Good morning, ladies and gentlemen. My name is Leanne and I will be your conference call facilitator today. At this time, I would like to welcome everyone to Kimbell Electronics Third Quarter Fiscal Year 2017 Financial Results Conference Call. All lines have been placed on listen only mode to prevent any background noise. After the Kimbell speakers' opening remarks, there will be a question and answer period where Kimbell will respond to questions from analysts.
The question Today's call may 2, 2017, will be recorded and may contain forward looking statements as defined under the Private Securities Litigation Reform Act of 1995. Risk factors that may influence the outcome of forward looking statements can be seen in Kimbell's annual report on Form 10 K for the year ended June 30, 2016, and today's release. The panel for today's call is Don Charron, Chairman of the Board and Chief Executive Officer and Mike Surgis Vice President and Chief Financial Officer of Campbell Electronics. I would now like to turn the call over to Don Sharon. Mr.
Sharon, you may begin.
Thank you, Leanne, and welcome everyone to our third quarter conference call. Our earnings release was issued yesterday afternoon, on results of our third quarter ended March 31, 2017. We have posted a financial summary presentation to accompany this conference call. The presentation can be found on our Investor Relations website within the Events and Presentations tab or if you are listening via the webcast, you can find it in the downloads tab on the webcast portal. I will begin by making we will answer any questions that you may have.
Our sales in the third quarter of fiscal year 2017 were slightly higher than the previous quarter, and up nicely when compared to the third quarter of last year. Continued strength in our automotive end market vertical in both North America and Europe more than offset a decline in China, double digit growth in our industrial and public safety end market verticals compared to the prior year quarter helped 29% when compared to the same period last year, despite being assisted by our Metivative And Aircomm acquisitions. Our sales in our public safety and market vertical were up significantly in the third quarter of fiscal year 2017, when compared to the third quarter of fiscal year 2016 as a result of the ramp up of a new customer and increased demand from existing customers. Our new program launch and ramp up activity remain high as we continue to work diligently to achieve our goal of $1,000,000,000 in annual sales, in fiscal year 2018. We continue to face margin pressure.
And while we still have work to do to achieve our goal of 12.5 percent ROIC. We are encouraged by our progress in that both our 3rd quarter and year to for us as we close out this pivotal year. And the integration of the Metivative And Aircomm acquisitions. We continue to make good progress in Romania after receiving approval last quarter from our second automotive customer. We now have production ramping for 2 automotive customers, 2 industrial customers, and 1 public safety customer.
This positions us well to make sequential incremental improvements each quarter as we expect to approach our breakeven point next fiscal year. We also continue to make good progress on integration of the Metivative And Aircomm acquisitions. This combination of the 2 companies adds capabilities and expertise in mechanical design, machining and metal fabrication and plastic injection molding to our package of value. These new capabilities have strategically positioned us to open new doors for future growth in sales and profits. Since the acquisitions, 2 new programs from existing medical customers have been awarded and once they are fully ramped, they are expected to add an additional 3% to 4% to our sales run rate.
Ability provided by our capital expenditures in fiscal year 2016, we have invested $26,000,000 in capital expenditures in the 1st directly support new business awards. We are focused on getting through the launch cycle ramping up production and ensuring that these new programs and the newly deployed capital that supports them, achieve our expected returns. During the third quarter of fiscal year 2017, we also returned $3,000,000 to our $29,900,000 $2,400,000 shares purchased under the original $20,000,000 share repurchase program approved by our board in October 2015, and then later increased by an additional $20,000,000 with no expiration date by a board approval in September of 2016. Now I'll turn it over to Mike to discuss our third quarter results in more detail We will then open up the call to your questions. Mike?
Thanks, Don.
Beginning with sales Our 3rd quarter net sales were $232,900,000, which was a 9% increase compared to net sales of 214,100,000 the prior year third quarter. And as Don mentioned, this was our 5th consecutive quarterly sales record. Comparing the changes in our net sales by vertical to the same quarter last year. Our automotive vertical remained strong as it was up again by double digits in the 3rd quarter, compared to the same quarter last year, driven by strong demand in the U. S.
And Europe as well as new program introductions in those same markets. Net sales in our medical vertical was down 9% from prior year, which was the result of reduced demand from several of our largest medical customers. Our industrial vertical revenue was up 18% from a year ago, largely as a result of increased customer demand for climate control products, and new product launches related to smart metering. And net sales in our Public Safety vertical was up 47% from a year ago, setting a new quarterly record for this vertical. Our gross margin in the 3rd quarter was 8%, which was up 40 basis points from the same quarter last year.
The increase in margins was assisted by the leverage but it was also partially offset by costs related to new product introductions and the continued ramp up of the Romania operation. Selling and administrative expenses were $9,200,000 in the 3rd quarter, which were up in absolute dollars by less than $100,000 but was down costs related to our supplemental employee retirement plan or SERP increased by $400,000 compared to third quarter last year. As a reminder, the SERP costs are the result of the normal revaluation to fair value of the SERP liability. These costs classified as selling and administrative costs are exactly offset by income from the revaluation to fair value of the SERP investment which is recorded in other income and therefore has no impact on the company's net earnings during the period. In the prior year quarter, selling and administrative expenses included incremental cost of $700,000 related to the startup of the Romania facility.
Other income and expense net was an income of $300,000 in the current year third quarter, compared to income of $200,000 in third quarter of prior year. The current quarter income was driven by a $400,000 gain in the SERP investments which as I mentioned is exactly offset The effective tax rate for the 3rd quarter increased to 17.8% compared to a negative effective tax rate or benefit of 2.3% in the prior year third quarter. We recognized a $1,800,000 discrete foreign tax benefit related to the capitalization of our Romania subsidiary in the prior year third quarter. In the current year quarter, we recognized approximately $500,000 of discrete tax benefits from foreign and domestic provisions to return true ups. Net income in the third quarter of fiscal year 2017 was $8,100,000 compared $7,500,000 in third quarter of fiscal 2016.
Diluted earnings per share quarter of this fiscal 17 were $40,100,000. Cash flow provided by our operating activities during the current year third quarter was a solid $8,700,000, However, it was down from cash flow provided by operating activities of $11,700,000 This quarter's operating cash flow was primarily the result of by an increase in receivables and inventory, driven by the higher volumes. Borrowings on our credit facilities at March 31, 2017 $6,500,000 $300,000, largely related to our investment in new manufacturing equipment to support new product introductions and capacity expansion. As Don mentioned, we also repurchased $3,000,000 of our common stock during the quarter. Our short term liquidity available represented as cash and cash equivalents the unused amount of our credit facilities totaled $93,900,000 at March 31.
I would like to conclude by saying that our balance sheet is very strong and that we continue to focus on margin improvement and capital efficiency. With that, I would like to open up today's call to questions from analysts. Leanne, do we have any analysts with questions in the queue?
And our first question comes from Austin Hopper with AWH Capital. Your line is open.
Good morning, guys. Nice quarter. I was hoping maybe on automotive. Can you just talk about the strength you saw in North America versus just kind of compare that with what you saw in China?
Yes. Overall, the total vertical was up 10%. When you compare the quarter this quarter, Q3 to Q3 of last year, but we were up in both Europe and North America, but down in China. So there's a number of factors there, Austin. I think the 1st and foremost has to do with launch and ramp activity as well as end market demand.
So I think we have new programs, for example, that we're launching and ramping both Europe and North America. And those end markets are pretty stable growing a little. China for us has been an end market that from a geography standpoint, it's been very strong. So this is sort of the first time that we've seen some softness there. And a tough comparable last year, at this time, we had a lot of activity going on relative to ramp ups of new programs which have settled down now.
So overall, we would expect that our end market vertical in automotive would continue to remain strong. Dependent more upon the actual demand within geography. We still have a number of new programs that we're launching. But as we reached towards, I would say, more of a normal launch activity, our overall demand in those end markets will depend more and more on the end market demand within that region.
Okay. And then customer medical, it sounds like you have some new business coming on but maybe some weakness in some of your bigger accounts. Can you give some color on that? And that's all I had. Thank you.
Yes. We did see some general softness. Obviously, it was unexpected for us, as Mike mentioned, as we looked at our existing customer base, our 3 of our largest customers, for example, which would represent a number of different product categories as well as regions of the world, we're all down year over year in comparison. And so, not sure we really have a causal on that yet, just general softness. We are excited about the upcoming period given the new programs that we're ramping, I mentioned the 2 existing customers, that we've gotten program awards that we'll be ramping within our new business unit in Indianapolis, that are medical related, which we're really excited about we're hoping to see some from this retained return back within our existing customer base, again, given that there was really no specific causal to that soft that general softness we saw.
We're hoping that we'll return to maybe more normal run rates out ahead of us here in the future.
Thank
And I'm not showing any further questions at this time. I would like to turn the call back over to Don Sharon.
Thank you, Leanne, and that brings us to the end of today's call. We appreciate your interest and look forward to speaking with you on our next call. Thank you, and have a great day.
At this time, listeners may simply hang up to disconnect from the call. Thank you, and have a nice day.