We’ll start to dig into the financial data. Fortunately, Fastenal’s financial statements are straightforward. Except for Berkshire Hathaway, I INSIST on scrutinizing the financials before investing in a stock. While my attitude may keep me out of interesting opportunities, I believe it will also keep me out of the next Enron, whose financial statements were known for being extremely complicated. (I think the management intentionally made them complicated.)
The focus here in Part 3 will be on the net liquidity. Net liquid assets is the liquid assets minus all liabilities. If the company has positive net liquid assets, then it can pay off all liabilities without having to sell nonliquid assets. To be conservative, I EXCLUDE inventories and receivables. All too often, inventory doesn’t sell, and receivables don’t get paid.
Liquid assets consist of cash and marketable securities (at fair value). At the end of 2010, Fastenal had $143.693 million in cash, $26.067 million in short-term marketable securities, and $5.152 million in long-term marketable securities. Thus, Fastenal had a total of $174.912 million in liquid assets.
At the end of 2010, Fastenal had $60.474 million in accounts payable, $96.412 million in accrued expenses, $5.299 million in income taxes payable, and $23.586 in deferred income tax liabilities. Thus, Fastenal had a total of $185.771 million in total liabilities.
So at the end of 2010, Fastenal had -$10.859 million in net liquid assets. I’d prefer to see positive net liquid assets, but I’m not ready to rule out Fastenal as an investment just yet. Part 4 will discuss free cash flow.
