Exhibit 10.1
Fastenal Company
Bonus Program for Executive Officers
Quarterly Incentives
Our executive officers are eligible for cash incentives through individual bonus
arrangements based on improvements in the overall financial performance of the
company and/or their respective areas of responsibility. The bonus arrangements
provide our executive officers with the opportunity to earn a cash bonus for
each quarter during a year when we increase our earnings above a predetermined
minimum target.
The primary cash bonuses for all of our named executive officers other than our
chief financial officer are based on growth in pre-tax earnings of the company
and/or the officer's area of responsibility. The compensation committee selected
pre-tax earnings as the appropriate metric for calculating cash bonuses for
those officers because of the committee's belief that the focus of the named
executive officers should be on profitability, which is the primary driver of
shareholder value. The primary cash bonuses for our chief financial officer are
based on growth in company-wide net earnings because his responsibilities allow
him to affect our entire financial position including our tax position. The
compensation committee believes that no named executive officer should earn a
cash bonus under this program for a quarter unless financial performance has
improved and therefore sets minimum targets for each quarter that are equal to
the earnings achieved for the same quarter in the prior year. The compensation
committee requires growth in earnings before any bonuses can be earned due to
its belief that growth is achievable with superior effort and will generate the
cash necessary to expand the company's operations in accordance with our
business plans and increase shareholder value.
The payout percentage used to calculate the amount of each named executive
officer's primary quarterly cash bonus reflects the officer's track record in
his or her current position (i.e., newly promoted executives historically have
had to prove themselves in their new positions before earning higher payout
percentages) and relative ability to impact profitability.
We do not believe it is necessary for payouts under our primary executive cash
incentive program to be capped, as cash bonus payments to our named executive
officers are tied directly to our financial performance so that they increase
only if and to the extent the company's profitability grows. We do not base the
cash incentives paid to our executive officers on multiple metrics since we
believe the current design of our executive bonus arrangements, along with our
other controls, adequately mitigates risk and since the use of multiple metrics
would not be in furtherance of our goal of keeping our compensation programs
simple, understandable, and transparent, and would risk keeping our executives
focused on things other than profitability, thereby depriving them of the clear
feedback and motivation necessary to improve our bottom line.
The compensation committee approved a supplemental return on assets bonus
program for 2019 that is discussed under '2019 Incentive Program' below.
2019 Incentive Program
The bonus arrangements for our named executive officers for 2019 were approved
by our compensation committee at its last meeting in 2018. Consistent with prior
years, the bonuses for 2019 were based on growth in pre-tax earnings or net
earnings of the company and/or the officer's area of responsibility. The bonuses
for each quarter were determined by applying a payout percentage to the amount
by which pre-tax earnings or net earnings exceeded 100% of pre-tax earnings or
net earnings for the same quarter in 2018. The compensation committee determined
that the bonus formulas for each of the named executive officers for 2019 would
remain unchanged from those in effect at the end of 2018, except that Mr. Owen's
payout percentage was increased due to changes in his responsibilities. While
the compensation committee otherwise maintained the bonus formulas for each
other named executive officer consistent with 2018, it approved a supplemental
bonus program for 2019 for each named executive officer other than Mr. Florness.
The supplemental bonus program, known as the ROA (Return on Assets) Plan, is
intended to encourage better management of accounts receivable, inventory, and
vehicles and would provide cash incentive amounts on a quarterly basis for asset
management improvement over the same quarter in the prior fiscal year and is
described in more detail below.
The specific bonus opportunities for our named executive officers are summarized
in the table below. Each named executive officer's cash bonus for each quarter
during 2019 was determined by applying the payout percentage listed opposite his
or her name below to the amount by which pre-tax earnings or adjusted net
earnings of the company and/or the officer's area of responsibility for that
quarter exceeded 100% of such earnings in the same quarter of 2018 (the 'minimum
target').            

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Name
Earnings Type
Payout Percentage
Mr. Florness
Company-wide pre-tax earnings
1.25%
Mr. Lewis
Company-wide net earnings
0.90%
Mr. Owen
Company-wide pre-tax earnings
0.85%
Mr. Miller (1)
Pre-tax earnings
1.00% / 0.20%
Ms. Wisecup
Company-wide pre-tax earnings
0.65%

(1)
The bonuses for Mr. Miller were based on growth in pre-tax earnings for the
geographic areas under his leadership (Eastern United States), with the payout
percentage applied to that growth of 1.00%, as well as growth in company pre-tax
earnings, with the payout percentage applied to that growth of 0.20%.

The following table sets out, for each quarter in 2019, our actual and minimum
target pre-tax earnings and actual and adjusted net earnings on a company-wide
basis for that quarter, in each case rounded to the nearest thousand. (As
indicated above, the 'minimum target' amount in 2019 was 100% of such earnings
in the same quarter of 2018.)
2019
Actual
Pre-tax Earnings
Minimum Target
Pre-tax Earnings
Actual
Net Earnings
Minimum Target
Net Earnings
 
First quarter
$
257,467,000

231,873,000

194,103,000

174,303,000

 
Second quarter
271,378,000

265,961,000

204,593,000

201,470,000

(1) 
Third quarter
278,351,000

259,480,000

213,488,000

195,810,000

(1) 
Fourth quarter
236,465,000

229,703,000

178,708,000

168,698,000

 

(1)
In calculating the changes in second and third quarter net earnings from 2018 to
the comparable quarters in 2019 for purposes of determining Mr. Lewis’ bonuses
for such quarters in 2019, the actual net earnings for such quarters in 2018
were adjusted to exclude the impact of the one-time tax benefit of accelerated
depreciation for vending equipment, maintenance, and repairs for such quarters.

During 2019, the approximate percentage of the actual and minimum pre-tax
earnings of the company attributable to our operations in the geographic area
under Mr. Miller's leadership was 43%.

As noted above, an additional short-term cash incentive bonus plan (the 'ROA
Plan') was approved by the compensation committee for our named executives
officers for 2019 that was designed to encourage careful management of assets,
namely accounts receivable, inventories, and pick-up trucks. Quarterly bonuses
would be payable pursuant to the plan if a specified level of improvement in
asset management relative to the comparable prior year quarter was
achieved. Improvement in asset management was assessed using a two-quarter
average of total assets divided by the trailing 12-month net sales, which we
refer to as the 'performance percentage.'  If the performance percentage when
compared to the prior year benchmark showed improvement at a level specified in
the table below, the named executive officer would receive the corresponding
bonus amount.
Improvement Amount Exceeded
Bonus Payout
150 basis points
$
15,000

100 basis points (but less than 150 basis points)
$
10,000

50 basis points (but less than 100 basis points)
$
5,000

In addition, for each whole percentage improvement (e.g., 41.0%, 40.0%, 39.0%,
etc.) a $10,000 bonus would be payable for the quarter when the new whole
percentage threshold was first achieved.  Because we did not achieve improvement
exceeding 50 basis points in any quarter during fiscal 2019 and also did not
achieve a new whole percentage threshold, no bonus amounts were paid to our
named executive officers pursuant to the ROA Plan for fiscal 2019.
2020 Incentive Program
The bonus arrangements for our named executive officers for 2020 were approved
by our compensation committee at its last meeting in 2019. The bonus plans for
our named executive officers for 2020 are unchanged from our 2019 bonus plans,
except that Mr. Florness' bonus percentage increased in recognition of his
continued growth, performance, and experience in his role and Mr. Owen’s bonus
percentages increased due to changes in his responsibilities.