Ellen Trester - Financial Reporting & Regulatory Compliance Manager Willard D. Oberton - CEO Daniel L. Florness - CFO Leland J. Hein - President.

Ryan Merkel - William Blair & Company Robert Barry - Susquehanna Financial Flavio S. Campos - Credit Suisse David Manthey - Robert W. Baird & Co. Adam Uhlman - Cleveland Research.

Good day, ladies and gentlemen. And welcome to the Fastenal Company Q3 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder this call is being recorded.

I would now like to introduce your host for today’s conference, Ms. Ellen Trester, ma’am, please begin..

Welcome to the Fastenal Company 2014 third quarter earnings conference call. This call will be hosted by Will Oberton, our Chief Executive Officer; and Dan Florness, our Chief Financial Officer. Also present for today’s call is Lee Hein, our President. 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' homepage, investor.fastenal.com. A replay of the webcast will be available on the website until December 1, 2014, 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 materially from those 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. Thank you for everybody for joining us on the call this morning. To talk about the third quarter of 2014 overall we feel that we had a good quarter. Starting out with sales July was a little bit weak. We had a very good August and actually September was a good number.

We had a very slow start after the holiday but once we got through the first four days we had a very good run rate, very much on pattern of what we would expect after historical numbers. On the margin I also believe we did a good job on the margin. There are a lot of gives and takes on the margin right now.

We have customer mix, larger customers are growing faster. We have some product mix issues but the Fastenal growth continues to rebound and that’s very positive.

We also saw nice growth in our exclusive brands, which run at a much higher margin and going forward we have a lot of opportunity to improve the margin on our vending product through "T" hub and other things we are doing to source that product, lower our cost to package and lower our cost to serve the customers.

I think the most important thing to think about on margin though is a piece that Dan put in, talking about the margin in larger stores and the profit -- inherent profitability of those larger stores.

As you put in there the stores with revenue north of 100 the two groups, one from 100 to 150, then 150 and above have a -- about 90 basis point lower margin than the company average. Bigger customers -- bigger stores bigger customers, that’s really the story.

But the most important part there is their operating profit is 350 basis points above the company. So we are not as concerned about the absolute gross margin. We are concerned very much about the pretax and return on investment and we continue to make that point and that’s why I am pounding it here today. From an expense standpoint we did a good job.

We didn’t do a great job on that because I’ll put it this way, we did a nice job considering the labor we added in the store, we would have expected little more leverage, we continue to add labor in the stores. Going forward we’re in a very good position with store labor.

We will continue to add labor in the stores at a rate of about 10% more hours which translates into about 5% or 6% higher labor cost plus commissions and things like that. So we are in a very good position labor wise and I believe our expense growth going forward will look much better.

One area in particular that we did a nice job, kind of a shout out to team is the transportation. It’s been a tough area right now -- excuse me transportation has been tough, trucks are hard to find, rates are going up but our team just did a great job in both the second and the third quarter. I am very proud of what they have been able to do.

Vending, very steady progress. We are happy with what’s going on in vending. Our signings are basically have been steady all year. The best numbers are the numbers that give me the most -- I’m the happiest about sorry are really the sales going through the customers that have vending.

That growth -- the customers with vending grew at 21.9% and that represents 37.8% of our business. So very good progress, growing as a percentage of our business and vending in general, the overall business concept has a long pathway. We continue to see other ways we can use the technology.

We continue to lower our cost of the product and lower our cost to serve the customer, very competitive. We believe it’s a very long-term business for us. On the inventory, working capital, inventory grew much lower than sales and thus we made nice progress there.

Our supply team group is very focused on improving the service levels while at the same time reducing our days on hand.

I spent a lot of time talking with that group recently and we believe we have a lot of opportunity over the next four to even eight to twelve quarters to continue to improve our service to our customers and at the same time reducing the working capital need of inventory, using new tools, new tools they are buying and just getting better at understanding how to use the inventory.

Overall, for the quarter I feel very good about where we are. We have good sequential growth going into 2015. We watch that very close. Our margin seems to be more stable than it was earlier in the year. Labor in the stores is at a good level, so we have added the labor. Our margin is stable. We have good sequential growth.

If the economy stays steady we are in a very good position to see the benefits of pathway to profit in 2015. Before I turn over to Dan I apologize for stumbling. I was looking at the stock going down at the same time and I couldn’t speak clearly. With that I will turn it over to Dan.

He will cover some more things and then we will come back and answer questions. Thank you very much..

Thank you, Will and good morning, everybody, and thank you for joining us on the call today. I’ll reiterate the commentary; well we added some commentary in the quarterly release, I think much more explicit then we have been in the past and maybe that’s remiss on my part.

But on the page reference I am going to use are on my copy and if the version you print on the web is slightly different I apologize for that. But on one page one -- page two, we talked about gross margin and relative profitability, as Will touched on it a few minutes ago.

And that takes me right to page 10 which is our pathway to our discussion on profit drivers of our business and really the pathway to profit.

And some things that I think are worth pointing out on that table, one is and we have continued to make this point in both of these sections our profits and ability to leverage profits long term is above the top line growth and growing our average store size.

We have said that for a number of years as relates to pathway to profit we’re kind of -- to accentuate the feel of the components, the puts and takes in the math, both on the P&L as well as the working capital side, I think they are both important to talk about long term profit, growth, relative profitability and relative returns and we think we have amplifying effects for all.

Some things that I think probably jump out to you is the relative profitability decline in the different groups. And it really is stemming from four components, when I look at it; one, in comparison to both 2012 and 2013 our gross margins in those periods were 51.6 in 2012, third quarter I believe. Last year was 51.7, we are 50.8.

So we have given up about 90 basis points of gross margin, that’s one component when I look at that table.

Another component is, as we talked about last -- last year in the July and October calls we felt we were under investing in people, especially at the store level and so there was a little bit of under expense in those two periods when I look at those relative groups of stores and I believe we have corrected that and we have the appropriate staffing in our stores today to grow our business.

Growing our business drives our average store size up because when you look at these tables yes, we gave up some relative profitability in the groups but look at the percentage of the stores that are now in the fourth and fifth group, 100 to 150 and 150 plus. The relative in the 100 to 150 has gone from 15%-16% one and two years ago, they are at 21%.

The relative percentage of stores in the fifth group, over 150, is now at 17%. Last year was at 13% and change, two years ago was at 11% and change.

That’s what driving our overall profitability even giving up 90 basis points and adding people at a faster clip than we have done in each of the last two years, when I look at that third quarter timeframe. And I think those are important distinctions to make.

The other distinction that I think is important that’s often overlooked, I believe by many people, sometimes myself until you take a step back and you think about it, our relative expenses, if you look at our P&L over a number of years is a gross margin in the low 50s and operating expenses, 29%-30% kind of neighborhood and operating profit in the low-20s.

And I think those are important things to sit back and think about, because when I think about a lot of companies, I look at in the industry, I am just talking about public companies, I am talking of private companies too, in the industry when I think about profitability within industrial distribution, I think about a number in the low double digits and I think about P&L that probably is gross margin in the lower half of the 40s.

I think of operating expenses around 30%, maybe 29% maybe about our number and an operating profit in the low double digits and some of the better players in the industry, some of the better leveraged players in the industry starting to line up into the teens.

I think an important thing to ask yourself is Fastenal has an average store size of 107,000 which means that some time in our history, 20-30 years ago we figured out how to make money in a store doing $50,000 a month. There aren’t too many players in the industry have done that.

If you look at the average store size of most private and public players in the industry their average store size is a multiple of ours, eight, nine, ten times larger average store but the operating expenses really don’t change appreciably.

In fact they are in many cases when I look at them, they are at or slightly higher than ours, which always makes me scratch my head a little bit, of why the industry is so different.

And maybe it’s just a case of we developed a frugal nature 30 years ago and that frugal nature continues to shine through in our business and gives us just a structural delta to everybody else, I am not sure.

But I think it’s something for people to think about, because it positions us long term with that structural advantage to keep going after the market, and to keep going after the market in a profitable way and with great returns.

And speaking of going after the market and top line growth some things that always pop in my mind is it really gets down to a handful of things; our top line growth is above the existing market, it’s big, the relative health of our existing market share, and that’s had a tough couple of years for us.

We talked a lot about what we saw in our Fastener business, what was going on with our large customers over the last several years, the fact that was stabilizing, improving slightly I think you see that in nice growth numbers or good growth numbers in our Fastener business.

We grew about 10% this quarter and that’s a big business and we are pretty excited about the improvements we have seen there.

And then and then the growth in the average, in the available selling store energy, the fact that we have right-sized, we have corrected the headcount in our store and we’re positioned really well going in 2015 and our trends year-to-date you look at our daily gains in overall business, in fastener business in non-fastener business are quite strong as we approach 2015.

Some things, other things that jump out to me when I am going through the release and again I’m using my page references, on top of page four, looks at our five-year stores what’s happening to the growth in our five-year stores. We have had five months now of 10% plus growth.

Look at the last three -- look at the three years on that table that never happened. I think we had five months in 2012 with 10 plus growth but they weren’t consecutive.

I don’t believe we had any last year and so there are some [powerful] things going on because we have added the selling energy into our store and our large account business has stabilized, our heavy equipment manufacturers have stabilized and our inherent growth is shining through.

Page six, and I touched on this already, but our end markets and our product we are seeing improving trends there, both when you look at absolute year-over-year numbers but more importantly when you look at year-to-date numbers, where we will be January, where are we in September how we’re trending, as we’ve had said in the past, September and October tells us where we are start the New Year.

On page 12, you see the numbers and I am sorry headcount numbers, you see the number settling down now as we get in the third quarter because we are anniversarying where we started to add people post Labor Day last year. Gross margin we’ve touched on that, I think pretty explicitly both in the early part of the document is well on page 13.

The page 14, our SG&A.

Probably the only thing that stands out for me there is, okay our labor count -- our labor expense is up because of the headcount we added and because there has been improvements in our profitability bonuses, in our profit sharing contributions, because of our of -- of what we are performing relative -- and that’s more about the last several quarters, so much then the anniversarying.

One thing that jumps out, our selling transportation is too high, as we’re adding people we are adding, I believe some expenses there faster then we should and those are some things we are working on to correct right now, kind of rounding out the release. Our operating cash flow is okay.

It’s about operating cash is about two points lower than where I’d care it to be but it’s where that you won’t get that comment out of me on a quarterly basis we are two points higher, and we bought back some stock in the third quarter.

So year-to-date we bought some in the first quarter, we had previously disclosed we bought some in the third quarter and we increased our line of credit during the quarter to have some cash ready and available to buy -- to buyback those shares and potentially some more.

One item I’d like to throw out there that I want to point out, our International business, we were particularly pleased with that business and by International we -- our U.S.

and Canadian business are very homogenous businesses from the standpoint of our store footprint, the infrastructure in those countries and the amount of time we have been in those countries. So when I talk about the international, I’m excluding the Canadian piece.

I am just looking at south of the border, Europe, Asia business, very pleased with performance in that business.

We grew our earnings more than 50% in that business, third quarter to third quarter, partly recovery, had some struggle a year ago but probably just some darn good performance and a good compliment to Steve Rucinski and his team in those businesses.

With that I am going to turn it back over for some Q&A and as we have asked in previous quarters please limit yourself to one question with maybe a potential follow-up and we’ll go from there. Thank you..

Thank you. (Operator Instructions). Our first question comes from the line of Ryan Merkel with William Blair. Your line is open. Please go ahead..

Thanks, good morning everyone..

Good morning, Ryan..

Good morning, Ryan..

So I guess the big question here is how can we have confidence that gross margin stays near 51%, if the plan is for larger stores across your network, which larger stores had larger customers and the larger customer have lower gross margins?.

Dan, I will give it to Dan..

Yes, first off as we cited, the stores that are north of that have a gross margin that is slightly lower.

I think, Ryan it really gets back to what’s our operating profit going to be and if I think if everybody who looks at the Fastenal business and looks at owning our stock and looks at owning our stock today and having that stock three years from now and five years from now.

If you believe we can grow the business and we look out to a larger business some years into the future, and let’s just say for discussion sake that the margin drops 40-50 basis points but the operating margin is at 23 or 24 because right now the one thing that I probably didn’t touch on, sometimes I have learned to shut up when I should shut up is 23.7 for a 100 to 150, I would be lying if didn’t say I was really disappointed in that number.

I don’t think that number should be below 24, I think it should more like 24.5.

But would you own Fastenal organization, that larger organization in the future, because I believe it’s going to grow and I believe our average -- and if it grows our average store size has to increase and would you -- the question you should ask yourself, would you own that company that looks a lot like that, even that disappointing number that we have in my mind today, would you own that business versus some other stock, I would..

Ryan, I think I know history doesn’t always predict the future but if you -- we are focused on big stores margin going down but over the years we focused on company gets the bigger, the margin goes down. Fastenal mix drops, margin goes down.

There is a long list of things I could address there but our margin has been around 51, as the center point for 25 years.

And so a lot of it and Bob Kierlin always stated this, the number one thing that determines our margin is our branch pay programs or our incentive programs, not just at the branch but at all the levels and that continues to come true if you pay people to hit a goal, high percentage of time they would hit a goal.

It’s far more about that, than it is about product mix, customer mix or store size..

Okay, and then I guess my follow-up or second question, do you have an updated pathway to profit, average monthly store size to hit that 23% EBIT margin target? Is there an update there, I mean clearly it looks like it’s higher than 110,000 a month..

Yes, I removed that paragraph and there was some discussion on whether I should or shouldn’t and I looked and I said we have had that paragraph in there for years and I think the table removes the need for the paragraph and so I just finally decided get it out there and partly because I think there was always so much questions about 23, 23, 23% has never been a target.

23% is a point in time reference. I just cited a company in the future that has a 24% and but right now if you look at the table that 100 to 150 is at 23.7% and so I mean you could look at the -- I’ll throw out some components. Right now the 2,647 stores that are in that table as you see in the next page represent about 87%-88% of our sales.

If I look at the first five groups in that table, the ones where we have explicitly call out the percentages that subset represents about 80% of our sales, and the delta is in the strategic comps and oversea stores.

So you know, I look at a number that’s with the gross margin being lower then it was a year ago, it’s not a 110, because we are at 107 right now for average store size.

But we are also not happy with where those numbers came out this quarter, Ryan. So I don’t think it’s that far off of the 110, somewhere in that range, 110 to 125 but it’s really about point in time growing average store size..

Okay, thanks guys..

You bet..

Thank you. And our next question comes from the line of Robert Barry with Susquehanna. Your line is open. Please go ahead..

Hey, guys good morning..

Good morning, Robert..

Will, I did just want to follow-up on that and clarify. I mean I understand that some of the targets could be a little bit soft at times but it does sound like versus last quarter your outlook for the profitability of your business has gone down.

It sounds like both on the gross margin side and on the EBT margin side I mean is -- [that] involves interpretation?.

Yes. Yes. Our optimism about building the profits of the organization and our ability to grow profits has never been stronger. .

I guess….

We did -- we expanded the language around gross margin. If you went back to the transcripts from the second quarter call in July, I was very much expecting a call that would center on top line growth, top line growth, how do you get that top line growth, primarily because third quarter of a year ago we were in that July timeframe.

Our growth was pretty anemic; our growth was more in line with the industry. And we had started to expand our growth. We felt there was great momentum to continue to expand our growth and I was frankly a little disappointed that the entire call was about 15 basis points, 20 basis points of gross margin and not about our ability to grow the business.

And when I look at that table, that [path to the] profit table I -- it’s so compelling about where we can move the profit of the business to, if we are growing and we grow our average store size and the discussion was getting lost in a few fixation points and I think the fixation should be how do we move deeper into that table? And why do we do and grow our top line and how does that happen? The market’s big, what’s the health of our existing market share and what are we doing to grow the business and I think that’s where the headcount, the energy in the store really comes in to play and those are the three most important things..

You know….

To get back to your question, you misinterpreted our report. We are very confident in our ability to be highly profitable..

Yeah.

I guess, just to clarify, I mean I guess I’d agree with you about you know maybe there was too much focus on the gross margin but at the end of the day I think we need to measure the growth as well as the cost to engender that growth and as we move further down the income statement I mean I’m more concerned I guess about what sounds like backing off the ability to get to the 23% EBP at the 110,000, then I am about the softer gross margin target because that does sound like there is some offset on the SG&A..

Let me jump in here. If you think about the 2007 I don’t if you followed us then, when we came out with pathway to profit our 23% was -- goal was at a 125,000 a month. .

Halfway between the 150….

I think it was 125,000. In the interim when we got very tight with our expenses during the very tight recession of 2008 and ‘9 we lowered our base cost. We brought that down to 110. Now we are back to where we were at 2007, somewhere in the middle there and actually at 125. I think it will point to 23.7.

So the difference between 110 and 125 and 22 and 23.7 to us is going to move around. It’s an inexact thing but we believe we are going to go right by that number and be highly profitable and so we are not trying to back off the number.

We are trying to not give so much information that our calls are completely dominated by, as Dan said 5 or 10 or 15 basis points in different categories..

Okay.

So the message you want to leave with investors is that kind of over a period of time kind of big picture the targets are kind of roughly as they have been?.

Absolutely..

In terms of your ability to raise profitability, yes as store size grows..

It’s easy math, if we don’t open many stores we grow our top line just say 15%, our average store size goes from here to here you can look at the chart put your finger down and get a good idea of what the leverage is..

And the average store, in that 100 to 150 category right now is the 123,000. That’s the average store size if you actually run the math..

And we believe that should be about, we believe that group should be in the low 24% pretax not 23.7, that’s where our head is. We need to move to the next question..

Yes, okay, thank you..

Thank you. And our next question comes from the line of Flavio Campos with Credit Suisse. Your line is open, please go ahead..

Good morning, thank you for taking my questions. Just focusing on the selling personnel after you count it was flat in September and pretty much flat as well on the quarter, a little bit down.

I was just wondering if that’s just a seasonal thing because of the summer months and how do we go back, how do we go up to that 10% growth that you mentioned in the call?.

There is always some flattening that occurs in the August-September time frame really August through the first half September timeframe. We have a fair -- one of the means in which we recruit is we strive to have a subset of our employee base be full time students either in a four year state college or a two year technical school, technical college.

Because we find that if we have some part timers working for us that hit that type of demographic it’s a great short term work force but probably more importantly it’s a great long-term recruiting force. And so we recruit from that. There are certain times of the year you get some churn in that group or just some stalling in that group.

When they are going back to school in August you see a little bit of a pause until they get their schedule worked out in August-September and you see a little drop off in some hours typically..

Because when we report numbers we are reporting FTEs..

Perfect, that’s helpful. And just turning to margins for just one quick second, on Q4 generally we see a little bit of a drop seasonally.

Just wonder if we are going to see that this year if you are expecting that this year as well or if this 50.8, that’s kind of your expectation for Q4 as well?.

We don’t give guidance on the fourth quarter. I mean, Dan anything..

Yes, the only thing is the softness that we do sometimes seasonally get is related to, we have an extensive trucking network and that trucking network loses a little bit of leverage in the November-December timeframe.

It can be amplified in a year like 2012 or 2013 or 2008 if there is something that’s compounding that softness, but it’s a little bit of noise and right now our trends on volume are good..

Perfect, that’s helpful. I am going to jump back in queue and thank you for taking my questions..

You are welcome..

Thank you. And our next question comes from the line of David Manthey with Robert W. Baird. Sir please go ahead..

Thanks, hi guys, good morning..

Good morning, Dave..

First off, I realize that stores don’t drive growth at Fastenal.

It’s the people but you closed 37 locations, I am just trying to get a read on that number and did those closures, do you think have any impact on September? And then to back it up and forget about the stores for a second, could you discuss your hiring plans as you look to 2015? Will, I think you mentioned 5% to 6% increase in labor cost, is that kind of a next year thought as well?.

I’ll take that part and then I will hand it to Lee for the store closings. Our thought is 10% more hours, a minimum of 10% more hours assuming our sales growth stays in the range it is, the teens. If we do that it will cost us about six percentage points higher labor and that is the plan for 2015.

Well we’ll move that up or down as if we grow faster we will add to it, if we grow slower that kind of that roughly add hours about 5% lower than our sales growth..

Okay..

And the other 5% come through productivity. Now I will give it to Lee on the stores..

Hey, David. On the store consolidation piece it really you got to get your arms around the fact they are small stores. We’re highly aggressive as we open stores.

So yeah, did we put some stores in markets that were fairly close, we really feel we are going to retain a good portion of the business, we have [homes] for our people, the markets are great and it was just a great strategic move for us but it’s really about the consolidation and we are still committed to the markets in almost every case and even more so when you really think about going forward with the energy we are going to put it into some of these stores or move the business and it’s just discipline at work at Fastenal and it’s what we do..

And the store would not have impacted September any more than it would have impacted August, July, June or May because these things were in the works.

And I think we cited in the second quarter release and I apologize if I am slightly off, but out of the 40 some stores we had identified I think they were eight that were more than ten miles from another store and when I looked at all the data we assumed less than 10% of the sales from all the stores we were closing would have some risk of being lost..

Got it, okay. And then just final question, you touched on "T" hub and it’s been over a year since you started rolling that out.

I am just wondering if you can talk to us about are we seeing the benefit today, what kind of tail is on this initiative?.

I don’t have the stats, I stay very close to it, Dave, but I don’t have the stats as far as how many parts we’re shipping. I don’t know if you do, Dan..

I don’t but I….

And I said in the second quarter call it has not ramped-up as quickly as we thought it would but it continuous to grow.

We have a long tail on it from a -- probably the biggest, two biggest areas that we will pick-up benefit is gross margin because the product in "T" hub we are buying at very, very good prices; and the other is inventory turns because if we are buying it centrally the stores do not have to buy as much because if stores are buying a product on their own they might buy two or three months’ supply to get the pricing.

So the big advantage right now is we see our gross margin and inventory turns as also efficiency but that is probably not as big a saving. So we are very still very optimistic on moving that project forward..

Just a couple of thoughts on it, end of July we had all of our stores that are going to be serviced by "T" hub, their point of sales system was converted over, such that they could turn parts on/off on being serviced out of "T" hub and that ramp up really occurred in the June-July timeframe.

So the steps that occur before and after that is aligning the parts that are being vended in the machines and optimizing the turning parts, so that you have an efficient redistribution plan.

I always use the analogy if we have a soda machine in the warehouse and nine out of ten people want Mountain Dew and Mountain Dew is one of the six options, they are going to fill the Mountain Dew slot every day as opposed to maybe you need five out of the six be Mountain Dew or Diet Coke or whatever the case might be.

One tangible thing that I can point to that comes with "T" hub, Will touched on the gross margins, is we measure different pieces of our business and the one thing that did change is the percent of our sales going through vending, that are Fastenal brands went up by one percentage point from Q2 to Q3.

And so we are seeing some tangible things there and for the suppliers of branded products that are in our "T" hub facility I would expect to see their business and we have seen their business grow commensurate because there is more of that activity going on..

Got it, great. Thanks a lot guys..

Thank you. And our next question comes from the line of Adam Uhlman with Cleveland Research. Your line is open, please go ahead..

Hi guys, good morning..

Hey Adam..

I guess just to start with the Fastenal sales, you touched on it a little bit here but -- and we saw good acceleration in that.

Could you talk about the visibility that you have into growing that chuck of the business, what are you hearing from customers and their production schedules versus new business that you brought into the fold and combined with that heavy manufacturing, there is a good deal of worry from investors like us from the impact from farmer equipment demand and oil and gas.

So maybe you could help us understand your exposure to that as well..

It’s hard for us to breakdown exactly where the Fastenal growth is coming from. The biggest part of it is machinery manufacturers. We have also had a very strong push with small customers.

It’s really about incentive programs at the stars, difference programs for bin stocks and just raising the awareness of Fastenal because it’s kind of the other stuff is more fun to sell, branded products are just more to it. So I think it’s about putting the energy in and continuing to work hard on just talking about the Fastenal.

As far as the exposure, yeah I have been reading that too, some of the large farm equipment manufacturers are slowing down. I guess fortunately we don’t have a lot of that business right now. We would like to have it but the timing is probably good that we don’t.

I guess our exposure really trends more with the overall manufacturing than any specific area of manufacturing, I mean whether it would be egg. We are light in egg on a big scale the [Dears and the CH Case and Holland], we are light in automotive. So there is less exposure in those areas but it’s broad manufacturing base.

I mean I think it’s same exposure we see in all manufacturing. Does that help, it’s a little bit difficult..

Yes, that’s helpful, thank you.

And then just somewhat related to that, if you think about your longer term growth drivers, can you talk about what you are seeing, what metalworking, government, e-commerce overall the growth rates and maybe how big they are now?.

On the -- government continues to grow well, represents about 4% of our business. Metalworking has slowed a little bit still, are growing the company but slowed some, that’s about just under 10% of our business. So it’s about a $300 million business.

We are working hard on that, trying to think about -- we talked about the vending earlier, fasteners you know those numbers. Safety is one that continues to do well, driven -- it’s a great product -- through vending.

We continue to see very good growth in the safety product line, some of them, trying to think ones that aren’t doing as well, fasteners I guess is still doing well but it’s still not keeping up with the company, so the other ones are outgrowing it..

One tip that I will throw in though on trends is year-to-date the last couple of years if I look at what our business was doing in ‘12 and ’13, if I looked at January to September we are up about 12% on average, 12.5% in ‘12 and 11.5% in ’13. We are up about 18% this year. Fasteners aren’t far behind that 18%, so up about 17%.

Last two years they were up 8% and 6% respectively and our non-fasteners are up about 19% to get our average of 18% and they were up about 16% the last two years. And so our vending business continues to help support our non-fasteners, more hours in the store support our non-fasteners.

The marketplace as well as more energy in the stores is getting our fastener growing..

Okay, thank you..

Thanks Adam..

I think we are at 9.44, sorry Michele. I think we are at 9.44 and so we are going to wrap up the call. We are very conscious of the fact that the folks on this call were in earnings season so you have busy schedules and we like to hold to our 45 minutes. Again thank you for participating in the call this morning.

And one shout out I’ll give is my son’s soccer team won in the High School, won their second game last night in the state tournament or in the sectional tournament. I wish them good luck on Saturday. Thank you..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day..