way, you're a different type of partner.
When a customer looks at their supply chain and says, these are the problems I have. I need these 5 things solved in my supply chain. It allows Fastenal to go back and look at our toolbox of resources, whether that be an on-site program, whether it be technology through e commerce or vending, whether it be a simple stocking program, whether that just needs additional labor put into it from a local perspective. When we're allowed to look at our toolbox and share those solutions with the customer, we come up with fantastic solutions to save that customer money.
When you look at procurement expense and the cost that goes into moving material in inexpensive C class items and consumables, the expense is not in the product, it's in the process. So as Fastenal moves into your facility, we can take over that responsibility, we can lower the total cost of ownership, we can lower the inventory dollars and improve the working capital performance by integrating into your business and that means data, that means process, that means continuous improvement, really on fasten all shoulders in your business.
The on-site model helps our customer in many ways, but some of the fundamental ones that come to mind for me is putting dedicated inventory into customer's facility, that's inventory they don't need to stock, Putting dedicated supply chain professionals into the customer's facility, those are roles they don't need to staff. And bringing those two things together combined with the existing Fastenal infrastructure of global procurement, continent wide as well as global distribution capabilities and mixing those all together for a more efficient supply chain. So our customers can focus on what they do, not the products they need to support their day to
day activities. We invest in things that make our customers better, right? And when we do that, we usually get it right.
So the video you just saw, each day, our customer expo in Nashville, it's a 3 day event and each day we have a room full of a couple of 1,000 people and we have breakfast together and that video would play and then I'd come up and talk for about 5 minutes. And the reason we do it that way is twofold. 1, it gave a consistent message to the groups each day. The second one is the realization that I have that I have a face for print and a voice for let's see, a face for radio and a voice for print. And so I want to minimize the damage I can do, but let the customer hear about the great things we have within the faster organization.
So we would play that each morning. That's the Customer Expo. In December of each year, we have an employee expo, and that's about improving and growing the product awareness within our employees across the organization. And one of the hallmarks of that, that we started some years ago is honoring our employees for service to the organization. Will honored Nick a few minutes ago by pointing out the fact that he's almost at the 40 year milestone of service to Fastow and to our shareholders and to our customers.
If you look at throughout the organization right now, we've enjoyed a tremendous amount of growth. And if you think about that organization that I talked about 30 years ago with 400 employees and the number of and how that family has grown to the 21,000 we have today, Today in the organization, we still have a lot of those employees in the business. So we have roughly 126 employees that have been with Fastenal more than 25 years that have been honored by their peers at our employee event in Florida each year. 47 of those employees have more than 30 years, 11 at 35. We have 2 employees that have been with the organization more than 40 years, and I don't know if Dan or Linda are in the room, but Dan Connor and Linda Pagliovecki, if you are in the room, please stand up to be recognized by the shareholders in the space.
We had a third individual who had I believe he was on year 43, Bill Becker, passed away unexpectedly last May, who's still a member of the Fastenal family, which we honor him in a number of ways. And one of those ways is our main meeting room here in Winona. We switched from the Brentano room, which frankly, I don't think anybody could spell, I couldn't. We changed it to the Becker room. And when we talked to our employees, Bill Becker was known.
He would go around and give cost savings seminars. He always would speak to a packed house because after 43 years, he still had a passion for the business. He wanted to share that passion. There wasn't a time that I wouldn't see Bill Becker, and he wouldn't say, Hey, Dan, I've got an idea. And we missed that.
And so what I've asked of our 21,000 employees is to make sure that every day, every week, every month, you have an idea for your customer, for your fellow Fastow employees and share those ideas. That's how we get stronger. That's how we grow over time. I don't know if Bill's wife, Lori, is in the room. But Lori, if you're in the room, please stand and we can recognize Bill Becker.
With that, I would turn it over to any Q and A. I might throw my glasses on. I feel a little more intelligent answering. I don't know if the answers are any better. But if there's any questions, we have a few folks floating around with a microphone.
Hi. I'm John Graf, and I saw in your graph where 3% of your business is in manufacturing. What do you foresee in that in the future for profit and percentage of growth?
Yes. Two pieces to that question. The graph showed the 3% of our employee base that are engaged in the act of manufacturing or support service. You saw within Nick's video examples of that. So that's where we're making custom products for customers.
It might be a machined item, a lot of CNC machines scattered around business. It might be a cold headed item or a hot headed item, might be stud cutting in one of our facilities. So that's the number of people that are engaged in the act of manufacturing. If I think about our customer base, about 60%, 65% of our revenue is to a customer that's engaged in manufacturing and we're supplying into their facility. It might be an OEM fastener going into the item they're producing.
It might be a maintenance item going to maintaining their facility. That business for us has been quite strong. Item going to maintaining their facility. That business for us has been quite strong. Again, over 90% of our revenue is here in actually, 97% of our revenue is here in North America.
And manufacturing has been very strong for us over the last year and a half, now ramping up nicely. You see that in industrial production numbers. Construction has also been strong, another large segment of our end market, but we're very bullish on what's happening in our manufacturing customer base.
All right. Good morning. My name is Tobias Baumrad, here attending for the first time. Excited to be here. Actually representing one of your German shareholders today, the Long Term Investment Corporation or Langfist.
Thanks for taking my question. Actually, I have a couple of questions, if I may. I saw in the slide presentation from your Investor Day in Nashville, one of the statistics was that when you install a vending solution, the consumption of those related products actually decreases by 30% or so if I recall correctly. Just thought it was a stunning number. So I was wondering if you could talk about what drives that reduction?
And related to that, if the vending solution provides such tremendous value, what are some of the reasons you're hearing from potential customers, why they choose not to use a vending solution? And secondly, would love it if you could expand a little bit on your international business, whether you're finding that the business model that you have created here in the U. S. Translates well in other geographies and cultures? Thank you.
Okay. There's a few pieces there. I'll try to keep track and if I lose a piece, somebody give me a nod. The first comment was about vending. So when we put vending into a customer's facility, we fully expect their spend on those products will drop and drop dramatically.
Great business model, Give us solutions to your customers so they buy less from you. It would be a bad business model if we had the business to start with. And but even if we had some of the business to start with, if we're bringing a better value to the customer, they'll figure out other ways we can touch their business, and we'll grow our relationship. But what really happens is I think of it sometimes as the hoard factor, the waste factor. So I'm in a production setting and I need safety glasses, I need gloves, I need the stuff that you use day to day.
And oftentimes, 1 of 2 things happen in a setting. You have a room somewhere in a distribution center where all that stuff is stocked. It takes a lot of labor to manage it. And stuff is always running out. And when it's a free issue, stuff scatters to the wind because everybody has some stuff squirreled away.
And if I leave a pair of safety glasses somewhere or a pair of gloves somewhere, I'll just go grab another pair. What changes is, so I'm at Fastenal here, I have my Fastenal ID. I can walk up to a vending machine. I can swipe it or I can punch in my employee code. And 24 hours a day, 7 days a week, if I need a pair of gloves on a construction site or in a manufacturing plant, I just grab them when I need them.
So I know the supply is always there. I don't need to go find my supervisor to get some. Also, move it closer to the point of use so it's easier to get. And the real driver then is we're finally accountable for what we're doing, too. Because the thing is when you have a bunch of gloves lying around, nobody really knows who got what.
And you will find in life the eighty-twenty rule always works. 20% of your employees probably create 80% of your core waste because they have bad habits. So if I'm if I have a bad habit and I'm using more gloves than anybody else, Mike Dolan sitting here to come to Dan and say, Hey, Dan, is there a reason you're going through 3 pair of gloves a week? Can you be a little more organized? And it fixes the problem.
So you tend to see we're more accountable for our actions, and I don't need to hoard supplies because it's always available. The second part of your question is what if it's such a great solution, why does it why is there reluctance? Most human beings are not wired for change. This is change. When we first were introducing vending into our organization 5, 6, 7 years ago, a lot of reaction from Massimo employees.
We want to put a candy bar machine in a customer's location. Are you kidding me? Once we start seeing the benefits that come from it, people recognize, hey, this is something special. But the biggest reluctance is change. And so it takes a number of conversations, but we eventually all change and improve over time.
You can ask my wife to testify to that. I've modified a lot and hopefully improved in the process the last 22 years. The third was about international. When we first went into Mexico, we really banged our head against the wall. Canada wasn't a huge transition for us because most of the Canadian population lives within 200, 300 miles of the U.
S. Border. Both nations are based on British common law, and our business norms are very similar, and our brand preferences are very similar. When we first went into the Mexican economy, we struggled a bit there. A lot of products we had in the front rooms of our branches collected dust because while this brand is prevalent in Texas or in Iowa or in Minnesota, it's not necessarily prevalent in Nuevo to Nuevo, Mexico.
So we went to market in a little different way. And the on-site model, the key account model is really the direction we migrated to, and we created that something special. And our business in Mexico pulls us along today from the standpoint it's our fastest growing area because we took what was special about Fastenal, recognize what is unique in that economy and made the 2 work. Today, we're in about 24 countries, and our success is really coming from doing those two things again and again. It also comes from the fact that a lot of our relationships outside of North America are with customers from within North America.
And so we help learn new things together. And if you have great business partners, it's kind of like having a big brother when we opened up in locations in Europe, as an example. We already had a big brother there, one of our customers, and you learn together. So it helps us be very successful. And that business in the Q1 here, we grew our international business in total about 25%.
So growing very rapidly. One question back there, I see.
Hi. My name is Tim Dierche. I'm from La Crosse, a long time shareholder, first time at a meeting. Congratulations, I'm very impressed.
Thank you. You got
a tremendous tax break in December, which helped your bottom line. Now the President has instilled a 25% tariff on imported steel. How does that affect you versus imported versus U. S.-made steel?
The I think of it somewhat as sometimes in periods of our history, we've had periods of different types of rates of inflation. And the first concern you have because a tariff is inflation. The first concern you have is downstream from Fastenal. How does that impact our customer? How does that impact our customer's customer?
Does it slow things down? Does it change the playing field? Does it make it more difficult for manufacturers in North America and the U. S. To export their products as well as import different supplies?
Whenever you have things that are very fluid in a very short time frame, that's where it gets noisy in a business and probably creates the most angst. When because it seems like every time you turn around and now it might be a tweet, it might be something you see on the headline news, but things are changing real time and they're changing in massive ways. So it creates pause because a lot of our our faster product is basically processed steel. Most of the manufacturer of faster product moved to Asia back in the '50s '60s before we even started in business. So a fair amount of the fasteners come into this country from Asia.
So far, finished goods for the most part have not fallen under the evolving gamut. Nut product does fall under the gamut. So the biggest concern is more outside of our products in a way because a lot of the raw steel that our customers are using and the products they're making, that's being impacted real time. This is a kind of long and probably not too artful way of saying, in many ways, we don't honestly know. I'm a farm kid.
I learned at a young age you don't worry about the weather there's nothing you can do to change it. You plan. You look at what alternatives are. You make sure the hay is in the barn before it rains. In the case of the Fastenal business, it means deeply engaging with our customer to understand what are things that we have to do and do quickly, making sure we've always been really adept at having multiple sources of supply.
We do that so we can honor our commitments to our customer, and that is we will have product available for you. In some cases, that might mean you switch some of your sourcing from Country A to Country B, but there's going to the tariffs will create inflation impacts within our business. We saw some of it in the Q1, and it creates a tremendous amount of uncertainty. The marketplace doesn't like tremendous amounts of uncertainty. So the real question is, does it slow down economic activity?
Because that's the most crucial aspect. Looks like we're through on the oh, there's one more question over here, and then I'll switch it back over to Will to wrap up the meeting.
Jeanette Bergler, Rochester, Minnesota. And I'm interested in knowing your idea of Snap on products. I see the trucks occasionally in the city and wondered if it was a big competitor, Chinese run or just exactly where we are with it?
Sure. So Snap on is a competitor of ours in the tool space. We actually sell we actually Snap on is a customer of ours as well. And so there's a lot of business that goes back and forth. We are blessed, and I say it that way, we're blessed with a lot of really good competitors in the marketplace.
And the reason I respond in the term we're blessed because of that, it makes us better. And so I think the biggest thing is we have an offering that's more expansive, and I believe the way we go to market is fundamentally better. And ultimately, the market is going to decide where they're going to source the products they need. I believe we'll win most of those discussions because we're fundamentally a better business partner to our customer. With that, I'll turn it over to Will.
Thank you, everybody.
Thank you, Dan. Thank you, Nick. You both did a great job. But I'd also like to recognize the videos here. I have not seen any of the 3 videos before today.
And just for everyone in the audience to know, that's all done in house. Our marketing team, they have a great group of creative, really fun people. And the quality of the work just continues to become better and more engaging. I really appreciate Mark and Pat and the entire team. Mick?
So the ballots have been the ballots have now been counted and the report of the Inspector of the election indicates that Willard D. Overton, Michael J. Anzius, Michael J. Dolan, Stephen L. Eastman, Daniel L.
Flores, Rita J. Heisey, Darren R. Jackson, Daniel L. Johnson, Scott Satterlee and Renee K. Weiskop have received the required number of votes and are hereby elected directors of the company.
The report of the Inspector of Election also indicates that 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, 2018, has received the required number of votes and has been adopted. Also, the resolution for the approval on an advisory basis of the compensation of certain of our executive officers has received the required number of votes and has been adopted. And the resolution for the approval of the Fastenal Company non employee director stock option plan has received the required number of votes and has also 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 the Election will be attached to the minutes of the meeting as Exhibit C.
So that concludes the formal business, but here's the fun business. We have the prizes today. So Mr. Alan for the door prize, Mr. Alan Rivard, if you want to step up, I believe it's ladies right here for your door prize and I might murder your last name, Mr.
Jim Tushall. So those are the 2 door prizes. A couple other notes. Okay, go ahead. A couple other notes.
For those of you that didn't know, Fastenal a team of Fastenal employees led by Jean Dubois and her team have we have a Fastenal Museum. It's not a big facility. What it is, it's the building that Bob originally started the business in, and it's downtown Winona. And this afternoon between, 1, I have to get my times right here, excuse me, between 12 and 5, it's at 69 Lafayette Street. The museum will be open.
So if you have some time, if you know Fastenal, you're a little bit of student of Fastenal, it's really well, it's very well done and it's kind of fun. So if you have the time today between 125, 69 Lafayette Street, you get a look into history and it kind of walks you through the time line of Fastenal. So I'm glad they're doing that today. At this time, I would like to introduce a motion excuse me, I would like to entertain a motion for adjournment. I recognize Andy Bray.
My name is Andy Bray.
I'm a shareholder of the company, and I move that the meeting be adjourned.
And I would like to also recognize Mr. Scott Determan. My name is Scott Determan. I am a shareholder of the company, and I second the motion. It has been moved and seconded that the meeting be adjourned.
All those in favor, signify by saying aye. Aye. All those opposed, signify by saying no. The meeting is officially adjourned. Thank you for coming.
And if I'm correct, lunch is behind this curtain. Is that correct? Somebody help me because they didn't give me this on my notes.