We'll begin. As most of you know, this last year we lost our unofficial chaplain for the last 24 years, Monsignor Jim Habegger. I suspect that after 24 years of praying for the welfare of Fastenal and their shareholders, he probably now has more of a direct line to be able to do the same. We have a very worthy replacement to give the invocation today, Father Michael Cronin, who bought shares in Fastenal about a year ago when he was here in Winona. He's currently a parochial vicar at Sacred Heart Parish in Owatonna, Minnesota. I'd like to welcome Father Cronin to the podium.
Good morning. I'm not so used to this corporate world because I work for the church. I'm going to take an opportunity before the prayer to do two short things. Back in February, Bob wrote me an email and said, "Father Cronin, the Fastenal annual shareholder meeting will be 10:00 on Tuesday, April 16th. We would be honored to have you give the invocation at the start of the meeting. You would be filling the big shoes of Monsignor Habegger, who did this for 25 years. I hope you can make it. We serve a barbecued chicken lunch after the meeting and Bloedow's cookies before the meeting." Apparently, that's why that section of the building got seated first because it's closest to the lunch. I emailed him back and said, "Bob, I would love to.
I just put it on my calendar, and I still have my five shares." He responded back, as only corporate emails can do, "Okay, you're on. Remember that the stock success in the following year correlates with the quality of the invocation." I do want to remember and dedicate this prayer today to the life of Monsignor Jim Habegger, who was such a great friend of this whole community. I also want to just take a moment now, if we could just stand just for a moment of quiet silence for the people of Boston. Blessed are you, God of all creation, whose goodness fills our hearts with joy. You have brought us together here this day to work in harmony and peace. Enlighten our hearts, strengthen us with your grace and wisdom, aid us with your constant help.
Unite us to yourself in the bond of love and keep us faithful to all that is true. May everything we do begin with your inspiration and continue with your help. Give us light and strength to know your will, to make it our own, and to live it in our daily lives. Amen.
Thank you, Bob.
You're welcome.
I can see. This annual meeting of the shareholders of Fastenal Company is now convened. I am Robert A. Kierlin, Chairman of the Board of the company. Stephen M. Slaggie will act as secretary of this meeting, I will act as chairman. Also present are Michael M. Gostomski, Willard D. Oberton, Michael J. Dolan, Reyne K. Wisecup, Hugh L. Miller, Michael J. Ancius, Scott A. Satterlee, Rita J. Heise, and Darren R. Jackson, who are directors of the company. I'd like to first welcome all of you to this annual meeting of shareholders. Next, I will report on the number of shares present at this meeting, and I'll conduct the voting on the proposals to be considered at this meeting. Following the vote, our Chief Executive Officer Will Oberton will report to you on the company.
The record date for the determination of the holders of the company's common stock entitled to receive notice and to vote at this meeting was fixed by the board of directors as February 22nd, 2013. I present to the meeting at the back of the room by the receptionist 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 the inspection of any shareholder during the meeting.
In the back by the receptionist, I will present to the meeting an affidavit of a manager of Broadridge Financial Solutions, Inc., attesting that a notice of meeting, together with a proxy statement, proxy card, and certain other documents, were mailed on or about March 7th, 2013, to each holder of record of the company's common stock at the close of business on the record date. The affidavit of mailing of the notice of the meeting will be 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. At the close of business on the record date, there were outstanding and entitled to vote at this meeting 296,662,531 shares of common stock. Each share of common stock is entitled to one vote.
Regardless of how many shares and votes you have, though, you probably will only be getting one piece of chicken at the barbecue. For a quorum to be present, a majority of the 296,662,531 votes entitled to be cast must be present in person or proxy at this meeting. On a preliminary count, there are represented at the meeting, either in person or by proxy, a majority of the votes entitled to be cast at the meeting. Therefore, a quorum is present for the transaction of business. Is there anyone present who has not submitted a proxy or registration form? All right. Let's see. A record of the proxies submitted to the meeting and the ballots of the individuals 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 Degallier is hereby 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 will be administered and will be attached to the minutes of this meeting as Exhibit B. We hereby make available to the Inspector of Election the list of shareholders, registration forms, and a record of all proxies submitted at the meeting. Copies of the minutes of the last annual meeting of the company held on April 17th, 2012, are available at the registration desk. 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 22nd, 2013, 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 a ballot will be given 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. For the first time this year, we will be distributing just one ballot covering all matters to be voted on at this meeting, rather than separate ballots for each matter. We will now take up the business of the meeting. We have three 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 11 persons for election to the board to serve until the next regular meeting of shareholders or until their successors are elected and qualified: Robert A. Kierlin, Stephen M. Slaggie, Michael M. Gostomski, Willard D. Oberton, Michael J. Dolan, Reyne K. Wisecup, Hugh L. Miller, Michael J. Ancius, Scott A. Satterlee, Rita J. Heise, and Darren R. Jackson. I will now open the floor to a motion to formally place before this meeting the nomination of these individuals. I'll recognize Mr. Christopher Gervais.
Mr. Chairman, my name is Christopher Gervais. I am a shareholder of the company. I move to formally place before this meeting the nomination of the 11 individuals identified by you 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. Chair recognizes Mr. Darryl Dvorak.
Mr. Chairman, my name is Darryl Dvorak. I'm a shareholder of the company. I second the motion.
Thank you. As no other nominations have been made in accordance with the proceedings established in the company's bylaws, I declare the nominations to be closed. The next matter for consideration today is the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2013. I would like to introduce Mr. John Atkinson, a partner of that firm, who is here today to answer any questions you may have. John? There he is. Let's see. 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 2013. Chair recognizes Ms. Sheryl A. Lisowski.
Mr. Chairman, my name is Sheryl A. Lisowski, and I am a shareholder of the company. I move that the following resolution be adopted. Resolved that the appointment of KPMG LLP as independent registered public accounting firm for the company for the fiscal year ending December 31st, 2013, be and hereby is ratified.
Thank you. Chair recognizes Ms. Gladys Severson.
Mr. Chairman, my name is Gladys Severson. I am a shareholder of the company. I second the motion.
Thank you. Is there any discussion on 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, 2013, 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. Chair recognizes Mr. J.W. Hein.
Mr. Chairman, my name is J.W. Hein, 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 2013 annual meeting of shareholders captioned Executive Compensation.
Thank you. Chair recognizes Ms. Mary Spitzer.
Mr. Chairperson, my name is Mary Spitzer, and I am a shareholder of the company. I second the motion.
Thank you. Any discussion on this motion? It has been moved and seconded that the compensation of certain of our executive officers be approved. If you wish to vote on these motions by ballot, please raise your hand and a ballot will be given to you. If you have appointed another person or proxy to vote your shares and have not terminated that proxy, you should not vote by ballot. After you have executed your ballot, it'll be collected and tabulated. Anybody needing a paper ballot? Okay. The polls are now closed. The ballots will be counted. While the ballots are being counted, Mr. Willard D. Oberton, our Chief Executive Officer, will report to you on the company. After the conclusion of this report, we will answer any questions you may have related to the company and its activities. Mr. Oberton?
Thank you, Bob. Before I get started with my part of the portion, I want to lay out what our program's going to be today. I'm going to give a brief overview on the company. I need to make it brief because we had to shut down the picking system, so we have a bunch of people back there going, "Let's go." I'll talk about the company. We're going to have a report from Leland J. Hein, our President Leland J. Hein. Leland is a long-term member of the Fastenal team. He joined us in 1985. He's worked in various positions, been here in Winona for about the last 15 years as a Regional Vice President, then an Executive Vice President, and most recently, President of Fastenal. Leland's going to report on our fastener initiative, how we're trying to put more focus on growing our fastener business.
Followed by Leland, we'll have a report from Walter Tate. Walter is a little bit newer to the Fastenal family. He started in November of 2000, so he's 13 years, which makes him young for a lot of us. Walter's worked in six different roles over his 13 years with Fastenal. He's been in sales, operations, marketing, but most recently, he's heading up our project for automating our warehouses. I thought it was a very good time to tell our shareholders more about what we're doing with automation. We made decisions in the last year to greatly increase our investment in these systems. Walter, I think, will do a fine job of explaining why we're doing it and what we expect out of that. Forward-looking statements. Just first, some highlights from 2012. 2012 was a good year for Fastenal.
We grew our sales 13.3%, which was lower than we had expected going into the year. We started out very strong at 20% in the first quarter. As the economy softened a little bit, our sales slowed throughout the year. We did a nice job in improving our profits. We grew our net profits at 17.5%, a number that we're proud of. We increased our dividend payout to the shareholders by 91.6%. $367 million were paid out in dividends. We added $958 million in market value. Only 7.4%, that's a disappointing number for us. When you look at almost $1 billion in market value increase, I was very proud of that number when you just look at it in absolute dollars.
When you compare that to the fact that 26 years ago, when we went public, the value of the entire company was only about $25 million-$30 million, it's a nice improvement in just one year. What I intend to do today is talk, kind of just restate the basics of our model, and I continue to do this with our managers and our employees, and I think it's very important to tell people how we plan to go to business, what our strategy is. Always remember, our motto is growth through customer service. The way that we plan to serve our customers, we want to serve our customers, is through a store-based network. What I'm trying to illustrate with this slide is everything we do evolves around our stores.
The reason we're so committed to a store-based network is we believe that the closer that we can become or get to our customers, the greater we'll be able to service them and the greater market share we will drive through the customer base. We're trying to get closer to the customers and drive more business. All the pieces around that are the things that we're trying to support our stores with. Better people and people policies, products and marketing, distribution, systems to keep everything together, and then finances, make sure that we continue to make money and get a return so we can continue to invest in this system. On the people side, the most important thing we can do. There are a lot of things we need to do with people.
We need to recruit, we need to train, we need to provide benefits, pay, and opportunities, all very, very important things. Probably the biggest part is developing the people. What I'm showing you here, just one part of our people policies today, is our Fastenal School of Business. In 2012, Fastenal School of Business delivered 8,600 instructor-led. What this means is 8,600 people went through instructor-led courses, and these courses range from one to five days, mainly two- to three-day courses. 8,600 people out of our 16,000. More impressive to me is that we had 247,000 online courses. Some of these are 30 to 40 minutes. Some of them take days and even weeks. The real point here is we're adapting to the technology that's out there today. I shouldn't say we. Our Fastenal School of Business is using it to train our people.
This is what it's all about, taking smart, ambitious people and investing in them to continue to make them better. I think that's a very important part of our culture that's been there for a long time. We continue to evolve and push it forward. On the product side, if you think about it, you have the locations, you have people, you need to give them great product to service our customers. We continue to expand our products and look at different things that we can stock and that we can provide and that we stock with really one pretty simple goal. We want to put our salespeople in a position to say, "Yes." They pick up the phone, customer is needing something, "Yes, I can get that for you," or, "Yes, I have that in stock.
I can have it for you tomorrow," whatever the answer is. We know that if we don't say yes, and we say, "Well, let me take a look at it, maybe I can do that," there's a good chance when they hang up the phone that the customer's calling someone else, our competitor in many cases. We're very focused on putting our salespeople in a position to say yes. The other thing that we want to do is we want to give our customers choices. In the bottom corner there, where it shows the Blackstone and PowerPhase, those are Fastenal brands we've developed. What we do with that is we provide high-quality product, typically at a lower price. The customer has a choice between the best brands in the industry or the Fastenal brands, depending on what they're looking for.
Are they looking for price? Are they looking for performance? Ours provide both price and performance, but sometimes a customer needs a certain brand, so we want to put them in choice or give them choice. If you look at the top, we have pictures of the vending machines. Those are really just delivery systems. The one thing I want to comment on our industrial vending program, which is going very well, our goal going into 2012 was to sign 15,000 vending contracts with customers. The team did a great job. The entire Fastenal Blue team did a great job. We ended up the year signing just over 20,000 vending contracts. We exceeded our goal by 30-some%, and it continues to go well this year as well. Great delivery system.
One thing I just want to mention on the products, the product journey, if you put it that way, will never end. Every time we think we have everything they need, someone invents new products or new needs, which is great for our business, but creates a very large challenge for all the people involved in it. Moving forward on distribution, I'm not going to touch much on distribution Walter's going to do his presentation. One thing I did want to mention is, again, always trying to change our company and do new things. This year, we made a decision, somewhat of an experiment or a test. We went out and bought six brand-new tractors that run on compressed natural gas. An effort to try and lower our emissions, lower our costs, and try a fuel that's actually plentiful here in the U.S.
Far, the test is going well. Way too early to determine if we have 20 of them next year or 200 of them. Over time, we believe it will be something that we'll be able to deploy within our fleet, lower our costs, and lower emissions at the same time. We are trying a lot of different things to improve our business. Systems and system strengths. Many times, and even myself, when I think of systems, I almost always focus on just the IT stuff, the technology. When I list it down, we have systems for purchasing, for shipping the product, all the stuff we do with logistics and containers and all that, for storing the product and repicking it for our stores. We have separate systems for our branches. We have systems to develop sales tools. In the middle is an iPad.
That's something we're working on right now so our salespeople have mobile. They can take orders on the fly. Phone right above that. We have systems for delivering product out not only to our stores but to our customers, another complete system. We have a very large system to keep track of all the money, the accounting, the bill paying, and all of that, along with the inventory. When I think of the things that our IT group does, along with accounting and purchasing and all these other areas, we are completely dependent on the strength of our systems. We have a great team working well in all areas. We have great people working on it. It's going to continue to grow, and we're going to continue to improve those systems.
It's one of the reasons I believe that we've done so well over the last several years. It all wraps up to what does this mean to the company, and what does it mean to the shareholders? I've been using this slide for many years. In 2012, we didn't add as many employees as we did in 2011. We had a great first quarter. Business started slowing down, so we said, "We're going to be a little cautious on adding headcount." We basically ended up at about the same place we started the year with headcount. We did continue to open stores. We grew our sales, as I mentioned earlier, 13.3%, and we grew our earnings at 17.5%. We hire smart, ambitious people.
We put them in stores or some kind of a selling activity. If they do a great job, we grow our sales. If they do a good job or a great job, we grow our sales. If we do that profitably, we grow our earnings, and we take that earnings power, and we put it back into the business like a big flywheel. Hopefully, we do that next year, recreating that, and continue to go forward. We've been able to do that for the last 40 years, and hopefully, we'll continue for the next 40. I can't predict that, but that's really what we're trying to do. That's why we continue to hire great people and promote the strongest within the group. With that, I would like to introduce Lee Hein, President of Fastenal. Thank you very much.
Good morning. Good morning.
Good morning.
I'm going to talk today, when you look at our catalog, we offer this, but I'm going to talk about just this piece here today, and it's really just about the fasteners. I'm going to start out by being very honest. We're not happy with where we're at with the fastener growth, and we're going to address that, and I'm going to give you just a real clear overview of why that is. Two things that we have to talk about first, external and internal. Externally, what happens to our fasteners is basically this, and it's real simple. The economy slows, production slows, fastener consumption slows. That's just the reality of the world that we live in.
Internally, we have X amount of resources that we can use, and you know if you've been to a number of our shareholder meetings, we've poured a lot of our resources into vending, government, safety, cutting tools, FSB, opening stores, et cetera. I'd say maybe a year ago or so, we really started to look at bringing back and putting resources into fasteners. I want to give you some facts. Just when you look at fasteners, you got to always be thinking, like, "What's this guy talking about?" I'm talking about threaded fasteners. They're heavy. They're difficult to move. The other thing is, when you look at fasteners, to be able to bring a high quality of satisfaction to our customers, that's difficult to do from a distance. Heavy, weighty objects, you need to move them.
The other thing is they use high quantities of fasteners daily, weekly, and monthly. That's the reality of what we try to do in our 2,658 stores. We try to bring value. How do we bring value to a threaded fastener? It's real simple. We use a statement often that says, "If I, will you?" If I stock this product for you in my local branch, will you buy it? If I come out to your facility and I manage your inventory, will you pay me in a timely manner? We go, if I were to help you reduce your inventory and your assets, will you allow me, Mr. Customer, Mrs. Customer, to let me make a fair return? Generally, that's how we go to market, and how we do it locally, and how we try to take fastener share. Now, the story by the numbers.
I really want to now give you just a real good overview of why we're the leader in fasteners, and you have to understand now the breadth and depth of what we offer. When you look at the fastener market share, and you look at the world market, it's about $70 billion. We do about $1.35 billion. We're about this much of the world market in fasteners. When you look at North America, again, $16.7 billion, we're still about this much of the fastener, yet we're number 1 when you rank fastener distributors. That's only 7.9% of the market. It's a very fragmented market. When you start to look at the SKUs, and you look at the actual number of items that we try to manage to different customers, whether they're standard or specials, this gives you a clear picture.
About 1.3 million SKUs, 189,000 standard everyday product. They come into the store. We make a call, "Hey, I need a half by two grade 5 zinc cap screw." That's a standard. They may say, "You know what? I need this real weird type," if you look down front here, bolt, stud, what have you. We can do things like that. We also offer our customers, we can import items for you. When you look at the import part, 65,000 parts, 5,119, and these are really wild parts. That's where a customer says, "I need you to import this sprocket." We'll do that for them. We look at every opportunity. You got to look at how much product are we bringing in. Last year, we brought in about roughly 4,000 containers. That's what you see driving down the semi, these big 40-foot containers.
That's how many containers of just fasteners we brought in last year. Another impressive number is how many pounds of fasteners this company moves in a year, about 200 million pounds of fasteners. We're into this. One important part when I'm talking here today, keep in mind, always think of the weight of what we're trying to do, of moving these 200 million pounds of fasteners. We move it internally, another very good weapon for us. We own our company-owned fleet, local store, moving a heavy product. I'd like to take you into some of the different things that we do in our core capabilities. Again, you've heard from Will, it's about the local store. Local store inventory. We're talking about MRO fasteners, right to my left here. You look at the bins.
When you hear the word MRO, maintenance, repair, and operations, that's where someone's saying, "I need to keep this place running, that machine rolling," and we have something go down, "I need a part." They go to the bin, they grab it, they go right back to work. Okay. They need that in their plant, and they need someone that can fulfill that and replenish that oftentimes daily. We also talk about OEM, original equipment manufacturing. That is now where someone's producing something. That's where they need high volumes of fasteners, and they may need them by the hour, and someone out there to manage that. Custom manufacturing right here out front. That's where they say, "Standards don't work, specials don't work. I need this print. I have this print. Can you make this for me?" Yes, we can.
I don't have a print, but I have this part." We will reverse engineer that part for them and produce a part over at our manufacturing facility. Again, I want to just say, if it's high volume, we can take it overseas. Again, high quality always with Fastenal. Transportation network is critical. Again, how do we get a part from Asia to a customer in their facility? It's through our distribution network. Then our VMI services. We'll come into your facility, we'll stock it in our branch locally. We'll do what it takes to get you taken care of within your place of business. Now I'm going to take you down one more layer, and I'm going to talk about the OEM, the FMI. We call it Fastenal Managed Inventory. Two individuals I'd like to really recognize, and that's Jeremy Johnson and Darryl Dvorak.
Both these gentlemen have stepped up and said, "I'd like to take control of this initiative," and they have done a wonderful job. Now on the OEM, we're going to just take it from the top, the most energy, how do I say, the initiative that takes the most energy for us, and we'll take it from the OEM. This is what we do. It's a local supply chain again. Then we'll go in and it's global sourcing. We'll come into the facility for manufactured parts. We'll look at the quality of their items, engineering, and then logistics. All this goes into our OEM initiative. These are customers with high volumes of fasteners. What we come in is, our tagline internally is get in line and stay in line. Think of a window manufacturer that they're buying from someone else.
We'll come in, make the call, identify the problem, then we'll stay right with the customer till we get one part. That's all we want. Just give us one opportunity. Then we'll come in, we'll bring a solution, and we'll then begin to come in their facility and manage their inventory. Sometimes, like I said earlier, they need a special part. Excuse me. We've now taken our manufacturing, and we've really put some energy into this. This is where we have custom manufacturing, which you drove by on the way in. We have cold heading. This is where we're producing high quantity production runs. Think thread cutting screws, high speed screws of sorts. They'll come in, and we'll make 20,000, 30,000, 100,000 pieces. Holo-Krome, we purchased this company a few years back, highly recognized name in the industry on socket products.
We're truly making the unavailable part available when you think of manufacturing. Now we're going to go down to the Fastenal Managed Inventory. Really, pictures, they say, says a thousand words. When you look at the before and after, that says everything you need to know about what we are trying to do for our customers. We'll go into their tool crib. There we'll walk in, and it'll be chaos. Labels will be off the bins, boxes will be sitting on top, bins will be empty. It'll be dusty and dirty. We come in, and we say, "No, let us bring our bins in." We have a real nice system for our people. In the old days when I had to do it at the store, it was like that. We came in, we tore bins off, labels.
We were just cleaning them up, putting new ones on, and it was work. Today, our stores can go out, identify the problem. Here's the solution. They can go in, and on their webpage, they can go in and start selecting parts and just dropping them in. What'll happen then is we'll start, and we'll get the labels printed in our build centers. The folks in the build centers will get the bins ready for our people in the store efficiently, send them out. Our folks will have them package the fasteners. They'll start to fill the bins, and it's an excellent cycle for us to do FMI or Fastenal Managed Inventory. When you think about this, it's like if you were a meat packing plant in Iowa or you're a processing place out on the East Coast, and you need stainless.
We have stainless bins or stainless fasteners that we can put in. The key here is, again, as I said earlier, these parts are waiting on a problem. That's all they're doing. A problem arises at any hour of the day, they need their parts. Stainless or Grade 5 or Grade 8 or what have you. We've taken OEM, FMI, manufacturing, and we've identified a problem where we have customers that we have bulk fasteners in our stores. 2,600 stores, roughly. Every store has a fastener center, large quantities of fasteners. We identified and heard from our customers that you know what we need is we want to buy small quantities of fasteners.
What we did is we went out, and as you can see in the slide here, we created a mini pack or a packaged fastener center that when the customer walks into our store now, they can grab a couple bags of fasteners and be on their way. This really is boiling down to a strategy of a local store servicing customers in any capacity. Do you want us to come to your facility? Is it a production facility? We'll come in and help you. Do you want bins replenished every month? We can do that. Do you want to come into our store and do you need bulk fasteners or bulk anchors, customer? We have those. If you have a small project and you want bagged fasteners, we can do that.
The point I'm trying to drive home more than anything else, it's about our stores. You've got to process in your mind when you think of Fastenal, you've got to compare us and you've got to think, is this a better strategy or is it a better strategy to buy out of a catalog and try to move fasteners? You got to think that through. The internet, the 1-800, or do you want someone local looking you in the eye and saying, "You know what? I hear exactly what your problem is. I can take care of it." For us at Fastenal, it's real simple. It is about our men and women in the store. It really is. It's about local people with local inventory solving and providing local solutions. It is truly about growth through customer service. Thank you. Thank you.
With that, I'd like to turn it over to Walter Tate.
Good morning.
Good morning.
It was a real honor to be asked to speak here in front of what a great group of shareholders, directors, all of our Fastenal leadership, coworkers, and even my parents who made the 1,000-mile trek to be here today. I appreciate it. I'd also like to thank our people at our distribution centers. What we do when we go in and automate hubs is much like remodeling your kitchen. When you remodel your kitchen, you have to take everything out of your cabinets, you have to move all of the stuff that was stuffed back in a corner, you have to put it in your living room, your den, et cetera. It makes multiple areas of your house basically unlivable. We go in and we do these automation projects with great return in the future.
We ask our people to go in and deal with the fact that we displace certain portions of the operations without affecting our customers, and they do whatever they have to do day in and day out to make that happen for the nine months to a year that they're under construction and being updated. They do a great job taking care of our customers, and I really appreciate that. As a housekeeping note, Lee said he will be translating this into Midwest. I'm from Alabama, so if anybody doesn't understand me, see Lee after the meeting. I tried to look at scenarios that would kind of bring it down to anybody who doesn't deal with it, because I deal with this every day. One of the things that I thought about was grocery shopping.
Grocery shopping is a lot like what we do in our distribution centers every day. We make a list, the customer provides a list. It comes to the Fastenal warehouse, and we walk up and down the aisles every day passing thousands of items we don't need to get to the one or two that we do. Same way as if you run in the grocery store, the milk's always in the back. It always seems to be that way. We spend a lot of time doing that, you spend a lot of time doing that when you go to the grocery store. What we look to do is how do we automate that? Think about going into a grocery store.
You've got your list, all of a sudden, you stop right when you walk in the door, you get a shopping bag, and the shelves just automatically appear to you. That's exactly what we're doing with this automation. Instead of walking to the part, wasting the time, we're bringing the part to the picker. Once you're done, the shelf just goes away and the next item you need from your grocery list appears in front of you. As we continue to revolutionize vendor-managed inventory, we're automating that list for the customer through our FAST Solutions, the FAST 5000, the FAST 10000. We're automatically generating that list to our warehouses back to the customer. The best equation I can think of is every time your refrigerator was almost out of milk, more just appeared. That's what happens with our FAST Solutions.
What is an automated storage and retrieval system? It's a fancy word for a variety of computer-controlled methods of automatically placing and retrieving loads from a specific location. I actually like a term that was come up by a guy that I work with named Matt Lowe. He calls it auto magic. You put the inventory in the tote and it auto magically disappears, and it auto magically reappears at the time it's needed to pick for the customer and process. That's really all it is. It consists of a few things, storage rack, captive containers, cranes, robots, conveyors, barcodes, and the real intelligence is in the software, how we process our orders and what's done behind the scenes. I'm running a little fast.
Right now, I'm going to show you a little warehouse or take you through a little tour of what we're doing, if I can get this to work.
Why is Fastenal investing in warehouse automation? To get a better sense of how this technology is impacting our business, let's take a look at the activity that takes place in this distribution center on a daily basis. We'll start with our traditional picking process, using people and forklifts to store and pull product from rows of shelving. With this method, once the product is received into the warehouse, it's hauled to a shelf location, which may be hundreds of yards away, and then manually entered into the system so that it can become live inventory. To fill each store's daily orders, employees known as pickers travel back and forth across the warehouse, picking store orders one at a time.
We've improved this process significantly since we implemented it years ago, but it's still relatively time-intensive, which is why we only use it for bulk items that aren't supported by our automated systems. In fact, around 60% of all of the time spent in a traditional warehouse involves traveling to the next pick. Of course, every time a product is touched, it increases the potential for accidents and human error, compromising safety and accuracy. Our automated storage and retrieval system, or ASRS, eliminates many of these issues. With this system, the product becomes live, ready-to-use inventory the moment it's received in. Upon receipt, inventory is placed into a custom-made plastic bulk container. It's then conveyed to a high-density rack system where it awaits an order assignment from our warehouse management computer system.
Rather than traveling from one pick location to the next to fill an order, the product is automatically brought to the picker, a journey that involves robotic cranes and state-of-the-art conveyor systems. The product isn't touched until the moment it's packed, minimizing the potential for errors. The process is further streamlined with our new pick-to-light technology. This system is reserved for high moving prepackaged items that lend themselves to a grab-and-go process. Things like cable ties, fastener quick packs, and saw blades. We don't store a huge number of items in our pick-to-light system, but together these products represent about 30% of our total picks on a daily basis. Rather than wasting time and energy moving these repetitive items via cranes and conveyors, the product is stored along a conveyor line.
As a shipping container representing a store order moves down the line, it passes through a series of product zones. If a product in a given zone is needed to fill the store's order, a light illuminates, prompting the picker to grab the item and place it in the container. By the time the container reaches the end of the line, it contains all of the high moving product needed for the store the next day. Using our traditional picking method, we can pick around 40 lines per hour. The primary ASRS picking solution allows us to process orders for most products at a rate of 80 lines per hour. Finally, our pick-to-light system, which again is reserved for a subset of high volume prepackaged parts, enables us to achieve a rate of 250 lines per hour.
By matching the product to the right picking solution, we're able to fill orders more quickly, accurately, and efficiently, allowing us to get our trucks on the road earlier and ultimately improve our service to the customer, all while reducing labor and distribution costs.
That was a little overview. Hopefully it helped everybody understand. You start back in 2007, I'll kind of run everybody through what we've done and where we're going as far as automation. 2007, we really had no automation. In 2008, we started with our first facility in Denton, Texas, and that represented about 10% of our total sales moving into an automated system. I talked about the fact it's like remodeling your house. Sometimes when you have a really big house, you can't remodel all of it at once. We really spent the next few years Unlikely I forgot to hit the button. 2009, we moved about 18%, but that was in Indianapolis that we had to do in three phases. 2010, we continued.
We brought about 26% of our sales up to automation, then we finished the third phase in 2011, which brought about 34% of our sales up. That three years was on Indianapolis because we had to continue to keep the business running as we moved through different sections of the business. That is our master hub. 2012, we actually moved right here to Winona, Minnesota, which is our second largest and our oldest distribution center in the network. In fact, if anybody who wants to see it, they'll be happy to show you through the new system on the other end of the building when they turn it back on as soon as I quit talking. That took us to over 50% of our sales. What we decided during the Winona was we decided, you know what? We're really going to push forward with this.
The return, taking care of our customers, it's the right decision for us. If we move forward this year, we're actually automating our Atlanta facility, which turns on next month, our Akron, Ohio, facility, which turns on in September, and our Scranton facility, which we're going to try to have turned on by the first quarter of next year, taking us to over 70% of our sales. We roll into 2014, we still have a pretty aggressive plan where we're going to take care of our Kansas City facility, our California facility, our High Point, and hopefully our Kitchener, Ontario, facility up in Canada and get some of this savings up into that area. In 2015, we hope to have our new state-of-the-art facility built up in Lacey, Washington, where we purchased some land and we are developing a greenfield facility for that area.
That kind of gives you the plan of what we're doing and where we're headed. I kind of put this slide together to show this is kind of how we used to do, and it kind of removes some steps. We used to touch a package approximately 10 times. From the time it came in a door till the time it was loaded on a truck, we would handle that 10 times. Every time it's handled, that's an opportunity for a mistake and an additional cost. With the automation that we're doing currently with the ASRS systems and the current state of what we're rolling out, we've cut that down to six. We're not happy there. We can continue to do better.
As we move forward with things like automated receiving and other automated initiatives that we're scoping and working on right now, we think we can cut that down to five. In essence, taking 50% of the work and the non-value-added cost of processing a customer order. In conclusion, why do we automate? Well, there's several reasons. Speed. We fit the right solution to the right process. We fit the pick-to-light to the grab-and-go products. We pull the ASRS systems for the non-grab-and-go products. Accuracy. We actually go to one part per tote. Why that's important is our number one mistake in traditional picking is right shelf, wrong part, meaning I grab something off the shelf next to it, above it, or below it. By only presenting the picker with the product that's to fulfill that order, we eliminate that opportunity for a mistake and provide better customer service.
Cost is really easy. The less we touch a product, the less it costs to process an order, the more we can add to the bottom line from a DC network. Extended building life, and that's really a big one. The Winona facility you're in here today is a great example. We were landlocked. We put on high-density storage. We never thought we could get this facility as far out as it is. We don't even know how far it can go right now because we have expansion plans and can probably double what we're doing out of this building. If we try to do that in a traditional warehouse, we'd be somewhere in the middle of the Mississippi right now. It allows us to keep the jobs local, where the people are. We have great trained people and extend the life of our facilities.
That's what I got. Thank you for your time.
Before we go back to see the results of the election, we have a few minutes to open up for question and answer. I believe there are some people with mics around. Yeah, someone back there. If you'd like to ask a question, please raise your hand.
I'm Marian Peace. I'm from La Crosse. I'm a longtime shareholder. I have a problem with customer service. I know you don't get to see that. More than once this year have I been cut off by a Fastenal van, and I mean really sharp.
You mean a Fastenal vehicle?
Yes.
Okay.
Not the truck and not the big trucks. It's the van. Fastenal, I'm very proud of Fastenal. I think you've done a great job. For customer service, they remember the name on the van. They don't know who it is, but I've been really sometimes very angry. I had to get out of cruise control. They just cut you off. I know you don't see that, but perhaps there's somebody who can teach these people to be a little more careful. Thank you.
Thanks for your comments. We do concentrate very much on our safety record, and I apologize for what happened to you. We have a great transportation group, and we are very concerned about the safety of our drivers. We have more than 6,000 vehicles, safety of our vehicles with the public, and [inaudible ] about 6,000 vehicles on the road today.
My understanding is you may be making some of your own fasteners. To me, that's vertical integration. Could you explain why vertical integration is important to your operation?
Yes. Back up a little bit. We've been making some of our own fasteners since 1982, I believe. Is that correct, Bob? Since 1982. We've been doing this for a long time, and it's really about the specials. We produce about somewhere between 4% and 5% of what we sell. We're not trying to make the standard fasteners that people make in very large factories at very good cost. We're trying to make the items that are lower quantity, special materials. Many times it's a highly engineered part made out of a special alloy or materials that are not on the shelf, and we do that to enhance our customer service. Our goal, as I said earlier, is to put our salespeople in a position to say one thing, yes.
That allows us to do that a much higher percentage of the time. If you go into our stores, many of them, you'll see a sign that says, "If we don't have it, we'll make it." That's really what we're trying to accomplish. Does that answer your question, sir?
My name is Eileen Bahula, I'd like to know what your growth plans are for expansion of the company.
Well, we have lots of growth plans to expand the company. It's really driven around adding additional people and additional products to sell. For many, many years, it was about opening 30% more stores every year over a long period of time. We did that basically throughout the '80s and the '90s. As we run out of store locations, we have to look at other things. One of our big areas is international. We continue to open in new countries and add additional people outside of the U.S. or outside of North America. One would be our vending systems, where it's really a delivery system. We look at it as an off-site store that's designed to grow our products. Another is expanding product into much bigger or expanding greatly into new product areas like metalworking and cutting tools.
It's about adding people, adding products, adding new deliveries, and new geographies, and several other things, but those would be the four major areas.
We want you to know that we old shareholders really appreciate the continual increase of the dividend.
We middle-aged shareholders like it as well.
Also, I wonder if there's any plan in the near future for a dividend reinvestment program because we'd like to get more shares continually.
I don't believe we have anything in the works right now for a dividend reinvestment program. Not that I know of. I don't think we've been discussing that. Did we wear them out? Oh, there's one over here.
Yes, I'm John Duzak, and I'm a shareholder. Been a shareholder since Well, no one wants to account for that time. My question has to do with Europe. How are you doing in Europe?
We're doing okay in Europe. We have a lot of good things going on. Our European business is centered on We have a lot of business with a few customers, meaning it's larger customers, and a couple of our larger customers have been struggling in the last year or so. We're expanding nicely. We continue to add countries. We have a few companies that are very slow, so our actual sales growth is a little lower than we would expect. We continue to expand because we think it's a good opportunity.
How about in the eastern part of-
Europe?
Europe, yeah.
Today, we're in three countries in what would be considered the old Eastern Bloc . We're in Romania, we're in Hungary, and we're in the Czech Republic. All three of those areas are doing quite well. Romania is quite new for us. We opened it, I believe, in May of last year, so it's less than a year old.
How about Slovenia?
We're not in Slovenia, no. I don't know if we have customers in Slovenia or not. I don't know.
I hear the German produce a lot of their products over in Slovenia because they're very high-quality manufacturing.
Actually, we've found that all of the eastern European countries that we deal with have a craftsman style, very high-quality production manufacturing. We also do sell into Poland, but we're not located there.
Thank you very much.
Thank you.
I find the automation extremely interesting, and it appears to be a huge financial undertaking. Is there any way that you've been able to monetize it and predict the payback on that kind of expansion?
Oh, yes. Before we decided to do it, the reason it took us from 2007 to 2012 to decide to really go full force, is we were measuring the returns. We found that the returns on these investments actually exceed the average return that Fastenal is getting on their invested capital. That's what we base the returns on, or we base the investment decisions on those results.
Hi, I'm Ed Walsh, a stockholder. A question I have is, what quality control do you have on imported items? I know the Chinese were mislabeling bolts at one time.
We have a tremendous program, and I'm not saying this just because Bob's sitting next to me, but I've said it to hundreds of customers over the years. We have an advantage because we were founded by a gentleman with a mechanical engineering background. Back in the '80s, we were one of the first companies, probably in the world, to have lot traceability, to have a very good part numbering and quality system. When we opened Fastco Trading, which is our Chinese trading company, we actually invested in putting three A2LA laboratories in Asia. We have one outside of Shanghai, China. We have one in Kaohsiung, Taiwan, and we have one in Johor, Malaysia. What we do is we actually test the product before we take possession because, well, there's lots of reasons. One is you want to have a good product.
It's a lot easier to argue whose product it is when it's on their dock than when it is on our dock. It's also we save a lot of time because if we do find a quality issue by testing it when it's still in China, we can get things going much quicker. It could take six to eight weeks to get the product here. Very good quality standards, and it's really all driven by our group that works in the building next door to us, our quality engineering group, where we take it very serious.
Yes, my name is Roger Sorensen, and I'm a shareholder going back to when you were first went public.
Happy one?
Pardon?
A happy one?
Yes. What troubles me is I went through a GM truck manufacturing facility about a year ago, and in that facility, there were all kinds of boxes of fasteners that said Made in China. I'm wondering, do you guys supply that possibly, or are you doing much with auto manufacturers?
We probably don't supply the GM truck manufacturer. A lot of the parts that are actually used to assemble high-volume vehicles like trucks are purchased direct. We do have some high-volume business, but typically not car and truck business.
I'm Carol Jefferson, a shareholder here from Winona. First, I'd like to thank Fastenal and Bob Kierlin for all he's put into our community. My question is a problem I face with many of my financial holdings, and that is private equity or Warren Buffett buying out my best companies. What are our prospects here? Do you have a way to defend yourself against this? Have you been approached by private equity? Need we be concerned? Thank you.
Well, I think our best defense against that is a good offense. If we continue to do well and we have a high price-to-earnings ratio, people are going to have to be more bold than they are to try and ante it up. If you look at the recent ones, you look at Warren, his group bought out Heinz. I think there was about roughly a 20% premium on that stock at the point of purchase. The best thing is we continue to keep our folks motivated. We continue to focus on our customers in the market. If we grow the business, keep our stock price high, that's usually typically not a problem. We can't predict that. We can only do our jobs and continue to move forward.
Well, I want to congratulate the management and staff of Fastenal. It's been a great benefit to all of us who own stock, and I think you should be congratulated. Bye bye.
Thank you.
Dwayne Carlson, stockholder. Second question. Thank you. Is there a trickle-down effect between housing starts and your revenues?
We have not seen a trickle-down effect from housing starts. If you look at housing, we're not highly involved in the actual construction of the home, and it's more of a stick construction. Where we benefit from housing would be things like the shingles. Like Owens Corning is a supplier of ours. Shingles, insulation, garage door openers, people making the trucks to pour the concrete. There is a residual effect, but it's quite distant, and we're not feeling the positive impact at this point. We're crossing our fingers and hoping. With that, I think I'll end the questions and turn it back over to Bob to see if we were elected for another year. Thank you.
Probably the most important thing here, the two winners of the buckets of NASCAR and Fastenal prizes in the back. One is Ray Walter. Ray? There he is, right in front. The second one is Jim Ingbrecht. Where's Jim? Way back there. Both of you can pick up your buckets at the end. The ballots have now been counted, and the report of the inspector of election indicates that Robert A. Kierlin, Stephen M. Slaggie, Michael M. Gostomski, Willard D. Oberton, Michael J. Dolan, Reyne K. Wisecup, Hugh L. Miller, Michael J. Ancius, Scott A. Satterlee, Rita J. Heise, and Darren R. Jackson have received the required number of votes and are hereby elected directors of the company.
The report of the inspector of election also indicates, number 1, that a resolution for the ratification of KPMG LLP as the independent registered public accounting firm for the company for the fiscal year ending December 31, 2013, has received the required number of votes and has been adopted. Two, 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. All ballots and a record of all proxies will be filed with the books and records of the company, and the certificate of the inspector of election will be attached to the minutes of the meeting as Exhibit C. I will now entertain a motion for adjournment. The chair recognizes Mr. Max Harnpanich.
Mr. Chairman, my name is Max Harnpanich. I am a shareholder of the company, and I move that the meeting be adjourned.
Thank you. The chair recognizes Mr. Michael Chikanowsky.
Mr. Chairman, I'm Mike Chikanowsky, a shareholder of the company. Because we're getting hungry, I second the motion.
All right. It has been moved and seconded the meeting be adjourned. All those in favor say aye.
Aye.
Food is right over here. Head over there.