Fastenal Company (FAST)’s Q4 and FY2014 Earnings Results Conference Call Transcript

When I look at that slight leakage, what really drove it is the decision we made to a year ago to dramatically expand our district and regional leadership. We went from roughly 230 district managers to shy of 300. We expanded the key accounts teams, we expanded our ability to manage the business and grow the business, and everything that happened, if you look at the business this year as Leland J. Hein- President & CEO just mentioned we grew a 20.1 percent. Our top line a 15.7 on daily while 14 percent on absolute basis. A year ago those numbers were 9 percent pre tax growth and about 7 and a half percent sales growth. So what the other component of our P and L that changed dramatically is folks at the district level, folks at the regional level, our teams throughout the organization were paid a premium to grow our earnings.

Bonuses and store compensation were up meaning this from a year ago. So, when I looked at that we picked up about 70 bases points of expense because of the fact we’re not growing earnings in 20 percent versus 9, I don’t want to get too deep in the weeds here, but despite that 70 basis points our profitability in that group only went down 20. The other 50 pathway to profit leverage, which only did we improve the profitability of the organization because the mix changed, but the underlying health of the business improved and where we did get deterioration it’s because of the investments we made, A and the way our incentive compensation was B, and I think that’s a winning combination. What is with that again, our press release I think gives most people more details about the world within Fastenal. With that I’ll stop and well if you have anything you wanna add let’s all turn over to Q & A.

Operator

Ladies and Gentlemen at this time please press star and then the number one key on your touchstone telephone. If your question has been answered or you wish to remove yourself from the que please press the power key. In the interest of time, we’ll ask that you please lend yourself to one question and one follow up question. Our first question comes from Raymond Jane. Your line is open.

Raymond Jane

Good morning Leland J. Hein – President & CEO, Dan, Will. How are ? Very nice quartet with respect to expense control. First question, the spread between vending customers and non-vending customers in terms of the growth rates, continues to moderate. How should we look at that? I’m concerned obvious to the reflection of the maturation of the initiative but there’s gotta be some other factors and components driving the contraction of the spread.