Management’s Discussion & Analysis of Financial Condition & Results of Operations 2004  $_{ }$ (Dollar Amounts in Millions except Per Share Information and as Otherwise Noted)  Results of Operations 2004 ANNUAL REPORT – PAGE 9  Our stores that are two to five years old (2004  group reflects store sites opened in 2002, 2001,  or 2000) are also impacted by the economy, but  to a lesser degree. The net sales growth rate of  our store sites that are two to five years old was  as follows: Business Overview—  Fastenal is a North American leader in the wholesale distribution of  industrial and construction supplies. The Company operates stores sites primarily located  in North America. On December 31, 2004, the  Company operated 1,533 Company-owned or  leased store sites. Most of the Company’s customers are in the  construction and manufacturing markets. The  construction market includes general, electrical,  plumbing, sheet metal, and road contractors. The  manufacturing market includes both original  equipment manufacturers (OEM) and maintenance and repair operations (MRO). Other  users of the Company’s products include farmers, truckers, railroads, mining companies,  federal, state, and local governmental entities,  schools, and certain retail trades. Geographically,  our customers are primarily located in North  America.  Combined, these two groups represent a consistent same-store view of our business.  These stores, which are more than two years old  (2004 group reflects store sites opened in 2002  and earlier), had net sales growth rates as  follows:  Financial Overview— During 2004 and the  latter half of 2003, the strength of the global  industrial environment positively impacted the  Company’s performance. During the first half of  2003 and all of 2002, the recession in the global  industrial environment negatively impacted the  Company’s performance, and that of the industry  as a whole. The impact of the economy is best  reflected in the growth performance of our stores  greater than five years old (2004 group reflects  stores sites opened in 1999 and earlier). These  stores are more cyclical due to the increased  market share they enjoy in their local markets.  The net sales growth rate of store sites more than  five years old was as follows:  During August 2001, the Company acquired a  business which sold packaged fasteners to the  retail market (Do-It-Yourself or DIY Business).  During October 2002 this business was sold. The DIY Business had net sales of approximately $17.0 during 2002 (or approximately 1.9% of the consolidated net sales  for the year). Excluding the sales related to the  DIY Business, net sales and growth rates in net  sales would have been as follows:  2004 2003 2002 24.9% 16.5% 16.6% 2004 2003 2002 15.3% 3.3% 0.5% 2004 2003 2002 Net sales  $1,238.5 994.9 888.5 Percentage change  24.5% 12.0% 9.7% 2004 2003 2002 17.1% 5.3% 3.2% 2004 2003 2002 Net sales  $1,238.5 994.9 905.4 Percent change  24.5% 9.9% 10.7% Net sales—  Net sales and growth rates in net  sales were as follows: