FAST
#I'll answer the last part and then <UNK> can answer the numbers part.
But as far as pulling back on other projects, the only thing that we've pulled back on consciously is we slowed down a bit the pace of store openings.
But other than that I don't really see us pulling back on the initiatives that we have in place.
As we talked about in 2015, a lot of the big initiatives we had from a CapEx standpoint are in our rear view mirror.
I'm talking about automation of our distribution centers and the initial build of creating and growing a vending business.
So, I don't see a lot of other pullback.
But, <UNK>, you can touch on exact numbers.
Sure.
We're still, as we're projecting our cash flow for the year, we feel very confident that operating cash flow will continue to exceed historical percentages of net earnings.
Our total CapEx will be a little bit higher than the historical percentage of net earnings due to the increase in our vending spend for the year.
And our free cash flow will continue to fall within the historical percentage of net earnings throughout the year.
So, we feel very confident that we have adequate cash flow to continue to support our initiatives throughout the year.
We continue to see our bad debt expense trend to historical norms.
We are not seeing a significant increase in bankruptcies or anything that causes us great alarm or concern.
It's a pretty quiet quarter from that perspective, so really no surprises from our end.
Whenever I touch on the current month I'm always wrong and the question is how much.
I don't know that with basically a week into the month that we've had some chance to look at the data.
I don't think it's meaningful enough to even talk intelligently about it so I'm going to defer that until early May when we report it.
Sure.
The commentary on that, both in the fourth quarter and in the first quarter is as much art as it is science.
The team that analyzes all of our sales data, slices and dices it about 18 ways to Sunday.
One of the things that jumped out for them was, they looked at frequency of items and stuff that's purchased in a less frequent basis, how that was performing in the fourth quarter, and we did see a drop off in that.
We saw some of that come back as we got into February, didn't see much of it in January.
But I'd say it's still tepid.
I think there a lot of organizations out there ---+ similar to comments I started the conversation with about what we're doing with headcount, what we're doing with expenses in general, what we're doing with store openings ---+ a lot of organizations out there have their belts really tightened down.
And I think you're seeing that, coming into the new year, holding pretty firm.
To quantify it ---+ this is a from-the-hip number ---+ but, I don't know, 10 basis points.
That's more of a guess.
Sure.
Late in 2014 we started to take probably a more serious look ---+ rather than stumbling upon stuff periodically, let's take a little more serious look at it.
We looked at a bunch of companies last year, one of them that we met early in the year in April to be exact, we ended up acquiring later in the year.
There is a few companies we're in discussions with right now.
We're constantly looking, both on the distribution side as well as some of the support service side.
That might be a manufacturing entity or some type of support service for our stores.
Only time will tell how that plays out.
I think the biggest thing is that we're open to it and we're actively looking rather than just seeing what jumps up and hits us.
But nothing in the works.
Geography ---+ the only thing that stood out there is that we did continue to see weakening deeper than we probably would have expected, or maybe a better way to say, hoped for when we were looking at it back in the latter part of 2015.
But the oil and gas areas did continue to weaken when I look at it on a sequential basis.
And time will tell if some of the recent pricing influences that positive in the upcoming months, but it continued to weaken.
But, setting that aside, the month finished very poorly.
With five days, six days, seven days, eight days left in the month, I felt we would be closer to 2%, and the month really deteriorated late.
That probably describes some things that we saw in the patterns of our larger account base because they tend to be somewhat loaded a little bit towards the back end of the month.
But, frankly, a weak finish.
That's how I'm thinking about it.
On the latter part, I don't know.
One thing that I will have the benefit of, this week is our national customer show.
We'll have a little over 5,000 customers over a three-day period in, meeting with suppliers, meeting with our employees, meeting with our onsite folks, all of our teams, our vending folks, et cetera.
So, I'll get more of a chance to get a pulse on that this week because this afternoon I'm leaving for that show myself.
But when I think of what are some of the positives, in the fourth quarter that was probably as bleak a period as you could see.
And I was not hesitant to share my thoughts on it during the fourth quarter.
But our fasteners, as an example, were down about 6% in the fourth quarter.
In the first quarter they're down around 2%.
Our non-fasteners were struggling in the fourth quarter.
I don't have the exact stat in front of me, I'm sorry, but they improved to mid single digits, upper single digits, in the first quarter.
We saw, generally speaking, an improvement in our business and that's I think what we are really talking about.
I think what we see is the business in January, February ---+ and I can't quite say that for March ---+ but in January and February felt more like where we were in October.
And I think, if I look at the last five or six months, I really think the outliers was the extreme weakness we saw in November and December.
And I think that was a function of companies just shutting down around the holidays more extensively than normal.
March ---+ only April and May will start to answer for us what really happened in March.
You mean down 10 on a sequential when you talk about pace.
There's a number of things.
One, our growth is primarily coming from large accounts.
That deepened as we went through the year.
It's primarily coming from ---+ if I think of our sales number and the weakness, we've done a nice job signing new customers, both onsites and traditional national account customers that aren't onsite.
When you're doing a nice job taking market share, you're turning on a lot of new business and a lot of times when you're turning on a lot of new business you do get some short-term mix issues going on in that a new large customer isn't at average margins for that group on day one because it takes you time, 6, 9 and 12 months, to work through some of the hiccups in the system of finding the best source of supply, finding the best part match for this item when you're turning on new business.
Typically you have your existing business that is supporting that because that existing business, you've done a better job of improving your supply chain already.
If you think of what's really hurting us right now from a revenue and revenue growth perspective, we're doing a wonderful job signing new national accounts, we're doing a wonderful job signing onsites, we're doing a wonderful job signing vending, and growing those pieces of business.
So, we're taking market share at a very good clip.
What's causing us to struggle is our existing book of business.
Our existing customers are struggling in a weak environment.
So, the more mature component of our business is going backwards, and that more mature piece has a better gross margin profile, because if I had a customer for two or three years, I've already, in many cases, established a lot of the best parts, a lot of the best sources of supply to serve that customer's needs.
That's in my mix and that mix has weakened right now.
So, that's a piece of it.
The other piece of it is on an execution standpoint we slipped a little bit as we went through 2015.
We slipped a little bit on the freight, how good we are on our freight expense versus our freight that we charge the customer.
Part of that, I think it became more difficult for our stores to operate as effectively given that fuel prices were lower.
Fuel prices is an important part of our distribution cost but it's not the only component.
But it might make it harder for you to charge freight on this item or that.
And the fact that it's a weak environment, it's a competitive marketplace.
I feel we're at a point where our gross margins are stable from a sequential standpoint but that still has been a painful process on a year-over-year basis.
There's no question about that.
Yes.
I think the biggest one is the offset we've had in the last 12 months.
You've had dramatic weakening of our existing customer base and that's hurt our gross margin because that's business where we have a very established, efficient source of supply.
That's put a pinch on that.
I believe the pace of that deterioration is slowing.
And I think that shines through in what you're seeing, what's happening in our fastener business, in our non-fastener business from a growth perspective.
So, I think that's the wild card.
I'd say it probably leans towards the maintenance as well as the construction fasteners, in many cases.
That's a relatively small piece.
I don't have the exact stat in front of me but relatively small.
Single digits.
Thank you.
With that, I see that we're at 9:44.
Hopefully there wasn't anybody else in queue that didn't get to ask a question.
I'll finish the call the same way I started the call.
Thank you for taking time this morning to listen to our first-quarter earnings call.
I hope you find our Earnings Release today as well as our 10-Q, which I believe will go out later in the week, to be informative of helping to understand the Fastenal story.
I also invite anybody that's interested to either make a trip to Winona next Tuesday for our annual meeting or listen to it in our webcast.
Thank you very much.
