Welcome to the Flexsteel Industries, Inc. third quarter earnings release call. [Operator Instructions] At this time, I will turn the call over to Mr. Tim Hall, Flexsteel's Senior Vice President of Finance and Chief Financial Officer. .

Thank you, Melissa. Welcome to Flexsteel's conference call for our third fiscal year quarter ended March 31, 2014. Joining me this morning is Ms. Karel Czanderna, our President and Chief Executive Officer. Our comments today include forward-looking statements.

While these statements reflect our best judgment at the present time, they are subject to risks and uncertainties as described in our SEC filings. Accordingly, our actual results may differ materially from our current expectations. The company assumes no obligation to update or revise any forward-looking matters discussed during this call..

I will make some comments on our financial results for the quarter and 9 months ended March 31 before I turn the call over to Karel for her comments..

Yesterday, we reported record net sales and net income for the quarter and the 9-month period ended March 31, 2014. Third quarter sales were $111 million, an increase of 12% from the prior-year quarter. Earnings per diluted share for the quarter were $0.58 versus $0.42 in the prior-year quarter..

As described in our second quarter press release, we entered into a confidential agreement to settle Indiana civil litigation and eliminate the ongoing cost and distraction of the litigation. Excluding these litigation and settlement costs, adjusted earnings per share for the current quarter were $0.56 versus $0.47 in the prior-year quarter..

For the 9 months ended March 31, 2014, sales were $327 million, an increase of 15% over the prior-year period. Earnings per diluted share for the 9-month period were $1.24 versus $1.22 in the prior-year period. On an adjusted basis, net income was $1.75 versus $1.36 in the prior-year period.

For the 9-month period, net sales improved both in residential markets, up 16%; and in the commercial markets, up 11%. For the 9-month period, gross margin decreased by 0.7% to 22.8%. The decrease was primarily due to price discounting on certain case goods to address changing customer requirements.

The discounting will continue during the fourth quarter and may continue during the first half of fiscal year 2015. SG&A of 16.8% for the first 9 months of 2014 compares to adjusted SG&A of 17.5% for 2013, excluding $1.7 million for Indiana civil litigation defense costs and $1.3 million for executive transition costs..

Other income was $1.4 million for the 9-month period, an increase of $1 million over the prior-year period. This increase is primarily the result of liquidating Rabbi Trust assets at a gain to complete distributions to retired senior officers. The distributions were made as scheduled in early January 2014.

Due to the higher sales volume and the timing of collection, accounts receivable increased $4 million above the June 30, 2013 balance. Our days sales outstanding remain constant at approximately 35 days..

On March 31, 2014, our inventories are similar to the June 30, 2013 balance. We will continue to actively manage inventory to meet market conditions. Capital expenditures totaled $4 million for the 9-month period. Estimated capital expenditures will be approximately $500,000 for the remainder of fiscal year 2014.

The fiscal year expenditures will be primarily for delivering and manufacturing equipment. Depreciation expense was $3 million for the 9 months and will be approximately $4 million for all of fiscal year 2014. Our balance sheet remains strong. Working capital increased to $122 million, and we have no bank borrowings.

Our cash balance was $17 million on March 31, 2014. .

I will now turn the call over to Karel for her comments and business review. .

Well, good morning, and thank you for joining our conference call. We are pleased that sales grew 15% for the first 9 months of 2014 versus last year, while adjusted net income doubled that pace, growing 32%, with adjusted net income at 4% of sales..

The earnings for the first 9 months were driven by ongoing double-digit revenue growth in upholstered seatings sold by retailers and ready-to-assemble products sold online, both targeting the residential market.

Introducing a wide range of compelling products on a 6-month cycle has been key to our success with brick and click retailers, engaging customers even more heavily than before.

Our residential growth at retail is balanced across independent retailers and major accounts which have confidence in product availability due to Flexsteel's strong balance sheet and long track record of delivering quality products as promised..

The Flexsteel gallery and studio dedicated space at retail covers 2.8 million square feet. In addition, we are doing business with more top 100 retailers than ever before. As in past quarters, upholstered products continue to outpace case goods..

In the commercial market, BIFMA is now projecting only 2.8% shipment growth in office furniture during calendar 2014. Our product portfolio and service platforms are evolving to meet the changing needs of the many commercial markets we serve and our customers.

To support Flexsteel's growth, we started 2 multi-year infrastructure initiatives designed to enhance customer experience and increase shareholder value. We approved the logistics strategy and are assessing our future business information requirements.

The timing and level of investment required for these initiatives will be determined and discussed as the projects progress..

The corporate order backlog remains strong at $51 million on March 31, up 16%, and is continuing into the fourth fiscal quarter. The company is in a good position to produce quality products that meet customers' growing demand..

Looking forward, better weather this spring and summer, along with a more stable economy, will enhance business owner and consumer confidence, enabling further growth in the furniture industry.

Our team remains focused on providing a broad portfolio of quality products with knowledgeable customer service to enable our customers to grow in all the markets we serve. Melissa, at this time, please open the phone lines for questions, and then I'll wrap up. .

[Operator Instructions] And there are no questions in queue at this time. I'd turn the call back to our presenters. .

Thank you for participating in our conference call today. We are pleased with the growth in our business and the continuing solid operating results during the first 3 quarters of fiscal 2014. Our team remains dedicated to creating value for our customers and shareholders.

We look forward to reviewing our fiscal year operating results with you in August 2014 and appreciate your interest in Flexsteel Industries. .

Ladies and gentlemen, this concludes today's conference call. You may now disconnect..