Willard Oberton – Chief Executive Officer Daniel Florness – Chief Financial Officer Darin Pelligrino - Controller

Michael Cox - Piper Jaffray Brent Rakers - Morgan Keegan Holden Lewis - BB&T Capital Markets David Manthey - Robert W. Baird John Baliotti - FTN Capital Markets Sam Darkatsh – Raymond James Unspecified Analyst – Credit Suisse

Good day and welcome to the Fastenal Company's second quarter fiscal year 2009 earnings conference call. (Operator Instructions) At this time I would like to turn the conference over to Darin Pelligrino; please go ahead sir.

Good morning and welcome to the Fastenal Company 2009 quarter two earnings conference call. This call will be hosted by Willard Oberton, our Chief Executive Officer and Daniel Florness, our Chief Financial Officer. The call will last up to 45 minutes. The call will start with a general overview of our quarterly results and operations by William and Daniel 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 home page at www.investor.fastenal.com. A replay of the web cast will be available on the website until September 1, 2009 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 these forward-looking statements are contained our 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 statement that 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 will undertake no duty to update the information provided on this call. I would now like to turn the conference over Willard Oberton.

Thanks Darin. I was wondering if we were going to have any time left after that introduction. To start out here, first I want to thank everyone for joining us on the call today. As you can probably guess that overall second quarter was a very disappointing quarter for Fastenal. Just didn’t have the results that we thought we would. Going into the quarter we thought we would see some improvement in the general economic activity but as the quarter played out, the economy just continued to deteriorate. Our sales for the quarter were down 21.4% when compared to the same quarter in 2008. Although our sequential growth was not as strong as we would like, we did see sequential daily average growth in the last two months and at this time any growth at all is really perceived as positive to us. The real problem for the earnings was the 180 basis points drop in our gross margin and that was really caused by three things, three areas really came together to cause the drop in the gross margin. First was the competitive pressures we are seeing in the market. This competitive pressure lowered our reported margin by an estimated 100 basis points. And although this is an issue, understand that we are advising our sales people to not make short-term decisions. We’re advising them to be aggressive when they need to, maintain as much margin as they can. If there’s a competitive situation that may cause them to lose a long-term customer over a short-term issue, keep the customer if at all possible. And so that’s a tightrope, that’s a fine line to walk but we believe that’s the best decision long-term for Fastenal to not make short-term decisions that will have long-term implications. We believe as the economy improves this pricing pressure will ease to a more normalized level and things will just settle out. It won’t go on forever. The second margin issue was caused by the deflation in steel and the fact that with the lower sales we cannot sell through the older, higher priced inventory as fast as the market is dropping. In other times when we’ve had deflation the inventory has moved out as the prices have dropped and it’s been a natural flow. Because of our higher inventory levels and the unprecedented drop in our sales, we could just not move the inventory through as fast. This has caused a 50 basis point reduction in our margin and is also more of a temporary situation as prices stabilize that should just work itself through. The third area of margin that’s caused us problems is the volume incentive and rebates. Our product people, the purchasing people, the product development people, did a very good job of negotiating lower hurdle rates for our 2009 programs but with our inventory reductions and the lower sales which reduced our purchases we still may not hit these lower hurdle rates which will cause our, will decrease our rebates, decrease our purchasing incentives and this cost us about 30 basis points in the quarter and that’s where the 180 came together, basis point reduction. All of these serious issues, but all of them are more timing issues. We believe that most of that will come back over time. On a more positive note, I believe our team did a very good job on expense control. We reduced our operating expenses by 11.2% year over year exceeding our goal and our labor was down almost 19%. So everybody is on board. We’re working hard trying to make the changes we need to make. We expect this trend to continue into the third quarter estimating a sequential reduction in operating expenses between 2% and 5%, so we’re going to continue to work hard to lower our expenses and right size them with the size the company is today. We also did a very nice job on reducing our inventory. Credit there goes to everyone in the stores, our purchasing department and Daniel’s financial group. We lowered our inventory by $36 million exceeding our goal of $30 million and our goal for the third quarter is to reduce our inventory between another $12 and $15 million. At that point we will be very close to where we were back, actually lower than we were last year at the same time but our turns will be getting back to the more normalized levels so we’re working hard to achieve that goal. The collections group did a very nice job on accounts receivable. They held up very well and we saw no deterioration in the second quarter from a day’s out standpoint so another very positive from cash flow and managing the asset base. Looking forward our plan is to maintain our current headcount level at the stores and continue to work very hard at reducing the support headcount wherever it makes sense. It’s a fine line between service and support and we’re trying to identify the areas where we may be able to reduce. In some cases we’ve actually reassigned support people back in the store positions they had previous and that’s actually gotten very well. People are very happy to have the jobs and be gainfully employed. Also looking forward we’re planning for the rest of the year, we plan to maintain our store openings in the 2% to 5% range, and with any pickup at all in 2010 we would plan to go back to our more historical opening pattern of 7% to 10%. So we’re looking out trying to understand what is going on. In an effort to try and understand the whole industry, a couple of weeks ago I went to our Vice President of purchasing and our Senior Product Development leader in fasteners and I asked them to contact some of the companies that we know well, old suppliers, basically Fastenal friends and see if we could gather some information to see what they’re seeing out in the market as far as how their businesses are holding up. They contacted actually five of our largest distributors, these would be importers, people brining product in from Asia and reselling it and four of them were willing to give us good information. We averaged out the results from those four and they came out to be 38% down, their sales to us and our competitors are down 38% year over year. And that’s year to date, so they’re way down. We also contacted five of our Asian manufacturers and all five of them got back to us with good information and their shipments to the United States are down, and this is in dollars and not in pounds, the tonnage is not quite as bad because of deflation, but in US dollars their shipments are down 59% year over year. And the reason I give you this is it just brings more color to how beat up the fastener business is and many other industrial businesses this year. I was actually quite surprised that their business was down that far and I got a lot of different information back from the US suppliers. Some of them were talking about the numbers of companies they have on credit hold and that some of our smaller distributors or competitors are actually buying product on credit card at this point. So there’s a lot of pain going on out there and hopefully it will ease soon. Looking back at my notes on a very positive note we continue to sell to more customers. Our actives for the second quarter grew 3.5% over the same quarter in 2008 which is lower than we would want but Daniel has done some work on frequency and when you look at the reduced frequency that we’re seeing you add that in and it translates into about 8% to 9% increase in our actives on a real basis. So considering everything that’s going on we believe that’s pretty good, pretty aggressive. And when I look at that I’m trying to think of how that affects us. A real example of how this plays out to our business, in June of 2008 we sold to 214,000 customers and we sold them $206 million in product or $959.00 per customer. Roll the clock forward 12 months to June of 2009. We sold to 226,000 customers, we sold to 12,000 more customers but we only sold $167 million. So our sales were down by $39 million but we sold to 10,000 more customers, 12,000 more customers, $739.00 per customer. And when I look at that it tells me a few things. One is really the state of what our average customer is doing but on a positive note we seem to be maintaining and retaining our customers, they’re just at a lower level. So when things do come back we should be in pretty good shape. Sorry about fumbling around with that but at this point I’m going to turn it over to Daniel and Daniel is going to give you more color on what our actual customer groups are doing and then a little bit of information on cash flow. Thank you very much.

Thanks William, and as Willard mentioned I’m going to cover a little bit, a little color in the customer components as well as cash flow. My comments today will be relatively brief. I think the earnings release speaks for itself. In the first quarter call I spoke of what I called a core customer comparison and what I was really trying to do is look at October of the prior year and the reason October, historically for those of you that followed us for many years, historically we look at October as our springboard to the next year. It serves as a guidepost to where January daily averages will come in and where we’ll start the new year in building our business. When I talked about these numbers and again last October we had about 225,000 active customers. When I looked at that business from October to March, what I saw was if you looked at that over the entire decade, what we call our core group, the customers that would buy in both of those two months, October and the following March, you saw basically a parallel pattern from the standpoint of dollars. On average for the decade it was not up, it was not down. If you looked at that a little closer within the decade, you would see that in the early part of the decade we averaged down about 7% in the recessionary environment. In the middle of the decade when the economy was strong, we averaged up a plus about nine and then in the last three years we’d gone from plus nine to zero in other words flat to down seven. And in March of 2009 our business was off 27%. So summarizing that all out, we saw about a 2,800 basis point decline versus our norm in the October to March timeframe. When I extend that forward now to June, and I compared it to historical norms, as William mentioned we did see additional softening in the marketplace but if I compare it to historical norms, we lost about 100 basis points of growth from what we saw in the balance of the decade. So while it did worsen, it was a marginal worsening as opposed to the previous six months or the previous fourth quarter and first quarter where it was a dramatic drop off in business. So while the business has not stabilized, the rate of worsening has narrowed dramatically. The other item about frequency, as I had mentioned in the March call and these numbers are holding pretty true to this day, our frequency is down about five percentage points, just over five and that’s really that comparison William had to the 3.5% going to about an 8.5% active account growth comparison. The second type and I put a paragraph in the first page of our earnings release, historically we’ve not given a lot of color on components of our customer base but I thought I’d share some in the context of the release and elaborate on it a little bit in the context of narrative. Our manufacturing customer base which represents historically somewhere between 45% and 50% of our sales, on a Q2 to Q2 basis, that business was off about 28%. Now we don’t have perfect information for delineating OEM versus MRO because sometimes it’s commingled in a common account. Near as we can ascertain the OEM business is down somewhere in the neighborhood of 40%. The MRO business is down somewhere in the mid to upper teens and that’s really given our overall balance of being down about 28%. Some positives we did note, is that in the period from October through April we saw sequential drops in our business on a month to month basis. From April to May the business did improve from the standpoint there was a sequential gain in the daily average and from May to June we saw a positive. Now the numbers are slight but they’re positive nonetheless. On the second component of our business, non-residential construction, again historically that’s run somewhere in the 20% to 25% of our business. That business was off 23% as I cited in the press release. Sequentially that business did soften some from April to May and May to June and so that’s a little bit of a negative coming into the summer. It offset the improvement we saw in the manufacturing component. The third category and this category is a little bit of a grey category in that its product we’re selling to a reseller. Some of that product is a contractor, it might be an electrician that business is going into non-res construction, some of its going into manufacturing that might be a reseller of product. That business represents about 10% to 15% of our sales. It was off about 22% for the quarter. Sequentially April to May and May to June, that business improved. The third piece of our business and this business is about 25 to 5% of our sales historically is our government component. That business Q2 to Q2 was up 10% so the government is out spending dollars. Unfortunately for us it’s a small enough piece so it doesn’t really move the needle and as you can imagine, that business improved from April to May and from May to June as well. Finally on the cash flow statement, if you recall when we started the pathway to profit back in 2007, we laid out a long-term goal of what we thought our cash flow statement would look like and that goal really centered on looking at our operating cash and our CapEx and our free cash flow, all as percentages of earnings in a given year on where we thought that would come in. And our range for operating cash was 80% to 90% of earnings. CapEx, shoot for a 25% to 30% of earnings and be in a position where we had free cash available of somewhere between 55% and 60% of earnings in any given year to build strong cash flow, to use in a variety of measures to improve the return for our shareholder base. As you saw in the first six months of this year much as we saw in the first three months, extremely strong cash flow. The operating as about 182% of earnings and that was really driven up because of as William referred to earlier, our strong management of inventory. If you look at our balance sheet and you get down to it we have three primary assets; accounts receivable, inventory, and fixed assets. From an accounts receivable standpoint, as William mentioned, we’ve been able to minimize the cash flow or balance sheet risk in this environment and have been able to maintain or nominally improve our days. Have felt some income statement impact with some bankruptcies in our customer base but a number we can manage through. On the inventory sides, we’ve made nice progress. We’ve had a balanced approach to both our store and non-store, primarily DC inventory. If you look at the components of our inventory our June 2009 balance is essentially in line with our June 2008 balance and our goal is to get back to as William mentioned earlier where we were in December of 2007 so we can hit 2010 lean and ready to go as we charge into the new year. With that, we’re ready for the Q-and-A session. Thank you very much.

(Operator Instructions) Your first question comes from the line of Michael Cox - Piper Jaffray Michael Cox - Piper Jaffray: My question is on the margin side, I was just hoping you could comment on your inventory position, the flow through of higher cost inventory, how long should we expect that to continue from I guess a mismatch to where current selling prices are and then I have a follow-up on SG&A.

Well its getting better already but its not like its just a drop dead because you buy product and it sells off some of the slower moving product will still be in the system three, six, nine months from now because on the importing side where we’re really seeing at the fasteners, many of the slower moving parts we’ll buy, we only turn them one and a half to two times a year in a normal situation so, they will just continue to become less of a problem over the next three to six months and by the end of the year it should be pretty well normalized. Michael Cox - Piper Jaffray: On the SG&A side, your comments around the sequential drop in SG&A that would imply a pretty significant year over year decline in SG&A dollars. I believe that you were about $22 million in the second quarter and your guidance would imply double that. I was hoping you could give a little more color of incremental cost test that you’re looking at.

It might be best to look at it from a sequential standpoint, as you recall last year in the third quarter we had a settlement in the number of about $10 million but if I look at it, if I ignore that and look at it from both either a sequential or year over year, the improvements you’re really seeing, if you look at the components of our operating expense, the biggest component it relates to labor costs. We’ve been able to manage labor, headcount quite well through this process. There’s a fair amount of incentive compensation both at the store, district, region and national level component of our business and that as you can appreciate has contracted quite dramatically to help us manage through it. So a piece of the additional savings sequentially and year over year will be coming from that component, a meaningful piece, and if you look at the balance of our P&L we still have some benefits in the P&L from fuel. We still have some benefits for reductions in [paying] because our occupancy expense is improving dramatically and probably the only outlier on that of expenses year to date whether it be the six month period or three month period, interestingly enough our healthcare costs are running higher not because of anything other than we’ve seen about an 8% increase, our healthcare is up about 11% in the second quarter. About eight points of that 11 relates to additional employees opting expanded coverage as their spouses have either lost their jobs or they’ve seen benefit reductions at other employers. So what’s one of the offsetters, but even with that in there, the real big piece on a sequential and year over year basis relates to payroll costs.

One of the areas that’s positive from a headcount standpoint, is both our distribution centers in Dallas and Indianapolis, the large investments are starting to come on line. We’re starting to operate those. We’re seeing the efficiencies that we thought we would and it’s allowed us to lower headcounts in both those facilities which will add into the, reduce our expense in the third quarter. That’s a very positive.

Your next question comes from the line of Brent Rakers - Morgan Keegan Brent Rakers - Morgan Keegan: Just wanted some additional clarity on the SG&A, I guess I was surprised that in light of the cuts to the FT&E on a sequential basis and the revenue decline sequentially and the substantial gross margin decline substantially that the payroll numbers were not down more than they were sequentially. I understand that the healthcare component, but maybe could you dissect some of that on maybe a per head basis and maybe talk about both kind of the wages or the base compensation and contrast that with the incentive compensation.

I guess when you look at the base component, that was dropping quite dramatically when you went from Q4 to Q1 because actually our base component dropped off about 14%, 13.8%, excuse me 16%. But from Q1 to Q2, that’s shallowing quite dramatically and that dropped off about 4%.

I think one other piece that you don’t see is that the margin reduction, only about half of that actually goes through the branch pay program where the deflation, revaluation through deflation doesn’t go through POS and so it doesn’t affect our bonuses as much. That’s the way it was on the way up and the way down, same with the rebate component. Neither one of those effect the POS store system so it doesn’t have the effect of reducing bonuses as much. The other piece is that basically the growth was out of the pay program in the first quarter so we didn’t see a lot of benefit in the second quarter, lower pay because of the growth. Once you go below zero, there’s no growth component left. Brent Rakers - Morgan Keegan: One other question, William you did a great job breaking out the components of gross margin earlier, could you maybe also address though the impact of product mix sequentially and then also the fuel component. I think Daniel said last quarter I want to say it was 30 or 40 basis points.

Well the product mix really didn’t change. What you’re seeing the fasteners drop but that’s really due to the deflation in the fasteners and the other products we really aren’t seeing a lot of deflation and I have not, I don’t have this information yet but I think when we break it out by units or sold versus dollars, the fasteners held up fairly well. There’s probably a little deterioration there because of the OEM customer component. But generally the fastener margin dropped, the rest of it held up quite well.

In the first quarter when we talked about the components, you’re correct; it was about 35 basis points that we saw an improvement. As we go from Q1 to Q2, we lost a little bit of the steam on the fuel side. We still had some operational improvements. We picked up about seven basis points. So it was pretty much a neutral.

I have to say though on the transportation side, the group continues to do a great job and we did have our transportation system was a revenue stream for us in the second quarter versus an expense issue. That’s just hard work.

Your next question comes from the line of Holden Lewis - BB&T Capital Markets Holden Lewis - BB&T Capital Markets: I also wanted a little bit more color on the gross margin, can you give a sense particularly as it relates to the competitive pressures and sort of the steel deflation issues, it seems like you’ve been seeing some movement towards higher raw material costs both Chinese steel as well as domestic, what is sort of your expectation for how that plays out. Does that take away the need for the price cuts that you took in March and June or do you expect to see more price cuts coming despite that.

Well talking to our purchasing people, they said it’s been pretty stable over the, what we’re paying for product has been stable through May and June. But as volatile as the world market is from an oil standpoint and ore standpoint and just pure volume, it’s hard to say what will happen with steel going forward. If we did see any up tick in inflation at all, it would greatly reduce the repricing of the inventory on the shelf that’s basically cost us 50 basis points and one commodity, stainless steel, we have seen it move up. Stainless is a pretty big product area for us, nickel has gone up about 20% over the last couple of weeks, so that’s a positive. But you know it’s like looking through that cloudy crystal ball right now as to what the commodity prices will do. A little bit of inflation at this point would be very helpful from a margin standpoint just to stabilize the position. Holden Lewis - BB&T Capital Markets: Can you talk about what you did with pricing in June and what you’re expectation is for September.

Right now with June we lowered a small group, kind of the center part of the commodity fasteners, the A items because that’s where we are seeing the most pressure. We didn’t lower basically none of the non-fasteners and about 50% of the fasteners we held tough on, all the slower moving items. What we’re finding is that where we’re really getting the pressure is on the very high moving parts and that’s probably because people are buying them and selling them like hand to mouth. So it was the smallest change we’ve seen in the last three quarters. Right now what we see in September if it would remain the way it has been through May and June, we probably wouldn’t have to reprice anything but we’re a couple of months away. The environment is looking better from a pricing standpoint then it has. Holden Lewis - BB&T Capital Markets: Okay so based on what you’re seeing, that 150 basis points from competitive pressures of steel deflation, how much of that do you think will sort of fade away as you get into Q3 and Q4 if any based on that statement.

I don’t think it will fade away in Q3 because we’re well into Q3, and it takes time to go away. In Q4 if our cost of goods, our purchasing prices stay stable, a lot of it will fade away in Q4 but we’ll still have the rebate and volume issue and competitive pressures really depends on what the overall economy does. If business starts to pick up, people will try and make money. If business doesn’t they’re going to try and survive and produce cash to keep their business, their doors open.

Your next question comes from the line of David Manthey - Robert W. Baird David Manthey - Robert W. Baird: Sticking with the pricing theme, can you tell us what the price impact on the top line does in the second quarter and what your expectations would be for the third quarter.

It’s a difficult one, I’d say in that neighborhood of 3% to 4%, 4.5%. I’m looking on a year over year basis.

We’re waiting for more, we’re trying to piece all the information together and the real challenge we have in it is so much of our product is customer specific for the large accounts. I think Daniel is probably on the high end of that 3% to 4% year over year and because we are running up the ramp last year, we’re almost at the peak, and then it was coming down. If I would say, it’s probably more in the 2% to 4%, 2% to 3%. And in the third quarter probably won’t get much more back. At least as we see it today. We’re really cautious in saying anything because it’s been moving, when it does move, it moves quickly. We’ve never seen it move like that. David Manthey - Robert W. Baird: And then second, as you’re deciding whether or not to ramp the store growth back up in 2010, could you talk to us about what some of the key indicators you’ll be looking for. Is it just primarily related to your business or are there other factors.

For me the number one indicator will be sequential pattern. If we could get our business back on to a pattern that was above the historical norm for sequential growth, then we would believe we’re moving in the right direction. As we said we saw sequential growth in the last two months but it was below the average, our historical average. We need to get above the historical average which means at some level the customers are coming back, their businesses are coming back, at that point we think our best investment for the future would be to ramp up our store openings and start to hire sales people at the level that we can afford, while at the same time increasing our earnings on a pre-tax basis.

To frame that a little bit, from May to June our daily average increased 1.7%. We’d have felt a lot better about it relative to historical norm if that would have been in a range of 3 to 4.

That’s really what we’re looking, what do we see out there.

Yes, the steps we’re going up.

Your next question comes from the line of John Baliotti - FTN Capital Markets John Baliotti - FTN Capital Markets: In the earnings release you talked about how the cost structure now with the changes through [inaudible] path to profitability, a greater portion of the cost is variable versus fixed. I was just wondering in the context of the leverage that we saw, I think it was down over 500 basis points, and I don’t think you had that in the last recession, is there a volume point that you would see that, where we would start to see that new cost structure kind of materialize.

Well if you looked at it say in the first quarter, using that as a benchmark because I’ve done a fair amount of work on that earlier, we saw where we could have had zero percent sales growth and we would have leveraged our income statement. In the current quarter our operating expenses on a year over year basis are down just over 4%. And so let’s just say, if we had been at a flat growth perspective, it would have probably eaten up half of that reduction, maybe three-fourths of that reduction so the wildcard here is what gross margin would have done in that kind of environment, would we have been able to maintain gross margin. And so we’re looking at the business from the standpoint of the way we’re managing it right now in the context of 2009, with our comparisons to where operating [inaudible] were in 2008, could operate through the year and we believe we could leverage at zero percent sales growth. If I went to pre pathway to profit, that number would have been more in the 16% neighborhood and we would have been really challenged to get it much down into 13 or 14. And again the wildcard in what I just said would be in that kind of environment if we’d have been at zero percent sales growth versus down 20, what would our gross margin have done.

We know that the gross margin would be better than it was because we wouldn’t have given up the volume incentive part. That part is very, you can calculate it out where we got hit. We know where that occurred.

And we would have burned through inventory faster in the first and second quarters.

Even if the competitive nature had stayed where it was, the other two would have probably not existed and we would have lost about 100 basis points. John Baliotti - FTN Capital Markets: Is it possible that as the year goes on and you kind of get a look at the locations and how they’re progressing that you may find that 2350 is the right number in total stores. If you look at the other, a couple of the other large publicly traded distributors that are out there, they’re combined locations are about 1125 and I’m just wondering if you look at your inventory turns it would kind of indicate at sort of a nominal 2.0 times it seems like you could, maybe be able to deliver more and you don’t necessarily have to be right next to the customer as much. I’m wondering if there’s a possibility that a review of the locations as we go through this difficult time may reveal that you got the right number where you are today.

I don’t have to give too much thought to that to come out with no, I don’t believe that’s the case. And part of it stems from the fact we’ve slowed openings this year because we really are trying to manage from a short-term and long-term standpoint managed our P&L through this as well as managed our investment through it. But when I look at our stores, there’s parts of North America where we’ve been for years, 40 years in Minnesota and Upper Midwest and have expanded beyond that. There’s other parts as you get closer to the oceans where we haven’t been there as long and so we continue to have tremendous opportunity for store openings in the Upper Midwest, the Central Midwest, and that’s amplified even greater when you get closer to the coast where we’ve just been less time. One thing you have to keep in perspective, fasteners represent half our sales. It’s a relatively low value product per pound. We’re selling processed steel. Where we’re really successful is where we’re able to position ourselves to be a solution provider to our customers and most of our customers operate within 10 miles of one of our stores. And it puts us in a position we believe long-term to garner the greatest market share and it also puts us in position we believe long-term to increase our store count quite dramatically yet in the future.

I think I’ll add a little on that where I look at, what I look at and I look at markets that none of our competitors have ever been in and probably won’t go to, last fall I made a trip through Northwest Iowa and I went to three cities, none of them 10,000 people or more. All of them doing more than, well over the company average, about a million, they’re all about between a million and $2 million stores. And they are all operating close to 30% operating profit. And when I got back I had to pull all the numbers because I was so impressed with the people working, I had never been to these three stores before. Those are the types of markets that other people won’t go to. They can’t figure it out and there are still hundreds of those out there, highly profitable, high service model and we’re just going to go and take market share that no one else will get. I don’t think we would every do $1.5 million in a store like Iowa unless we were there.

I’ll double down on it too, just from—

We’re going after you now—

If you look at communities of less than 100,000 people, really 90 to 100,000 people, there’s very, you really see a dramatic drop off in national industrial distribution in those marketplaces and those are extremely lucrative marketplaces for us and we have really, I think we’ve done a nice job as an organization of figuring how an $80,000 a month store can be a profitable business with an attractive return where we can compensate our store employees well. We can compensate the leadership off that store well and we can have a nice return for our shareholders and address the needs of a really an underserved marketplace in those communities.

Your next question comes from the line of Sam Darkatsh – Raymond James Sam Darkatsh – Raymond James: As always the level of detail is much appreciated and terrific. Most of my questions have been asked and answered, mostly looking at, when you’re talking about the manufacturing and reseller customers sequentially moderating I guess in May and June, then you’re also taking about pricing being more difficult in May and June sequentially, I know you talked about keep the customer and try and balance that with your sales force, but how much of those two aspects interrelated and if they are interrelated, how should we look at that sequential moderation looking at 30,000 feet perspective.

I guess looking at it first off, just the overall statement that the fact that we saw positive sequential gains in those two segments of our customer base from April to May and mid June, if for lack of a better description it felt good just to see numbers moving north rather than south. The pricing pressure that we saw in the second quarter in May, in June, tended to not reduce those numbers so that fact that we were able to put up positive numbers in both those categories is probably understated a little bit by the fact we had pricing pressure. Sam Darkatsh – Raymond James: And I just wanted to make sure I understood what you said earlier about Q3 and Q4 pricing and then the overall impacts, should we then expect gross margins overall then to be pretty similar Q3 versus Q2 and then a little bit of improvement in Q4 or are there other impacts moving the gross margins around on an overall basis that we’re not looking at.

Right now looking into just Q3, we think our margins will be similar to the Q2 level. Q4 is too far out and that really depends on what happens with the steel pricing and commodities pricing over the next two to three months.

Your next question comes from the line of Unspecified Analyst – Credit Suisse Unspecified Analyst – Credit Suisse: Could you remind us again when you expect to cycle through your higher priced inventory and any timing of benefit you’re expecting from customer restocking as well as is your CapEx number the $65 million, is that purely maintenance, is there some growth in there. What’s maintenance level CapEx for your business.

We are seeing it cycle through as we speak and we believe it will be, assuming that prices don’t continue to drop, we should be at a pretty normalized level by the end of the year and it will continue to diminish as a problem as the year goes on as we sell more of it out. So it’s just a long gradual slope. As far as restocking at our customer level, we’re not sure when that will begin but my own gut feeling is that at some level its never going to come back and we saw it in the early 90’s, we saw that in early 2000. Is when customers learn to live with less inventory, they go, the CFO’s say, hey, you didn’t have it six months ago, why do we need to put that back in. But that’s actually a very positive thing for Fastenal because if the customers have a warehouse full of product they don’t need a high value, high service model like Fastenal. So the more inventory that’s taken out at the manufacturer level, at the contractor level, the better off we are. Without making a lot of calls, just trying to understand customer needs, I was at a big contractor in Phoenix and the guy takes me out in his shop and shows me this big shelving area that’s almost completely empty and explains that at a year ago that was all backup inventory, but now he wasn’t speaking very positively about the guy with the checkbook in his conversation, but he said, I don’t have anything any more, that’s why I need guys like you and I just smiled to myself. That was a first hand example where I was involved where a reduction of inventory taking cash out of the business benefited one Fastenal store with one particular customer.

On the second part of your question about CapEx, the $65 million this year, sometimes you’re splitting hairs to figure out what is maintenance, what is growth. If I look at the pieces as we said in the release, a good, most of what we’re doing in Indianapolis, what we’re doing in Dallas, is behind us as far as dollars spent. But there’s still dollars being spent there in 2009. In the case of Indianapolis, we have our ASRS or unit load system, but we’re still in the process of putting in a [mini] load system so if I were to look at 2009, that $65 million, and just kind of throw a little bit of a guess at it, its probably when you really get down to it, in the traditional definition of the word, its probably two thirds, one third growth versus maintenance. Because our CapEx, we’re always investing into a marketplace that we believe long-term will allow us to keep growing as obviously in 2009 we’re working through unit compression, the demand compression on a per customer basis. But the long-term opportunity, we still invest for that long-term opportunity.

Your final question is a follow-up from the line of Holden Lewis - BB&T Capital Markets Holden Lewis - BB&T Capital Markets: The new compensation structure that you sort of have out there, can you just comment, did that have any bearing whatsoever on what took place sort of in the gross margin, or just sort of address any impact that the new compensation structure may have had.

No Daniel and I looked at that because we’re very concerned about that also and when we looked at how the quarter played out, the one thing that made it difficult to completely understand is we have a, three times a year we have a large promotion called the Bounty Hunter which is really pushing a lot of lower margin products that is paid for by the tool guys and so we looked back historically and said, what is the margin do when we, the month of the Bounty Hunter which the last one was March, it was March, June and September that we do this. Actually it appeared that we had less impact or lowering of the margin in June or we did than in March so looking at all the information, looking at large sales taken, looking at pricing trends, all the information we could gather, it looked like there was no effect and Daniel and I just went over it again yesterday because we were trying to understand, we’re trying to forecast for the third quarter where our commissions and our margin is going to come out. The one thing that it has done and on a very positive note, is it simplified the program and just got people back to work because they were spending a lot of time managing the numbers and very few complaints. I’m actually meeting with a group of regionalized presidents this afternoon so I’ll have some more color on that but overall it appears to be a very good decision from a simplicity standpoint and it didn’t effect or margin. Holden Lewis - BB&T Capital Markets: And I think you said that sequentially for SG&A you’re looking to push the SG&A number down another 2% to 5% sequentially I think you said, what revenue assumption is in that. If you see that the normal seasonal tick up in revenue that you would expect in Q3, is that the environment in which you expect to be able to cut the SG&A further or if you see the normal seasonal pickup in revenues, is that 2% to 5% off the table.

No, normally because of July there isn’t a large pickup from second to third. You get August and September are good, but July pulls you back a little bit because of the holiday so we’re looking if we get the normal, or the trend that we’re in here which is a little below line, that we’ll be able to manage that. Even if sales pick up a little more than that, we’re still well below the growth line so none of the bonuses are going to kick in. We need to see a lot of sequential growth before our pay programs and bonuses have any effect on our expense.

Because they really are a year over year program.

And we’re so far under water that the district, the region, even the store level has to show growth before the commissions tick up, so we’re really unfortunately, we’re a ways out from that being a problem. We’re comfortable with the 2% to 5% unless just went on fire, if sales went through the roof, which right now we’re not predicting.

But we’d take the—

Yes we would handle it if it came.

There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

My closing will be short as my comments were, really want to, speaking to our shareholder base I want to thank you for the support you’ve shown us through this cycle. We’ve tried to enhance what we can on at least a cash flow basis the return by increasing our dividends quite meaningfully over the last six to 18 months and we will endeavor to manage our cash flow through this cycle and position ourselves to have ample cash supply to invest in the business and have some dollars to return to our shareholders. Secondly and of equal importance, I’d like to thank, there’s quite a few employees of Fastenal that I anticipate are on the call right now listening or will listen to a replay of it, and I want to say thanks to that group. We sat down with various groups within the organization last fall in December when we had our national meeting, in the spring here with a lot of individual groups. All of us travel quite a bit and our meeting would focus every day. One thing I have to say about our population of people, the blue team, is that people have been willing to roll up sleeves and to be flexible. We don’t have written job descriptions. We do what we need to do to get things done within the organization and folks have been really open to the idea of, you know what, if the organization needs this for the next three months, for the next six months, for the next 12 months, I will step up to the plate and take that on, maybe in addition to what I’m doing or in place of what I’m doing. And I want to thank the employees for that willingness because it helps a lot when you manage through a time like this. That would be it for the day. I want to thank again all our shareholders and everybody for listening to the call.