Timothy E. Hall - Chief Financial Officer, Principal Accounting Officer, Vice President of Finance, Treasurer and Secretary Karel K. Czanderna - Chief Executive Officer, President and Director

Bruce C. Baughman - Franklin Advisory Services, LLC

Welcome to the Flexsteel Industries, Inc. Third Quarter Fiscal Year 2013 Operating Results Conference Call. At this time, I will turn the call over to Mr. Tim Hall, Flexsteel's Senior Vice President of Finance and Chief Financial Officer. Timothy E. Hall: Thank you, Shelley. And good morning, everyone, and welcome to our conference call for the third quarter of our fiscal year 2013. We appreciate your participation. Joining me this morning is Ms. Karel Czanderna, our President and Chief Executive Officer. We may make forward-looking statements during this call. While these statements reflect our best judgment at the present time, they are subject to risk and uncertainties as described in our SEC filings. Accordingly, our actual results may differ materially from those of our current expectations. We undertake no obligation to update any forward-looking statements made during this call. I will now highlight some of the items from our third quarter press release. Net sales for the 9-month period ended March 31, 2013, were $284 million, 10% higher than the prior year period. Residential net sales increased 14% to $229 million, an increase of $29 million from the prior year period. Commercial net sales were $55 million, basically flat with the prior year 9 months. Net income for the first 9 months of fiscal year 2013 were $8.9 million, 3.1% of net sales and $1.22 per share. The prior year net income was $8.7 million, 3.4% of net sales and $1.24 per share. The gross margin for the quarter and 9 months decreased 9/10 of 1% and 3/10 of 1%, respectively, versus the prior year periods. They were the second highest in the past 10 years. Gross margin was impacted by changes in product and customer mix, and cost increases for freight, raw materials and finished products. Our balance sheet remained strong. Working capital was $110 million and we have no bank borrowings. Cash decreased $2.2 million during the first 9 months of fiscal year 2013. We utilized the cash to pay $3.1 million of dividends, increased inventory, $3.3 million to support our increasing residential sales volume, including the expanded product offerings. We believe our cash balance of $11.7 million is sufficient and that borrowings will not be necessary during the balance of the fiscal year. With that, I will turn the call over to Karel for her comments and business review. Karel? Karel K. Czanderna: Well, good morning, and thank you for joining our conference call. We are pleased to report strong third quarter and 9-month results even when compared to our prior year record results. We've increased sales, net income and the dividend, and stock prices are higher. During the first 9 months of 2013, net income increased 2.8% from the same period a year ago. Ex our special item, the 9 months net income grew 10% and we remained at 3.4% of net sales. This is our fourth year in a row of increasing first 9-month earnings. The growth of earnings largely resulted from continuing double-digit revenue growth due to shipments of residential upholstered seating and Home Styles' Ready-to-Assemble products. We are experiencing raw materials cost increases, and we'll adjust pricing as necessary while continuing to maintain a portfolio of competitively priced products that create value for our customers. On the sales side, upholstered products continued to outperform case goods. We are benefiting from an expanded customer base in the residential market, as well as growth from new and existing products with our current customers. Purchasing trends in the RV industry are shifting to moderate growth. We are seeing signs of optimism from the designers and buyers in the hospitality and healthcare markets. We believe less economic uncertainty [indiscernible] consumer confidence and further enable growth in the furniture industry. The High Point, North Carolina residential furniture [indiscernible] to test drive our broad array of new product introductions and meet with our sales team from across the U.S. The wide variety of fabric introductions we launched at the October High Point Market are meeting the [indiscernible] in premium finishes. Our Commercial teams have recently received positive customer endorsements of our enhanced product portfolios for the hospitality and healthcare markets. Our corporate backlog of orders remained strong at $44 million on March 31, and is continuing into the beginning of our fourth fiscal quarter. Our team remains focused on providing a broad portfolio of quality products, with knowledgeable customer service, to enable our customers to grow across all the markets we serve. At this time, Shelley, please open the phone lines for questions, and then I'll wrap up.

[Operator Instructions] Your first question comes from the line of Bruce Baughman from Franklin. Bruce C. Baughman - Franklin Advisory Services, LLC: I see that you've -- for a string of quarters now had very nice sales growth in residential. So to what extent that do you feel that's tied to the uptick in housing? And then as a follow-up, would you expect commercial to follow once the commercial building cycle gets going? Karel K. Czanderna: Bruce, this is Karel. Thanks very much for that -- for your question. In terms of the direct correlation to the housing market, we haven't, in the past, necessarily seen direct linkage between our sales and either the changes in new purchases of house and new homes or people moving into a different home, so existing home changes. Certainly, we know that there is some impact there, but we're not looking forward to -- I believe that will lift the entire furniture industry over time, but we're not looking at that as a specific trend versus making sure we have the right product portfolios in the right places to serve all our customers. Conversely, on the commercial side, I certainly anticipate, as commercial building increases and renovations begin to increase, that will positively impact our [indiscernible] furniture into offices. And on the hospitality side, as renovations start to pick up after sort of the long dry spell where people have been holding off and also in the healthcare businesses that we serve, I would expect all of those to be more directly positively impacted. Bruce C. Baughman - Franklin Advisory Services, LLC: And as a follow-up, could you give us an update on the headquarters project? And if there's anything -- just wrap it up as far as moving in and getting things going. Karel K. Czanderna: I'll ask Tim to answer that one. Timothy E. Hall: Bruce, our corporate headquarters is completed, and we moved in last August. And other than a few items that we certainly want to improve with new buildings, it's fine. It's a wonderful building, it's a great [indiscernible]. Bruce C. Baughman - Franklin Advisory Services, LLC: Great. And I guess anything -- any [indiscernible] people started their new roles or production or anything else, is that all behind us now, whatever there might have been? Timothy E. Hall: No. Everything is behind us. The only thing that we'll have going forward will be the depreciation on the new building, approximately $50,000 a month as we go forward. Bruce C. Baughman - Franklin Advisory Services, LLC: Okay. And what's the outlook for CapEx? You told us it would be $0.5 million for the balance of the fiscal year, I think it was, right? Timothy E. Hall: Correct. Bruce C. Baughman - Franklin Advisory Services, LLC: What -- do you have a projection for the [indiscernible]? Timothy E. Hall: On a go-forward basis is we'll return to the previous levels, so a couple $3 million.

There are no further questions. I turn the call back over to the presenters. Karel K. Czanderna: Thank you, all, for participating in our conference call today. We have had a solid first 9 months for our fiscal year 2013, and our team remains focused on creating value for our customers and our shareholders. And we look forward to reviewing our fourth quarter and full year operating results with you in August of 2013. We appreciate your interest in Flexsteel.

This concludes today's conference call, you may now disconnect.