Welcome to Kirkland Fourth Quarter 2014 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this call is being recorded. I would now like to turn the conference over to Jeff Black with SCR Partners. Please go ahead.

Thank you. Good morning and welcome to this Kirkland's conference call to review the company's results for the fourth quarter of fiscal 2014. On the call this morning are Mike Madden, President and Chief Executive Officer and Adam Holland, Vice President and Chief Financial Officer. The results and the notice of accessibility of this conference call on a listen-only basis over the Internet were released earlier this morning in a press release. Except for historical information discussed during this conference call, the statements made by company management are forward-looking, 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 in future periods to differ materially from forecasted results. Those risks and uncertainties are more fully described in Kirkland's filings with the SEC, including the company's Annual Report, Form 10-K filed on April 17, 2014. With that said, I will turn the call over to Mike. Mike? W. Michael Madden - President & Chief Executive Officer: Thanks, Jeff and good morning, everybody. Kirkland's ended 2014 with strong momentum across our business. Comparable store sales were up 8.2% in the quarter; that was fueled by healthy combination of traffic and conversion. The growth in our e-commerce channel accelerated and added 1.8% to our consolidated comparable store sales. Our operating margin improved 94 basis points over the prior year quarter. Strength in our merchandise margin drove the performance, as we improved our markdown rate. All-in-all, we are very happy with the quarter. Our balance sheet is strong with ample cash to invest in growth and repurchase shares. Inventory levels ended the quarter in good shape. We're currently a little lean due to the West Coast port slowdowns and that plays into our…

Thank you. We will now begin the question-and-answer session. The first question comes from Brad Thomas of KeyBanc Capital. Please go ahead.

Hey, good morning, Mike and Adam, and let me congratulate you on a great fourth quarter and a great year. W. Michael Madden - President & Chief Executive Officer: Thanks, Brad. I appreciate that. Adam C. Holland - Chief Financial Officer & Vice President: Thanks, Brad.

First I wanted to talk a little bit more about the recent trends, if you could give us little bit more color on what you saw in February and early March and put into context a little bit more the guidance for the first quarter, where the upper end of the range is for flat earnings year-over-year? W. Michael Madden - President & Chief Executive Officer: Sure. Well, Brad, we came out of the fourth quarter on a really strong sales trend. We entered the first quarter on the same. And what we experienced is we got in the February is a much harsher situation in terms of the weather impact on our business, particularly here in Texas and in the Southeast. And we calculate and we put some numbers in the release this morning about stores, days impacted, but if you were to map that to actual sales dollars, I mean, our estimate would be about $1.5 million and that has an impact on the earnings, obviously. If you follow the math down, that could be kind of around three pennies even. So that's been – in late February and in the first week of March, we were impacted by that and that's been really the biggest driver to that delta you're talking about in the earnings.

Great. Great. Thank you. And then, just as we think about the full year, could you give us a little bit more color on some of the puts and the takes on gross margin. Obviously, you've alluded to it in the press release and prepared remarks, but how are you thinking about the opportunities within your stores versus the drag from e-commerce as well as some of the exogenous factors like the port situation? W. Michael Madden - President & Chief Executive Officer: Sure. I mean e-commerce is becoming less of a drag in some ways. I mean, in the fourth quarter, we actually saw a nice margin pick up in that business. As you look at the overall gross margin profile for 2015, I think the way to think about it is we expect some improvement in our merch margin that we're planning for and that's going to be offset a little bit and that's why we mentioned flat this morning and the expectation on gross profit, offset a bit by the DC and the supply chain investments we're making this year to handle the growth in e-commerce. So just – that's the way that's going to play out. I think the lift in op margin for the full year is going to be more leverage-driven with the double-digit sales gain expected.

Got you. And I apologize if I missed this, I got on a minute or two late. But if you haven't already, could you quantify what you think maybe the drag on gross margin is this year from those investments in the DC and the supply chain either in dollars or basis points? Adam C. Holland - Chief Financial Officer & Vice President: Yeah. Brad, this is Adam. It's going to almost fully offset if you count the distribution center that we're adding and the expected outbound cost related to shipping e-commerce. We think we're going to have a merchandise margin improvement, not quite as dramatic as we saw from 2013 to 2014, but it's going to be a healthy improvement. And the DC impact is what's going to be eating into that improvement for the year. W. Michael Madden - President & Chief Executive Officer: Brad, one thing I'll throw on to that is, as we've entered 2015, the merch margin has actually been up nicely more so than we had projected. So that's a good start for this year in terms of the merch margin side of this.

Great. Great. Appreciate all the color, and clear you all still have a lot of opportunities ahead. Thanks so much. W. Michael Madden - President & Chief Executive Officer: Thanks, Brad.

The next question comes from David Magee of SunTrust. Please go ahead.

Hey, guys. Congratulations as well for great performance. I had a couple of questions on merchandising and just given the fact that Kirkland is outperforming some of the other players in the space, could you give any more color with regard to a style trend that maybe you're closer to or just maybe the role of the analytics software in terms of helping show this comp performance, that would be helpful. W. Michael Madden - President & Chief Executive Officer: I'll do some of that, David. We had a good fourth quarter obviously. I think some of that was driven by our holiday assortment, it was very strong. Our tree décor and our wall décor, the aspects of that assortment really drove that business really well this year, so that was a big lift to Q4. Our textiles business has been very strong. Our housewares business has been very strong, those continue into this fiscal year. And our buyers are always on the trends and the specific tweaks is just the base of the product that really relate to our customer. And they're doing a good job with that. And we feel good about that. So that's ever changing. As you know, Kirkland's, we're always updating and staying on top of those things and we'll continue to do so. But those categories have been leaders for us. And as we enter 2015, those are in addition to fragrance and our wall décor categories, really the ones that are leading the comp right now.

Thanks, Mike. And to the degree that the analytics and the processes and the people have also contributed here, how much more upside is there from those factors? W. Michael Madden - President & Chief Executive Officer: I didn't really touch on that, thanks. There's clearly been a lift in our management of our basic assortment, what we call our basic assortment, which at Kirkland is not quite as basic as some other retailers, but it's our bestsellers. It's our items that our customers are looking for 52 weeks out of the year. And we had placed over the last two years, a specific focus on managing that slice of the overall assortment, which happens to be about 35% to 40% of it, depending on the time of year. And we've got strong margins in that business. We're more in stock than we used to be in those items, because we've been very intentional about managing that. And I think that's helped the consistency and the stability of our merch margin over the last few years and we'll continue to do so. When you get – how far along are we? We're still very early and I think the full utilization of all that technology because we haven't really done much in the way of managing markdowns differently, pricing, as well as tailoring assortments a little bit more so to the individual store and those are the opportunities we look at going forward that can help drive that margin. In addition to on the marketing side a little bit, the loyalty programs, growth and our understanding of that customer and what they're buying, and what their behavior looks like, and that ultimately, I think translates to a more targeted marketing to that customer and a better assortment in those individual stores where those customer shop. So we have a lot to do yet. I mean, that core piece was really the early on win that we saw with all the technology, but there is still a lot left to go.

Great. Thank you and good luck. W. Michael Madden - President & Chief Executive Officer: Thanks.

The next question is from Kristine Koerber of Barrington Research Associates. Please go ahead.

Good morning. A couple of questions. First, can you just give us some more color on inventory levels and kind of the impact that you've seen from the port slowdown and maybe quantify that if possible and what are delays running at this point? Adam C. Holland - Chief Financial Officer & Vice President: Hi, Kristine. This is Adam. Well, we ended the quarter – fourth quarter, a very healthy inventory position and we were on our plan and we were – we had seen the port delays. The impact slowly building, and really started to feel the impact. I'd say the – maybe in the last week of February, first week of March. And the way the impact was felt was just really in the distribution center. Our store level inventories remain steady. And I think it's tough to quantify what – different from weather, it's tough to quantify exactly how much sales you've missed due to the lack of certain SKUs arriving on time. There is definitely an impact. I can't quantify it. Same for the web. We've had some SKUs that falling off the web, because they're not in stock. So you know you're missing sales there. But the good news is the flow has – it's starting to return back to more normalized levels and our projection showed that by the end of the quarter, will be back on plan.

Okay, that's helpful. So most – looking at Q1 guidance, most of that is weather-related, is that fair and to lesser extent the poor slowdown? Adam C. Holland - Chief Financial Officer & Vice President: I think that's fair. But there is an impact and we know that we're running a little leaner than we'd like to be right now and expect that to get back on plan by the end of the quarter.

Okay. Great. And then, can you give us more color on the real estate pipeline for this year? I mean, do you have a deep pipeline? And I'm assuming you've signed all – most, if not all, of the leases and are you working on 2016? Adam C. Holland - Chief Financial Officer & Vice President: Well, we're working on 2016 as well as finishing out 2015. Right now and lease is kind of flow based on the timing of when the spaces are available, so not every lease is signed, but we have identified the large majority of that 35 to 40 store class and actually feel like we're a little bit further ahead in terms of where those stores are fitting in this year. We're going to have many more in the second and third quarters than we did last year. So we'll have a better impact from that new store class going into the holidays. And then, as you look ahead the next year, I can see let's getting further ahead in terms of that and I think you'll see those new stores spread a lot more evenly across the quarters as we go into 2016, so again given you more of a benefit earlier in each year in terms of those new stores. I mean, the good news is the new stores that we've opened toward the end of 2014 are doing really well. We're very pleased with the performance and I'm also very pleased that we seem to be getting ahead of ourselves a little bit more on real estate this year.

Okay. That's great. And then, just one last question on the distribution expansion, I did catch all that. So it's 300,000 square feet you're adding to your Jackson facility and you just – give me some thought on the timing of that? W. Michael Madden - President & Chief Executive Officer: Yeah. Sure. It's going to be in the middle of the year before the peak and I would think about it more as kind of an overflow situation where we're trying to alleviate some of the pressure we felt by moving e-commerce into its own facility, and we'll also with that space be able to take some of the non-core operations out of the existing DC such as staging new store inventory and fixturing and perhaps even our supply fulfillment. Things like that that can really give the existing DC more space devoted to the brick-and-mortar operation and this growth in store count. So, we've always had kind of a peak issue in terms of overflow, we had it this year as well, but we made the decision to kind of take e-commerce out, which I think will help our operation tremendously and provide that extra space we need to get to the next step, which is down the road.

Okay. Great. Thank you. That's helpful and good luck. W. Michael Madden - President & Chief Executive Officer: Thanks, Kristine.

The next question comes from Anthony Lebiedzinski of Sidoti. Please go ahead. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Good morning. Thanks for taking the question. So, first, I appreciate the detail as far as the number of store closings versus a year ago, certainly that's helpful. Can you give us a sense as to like once people do come into the stores, can you just tell us or give us some insight as to what your in-store conversion is now versus let's say a year ago? W. Michael Madden - President & Chief Executive Officer: The conversion rate – conversion rate was strong throughout 2014, and continued to be so coming into this year. The weather in terms of the conversion rate really doesn't have an impact, I mean, that's more a traffic issue. When we get them in, we're converting them at a higher rate. Anthony C. Lebiedzinski - Sidoti & Co. LLC: Okay. So you've seen that so far quarter-to-date as far as being able to convert the more of those customers into actually people – buying merchandise, okay. Got it. Okay. And then, what do you attribute the higher than expected merchandise margins so far that you've seen, I think Mike you had mentioned earlier that so far the merchandise margin has come in at a higher rate than what you had anticipated. So can you give us some reasons why that's happening? W. Michael Madden - President & Chief Executive Officer: Yeah. Well, I think that the merchandise continues to resonate well with the customer and that's part of it. I think also we have not been quite as promotional so far this year compared to last, and I know that by just knowing the events that we've run year-to-date or quarter-to-date versus what…

The next question comes from Bruce Geller of DGHM. Please go ahead. Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co. LLC: Hi. Good morning, guys. Congrats on a nice finish to the year. W. Michael Madden - President & Chief Executive Officer: Thanks. Bruce Howard Geller - Dalton, Greiner, Hartman, Maher & Co. LLC: So, you've got close to $100 million in cash, which is terrific. Congratulations on building up such a nice war chest. And it sounds like you, even though you're growing square footage at a solid pace, you would still intend to generate free cash flow over and above that. So I am curious what do you really feel is the ideal level that you need to run the business on a regular basis and based on that, do you have plans to put the balance sheet to use a little bit more aggressively, whether it's dividend or ramping up the share repurchase or if you even have acquisitions in your sites. I'm just curious what the priorities are and if you plan to be a little bit more aggressive considering the level of cash? Adam C. Holland - Chief Financial Officer & Vice President: Well, I mentioned in my comments, just a more of a focus or a tightening of our focus on capital allocation, clearly this fits into that theme. The priority for us in order would be to our real estate growth reaccelerating is our best use of cash right now, as I mentioned earlier. Openings have been strong. The opportunities are there. But to your point, we did build up to $99 million cash balance this year. We expect that to increase even with this plan we've laid out this morning. If we were to hit those metrics, we'll have more…

There are no additional questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Mike Madden for any closing remarks. W. Michael Madden - President & Chief Executive Officer: Thank you for everybody's attendance today and we look forward to catching up with you at the end of the next quarter. Thanks.

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