Willard D. Oberton - President and CEODaniel L. Florness - ExecutiveVice-President andCFO

David Manthey - Robert W. Baird & CoMichael A. Hamilton - RBC Dain RauscherDaniel Whang - Lehman Brothers Equity ResearchHolden Lewis - BB&T Capital MarketsAdam Uhlman - Cleveland Research CompanyJohn Baliotti - FTN Midwest Research Securities CorpMichael Cox - Piper JaffrayJeffrey S. Germanotta - William Blair & Company

Good day and welcome to the Fastenal Company 2007 Quarter Three Earnings Conference. This call will be hosted by Mr. Will Oberton, Chief Executive Officer; and Mr. Dan Florness, Chief Financial Officer. The call will last for up to 45 minutes. Today's conference will start with a general overview by our Fastenal hosts, Mr. Oberton and Mr. Florness. The remainder of the time will be open for question and answers. As a reminder, certain statements contained in this presentation that are not historical facts are forward-looking statements and are thus perspective. These forward-looking statements are subject to risks, uncertainties and any other factors, which can cause actual results to differ materially from the results expressed or implied by such forward-looking statements. More information regarding such risks can be found in Fastenal's quarter earnings and annual SEC filings. Mr. Oberton, please go ahead. Willard D. Oberton - President and Chief Executive Officer: Thank you very much Sera and thank you everyone for coming on and joining us for our conference call this morning. This morning, I am actually reporting in from or calling in from Nashville, New Hampshire. I am out here for some sales meetings and so my comments will be more brief and Dan will be covering more of the information. I'll give you my thoughts on the overall quarter; generally we are very pleased with the quarter. The one area of disappointment was revenue growth. We were one point to two points below what we thought we would be and that caused the shortfall on earnings. But if you break the numbers out and look at all the pieces, most things actually came in very good. We are pleased with our progress and margins were back to 51%. That's really what we had stated earlier in the year. You'll continue to see improvement there, we believe going forward that we still have a lot of room to move the margin overtime through transportation initiatives, purchasing and just good business practices. From the earnings standpoint, as I said earlier, it was a little lower than we had expected and that was really due to the revenue, it was not an expense issue at all. With one to two points higher revenue, which we had thought we would have going into the quarter, the earnings would have came in more on plan. On the balance sheet side, I am very pleased with the progress we have made. I have to give a lot of credit of that... for the balance sheet to Dan and his group. The inventories are good shape. AR continues the track very well and we are in a very strong position. As far as our pathway to profit and our hiring plan, we are right on-track where we thought we would be. Our sales headcount is up 18.4% year-over-year. Our support group is up about 7.5% when you blend the distribution with the other support people. So overall, we are right where we need to be. The aggressive hiring also made it higher... harder to hit the earnings estimate, but I really think we are doing the right thing by hiring the outside sales people, controlling our support growth and we are setting ourselves up very well going into 2008 and beyond. So overall if I had to talk about the quarter and explain the quarter which I did yesterday in my Board meeting is, I explained the third quarter of 2007 as a good quarter, not a great quarter but a good quarter. What you can look for going forward from a hiring and expense standpoint is we see... I would forecast lower hiring in the fourth quarter, in the second half of the fourth quarter, that's very typical that we will slow it down through the holidays and then pick it up again in the first quarter. So, for the most part, business is on-track, revenue is tracking a little slower than we had hoped, but other than that I am very positive with the way the business is running at this time. With that... and I will also be on for Q&A. With that I will turn it over to Dan Florness, and Dan will give you a lot more color into the specifics of the quarter. Thanks Dan. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Good morning everyone. I am going to use the earnings release sales that somewhat in my outline and things I'm going to cover, to make it easier for everybody following. As noted in the first page of the earnings release, we are pleased that for both the three-month period, the quarter ended September 30th as well as the nine-month period, we have been able to leverage operating earnings, net earnings and earnings per share. The operating earnings leverage has been enhanced by the fact that what it was earlier with our gross margin improvement, has really allowed us in the year of 2000 to move aggressively into our pathway of profit, which really from a standpoint of the three months and nine months ended September, has been a net drag because of the investments for making additional people and I will touch more on that in a few minutes. But the add in gross margin has given us the ability to add some of that SG&A costs and for the impacts, we believe will occur into 2008 and into the future, as we discussed back in April at our investor conference, of allowing us to continue to grow the organization handsomely, increase the average size of our store overtime and let the natural profitability enhancements that come with migrating from the less than 50 group to 50 to 100 group to 100 to 150 group and 150 plus, and the profitability that moves with that. As noted in the Earnings Release the net earnings saw a leverage up in the third quarter, but it's pretty much in line with the operating earnings in the nine-month period and I would largely attributed to income tax item that I'll cover a little bit later and the EPS did leverage up slightly above net earnings, because of the stock buybacks we have been doing last year and into this year. Moving down the page, we look at the sales growth in the different categories; as Will mentioned in... as discussion of our top line; it is a challenging environment out there. We... with the June numbers coming in close to 15% growth, we had really hoped that that growth would extend into the third quarter and give us added lift and allow us to leverage up additionally, looking at the third quarter with the added lift that would have come from the 15%. We feel our earnings growth would have been around in the 18% category and it would have given us a nice leverage point. As that moves closer to 13.5, that leverage point started to dry up pretty fast. Looking into some specifics to the de-leverage. I broke out a few because I think it's useful for the... we, the financial to understand some components of our SG&A, and how that really is factored into our ability to leverage or not to leverage and how we see that going forward. In the case of the payroll category, year-to-date our payroll growth is around 12%. For the fourth... excuse me third quarter that number was approximately 14%. So we had some negative leverage on payroll and as we've discussed in the past payroll and related cost i.e. healthcare etcetera represents about 70% of our SG&A. So when we lose some leverage there, it has a pretty dramatic impact on our overall performance. If I look at occupancy we really haven't seen a benefit in occupancy related to cap with the profit. We'll really see that going in the fourth quarter and more pronounced going into next, year when the fact that we are opening about 8% in the stores a year versus 14 really starts to be felt, when we aren't seeing such as many stores added in the fourth quarter of the year. On an occupancy standpoint, year-to-date our occupancy is up about 22%. For the quarter occupancy was up about 18%. And so, what we have been able to do is we are starting to move that closer and closer to our... to getting that into the low double-digits, which is our goal and really accomplishing that by being very, very cautious and very, very creative about how we merchandise our stores, how much space we take for that product, how we structure that product within the store to make it as efficient use of the square footage as possible, so we can stay in locations longer, opening locations, good locations. But be very, very aggressive with what kind of space we need for that location to make it as efficient as possible from an occupancy standpoint. The other biggest item within SG&A is our vehicle pool, which includes our store delivery vehicle, the fuel that goes into them. Year-to-date that expense category is up about 15.5% and in the third quarter, we stopped some challenging trends in fuel prices and that category was up about 18%. So, I thought I would at least give some insight in to some de-leverage items or items that that gave us some challenges during the quarter, and where that is year-to-date, because I think that helps you look into fourth quarter and look in the next quarter... next year to understand, where are those leverage points? For us to where the leverage really took off if we had gotten above 13.5, got closer to 15, we would have seen a meaningful change in our leverage. Looking at current initiatives, I think they speak for themselves in our earning release. I will add a couple of things; touched on in the release the movement away a little bit from the CSP2 and the CSP3 distinctions and moving more to an 'a la carte', one thing we found in CSP2 is that we were adding a lot of good products, the products that sell well for us. But depending on the local demographics of our customer, they might sell better or not as well or maybe you need more or less depth of certain items, given the local market demographics and the 'a la carte' really allows us to move that direction. It goes... in my mind, it complements very well to our pathway to profit, of arming our sales folks with the best products that will sell in end- markets and also products they are comfortable selling. If we have a market that the individuals selling it really comfortable with the commercial construction segment, they might emphasize some of that more, because it's a good strength for them in local environment and they have good experience in it. In fact I think it works very well. I think it also allows us... as we have mentioned in previous quarters, it allows us to really address our working capital and our inventory in getting the best utilization of that inventory throughout the network. And the case of IHUB, I am happy to say, we continue to move... invest in our master stocking hub in Indianapolis. Sorry I used an internal reference. We have continued to add inventory into that. Its... that as well as store openings year-to-date, are the big drivers of the inventory growth that we do have and I am pleased to say that 130,000 SKUs that we talked about last spring and a year ago, well we are at that number now. So we really are in a position where we have an in-stock catalog and that's a great selling tool for our sales organization and as well I'd mentioned in our April meeting, we made a lot of changes in our Indianapolis facility in a relatively short time. We put a lot of weight on their shoulders and frankly almost buried some of the delays and they really have stepped up in our... in position now to really react well and service the needs of their local region, as well as the inventory needs of the company. I think that's a great tool for us going into the future. The income taxes, as I mentioned earlier, we did see a lower tax rate during the quarter and touched that on page four of our release. Really it what was the case under FIN 48, the defining term is discreet events. FIN 48 didn't change the number for the quarter, in fact, the circumstances did. We just called it a different thing, we called it a discreet event, but we did have outstanding years that were under review. They... we settled down all the outstanding years, and we settled out better than we thought we would, and we were able to pick up slight adjustment to the quarter of approximately $770,000 which lowered our tax rate. Going forward, these events really don't have an impact our core booking rate and that 382 neighborhood we have been in, we believe as our rate going forward. Looking at working capital as well touched on pleased with the progress on the balance sheet side of the equation. I am extremely pleased with the progress on the balance sheet side of the equation. Several years ago, we talked about our call center in Caledonia; they made dramatic impact on our accounts receivable and our cash flow, starting from February '05 and through the end of 2006. The impacts are starting to lessen some and it's really a function of the numbers that are coming up against, on a year-over-year basis are becoming much more challenging, which is causing them to become much more creative and innovative with how they... how we present invoices to our customers, how we... are calling tenants etcetera and I am pleased to say, we continue to make progress, growing our accounts receivable year-over-year 11.5 on 13.5% sales growth, 13.7%, September. I think it's still a testament to innovative ideas that were put into place there and I credit my team for that. On the inventory side, the inventory growth that we do have year-to-date of 7.2, I am very pleased with that number. In the first nine months of last year, we grew our inventory about 16%. Most of that inventory growth is really about product that's going into distribution particularly on Master hub in Indianapolis as well as two of these new stores that we have opened thus far this year. So from that standpoint I think, we are doing a great job of managing the inventory elsewhere. One item I touchdown in the release and I'll try not to go into too much detail to keep on boring the audience. We have implemented starting in July, a process at our store level, we call inventory redistribution and really what the concept is, a year and a half ago we talked about inventory draw downs where we were pulling surplus inventories out of our stores and doing it in lumps at a time. Inventory redistribution is really about identifying need at the store level on a geographic region of the country and finding actionable inventory that we can pull from another store that constantly rebalance our inventory everyday, a little bit at a time. And right now... we do just over a 100,000 picks in our distribution centers a day, I believe it's about 118,000 -120,000 picks. We do about 6,000 picks a day at our store. So really our stores are now in extension of our distribution centers from the standpoint of getting products to our customer when it's needed most. And it allows us to be much more efficient at utilizing our inventory and I look very optimistic towards continuing improvements we can make at out inventory balance of this year and into next. And I think, we are very much on path with the plans we talked about earlier in the year in April. Looking at over the next five years, we've challenged ourselves to raise our operating cash flow from that $0.50 to $0.70 on the dollar, so for every dollar of earnings throwing off operating cash of $0.50 to $0.70, challenged ourselves to raise that up to the mid eighties and really believe we can through a combination of improving our profitability and improving the leverage of our inventory, but really the inventory size over the next five years. And as I noted in the... I didn't note in the release but I noted as of preparing for the call and preparing some of our projections, I am pleased to say that in the first nine months of last year our operating cash to earnings came in at 53% or $0.53 to the dollar, excuse me. In the first nine months of 2007 that number is $0.91 from the dollar and continues to be a very strong cash flow position for the company. The pathway to profits; only thing I'll cuts on that is point out that we added some additional disclosures to the release this quarter, really the stuff that we are putting in our monthly sales releases I added to our earnings release, talking about store, personnel growth in FTE, really investing our growth labor dollars at a store level directly into the selling energy of the organization and leveraging the support infrastructure of the organization, which as we mentioned earlier is really more akin to the added personnel we had in the past and administrative support was akin to store openings and less related to pure sales growth. We did do some additional stock repurchases during the quarter. Year-to-date, we've bought back 884,000 shares and at that I am getting too above the 20-minute point. So I am going to stop. I am going to turn it back to Sara and I would open it up for questions. Question And Answer

Thank you. We will go first to David Manthey of Robert W. Baird. David Manthey - Robert W. Baird & Co: Hi good morning. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Good morning, Dave. David Manthey - Robert W. Baird & Co: Just wondering in terms of the SG&A growth rate. It seems like that fulcrum had been driven down significantly or recently and it ticked up a little bit sequentially. Well you mentioned that your hiring trends and the pathway to profit was right on target. I am wondering what we should expect there going forward in terms of that leverage point, I know that the sales came in a little bit later than you thought this quarter, but should we... Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: I lost you.

[Operator Instructions]. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: I think should we... Sara?

[Operator Instructions]. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Did we loose everyone? Willard D. Oberton - President and Chief Executive Officer: I am still here Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Okay, Will.

: Again please press star one, caller. Willard D. Oberton - President and Chief Executive Officer: Yes, Dan. Why don't you... my guess is Dave was just going towards give a little more visibility on leverage point and labor trends going into fourth quarter into next year, if you want to touch on that. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Okay like but is he there? David Manthey - Robert W. Baird & Co: Can you hear me well? Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: I can you hear Dave. Anyone else?

: Mr. Manthey your line is open again sir. David Manthey - Robert W. Baird & Co: Okay thank you. Yes Dan that summarized it well. That's what I am looking for just in terms of SG&A. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: From... okay Dave, I will try and cover that. David Manthey - Robert W. Baird & Co: Got it. Willard D. Oberton - President and Chief Executive Officer: Going forward we will have very low store openings. We will open 8 to 10 stores this quarter, so that will help us from a growth or expense standpoint and from hiring standpoint we will add additional people in October and then it will be very flat. So our leverage point for the fourth quarter should be at roughly, the second, third quarter... its going to be above what it has been, if you level that out, meaning the hiring will slowdown but our sales are going to slowdown at the same level. So if we are able to grow our business... if we grow our business in the 13% to 14% range, it will be hard to see a lot of earnings leverage. If we are able to get an uptick in our sales, up to the 15% range, then we should show earnings leverage as Dan described in his commentary. Does that help you? David Manthey - Robert W. Baird & Co: Yes that does and Will, I know comps get easier, as you move forward here. Is your outlook that things do tick up just because of the easier comps or any comments you have into fourth quarter in '08? Willard D. Oberton - President and Chief Executive Officer: Well the Cops don't... they get a little but easier but not a lot easier on the overall because if you look at... I guess two or three points. We are really hoping that we can drive revenue by doing a better job of selling. I recognize that revenue is our biggest problem... revenue growth is probably our biggest problem, that's why I am in New Hampshire today working on sales initiatives. So we are going to work very hard at trying, driving that growth up with... the 18% additional people should translate in the higher revenue going forward. David Manthey - Robert W. Baird & Co: Great, thanks guys.

We will go next to Mike Hamilton of RBC Dain Rauscher. Michael A. Hamilton - RBC Dain Rauscher: Good morning. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Hello, Mike. Michael A. Hamilton - RBC Dain Rauscher: I am wondering if you could comment a little bit on what you are seeing geographically at this stage, just walk through the regions? Willard D. Oberton - President and Chief Executive Officer: For the most part Mike, we are seeing the West Coast, mainly California and Florida are slower for us. And really it's the areas that have a really bad housing problems or appear to have bad housing problems, based on what's reported. You take out Southwest and you take out the very part of the Southeast mainly Florida, the rest of the country is very consistent, where we are seeing regions slightly above, slightly below that 13% throughout the country, with nobody way above or way below. So it doesn't... it seem like it's pretty much flat out there in those two areas, and those two areas are way down. We are also seeing good growth in Canada. Michael A. Hamilton - RBC Dain Rauscher: Thanks. As a follow on there, you commented and decided to tighten down occupancy here. Are there parts of the country, where you are not pleased with what you've got in terms of efficiency there? Willard D. Oberton - President and Chief Executive Officer: It's really not parts of the country; we think we got a little bit ahead of ourselves, trying to upgrade our stores and we're just taking a tighter approach like Dan said the merchandising in display. So when we open a new store, we don't need 5000 feet; may we go to 3500, and we have got a little bit ahead of ourselves and so look hard, it rather goes with that occupancy where it is. Michael A. Hamilton - RBC Dain Rauscher: Thanks, and thanks for all the detail. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Thanks Mike.

We will go next to Daniel Whang of Lehman Brothers. Mr. Whang your line is open. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Good morning Dan. Daniel Whang - Lehman Brothers Equity Research: Hi, good morning. Sorry. The first question was regarding the sales force, ramp up process, it seems like that's tracking... could you go into a little bit more detailed about the amount of training that's being required and I think when you initially rolled out the Pass way to profit strategy, you talked about some of the infrastructure needed to sort of hone in terms of performance measurement and, in fact, some of the productivity technology, may be just an update on those items. Willard D. Oberton - President and Chief Executive Officer: Okay, there is a lot pieces of that; starting at the training, we have them revamping our new employee training to focus far more on outside the store versus inside the store, that's a two week program. We have rolled out our hand held computer, its called Symbol MC70 to over half of the sales force. That roll out will complete in the first quarter. So everyone will have the hand held computer. By the middle of November, we'll have almost all of the upgrades and software downloaded to the system. We are doing a lot of... we have all the measurements in place as far as the scorecard, the expectations. That's actually what I'm doing... I'm doing a 14-city tour, working with everybody in small groups. It's an all day sales session with six meetings, going through the expectations. So now it's really about seeing who is performing, who is not and then addressing it at the district, the store and the sales level. So going through the process, we know that we have to become far better as the sales organization from a management standpoint. We've always been very good at the store but we need to organize it companywide and I am confident that we are seeing a lot of improvement there but on odd thought we working to see what are the people telling me, what do they know and for the most part, we have been a nice guy but there are still too many people who aren't completely informed as to what our company goals are and that's the purpose of these trends. Daniel Whang - Lehman Brothers Equity Research: Okay and in terms of the, obviously this first round of the sales force expansion, I think have you being focusing on certain geographic markets or end-markets, strategic accounts? Willard D. Oberton - President and Chief Executive Officer: No, we haven't. What we've been focused on is adding them in our most successful stores wherever those happen to be in the company, meaning that appear in the bottom half of the performance ranking at the store level, you won't be getting people added additionally to tell you perform at a higher level. It's basically investing good money with good money. Daniel Whang - Lehman Brothers Equity Research: Okay and finally I think you had commented that the end-markets remain challenging. And I was wondering if you can just perhaps provide a little bit more color I mean, I think as many... Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Yes, Dan. Daniel Whang - Lehman Brothers Equity Research: Yes. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: I am going to jump in. Last call we ran in to a few folks that couldn't on. So I am going to ask you to get back in queue with that one. Daniel Whang - Lehman Brothers Equity Research: Okay. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Thank you.

Holden Lewis with BB&T has our next question. Holden Lewis - BB&T Capital Markets: Good morning, thank you. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Hi Holden. Holden Lewis - BB&T Capital Markets: Good morning. The gross margin side rebounded nicely in Q2 which was expected, but you are sustaining that 51% level, I think the headwind in the quarter would have been that your mix of Fastener business which I think has specially better margin, that kind of hit historic lows and so one could argue that you did a good job keeping the gross margin where it was despite that headwind. Can you talk about what were the incremental contributors to sustaining that gross margin and whether or not that mix drag and the national accounts drag sort of ... how you're going to continue to offset that going forward, just further detail on that? Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Hey, Will I will take that one. Willard D. Oberton - President and Chief Executive Officer: Okay. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: There is really two headwinds in the quarter. Holden you are exactly right. Our fasteners as a percentage of sales dropped from the... dropped down to about 15.5% and it is actually the lowest percent we have ever reported. And so that did create some headwind. And the second one is fuel cost created some headwind because the fuel that goes... the diesel fuel that goes into our distribution fleet really is a meaningful thing for us in the scheme of our gross margin. If I look at piece of the equation that they help us, one of them is the initiative we've talked in the past about and that is our direct sourcing Scott Camp and his team have built a great organization for us on our direct sourcing and we have improved dramatically over the last several years and that continues to give us incremental gains when I look at from quarter-to-quarter and year-over-year. So that's one piece in there that's come in the plan and that helps us in the fastener line, but it also help us dramatically in non-fastener line. The other piece of the equation is when I look at our transportation, our distribution costs in general, we were able to hold the line if you will, from the standpoint we are able to offset the added fuel cost by just being more efficient with the mono product we are holding in our trucks, the amount that Will called and how we are handling the distribution, the trucking in general and so it's really a case of those headwinds we are able to offset. Willard D. Oberton - President and Chief Executive Officer: I think one thing going forward Holden, that we are counting on to help us as we grow the outside sales force that we are adding, most of these people are focused on small to medium customers. The margin for the group as a whole the accounts that are signed to the outside sales people runs three points ahead of the company average, actually just slightly higher than. So if they were to outgrow the company which we believe they can or grow their peers, it will help us overall with the margin mix, besides the better sourcing as we go forward. Holden Lewis - BB&T Capital Markets: And just to quickly follow up on the fuel stuff; I think where you gave the dollars in your release, I think you indicated that so far this year your fuel cost has averaged 2.1, 2.5, 2.4. Were those numbers for each month during the quarter? Were those the last three quarters numbers? Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Those numbers were the average monthly number for each of the quarters we talked about. So, if we take $2.4 million, that's the average month in that quarter. Holden Lewis - BB&T Capital Markets: Right, okay, and so for the prior year is 1.9, 2.1. 2.2, I mean it actually looks like the... the fuel impact was less of an issue in Q3 than it was in Q2? Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Yes, and that's what I was alluding to. The fact that despite the increase in per gallon costs, we were able to continue improving... how we are moving product, and how we are picking up product, how we are transferring product from hub to hub to more than... to offset it. Holden Lewis - BB&T Capital Markets: Okay and that's just routing efficiencies? Willard D. Oberton - President and Chief Executive Officer: All of the above. Holden Lewis - BB&T Capital Markets: Yes okay. Willard D. Oberton - President and Chief Executive Officer: We are working hard on it. Holden Lewis - BB&T Capital Markets: And that's largely sustainable right? Willard D. Oberton - President and Chief Executive Officer: Yes, that's... Holden Lewis - BB&T Capital Markets: Okay. All right, thank you guys. Willard D. Oberton - President and Chief Executive Officer: You bet.

: We will move next to Adam Uhlman of Cleveland Research. Adam Uhlman - Cleveland Research Company: Hi good morning. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Good morning Adam. Adam Uhlman - Cleveland Research Company: I guess still Dan's question here; could you talk about what you are hearing from your store base and your customers specifically regarding your big end-markets industrial MRO, OEM and also a non-res construction? Willard D. Oberton - President and Chief Executive Officer: I'll take that and if you want to follow up Dan. I am starting at the back at the non-res construction. It seems to be slowing some, job starts are not where they were, but there are certain areas that are real hot. Energy is red hot, the ethanol especially in the Midwest where we operate is very good. But fewer office buildings and some of the other things... it's more mechanical that the petrochem is still doing well on the non-res. From a large manufacturing perspective; our big customers and our big suppliers, all of them are very cautious. Most of them are doing very well on international basis and that's what driving their numbers, but their North American businesses are slow and I talked to a lot of leaders of the these businesses and they are very cautious saying what's going to go into 2008. So we are kind of playing our cards the same. But in the MRO, the MRO has always being the most consistent part our business because if you don't build new, you have to maintain old and so that is a very smooth business with the construction and the manufacturing being the two of that seem to be as far more cyclical. Adam Uhlman - Cleveland Research Company: Okay, got it and then my second question, could you comment us to what the benefits of revenue growth was this quarter from price increases, and how should we think about that going forward. Have you gotten any signals from your suppliers regarding pending price increases? Willard D. Oberton - President and Chief Executive Officer: We saw very, very little gain going forward this quarter in price increase, as normally price increases would come at the end or the beginning of a year, fourth quarter and first quarter when the suppliers... right now the steel prices are going up slightly out of Asia, but the biggest thing that we have going right now with price increases is the repeal of the VAT tax in China, over the year tax credit they were giving for export product and on our Fastenal products that we buy from China there will be between an 8% and a 13% increase, representing... that's on about 10% of our spend. Those products will go up. We are working through that now and that will come in between now and the end of the year, the prices actually went up in China at July 1, but everything we had purchased and had in the pipeline it's really just starting to come through. As far as other price increases we will have better color on that in January because no one is coming through with a regular annual price increases at this time. Adam Uhlman - Cleveland Research Company: Great thanks.

Up next from FTN Midwest Securities, we will go to John Baliotti. John Baliotti - FTN Midwest Research Securities Corp: Good morning. I was just curious about the... Willard D. Oberton - President and Chief Executive Officer: Good morning, John. John Baliotti - FTN Midwest Research Securities Corp: How are you guys doing? I was just curious about the that combined ratio and you guys talked about the receivables and inventory ratio. As you mentioned in the earnings release, you have been able to keep the growth and receivables lower than that of sales. But obviously, the balance sheet impact, the receivables is significantly smaller than the inventory. So I was just wondering do you feel that you can get a meaningful pick up in the receivable turn on it's own that would obviously as you grow out the master hub and the other initiatives with the stores and inventory that, that obviously has a little bit of headwind, but in total you feel that perceivable future benefit be meaningfully better than where it is today? Willard D. Oberton - President and Chief Executive Officer: I do because as we see what the things we are still doing to challenge ourselves on... how do we just... a lot of it comes down to make and I am talking about the AR here. A lot of it comes down just being an easy company to deal with; simple presentation of your invoice, making it convenient for your customer. One thing that we did several years ago with our customers that do less $1000 a month in business with us, we migrated them more to a statement concept of billing where we instead of mailing out invoices each week, we had mailed them several invoices mid month and at the end of month we had mailed the balance of their invoices with the statement, and it just made it easier for them to pay us, because you've push a lot paper art, there's much more openness to going to other ways of billing, whether that's presented by e-mail or presented in some type of electronic fashion and what that can do from the standpoint of not only presenting but how the payment comes back, whether that's fee-based payment or electronic payment, really gives you tools to improve your days to collect, without it being a negative to your customer base. And so, I think there are still opportunities there to continue to move that number down from the low 40s or add into the upper 30s. But I think the working capital on that, that three to one relationship, we talked about, the real improvements we will see over the next several years is more tends to be inventory side of the equation. John Baliotti - FTN Midwest Research Securities Corp: Right. Willard D. Oberton - President and Chief Executive Officer: You'vejust got to leverage that, the investment going into our master hub, are dropping off, quickly as far as incremental investment. John Baliotti - FTN Midwest Research Securities Corp: Right. Willard D. Oberton - President and Chief Executive Officer: And floor store openings. In stores opening. John Baliotti - FTN Midwest Research Securities Corp: Yes, I mean it seems like a may be even 20 or 30 basis points improvement in the inventory turn alone would work. And even if the receivables stay where it was, it would be a huge benefit to that combined ratio. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Absolutely, because for every dollar they are, we have over $2 of about $2 of inventory. John Baliotti - FTN Midwest Research Securities Corp: Right and just to quickly wrap that up. How long do you think that you are going see the short-term impact or the impact of the inventory build as you think you start to see that decline, let's say some time next year or do you still have to get that in going out? Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: I think we have already started to see the decline and I think... and I anticipate that decline continuing well through our business. And the only challenge that we'll have introduced into that that will be new, some of the inflation in Drugstores product that Will mentioned a few minutes ago. John Baliotti - FTN Midwest Research Securities Corp: Yes, I guess I am not sure you mentioned it was the growth rate of that relative your sales, seems to be a little bit wider this year than it was last year. I am just wondering this 8% looking back in the 7% is your comparisons for that? Otherwise you did almost 17% growth in inventory and 13.5% for sales, that you pointed out, where as last year that difference was only about 200 basis point; '08 going to moderate for that? Willard D. Oberton - President and Chief Executive Officer: By the end of the year that will look much better because most of the inventory build is in the fourth quarter last year? John Baliotti - FTN Midwest Research Securities Corp: Right Willard D. Oberton - President and Chief Executive Officer: Year-to-date, we are only up 7% and we think going towards the end of the year the year-over-year number will be much closer to that then its is today. John Baliotti - FTN Midwest Research Securities Corp: Okay. Great, thanks a lot.

We will go to Michael Cox of Piper Jaffray. Michael Cox - Piper Jaffray: Thanks, good morning. My question is related to the gestation period of new sales reps. I was wondering if you could comment on the time it takes from higher to training and then on to becoming a more productive sales person, how long that takes and during that time period given the macro back drop you are operating in, if you can highlight any specific internal initiatives you have to try and drive sales back to that 50% level. Willard D. Oberton - President and Chief Executive Officer: We are still working on really dialing and what is the necessary amount of time, right now based on the productivity of the people we hired in 2006, 15 in months is where we are really starting to make money of that individual, three months to get them up and going and 12 months of selling and by the end of the fifteenth month, its been a very... it's a very profitable investment for us. But we are still trying to work that down through better training and doing some different things. The initiatives that we are going to try the drive the number up right now is getting out to the people who have been around and explaining the expectations and doing a better a job of making sure that all of our store managers and district managers are leading the people. What I am finding out that in too high of a percent and that meaning 25% to 30% of the cases I'm talking to people. In the last three weeks, I've been in front of about 700 sales people and small group meetings, 25 or less. There are about... quarter of the people aren't really being led, they are good people but we are just letting them going. So we have to work with our managers and our district managers to bring these people closer, explain the expectations and hopefully that alone will drive greater sales growth from these people, so they understand the objectives and the company goal. Michael Cox - Piper Jaffray: Okay, thanks. And one quick question on the cash flow. With the improvement in working capital, should we expect you to become a little bit more aggressive, repurchasing stock over next couple of two, three quarters? Willard D. Oberton - President and Chief Executive Officer: It's yours, Dan. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: We will continue to be buying back stock, I think we have done... we would make a good stride, as far this year. One thing to keep in perspective on stock repurchases... for us it's a relatively new phenomenon and we are still trying to figure our way through it and... but I would anticipate we will continue to be in the market and I wouldn't be... I want to go out on a limp here but I would expect us to continue to make meaningful buyback. Willard D. Oberton - President and Chief Executive Officer: And we've Dan, one authorization up to about million shares at this point? Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: I think we have a 1.2 million left on our authorization. Willard D. Oberton - President and Chief Executive Officer: So that gives you an idea of what Dan and I can approve. Michael Cox - Piper Jaffray: Great. Thank you very much. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Yes.

: And our final question today comes from Jeff Germanotta from William Blair. Willard D. Oberton - President and Chief Executive Officer: Hey Jeff. Jeffrey S. Germanotta - William Blair & Company: Well I really wanted to explore a little longer term the ramp of sales people and in terms of numbering quantity, but then also at what point do they get to a sales person to breakeven and then keep productivity? Willard D. Oberton - President and Chief Executive Officer: Well in order to breakeven, if they hit the averages they are going to breakeven in about 10 months, 10 months of selling which is actually 13 months of being... we are looking about 3 months to get them in to the roll. It takes one quarter and they are agreeing, understand that. Why there, why the 8 to 12 months depending on how they are doing they will be producing an enough sale to pay for themselves and being paying back the overhead of the company and to start paying to hire new people. So that's, that's where that is. Maximum productivity, we don't know where that is. We have sales people that are... they have been in five years managing the $100,000 a month that are still growing nicely. So as they become better, there is almost no limit and it's like saying, what's the biggest Fastenal store ever going to be? 10 years ago we would have said maybe 100,000 and now they are 500,000 and 600,000. As we develop people, they will get better and they will continue to grow to a higher level. As far as our headcount going forward; right now we are, based on worse or we think the sales are going to come in. For 2008, we are looking at adding between 15% and 20% more outside sales people or full time people to our stores. And that range is really based on our ability to grow the sales faster. If we are able to get our... drive our top line revenue closer to 20%, our hiring will be close to 20% for outside sales people and full time people in the stores. We will continue to work very hard in controlling our growth and our distribution and all other support areas. So we can create positive earnings leverage not by slowing down sales, but by saving in another areas. Jeffrey S. Germanotta - William Blair & Company: Would it be fair to say that you will try to manage the hiring rate in the field to a level consistent with the sales growth rate? Willard D. Oberton - President and Chief Executive Officer: That's a good rule of thumb, and so we are going to be somewhere in there, but it really depends on if we are at the lower end or the upper end of that range. If we are at the upper... if we were at 20% we could get probably hire few more people and still have very positive leverage because then we are going to get more benefit out of the store, slower store openings with a higher revenue. But safe to say we are going to be aggressive with trying to grow our business because we believe that's the best opportunity long term for our shareholders. Jeffrey S. Germanotta - William Blair & Company: We agree, thank you. Daniel L. Florness - ExecutiveVice-President andChief Financial Officer: Sara I just have one comment I want to throw in and that was a clarification. I jotted down a few a notes as we were going through the Q&A and related to I believe it was Dave's question towards the front-end, might have been Mike. We talked about the leverage as we look into fourth quarter and just wanted to clarify, we will... based on where gross margins are trending, that would imply a gross margin leverage where we talked about having challenge in the ability to leverage, that's in the SG&A line, not in the operating income line. I just wanted to clarify that because looking in the fourth quarter, as we have experienced in previous quarters of this year, the gross margin is giving us a nice leverage point to allow us to proceed quiet aggressively in the pathway to profit. Willard D. Oberton - President and Chief Executive Officer: And one final comments from me. I am traveling today, but I know some of you usually call me on earnings day. Leave a message and I will get back to you. I do have some time today to return calls, if anyone has questions. Thank you very much.

And that concludes today's conference. We thank you all for joining us.