Kirkland's (KIRK) 10-Q 10 Dec 15 2015 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Oct. 31, 2015	Dec. 03, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Oct. 31, 2015
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q3
Trading Symbol	KIRK
Entity Registrant Name	KIRKLAND'S, INC
Entity Central Index Key	1,056,285
Current Fiscal Year End Date	--01-30
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		17,024,597

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 31, 2015	Jan. 31, 2015	Nov. 01, 2014
Current assets:
Cash and cash equivalents	$ 32,358	$ 99,138	$ 56,642
Inventories, net	95,460	55,775	77,456
Deferred income taxes	3,522	3,538	2,969
Prepaid expenses and other current assets	18,056	8,878	12,549
Total current assets	149,396	167,329	149,616
Property and equipment, net	107,000	90,992	90,683
Other assets	2,107	2,166	2,125
Total assets	258,503	260,487	242,424
Current liabilities:
Accounts payable	53,962	24,705	32,049
Income taxes payable		5,648
Accrued expenses	26,927	27,027	25,296
Total current liabilities	80,889	57,380	57,345
Deferred rent	45,962	41,995	40,831
Non-current deferred income taxes	4,279	4,138	3,116
Other liabilities	5,934	5,912	5,474
Total liabilities	$ 137,064	$ 109,425	$ 106,766
Shareholders' equity:
Preferred stock, no par value, 10,000,000 shares authorized; no shares issued or outstanding at October 31, 2015, January 31, 2015, or November 1, 2014, respectively
Common stock, no par value; 100,000,000 shares authorized; 17,166,491; 17,127,875; and 17,162,929 shares issued and outstanding at October 31, 2015, January 31, 2015, and November 1, 2014, respectively	$ 161,253	$ 159,015	$ 158,295
Accumulated deficit	(39,814)	(7,953)	(22,637)
Total shareholders' equity	121,439	151,062	135,658
Total liabilities and shareholders' equity	$ 258,503	$ 260,487	$ 242,424

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Oct. 31, 2015	Jan. 31, 2015	Nov. 01, 2014
Statement of Financial Position [Abstract]
Preferred stock, par value
Preferred stock, shares authorized	10,000,000	10,000,000	10,000,000
Preferred stock, shares issued	0	0	0
Preferred stock, shares outstanding	0	0	0
Common stock, par value
Common stock, shares authorized	100,000,000	100,000,000	100,000,000
Common stock, shares issued	17,166,491	17,127,875	17,162,929
Common stock, shares outstanding	17,166,491	17,127,875	17,162,929

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Income Statement [Abstract]
Net sales	$ 129,238	$ 117,198	$ 362,837	$ 328,938
Cost of sales (exclusive of depreciation as shown below)	81,137	71,446	224,561	202,711
Gross profit	48,101	45,752	138,276	126,227
Operating expenses:
Compensation and benefits	25,514	23,021	73,116	65,387
Other operating expenses	17,962	16,090	49,601	43,980
Depreciation	5,557	4,670	16,096	13,401
Total operating expenses	49,033	43,781	138,813	122,768
Operating income (loss)	(932)	1,971	(537)	3,459
Interest expense, net	70	70	210	206
Other income, net	(58)	(69)	(169)	(377)
Income (loss) before income taxes	(944)	1,970	(578)	3,630
Income tax expense (benefit)	(674)	710	(549)	1,370
Net income (loss)	$ (270)	$ 1,260	$ (29)	$ 2,260
Earnings (loss) per share:
Basic	$ (0.02)	$ 0.07	$ 0	$ 0.13
Diluted	$ (0.02)	$ 0.07	$ 0	$ 0.13
Weighted average shares for basic earnings (loss) per share	17,243	17,258	17,252	17,300
Effect of dilutive stock equivalents		476		499
Adjusted weighted average shares for diluted earnings (loss) per share	17,243	17,734	17,252	17,799
Dividends declared per common share outstanding			$ 1.50

Condensed Consolidated Stateme5

Condensed Consolidated Statement of Shareholders' Equity (Unaudited) - 9 months ended Oct. 31, 2015 - USD ($) $ in Thousands	Total	Common Stock [Member]	Accumulated Deficit [Member]
Beginning Balance at Jan. 31, 2015	$ 151,062	$ 159,015	$ (7,953)
Beginning Balance, shares at Jan. 31, 2015		17,127,875
Exercise of employee stock options and employee stock purchases	278	$ 278
Exercise of employee stock options and employee stock purchases, shares		484,347
Tax benefit from exercise of stock options	1,103	$ 1,103
Net share settlement of stock options and restricted stock units	(2,024)	$ (2,024)
Net share settlement of stock options and restricted stock units, shares		(297,584)
Issuance of restricted stock	0	$ 0	0
Issuance of restricted stock, shares		105,864
Stock-based compensation expense	2,881	$ 2,881
Repurchase and retirement of common stock	(5,881)		(5,881)
Repurchase and retirement of common stock, shares		(254,011)
Dividends paid	(25,951)		(25,951)
Net loss	(29)		(29)
Ending Balance at Oct. 31, 2015	$ 121,439	$ 161,253	$ (39,814)
Ending Balance, shares at Oct. 31, 2015		17,166,491

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014
Cash flows from operating activities:
Net income (loss)	$ (29,000)	$ 2,260,000
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation of property and equipment	16,096,000	13,401,000
Amortization of landlord construction allowances	(3,856,000)	(4,065,000)
Amortization of debt issue costs	58,000	58,000
Loss on disposal of property and equipment	77,000	294,000
Cash received for landlord construction allowances	6,308,000	6,099,000
Stock-based compensation expense	2,881,000	2,055,000
Excess tax benefits from exercise of stock options and vesting of restricted stock	(1,103,000)	(123,000)
Deferred income taxes	157,000	(413,000)
Changes in assets and liabilities:
Inventories, net	(39,685,000)	(24,819,000)
Prepaid expenses and other current assets	(2,451,000)	(832,000)
Other noncurrent assets	1,000	(345,000)
Accounts payable	22,797,000	8,947,000
Income taxes refundable	(9,172,000)	(8,803,000)
Accrued expenses and other current and noncurrent liabilities	(663,000)	1,813,000
Net cash used in operating activities	(8,584,000)	(4,473,000)
Cash flows from investing activities:
Capital expenditures	(25,721,000)	(24,049,000)
Net cash used in investing activities	(25,721,000)	(24,049,000)
Cash flows from financing activities:
Excess tax benefits from exercise of stock options and restricted stock	1,103,000	123,000
Cash used in net share settlement of stock options and restricted stock	(2,024,000)	(318,000)
Employee stock purchases	278,000	242,000
Cash dividends paid to stockholders	(25,951,000)
Repurchase and retirement of common stock	(5,881,000)	(3,933,000)
Net cash used in financing activities	(32,475,000)	(3,886,000)
Cash and cash equivalents:
Net decrease	(66,780,000)	(32,408,000)
Beginning of the period	99,138,000	89,050,000
End of the period	$ 32,358,000	$ 56,642,000

Basis of Presentation

Basis of Presentation	9 Months Ended
	Oct. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	Note 1 — Basis of Presentation Kirkland’s, Inc. (the “Company”) is a specialty retailer of home décor and gifts with 370 stores in 35 states as of October 31, 2015. The condensed consolidated financial statements of the Company include the accounts of Kirkland’s, Inc. and its wholly-owned subsidiaries, Kirkland’s Stores, Inc., Kirkland’s DC, Inc., Kirkland’s Texas, LLC, and Kirklands.com, LLC. All intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 14, 2015. It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than those at fiscal year-end. In addition, because of seasonality factors, the results of the Company’s operations for the 13-week and 39-week periods ended October 31, 2015 are not indicative of the results to be expected for any other interim period or for the entire fiscal year. The Company’s fiscal year ends on the Saturday closest to January 31, resulting in years of either 52 or 53 weeks. All references to a fiscal year refer to the fiscal year ending on the Saturday closest to January 31 of the following year. The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from the estimates and assumptions used. Changes in estimates are recognized in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include, but are not limited to impairment assessments on long-lived assets, asset retirement obligations, inventory reserves, self-insurance reserves, income tax liabilities, stock-based compensation, employee bonus accruals, gift card breakage, sales return reserves, customer loyalty program accruals and contingent liabilities. For the 39-week period ended October 31, 2015, the Company incurred approximately $7.3 million of non-cash investing activities, due to purchases of property and equipment awaiting processing for payment. This amount was included in accounts payable at October 31, 2015, and was not material for the 39-week period ended November 1, 2014.

Income Taxes

Income Taxes	9 Months Ended
	Oct. 31, 2015
Income Tax Disclosure [Abstract]
Income Taxes	Note 2 — Income Taxes An estimate of the annual effective tax rate is used at each interim period based on the facts and circumstances available at that time, while the actual effective tax rate is calculated at year-end. For the 13-week periods ended October 31, 2015 and November 1, 2014, the Company recorded an income tax benefit of 71.4% of the loss before income taxes and an income tax expense of 36.0% of pre-tax income, respectively. For the 39-week periods ended October 31, 2015 and November 1, 2014, the Company recorded an income tax benefit of 95.0% of the loss before income taxes and an income tax expense of 37.7% of pre-tax income, respectively. The tax benefit for the 13-week and 39-week periods ended October 31, 2015 reflects state employment and investment credits realized during the period.

Earnings Per Share

Earnings Per Share	9 Months Ended
	Oct. 31, 2015
Earnings Per Share [Abstract]
Earnings Per Share	Note 3 — Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during each period presented, which excludes non-vested restricted stock units. Diluted earnings per share is computed by dividing net income by the weighted average number of shares outstanding plus the dilutive effect of stock equivalents outstanding during the applicable periods using the treasury stock method. Diluted earnings per share reflects the potential dilution that could occur if options to purchase stock were exercised into common stock and if outstanding grants of restricted stock were vested. Stock options and restricted stock units that were not included in the computation of diluted earnings per share, because to do so would have been antidilutive, were 1.3 million and 556,000 shares for the 13-week periods ended October 31, 2015 and November 1, 2014, respectively, and 1.3 million and 510,000 shares for the 39-week periods ended October 31, 2015 and November 1, 2014, respectively.

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Oct. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Note 4 — Commitments and Contingencies The Company is party to pending legal proceedings and claims. Although the outcome of such proceedings and claims cannot be determined with certainty, the Company’s management is of the opinion that it is unlikely that these proceedings and any claims in excess of insurance coverage will have a material effect on the financial condition, operating results or cash flows of the Company.

Stock-Based Compensation

Stock-Based Compensation	9 Months Ended
	Oct. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-Based Compensation	Note 5 — Stock-Based Compensation The Company maintains equity incentive plans under which it may grant non-qualified stock options, incentive stock options, restricted stock, restricted stock units, or stock appreciation rights to employees, non-employee directors and consultants. The Company granted 187,500 stock options and 107,000 restricted stock units during the 39-week period ended October 31, 2015. This compares to 182,500 stock options and 97,000 restricted stock units granted during the 39-week period ended November 1, 2014. Total stock-based compensation expense (a component of compensation and benefits) was $830,000 for the 13-week period ended October 31, 2015, and $2.9 million for the 39-week period ended October 31, 2015 compared to $670,000 and $2.1 million, respectively, for the comparable prior year periods. Included in the 39-week period ended October 31, 2015 is $600,000 of stock-based compensation expense that resulted from the accelerated vesting of stock options and restricted stock units upon the retirement of the Company’s former Chief Executive Officer. Compensation expense is recognized on a straight-line basis over the vesting periods of each grant. There have been no other material changes in the assumptions used to compute compensation expense during the current quarter.

Related Party Transactions

Related Party Transactions	9 Months Ended
	Oct. 31, 2015
Related Party Transactions [Abstract]
Related Party Transactions	Note 6 — Related Party Transactions In July 2009, the Company entered into an agreement with a related party vendor to purchase merchandise inventory. The vendor is considered a related party for financial reporting purposes because its principal is the spouse of the Company’s Vice President of Merchandising. During the 13-week periods ended October 31, 2015 and November 1, 2014, purchases from this vendor totaled approximately $13.2 million, or 15.6% of total merchandise purchases, and $9.4 million, or 13.0% of merchandise purchases, respectively. During the 39-week periods ended October 31, 2015 and November 1, 2014, purchases from this vendor totaled approximately $28.4 million, or 14.2% of total merchandise purchases, and $21.4 million, or 12.3% of merchandise purchases, respectively. Included in cost of sales for the 13-week periods ended October 31, 2015 and November 1, 2014 were $7.7 million and $5.8 million, respectively, related to this vendor. Included in cost of sales for the 39-week periods ended October 31, 2015 and November 1, 2014 were $20.8 million and $17.4 million, respectively, related to this vendor. Payable amounts outstanding to this vendor were approximately $7.2 million and $3.8 million as of October 31, 2015 and November 1, 2014, respectively. The Company’s payable terms with this vendor are consistent with the terms offered by other vendors in the ordinary course of business.

Stock Repurchase Program

Stock Repurchase Program	9 Months Ended
	Oct. 31, 2015
Equity [Abstract]
Stock Repurchase Program	Note 7 — Stock Repurchase Program On May 22, 2014, the Company announced that its Board of Directors authorized a stock repurchase plan providing for the purchase in the aggregate of up to $30 million of the Company’s outstanding common stock from time to time until May 2016. From the inception of the plan through October 31, 2015, the Company repurchased and retired approximately 523,000 shares of common stock at an aggregate cost of approximately $10.7 million under this repurchase plan. As of October 31, 2015, the Company had $19.3 million remaining under the Board of Directors’ current authorization to repurchase its common stock. Subsequent to October 31, 2015, the Company has repurchased and retired approximately 142,000 shares of common stock at an aggregate cost of $2.4 million.

Dividend

Dividend	9 Months Ended
	Oct. 31, 2015
Equity [Abstract]
Dividend	Note 8 — Dividend On May 21, 2015, the Company announced that its Board of Directors authorized a special cash dividend of $1.50 per share on its common stock. The special dividend of $26.0 million was paid on June 19, 2015 to stockholders of record as of the close of business on June 5, 2015.

New Accounting Pronouncement

New Accounting Pronouncement	9 Months Ended
	Oct. 31, 2015
Accounting Changes and Error Corrections [Abstract]
New Accounting Pronouncement	Note 9 — New Accounting Pronouncement In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers.” Under ASU 2014-09, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. ASU 2014-09 also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB approved a one-year deferral of ASU 2014-09. As a result of the deferral, the amendments in ASU 2014-09 will be effective for the Company at the beginning of its fiscal 2018 year. The Company is still evaluating the impact the adoption of ASU 2014-09 will have on its consolidated financial statements.

Basis of Presentation - Additio

Basis of Presentation - Additional Information (Detail) $ in Millions	9 Months Ended
	Oct. 31, 2015USD ($)StoreState
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of home decor and gifts store | Store	370
Number of states | State	35
Non-cash investing activities incurred | $	$ 7.3

Income Taxes - Additional Infor

Income Taxes - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Income Tax Disclosure [Abstract]
Income tax rate as a percentage of pre-tax income or loss	71.40%	36.00%	95.00%	37.70%

Earnings Per Share - Additional

Earnings Per Share - Additional Information (Detail) - shares	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Earnings Per Share [Abstract]
Stock options and restricted stock units not included in the computation of diluted earnings per share	1,300,000	556,000	1,300,000	510,000

Stock-Based Compensation - Addi

Stock-Based Compensation - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options granted			187,500	182,500
Stock-based compensation expense	$ 830,000	$ 670,000	$ 2,881,000	$ 2,055,000
Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation accelerated expense			$ 600,000
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock units granted			107,000	97,000

Related Party Transactions - Ad

Related Party Transactions - Additional Information (Detail) - Merchandise Inventory Purchase [Member] - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 31, 2015	Nov. 01, 2014	Oct. 31, 2015	Nov. 01, 2014
Related Party Transaction [Line Items]
Purchase from related party vendor as percentage of total merchandise purchases	15.60%	13.00%	14.20%	12.30%
Vendor [Member]
Related Party Transaction [Line Items]
Purchase from related party vendor	$ 13.2	$ 9.4	$ 28.4	$ 21.4
Cost of sale related to vendor	7.7	5.8	20.8	17.4
Payable amounts outstanding to vendor	$ 7.2	$ 3.8	$ 7.2	$ 3.8

Stock Repurchase Program - Addi

Stock Repurchase Program - Additional Information (Detail) - USD ($)	1 Months Ended	9 Months Ended	17 Months Ended
	Dec. 10, 2015	Oct. 31, 2015	Oct. 31, 2015	May. 22, 2014
Equity, Class of Treasury Stock [Line Items]
Stock repurchase program, Expiration date		May 31, 2016
Repurchase and retirement of common stock, shares			523,000
Repurchase and retirement of common stock		$ 5,881,000	$ 10,700,000
Stock repurchase program, remaining authorized repurchase amount		$ 19,300,000	$ 19,300,000
Subsequent Event [Member]
Equity, Class of Treasury Stock [Line Items]
Repurchase and retirement of common stock, shares	142,000
Repurchase and retirement of common stock	$ 2,400,000
Maximum [Member]
Equity, Class of Treasury Stock [Line Items]
Stock repurchase program, Authorized amount				$ 30,000,000

Dividend - Additional Informati

Dividend - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions	Jun. 19, 2015	May. 21, 2015
Equity [Abstract]
Cash dividend authorized		$ 1.50
Special cash dividend paid	$ 26
Dividend paid date		Jun. 19, 2015
Dividend paid date of record		Jun. 5, 2015