Fastenal Company (NASDAQ:FAST) Q3 2019 Earnings Conference Call - Final Transcript

Oct 11, 2019 • 09:00 am ET

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Fastenal Company (NASDAQ:FAST) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Our first question today comes from the line of David Manthey with Robert W Baird. Please proceed with your question.

Analyst
David Manthey

Thank you. Good morning, everyone. First off, can you talk about additional price increases that you may be thinking about in the fourth quarter to offset additional tariff related COGS inflation?

Executive
Holden Lewis

Sure. The -- so as you know, there's going to be another round of tariffs that go into place in mid-October and then there'll be another round in mid-December. Our intention is, as we get into latter part of this quarter that we will adjust our pricing and our pricing tools to reflect the changes that are coming because of those tariffs. So I think you're going to expect us to take action on those should they ultimately materialize in the latter part of this quarter.

Analyst
David Manthey

Okay, thank you. And second it's a small percentage I know but I'm hoping you can provide more details on the 35 onsite closures. Were these purely chance or cyclical customer issues rather than a bad fit or some sort of competitive loss? Is there anything you can share with us regarding that? Or is there anything you learned from those closures that have helped you better that potential customers for onsite implementations in the future?

Executive
Holden Lewis

Sure. Yeah, the quick answer is probably a little bit of all of the above. But you're right, Dave, I mean we've closed more this quarter than we've typically done. And I think there's a couple of things to think about here. One is simply the installed base has gone up, and as the installed base goes up, there is going to be a natural degree of churn that happens. And so the fact that -- with that -- it's a high number, but frankly, the three or four quarters that preceded this quarter were higher than the ones before that. And so there is an element simply of it's become a big part of our business, we have a lot of them out there, that's going to be a natural element of churn that goes up over time.

But the second piece is, you're right, as we've achieved a degree of critical mass in that initiative, the reviews -- we always review our business, not only in onsites but elsewhere, but we get more active in terms of reviewing the business that we have, as we get critical mass, as we have more aged facilities. And if I look at the 35 that we closed in this quarter, I was able to get a good explanation about 27 of them, just to let you know. And if I look at that, there is a handful where the plant closed. There is a handful where the model changed, right where we opened the onsite because of purchasing, Andrew liked the model, and that purchasing manager has now moved on and new ones in place doesn't like the model as much and so they've changed it. And