EX-99.1 2 exhibit1.htm EX-99.1 EX-99.1

News Release

         
Contact:  
W. Michael Madden
Senior Vice President & CFO
(615) 872-4800
  Tripp Sullivan
Corporate Communications, Inc.
(615) 324-7335

KIRKLAND’S REPORTS FOURTH QUARTER AND ANNUAL RESULTS

NASHVILLE, Tenn. (March 10, 2011) — Kirkland’s, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week and 52-week periods ended January 29, 2011.

Net sales for the 13-week period ended January 29, 2011, were $139.6 million compared with $142.8 million for the 13-week period ended January 30, 2010. Comparable store sales for the fourth quarter of fiscal 2010 decreased 7.9% compared with a 10.2% increase in the prior-year quarter. The Company opened 10 stores and closed 6 stores during the fourth quarter to end the period with 300 stores.

Net sales for the 52-week period ended January 29, 2011, were $415.3 million compared with $406.2 million for the 52-week period ended January 30, 2010. Comparable store sales for fiscal 2010 decreased 0.5% compared with an 8.4% increase in fiscal 2009. The Company opened 38 stores and closed 17 during fiscal 2010.

The Company reported net income of $14.4 million, or $0.70 per diluted share, for the fourth quarter of fiscal 2010 compared with net income of $22.1 million, or $1.08 per diluted share, for the fourth quarter of fiscal 2009. For fiscal 2010, the Company reported net income of $26.4 million, or $1.28 per share, compared with net income of $34.6 million, or $1.71 per diluted share, in the prior year.

Income tax expense for the fourth quarter of fiscal 2010 included a net benefit of $0.8 million related to an adjustment to the Company’s prior year income tax provision partially offset by an adjustment to the state tax rate applied to the Company’s deferred tax assets. Excluding the impact of these items, adjusted net income for the fourth quarter of fiscal 2010 was $13.6 million, or $0.66 per diluted share (adjusted). Income tax expense for the fourth quarter of fiscal 2009 included a benefit of approximately $3.3 million related to the reversal of the valuation allowance on the Company’s deferred tax assets established in prior periods. Excluding the impact of this item, adjusted net income for the fourth quarter of fiscal 2009 was $18.8 million, or $0.92 per diluted share (adjusted).

The Company believes that presenting adjusted net income and earnings per share for its 2009 and 2010 periods to reflect more normalized tax rates is instrumental in evaluating the Company’s performance. See “Reconciliation of Non-GAAP Financial Information” below.

Robert Alderson, Kirkland’s President and Chief Executive Officer, said, “Our fourth quarter results were in line with the sales we previously reported and certainly affected by the tough comparisons we faced this year. We managed the promotional environment well during the quarter, had a strong performance from our Christmas merchandise, and finished the year with inventory levels on plan. Our store base

-MORE-
2501 McGavock Pike, Suite 1000 ¦ Nashville, Tennessee 37214 ¦ (615) 872-4800

KIRK Reports Fourth Quarter Results
Page 2
March 10, 2011

growth resulted in an increase in total square footage of 14%, and we are encouraged about the early results from our 2010 store class.

“As we enter fiscal 2011, comparable store sales trends continue to be challenging given that comparable store sales were up 19% at this time last year. Based on quarter-to-date sales and merchandise margin trends, we are cautiously optimistic about our prospects for the first quarter. We are also encouraged by early signs of improvement in our all-important framed art category.”

Fiscal 2011 Performance Goals

     
Store Growth:  
At year end, the Company had 300 stores compared with 279 at
the beginning of 2010 and 299 at the beginning of fiscal 2009.
For fiscal 2011, the Company expects to open 40 to 45 new
stores and close 15 to 20 stores. Store openings will be
weighted toward the second half of the year, while store
closings will be spread relatively evenly throughout the year.
As always, net store growth will depend on the availability of
the right deal for the right location.
Sales:  
The Company expects total sales for fiscal 2011 to increase in
the range of 9% to 12% compared with fiscal 2010. This level
of sales growth would imply flat to slightly negative
comparable store sales for the fiscal year. Comparisons are
expected to remain challenging in the first half of the year as
the Company is up against record results and then comparisons
ease in the second half of the year.
Margins:  
Based on the current outlook, the Company expects operating
margin in fiscal 2011 to be slightly below that of fiscal 2010
due to an anticipated increase in sourcing and transportation
costs and deleverage on the fixed components of operating
expenses due to flat to slightly negative comparable store
sales, offset by the expected strong performance of new store
openings. We will update this outlook periodically, as we gain
more transparency on product costs and some anticipated
tightening in the commercial real estate markets.
Earnings:  
Based on the above assumptions, the Company would expect
earnings per share for fiscal 2011 to be at or slightly below
adjusted earnings per share for fiscal 2010. The current
assumption for the effective tax rate is in the range of 38.5%
for fiscal 2011.
Cash Flow:  
The Company expects to generate positive cash flow in fiscal
2011 and fully fund its new store growth and technology
improvements through cash generated from operations. Capital
expenditures in fiscal 2011 are estimated to range between $25
million and $28 million for fiscal 2011.

First Quarter Fiscal 2011 Outlook

The Company issued guidance for the first quarter ending April 30, 2011, of net income of $0.10 to $0.14 per diluted share, compared with $0.32 per diluted share a year ago. Net sales are expected to be $94 million to $96 million, with a comparable store sales decrease in the high-single-digit range, compared with net sales of $93.5 million and a comparable store sales increase of 12.6% in the prior-year period. The Company expects to open approximately 3 stores during the quarter, and close 6 to 8 stores during the quarter.

Investor Conference Call and Web Simulcast

    Kirkland’s will host a conference call today, at 11:00 a.m. ET to discuss its results of operations for the

    fourth quarter of fiscal 2010. The number to call for the interactive teleconference is (212) 231-2927. A

-MORE-

    KIRK Reports Fourth Quarter Results

    Page 3

    March 10, 2011

replay of the conference call will be available through Thursday, March 17, 2011, by dialing (402) 977-9140 and entering the confirmation number, 21510653.

A live broadcast of Kirkland’s quarterly conference call will be available online at the Company’s website www.kirklands.com under Investor Relations or http://www.videonewswire.com/event.asp?id=76716 on March 10, 2011, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue for one year.

Reconciliation of Non-GAAP Information
This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”). The non-GAAP measures are “adjusted net income” and “adjusted diluted earnings per share” and are equal to net income, and diluted earnings per share excluding adjustments to the Company’s valuation allowance for deferred tax assets, adjustments related to the prior year tax provision, adjustments to the state tax rate applied to the Company’s deferred tax assets, and certain income tax credits related to prior periods. Management uses these measures to focus on normalized operations, and believes that it is useful to investors because it enables them to perform more meaningful comparisons of past, present and future operating results. The Company believes that using this information, along with the corresponding GAAP measures, provides for a more complete analysis of the results of operations by quarter. Net income and earnings per share are the most directly comparable GAAP measures. Below is a reconciliation of the non-GAAP measures to their most comparable GAAP measures:

                                 
Reconciliation of Non-GAAP Financial Information                
(dollars in thousands, except per share amounts)   13 Weeks Ended   52 Weeks Ended   13 Weeks Ended   52 Weeks Ended
    January 29,   January 29 ,   January 30,   January 30,
    2011   2011   2010   2010
Net income
                               
Net income in accordance with GAAP
  $ 14,383     $ 26,431     $ 22,078     $ 34,570  
Adjustments to income tax expense
    ($814 )     ($814 )     ($3,319 )     ($5,881 )
Adjusted net income
  $ 13,569     $ 25,617     $ 18,759     $ 28,689  
 
                               
Diluted earnings per share
                               
Diluted EPS in accordance with GAAP
  $ 0.70     $ 1.28     $ 1.08     $ 1.71  
Adjustments to income tax expense
    ($0.04 )     ($0.04 )     ($0.16 )     ($0.29 )
Adjusted diluted earnings per share
  $ 0.66     $ 1.24     $ 0.92     $ 1.42  
 
                               

Kirkland’s, Inc. was founded in 1966 and is a specialty retailer of home décor in the United States. Although originally focused in the Southeast, the Company has grown beyond that region and currently operates 296 stores in 30 states.  The Company’s stores present a broad selection of distinctive merchandise, including framed art, mirrors, candles, lamps, picture frames, accent rugs, garden accessories and artificial floral products.  The Company’s stores also offer an extensive assortment of gifts, as well as seasonal merchandise.  More information can be found at .

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Kirkland’s actual results to differ materially from forecasted results. Those risks and uncertainties include, among other things, the competitive environment in the home décor industry in general and in Kirkland’s specific market areas, inflation, product availability and growth opportunities, seasonal fluctuations, and economic conditions in general. Those and other risks are more fully described in Kirkland’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K filed on April 15, 2010. Kirkland’s disclaims any obligation to update any such factors or to publicly announce results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

-MORE-

KIRK Reports Fourth Quarter Results
Page 4
March 10, 2011

KIRKLAND’S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)

                 
    13-Week Period Ended
    January 29,   January 30,
    2011   2010
Net sales
  $ 139,606     $ 142,797  
Cost of sales
    80,521       77,803  
 
               
Gross profit
    59,085       64,994  
Operating expenses:
               
Operating expenses
    33,371       31,015  
Depreciation
    3,523       3,488  
 
               
Operating income
    22,191       30,491  
Other income (expense), net
    46       (26 )
 
               
Income before income taxes
    22,237       30,465  
Income tax expense
    7,855       8,387  
 
               
Net income
  $ 14,382     $ 22,078  
 
               
Earnings per share:
               
Basic
  $ 0.72     $ 1.12  
 
               
Diluted
  $ 0.70     $ 1.08  
 
               
Shares used to calculate earnings per share:
               
Basic
    19,902       19,731  
 
               
Diluted
    20,549       20,450  
 
               

-MORE-

KIRK Reports Fourth Quarter Results
Page 5
March 11, 2011

KIRKLAND’S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)

                 
    52-Week Period Ended
    January 29,   January 30,
    2011   2010
Net sales
  $ 415,300     $ 406,194  
Cost of sales
    244,764       237,688  
 
               
Gross profit
    170,536       168,506  
Operating expenses:
               
Operating expenses
    115,745       107,063  
Depreciation
    12,817       14,505  
 
               
Operating income
    41,974       46,938  
Other income, net
    194       47  
 
               
Income before income taxes
    42,168       46,985  
Income tax expense
    15,737       12,415  
 
               
Net income
  $ 26,431     $ 34,570  
 
               
Earnings per share:
               
Basic
  $ 1.33     $ 1.76  
 
               
Diluted
  $ 1.28     $ 1.71  
 
               
Shares used to calculate earnings per share:
               
Basic
    19,855       19,696  
 
               
Diluted
    20,578       20,249  
 
               

-MORE-

KIRK Reports Fourth Quarter Results
Page 6
March 10, 2011

KIRKLAND’S, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)

                 
    January 29, 2011   January 30, 2010
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 91,222     $ 76,412  
Inventories, net
    44,452       39,355  
Deferred income taxes
    3,528       3,552  
Other current assets
    7,468       4,331  
 
               
Total current assets
    146,670       123,650  
Property and equipment, net
    46,231       36,856  
Non-current deferred income taxes
    1,440       4,395  
Other assets
    736       640  
 
               
Total assets
  $ 195,077     $ 165,541  
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  $ 20,236     $ 15,589  
Income taxes payable
    1,289       7,087  
Other current liabilities
    24,364       25,402  
 
               
Total current liabilities
    45,889       48,078  
Deferred rent and other long-term liabilities
    30,899       28,978  
 
               
Total liabilities
    76,788       77,056  
 
               
Net shareholders’ equity
    118,289       88,485  
 
               
Total liabilities and shareholders’ equity
  $ 195,077     $ 165,541  
 
               

-MORE-

KIRK Reports Fourth Quarter Results
Page 7
March 10, 2011

KIRKLAND’S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)

                 
    52-Week Period Ended
    January 29, 2011   January 30, 2010
Net cash provided by (used in):
               
Operating activities
  $ 36,736     $ 49,972  
Investing activities
    (22,632 )     (10,246 )
Financing activities
    706       241  
 
               
Cash and cash equivalents:
               
Net increase
    14,810       39,967  
Beginning of period
    76,412       36,445  
 
               
End of period
  $ 91,222     $ 76,412  
 
               

-END-