Dan Florness: From a historical perspective, and I’ll use an extreme time frame because, quite frankly, over the years, there hasn’t been a lot of significant inflation or deflationary periods. In the late 2000, so 2008, 2009 time frame, you saw a period of pretty heightened inflation followed by not only deflation, but the economy getting pounded pretty hard in that late €˜08 and €˜09 time frame. So what you saw is if you think of our business in 2 components, large production-type environments and and then maybe some of the smaller customer base departments, you €“ the one is driven more by conversations with customers about pricing. And there, we tend to do a pretty good job over time of maxing it and some you get a little bit ahead of it depending on the turn of that product.
But our fasteners turn a lot slower than our €“ turns slower than our overall inventory. So generally speaking, on the way up, you get a little bit of margin profit in there. And you’ve see an expanding gross profit margin. You saw that back in €˜08, and that’s over that turn of inventory. In €˜09, it was amplified obviously because the economy was weak, but you saw the inverse of that, and we’ve got squeezed pretty hard. But again, it was for a turn. So it’s about understanding what’s happening in the turn versus what’s happening in the long term. What’s changed in today’s environment is that piece that is the more the production center element is a larger component than it would have been back in 2008. And so that piece where the marketplace is raising prices affects a smaller piece of our inventory, and it’s more of these direct conversations.
And so €“ and I think we have better tools to manage through it and have a more sophisticated conversation with our customer on the way up and on the way down. But you know it is it’s easier to slow things down on the way up because your customers arguing that direction, then it is to slow things down on the way down because your customer actually has a different incentive there. So you have those challenges. It will be challenging in the cycle of this turn of inventory, but I believe our team and our tools, we have a means a disciplined way of managing through it.
Operator: Our next questions come from the line of Tommy Moll with Stephens.
Tommy Moll: Wanted to start off with some of the end market — end market commentary you offered, particularly around what appears to be continued strength in manufacturing tied to industrial capital goods. At the same time, I think, Holden, your word characterizing the outlook for this year on manufacturing was cloudy, obviously, PMI is sub-50 now. Have you seen any softening there? Or would you characterize that end market is just as strong as it was, say, a quarter ago?
Holden Lewis : Still feels pretty strong. And again, I tend to try to rely on the regional Vice Presidents and kind of their feedback to me. And honestly, the feedback over the last 2 or 3 quarters really hasn’t changed that much. We clearly down shifted from first quarter to second quarter. But since then, it’s kind of been the same kind of feedback from the RVPs. They still feel good about what we’re doing. They feel constructive about the cycle. Their customers are constructive, but nervous. And RVP might cite something that’s worrisome, but on the other hand, another one might sort of change their tune quarter-to-quarter. And that’s why I look at it net-net, the overall tone and tenor of what the RVPs are describing to us about the marketplace, frankly, it hasn’t changed a whole lot as it relates to that manufacturing and the dynamics are fairly similar.
