Fastenal Appoints Jeffery Watts as Director and Confirms CEO Transition Compensation Structure

Watts Named Director Ahead of CEO Leadership Transition

Fastenal Company's Board of Directors elected Jeffery M. Watts as a director of the company, effective July 16, 2026, according to disclosure filed with the Securities and Exchange Commission. This appointment succeeds Daniel L. Florness and occurs on the same date that Watts formally transitions to the role of President and Chief Executive Officer. The Board determined that Watts would serve as a director until the company's next annual meeting of shareholders or until his successor is duly elected and qualified, establishing a clear governance framework for his executive leadership position.

The filing indicates that there are no arrangements or understandings between Watts and any other person or persons pursuant to which he was selected as a director. Additionally, the disclosure states that there are no current or proposed transactions in which Watts or any member of his immediate family has an interest that requires disclosure under applicable Securities and Exchange Commission regulations. This representation provides clarity regarding potential conflicts of interest as Watts assumes his dual leadership and board responsibilities.

Base Salary and Annual Director Retainer Structure

Under the new compensation arrangement approved by the Compensation Committee on July 9, 2026, Watts will receive an annual base salary of $650,000, with this amount prorated from the CEO Transition Date through the end of 2026. This base salary establishes the foundation of his executive compensation package as he assumes the top operational leadership position at Fastenal, a Minnesota-based industrial fastener and supplies distributor. The prorated calculation reflects that Watts will occupy the CEO position for approximately five and one-half months during the 2026 calendar year.

In connection with his director role, Watts will receive an annual cash retainer of $50,000 for his service as an employee director of the company. This retainer will also be prorated for the portion of the year during which Watts serves on the Board following the CEO Transition Date and will be paid in accordance with Fastenal's standard director compensation practices. The combination of executive salary and director retainer creates a comprehensive compensation structure reflecting both his operational responsibilities and his governance duties on the Board.

Quarterly Incentive Compensation Tied to Pre-Tax Income Performance

The compensation package includes target quarterly cash incentive awards designed to align Watts' compensation with company financial performance. According to the filing, Watts will receive target quarterly cash incentive awards calculated as 1.75% of the amount by which company-wide quarterly pre-tax income exceeds 100% of company-wide pre-tax income for the same quarter of the previous year. This performance metric creates a variable compensation component that rewards operational results and year-over-year profitability improvement.

Additionally, Watts will receive target supplemental quarterly cash incentive awards consistent with the Return on Assets Program, which the Compensation Committee approved on November 21, 2025. This supplemental incentive structure provides additional performance-based compensation opportunities aligned with the company's asset efficiency objectives. The dual-tiered quarterly incentive approach demonstrates Fastenal's use of multiple performance metrics to evaluate and reward executive leadership effectiveness across both profitability and operational efficiency dimensions.

Equity Award Eligibility and 2027 Forward Planning

The Compensation Committee specified that no additional equity incentive awards will be granted to Watts in 2026 as part of his CEO transition compensation package. This decision establishes a clear delineation between his initial compensation structure during the transition year and his longer-term equity participation in the company. The filing indicates that Watts will be eligible for equity incentive awards commensurate with his position beginning in 2027, signaling the Board's intent to incorporate equity-based compensation as part of ongoing executive retention and alignment strategies.

This approach to equity compensation during the transition period provides flexibility for the Compensation Committee to establish appropriate equity grant levels and structures in 2027 following the completion of Watts' first full year as CEO. The deferral of equity grants to the subsequent year allows the Board to assess Watts' performance in the chief executive role and calibrate equity incentive levels accordingly. Such planning reflects common corporate governance practices in executive transition scenarios, where new leaders' performance in expanded roles informs longer-term equity compensation decisions.

Transition from Chief Sales Officer to Chief Executive Officer

Jeffery M. Watts held the position of President and Chief Sales Officer prior to his appointment as President and CEO effective July 16, 2026. The filing characterizes the compensation approval as addressing "his transition from President and Chief Sales Officer to President and CEO," indicating that Watts was already serving in a senior executive sales and operational capacity at Fastenal. This internal promotion reflects the Board's decision to elevate existing leadership within the company's management structure rather than conduct an external search for the chief executive position.

Fastenal operates as a distributor of fasteners, tools, hydraulics, pneumatics, and other industrial supplies serving diverse industrial and construction markets. Watts' background in sales leadership positions him to oversee the company's commercial strategies, customer relationships, and market positioning as chief executive. The Board's confidence in promoting from within the existing executive ranks suggests continuity in the company's strategic direction and market approach following the leadership transition.

Board Action Timeline and Amendment Details

This disclosure represents Amendment No. 1 to a Current Report filed on December 22, 2025, as indicated in the explanatory note accompanying the filing. The amendment reports two specific Board and Compensation Committee actions taken in connection with Watts' CEO appointment. The distinction between the original filing and this amendment demonstrates the company's need to provide updated governance information as the formal director election and compensation approval processes were completed.

The filing was executed on July 16, 2026, the same date as the CEO Transition Date, with the document signed by Sheryl A. Lisowski, Executive Vice President, Chief Accounting Officer, and Treasurer. This timing ensures that governance and compensation arrangements were formally documented coinciding with the effective date of Watts' transition to the chief executive position. The amendment structure clarifies that the director appointment occurred on July 10, 2026, while the compensation approval by the Compensation Committee took place on July 9, 2026, with both actions becoming effective on the CEO Transition Date.

Governance Considerations and Regulatory Compliance

The disclosure addresses multiple regulatory requirements under the Securities and Exchange Commission's disclosure rules for officer and director appointments. Item 5.02 of Form 8-K requires companies to report the departure of directors or certain officers and the election or appointment of directors and officers, along with any material compensatory arrangements. Fastenal's filing provides comprehensive detail regarding Watts' dual role assumption, his compensation structure, and the absence of conflicting transactions or undisclosed arrangements.

The filing explicitly confirms that Watts does not qualify as an emerging growth company filer, indicating Fastenal's maturity as a public company subject to standard Securities and Exchange Commission disclosure obligations. The Board's careful documentation of the appointment process, compensation rationale, and governance terms reflects adherence to corporate governance standards and shareholder communication principles. The prorating of both salary and director retainer demonstrates attention to precise compensation calculation methodologies aligned with Watts' actual tenure in each role during the 2026 calendar year.

Market Position and Industrial Distribution Business Model

Fastenal Company operates as a distributor of fasteners and other industrial supplies, competing in the broader industrial distribution sector. The company serves manufacturers, contractors, and other industrial customers with products ranging from fasteners and tools to hydraulics and pneumatics. Fastenal's business model relies on sales and distribution capabilities, making the appointment of a leader with Chief Sales Officer background particularly relevant to the company's strategic direction and competitive positioning.

The emphasis on Watts' sales leadership experience in the CEO promotion reflects the Board's assessment of critical capabilities required to navigate industrial distribution markets. The quarterly pre-tax income targets embedded in Watts' incentive compensation structure align leadership motivation with the company's profitability objectives across varying economic cycles. The supplemental ROA Assets Program component reinforces focus on asset utilization efficiency, a key metric in capital-intensive distribution operations.