Welcome to the Crown Crafts Incorporated Investor Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. Any reproduction of this call, in whole or in part, is not permitted without prior written authorization of Crown Crafts Incorporated. And as a reminder, this conference is being recorded today, February 12. At this time, I would like to turn the call over to Olivia Elliott, Vice President and Chief Financial Officer, who will begin the call. Please go ahead.

Thank you. Good afternoon. Welcome to the Crown Crafts investor conference call for the third quarter of fiscal 2014. With me today is Randall Chestnut, the company's President and Chief Executive Officer.

Good afternoon.

A telephone replay of this call will be available one hour after the end of the call through 8:00 a.m. Central Time on February 20, 2014. Also, a web replay of this call will be available for 90 days and can be accessed by visiting our website at www.crowncrafts.com. Before we begin, I would like to remind everyone of the cautionary language regarding forward-looking statements contained in the press release. That same language applies to comments made in today's conference call. I will now turn the call over to Randall.

Olivia, thank you. And again, good afternoon to everyone and welcome to the Crown Crafts Incorporated investor conference call for the third quarter of fiscal year FY'14. This morning, before the market opened, we reported earnings for the quarter that ended December 29, 2013. Some of the highlights of the quarter and year-to-date are as follows. Net sales for the quarter in the current year were $20.619 million, as opposed to $20.070 million in the prior year, or an increase of $549,000 or 2.7%. Net income for the quarter was $1.779 million as opposed to $1.604 million or an increase of $175,000 or 10.9% in the current of the current year. Diluted earnings per share also increased from $0.16 to $0.18 per diluted share. On a year-to-date basis sales have increased 4.5% from $54.805 million in the previous year to $57.283 million in the current year or an increase of just under $2.5 million. Net income also has increased by 15% year-over-year increasing from $3.256 million last year to $3.743 million in the current year. Also, diluted earnings per share have gone from $0.33 to $0.38 for the nine months ending December 29. The third quarter of FY'14 was a solid quarter. We were able to improve our sales in the third quarter even in a soft retail environment. Our gross profit percentage improved from 23.6% in the prior year quarter to 28.9% the current year quarter and improved on a year-to-date basis from 24.9% last year to 28.2% this year. As we have reported earlier, the improvement in the gross margin has a combination of product and customer mix improvement in the year-over-year, quarter-over-quarter periods. Turning to the balance sheet, we're very proud of the fact that we finished the quarter with no debt and we finished with a cash balance of just under $3.8 million of cash on hand. Today, we announced our 17th consecutive quarterly dividend. We announced that we're going to pay $0.08 per quarter to be paid on April 4 to shareholders of record as of March 14, 2014. And this $0.08 quarterly dividend will be funded from available cash balances. This represents a 4% annualized yield based on yesterday's close price, something we are pretty pleased with. I'll turn it over to Olivia to make some additional comments and then I will come back with the closing and we'll open it up for any questions. Thank you.

I'm only going to give financial highlights. For a more detailed analysis, please refer to the company's Form 10-Q filed with the Securities and Exchange Commission this morning. Net sales for the third quarter of the current year increased $549,000 or 2.7% to $20.6 million from $20.1 million for the second quarter of the previous year. For the nine-month period, net sales for fiscal 2014 were up $2.5 million or 4.5% to $57.3 million compared to fiscal 2013 net sales of $54.8 million. These sales increases were largely driven by three new programs that were introduced during the second quarter of the current year. Gross profit increased in amount by $672,000 and as a percentage of net sales from 26.3% for the second quarter of the prior year to 28.9% for the third quarter of the current year. For the nine-month period, fiscal 2014 gross profit increased in amount by $2.6 million, and as a percentage of net sales from 24.9% for fiscal 2013 to 28.2% for fiscal 2014. Gross margin increased in amount primarily as a result of the increased level of sales and the gross margin percentage increase as a result of a more favorable customer and product mix in the current year compared with the prior year. The higher level of sales in the current year also provided better coverage of the fixed portion of the company's cost of sales than in the prior year. Marketing and administrative expenses for both the quarter and year-to-date increased in amount and as a percentage of net sales, as compared with the same period of fiscal year 2013, primarily due to increases in the company's performance-based compensation cost and higher legal fees, which were primarily associated with the company's defense of two lawsuits. The company's provision for income taxes is based upon an estimated annual effective tax rate of 37.7% for fiscal year 2014 compared with 36.2% for fiscal year 2013. The increase in the estimated annual effective tax rate in the current year is related to a decrease in the current year in the amount of certain costs which are deductible for tax purposes, but not for book purposes, as well as a decrease in projected state Enterprise Zones wage credit. Net income for the second quarter of fiscal 2014 was $1.8 million or $0.18 per diluted share compared to net income of $1.6 million or $0.16 per diluted share in the third quarter of fiscal 2013. Net income for the first nine months of fiscal 2014 was $3.7 million or $0.38 per diluted share compared to net income of $3.3 million or $0.33 per diluted share for the first nine months of fiscal 2013. I will now return the call to Randall.

Olivia, thank you very much. And in closing before we open it up for questions, just a few general comments. We continue as we also have, and those of you that follow us know that, to maintain tight controls on cost at all times, something that we are very proud. We remain debt free with a cash balance, we also reward our shareholders with dividends which we have been doing now for quite a few quarters, and something that we look back at that's very notable. This quarter marks our 34th consecutive quarter that the company has made a profit excluding a one-time write off of goodwill in fiscal 2009. And that represents over eight years of quarter over quarter profitability. We consider that not bad track record based on today's environment. We would like to thank all of our customers, employees, suppliers, shareholders for your continued interest in the company. And with that, Amy, I will bring you back to see if anyone has any questions.

Thank you. (Operator Instructions) Our first question comes from James Fronda of Sidoti & Company.

I'm just curious about the new programs and I guess is there any shelf life and help with any of those, and do you think there's room to grow those going forward?

Well the new programs that you're alluding to, James, are the ones that we announced in the second quarter which we announced three new programs and they are on the shelf now. Two of them, yes, they have life after the first initial shipment and we will continue to be re-plan to rejuvenate it. The third one possibly not, okay? Two of the three do have some life after the first initial shipments.

Our next question comes from Arnold Brief at Goldsmith & Harris.

The DIU has had a change in management a little while ago. Do you see any change in their merchandizing programs specifically the rate at which they're shipping to private label? And my second question will be do you see any change in the birth rate?

Okay. Let me answer the second question first, Arnold, the birth rate. The latest numbers that we saw the preliminary to come out we are at 3.8 million births per year and that was for 2011. That's the latest number that's been published and that we've seen. We haven't seen anything of 2012. And that's it. That's all we know. We have heard from some economic forecast that they feel that that's at the bottom of the trough and that hopefully that will come back up, but strictly speculation. Back to the first question, Babies'R'Us with the management change, I haven't seen more a shift towards private label. One of the programs that we are doing is our brand, and that's the one that James has asked about a moment ago, its one of our brands but it's exclusive to them. And so we haven't seen a dramatic shift towards private label.

In previous call sometimes you mention the success of your brand versus your other products. You didn't give any of the numbers on this call. Is there any -- can you give us some insight into some of your brand sales? You mentioned mix of product mix and customer mix being more favorable, but could you shed some light on that?

No, and Arnold, I did mention that, but I will tell you that if you look at the third quarter of this year as opposed to the third quarter last year, it is up. The branded versus the private label versus the licensed is up, it's in the mid single digit numbers, but it is up.

(Operator Instructions). Our next question comes from David King at ROTH capital.

So I guess a few quick questions here, maybe Olivia, the first one is just on the legal fees. How much did that kind of weigh in the quarter or how much of the increase was attributable to that, and then more importantly I guess how should we think about that on a go forward basis if you are able to share how are you guys thinking about it?

Let me answer the second one, and I will let Olivia address the numbers, Dave.

All right.

I will address the second part of it as and that is that as a standard answer we don't comment on legal proceedings of many, many, many reasons. So therefore, we can't project what the cost is going to be for the future. I mean, we really can't. Olivia, you want to address the quarter and year-to-date?

Yes, for the quarter the legal fees went from $37,000 to $144,000 in the current year and then year-over-year it was $270,000 increase to $701,000 and almost the entire amount of the increase would be related to the open legal matters or the one that previously closed that we announced for the California class action.

Okay, so in terms of -- maybe trying to think about it in a different way then, in terms of how you guys are recording it, is it more of a kind of a accrual policy as you see new matters arising or getting a different sense from lawyers or is it as they come in you're getting you're booking the cost?

Well we're booking the cost if we get the invoices or in the instance where we may not have received an invoice for a current month then we would have accrued it.

And then next question is on inventory. It looked like the increase was fairly notable this quarter. Was there anything to note there that might be driving it? Is there anything to -- how we should think about revenues in the coming as a result or anything along those lines?

No. Dave, there is not. It's more inline with where Chinese New Year falls this year and bringing goods in probably this year a little bit earlier because Chinese New Year we're sort of into it, we're towards the end of it as we speak. So with that coming a little bit earlier this year we brought some goods; had to bring some goods in early.

So that should come down in the next quarter.

It will. Yes, you will see a decline in the real numbers in the fourth quarter. Yes, sir, you would.

And then I guess last question is kind of multi-part big picture. I guess on the uses of capital I guess, one, the dividend $0.08 should we think about or what's your mindset towards increasing that at any point? Or I guess maybe a different way of asking it is what sort of the optimal payout that you kind of manage to if there is one? And then the second part of the question is use of the capital obviously. Some of your competitors, some peers in the space have had some challenges. Just kind of a broader question on what do you see as the prospects for M&A out there? Have they changed at all and kind of what's your mindset on overall use of the capital? Thank you.

Okay, Dave, on the policy for the dividend, every quarter we do analyze and the board analyzes and makes a decision on paying the dividend and it's not a guaranteed quarterly dividend, its approved and granted once per quarter. But the board does review it every quarter, okay, and the board is determined if for the time being we're going to maintain the excess per share. The use of capital for acquisitions, we're constantly looking, none of our interest for what was assumed by our competitors. We keep our head down and try to keep pushing ahead doing what we do and that is try to run a good company. But we are constantly looking at acquisition candidates, acquisition opportunities and that's an ongoing situation for us. And its something that if we can find the right fit at the right price we will pull the trigger on it.

Okay, fair enough. And is it fair to say that, Randall, has the environment improved at all in terms of opportunities? Is it status quo? Is there anything making --

I would say, Dave, that status quo and still the prices of what we see are a little higher than what I'd like to see. And I mean, so it has a right-size the price in it, let's put it that way.

At this time, we show no further questions, and I would like to turn the conference back over to Mr. Chestnut for any closing remarks.

Amy, thank you very much, and we appreciate everyone's interest and everyone on the call and your interest in the company. And in the mean time, if you have questions please don't hesitate to call. As a reminder to everyone, we are on a March ending quarter. So our year ends next month, at the end of March. So the next quarterly conference call will be our year-end, which will be a few months away as we close our year-end books and come back and report the full FY'14. Again, thank you very much. Have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.