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Fastenal Company (FAST)

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Fastenal (FAST)

Q4 2011 Earnings Call

January 18, 2012 10:00 am ET

Executives

Ellen Trester -

Daniel L. Florness - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Willard D. Oberton - Chief Executive Officer, President and Executive Director

Analysts

Hamzah Mazari - Crédit Suisse AG, Research Division

Robert Barry - UBS Investment Bank, Research Division

Ryan Merkel - William Blair & Company L.L.C., Research Division

Holden Lewis - BB&T Capital Markets, Research Division

Sam Darkatsh - Raymond James & Associates, Inc., Research Division

Adam William Uhlman - Cleveland Research Company

David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division

Brent D. Rakers - Morgan Keegan & Company, Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fastenal Quarterly Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ellen Trester, with Investor Relations.

Ellen Trester

Welcome to the Fastenal Company 2011 Annual and Fourth 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 for 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 being audio simulcast on the Internet via the Fastenal Investor Relations homepage, investor.fastenal.com. A replay of the webcast will be available on the website until March 1, 2012, 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 material from those anticipated. Information on factors that could cause material results to differ -- 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 undertake no duty to update the information provided on this call.

I would now like to turn the call over to Mr. Will Oberton. Go ahead, Mr. Oberton.

Willard D. Oberton

Thank you, Ellen, and thank you, everyone, for joining us today. We're proud to announce another good quarter. In fact, it's our seventh quarter in a row where we've had EPS growth north of 30%. We're very proud of that. It's also our second year in a row that we've had EPS growth north of 30%. So we're feeling good about the accomplishments that the team has done, and I want to thank all the Fastenal people for a hard -- a job well done.

For the quarter, our sales -- we had a very good quarter for sales, coming in about the same as third quarter. And I guess the way I would describe our sales over the last 6 quarters is very consistent. If you look at it, we've been in that 20% to 22% range almost every month for the past 18 months. So they've done a nice job with just growing it consistently over a long period of time.

December, a little bit of color on December. December was actually, in my view, a better month than we reported, at just over 21%, because we had a very strong first 3 weeks and then we slowed down for the holidays. And my own personal opinion is, every year, it seems like holidays become longer or businesses take more time off if you look at the Fourth of July and different holidays. It's probably just a cultural thing. But it's very hard to read looking at the month, but the positive is we came into the month strong and had a great 3 weeks, which led us to still having a good month even with a disappointing finish.

On the margin side, we did take a dip in the margin. As you see, reporting 51.2%, still within our range of 51% to 53%. I guess, and I'd look at the numbers closely to -- things just didn't line up for us. There was some seasonal things, there -- a little bit of pressure from mix, but overall it was a disappointing quarter on margin, but we're still very comfortable with our range and believe that some of it will snap back in the first quarter. But Dan will also give more color on the pieces of where our margin deteriorated some.

Earnings standpoint. I really feel comfortable with what we did there, nice earnings growth, and I'm very proud of the fact that we reported pretax of 20.2%. That's the first time in our history that we've ever had pretax above 20% in the fourth quarter, so that was a good achievement. For the year, our pretax came in at 20.8%, the first time that we've been over 20% in actually more than 15 years. We were there in 1995. So another good accomplishment, I think, and it just shows that the power of our 'pathway to profit' is working and we're still able to get the good growth. So we're very happy with that.

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