Good morning, ladies and gentlemen. My name is Kim, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimball International Fourth Quarter 2018 Fiscal Results Conference Call. [Operator Instructions]. As with prior conference calls, today's call, August 2, 2018, will be recorded and may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the forward-looking statements. Risk factors that may influence the outcome of forward-looking statements can be seen in the Kimball International Form 10-K and today's release. The panel for today's call is Bob Schneider, Chairman and CEO of Kimball International; and Michelle Schroeder, Vice President and Chief Financial Officer of Kimball International. I would now like to turn today's call over to Bob Schneider. Mr. Schneider, you may begin.

Thank you, Kim, and welcome, everyone, to our fourth quarter fiscal year 2018 conference call. We announced yesterday our financial results for the fourth quarter and fiscal year ended June 30, 2018. As in prior calls, we have an investor presentation slide deck that has been posted to the Investor Relations section of our website to accompany this conference call. As in the past, I suggest you pull up that slide deck as it includes important information on the quarter along with trending of our financial results. I will start with a few brief comments on the fourth quarter and fiscal year 2018 highlights before I turn the call over to Michelle, who will provide us with the key financial highlights for the fourth quarter. We will then open the call to questions from analysts and investors. I was very pleased with our revenue performance in the fourth quarter, with growth of 7% or 4% on an organic basis, after a couple of quarters of slower growth. The growth was broad based with 5 of our 6 vertical markets increasing compared to the fourth quarter of last year. This was the highest sales quarter in over 15 years. Orders were strong as well coming in at $208 million for the quarter, which was 19% higher or 10% higher than last year on an organic basis. Orders increased in 5 of our 6 vertical markets with the strongest growth coming from the hospitality vertical at a 33% increase on an organic basis. The hospitality market is normally choppy from one quarter to the next because of the project nature of the business so we tend to see big fluctuations from quarter to quarter. Even so, I'm very encouraged by the significant volume of orders received during the quarter in all of…

Thanks, Bob. So Bob covered the fiscal year 2018 highlights. My comments are going to focus on just the fourth quarter. I'm pleased with our results for the fourth quarter and in fiscal year 2018 on a strong note. We reported sales of $184.5 million, which was a 7% increase over the fourth quarter of last year. Now, this does include the D'style acquisition that we completed in November. So an organic basis, our sales increased 4%. It was encouraging that the growth was broad based among our vertical markets. Five out of our six vertical markets experienced growth in the quarter. The largest contributor to the increase came from our hospitality vertical with 26% growth. The D'style acquisition is included in this vertical and so that's part of the reason for the increase. But on an organic basis, sales in this vertical still increased a strong 12%. The increase came from our program business and was spread among various hotel brands. We also saw a solid 14% increase in our healthcare sales in the quarter. We've been talking the last couple of quarters about investments we've made in the healthcare space, including some new product introductions and the new leadership team within our Kimball brand. This vertical has a longer selling cycle than the other office verticals so it has taken a little longer to see the benefits of all the work the team has done in this space. We believe there are a lot of opportunities within this vertical as we move into fiscal '19. Our finance, education and commercial verticals all increased as well during the quarter, and the only vertical that declined was government. State and local government sales were flat, while federal government declined primarily due to a large project that shifted last year. Consolidated…

[Operator Instructions]. The first question comes from Kathryn Thompson from Thompson Research.

This is Steven Ramsey on for Kathryn. Can you -- I may have missed this on the call. Can you review your pricing again? And then -- and maybe how you think your pricing change relates to competitors in the space?

Our pricing. What we've mentioned earlier is we came out with price increase in April with one brand. We came out with another one and the -- another brand in July. The amount of increase we didn't mention, but I will tell you it's very similar to what our competitors have done. We very much watched what is happening in terms of the market with respect to when to come out with the price increase. Given our market size, we clearly are a follower in terms of that with respect to the market. And -- but very much have been watching what our cost increases have been throughout our cost structure, and then planning for when we could, perhaps, come out with a price increase, which we did on those two dates. As a Michelle mentioned, when do a price increase, if the world was very simple, it would be very easy and the very next day the prices would go up. But due to various contracts, there often is a delay on when we see the impact of those price increases. So the National, the one brand price increase will be benefiting us in the first quarter of fiscal '19. The other price increase we did with Kimball in July, we probably won't see as much effect until you get into the second quarter of fiscal '19, just due to the lagging effect of that process.

Got you. And then, I guess, kind of putting together the $7 million of cost savings and how those filter in, combined with the price increases. I guess two questions there. Kind of what is the pace of the $7 million coming in through the year? And maybe if I heard you right or wrong that you would be -- the price-cost gap would close in the second quarter of fiscal '19?

That's correct, Steven. The $7 million savings, we've got a little bit in the first quarter and then it ramps up more in the second quarter. Each quarter it's a little bit more, but there is a little bit bigger ramp-up between Q1 and Q2. And then we do expect between that and the price increase impact that we would be able to offset the transportation cost and commodity cost increases that we've been seeing.

And, Steven, after that quarter, we would have margin expansion because the continuous improvement processes -- projects we're working on will be finishing up, as we go out through the year. So we would have additional benefit thereafter. But it's Q2, where we are able to offset the various cost increases that we have mentioned earlier.

Great, okay. I would be interested to hear given the increased focus on new products in the last few years and, kind of, the way your more current set of new product introductions are going. Can you talk about maybe what you've learned in launching new products? And if margin trends -- initial margin trends in a product launch are better now than when you would launch them a few years ago? Or maybe even it's not even fair to compare them because of the inflation pressures going on right now versus the past couple of years?

Good question, Steve. We really, really hit the gas pedal on new products starting 4, 4.5 years ago. And in order to do that and not just completely blow our new product introduction budgets, we had to really rethink how we come out with new products and speed the market. And so a lot of process changes were put in place to really speed up the process, to try to take cost out of new product introduction. And so we're a lot faster than we were then. And the products, of course, now compared to 4, 5 years ago, they just looked so different. Much, much more contemporary. With respect to margins, it's difficult comparing to some of the prior type product introductions because those often had a lot more material content that we have today. When you're thinking about case goods and open plan. But generally, the margins are equal to or better. And then as we -- of course, as you would expect, as we introduce a product and we work through all the introduction issues that typically occur, margins tend to get better. We spend a lot of time working with our supply chain. I would say, much more time than we had done in the past to try to remove cost on new product introductions, to try to get the target pricing and the target margin where we want it when we came out with that product.

Great. And then lastly, how would you compare not maybe in the last quarter to last year versus the past large order trends versus small order trends in your end market?

The quarter we just ended, both were up substantially, both were strong. And I am, obviously, very, very pleased to see that, but I know as you go back about nine months ago, maybe six months ago, there were stresses on day-to-day orders, there were stresses on large projects. But for us, both of those were strong this last quarter.

Excellent. And then my final question. Kind of what the flurry of acquisitions and partnerships in the space recently. How does -- does that change your outlook on the market getting pricing or sales trends or does that -- or are you guys looking at the partnership avenue as well to expand your portfolio?

We are investigating acquisitions, we're looking at partnerships where it makes sense. In terms of what impact it has on pricing, I'm not sure if that's substantial of a change in the marketplace, but it certainly helps with some of those collaborative partnerships to be able to bring products to our distribution. But yes, we're looking at both of those, in addition to a lot of focus on organic growth with new products.

[Operator Instructions]. Your next question comes from Samantha Doxie from Walthausen & Company.

First, pre-buying activity out of the price increases correctly. So you said you had about $2 million of orders that was for that?

Samantha, this is Bob. The first part of your question we couldn't hear if you could you repeat it?

Oh, I'm sorry. I just want to make sure I'm understanding the pre-buying activity out of the price increase correctly. So you mentioned on the call that about $2 million of orders were for to beat the price increases?

That's right. For this quarter, the Kimball brand price increase was effective July 2, and so we estimate about $2 million of orders that were pulled forward to beat that price increase.

Okay. Awesome. And then just quickly next. There's been some news out there about management teams regretting the whole open office space move and it actually -- that it decreases employee collaboration and everything like that. So I guess maybe any comments you guys have on that? Or how it may impact you in the future?

Samantha, the key to that is really good design, and -- not only in terms of our products but with the design firm working with them as to how the layout of that facility is going to be set up. And when done properly and the different areas of the building that become available for people to work, it works very, very well. And we actually have lived that with one of our brands here at Kimball International. And so we -- which really positions us, I think, very well to come out with new products that really help in this whole process. Those types of installations where they don't really think through all the different needs of the unique needs of that particular aspect of the company, you do get some negative feedback. And I think the key is just how you do the design. What we really stress with our employees, again, as I said, we have lived through this, how -- it's a real important mindset change that no longer is your physical space of your desk that's no longer really just your office, it's the whole building. And with mobility and the different modes of work that are available within the whole facility, it works very, very well. So I would -- my response would be before anybody should partake of and undertake a renovation and a relay out of their facilities, they really have to think through the design and work with companies that have experience doing it, and -- to be able to avoid some of those issues.

There are no further questions at this time. I now turn the call over to Mr. Schneider.

Thanks, Kim, and thanks, all of you, for joining us today. Our fourth quarter performance and June 30 backlog positions us very well moving into fiscal year 2019. I'm excited about the initiatives our teams are working on to support our long-term growth strategies. My retirement is still a few months away, but I want to thank you for -- all of our investors, for your support over the years. I'm confident our board will appoint a CEO who will continue to focus on and drive shareholder value. Thank you, everybody, and have a great day.

At this time, listeners may simply hang up to disconnect from the call. Thank you, and have a great day.