Leland J. Hein – President & CEO
Thanks Ellen, Good morning. Before, I start I’d like to just say thank you to the Fastenal members on the call. I know there’s a lot of you that tuned into this. And we’re so appreciative of the work that you did in the fourth quarter. So just a great job and I’d like to report that it was a good quarter for our company. 13.8% sales growth that’s 15-7 on the daily average and there will be some questions I’m sure on Christmas. And December was in line with the rest of the quarter. We just felt that it was the right thing to do to take the 26th off. 20.1% on earnings growth and that equated to 28% incremental margin growth which again these are strong numbers for our company and, how we got there really was we continued to work hard on our gross margin, but in this quarter we really focused our attention on our expenses and the Fastenal company and the members, I gotta tell you really did a nice job looking at all different types of expenses and we really clamped down.
And one thing that really came on is our ability to manage our labor. Historically, our daily average is going to decline somewhere around 10% from the end of October to the end of the year. We know that, and what we simply did is we turned down the hours and pulled back the hours and we looked at the timing of thanks giving, Christmas etc, and just with the natural decline in our daily average. But, we continue to add people at the company except in the part time ranks. And I’d say in 2015 with a good economy we are committed to putting selling energy in our stores. And I just again when we talk internally, we are committed to a store based model, we are committed to the fact, that we really believe being close to our customers offering a high level of service is… really the best way to really approach the industrial market.
The other question, we get is you know, if you’re gonna add 10-15% more hours in the store can you really afford it? That really equates to about 7% net effect on the labor dollar impact and so, It’s a good model for us. It really holds well for our stores and for most importantly our customers. So, strong quarter, we continue to stay disciplined on the gross margin and there’s pressure there but we really like the momentum and the direction we’re moving with that. I’ll turn it over to Dan.
Daniel L. Florness – Chief Financial Officer
Thank you Leland J. Hein – President & CEO, and Good morning everybody and thanks again for participating in our call today. I think our press release is self-explanatory on the quarter. We’ve probably smuffed, the numbers I think as we touched on our sales transit remains strong throughout the quarter, endeavored well as we go into 2015. I tried to highlight on the bottom page 1 titled page 2 a handful of bullets of things that I think were important to the business, and you know what I wanted some of this commentary is based on questions that I might get, and so you know I did wanna touch on the head count patterns as we were going through the fourth quarter, specially at the store level as we talked in the past about the investment and selling energy and adding hours, the one position we were in this year that we really weren’t in last year is we are in a position that much more acutely managed the expense because we weren’t in a ramp up mode, we were in a manage the business mode and so, we did a much better job in managing our expenses, as we went into the fourth quarter, we were able to dial up and down the variable components of our expense, a big piece of that being store based labor, to really match the needs of the business and really the needs of the customer to serve the customer.
One item that I typically touch on or get questions on is the table we have on passage way of profit. I think it’s a good way to assess some of the underlying things going on our business. One of the things that is helpful is to appreciate how we look at our business. One thing that we do is we’re an organization that rewards our personnel internally whether that be people at the store, at the district level, distribution center or some other support roles. We reward folks on our ability to grow the business. We reward more fore for growth sales then we do for maintenance sales, that’s an example.
We reward for managing and containing the costs of our business and growing the profits of the business. So, these are the three things really critical when we look at how we compensate and so, one thing to keep in mind when we look at that pathway to profit table over the three years, I would look at different buckets and in my childhood always look at 150,000 plus store or I look at the last two groups combined, it helps me understand what’s really going on in the business, and I’m pleased to say when I look at 2014, I look at that group the level of profitability, the components of the profitability make a lot of sense to me and position us well to go forward. One thing, you will notice is the profit in that group slipped slightly from a year ago. Now ,we’re largely beyond the noise we’ve had in the past months so, what’s going on with growth margins in over a year so, it’s really about how are we managing the expenses of the business, investing to grow the business.
