Willard D. Oberton – Chairman
And it’s pretty close to 12 per cent. And more information, that grew in the third quarter, grew at about 24 per cent versus the company. We have enjoyed very nice growth so that’s the 12% of our business. It’ll probably slow down. But the other part of our business at 90% or 88% remaining we’re hoping we get a little tail through lower energy costs and maybe it balances. If it doesn’t balance we’ll also have about a 12 million dollar quarter energy bill. That we think is gonna go down by 3 or 4 million dollars. So we could give up a little revenue and balance it with expense. We’re hoping we don’t give up any revenue and we get to capitalize on the expense. So we worked that hard right and we’re gonna try to figure it out but it’s no crystal ball for this right now. It’s all about how the rest of the economy is affected because of lower fuel prices.
William Blair
Okay so, I wanna clarify that. You’re saying that 10-12 is the direct and indirect? Yeah okay I just wanted to be clear you said that would’ve been a little bigger than I thought but 5% makes sense. Which would be direct. Fun question. Given that decline in steel prices, should we be worried about deflation in Fastenals? can you just remind us how your Fastenal contracts work with regard of price?
Leland J. Hein – President & CEO
The large contracts which probably make up 20-25% of our Fastenal business are tied a CRU index which is a steel index. & when the triggers on that are typically they’re not all the same but the most majority of them have a 5% trigger. So if steel goes down or up, more than 5% over 6 month period. It’s always on the calendar, January & July are the trigger points. we will either raise our prices or lower our prices accordingly. Then based on that we’re figuring out what percent. If steel goes up 5% or down it doesn’t mean we lower our price as a factor in the labor. So there’s a formula there. So the other 75% of our business is not on these contract when steel goes down, we have some up side from margin that we could hold onto that pricing. And that’s really where we think our balance is. There’s always margin pressure exposure if there’s a lot of deflation in the business. So far we haven’t seen a lot but you know that time will tell. We’ve been very close with our guys in Asia, They run our business for us and, They’re in the trading business. And trying to understand what the manufacturer are saying and seeing.
William Blair
And what would the lag be? So steel prices go up or down 5% you have to change your pricing. Is it a quarter lag or is it right away?
Leland J. Hein – President & CEO
It’s usually 6 months
Willard D. Oberton – Chairman
Okay. And then one more of a kind of a big picture question. There’s a view by some that the MRO industry is more competitive today and therefore the growth is growing slower and less potentially less possible. So what is your view of the past ten years?
