Thank you, Will. Well, if I could mention that earlier this year, January 15, the Finnish Lutheran Bishop led a delegation to Rome, had a wonderful audience with Pope Francis after which they attend mass at the wonderful St. Peter's Basilica. The Lutherans came up for communion with arms crossed, seeking a blessing from the priest, and the priest refused the blessing. Instead, he insisted that these Lutherans receive communion at St.
Peter's Basilica, which was an amazing ecumenical moment. Well, not to be outdone, Fastenal has arranged for this invocation to be done for the first time by a Lutheran pastor. Well, this Lutheran pastor and Fastenal shareholder is humbly delighted to be with you today. Let's pause just for a moment as we pay our attention to the Creator from whom all things are made. Creator God, you are the source of all that is good.
You provide ore that is mined and milled into our products. You provide energy that powers our equipment, guide us to be good stewards of your precious resources. As we gather to review our accomplishments, challenges and plans for the future, bless the work of our assembly in this corporation, Bless the hands of those who labor to move products, process documents, operate machinery and clean our buildings. Bless the minds of those who with their ingenuity and creativity devise strategies and create new products. Bless the vision of those who through their leadership bring out the best in their coworkers.
Bless the faithfulness and trust of shareholders who with hope and yes, sometimes with patience too, provide encouragement and accountability for all. May our work be done not only for our gain, but for the betterment of all. Amen.
This annual meeting of the 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 of the Company, will act as the meeting the secretary of this meeting.
I'd like to start out by first recognizing the risk takers, the entrepreneurs that started this company. 4 of our 5 founders are here today. As I read off your name, if you'd please stand, I would appreciate it. Robert or Bob Kirlin John Remick, Jack Remick Steven Sloggy, Steve and Michael and Mike Gostonsky. Henry McKinnon was not able to make it today.
Also before we move further along, I'd like to introduce our Board. We have a fantastic Board of Directors. They work very hard and they represent you, the shareholders, very well. And as I read off your name, if you would also stand, I would appreciate it. Michael Ancias, Michael Dolan, Steven Eastman, Daniel Florness, Rita Heisey, Lee Hine, Darren Jackson, Hugh Miller, Scott Satterley and Renee Weiskov.
Slide, please. I'd also like to recognize Hugh Miller. We're recognizing Hugh because he was excuse me, has chosen to step down from our Board. He's very busy running his own business, lot of things going on in his life. But he served on the Board for 9 years.
He served on the Audit Committee and the compensate or excuse me, and the oh, I thought it was up here. He served on the Audit Committee and the nominating I apologize for that. The Mike nominating, okay, I get nominated in conversation. So he served on the committees for 9 years, did a wonderful job. And the great thing about Hugh is he always had great insight.
He wasn't the biggest talker in the meetings, but when he did talk, everyone listened because he had really thought out his points and every time he just nailed it. And so everyone was sitting there waiting, Hugh, what do you think? Because he has great insight into business, and he's just a wonderful person to spend time with. Hugh, thank you very much. I will now ask John Millich to report on the number of shares present at this meeting and to conduct the voting of the proposals to be considered at this meeting.
Following the vote, our Chief Executive Officer and President, Dan Flores, together with other individuals from our organization, will report to you on the activities of the company. Mr. Millich?
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 to vote at this meeting was fixed by our Board of Directors as February 19, 2016. I present to this meeting a certified list of the holders of shares of the company's issued and outstanding common stock as of the close of business on the record date. The list will be kept open and subject to inspection of any shareholder during this meeting. I also present to this meeting an affidavit of the 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 8, 2016. To each holder a record of the company's common stock as of the close of business on the record date. The affidavit of mailing of the notice of this 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 were outstanding and entitled to vote at this meeting 288,000,000 522,069 shares of common stock.
Each share of common stock is entitled to one vote. For a quorum to be present, a majority of the 288,522,069 votes entitled to be cast must be present in person or by proxy at this meeting. On a preliminary count, there 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 today. Is there anyone present who has not submitted a proxy or registration form?
Okay. A record of the proxy submitted
to the meeting and
the ballots of the individuals appointed as proxies and the shareholders voting in person at the meeting will be filed with the books and records of the company. Jan DeGelier has been appointed to act as the Inspector of Election with respect to all matters to be voted upon at the meeting or any adjournment thereof. The oath of the Inspector of Election has been administered and will be attached to the minutes of the meeting as Exhibit B. We hereby make available to the Inspector of Election the list of shareholders, the registration forms and a record of all proxies submitted to this meeting. Copies of the minutes of the last annual meeting of the company held on April 21, 2015 are available at the registration desk.
We will therefore dispense with a reading of the minutes of that meeting. All shareholders of records as of the close of business on February 19, 2016, may vote on the matters to be considered here 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. Shareholders who have appointed others as proxies to vote their shares, whether in writing or by telephone or over the Internet and have not terminated those 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 on the business of the meeting. We have 3 matters to be considered by our shareholders today. The first is the election of directors for the coming year. The Board of Directors of the company has nominated the following 9 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. Oberton, Michael J.
Ancias, Michael J. Dolan, Stephen L. Eastman, Daniel L. Flores, Rita J. Heisey, Darren R.
Jackson, Scott A. Satterlee and Renee K. Weiskop. I will now open the floor to a motion to formally place before the meeting the nomination of these individuals. I recognize Mr.
Sam Jansen.
Janssen and I am a shareholder of the company. I move to formally place before this meeting the nomination of the 9 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. Mark Cott Smith.
My name is Mark Cott Smith, and I'm a shareholder of the company. I second the
motion. Thank you. As no other nominations have been made in accordance with the procedures established in the bylaws of the company, 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 2016. I would like to introduce Ms.
Angela Dossedel and Mr. Tim Forstad, partners of that firm, who are here today to answer any questions that you Thank you, Angela and Tim. 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 2016. I recognize Mr. Casey Miller.
My name is Casey Miller, and I'm a shareholder of the company. I move that the following resolution be adopted, resolved at the appointment of KPMG LLP as independent registered public accounting firm for the company for the fiscal year ending December 31, 2016 and hereby is ratified.
Thank you. I recognize Mr. Tim Craft.
Good morning. My name is Tim Craft. I'm a shareholder of the company, and I second the motion.
Thank you. 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, 2016, 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 Ms. Suzanne Wobig.
My name is Suzanne Wobig, 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 officers as disclosed in the compensation discussion and analysis, compensation tables and related disclosures contained in the section of the proxy statement for the 2016 Annual Meeting of Shareholders captioned Executive Compensation.
All right. Thank you. I recognize Mr. Chris Wise.
My name is Chris Weisz. I'm a shareholder of the company, and I second the motion.
Thank you. Is there any discussion of this motion? It has been moved and second that the compensation of certain of our executive officers 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 terminated that proxy, you should not vote by ballot.
After you have executed your ballot, it will be collected and tabulated. No hands. The polls are now closed and the ballots will be counted. I will turn the podium back over to Mr. Overton, who will continue with the meeting.
Thank you.
Thank you, John. While the ballots are being counted, Mr. Flores, our President and Chief Executive Officer, together with other individuals from our organization will report to you on the company's activities. After the conclusion of this report, we will answer any questions you may have relating to the company's activities. But before I do that, Dan and I have been getting a weekly report on the balloting, which we're going to know in a minute.
And Dan's been leading me by just a couple of 100,000 votes every week. And I was thinking about it because I hadn't voted mine yet, and I said, bad do I want to win? Maybe I'll just not vote for Dan, but I couldn't do it. I gave Dan my vote so he will win, but I could have stopped him. So anyway, thank you very much.
And Dan?
Good morning, everyone, and thank you for attending today's Annual Meeting. I thought I would take a few minutes to introduce myself to the room. For many of you, I'm a familiar face. I've spoken at the Annual Meeting before. I've been with Fastenal for about 20 years, most of that time in the role of Chief Financial Officer.
Now last year in the recent months, I've been thinking a lot about Fastenal's future, thinking a lot about ways we can grow the business. But I also took a step back and I tried to remember back in 1996, why I personally joined Fastenal. I grew up on a farm in Western Wisconsin, about 10 miles from Red Wing up on Lake Pepin. And out of college, I had worked for 10 years up in the Twin Cities market. And to be honest with you, even though I grew up in a small community, I thought I'd end up in Chicago someday.
And but in the early 1990s, I met Bob Kerlin, I met Steve Sloggy, I met Will. And over a couple of years, I met a handful of people at Fastenal. And at the time, I made the comment to my wife, I said, do you care where we live? And she said, no, the right opportunity, I don't really care where we live. And I said, there's this company in Winona, Minnesota that really has something special.
At that time, there was a just approaching 2,000 employees, about 375 stores to just over $200,000,000 in revenue. And I'm a firm believer, one key to being successful in life is you surround yourself with people that are better than you. And on the days that you need a kick in the seat, that group does that for you. On the days you need a hug, that group does that too. And I'm really proud of the fact that I was invited to join Fastenal 20 years ago, because was truly able to accomplish that of surrounding myself with a team of people that is truly better than me, and I'm honored to be part of the team.
Thought I'd also give a little bit of background on Fastenal. Most of the people attending this meeting, your view, your vision of Fastenal is typically centered on what you see from the outside, our quarterly financial statements, our monthly sales releases, our discussions at the annual meeting. And in those observations of Fashional, what you see is our performance. Performance is the outcome, but what you don't see is some aspects within Fastenal, and I thought I'd share a few of them. And a lot of them started with Bob, some were extended by Will in the over the last 10, 15 years.
But there was a lot of voices in that choir contributing to these ideas, but I thought I'd share a few of them. First thing that's important to Fastenal is decentralized leadership. We believe the closer you are to the customer, that's where we make the best decisions and that room to make decisions quickly and that serves us well. So challenge people to make decisions, really challenge people to succeed and also allow them to fail sometimes. And what you do in that process, you also allow them to learn from that.
Because if you can do that every day, you create a better organization. We're an organization that doesn't have key employees. I believe that the employee talking to the customer right now is our key employee. The employee picking product for our customer right now is the key employee. The employee driving that product to the store for the customer is our key employee.
The rest of us, our job is to help make their life a little bit easier. And if we can do that, we can be successful long term. The second thing, and this one took me a while to get used to because I came from an I have an accounting background, which means you kind of look at a world in a certain way. Idea called chaotic communication. With that concept of there is no key employees, that means great ideas can come from anywhere.
And we've received a lot of our best ideas and some of our worst from everybody in the organization over the last half a century. We are better off for that, and I hope we never lose that ability to listen to each other and find the best solutions for our customer because that will allow us to grow long term. The third one on that list would be a frugal operating structure. And notice I said frugal, not cheap. Frugal to me is you don't waste.
Frugal to me is the further you get from your customer, the less willing you are to spend money. Because if it doesn't enhance your service to the customer, you really have to question why you're doing it. Because an organization that is frugal has a lower cost structure, and I'll touch on that in a few minutes when I touch on On-site, but it allows you a flexibility that other organizations don't have through good times and bad. If I was jotting down and a lot of those initial ideas came from Bob in his role of founding Fast Stone, leading it for our 1st 35 years. When I think of Will's input, one of the things I think about is the building of structural advantages in the marketplace.
When I think of our distribution and trucking network, a lot of times out one of my roles in the last 20 years has been talking to our investors. And a lot of them will look at it and say, well, geez, you guys are a lot more profitable than your distribution peers, why is that? And there's a number of things that come into play. One is product mix. We have a product mix that's more faster centered.
There's a little more gross margin there. But that's really the small part of the story. A big piece of the story is we have a distribution and trucking network that is second to none in our industry, and it gives us a structural cost advantage. And that again serves us well as we decide to expand into different types of business. Will also did a wonderful job of extending the creativity of the organization beyond distribution and trucking into the store and closer to the customer.
And the 2 that come to mind for me when I think of the last 15 years is one that we did about 12, 13 years ago that we called CSP. The acronym stood for customer service project. And it was really looking at what we stock in our stores, close to the customer. And taking a step back and saying, if we were recreating Fastenal today, what would Fastenal look like? What would we stock and why?
And we completely changed what we stock in our store. Many of you probably remember that transformation 12, 13 years ago. Our job is to do that every day, to do that every month, to do that every year and challenge ourselves of how we can be the best distribution business to support our customers' needs every day. The second one was vending. Vending, we've seen explosive growth for vending.
We've added 55,000 vending machines across the planet, most in North America over the last 5 years. And last week at our we had 50, a little over 5,000 customers in at a trade show event. We do that annually. And to that group, one thing I was able to share with them is when I look at our customers in total, because of our vending platform, our customers spent about $250,000,000 less for products last year, because vending brings consumption reduction to their business. I believe a distributor that can provide that kind of solution for our customer going to get more customers every day.
And that's part of our growth driver into the future. But it took that first vending machine, it took that first step of bringing that and having the courage to bring that to the customer's business. And then the final one is the idea of push everyone to be a little bit better and do it every day, do it every week, almost wear each other out, challenge each other to be their best. It gets back to that surrounding yourself with people better than you idea because it's critical to our success. Now with Dan in this role, there will be some changes.
Now for those of you that saw a Lutheran minister up here a few minutes ago, Pastor Mark from Faith Lutheran Church, just so everybody's clear about it, it was Bob Kirtland's idea. And Bob came into me about 6 weeks ago and he said, Dan, I know you're Lutheran, maybe you would like to have your Lutheran minister come for an invocation. I was a little bit surprised, but then knowing Bob and the way he thinks forwardly, I don't know if that's the right way to say that, but I wasn't surprised at all because that's the type of person that he is. He thinks about what's next, what's 5 10 years from now and that's his biggest strength. And I'm glad his office is still down the hall from mine because I can talk with him every day.
The next one is continue the traditions of Fastenal. That doesn't mean look at what we did in the past. That means continue the traditions that got us here, all those things I talked about. And it's really continue the traditions of excellence. If we can do that, we will be successful for years into the future.
The second one is to attract talent every day and promote training. We have an incredible school of business that Renee and Pete have worked to create and a team of people have worked to create over the last 15 to 18 years. Promote training, because the second rule of life after surround yourself with great people is learn something every day, because if we can do that, we will bring solutions to our customer every day and we will be a little bit better than everybody else in the marketplace and that's how you grow a business. Reward for exceptional performance. We're a competitive structure.
Reward for exceptional performance and expected of everybody because everybody is capable of it. And if you have high expectations, you will get high results. And strive for a common goal. And the common goal I'll touch on in a few minutes would be our vending and On-site when I think of 2015. If you could advance the slide.
Speaking of 2015. So looking at this quick view of the year, you can see we had it was a disappointing year. We grew our revenue about 3.5 our earnings per share about 6%. We bought back some stock during the year, get a little bit of leverage from that. 2015 was really a tale of 2 years.
The first half of the year, we started growing around 9%. We were growing our earnings double digit. Our oil and gas customers and our exporting customers, their business slowed dramatically. And in that process, our business slowed with it. We exited the year, 3rd quarter growing around 2%, in the Q4, we actually went a little bit negative.
But the fundamentals under the scene were very good. And our goal in a tough environment is to be there to support our customers even more than a great environment, because they need business solutions that will save them money. And I believe we bring those to the table and that vending example is one example of that. Secondly, capital allocation. What do we do with the cash we generate?
Last year, about 10% of it, as you see from the slide, went back into working capital. Most of that went into inventory. We are pushing the envelope a little bit right now on stocking additional products in our stores. We want to be in a position to provide great same day service to our customer. We believe that differentiates us in the market.
Secondly, capital expenditures. Now this 28% you see, the $145,000,000 dollars that was actually a dramatic drop from what we had seen in the previous 3 years. In the last 3 years at this annual meeting, you've heard about all the things we're doing with automation, all the things we're doing with vending. And we had ramped up the business dramatically to invest in that. The year before, we put more than $200,000,000 into CapEx.
I'm pleased to say a lot of those big ramp ups are behind us and our ability to generate stronger free cash is greater in the next 5 years than it was in the last. Dividends, so we take 63% of our earnings and we paid out dividends last year. I'm pleased to say we've had the opportunity to increase our dividend payout for many years, starting back in 1991. And I see given the strength of our cash flow in the future, we have many years of opportunity in front of us. Don't read that as a forward looking statement.
I'm talking about the fundamentals of the business here. And finally, we bought back some stock last year. Our stock has struggled in recent years, particularly last year. And we looked at it and said the marketplace is putting our stock on sale, let's go out and buy some. And we bought about $300,000,000 worth of stock.
Now you might notice if you add those percentages up that we spent more than we made last year. And so we did we took on some debt. We looked at all of these as great investments for the business and we were willing to borrow some money to pull it off. We think it was a good decision for you today and in the years to come. This slide here is a lot of stuff going on here.
There's really only three points of this slide that I'm going to touch on. The first one is that just right of center, 20,700 employees. Now at this point, I would ask the officers of Fastenal to stand up and introduce and show yourself to the crowd. Earlier, we had the Director stand up, but I would ask each of the officers of Fastenal to please stand up. I am truly blessed to be surrounded by this group.
But I'd also ask when you look around the room now and after the meeting, notice there's a lot of people in this room that are wearing blue shirts that say Fast Snow on them. It's an unbelievable group. It's a great group to be surrounded by, and they represent the tip of the iceberg. We have 20,700 employees and one of the biggest strengths about Fastenal is 70% of those people live and work within minutes of our customer and they know our customer on a first name basis. No other industrial distributor can lay claim to that.
That is why we take market share faster than everybody else, because we're close to our customer and we bring solutions to help their 487,000 employee online courses that were completed online. That number the previous year, I believe, was 250,000 and the year before that was 247,000. It's a great number to see, because you see that our employees are taking advantage of ways to learn and improve themselves to serve their customers better. That will serve us well for years into the future. Next slide please.
This one I'm going to be brief on. When I talk to our investors, this is the slide I always talk about. Earlier, I talked about the frugality of Fastenal. And in the bottom half of that picture, you see what frugality is. It means you're not willing to spend the further you get from the customer.
And we have the lowest cost structure in our industry. However, we have the highest service model, which you see in that top one about people being close to the customer. So we can provide a level of service that our competitors can only hope to do, and we can do it for less cost. It's really a cool combination when you think about it. We have a lower cost structure, so you need us to do these 5 things, we can do it, And we can do it for less cost than our competitor who's doing 2 or 3 of those things.
Again, it serves us well because we're willing to learn and change every day to create a better distribution business. And finally, after I'm done, Terry Owen and Renee Weiskopf are going to talk a bit about our international business and about our people side of the business, because quite frankly, the people is the most important, that's why Renee is going last. In international, we haven't talked a lot about it in recent years, but it's a big part of what we're doing and there's some wonderful things happen there and I'd like you to learn about it. But the 2 biggest growth drivers for us when I look at 2016 is vending in the upper left hand corner and On-site, which is right of center. On-site has taken a Fastenal store and moving it inside our customer's facility.
Right now, we signed 80 new Onsites last year. The district managers that signed those Onsites, now we're in a pretty weak economic environment right now. Our competitors as well as our business and our customers are struggling. Our district managers that signed Onsites last year are growing double digit. Our district managers that didn't sign Onsites last year are not.
And in the Q1, we grew 3.5%. If we can get a few more people engaged in the On-site business, and again, it's getting closer to a customer because when you're inside the 4 walls, you hear about a lot more stuff they're doing and you get the opportunity to supply a lot more items than you could in the past and you elbow everybody else out. It's a great way for us to grow. And the reason we're able to do it in so many places with our lower cost structure, we can make money doing smaller on sites where our customer where our competitors can't. So it's a great place for us to grow.
The second one is vending. Vending has proven itself for the last 5 years. It's a great enhancer to our non faster part of the business to extending our relationships. And again, with that close proximity to our customer, we're better able to serve that business than anybody else. With that, I'll turn it over to Terry.
Thank you.
Good morning. The one area of our business that I receive the most questions concerning from whether it's from employees, its customers or even shareholders is our international business. So today, I'd like to spend a few minutes really talking about or reporting on our international business, our background, our history, where we are today and where we expect to be in the next 3 to 5 years. So almost 30 years after we opened our 1st Fastenal store here in Winona, Minnesota, we started expanding internationally. In 1994, we opened our first store in Stoney Creek, Ontario.
Soon after, so that was 1994. For the next 13 years, you got caught up a little voices in my head. So for the next 13 years, we expanded slowly across Canada, but we also expanded in other countries. So by 2,007, we were internationally, we were in Canada, we were in Mexico, we were in Singapore, we were in China, and we were in the Netherlands. So in 2007, we made our first our biggest step to that point for international business.
We asked Steve Ruszynski to take over that the leadership of that international business. And for the first time internationally, we had someone solely focused on that business. So as you can see from the slide there, from 1994 to 2,007, we had grown our international business to just under 100 and $50,000,000 Over the next 8 years under Steve's leadership, we took that business from $150,000,000 or under $150,000,000 to almost $430,000,000 So there's no question that Steve's 35 years of experience, his leadership benefited that business and helped the growth. But I think that Steve really did 2 things to help spur that growth. And the first thing he did is he took our regional Vice Presidents internationally and moved them out of Winona and put them in those regions.
You heard Dan talk about decentralized decision making. When Steve took over in 2007, we had 1 Regional Vice President who lived internationally and that was Jeff Watson, Canada. By the time Steve retired last year, we had 8 Regional Vice Presidents, and all 8 of those Regional Vice Presidents lived in the country that they were responsible for. So that's important because when we talk about decentralized decision making, to make those decisions, you have to understand the business, you have to live it, you have to work it every day. And moving those RVPs into those areas enable us to do that.
That leads to the second thing I think Steve did a really good job of in that 8 year time period is we have really good teams in each one of those regions where we operate. And Steve allowed those store managers, the sales people, the operations managers, district managers and RVPs to make decisions about that about those businesses and make the right decision. So what we did, you talk about when we go Internet, when we started going international, our first few expansions, we kind of we try to take our U. S. Model and drop it into another country.
Well, there are challenges with that, because each country is different. And so those differences, they center on the laws and regulations, the culture, the market conditions, the business practices. And so if you look at our model today, 2016, and you look at Canada, Mexico, Europe, Asia, Latin America, you're going to see completely or differences in each one of those countries because they're adapted to the business in that country. So those differences center primarily on strategy, distribution capabilities, solutions, product selection
and pricing
strategy. The one thing that you will notice and Dan talked about the drivers of our company, the one thing you will notice that in each one of those countries, we're focused on our core drivers, because regardless of culture, regardless of business practices, some things don't change and that's people, product close to the customers, our vending, our on-site and our FMI. So when Steve retired last year at the end of 2007, we were in 5 countries. Over the I'm sorry, when Steve took over in 2007, we were in 5 countries. When he retired last year in 2015, Fastenal had expanded to 21 countries.
The majority of those sales, as you might expect, are coming from our 2 most mature regions, that's Canada and Mexico. So that's a report on the history where are we today. Steve retired last year and at that time we asked Jeff Watts to take over the leadership of our international team. Jeff is a 20 year Fast Mill employee, can't be here today, he's actually on his 10 year anniversary. It would have been nice to have him here because this presentation would have been much, much better in his cool Canadian accent than my Texas draw.
But he's not here. So you got me. So Jeff is a 20 year employee, but the most important part of that is all 20 years that Jeff has spent with Fastenal Company has been international. Most of it's in Canada, but he also moved to Europe for a few years to open our operations there. So I'll tell you this, that there is no one in this company that understands the complexity and challenges of leading international business units than Jeff Watts does.
He understands how to open a new country. He understands difficulties in attracting, retaining, training and developing employees, developing sales strategies in different countries, establishing local supply chains, navigating regulatory challenges and driving profitability. So that's our leadership today. You look at and Dan talked about briefly, he mentioned the exchange and the strong dollar and how that impacts us. And he talked about how that impacts us in the U.
S. I'm going to talk a few minutes and park here for how does that impact us internationally? Because when we talk about the strong dollar and it's lowering our revenue, it's lowering our earnings, I often am asked, well, how does that work? Why are your earnings or why is your revenue lowered because of the strong dollar? So I'm going to use 2 examples.
The first is going to be our earnings revenue. How does the strong dollar impact our earnings revenue? So in 2007, I packed my family up and I moved down to Mexico, my wife and daughter are here today. So we moved to Mexico. When I got there, the exchange rate was 10 pesos to a dollar.
We went back last month, we went on vacation. The exchange rate today is 17 or over Ps. 17 to $1 That was good for us on vacation because we were able to buy a lot more things for less money. But for a business, this is how it impacts us. So let's imagine that in 2007, I had a customer that I was selling a pair of safety glasses and those are safety glasses on the screen if you can't tell.
So I'm selling this customer a pair of safety glasses. I sell those safety glasses for Ps. 20. Exchange rate is Ps. 10 to $1 so I'm selling those safety glasses for $2 Jump ahead, 2016, I sell those same safety glasses, I sell them for Ps.
20. Now when I report that revenue back to you in U. S. Dollars, I'm only selling those safety glasses for $1.15 I didn't do anything different. My supply chain stayed the same.
My cost from my competitors stayed or my supplier stayed the same. The exchange rate was the only thing that happened there. And so it doesn't sound significant because it's only $0.85 but the big picture is much different for us as a company. Internationally, in 2015, the exchange rate converting our local currency back into U. S.
Dollars, we lost almost $44,000,000 in reported revenue last year. So it's not this isn't $0.85 or $1 or $2 a year, it's big dollars we're talking about. And so when you look at this graph or this chart, you see international sales except for the dip in 2,008, 2,009, it's a continual growth, and we're growing that business continually over the past 8 years. And then you see 2015, it's almost a flat line. The reality is that's not a flat line.
In 2015, if you look at our international growth in local currency, we grew our revenue 10%. But when we report that back in U. S. Dollars, it's 1%. So that's the first way that the strong dollar is impacting us internationally.
They're complicated a little bit more. Let's go back to the same example of safety glasses, but let's sell those safety glasses in Canada. And so 4 years ago, let's use our imagination, let's imagine that 4 years ago we signed a contract with a customer in Canada, we're going to sell them these safety glasses, we contracted the price at CAD2 dollars but we're going to import those safety glasses from the U. S. And we pay $1 USD.
Pay $1 USD, we sell it for CAD2. The exchange rate is 1 to 1. Our margin on that sale is $1 Jump ahead 4 years, now the exchange rate is CAD0.78 to 1 U. S. Dollar.
We're still importing that those safety glasses for $1 We're still selling them for CAD2, but the difference is when we convert that CAD2 back to USD, it's now a CAD1.56 Our margin went from CAD1 to CAD0.56 So those are that's our biggest challenge today that we're facing internationally. The positive is, if you're looking to take a vacation out of the country anytime soon, now is a really good time. The next question I get most often is where are we going next? What countries are we going to open in the near future? And so when we consider opening in a new country, we really look at 3 factors.
The first is, do we have an anchor account? And for us, an anchor account is a large national account that's going to that awards us business, gives us revenue, that affords us the ability to open in a new country. That's the first criteria. The second criteria is there enough revenue potential, enough opportunity within that country for us to open and meet our earnings and our revenue growth expectations, really is the country big enough. And the final thing that we evaluate is the risk involved in opening that country.
And usually those considerations are around political risks, they're around financial risks and they're around safety risks. So you can see that there that takes out many countries around the world where we just won't open. So today, we don't have any plans of opening in future countries. We're considering a few. We're evaluating those countries by that criteria.
But our real focus today is getting really good at the countries where we already open. You saw that we opened 16 countries in 8 years. When you open when you expand that rapidly, it creates some challenges. And the 2 biggest challenges for us as a company has been developing our employees. And it's and frankly, it's been the 2nd biggest challenge is generating revenue and generating earnings within those countries.
So our focus now for the near term 3, 5, 7 years, we've got really 4 things that we're focusing on. We're focusing on people, we're focusing on revenue growth, we're focusing on earnings growth, and we're focusing on return. So let me talk about those each for just a minute. And I want to talk about people first and I'll park here for just a minute because that's I get fired up when I talk about the people. I've spent almost the last 9 years with Fastenal traveling, working and living internationally.
My family and I lived in Monterrey, Mexico, we lived in Panama City, Panama. I've spent almost 9 years, Brazil, Colombia, I have an exchange student here today, she's from Colombia. But I get passionate when I talk about the people, because I'll tell you, I've seen our competitors. And when I look at our local teams, there is no competitor, there's no company out there that has more motivated, more honest, ethical and hardworking people than we have. Our leadership teams in each of our countries, they've done a really, really nice job of attracting, training and retaining our employees in each one of those countries.
But the focus for us now, instead of opening more countries, the focus for us now is developing those employees. And when you look at our most mature countries, our most mature regions, Canada and Mexico, and that's exactly the model that we're executing
in the
rest of our countries. Today, we have 8 Regional Vice Presidents internationally, 6 of those Regional Vice Presidents are from either Mexico or Canada. Several of our District Managers and Directors around the world are from Canada or Mexico. Our mission today as leaders of our international business is to develop the employees in our younger regions to that same model. So that in the next 3, 5, 7 years, we have regional Vice Presidents from Germany, from China, from Singapore, from Colombia.
That's our focus today. Our second area of concentration is really is on our earnings growth. And so especially in our less mature regions, that really centers on our key accounts, but more specifically, our national accounts. We have a all hands on deck mission today throughout the company to grow that national account business internationally. In fact, today, our Vice President of National Accounts, he's not here today.
He flew out Sunday morning. He flew to Europe to meet with our largest customer there. We are focused on driving that international revenue. And then finally, our concentration, a heavy concentration on our earnings and our our earnings growth and our return. And so Dan mentioned was talking he talked about where the earnings grows, but he talked about the distribution center, he talked about that low cost structure that we have and how our frugal, not cheap, our frugal mentality affords us to do things that our competitors either will not or cannot do.
And so today, that's what we're doing. That's how we're that's our primary lever that we're using internationally to grow our earnings. It's managing our operating expenses, but especially through our distribution centers. So today, we have 2 distribution centers in Canada. We have 1 distribution center each in Mexico, Europe, China and Malaysia.
And we're leveraging those low cost structures to manage our operating expense, grow our earnings and get the return on our business. So in closing, you've seen the history of our background, where we've come from, you've seen where we are now and our focus for the future. Today, our international revenue is about 11% of our total company revenue. I've spent a lot of time trying to determine what is what's our market potential globally in the markets where we serve. That's a difficult number to come by.
But I am confident, I believe that today we have less than 1 10th of 1% of the global industrial market where we serve. But I'm also confident that we have the leadership, we have the local sales teams, we have the plan and strategy to continue to take that market share, but more importantly, to drive company growth. Now today, it's all about the execution. Thank you, and I would like to introduce Renee Weiskopf, our Executive Vice President of Human Resources and also Director on our Board. Renee?
Thanks, Teri, and a big thank you to all of you here today. We appreciate you joining us for the meeting, and we are truly grateful for your support of our company. I have the privilege of sharing information with you today about our biggest strength, our employees. I work with a great HR team, and we're supported by great leaders. When I started with Fastenal, we had 375 employees and I thought, wow, I work for a big company.
And today, there are over 20,000 of us. And every person, as Terry has talked about and Dan, is important to our success. What I'd like to do is ask the employees that are here today to raise their hands, and I invite everyone to recognize them with me for the values they embody and the customer service that they demonstrate daily. Last year at the shareholder meeting, our sales leadership described how their teams retain and recruit talent. And the distribution and support teams are very similar in that regard.
It's the most important job that we all do because it starts and ends with good people. The business units in the support and distribution areas look at we're looking for business minded people, obviously, and that can also model our company values of ambition, integrity, innovation and teamwork, and also who place a high value and can demonstrate customer service. Some of the groups that we recruit from are veterans and military organizations, diversity groups, many different local community and service organizations as well as colleges and technical schools. We sponsor Fastenal Day at many colleges across the country as well as at our distribution centers where individuals that are interested in Fastenal can interface with leadership and learn about the opportunities that we can provide. Our most successful approach is when we actually interface with professors and students directly in the classroom.
We offer to help support the learning and speak to the subject matter that's being taught, providing real world applications from our business. It makes the learning process much more engaging and interesting for the students, and it's during these sessions that long lasting connections can and are made. Additionally, we volunteer at many mock interview nights. We review different resumes at different sessions with them or resume review sessions, as well as speaking to many different student organizations and clubs on a variety of topics that we're asked to speak on. We're currently involved in a program with Winona State that we call our co op program, and it's very unique in that we the student has to promise that they'll work for us throughout their college experience.
And in return, we provide an opportunity that they can't find anywhere else. We will rotate them through each part of our business, usually 6 to 9 month rotations, so they can learn exactly how a business works and everyone starts in the warehouse. Being able to offer exposure to multiple business functions is not something a part time employee is going to get anywhere else that they're looking for a job at. And many of these part time jobs materialize into full time careers upon graduation. Again, we provide opportunities that others cannot, and our promote from within mentality really is an advantage to our internal part time employees.
With regard to our hiring, we have a very structured process, but there are allowances for decentralized decision making. As Dan has explained and he explained earlier, we feel really that the people to make the best decisions for our customers are those closest to the business. And likewise, we feel the people that are best able to make hiring decisions are those that have the job postings. They know better what they need than we do. However, the HR team does assist with some of the efficiencies with this process.
This team of 10 people posts the requested job openings for the entire company on multiple hundreds of websites. And then they review the applications and resumes that come in from candidates that have applied for these jobs. Next, they complete phone screens, actual phone interviews with the candidates that have passed the initial application screen and then they pass those individuals that are selected through the phone screen on to the hiring manager in the field. Those are the people that actually schedule the personal interviews, complete them and make the offers of employment. When a new hire begins employment, they go through an onboarding process and the support from Winona continues with our training and development department, the Fastenal School Business or FSB.
As many of our openings are entry level, the training and development that we offer and that is completed by the employees is paramount to their success and the contributions that they can make to the company. Since 1999, the company has continued to invest in FSB, which demonstrates the importance that we place on employee development. 2 of Bob Kierlin's basic rules of leadership are let people learn and challenge rather than control. And the fact that we make training a priority really puts action behind those words. The 2015 data on this slide, when you combine the classroom trainings that were completed, usually it's 3 days to complete a course and the online completion hours, we illustrate here about 60,000 days of training that were completed last year.
And that is in addition to all the on the job mentoring that goes on, as well as the on the job training that's delivered through leadership in the field. We are heavily invested and committed to our employee development. We want employees to build upon the knowledge, skills and abilities that they bring to the company, and with training, that confidence builds. They become better able to problem solve, assist customers, innovate new processes and obviously support the teams that they work with. Over the past 17 years, the FSB department has grown to over 50 employees who internally design the training and deliver it in multiple formats.
The training is for employees in all of our business units, but it starts with basic foundational courses related to our culture and our values. From there, specific courses can be taken regarding leadership, sales and distribution. We also offer training at multiple sites across the U. S, Canada and Mexico, which is a true benefit for employees. They can continue their development, but spend less time away from their families and their businesses.
We offer training in multiple formats. Instructor led, which is typically what you think of about training, it's classroom style. There are currently 22 different courses that we offer in multiple sites across the country. We offer online training. Over 400 online courses are offered, which can be taken at a time that's convenient for the employee.
Online tutorials and videos, there are numerous subjects available and these typically demonstrate how to use a product or a system. And finally, our manuals and other literature, there are multiple resources that can be used as a quick reference or an online guide in the future. We're very lucky to work for a company that places such a high value on employee development and the continuing development of all of us. As I mentioned earlier, our biggest strength is our employees. Our business begins and ends with them, and they are supported by systems and leadership to help them achieve their success.
I have something on my bulletin board. I've had it in my office for about 15 years. I ripped it out of a magazine. The title of it was called customer needs. And all of us in HR look at the employees as our customers, but I know too that many of the thousands of other Fastenal employees see this and can understand what I'm going to share with you as this list contains some of what our customer needs are.
Help me to learn and help me to do it myself. Make the response time fast and anticipate my needs. Customize my experience and respect my time. Treat me with respect, never take me for granted, and make service a valued connection. Thank you, and I'll turn it back over to Dan.
After listening to Terry and Renee speak for a few minutes, you can understand why a person would love working with the kind of people we have at Fastenal. With that, I'd open up to any questions there might be and I will attempt to answer We have a question over here on my right.
I'm not
sure if that's stage right straight left, I'll get it wrong, but over there.
My question concerns something a little bit worrisome. I understand Fast and All sponsoring NASCAR race car, but also it makes sense, but I also understand that the family that owns NASCAR has chosen to endorse, which is their right, a particular candidate for President, which many people find troublesome, worrying and I think obnoxious. But and also they sell the naming rights to certain races, which sometimes are a little bit controversial. So is this at all a concern of Fast and all? And would you find it all worrisome?
Just appreciate your comments on my concerns. Thank you.
Certainly. And thank you for the question. When I think of NASCAR, we entered NASCAR because we felt for our customers and our employees, it was a great means to expand the Fastenal name so that when I'm on a sales call, somebody is familiar with the Fastenal name. In the Midwest, people know us really well. You get outside the Midwest and they don't know us as well.
And it helps open that door. In life, I encounter a lot of people that have political views that align with mine and don't align with mine. I think you're going to drive yourself crazy if you let that dictate your decisions. And you take a step back and you say, is this a good business decision for Fastenal? And does our driver in this case, Ricky Stenhouse Jr.
Represent some of the best aspects of Fastenal? And I believe the case is yes. I've spent a lot of time with Ricky. He's a good quality individual and I believe he represents the FastNow name and the FastNow organization well. Any other questions?
Well, if I get away with just one, that's kind of cool. It's one right back here, just left of center.
Yes.
My question has to do with safety. Does Fastenal track and measure safety in the company? And what measures do you have to make yourself world class in that area?
Yes. I know enough about the subject to get myself in trouble in a conversation like this. One of the items that was up on that slide that showed earlier, and I forget the exact number, but it showed the number of trainings that we did that were specifically centered on training on safety, excuse me, 18,000 trainings we did last year across the organization. Now those trainings were for employees and customers alike. Within, obviously, we operate a large trucking network.
So if Chris Dufenbach were here, he could tell you about all the things we do for our over the road drivers, our semi drivers, as well as folks that use our pickup. And a good example there is starting about 8, 9 years ago, all the Fastenal employees, and I have mine in my wallet, have a Fastenal driver's license and we monitor the driving records of our employees and if they have a poor driving record, they don't get to drive our vehicle. So we do things every day to measure it where we are for our customers benefit and for our employees benefit to have a safe work environment because in a company of the frugal nature, it's a smart way to do business is to be safe with your employees. Thank you. I see one way in back.
Based on what you've accomplished so far, what's next? For example, 3 d molding?
There's a whole slew of things that we're either working on or our potentials out there, and I'll touch on a couple of them. I know some of you may have noticed the shipping container that was set over by the J. C. Penney building for a while. There we're creating some potential virtual stores that we'll put on a construction site maybe in the parking lot of a Fastenal store or maybe inside a Port Authority, where you have on-site ability to sell and it's in a little containerized store.
That's something that is this big in our business today. The reason it disappeared, one of our construction customers love the idea and said, hey, I'll take your first, I'll be your guinea pig, I'd like 20 of them. And so we placed that first one out in his business here recently. And your example was, I believe you're referring to 3 d printing. Our manufacturing division has some 3 d printers.
We've had them for several years. And we are doing 3 d printing for our customers, where they send us specification, we make the item for it and send it to them. So they don't have to make the investment in the equipment. But there's a wealth of things that become available, if you're willing to open your mind and creativity to it. And I think vending was a perfect example of it, but there's a tremendous amount of things we can do inside the technology world and outside it that are innovative to our organization?
Thanks. I think that wrap it up.
I was wondering if you were doing anything in acquisitions?
Last fall, Last fall, we did an acquisition. Starting about 1.5 years ago, we started to actively look at acquisitions. We wanted to see if this was a viable part of our growth. And we want to be more open to the idea. And most of our acquisitions over the last 20 years have come from things we stumble on that we hear about.
So we thought we'd take a more proactive approach. Last April, we met a company of Pacific Northwest. We acquired them in the fall. They look and feel a lot like Fastenal. So culturally, they met they meshed with us really well, great people.
13 locations, about a $35,000,000 a year business, about half the business, 60% of the business was threaded faster, sounds familiar. And the employees there look really good in blue. And so we think it's a great fit. I believe we will do more acquisitions. We're actually in discussions with a few as we speak, but these discussions are very early.
Odds are they'll turn into nothing, but last April, odds are Faster Zinc would turn into nothing and it turned into something, but only time will tell. But I believe it will be a relatively small piece of our growth drivers. Dan? Dan, we have a question over here. Sorry.
Yes, Mike, quick kind of technology involved, but we're looking at autonomous driven vehicles coming down the line and we might even have a few cars available over the next couple of years for private purchase even. But what about your trucking fleet? And when I thought of this when you mentioned your company driver's licenses and if you've done any explorations into this area yet?
Pretty limited. The technology is still pretty new. I think it will be years before it becomes a meaningful part of our distribution activities that occur on the road. However, if you were down in our Indianapolis facility right now, you would see quite a few autonomous vehicles driving around that warehouse moving pallets around, because there it's the technology is ready for prime time and we're making great use of it. But I think the over the road type of activities are still quite a few years into the future.
Thanks. One more back here, I believe, Will.
In the trade off between lower oil prices and the savings in fuel and the lost revenue in your sales, which one would you take?
I'd take a higher fuel price in a day and twice on Sunday. If I think about it, from Q4 to Q4, when you really saw the stiffness of the drop, I believe our fuel costs went from about $12,000,000 for the quarter to about $9,000,000 So it saves us about $1,000,000 a month. However, the price of that is economic activity because the energy sector is about infrastructure. It's not just about putting a hole in the ground and it's about connecting all the dots of infrastructure. And that's a we've been very successful in that because our locations are where that activity occurs.
And so our business fell off dramatically in the last 12 months as that activity slowed. So I would take even though we don't like spending more every time you pull into Quick Trip and put gas in your vehicle, I'd take it in a second because our economy would be healthier. About 10 minutes. With that, I'll turn it back over to Will to finalize the annual meeting. And again, thank you for attending today.
I really appreciate
Before we move forward with the ballot results, we do have the winner of the door winners of the door prizes, Mr. Dale Engrave and Frank Willett. Before you leave, I think you step over to this table, is that correct? And pick up your prize. And again, thank you for coming.
The ballots have been counted, and the report of the Inspector of Election indicates that Willard D. Oberton, Michael J. Anzius, Michael J. Dolan, Stephen L. Eastman, Daniel L.
Flores, Rita J. Heisey, Darren R. Jackson, Scott A. Satterlee and Renee K. Weiskop have received the required number of votes and are hereby elected directors of the company.
Thank you. The report of the Inspector of resolution that has been adopted. And the resolution that has been adopted. And the resolution for the approval of an advice on an advisory basis of the compensation of certain of our executive officers has been received and the required numbers of votes have 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. I will now entertain a motion for adjournment. I recognize Mr. Chris Blasco.
Hello. My name is Chris Blasco. I'm a shareholder and I move to adjourn the meeting.
I recognize Mr. Mike Wilkinson.
I'm Mike Wilkinson, 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 say aye or a. Those opposed say no. The meeting is adjourned. Thank you for coming.
And we have lunch behind the curtain right here. So if you have a few minutes, please stay and join us for lunch. Thank you very much.