Ellen Trester Willard D. Oberton - Chief Executive Officer, President and Executive Director Daniel L. Florness - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Ryan Merkel - William Blair & Company L.L.C., Research Division Holden Lewis - BB&T Capital Markets, Research Division Joshua Wilson David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division Robert Barry - UBS Investment Bank, Research Division Adam William Uhlman - Cleveland Research Company Brent D. Rakers - Wunderlich Securities Inc., Research Division

Good day, ladies and gentlemen, and welcome to Fastenal Company Second Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. Now I'll turn the conference over to Ellen Trester of Investor Relations. Please begin.

Welcome to the Fastenal Company 2012 Second Quarter Earnings Conference Call. This call will be hosted by Will Oberton, our Chief Executive Officer; and Dan Florness, our Chief Financial Officer. The call will last for up to 45 minutes. The call will start with a general overview of our quarterly results and operations by Will and Dan, with the remainder of the time being open for questions and answers. Today's conference call is a proprietary Fastenal presentation and is being recorded by Fastenal. No recording, reproduction, transmission or distribution of today's call is permitted without Fastenal's consent. This call is being audio simulcast on the Internet via the Fastenal Investor Relations homepage, investor.fastenal.com. A replay of the webcast will be available on the website until September 1, 2012 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 material from those anticipated. Information on factors that could cause actual results to differ material from these forward-looking statements are contained in the company's periodic filings with the Securities and Exchange Commission, and we encourage you to review those carefully. Investors are cautioned not to place undue reliance on such forward-looking statements as there is no assurance that the matter contained in such statements will occur. Forward-looking statements are made as of today's date only, and we undertake no duty to update the information provided on this call. I would now like to turn the call over to Will Oberton. Go ahead, Mr. Oberton. Willard D. Oberton: Thank you, Ellen, and thank everybody for joining us today. I'm very happy with the quarter that we reported this morning. I'm going to make my comments pretty brief. Dan does a very good job in his press release, and so I'm go through it pretty quickly and basically just give you the color as I see it. Manufacturing has slowed, that's clear. But on a very positive note, I've been out talking to lot of our regional people and district people, and we have not seen a lot of abrupt changes. It's more of a step-down, and we haven't seen a lot of panic from our customers, so we think although it's much slower, so much slower than it was, it doesn't appear to be a lot of panic going on, so that gives us some optimism for the next several months. Construction has also slowed. But we're actually having a difficult time with the comparisons or understanding the comparisons. Because of the very warm winter, now the hot summer, it's hard to see where the business would have normalized. But overall, it appears to be somewhat weaker than it was, but there is still a lot of business and a lot of opportunity out there. On the margin, my comment there is I think we've made nice progress. I'm happy with what the team has done. We believe there are still several opportunities or many opportunities to show additional improvement in margin. We're going to continue to work very, very hard on the margin as we go forward. One of the areas that I guess I'm the happiest with is our expense management. The second quarter, this quarter, was the first time that we've ever reported SG&A below 30%, which we're proud of, and it's really -- I believe, it's really just the result of focus and hard work by the team. A lot of people working on, a lot of people understand the expenses and just really doing a nice job. And I want to give the chief people on our team a kudos for that, because they're working very hard. Initiatives, our sales initiatives, we continue to see very nice progress on those. Metalworking continues to show progress. We continue to pace -- run at a nice pace, but we have a long ways to go. We're learning a lot about it. Our learning curve is very steep right now. I've been meeting with several groups of managers and talking about this initiative and finding out what we need to improve upon and areas that we can move faster with. Government is also very similar. We're making nice progress with our government initiatives, and there's a tremendous opportunity going forward. Both of those areas were pretty much fully staffed, as we see it today with our sales teams, and those sales teams continue to improve their knowledge level. So we think that we have -- we should continue to see incremental improvement quarter-to-quarter as we go forward, so that's some built-in upside for us. Vending, all I can say is I feel we made great progress. Our team, Russ Rubie and his team that runs the vending program, they're working hard and I've had the opportunity to talk to several of our larger customers that have deployed our vending solutions, and the feedback has all been very positive. So the customers are seeing the savings. The customers like the control on their inventory. The software is working well for them to show them what they're using, how they're using these products. So there's a very positive customer feedback. In our processes, internal processes, for how we receive the orders from the customers, how we set the machines up, all the different things that we have developed continue to improve. And we still have a lot of opportunities there to improve these processes. And every time we do that, we lower our cost and we improve the customer service at the same time. So we have a tremendous amount of focus on the entire process of the vending business from the start to finish, and think that, that will just continue to get better as we go forward. Sitting back or stepping back and thinking of the overview of our business and the puts and the takes, thinking about the economy -- the economy, as we see it, is I guess we'd say it's not great, but it's okay. So we should continue to -- we should be able to perform at a reasonable level in the current economic situation. I think we're doing a nice job, as I mentioned, with expense control, which creates cash flow. So we're in a very positive position there. I feel good about that. Our sales drivers initiatives that we continue to talk about are getting stronger, which is very good. You saw that with the vending numbers that we reported. We're actually accelerating in those areas. Some of the areas that we don't talk as much about are internal things. One that I'm very optimistic about is we've -- our IT group has developed some new software programs to use in our stores. And all of them, there's actually 2 or 3 large ones that we're either rolling out or testing at this time. Our systems that are set up to make store life far easier and automate different processes like receiving product, how we process orders and several other areas. Three weeks ago, I had the opportunity to go out and visit 11 stores in eastern Wisconsin, larger stores, some of our more mature area and talk to managers about how these were working. And in every case, they were talking about this one saves me an hour a day or this one saves me 2 hours a week. And so we only have these initiatives rolled out to a handful of stores or a smaller percentage of our stores. As we do that, it has the tremendous upside to save labor in the store and usually, with the way that works, is that labor will now be used for sales activity. So I'm very optimistic about what this -- the potential of this has for our company over the next 2 to 6, 7 quarters, very optimistic. Our warehouse and transportation group continues to work on automating their systems. We're within about 4 weeks of starting up our new automated warehouse here at the Winona facility, and that should not only shorten up our cycle times to produce the orders, but also lower our expense. And we have several other projects that we're working on for warehouse automation. The transportation group, the people that run all our entire fleet or direct our entire fleet, are a ways into a project trying to understand the use of compressed natural gas, CNG, to run our trucks off. And we've actually had some very good feedback, it's a small experiment with our branch vehicles, and now they have some semis coming in, some large vehicles coming in, and it has some real potential if it works out for the future. As an example, the semis that we're working on, we would save, on the average, between $1,500 and $2,000 per month in operating expense on those trucks after paying a higher price for the vehicle and the tanks. So it has some potential going forward to lower our expense. And as you know, transportation has always been a very big part of our business. So overall, I'm very positive about the future of things that we have going on, and we'll just have to work through this slower economic time and go from there. With that, I'll turn it over to Dan, and I thank you again for joining us today. Daniel L. Florness: Thank you, Will, and good morning, everybody, and thank you for joining us as well on our call. I'm going to touch on a handful of things in the press release just to highlight a few things that we believe are noteworthy. Let's start with the sequential trends on Page 3. If you look at the 3 years we have displayed there, it really is a story of 3 different years. If I look at 2010, from January to October, we were soundly beating the historical pattern about 60% to 70% of the time. February was what I'd call a setback month. And at June, our cumulative number was in line with history. We were beating it most of the time, we had a big setback month, but we were trending with history. 2011 was a little bit different story. From January to October, we actually we're beating, soundly beating the pattern a little bit less, about 50% or 60% of the time, but we didn't have any big setback months. And at the midpoint of the year, we were about 370 basis points ahead of what history says we should be building. And so we come into the year, we'd estimated we'd grow around 19 based on history. We ended up growing closer to 22 based on just having better momentum and better trends throughout the year and no big setback months. When I look at 2012, March was -- in the January to June time frame that we have history on, March was a huge beat. And April and June were essentially in line with our historical patterns. February and May were our setback months. And because of those 2 months, we're sitting there about 330 basis points behind our history. Those are just some of the things I guess to note when we look at the sequential patterns of our business. When I look at the second half of the year, the -- first some positives, then negatives. Positive, I think we have some nice built-up momentum with our vending machines that have been signed and are going to be installed, the ones that have been installed in the last 6 months, which are significant. And the headwind is the uncertainty about the economy and some of the things going on with our currency rates. One of the things we did see a change quite abruptly in the spring, and I mentioned it on Page 4 of the release, is on our production fastener side or on our fasteners in general. In the first quarter, that business was growing about 15.5%. In the second quarter, it dropped to just double-digits in April. It dropped down to about 6% in May and rebounded a bit to about 9% in June. But definitely, it has taken a step back. If you look at non-fastener areas, areas where most of our growth drivers are centered on, we're seeing, still, very strong results, still in the close to 20% neighborhood. The ISM index, I touched on that in the release as well, dropped just below 50 here in June. I believe that's the first reading below 50 since August of 2009, which was quite a long stretch. Growth drivers, as Will mentioned, continuing to make nice progress on those. One thing that I think is really noteworthy when you look at the vending stats is while we were seeing softening trends as we went through the second quarter, our vending numbers, the growth of our vending customers actually improved from Q1, where we grew at 33.9% with that subset of customers to Q2, where we grew at 34.3%. Which from a directional standpoint, I think that's a huge accomplishment, because these are larger customers where a lot of these vending machines are going and we're really demonstrating our ability to take market share at a faster pace in that subset of customers. Profit drivers on Page 8, a few things that I thought were noteworthy, we're often guilty a bit of beating ourselves up internally and externally a bit when some things aren't working as we think they could. A god example of that is our margin in the first quarter. We do this because we believe we fix stuff today, we don't just analyze and talk about it or, said another way, rationalize it. However, if I take a longer-term look at our business and look at first quarter of 2007, so the last quarter before we started the pathway to profit in the second quarter of 2012, our average store has gone from 72,000 a month to 89,000 per month. Our gross margin has increased from 51% to 51.6%, and our operating costs have improved through our pathway to profit and through our initiatives to improve our relative performance in each category or, said a much simpler way, we've increased the size of Fastenal by about 65% and we've doubled our profits. These are great long-term improvements, and we are all about long-term improvements. The other thing that I think is worthwhile to note, we probably are a little anal with some of our statistics we put in our press release. One of them is the table that shows our headcount numbers and our store numbers, et cetera, as we tried to demonstrate and to communicate what we're seeing on the pathway to profit. If you look at the FTE headcount growth in that table on Page 10, you would notice that since the first quarter of 2007, we've added about 3,700 FTEs to the business or an increase of about 38%. Of this, about 3,200 or about 87% of our increase are individuals that have direct contact with our customers, either in the store or a non-store selling role. We added another 235 people or about 6% into our distribution centers to support that 65% increase in sales. We added another 229 or about another 6% into our manufacturing centers, and about 40% of this came from our Holo-Krome acquisition back in 2009. And because of the efficiencies we've gained in our business in the support areas, we've added 27 FTEs or less than 1% of our headcount growth since the first quarter of 2007, have been in a role that doesn't directly relate to selling, moving product or manufacturing product that we sell. And I think that's a strong tribute to the individuals internally as well as the wisdom and the possibilities of our pathway to profit. And speaking of Holo-Krome, I thought I'd mention quickly that I had the opportunity here several months ago to go out, and one of our regional VPs, whose office are at [ph] -- out of Ohio, was having a district managers' meet there to get a view of the facility as well as have their district meeting, and I went out to speak to the group. One comment I'd make is, we've moved into a new manufacturing facility about several years ago. It was my first chance to see it. Very impressive facility, very impressive people I met that work in that facility, and my compliments to Tim and his team out there. Also, as noted in the table, we hit 22.2% operating margin. I don't know if that -- I think that's our best quarter we've ever had from an operating margin percent perspective. I'm sure if I'm wrong, somebody will call me later today and inform me, but very impressive. We had about an 80 basis point improvement from 2011, not the 100 basis points that we strive for, but I think very strong given that we moved our operating expenses below 30%. And that's a first as well, I believe, as Will mentioned earlier in the call. The gross margin on Page 10, as I mentioned, we kind of beat ourselves up on that a little bit, and that was our award in the first quarter. We aren't done yet, but I'm pleased with the progress we've seen in the second quarter. I'm also pleased, in general, when I look at the 22% pretax, the improvement in gross margin, the improvement in our business that we have experienced not only in the last year, but in the last 5, to personally be associated with an organization of this caliber. As mentioned in prior quarters, our exclusive brands continue to inch upward. Today, they are about 9.5% of our sales. A good piece of that is being driven by our vending solution. Operating and administrative expenses, we talk about the great thing we did with expense control. I think the story is often understated, because under the surface in those expenses, there are some things that are growing quite dramatically, but I see them as high-quality items of growth. 401(k) profit sharing contribution. We share a piece of our profits with our employees that participate either in our retirement programs throughout the company. Our profit-sharing contribution in the quarter grew 74% from the number a year ago. In fact, if you look at our profit sharing contribution calc for the second quarter, we're about 70% of our annual number of just 2 years ago in 2010. Also, in our occupancy, our vending machine cost more than doubled from a year ago because of the success we've seen with vending. Those are 2 items that are outgrowing the company, high-quality items, I might add. Finally, on the working capital side, all I can say is we had a nice improvement, and I credit that to our team in the field. They're doing a job of managing their working capital needs, both accounts receivable and inventory, which produced a very strong cash flow again as we go through the first 6 months of the year. Our expectation when we started pathway to profit was operational working capital -- excuse me, operational cash flow at 89% of earnings. I believe that range has really moved to 85% to 95%. Year-to-date, we're at about 90%. Net CapEx, we've really set our target number of that, it's about 25% of earnings. Year-to-date, we're at about 23%, which puts our free cash flow at about 66%, 67% of earnings. Not only a strong number given our range of estimating about 60% to 65%, but a very strong number when you consider the first half of the year is where we need the most working capital growth because of the seasonality in our business. I think that bodes well for our cash flow capabilities in the second half of the year. With that, I would turn it over to questions. As we have said -- asked in the past, please limit yourself to one question so we can get through the entire group of folks that get queued up. Thank you.

[Operator Instructions] The first question is from Ryan Merkel of William Blair. Ryan Merkel - William Blair & Company L.L.C., Research Division: Just want to start off with June, maybe if you could just provide a little bit more color. How did the month end, does that tell you anything about activity levels and maybe talk about the strength and weaknesses either by end market or by geography? Willard D. Oberton: June actually was a -- came in about where we thought it was. In the middle of the month, we had a little uptick and thought we might get closer to the 15%, 16%. But overall, it was a very predictable month, off from May and kind of an average growth as you saw in the sequential number. As far as the geography, there wasn't a lot of change. In May, we had more slowing, and up the Eastern Seaboard, most of those areas came back in June. It seems like it's just a step-down across the country. Even in the areas that we're doing so well earlier in the year, the oil patch from Texas, Louisiana, Oklahoma, their growth stepped down about equal to the rest of the company. The Midwest, where we've been strong, also saw a little bit, so I can't give you much help there. Industry-wise, Dan puts in his number, manufacturing, construction are -- so overall, it just seems like, and I think I've commented on this, the entire thing just stepped down a little bit. A little energy is like we let off the throttle for the economy. Even our international business is much slower than it was a year ago. Mexico, that has remained very strong for us, their growth was slightly lower than it had been in previous months, still well above the company, more than double the company. So it's hard to really pinpoint any one area that's slowed more than another. Dan? Daniel L. Florness: I would agree. Ryan Merkel - William Blair & Company L.L.C., Research Division: Okay. And then just for my follow-up, on SG&A, I was also quite impressed with the control in the quarter. I'm wondering is 9% OpEx growth sustainable if you continue to grow in the mid-teens? Maybe just talk about the puts and takes there. Daniel L. Florness: I mean, if you look at the nature of the items, the quality of our operating expenses, if you think of it that way, other seasonal things that help it or hurt it. On the first quarter, one of the questions I had going into the second quarter was, first quarter was helped in a meaningful fashion from the standpoint we had no winter, and natural gas prices had dropped. So we had some things in there that weren't necessarily sustainable on a sequential basis. When I look at our operating expenses in general today, there is nothing in there that is unusual in nature. So I think our ability to continue managing that at an extremely low level, like we did in this quarter, is fairly sustainable. Willard D. Oberton: And some of the things I mentioned about the software, some of that will be coming through, and that helps the large stores more than anyone else by quite a margin. And if you look in our report, that is the group of stores that raised their profit and had the most impressive increase in their profitability, because we're making those stores more efficient. So we do have some upside there.

Our next question is from Holden Lewis of BB&T Capital Markets. Holden Lewis - BB&T Capital Markets, Research Division: I'm just sort of curious, now that we've had kind of this step-down a bit in growth rates, your goal has been to expand your operating margin about 100 basis points a year going forward. Can you talk about whether or not the current level of growth is still consistent with 100 basis points of operating margin growth? And then maybe, also, sort of recognize that, that achievement is a series of things you're doing internally, can you talk about maybe some of the projects that are dropping off that have been successful and not successful and then those that are coming on? You alluded to sort of the software, the transportation issue. I'm just sort of curious about kind of how we're progressing through initiatives and stuff coming and going. Daniel L. Florness: Okay. Well, the first thing, and I'll let Will touch on some of the initiative piece, but just from a mechanical, if you think about the math of our P&L, we still -- and this problem improves as we move forward. But I mean if you look at it, our gross margin was down 60 basis points, roughly, from a year ago. And in the first quarter, it was down 80 basis points from a year ago. So as we work in -- I'm not going to make predictions on what our gross margin's going to do or not, but if you think of the mechanics of what's happening in 2011, our gross margin was stepping down during the year. So our comps changed dramatically as we step through this year. And all of a sudden, all that headwind from gross margin dissipates as we get into the second half of the year. So that puts us in a position, if we're doing good job with operating expenses, to do a great job on raising operating margin. But Will, maybe you want to touch on a few of the initiatives. Willard D. Oberton: Well, I think on the initiatives, you mentioned transportation, we continue to see improvement in our transportation. The first half of the year was a little tougher because fuel prices started out high, but we are making money on our transportation and we'll be, at least based on halfway through the year -- well, halfway through the year, we've already made more money on our freight program than we did the entire year of 2011, so well ahead there. The software things that I talked about are branch-based initiatives where it's just -- it's operational efficiencies and how we receive the product, pick the product, ship the product. So on the larger stores with higher volume, we are saving labor. I was in our largest facility on that trip to Wisconsin, and the manager there has had this system for about 3 to 4 months now. He said, "Well, I could not operate the business today without that." I suppose he'd figure it out, but that's his feeling, which was very positive. So there are a lot of things we're working on the vending software to streamline that process. It wasn't -- it wouldn't have been a real big deal when we had 500 or 1,000 machines, but now that we have 13,000 machines installed, we're going to -- by the end of the year, we could be close to 20,000 or probably should be close to 20,000. Those types of things really work and give us some efficiencies. We are, as an organization, we are very focused on making a more efficient business, a leaner business. So in the higher economy, we can use that to grow our sales faster and being leaner. In a slow economy, we can use it defensively to lower our costs and be a better competitor and more profitable.

Our next question is from Sam Darkatsh of Raymond James.

This is Josh filling in for Sam. First, a bit of a modeling question. Do you think there was -- or can you give us a sense of any negative impact on July from the timing of the July 4th holiday being in the middle of the week? Daniel L. Florness: I've chatted with a handful of our Regional Vice Presidents situated around North America just to see what kind of impact. If you think of last year, July 4th was on a Monday. The month started on a Friday, July 4th is on a Monday, that's about as a perfect alignment as you can get. This year, we have a few things going on. I believe we have an extra day in July this year, and the July 4th week falls -- the July 4th fell dead in the middle, so you have a couple of orphan days. What I was hearing from a lot of the folks is you had businesses that shut down in the first 2 days of the week and some businesses shut down the last 2 days of the week. I personally believe it takes a day to a day and a half out of the month, but time will tell how that plays out. As we look through the month, maybe Will has a different opinion. He might think I'm full of it. Willard D. Oberton: No, I -- the timing couldn't have been any worse, and we'll just have to play it out. But on a positive note, it's early in the quarter. And so we have plenty of time to make up if we lose some ground.

And then just looking at the spread between your vending growth rate and the company-wide growth rate seems to imply a fair amount of moderation in the non-vending customers. Is this entirely driven by moderation in the end markets? And do you think it -- the implied rate somewhere around 10% or 11% accurately reflects those markets? Daniel L. Florness: Well, I guess I'll answer it this way, and if you need a follow-up, I'll give you a follow-up on that. But I think it says more -- I think it understates the strength of vending in general, because if you notice -- one of the things we touched on was the slow-down in our fasteners. Our fasteners really aren't helped by our vending. Vending is really about the non-fastener side of the business. So I think the fastener business is doing what the fastener business will do right now because of what's happening in the economy. And the growth we're seeing is because of our ability to keep taking market share, but the economy has fallen back, in my opinion, on the fastener side. So I think it's more about that piece of the business. Clearly, our stores with fasteners grow faster than our -- with vending, grow faster than the stores without. In fact, I believe you look at our stores that -- Will, maybe you want to touch on. Willard D. Oberton: If you look at the stores that have deployed 10 machines or more, those stores are growing at almost double the rate of their peer group. So there really is something. Now there's more to it than just vending, and it may be the better managers, people embracing different ideas, but there is a direct correlation. And also, to answer is 10%, 11% the right number? If the ISM is flat to down, it says that there is no growth, no underlying growth, so everything that we're getting is taking share. And taking share at that rate, at our size is probably still pretty good performance. What it really tells us is that we need initiatives to cover a broader base of our business, and that's what we're focusing on, saying, "Okay, vending is working well, government's working well, metalworking is working well. We just need more of those and figure out what are the best ones to continue our above average growth as an organization."

The next question is from David Manthey of Robert W. Baird. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: A similar question, I'm looking at the same data here and trying to figure out is there anything to the thought that your -- that customers that don't have vending, for whatever reason, are not getting the TLC they need and just not growing as fast? And then, Dan, to your comment on the fasteners, I guess the non-fastener-type products you're selling through vending seem to be doing better than your OEM or industrial-production-type products. Is there anything related to that? Is it customer mix or is that market -- I'm just trying to get underneath the growth rate here, because, again, I -- when we look at the overall deceleration that you saw here, it seems a little bit more severe than your comps or than what we're hearing out in the field, and I'm just trying to understand what you think is kind of behind that, the step-down in growth rate that you saw here relative to the world? Willard D. Oberton: What I'm hearing talking to our people, and I have been out to see a handful of customers, is people are slowing down production at some level. If you look at the backlogs, the backlogs flattened out, a lot of them in April, March to May time frame. And what manufacturers typically do when their backlog quits building is they fall back on production so they can stretch that out, because you don't want to burn through your backlog and have nothing to do. And I really believe that's happening. A lot of the industrial areas in fasteners are production product. So it steps back just a little bit, and it doesn't take a lot, because understand that we're still growing that business. But if they're not growing or their production is slower than last year, you have to pick up a lot of additional business to make up for that. And it really is centered around that FAST production fastener business. I think it's slower than others maybe are seeing because we're more involved in that production. David J. Manthey - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then the follow-up, is there any trend or type of customer that you're seeing that's adopting vending? Is it primarily the manufacturing sort of production type of customer or is it the opposite of that? Is vending more appropriate for other types of service businesses or those that aren't so manufacturing-focused? My guess is it's the former, but if you could -- if there's any trend there that you could talk about. Willard D. Oberton: It's actually broad-based. We're seeing tremendous success in government accounts. A lot of big maintenance accounts, whether -- like food processing, things like that. Manufacturing is very strong. Energy being power plants, producers of energy. It is so broad-based, we just haven't seen an area that isn't working well when we present it right. The biggest hurdle that we have to overcome, and we're doing well with it, is finding the right person to sell to. Because in most cases, going to our everyday buyer that we call on isn't the right contact within the facility. And once we get to the right contact, it goes very well. But it's a very broad customer base. A lot of warehousing also. We've had some great success in big distribution operations, so pick back and ship operations for they're a necessary step.

The next question is from Robert Barry of UBS. Robert Barry - UBS Investment Bank, Research Division: I think last quarter, when you signed almost 5,000 vending machines, you thought that might be a little bit hard to sustain, but it looks like you even exceeded it a little bit. I was just wondering what had changed there and whether the right pace going forward can now actually be more in this 4,000 to 5,000 range than the 2,500 that you were originally targeting. And then also if you could comment on the mix of machines. I know that, originally, it was really focused on the FAST 5000, but you had the 3000 and the cutting tool machines, too. What are you seeing in terms of the other types of machines that you had introduced later? Willard D. Oberton: As far as the beginning of your question, what has changed? Nothing has really changed. We just -- we had seen such rapid acceleration that we didn't want to -- we were hoping it would hold, we thought it would hold, but we didn't want to commit to that. As far as going forward, our goal for the year is 10,000 machines. We're comfortable we're going to exceed that, but we're not going to ratchet up the number externally, because it's still -- it's a tremendous amount of work, but we're optimistic that we can keep a fast pace. As far as the types of machines, the FAST 5000 is still the workhorse. We're signing more of those than all the other ones combined. The second machine that we're seeing tremendous success with is the lockers. We put out a new locker system that's actually standalone, which means it doesn't need to be driven off the brains of a FAST 5000 or the controller on a FAST 5000. And we cannot keep up with that machine. In fact, we would've installed several hundred more machines in the quarter if we would've had the machines to do it. The success is greater than we had estimated, but we're getting caught up. We believe we'll be caught up this quarter and moving forward. The cutting-tool machines are moving slower than we had hoped. We are signing lots of them, but not the numbers that we had hoped. And the FAST 3000 is moving out but also slower than I would have estimated. But that really -- whether that's a 3000 or a 5000, it really doesn't matter to us. And part of the reason I think that's moving slower is we're still very focused on the larger customers, and it's a machine that's designed for smaller customers with smaller usage. But as a group, we're not real concerned which machine is signed, we just want to get our footprint out there. We want to plant our flag in that account. And then for the most part, what we're seeing is the customers that have it are where a lot of our growth is coming from that are deploying more equipment in other plants. And so that's a very positive result that we're seeing. Robert Barry - UBS Investment Bank, Research Division: The reason I asked about the mix is in part because I think that you require a different amount of incremental net revenue come to Fastenal based on the machine, right? I mean, so much that the lockers require -- is that also 2,000 a month a net new record? Willard D. Oberton: The lockers, there is different configurations, but for the most part, it's about 1,500. There are several different configurations, but it's about 75% of how we're trying to model it, if you're trying to model it.

And the next question is from Adam Uhlman of Cleveland Research. Adam William Uhlman - Cleveland Research Company: Just to follow up on the vending question, it looks like it added maybe on a net basis 4 percentage points of growth with all of the machines that were contracted here in the first half of the year. How are you thinking about that contribution to sales growth in the back half of the year? Willard D. Oberton: We think we should at least be able to maintain that level, possibly expand it. But the one thing that we have to caution on is whenever you put a tremendous amount of energy into one area, there is going to be some give, so it's not all incremental. Put a lot of energy into this, and I think maybe Dave mentioned is something else giving. We don't think we're not servicing the other customers. We may not be selling as hard to those other customers, because we're selling so hard to the vending customers. But as far as the contribution, we believe that we will increase our installs in the third quarter over the second quarter. We won't talk about the signings, but our installs should be up. And if that happens, then we should continue to drive the new revenue through those machines, because it continues to prove that, that works, and we see that in a very high percentage of the time. We have a lot of built-in sales growth. Adam William Uhlman - Cleveland Research Company: All right. And then, secondly, just on the gross margin, there were a couple of headwinds relative to the first quarter with -- the fastener mix was lower as a percent of revenues than we had in the first quarter, and the vending mix was higher, but you still got a little bit of gross margin expansion. I was wondering if you could just maybe elaborate a little bit more on why that played out and how you're thinking about at least the near-term direction of the gross margin rate. Willard D. Oberton: It's really focus. We spend a lot of time focusing on it, looking at areas that maybe we weren't making as much money. And in some cases, you walk away, in some cases you raise the prices. But overall, we were pretty clear on that. In the first quarter we thought we'd been a little sloppy and maybe not as focused as we need to be. But you're right, there were some headwinds. But vending, overall, isn't a headwind unless it's being sold to larger customers. We don't see a step-down in the margin in vending just because it's vending. We see a step-down in margin because it's being vended to large customers that are typically lower-margin customers. We want to make that clear, because there seems to be a notion out there that if it goes through a vending machine, it's a lower gross margin. The same product to the same customer, doesn't really matter how we deliver it. It's about the customer. It's about the customer and the product delivered to that customer. And overall, from an operating margin standpoint, as we develop our processes for vending, although the gross margins may be lower to those customers, our operating margin should continue to improve because it's a far more efficient process. So we're looking at this as, long term, a big tailwind, not a big headwind. Daniel L. Florness: It's a more efficient process, which is additive. But at the end of the day, that added sale increases the average size of our store, which increases our level of profits because of store mix. This adds to that. Willard D. Oberton: Yes. So it's a double win in that situation.

Our next question is from Brent Rakers of Wunderlich Securities. Brent D. Rakers - Wunderlich Securities Inc., Research Division: Just 2 questions. First, you've talked a lot about SG&A. And again, I congratulate you as well on performance there. But could you talk about what your thought process in this slower growth environment is towards hiring the second half of the year? Daniel L. Florness: As I mentioned in the release, our tone is cautious. If you think about where we're really adding heads, it's really in the sales part of the organization. And what we strive to do, if you think about the mechanics of the pathway to profit, as long as our labor growth on the store side of the business is running at 70% of the gross margin, running at 70% or better of the gross profit dollar growth, we leave our regionals alone and let them manage their business. But we really strive to have that -- and that's really a function of -- that's where the number should be just based on the fact that our average store size is growing and it's leveraging. And so for the areas of the business that are seeing good growth, whether it be because they're introducing vending or growing their government business or growing their metalworking or growing their fastener business, they will be adding people commensurate with that growth to service the need. On areas where we're not, we'll be managing it very tightly. Willard D. Oberton: And on the support side, we'll be managing it very tightly, because we believe we can. Brent D. Rakers - Wunderlich Securities Inc., Research Division: Great. And then just my -- I guess, my follow-on question. Last year, you guys seemed to really have some breakthroughs in Europe and China and Latin America with some new locations. Just wondering if you give us a better flavor on both how the existing stores are doing internationally year-to-date and then maybe how much of these 53 locations opened up this year are non-North American locations? Willard D. Oberton: Dan is looking for the number on what percentage are non-North American, and I can cover the first part of your question. We have seen a slowing in our international business. Some of that is FX. But also, we didn't do as good a job of signing new large accounts. Most of our international business is driven by large account signings, and we didn't have quite as many successes in the fourth and the first quarter, which slowed -- affected our second quarter growth. We do have a lot of good things going on. We've just signed a couple of nice large customers that will be coming on later this quarter, early fourth quarter, which will give us a boost. And so we're expecting the growth rates to come back. But it's always going to be more up and down in the rest of our business, because it's driven by a handful of large customers where those stores are. As far as new areas, we're just getting going in Brazil. It's taken us longer than we expected, it's a bureaucratic nightmare with the taxes and the things we have to do. But we are very optimistic about that area. And so overall, we still believe international is going to do well for us. On a very positive note with international, the profitability was up nicely in the second quarter. So although we didn't have quite as good a growth, the profit continued to grow at a very nice level even without the growth dollars that they were expecting. Daniel L. Florness: I checked my -- and 14 of our 53 locations were international. That includes North America international, so Canada, Mexico, Latin America in general as well as Europe and Asia. So that's about -- so 26% of our openings year-to-date are international. So it's just over 2x the percent of our business, so that's about 11%, 12% of our business is international. We're at 9:46. I apologize to the group that we've gone a minute long. But just to wrap up by saying, again, thank you for participating on the call. We are pleased with the quarter. We have some concerns about the sales patterns, but that just means you manage the business in a different fashion. But very pleased with the improvements we saw on the gross margin and the operating expense side. Two sidebar notes, I always try to add something at the end of the call just to make -- [indiscernible], it'd be fun. When I read the headline, I have to say, I'm a glass half-full guy. When you read the headline in our quarter's release that, that headline says "Fastenal misses sales", that's a little frustrating, but that's just me venting. Secondly, for those of you in the “for what it's worth” department, I noticed yesterday in The Wall Street Journal my hometown of Ellsworth, Wisconsin made the Wall Street Journal because of their annual cheese curd festival. They are the cheese curd's capital of Wisconsin. If you ever need any, stop by Ellsworth. Thank you much. Have a good day. Willard D. Oberton: Thanks.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.