Fastenal Company (FAST)
Q2 2010 Earnings Call Transcript
July 13, 2010 10:00 am ET
Ellen Trester – Internal Audit Manager
Will Oberton – President and CEO
Dan Florness – EVP and CFO
Tom Hayes – Piper Jaffray
Luke Junk – Robert W. Baird
Adam Uhlman – Cleveland Research
Brent Rakers – Morgan Keegan
Sam Darkatsh – Raymond James
Hamzah Mazari - Credit Suisse
Good day, ladies and gentlemen, and welcome to the Fastenal Company 2010 second quarter and earnings conference call. At this time, all lines are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will follow at that time. (Operator instructions) I would now like to introduce Ms. Ellen Trester.
Welcome to Fastenal Company 2010 second quarter and 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 home page investor.fastenal.com. A replay of the webcast will be available on the website until September 1, 2010 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 material 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 Will Oberton. Go ahead, Mr. Oberton.
Thank you, Ellen. And thank everybody for joining us today. Also, I thank everybody for the support you have given us over the last several quarters because things have been a little tougher and we are starting to bring it back. I’m very proud to report that we had a nice quarter. The second quarter turned out very well for Fastenal. Our sales are really on track with where we thought they would be.
If you recall back to our January conference call, Dan and I talked about the sequential trends and where we thought they would come out. And after the call, we got some people who were cautioning us on being a little bit optimistic, but fortunately they have played out exactly where we thought they would be.
If you look at the trend line, I believe five out of six months have been at or above the sequential pattern – historical sequential pattern. June came in right at 21.1%. At the end of May, we thought maybe June would do a little bit better, but actually it turned out that May was just a blockbuster month. We had a lot of things lined up for us. And so we are not at all disappointed with June. May was just a spectacular month.
The sales really were driven by our manufacturing customers, which were up 29.8% for the company – for the quarter, excuse me. Very, very good pattern. Construction customers did come back just a little bit. They were way down in the first quarter, came back to flat to plus 0.5%. So that’s actually a very positive sign. We don’t see a lot of activity there, but in some of the areas like oil and gas and some of the other more mechanical areas of construction we are seeing some life coming into that business.
Our active accounts have not been growing the way that we would like them to. They were up 3% for the quarter. We have done a lot of research trying to understand that better, and what we found, it’s really being driven by the lack of actives as being caused by two things. One is that our construction customers, a lot of the residential, which isn’t a big piece of our business, but it’s a big piece of our actives, and the small commercial contractors are just not showing up with the frequency they did at one time. Many of them are just very – not a lot of business.
The other thing that’s hurting our active accounts is that we have opened fewer stores, and new stores have always been one of the greatest drivers of active accounts. So all of the actives were only up 3%. We are pretty comfortable with where we are after we have looked at the data. In the manufacturing side, we had very nice growth in actives and that’s driving that 29.8% growth in manufacturing business.