Net earnings. Net earnings as a percentage of sales for the three and nine month periods ended November 3, 2018, was higher compared to the same periods in the prior year primarily due to the decrease in the effective tax rate from the Tax Act.
Earnings per share. Diluted earnings per share were $0.91 and $3.06 for the three and nine month periods ended November 3, 2018, which included a $0.16 and $0.51 per share benefit from recently enacted tax legislation, respectively, compared to $0.72 and $2.36 for the three and nine month periods ended October 28, 2017. The 26% and 30% increase in diluted earnings per share for the three and nine month periods ended November 3, 2018, was attributable to a 23% and a 26% increase in net earnings (inclusive of the reduction in tax rates), respectively, and 3% and 4% from the reduction in weighted average diluted shares outstanding, respectively, due to stock repurchases under our stock repurchase program for both of the three and nine month periods.
Liquidity and Capital Resources
Our primary sources of funds for our business activities are cash flows from operations and short-term trade credit. Our primary ongoing cash requirements are for merchandise inventory purchases, payroll, rent, taxes, and capital expenditures in connection with new and existing stores, and investments in distribution centers, information systems, and buying and corporate offices. We also use cash to repurchase stock under our stock repurchase program and to pay dividends, and we may use cash for the repayment of debt as it becomes due.
Nine Months Ended
November 3, 2018
October 28, 2017 1
Cash provided by operating activities
Cash used in investing activities
Cash used in financing activities
Net increase in cash, cash equivalents, and restricted cash and cash equivalents
1 As the result of the adoption of ASU 2016-18, Statement of Cash Flow (Topic 230): Restricted Cash, the prior year amounts were retrospectively adjusted. See Note A.
Net cash provided by operating activities was $1,450.1 million and $1,165.7 million for the nine month periods ended November 3, 2018 and October 28, 2017, respectively, and was primarily driven by net earnings excluding non-cash expenses for depreciation and amortization. Our primary source of operating cash flow is the sale of our merchandise inventory. We regularly review the age and condition of our merchandise and are able to maintain current merchandise inventory in our stores through replenishment processes and liquidation of slower-moving merchandise through clearance markdowns.
The increase in cash flow from operating activities for the nine month period ended November 3, 2018, compared to the same period in the prior year was primarily driven by higher earnings and timing of inventory receipts. Accounts payable leverage (defined as accounts payable divided by merchandise inventory) was 70%, 65%, and 70% as of November 3, 2018, February 3, 2018, and October 28, 2017, respectively. The timing of inventory receipts and related payments versus prior periods is the primary driver of changes in accounts payable leverage.
As a regular part of our business, packaway inventory levels will vary over time based on availability of compelling opportunities in the marketplace. Packaway merchandise is purchased with the intent that it will be stored in our warehouses until a later date. The timing of the release of packaway inventory to our stores is principally driven by the product mix and seasonality of the merchandise, and its relation to our store merchandise assortment plans. As such, the aging of packaway varies by merchandise category and seasonality of purchase, but typically packaway remains in storage less than six months. We expect to continue to take advantage of packaway inventory opportunities to maximize our ability to deliver bargains to our customers.