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Fastenal Company (FAST)
Q3 2009 Earnings Call Transcript
October 12, 2009 10:00 am ET
Darin Pellegrino – Controller
Will Oberton – President and CEO
Dan Florness – EVP and CFO
David Manthey – Robert W. Baird
Sam Darkatsh – Raymond James
Brent Rakers – Morgan Keegan
John Baliotti – FTN Equity Capital Markets
Tom Hayes – Piper Jaffray
Jeffrey Germanotta – William Blair
Previous Statements by FAST
» Fastenal Company Q2 2009 (Qtr End 06/30/09) Earnings Call Transcript
» Fastenal Company Q1 2009 Earnings Call Transcript
» Fastenal Company Q4 2008 Earnings Call Transcript
Good morning and welcome to Fastenal’s third quarter earnings conference call. This call will be hosted by Will Oberton, our Chief Executive Officer and Dan Florness, our Chief Financial Officer. The call will last up to 45 minutes.
The call will start with a general overview of our quarterly results and operations by Will and Dan with the remainder of the time being open for questions and answers. Today's conference call is a proprietary Fastenal presentation and is being recorded by Fastenal.
No recording, reproduction, transmission or distribution of today's call is permitted without Fastenal's consent. This call is also being audio simulcast on the internet via the Fastenal’s investors’ home page at www.investor.fastenal.com. A replay of the web cast will be available on this website until December 1, 2009, at midnight Central Time.
As a reminder today's conference call includes statements regarding the company's anticipated financial and operating results as well as other forward-looking statements based on current expectations as defined by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may often be identified with words such as we expect, we anticipate, upcoming or similar indications of future expectations. It is important to note that the company's actual results may differ materially from those anticipated.
Information on factors that could cause actual results to differ materially from these forward-looking statements are contained in the company’s periodic filings with the Securities and Exchange Commission, and we encourage you to review those carefully. Investors are cautioned not to place undue reliance on such forward-looking statements as there is no assurance that the matter contained in such statements will occur.
Forward-looking statements are made as of today's date only and we will undertake no duty to update the information provided on this call.
I would now like to turn the call over to Will Oberton. Go ahead Will.
Thank you, Darin, and thank you everybody for joining us this morning. I will spend a few minutes talking about the third quarter, then I will turn it over to Dan.
I'm going to jump right in and talk about sales. We had a very nice trend or we started a very nice trend in the third quarter. It was tough going into the third quarter, but if you look at the June through September daily average trend through the end of June, through the end of September in normal times between ‘98 and 2008 our average improvement was 2.4%, our June daily average to our September daily average.
During this period, the third quarter of 2009, we improved by 5.2%. So much stronger than we have over the last 7 or 8 years, or 10 years I should say. And the thing that impresses me -- or one thing that impresses me a lot about that is that we are able to do this without the help of new stores. Normally new stores would have contributed between 25% and 30% of that growth, and we didn't have a lot of new stores opened. So the growth is unusually strong considering that.
Talking to people in the field, trying to understand what is going on with our people in the field, I believe, the trend is a combination of one, low inventories at our suppliers that they have really worked the inventories down, and now I don't think they are rebuilding from what I hear, but they are using, consuming what they buy and so we are working off a very low show [ph].
The second is, I believe our sales force is really doing a good job taking market share. They are out there working hard, and a lot of our customers and even companies that aren’t our customers are still trying to save money. So they are very open to changing suppliers if the new supplier has something new to offer. So a very, very positive sales trend. We hope we can keep that going forward.
The margin was probably the only tough spot for us. So there are a lot of tough things, but the margin was the most difficult point for us in the third quarter. We knew going into the third quarter that it would be tough on margins, but we believe we hit bottom in August. All indications are that we hit bottom in August, and we should see improvement going forward.
I'm going to break down the components of the margin just a little bit. The biggest difficulty we had in the third quarter was caused by deflation in our product, and year-over-year we believe that cost us probably close to 100 basis points, and it is really that last year was so good because things were moving up and this year it was moving down so rapidly. It was more of a whipsaw effect.