<SEC-DOCUMENT>0001299933-11-000827.txt : 20110315
<SEC-HEADER>0001299933-11-000827.hdr.sgml : 20110315
<ACCEPTANCE-DATETIME>20110315141211
ACCESSION NUMBER:		0001299933-11-000827
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20110310
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20110315
DATE AS OF CHANGE:		20110315

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			KIRKLAND'S, INC
		CENTRAL INDEX KEY:			0001056285
		STANDARD INDUSTRIAL CLASSIFICATION:	RETAIL-RETAIL STORES, NEC [5990]
		IRS NUMBER:				621287151
		FISCAL YEAR END:			0130

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-49885
		FILM NUMBER:		11688110

	BUSINESS ADDRESS:	
		STREET 1:		2501 MCGAVOCK PIKE
		STREET 2:		SUITE 1000
		CITY:			NASHVILLE
		STATE:			TN
		ZIP:			37214
		BUSINESS PHONE:		615-872-4800

	MAIL ADDRESS:	
		STREET 1:		2501 MCGAVOCK PIKE
		STREET 2:		SUITE 1000
		CITY:			NASHVILLE
		STATE:			TN
		ZIP:			37214

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KIRKLANDS INC
		DATE OF NAME CHANGE:	19980219
</SEC-HEADER>
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<TYPE>8-K
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<FILENAME>htm_41070.htm
<DESCRIPTION>LIVE FILING
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<TITLE> Kirkland's, Inc. (Form: 8-K) </TITLE>
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		UNITED STATES<BR>
	SECURITIES AND EXCHANGE COMMISSION
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	WASHINGTON, D.C. 20549
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	FORM 8-K
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	CURRENT REPORT
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	Pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934
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	Date of Report (Date of Earliest Event Reported):
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	&nbsp;
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	March 10, 2011
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	Kirkland's, Inc.
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<BR>__________________________________________<BR>
	(Exact name of registrant as specified in its charter)
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	Tennessee
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	000-49885
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	621287151
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_____________________<BR>
	(State or other jurisdiction
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_____________<BR>
	(Commission
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______________<BR>
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	of incorporation)
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	File Number)
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	Identification No.)
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	2501 McGavock Pike, Suite 1000, Nashville, Tennessee
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	&nbsp;
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	37214
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_________________________________<BR>
	(Address of principal executive offices)
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	&nbsp;
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___________<BR>
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	Registrant&#146;s telephone number, including area code:
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	615-872-4800
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	Not Applicable
<BR>______________________________________________<BR>
	Former name or former address, if changed since last report
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	&nbsp;
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:</FONT>
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<P><FONT SIZE="2">
[&nbsp;&nbsp;]&nbsp;&nbsp;Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))<br>
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<B>
	Item 2.02 Results of Operations and Financial Condition.
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On March 10, 2011, Kirkland's, Inc. (the "Company") issued a press release and conducted a conference call regarding its sales and earnings release results for its fourth fiscal quarter and year-to-date period ended January 29, 2011 (the "Press Release"). A copy of the Press Release and transcript of the conference call conducted by the Company are attached hereto as exhibit 99.1 and exhibit 99.2, respectively, and are being furnished, not filed, under item 2.02 of this Report on Form 8-K. <br><br><br>
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	Item 9.01 Financial Statements and Exhibits.
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(d) Exhibits<br><br>99.1 Press Release dated March 10, 2011 announcing the Company's fourth quarter and annual financial results.<br><br>99.2 Transcript of the March 10, 2011 conference call conducted by the Company. <br><br><br><br>
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	SIGNATURES
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	Pursuant to the requirements of the Securities Exchange Act of 1934, the
	registrant has duly caused this report to be signed on its behalf by the
	undersigned hereunto duly authorized.
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	Kirkland's, Inc.
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<I>
	March 15, 2011
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<I>
	By:
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	&nbsp;
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<I>
	/s/ W. Michael Madden
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	&nbsp;
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<I>
	Name: W. Michael Madden
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<I>
	Title: Senior Vice President and Chief Financial Officer
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	Exhibit&nbsp;Index
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	Exhibit No.
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	Description
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	99.1
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	&nbsp;
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Press Release dated March 10, 2011 announcing the Company's fourth quarter and annual financial results.
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	99.2
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	&nbsp;
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Transcript of the March 10, 2011 conference call conducted by the Company.
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<P align="left" style="font-size: 10pt"><FONT style="font-size: 12pt"><img src="e33048-11731241442101b6b7_1.jpg">
</FONT>

<P align="right" style="font-size: 12pt"><FONT style="font-size: 22pt">News Release</FONT>


<DIV align="center">
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    <TD width="13%">&nbsp;</TD>
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    <TD width="39%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
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    <TD align="left" valign="top"><FONT style="font-size: 11.5pt">Contact:</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="font-size: 11.5pt">W. Michael Madden<BR>
Senior Vice President &#038; CFO<BR>
(615)&nbsp;872-4800</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-size: 11.5pt">Tripp Sullivan<BR>
Corporate Communications, Inc.<BR>
(615)&nbsp;324-7335</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 11.5pt"><FONT style="font-size: 13pt"><B>KIRKLAND&#146;S REPORTS FOURTH QUARTER AND ANNUAL RESULTS</B></FONT>



<P align="left" style="font-size: 13pt"><FONT style="font-size: 11pt">NASHVILLE, Tenn. (March&nbsp;10, 2011) &#151; Kirkland&#146;s, Inc. (NASDAQ: KIRK) today reported financial
results for the 13-week and 52-week periods ended January&nbsp;29, 2011.
</FONT>

<P align="left" style="font-size: 11pt">Net sales for the 13-week period ended January&nbsp;29, 2011, were $139.6&nbsp;million compared with
$142.8&nbsp;million for the 13-week period ended January&nbsp;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.


<P align="left" style="font-size: 11pt">Net sales for the 52-week period ended January&nbsp;29, 2011, were $415.3&nbsp;million compared with $406.2
million for the 52-week period ended January&nbsp;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.


<P align="left" style="font-size: 11pt">The Company reported net income of $14.4&nbsp;million, or $0.70 per diluted share, for the fourth
quarter of fiscal 2010 compared with net income of $22.1&nbsp;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&nbsp;million, or $1.71 per diluted share,
in the prior year.


<P align="left" style="font-size: 11pt">Income tax expense for the fourth quarter of fiscal 2010 included a net benefit of $0.8&nbsp;million
related to an adjustment to the Company&#146;s prior year income tax provision partially offset by an
adjustment to the state tax rate applied to the Company&#146;s deferred tax assets. Excluding the
impact of these items, adjusted net income for the fourth quarter of fiscal 2010 was $13.6&nbsp;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&nbsp;million related to the reversal of the valuation allowance
on the Company&#146;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&nbsp;million, or $0.92 per
diluted share (adjusted).


<P align="left" style="font-size: 11pt">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&#146;s
performance. See &#147;Reconciliation of Non-GAAP Financial Information&#148; below.


<P align="left" style="font-size: 11pt">Robert Alderson, Kirkland&#146;s President and Chief Executive Officer, said, &#147;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


<P align="center" style="font-size: 11pt"><FONT style="font-size: 11.5pt">-MORE-</FONT><BR>
<FONT style="font-size: 10pt">2501 McGavock Pike, Suite&nbsp;1000 &#166; Nashville, Tennessee 37214 &#166; (615)&nbsp;872-4800</FONT>



<P align="left" style="font-size: 10pt"><FONT style="font-size: 11pt">KIRK Reports Fourth Quarter Results
<BR>
Page 2
<BR>
March&nbsp;10, 2011
</FONT>

<P align="left" style="font-size: 11pt">growth resulted in an increase in total square footage of 14%, and we are encouraged about the
early results from our 2010 store class.


<P align="left" style="font-size: 11pt">&#147;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.&#148;


<P align="left" style="font-size: 11pt"><I>Fiscal 2011 Performance Goals</I>

<DIV align="center">
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    <TD align="left" valign="top"><B>Store Growth:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">At year end, the Company had 300 stores compared with 279 at<BR>
the beginning of 2010 and 299 at the beginning of fiscal 2009.<BR>
For fiscal 2011, the Company expects to open 40 to 45 new<BR>
stores and close 15 to 20 stores. Store openings will be<BR>
weighted toward the second half of the year, while store<BR>
closings will be spread relatively evenly throughout the year.<BR>
As always, net store growth will depend on the availability of<BR>
the right deal for the right location.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Sales:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The Company expects total sales for fiscal 2011 to increase in<BR>
the range of 9% to 12% compared with fiscal 2010. This level<BR>
of sales growth would imply flat to slightly negative<BR>
comparable store sales for the fiscal year. Comparisons are<BR>
expected to remain challenging in the first half of the year as<BR>
the Company is up against record results and then comparisons<BR>
ease in the second half of the year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Margins:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Based on the current outlook, the Company expects operating<BR>
margin in fiscal 2011 to be slightly below that of fiscal 2010<BR>
due to an anticipated increase in sourcing and transportation<BR>
costs and deleverage on the fixed components of operating<BR>
expenses due to flat to slightly negative comparable store<BR>
sales, offset by the expected strong performance of new store<BR>
openings. We will update this outlook periodically, as we gain<BR>
more transparency on product costs and some anticipated<BR>
tightening in the commercial real estate markets.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Earnings:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Based on the above assumptions, the Company would expect<BR>
earnings per share for fiscal 2011 to be at or slightly below<BR>
adjusted earnings per share for fiscal 2010. The current<BR>
assumption for the effective tax rate is in the range of 38.5%<BR>
for fiscal 2011.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Cash Flow:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The Company expects to generate positive cash flow in fiscal<BR>
2011 and fully fund its new store growth and technology<BR>
improvements through cash generated from operations. Capital<BR>
expenditures in fiscal 2011 are estimated to range between $25<BR>
million and $28&nbsp;million for fiscal 2011.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 11pt"><I>First Quarter Fiscal 2011 Outlook</I>


<P align="left" style="font-size: 11pt">The Company issued guidance for the first quarter ending April&nbsp;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&nbsp;million to $96&nbsp;million, with a comparable store sales decrease in the high-single-digit
range, compared with net sales of $93.5&nbsp;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.


<P align="left" style="font-size: 11pt"><I>Investor Conference Call and Web Simulcast</I>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 11pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Kirkland&#146;s will host a conference call today, at 11:00&nbsp;a.m. ET to discuss its results of operations
for the</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 11pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fourth quarter of fiscal 2010. The number to call for the interactive teleconference is (212)
231-2927. A</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 11pt">-MORE-



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 11pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>KIRK Reports Fourth Quarter Results</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 11pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Page 3</TD>
</TR>

</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 11pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>March&nbsp;10, 2011</TD>
</TR>

</TABLE>


<P align="left" style="font-size: 11pt">replay of the conference call will be available through Thursday, March&nbsp;17, 2011, by dialing (402)
977-9140 and entering the confirmation number, 21510653.


<P align="left" style="font-size: 11pt">A live broadcast of Kirkland&#146;s quarterly conference call will be available online at the Company&#146;s
website <U>www.kirklands.com</U> under Investor Relations or
<U>http://www.videonewswire.com/event.asp?id=76716</U> on March&nbsp;10, 2011, beginning at
11:00&nbsp;a.m.&nbsp;ET. The online replay will follow shortly after the call and continue for one year.


<P align="left" style="font-size: 11pt"><I>Reconciliation of Non-GAAP Information</I>
<BR>
This release includes certain financial information not derived in accordance with generally
accepted accounting principles (&#147;GAAP&#148;). The non-GAAP measures are &#147;adjusted net income&#148; and
&#147;adjusted diluted earnings per share&#148; and are equal to net income, and diluted earnings per share
excluding adjustments to the Company&#146;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&#146;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:

<DIV align="center">
<TABLE style="font-size: 9pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 9pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Reconciliation of Non-GAAP Financial Information</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 9pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">(dollars in thousands, except per share amounts)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">13 Weeks Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">52 Weeks Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">13 Weeks Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">52 Weeks Ended</TD>
</TR>
<TR style="font-size: 9pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">January 29,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">January 29 ,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">January 30,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">January 30,</TD>
</TR>
<TR style="font-size: 9pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2011</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2011</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2010</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Net income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net income in accordance with GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34,570</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Adjustments to income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">($814</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">($814</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">($3,319</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">($5,881</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Adjusted net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">25,617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">18,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">28,689</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Diluted earnings per share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Diluted EPS in accordance with GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Adjustments to income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">($0.04</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">($0.04</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">($0.16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">($0.29</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 9pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Adjusted diluted earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 9pt"><FONT style="font-size: 11pt">Kirkland&#146;s, Inc. was founded in 1966 and is a specialty retailer of home d&#233;cor 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.&nbsp; The Company&#146;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.&nbsp; The Company&#146;s stores also offer an
extensive assortment of gifts, as well as seasonal merchandise.&nbsp; More information can be found at .
</FONT>

<P align="left" style="font-size: 11pt"><FONT style="font-size: 9pt"><I>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&#146;s actual results to differ materially from forecasted
results. Those risks and uncertainties include, among other things, the competitive environment in
the home d&#233;cor industry in general and in Kirkland&#146;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&#146;s filings with the Securities and
Exchange Commission, including the Company&#146;s Annual Report on </I><I>Form 10-K</I><I> filed on April&nbsp;15, 2010.
Kirkland&#146;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.</I>
</FONT>

<P align="center" style="font-size: 9pt"><FONT style="font-size: 11pt">-MORE-</FONT>



<P align="left" style="font-size: 11pt">KIRK Reports Fourth Quarter Results
<BR>
Page 4
<BR>
March&nbsp;10, 2011


<P align="left" style="font-size: 11pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<BR>
(dollars in thousands, except per share amounts)

<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">13-Week Period Ended</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">January 29,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">January 30,</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2011</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2010</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">139,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">142,797</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,803</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,085</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,994</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,015</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,488</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,491</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income (expense), net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,465</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,387</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">14,382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,078</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.08</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Shares used to calculate earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,902</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,731</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,450</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 11pt"><FONT style="font-size: 11.5pt">-MORE-</FONT>



<P align="left" style="font-size: 11.5pt">KIRK Reports Fourth Quarter Results
<BR>
Page 5
<BR>
March&nbsp;11, 2011


<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<BR>
(dollars in thousands, except per share amounts)
</FONT>
<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">52-Week Period Ended</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">January 29,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">January 30,</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2011</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2010</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">415,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">406,194</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237,688</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,506</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Operating expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,063</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,938</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,985</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,415</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">34,570</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Shares used to calculate earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,696</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,249</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 11pt"><FONT style="font-size: 11.5pt">-MORE-</FONT>



<P align="left" style="font-size: 11.5pt">KIRK Reports Fourth Quarter Results
<BR>
Page 6
<BR>
March&nbsp;10, 2011


<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
<BR>
(dollars in thousands)
</FONT>
<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">January 29, 2011</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">January 30, 2010</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">91,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">76,412</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,355</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,552</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,856</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Non-current deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,395</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">640</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">195,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">165,541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">LIABILITIES AND SHAREHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,589</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,087</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,402</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,078</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Deferred rent and other long-term
liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,978</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,056</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,485</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Total liabilities and shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">195,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">165,541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 11pt"><FONT style="font-size: 11.5pt">-MORE-</FONT>



<P align="left" style="font-size: 11.5pt">KIRK Reports Fourth Quarter Results
<BR>
Page 7
<BR>
March&nbsp;10, 2011


<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<BR>
(dollars in thousands)
</FONT>
<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">52-Week Period Ended</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">January 29, 2011</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">January 30, 2010</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Net cash provided by (used in):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">36,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">49,972</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22,632</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,246</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cash and cash equivalents:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net increase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,967</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,445</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">End of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">91,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">76,412</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 11pt"><FONT style="font-size: 11.5pt">-END-</FONT>




<P align="center" style="font-size: 10pt; display: none">




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<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>exhibit2.htm
<DESCRIPTION>EX-99.2
<TEXT>
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<HTML>
<HEAD>
<TITLE> EX-99.2 </TITLE>
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<BODY TEXT="#000000" BGCOLOR="#FFFFFF" ALINK="#0000FF" HLINK="#FF0000" VLINK="#800080">

<BODY style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt"><FONT style="font-size: 12pt"><B>KIRKLAND&#146;S, INC.<BR>
FOURTH QUARTER CONFERENCE CALL</B></FONT>



<P align="center" style="font-size: 12pt"><B>Moderator: Robert Alderson<BR>
March&nbsp;10, 2011<BR>
10:00 am CT</B>


<DIV align="center">
<TABLE style="font-size: 12pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ladies and gentlemen, thank you for standing by. Welcome to the Kirkland&#146;s Incorporated Fourth Quarter<BR>
2010 Conference Call.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a<BR>
question-and-answer session. At that time if you have a question, please press the 1 followed by the 4<BR>
on your telephone. If at any time during the conference you need to reach an operator, you may press<BR>
star 0.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As a reminder, this conference is being recorded, Thursday, March&nbsp;10th 2011.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I would now like to turn the conference over to Tripp Sullivan of Corporation Communications.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Please go ahead, sir.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Tripp Sullivan:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Good morning and welcome to this Kirkland&#146;s Incorporated conference call to review the company&#146;s<BR>
results for the four quarter of fiscal 2010.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">On the call this morning are Robert Alderson, President and Chief Executive Officer; and Mike Madden,<BR>
Senior Vice President and Chief Financial Officer.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The results as well as notice of the accessibility of this conference call on a listen-only basis over<BR>
the Internet were released earlier this morning and a press release that has been covered by the<BR>
financial media. Except for historical information discussed during this conference call, the<BR>
statements made by company management are forward-looking and made pursuant to the Safe Harbor<BR>
provisions of the Private Securities Litigation Reform Act of 1995.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Forward-looking statements involve known and unknown risks and uncertainties, which may cause<BR>
Kirkland&#146;s actual results in future periods to differ materially from forecasted results. Those risks<BR>
and uncertainties are more fully described in Kirkland&#146;s filings with the Securities and Exchange<BR>
Commission, including the company&#146;s Annual Report on Form&nbsp;10-K filed on April&nbsp;15th 2010</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">With that said, I&#146;ll turn the call over to you, Robert.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks, Tripp, and good morning everyone. We appreciate you joining our call today.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fourth quarter was challenging, but we&#146;re pleased with the accomplishments we made as a company in<BR>
fiscal 2010. In historical terms, 2010 turned out to be the second best earnings year we&#146;ve ever had,<BR>
second only to the phenomenal performance we had in 2009. However, comp trends were challenging in the<BR>
back half of the year. And we&#146;re responding in various ways to address those trends and reestablish<BR>
our sales momentum.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I&#146;ll provide some additional thoughts on these topics in a moment. For now I&#146;ll turn the call over to<BR>
Mike Madden, our CFO, who will walk through our financial results and position.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mike?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks, Robert.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Good morning everybody. I&#146;ll begin with a review of the fourth quarter financial statements and then<BR>
finish with financial guidance for the first quarter and some performance goals for fiscal 2011.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">For the fourth quarter, net sales were $139.6&nbsp;million or a 2.2% decrease versus the prior quarter. As<BR>
previously announced, comparable store sales decreased 7.9%. Average sales per store were down 3%.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The comp sales decline was driven by 4% decline in transactions and a 4% decline in the average<BR>
ticket. The decrease in transactions resulted from flat traffic counts and a decline in the conversion<BR>
rate. The decrease in average ticket was the result of a lower average retail selling price, partially<BR>
offset by an increase in items per transaction.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Comp sales results were relatively consistent across geographic areas of the country. Among the more<BR>
significant areas of the country in which we operate, we had slightly better than company average<BR>
results in Florida and in California due largely to economic recovery in those areas and easier<BR>
comparisons. And slightly worse than average results in Louisiana due to economic dislocations from<BR>
the oil spill and drilling moratorium, and in Texas largely due to sales declines in our border<BR>
stores.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Merchandise categories showing comp increases were floral, seasonal and gift. These increases were<BR>
offset primarily by declines in our Wall categories and Decorative Accessories.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">E-commerce sales, which are not included in our comp base, were $1.3&nbsp;million for the quarter. We<BR>
launched our new Web site with a limited number of SKUs in early November of 2010.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">In Real Estate, we opened ten stores and closed six stores during the quarter. At the end of the<BR>
quarter, we operated 300 stores. Two hundred and forty-one of these stores, or 80%, were in off-mall<BR>
venues and 59 stores, or 20%, were located in enclosed malls.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">At the end of the quarter, we had 1,927,454 square feet under lease, a 14% increase from the prior<BR>
year. The average store size was 6,425 square feet as compared to 6,073 square feet last year &#151; a 6%<BR>
increase.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gross profit margin for the fourth quarter decreased 320 basis points to 42.3% of sales from 45.5% in<BR>
the prior year. The components of reported gross profit margin are as follows: first, the merchandise<BR>
margin decreased 261 basis points as a percentage of sales. As expected, higher inbound freight cost<BR>
negatively affected the margin during the quarter, accounting for 186 basis points of the decrease.<BR>
The remainder of the decrease in merchandise margin was equally attributable to a higher rate of<BR>
promotional activity and markdowns as compared to the prior year, an increase in product damage rates<BR>
and slightly higher inventory shrinkage rates.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Second, store occupancy cost decreased 3 basis points as a percentage of sales. This slight decline,<BR>
despite the negative comparable sales results were driven by favorable lease renewals, relocations of<BR>
stores to more productive off-mall locations and above-plan new store openings.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thirdly, outbound freight cost increased 55 basis points as a percentage of sales, reflecting<BR>
deleverage from the comp sales decline and an increase in diesel fuel cost, as well as shipping and<BR>
packaging cost associated with the initial launch of our new e-commerce capability.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Last, central distribution cost increased 7 basis points as a percentage of sales due to deleverage<BR>
from the sales decline.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Operating expenses for the quarter were 33.4&nbsp;million or 23.9% of sales as compared to 31&nbsp;million or<BR>
21.7 % of sales for the prior year quarter. Deleverage from the comparable store sales decline led to<BR>
an increase in store wages as a percentage of sales, accounting for 64 basis points of the increase in<BR>
operating expenses.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Stock compensation charges increased 32 basis points as a percentage of sales as a result of the<BR>
increase in valuations associated with stock options and restricted stock grants.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Marketing expenses increased 32 basis points as a percentage of sales, as a result of an increase in<BR>
promotional e-mails and other activities, as well as the decline in comp sales.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The remainder of the increase in the operating expense ratio is primarily due to deleverage from the<BR>
comp sales decline.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Depreciation and amortization increased 8 basis points as a percentage of sales, reflecting the<BR>
decline in sales, combined with an increase in capital expenditures during 2010.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Operating income for the fourth quarter was $22.2&nbsp;million or 15.9% of sales as compared to $30.5<BR>
million or 21.4% of sales in the prior year quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Income tax expense was $7.9&nbsp;million or 35.3% of pre-tax income versus expense of $8.4&nbsp;million or 27.5%<BR>
of pre-tax income recorded in the prior year quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Income tax expense for the fourth quarter of fiscal 2010 included a net benefit of approximately<BR>
$800,000, related to an adjustment to the prior year income tax provision, partially offset by a<BR>
revaluation of the state tax rate on deferred tax assets based on tax planning strategies implemented<BR>
during 2010.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Income tax expense for the fourth quarter of fiscal 2009 included a benefit of $3.3&nbsp;million related to<BR>
the reversal of a portion of the valuation allowance on deferred tax assets that had been established<BR>
in prior periods.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Reported net income for the quarter was $14.4&nbsp;million or 70 cents per diluted share as compared to net<BR>
income of $22.1&nbsp;million or $1.08 per diluted share in the prior year quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Excluding the impact from the tax items I mentioned, adjusted net income for the quarter was $13.6<BR>
million or 66 cents per diluted share as compared to net income of 18.8&nbsp;million or 92 cents per<BR>
diluted share in the prior year quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Turning over to the balance sheet and the cash flow statement, inventories at January&nbsp;29th 2011 were<BR>
on plan at $44-1/2&nbsp;million or $148,000 per store as compared to $39.4&nbsp;million or $141,000 per store in<BR>
the prior year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">While these numbers reflect an increase in the total inventory of 13% and an increase of 5% on a per<BR>
store basis, total square footage increased 14% year-over-year, and the average store size increased<BR>
6%. Therefore, inventory levels are in line with the prior year on a per square foot basis. We expect<BR>
to end the first quarter with inventory levels in the range of $44&nbsp;million to $46&nbsp;million.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">At the end of fiscal 2010, we had $91.2&nbsp;million in cash on hand, an increase of $14.8&nbsp;million versus<BR>
the prior year. No borrowings were outstanding under our revolving line of credit.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">For the full year, cash flows from operations were $36.7&nbsp;million. And capital expenditures for the<BR>
full year were $22.6&nbsp;million. Of the total capital expenditures, $14.4&nbsp;million related to new store<BR>
construction, $6&nbsp;million related to information technology projects, and the balance related to<BR>
maintenance capital expenditures.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The final item I&#146;ll cover before turning it over to Robert is to provide some guidance and our outlook<BR>
for the first quarter of 2011, and some high-level performance goals for the full year of fiscal 2011.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">For the first quarter ending April&nbsp;30, 2011, we expect total sales to be in the range of $94&nbsp;million<BR>
to $96&nbsp;million, reflecting a comparable store sales decline in the high single-digit range, compared<BR>
with net sales of $93 1/2&nbsp;million and a comparable store sales increase of 12.6% in the prior year<BR>
quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We expect some continued pressure from inbound freight cost during the first quarter, but not to the<BR>
level we experienced in the back half of 2010. Excluding the freight impact, merchandise margins have<BR>
been relatively strong for the first quarter to date.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Operating expenses in the first quarter expected to increase year-over-year at a rate slightly higher<BR>
than the rate of store growth.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Earnings per share expected to be in the range of .10 cents to .14 cents per diluted share, as<BR>
compared with .32 cents per share in the prior year quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We expect to open approximately three stores and close six to eight stores during the quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">For the full year, fiscal 2011 as it relates to store count and store growth, we expect to open<BR>
approximately 40 to 45 stores and close approximately 15 to 20 stores. We will update our progress on<BR>
this growth plan each quarter. The store openings will be weighted toward the back half of the year<BR>
and the closings will be relatively evenly spread across the quarters.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The real estate market showed signs of tightening due to lack of new development. We are still<BR>
confident in our ability to secure locations and open stores. But the process for securing deals and<BR>
existing centers is a bit more laborious than with new development. The opportunity for growth in<BR>
store count remains. But our primary focus is to be very selective in location and the economics of<BR>
each deal.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our top-line expectations are for total sales and fiscal 2011 to be above fiscal 2010 in the range of<BR>
9% to 12%. This level of sales increase takes into account the store growth expectations, combined<BR>
with a flat to slightly negative comparable store sales decrease. Given prior year comparisons and the<BR>
current trends in the business, we would expect comparable store sales trends to improve as the year<BR>
progresses.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Based on our current conservative outlook, we would expect operating margin for fiscal &#145;11 to decline<BR>
slightly from the 10.1% recorded in fiscal 2010. We expect sourcing cost pressures and transportation<BR>
cost to increase due to rising oil prices particularly impacting the back half of the fiscal year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Additionally, the flat to slightly negative comparable store sales expectations would result in some<BR>
deleverage of occupancy cost and other operating expenses. However, we were encouraged by our<BR>
merchandise margin results thus far in 2011. And we&#146;re also optimistic about our new store activity,<BR>
continuing to be a contributor to top-line growth and earnings.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">With a tax rate assumption of approximately 38-1/2% for fiscal 2011, at this time we would expect<BR>
earnings per share to be at or slightly below adjusted earnings per share for fiscal 2010.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">From a cash flow standpoint, we anticipate again generating positive cash flow in 2011 and fully<BR>
funding our new store growth and technology improvements through internally generated cash flow. We do<BR>
not anticipate any usage of our line of credit in 2011.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Capital expenditures are currently anticipated to range between $25&nbsp;million and $28&nbsp;million in 2011<BR>
before landlord construction allowances for new stores. We currently estimate that approximately $16<BR>
million to $18&nbsp;million of the total capital expenditures will relate to new store construction, and $5<BR>
million to $7&nbsp;million will relate to information technology investments, with a balance of our capital<BR>
expenditures relating to maintenance and store merchandise fixture enhancements.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We plan to update these annual performance goals and outlook each quarter during 2011.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you, and I&#146;ll now turn it back over to Robert.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks, Mike.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As expected, given tough multiple year comparisons and a year-over-year different in sales momentum<BR>
entering the quarter, both our annual and fourth quarter earnings results met the lower end of our<BR>
expectations and &#151; key items, but were not what we had hoped. Yet I would note that of the 18-cent<BR>
delta on year-over-year adjusted earnings, 13 cents can be attributed solely to increase inbound<BR>
freight cost that affected our merchandise margin.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The fourth quarter was strongly affected by such adverse cost. Quarterly sales were also affected in<BR>
store by flat traffic after experiencing nice gains throughout the year. Transactions, conversion and<BR>
average ticket were all down, low- to mid-single digits for the quarter, largely attributable to a<BR>
less robust season and less productive sales in our core categories.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Seasonal Christmas Merchandise performed well and consistent with the prior year. The performance lag<BR>
in our important Wall categories specifically in framed images continue throughout the quarter and<BR>
impacted quarterly sales performance. As we indicated in previous public comments, we recognize the<BR>
weaker back half Art trends and started the valuation and (unintelligible)&nbsp;steps in this category by<BR>
the midpoint of the third quarter. In our opinion, the downturn in Art sales was partially<BR>
attributable to our actions and execution and partially to the downtrend in the category nationally,<BR>
probably driven by an extended period of dislocations in the housing market.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We can and expect to repair our process and offering in the category. But we don&#146;t expect the housing<BR>
market to recover significantly in this fiscal year. Thus, we expect to see some continued hit in the<BR>
Land and the Wall categories which for Kirkland&#146;s includes framed images, alternative wall d&#233;cor,<BR>
mirrors, large clocks and wall frames.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Six weeks into fiscal 2011, we&#146;re encouraged with our framed image business, which is our largest Wall<BR>
component at 14% of total revenue, is already stronger than last year in terms of sales, gross margin<BR>
percentage and average retail.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">That&#146;s a nice and significant accomplishment. However, during the same time period, we have not yet<BR>
seen a comparable lift in the other components of the Wall category, which were collectively 22% of<BR>
our total revenues in 2011, and expect to have work on improving results there to continue well into<BR>
the second and third quarters.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Two thousand ten was marked by our return to net store growth for the first time since stopping store<BR>
growth entirely in 2008 as part of our recovery plan. We continue to close mall stores when we have a<BR>
replacement opportunity that fits our expectations to selectively backfill existing markets and very<BR>
selectively consider new markets.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our 2010 class of 38 new stores exceeded our early expectations in number as we experienced good<BR>
availability of locations and economic deals throughout the year. The class has less than a year -<BR>
full year of actual sales results. But even with the sales downturn in the back half of the year, we<BR>
expected to perform moderately behind the class of 2009, but still significantly better than our new<BR>
store model.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Class of 2010 is larger, more geographically dispersed than the prior year class and averages 8,481<BR>
square feet, which fairly represents the preferred footprint of 8,000 to 10,000 square feet in<BR>
dominant strip centers going forward.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We successfully restarted our direct sales to customer piece of the e-commerce business in November<BR>
2010. Our focus in this phase of the project was on carefully ramping up our SKU offering as we tested<BR>
our new software platform and oriented our new e-comm merchant and management team.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We largely met our 2010 goals as we focused on anticipating and meeting customer problems and<BR>
expectations, as well as vetting our business process and model.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">In 2011, we expect to add a third party dropship to customer capability and carefully build a partner<BR>
vendor base for this important element of the business.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We issued sales and earnings per share guidance earlier today for the first quarter of 2011 and<BR>
provided performance goals for the year. We were reminded that only being five weeks into the year<BR>
while at the same time facing outlier prior year sales and earnings comparisons is not the most ideal<BR>
moment in time to frame 2011 expectations. We do not have good visibility into the trends and landed<BR>
cost of product stores from Asia at the moment. We&#146;re very aware of the pressure on product cost<BR>
arising from persistent inflation in China deriving from rising cost of raw materials and especially<BR>
labor cost.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The extent of such rise depends largely on continued strong demand as it was demonstrated by the<BR>
strong price pressure throughout 2008, which was negated almost instantly by the drop in demand<BR>
occasioned by the fall market crash. Also, we can only speculate on the yearlong effect of more than<BR>
the minimal appreciation of the Chinese currency versus US dollar as we have no special knowledge of<BR>
how well and for how long China will balance competing interest into managing the currency markets.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We had anticipated lower and more historically normal inbound freight cost for containers and<BR>
relatively stable outbound fuel cost for merchandise deliveries in 2011 especially in the first half.<BR>
But the recent sharp spikes in oil prices quickly generated surcharges in both areas last week with a<BR>
clear prospect of more increase as political unrest and the oil-producing world continues to affect<BR>
expectations on production and delivery.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">US consumer is affected by all such matters. Kirkland&#146;s has some product price elasticity which we<BR>
will carefully exercise. But we have no control of many external factors that determine consumer<BR>
confidence and spending. We believe that consumer spending was affected during the period April<BR>
through December&nbsp;2010 by consumer perceptions related to US domestic and financial issues. And that<BR>
may be the case again this year albeit for different reasons.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">That said, we&#146;ve seen strong merchandise margin performance for the short year-to-date. We expect to<BR>
improve our &#151; Wall business, well underway with the framed image components. We expect to carefully<BR>
adjust our allocation of dollars to tweak the productivity of our product mix. For example, we expect<BR>
to sell more Accent furniture and Seating this year, which should have an impact on some of our<BR>
transactional metrics.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We continue to work on additional product lines that are accretive to our overall business. We expect<BR>
to react appropriately to the pressure on product process through a variety of means and not by just<BR>
increasing prices, although some of that will be necessary.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The heart of the Kirkland&#146;s 45-year appeal to customers in the basis of our connection to our loyal<BR>
customer base is to consistently deliver clearly discernable value, which to us is a combination of<BR>
price, quality and style. We continue to believe that our merchandising philosophy, well executed,<BR>
provides us with continued strength and relevance in our sector of the marketplace.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you for your time and interest. We&#146;re prepared to answer questions.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ladies and gentlemen, if you&#146;d like to register for a question, you may press 1 followed by the 4 on<BR>
your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has<BR>
already been answered and you&#146;d like to withdraw your question, you may press 1 followed by the 3.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">One moment please for our first question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our first question comes from the line of David Berman with Berman Capital.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Please go ahead with your question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(Unintelligible) as well.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks, David.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hi. How are you doing?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We&#146;re well. Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Outstanding results. I was just curious about the store growth. You know, given that the business is a<BR>
little bit weaker than, you know, one would expect, to what extent you considered reducing the store<BR>
growth? And also, I mean, the capital expenditures from that, you know, comes to almost close to $1 a<BR>
share, which is nice cash to have.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">On the growth issue, first of all, we&#146;re really &#151; we&#146;re not in a growth-at-all-cost mode. We &#151; I think<BR>
we said in the release that we&#146;re going to be very cautious. We&#146;ve said this since 2008. Right deal,<BR>
right location, we&#146;ll do it.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And I would point out that we don&#146;t think the box is broken. We don&#146;t think the business is broken. We<BR>
would have loved to have had better fourth quarter results, but we don&#146;t think that&#146;s a reason to pull<BR>
back. We still have historically great deals out there although the deal market for real estate may be<BR>
firming slightly and we may see some tightening on space availability throughout the year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So there&#146;s still a great opportunity to set up deals that will do extremely well financially for<BR>
Kirkland&#146;s over the next ten years. And then I think the last thing I&#146;d say is that when you look at<BR>
our store openings and store closings, and then you look at 57 or so stores that we still have left<BR>
there in mall stores, we&#146;re not going to be growing a whole lot. If we drop those &#151; continue to<BR>
replace those stores effectively over the next two to three years, we&#146;re really maintaining the store<BR>
base critical mass and the revenue of the company as opposed to being on some really high trajectory<BR>
growth rate.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Right. And, you&#146;re not finding it&#146;s taking away from your management skills in terms of trying to, you<BR>
know, turn the ship?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We don&#146;t think so. I think as always, there&#146;s a cost related to growth. You have to have the right<BR>
number of people to be able to open and close stores. And you have to generate the management. All of<BR>
that requires some investment in people. But I think it&#146;s manageable and I think that&#146;s something that<BR>
we pay a lot of attention to.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Right.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...the main thing that I think you should remember is this is &#151; we&#146;re very conservative. And we look<BR>
at every deal very, very carefully.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Man:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And David.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">In terms of your &#151; yes?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I was going to say, David.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">((Crosstalk))
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><BR></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...the new stores are outperforming our model that we&#146;ve put out there when we talk about growth. And<BR>
that&#146;s encouraging, so.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Right. That&#146;s good.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You also &#151; part of your capital expenditures was also for POS upgrade, which I think costs quite a bit<BR>
of money. Aren&#146;t you running that out now or at some point soon or &#151; and that kind of benefit should<BR>
we see from that on the bottom line?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, David, it&#146;s not only point-of-sale. We&#146;ve been working on various technology projects. One was<BR>
our e-comm platform which we finished and rolled out last year. One was a financial reporting package<BR>
that we went live with at the beginning of this year, and then at left, POS and merchandising, our<BR>
back-office system that we&#146;re working on replacing. So both the POS and the merchandising project are<BR>
scheduled for a 2011 implementation. And I think it&#146;ll take most of the year on both of those to get<BR>
them implemented.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And the benefits &#151; and we&#146;re with two systems right now that are about 10&nbsp;years old. They need<BR>
refreshing. We need to get updated with the partners that are going to be investing in their systems<BR>
over the next 10, 15&nbsp;years. And so that &#151; and on &#151; especially on the merchandising side, we have a lot<BR>
of opportunities to improve our store level assortment and allocations. And with the new system, it<BR>
gives us new capabilities to do that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, good luck with that. So when can we start to hear from you on that?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I think we&#146;ll continue to update that throughout the year. I think the benefits really are going to be<BR>
in 2012 and going forward from there.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay, good. Well, thank you very much. And despite the poor sales, operating margins are still healthy<BR>
and cash looks good, so thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks, Dave.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And our next question comes from the line of Anthony Lebiedzinski with Sidoti &#038; Company.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Please go ahead with your question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Anthony Lebiedzinski:Good morning. You mentioned that your new stores are outperforming the model. What would you say are the main</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">reasons for that?
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><BR></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, I think first and foremost, better real estate. We have, we&#146;ve discussed a lot, been moving out<BR>
of the enclosed mall or the enclosed regional mall which we felt, as it relates to our customer base,<BR>
those locations have changed over the years and aren&#146;t as shopped by our customer as they used to be.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So the new real estate in the strip center with the co-tenancy that, you know, our customer frequents<BR>
is probably the most relevant item there. So that&#146;s top line. And then on the occupancy cost, the<BR>
rates we&#146;re paying in rent are a lot lower than historically in the malls or in the lifestyle centers.<BR>
So the combination of those two continues to be the reason that we&#146;re outperforming now.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Anthony Lebiedzinski:Okay. And in what markets are you looking to open stores this year?</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We&#146;ll continue to backfill existing markets and replace mall stores. I think that&#146;s the first<BR>
consideration that we give when we&#146;re looking at location and the first priority. The second as we try<BR>
to backfill existing markets, we would &#151; we always love to do those in the Southeast Texas and in<BR>
places where we have large name recognition and a large customer base, and we can identify a market<BR>
that we&#146;re under-serving.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">But we&#146;ll add some stores in California in 2011 where we&#146;re doing extremely well. The upper Midwest,<BR>
the new stores we&#146;re doing there are doing extremely well. Mid-Atlantic will be an area of focus for<BR>
us this year. It&#146;s an area where we&#146;ve been somewhat likely represented but have had very productive<BR>
stores even in malls.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So I think we have plenty of opportunity without getting too far a field. And the one thing that we do<BR>
have &#151; there a number of companies that are trying to &#151; beginning to ramp up growth. But we have some<BR>
momentum in that market and we have a fairly large group of deals that had been worked for some period<BR>
of time. So we feel pretty good &#151; it&#146;s the reason we said we feel pretty good about being able to<BR>
obtain what we need in 2011, even without new development being a big factor.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Anthony Lebiedzinski:And you also mentioned that you expect some tightening of the commercial real estate markets. With that in</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">mind, would you perhaps look to accelerate the store openings for the year?</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You know, I think we have a plan that we think is manageable given the resources that we have, the<BR>
number of deals that we have in play that can actually be executed within the year. So I don&#146;t think<BR>
that would particularly drive any measurable increase. I think we pretty well know what we can do.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">It&#146;s very difficult &#151; Mike mentioned this in his remarks earlier. It&#146;s very difficult to get a deal<BR>
done and get the space when you want it and be able to get the store open within a time frame that<BR>
you&#146;d love to have it open. So if we said today, guys we&#146;d like to do 20% more, I&#146;m not sure we could<BR>
do that to be frank. I think we have some deals that we could do, but the question would be, when<BR>
would we get the space?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And a lot of it, Anthony, has to do with &#151; the spaces that are available are big box spaces that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...sometimes require the landlord to go in and develop out into smaller units of a 3,000 foot space.<BR>
And there&#146;s a lot of work to do in those instances.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Those guys are very reluctant to do those deals. It represents a large upfront cost. They&#146;ve got to do<BR>
some serious remodel to break it up, (follow with) utilities and demising walls and a redo of the<BR>
store front. And it really changes their expectations with respect to the property financially. And<BR>
they would love to find those single-user replacements if they could to quickly replace their cash<BR>
flow. But &#151; so those deals take a while.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Anthony Lebiedzinski:Okay. And, lastly, you have a great balance sheet. The cash flow here is good. Other than new store openings,</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">some technology improvements, do you foresee any other uses of cash flow?</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We haven&#146;t announced anything else. And, you know, we &#151; you know, if there&#146;s anything that happens<BR>
that we feel like we need to talk to you about, we certainly will.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Anthony Lebiedzinski:Okay, it sounds good. Thank you.</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks, Anthony.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our next question comes from the line of Chris Rapalje with SunTrust Robinson Humphrey.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Please go ahead with your question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chris Rapalje:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hi, good morning. Just a few questions.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Good morning, Chris.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chris Rapalje:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">First, with the merchandise right now, I guess just kind of big picture when you look at the spring<BR>
offering and then maybe some of what you have coming beyond that, do you feel like there&#146;s any<BR>
opportunities for adjustments there or are you feeling good with the right cadence with your customer,<BR>
et cetera?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You know, I feel pretty good about our first half offering, our spring and then as we go into the<BR>
summer. I think we, as always, we make a really strong effort to make it new fresh, different to flow<BR>
it rapidly in terms of new ideas. And I think we&#146;re trying to do a much, much better job of<BR>
communicating with the customer about it through various Internet vehicles. And so I feel pretty good<BR>
about that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You know, we&#146;re &#151; our merchandise cycles run sort of 90 to the top side, 120, 150&nbsp;days when you get<BR>
into textiles and some other things. So when you&#146;re in March, you pretty well have major bids. So we<BR>
will play this out. I think it&#146;s going to do reasonably well as we said. So, I don&#146;t know.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chris Rapalje:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Great.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...if that&#146;s going to change, Chris.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chris Rapalje:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. And then with the guidance, I&#146;m just wondering what your thoughts are versus traffic trends<BR>
versus ticket going forward?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You know, I think that, you know, we said in the fourth quarter, traffic was more flat. And so I think<BR>
that, you know, you can assume that we kind of thought about it that way going into 2011.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chris Rapalje:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. And then just.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And we&#146;re working on the &#151; yes, we look at the ticket and we try and manage that. We do realize we got<BR>
some opportunity there.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chris Rapalje:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. And then my last question was just whether you&#146;ve been seeing anything different on the<BR>
competitive front, any new sources of competition there, anybody being more aggressive.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You know, not so different.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chris Rapalje:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I think, you know, there&#146;s obviously &#151; has been some nice recovery by peer and cost of class-of-store<BR>
markets. And we&#146;re glad to see that. I mean that they&#146;re big factors in the co-tenancy that we&#146;re<BR>
looking for in dominant strip centers along with the usual players. But I &#151; you know, the Kirkland&#146;s<BR>
way of doing things well executed is &#151; and the way that our product mix shapes out makes us<BR>
significantly different. And I think we&#146;re happy with that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chris Rapalje:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. Well thanks very much, and good luck.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Man:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(Unintelligible).</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our next question comes from the line of Jennifer Milan, Sterne Agee.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Please go ahead with your question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Jennifer Milan:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks. Thank you. Hi, everybody.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I&#146;m just wondering back to the cost environment, if you could give us any more color, you know, where<BR>
you are in terms of your receipts and forward buys and then any particular areas of pressure that<BR>
you&#146;re seeing? And you talked about prices being a potential offset. I was wondering if you could<BR>
quantify that at all and talk about maybe other potential offsets.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I don&#146;t think we are &#151; Jennifer, I don&#146;t think we&#146;re in a position yet. I think we said we didn&#146;t have<BR>
a lot of vision into some of this. We have not been greatly affected at this point in time with<BR>
respect to buys that we have in the system and that we were currently negotiating. That would take us<BR>
into the fall. I think we are seeing in some places, you know, some increases being suggested. And I<BR>
think we&#146;re doing a pretty good job of managing that based on how we reported our early margin trends<BR>
to you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Some of the apparel people have reported expectations of mid-single-digit up to mid-double-digit<BR>
increases in cost in the cotton and some of those areas. We&#146;re not terribly affected by that. But we<BR>
do expect maybe sort of mid-single-digit pressure later in the year. And I think that&#146;s probably about<BR>
as far as I would speculate. A lot of it is on demand. And as I said in my remarks, and I think the<BR>
labor costs in China are the biggest piece of that if that was what you were asking about in the first<BR>
part of your question. I don&#146;t think it&#146;s as much raw materials as the pressure on labor cost.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Jennifer Milan:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes, that&#146;s very helpful actually. And, also, I was wondering if you could comment on, you know, any<BR>
changes or plans for changes in terms of visual merchandising and, you know, what response has been to<BR>
the new signage in terms of less of a focus on blaring price points?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, I think what we&#146;re trying to achieve is a better balance between talking to the customer in<BR>
store about price and also doing things about &#151; around branding and about lifestyle opportunities and<BR>
showing ideas. And I think the idea of the new effort in visual merchandising is about presenting<BR>
still a treasure hunt, but a more manageable and more understandable store for both the employees who<BR>
work in the store and who are responsible for replenishing the floor and talking to customers and<BR>
providing help, and also for the customers. We&#146;re not going to compartmentalize or departmentalize.<BR>
That was tried in our stores back in the 2006 and &#146;07 time frame. And it really wasn&#146;t &#151; didn&#146;t prove<BR>
to be very helpful.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">But I think we&#146;re seeking that balance. We&#146;ve added some capability there and are trying to build that<BR>
team and drive the information and ability and training down into the stores so that we do a more<BR>
consistent job. So I think consistency is one of the things that we&#146;re also looking for in addition to<BR>
balance and more manageability.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Jennifer Milan:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And nothing major in terms of, you know, the overall visual presentation within the stores?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I don&#146;t think you&#146;re going to see anything that&#146;s really a huge change that you&#146;re going to walk in<BR>
and go, &#147;Oh my God; they really changed the store.&#148; I think it&#146;s going to be a bit more subtle than<BR>
that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The Wall is a big, big category for us. I mean we sort of &#151; we talked about that a little bit earlier<BR>
in our remarks. And we&#146;re working really hard on getting those things interspersed with other<BR>
merchandise and more widely shown on the floor with other items. And we&#146;re working really hard on<BR>
showing ideas. And so the customer takes away more than the fact that they can get well-priced<BR>
product; they can also do some things that are really effective in their store for a really good<BR>
price.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I think we&#146;re overall, too, we&#146;re upgrading the merchandise offering. It&#146;s very, you know, it&#146;s very<BR>
subtle that I think we&#146;re offering better quality and better looks. And we&#146;re very much, I think in<BR>
the right color tones and on style. So I think we should see improvement in the floor over the year -<BR>
over the course of the year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Jennifer Milan:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">One last thing; I just &#151; I did notice a lot of changes or new merchandise in the Art category that I<BR>
thought was great. And I&#146;m excited to hear about the dropship direct to customers. I was just<BR>
wondering where you are in terms of maybe other categories, such as larger rugs or furniture pieces<BR>
for e-comm.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We&#146;re working on it actually. I think, you know, the dropship will be, you know, we&#146;re working on it<BR>
right now. It&#146;s sort of our number one e-comm priority. And hopefully by some time late second quarter<BR>
or early third quarter you&#146;ll see that at least in the early stages of being available.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I think it represents a great growth opportunity, especially on the SKU side and on the revenue side<BR>
for our e-commerce business, properly executed and if we get the right partner base and we make sure<BR>
that we meet customer expectations.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So I&#146;m kind of excited about that. And that certainly is an opportunity to do a lot of testing. And it<BR>
gives us an opportunity to sell our larger scale items and some &#151; that would be true in rugs and<BR>
furniture and art and other things. So, I appreciate your comment on the Art. We really, really made<BR>
an effort beginning last year to make that a much more interesting and vibrant category. And I<BR>
appreciate you recognizing that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Jennifer Milan:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you. Good luck.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks. We appreciate it.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And our next question comes from the line Alex Fuhrman with Piper Jaffray.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Please go ahead with your question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Alex Fuhrman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Great. Thanks guys.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So, you know, it sounds like if you strip out the freight costs, merchandise margins really weren&#146;t<BR>
that bad in Q4. So can you talk a little bit about, you know, what you&#146;re seeing as your &#151; in terms of<BR>
new customers&#146; proclivity to convert at full price? And when you say the decline in AUR we saw on the<BR>
fourth quarter, is that primarily due to markdowns or is there also sort of a merchandise-type mix<BR>
shift element involved there as well?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, I&#146;ll cover some of that, Alex.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You&#146;re right, I mean the fourth quarter freight was a big, you know, impact &#151; by far the largest<BR>
impact. We said going into the quarter, we thought it would be more promotional. It was. We had to<BR>
react to some of that given our sales trend. But all in all, pretty strong, you know, first cost<BR>
margins that we saw in the fourth quarter. And that continued into the early part of this year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As for the AUR, that has been pretty much the case throughout last year. And I think, you know,<BR>
certainly part of it is markdown particularly in the back half. But I think more of that issue was mix<BR>
related. And we&#146;re &#151; you know, Robert mentioned we&#146;re going to sell a little bit more furniture this<BR>
year. We&#146;re doing some things to try and drive the ticket and as a result, the average retail price is<BR>
going to be the driver there.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I think we used a lot of our better and more revenue-rich categories to drive business last year. And,<BR>
you know, I think we learned something from that. And I think we&#146;ll have a better balance of how we do<BR>
that this year as we do promotions. Ad some of the shipping dislocations that we had last year<BR>
affected our promotions, things that we would &#151; that we bought for promotional activity but which<BR>
didn&#146;t get here.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And those, typically when we do that, are fully &#151; at full margin. And we had to replace those. And<BR>
we&#146;re backing up a little bit in the whole process so that we&#146;re able to ensure that things get here<BR>
on time. And that was something that was maybe peculiar to 2010, but we don&#146;t want to see it repeated<BR>
in 2011. So I think we&#146;ve adjusted our process.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Alex Fuhrman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Right. And then, you know, just getting to the &#151; back to the real estate strategy a little bit. Can<BR>
you remind us of the productivity differential between the mall and the off-mall stores? And are there<BR>
any of your mall-based stores that are currently cash flow negative on a four-wall basis?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We currently have very few stores whether to mall or off-mall that are four-wall negative. It&#146;s<BR>
probably less than ten or around ten. And that it&#146;s probably &#151; it&#146;s a mix between mall and off-mall.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The productivity difference over the years has narrowed at least as a percentage of revenue because<BR>
we&#146;ve adjusted some rents in the mall stores and we&#146;ve closed the unproductive ones. So it&#146;s not a<BR>
problem in terms of they&#146;re unproductive. They&#146;re productive. It&#146;s a matter of finding a better<BR>
location that can drive more top-line volume. The mall stores still do quite a bit less in top-line<BR>
volumes than the off-mall stores do. And they&#146;re smaller. And they limit us in terms of the things<BR>
that we just talked about that we&#146;re trying to do in merchandising.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Alex Fuhrman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes. And then, you know, thinking, you know, beyond even the next two or three years, you know, longer<BR>
term, you&#146;re still growing your top line at a pretty good, you know, healthy high-single-digit,<BR>
low-double-digit rate, hopefully. And, you know, as you approach and eventually surpass half a billion<BR>
in sales, you know, what kind of options does that scale give you in terms of tweaking your supply<BR>
chain and mitigating sourcing costs down the road?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You know, I don&#146;t think we&#146;re still near the size of Target or Bed Bath &#038; Beyond, or some of the<BR>
larger box guys who have 600 or 700 stores and significantly higher sales and therefore buys. So I<BR>
don&#146;t know that, you know, another &#151; you know, moving from mid 400&nbsp;millions to over 500&nbsp;million is<BR>
going to change that much. I think we are significant to our vendor base, and I think we get very good<BR>
prices. And we have a very stripped-down model that we work with import vendors and factories where we<BR>
were more direct.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So I think there&#146;re a lot of things that we do that are calculated to deliver the best price. And<BR>
that&#146;s been consistently something that I think we have been able to do over the years. So I think<BR>
it&#146;s going to be a while before scale gives us some larger advantage.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Would you agree with that, Mike?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I would.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Alex Fuhrman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Right, that&#146;s helpful, and that certainly sounds fair.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And then, you know, I guess just real quick before I sign off here, you mentioned that color was<BR>
pretty strong in the fourth quarter, that you guys had some good color tones and that you&#146;re seeing<BR>
that. I&#146;m just kind of curious to which colors have really been the top performers here into the<BR>
spring season?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well I was really referring to the currencies and to the first half or the spring half of the year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And, you know, we&#146;re always using the bright primary colors in spring, which are the reds and yellows.<BR>
And that group &#151; but we&#146;ve also done some purples and browns and some of the lighter tones and colors<BR>
and worked those in nicely into the color palette. So we&#146;re pretty happy with what we&#146;re doing there<BR>
because I think it reacts well, or it&#146;s been the customers who reacted well to it.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Alex Fuhrman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(That&#146;s helpful). That all sounds great. And thanks a lot, and good luck guys.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And ladies and gentlemen, as a reminder, to register for a question, you may press 1 followed by the 4<BR>
on your telephone.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And our next question comes from the line of Bill Dezellem with Tieton Capital Management.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Please go ahead with your question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">William Dezellem:Thank you.
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><BR></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We have a group of questions. First of all, would you please discuss fuel prices in terms of the<BR>
impact on your customers, given that part of their budget is now going to be going to pay for higher<BR>
fuel?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well I think I&#146;ve said earlier in my remarks, I think the US consumer is always affected when anything<BR>
affects their disposable income. So we have sort of mid $3 to half $3-gas on average right now. I<BR>
don&#146;t know that that&#146;s a shock to anybody anymore given where we were a year or two ago when the -<BR>
when all spiked up and then close to $150 a barrel range. If we get $5-gas, that might be a shock.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">What has happened is that the trucking industry has reacted rather rapidly with fuel surcharges. And<BR>
we&#146;ll see that in some expenses for our supply chain expense. And we&#146;ve got a fairly small bunker fuel<BR>
surcharge on the inbound already. That will affect our business in terms of (landing)&nbsp;cost, actual<BR>
(landing)&nbsp;cost.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So as yet, I don&#146;t think that&#146;s translatable into higher prices for the consumer in our store. It<BR>
might be down the line if it becomes more.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">William Dezellem:And so you have not yet seen an impact on the consumer in terms of their buying behavior here in the &#151; just in the</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">last month? That&#146;s.
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><BR></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">((Crosstalk))
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><BR></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I don&#146;t know that it&#146;s been &#151; that we can make that attribution yet. I think it&#146;s too early.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">William Dezellem:Thank you.
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><BR></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Next question is, what do you feel is not correct or is the problem with the non-frame part of your<BR>
wall business? And with that in mind, how are you addressing that?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well I think we probably got a bit &#151; we probably drove the promotional side of alternative wall d&#233;cor<BR>
and the frame business, the wall-frame business a bit in the last three quarters of 2010. I think we<BR>
blurred the lines between our everyday business and our promotional business. And I think it was a bit<BR>
maybe disorientating to both our stores and to the customer, and probably resulted in less revenue<BR>
being derived from the everyday business.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I think any time we have a category that&#146;s not working, the process that we take here is that we step<BR>
back, take a look, try to understand why we are not performing as well as we hoped, and we develop a<BR>
plan to address that. If it involves selling the category down some in order to get a new start, we&#146;ll<BR>
do that. If it involves selling what we don&#146;t love about the &#151; what we own down over a more protracted<BR>
period of time, we&#146;ll do that. But we&#146;ll certainly try to adjust the dollars in the open-to-buy for<BR>
those categories to make them as productive as possible.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We always give a lot of attention to new ideas and bringing new designs and things that are not found<BR>
elsewhere in the marketplace as part of any recovery for our category. But it&#146;s much more &#151; it&#146;s a<BR>
very holistic process and requires the coordination and best thoughts of all the best people that we<BR>
have inside the company.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">William Dezellem:And would you anticipate selling down this category so you can bring some fresh things in or do not feel as though</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">that&#146;s necessarily going to be required for this category?</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I think at this moment in time, I don&#146;t want to say very much about it because we&#146;re in the midst of a<BR>
(bay waiting) a lot of things. We&#146;re always buying and looking toward new product and new designs. I<BR>
think what the big decision for us to make as we go forward is can we more productively use dollars in<BR>
other categories or some percentage of those dollars in other categories, and would we benefit by some<BR>
lesser amount of the offering. And you know, that&#146;s the process that we go through constantly,<BR>
monthly, literally in our open-to-buy discussions and evaluations of product performance.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">William Dezellem:Thank you. And then one additional question, the e-commerce side, what&#146;s the time frame to get your full SKU count</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">that you are targeting on the Web to get all those SKUs there?</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I don&#146;t think we know what the optimal SKU count is for our business right now. It&#146;s right around<BR>
1,000 SKUs at the moment. And that&#146;s certainly on the very low side dropship with vendors where we<BR>
don&#146;t touch the product. When it&#146;s fully implemented, it will almost give us, you know, infinite<BR>
opportunity there on the SKU side.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">But in terms of what we actually own and fulfill through our facilities at &#151; in Jackson, Tennessee,<BR>
I&#146;m not sure we really know that. I think that&#146;s something that we&#146;re going to walk very carefully<BR>
into. And that would be I think a process that will play out over the next six to eight quarters<BR>
actually.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">William Dezellem:Thank you.
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><BR></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks, Bill.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our next question comes from the line of Brad Thomas with KeyBanc Capital Markets.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Please go ahead with your question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Bradley Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks. Good morning, Robert. Good morning, Mike.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Good morning.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hey, Brad.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Bradley Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I just want to follow up on the performance of the 2010 class of stores and the 2009 class of stores.<BR>
I was wondering if you could provide any more quantification around the annualized run rate that that<BR>
2010 was coming in at. And how does the 2009 class perform as it started to enter the comp base?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, I&#146;ll take the end of that first.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">It&#146;s still very fresh, Brad, because a lot of those stores were open late in 2009, so you don&#146;t have a<BR>
lot of time there. But what I would say is their (comp had been) better than the average of the<BR>
company. They&#146;re doing better than the company&#146;s comp but still negative in the fourth quarter. And so<BR>
that&#146;s &#151; but again, caveat that that&#146;s very early and we don&#146;t have many months to that in on the<BR>
class because it was so back-ended.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">What we&#146;ve said about the annualized volumes, 2009 was a &#151; their first year was about 1.9&nbsp;million. As<BR>
many of those out there know, what we plan or what we shoot for in a new store class is 1.5&nbsp;million.<BR>
That&#146;s what we put out there. And that the class of &#145;10, again, early and we&#146;re using run rate<BR>
techniques to get the number, but I would say it&#146;s right in between what we put out as a model and<BR>
what that &#146;09 class did.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The &#146;09 class was heavily focused on relocations. And a lot of those stores matured faster, or that<BR>
class on average would mature faster than the class of &#145;10. And then the class of &#146;10 obviously has<BR>
been affected by the overall business not being as robust as &#146;09. So there&#146;s a lot of factors in<BR>
there, but generally, that&#146;s what we&#146;re seeing. And I hope that helps answer the question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Bradley Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">That&#146;s helpful, Mike.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So as we think about 2011 class that&#146;s ahead of us, would you think that 1.7 run rate would seem<BR>
realistic? And does the, you know, balance of relocation versus new markets seem similar to what we<BR>
had seen in 2010?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well it hasn&#146;t played out yet. So, you know, we&#146;ve only opened, you know, one store, I think at the.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Right.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...- at this moment in time. I think we&#146;ll know what the class is going to look like largely by the<BR>
time we talk to you guys next on a call. And we can give you a little bit more color on geographic<BR>
dispersion, how many percentage that are replacement or are not replacements, and then segment it into<BR>
markets for you a little better I think. Maybe we&#146;ll &#151; we can try to do that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">But I think it will look a lot like the 2010 class. I mean I&#146;m &#151; we&#146;ve approved a lot of deals that<BR>
are in lease negotiations and early stage of preparing to start construction. And, you know, I&#146;m<BR>
encouraged by the composition, the class and the way the deals look. We know there&#146;s going to be some<BR>
- well we think there&#146;s going to be some tightening in the market, and space is going to be a little<BR>
tighter as we move into looking at 2012 deals. But right now, it&#146;s pretty good for us.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And I think on a productivity side, we&#146;ve been very consistent since we started opening stores again<BR>
in 2009. We&#146;ve been very consistent in picking the right deal and getting some better than modeled<BR>
results from that group.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Bradley Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks. Just to follow up on that, Robert, you know, given that store openings is, I think, one of the<BR>
key stories for the company in 2011, can you just talk about some of the steps that you&#146;ve put into<BR>
place to ensure that you execute on this higher level of openings? You know, I&#146;m thinking in<BR>
particular on the real estate front, the training of employees and the recruitment of employees.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well I think we&#146;re &#151; you know, that&#146;s always the question. You know, it&#146;s a process to lease. You have<BR>
to do it well. But, you know, first of all, you have to pick the right place. And that&#146;s both art and<BR>
science. And at the end of the day, it&#146;s five- or ten-year marriage. And it takes a while to get away<BR>
from mistakes and, you know, you&#146;ll love the great ones.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So as you try to make sure that every one of those (are)&nbsp;good, you have to really make sure that you<BR>
vet the deal very, very carefully. And we spent a lot of time with that, with a group of people who<BR>
were very experienced working with it and was a really outstanding broker group.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The second thing that we do is we&#146;d get out and see the locations. That&#146;s another thing that this<BR>
management team makes a real effort to do, so that we take responsibility for it and learn a lot about<BR>
it. And it helps us determine whether or not we&#146;ve made the right decision on being able to run the<BR>
store effectively over a five- to ten-year period, depending on the term of the lease and whether you<BR>
have any options in it or not.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We&#146;re trying really hard to improve our store group. We inserted a new leadership a year ago. We&#146;ve<BR>
since added to that leadership group. We just put a new visual director in place. We intend to bump up<BR>
the ability of our store development team to allow them to do visual training and store analytical<BR>
training for our store managers. I think the training effort is something that&#146;s a real focus for us.<BR>
And we&#146;ll add some additional capability in that this year as we go downstream.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We&#146;re looking for a better store experience. And that&#146;s sort of the rallying cry around the efforts of<BR>
our store leadership and company leadership. We believe that we can add to the sales line, the top<BR>
line and productivity on the margin side of each and every store by how well we display product and<BR>
how well we treat customers that come in the store. Customers cost a lot to get. And we&#146;re spending a<BR>
bit more money, as you&#146;ll notice, trying to communicate with them and convince them to come to our<BR>
store, and largely through Internet and in-store activity. We&#146;ll continue to try to get better at<BR>
that. And we&#146;ve added some capability already to make our creative effort better in 2011.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So, Brad, I think we&#146;re making some investments. And we&#146;re focused on the right things. We just have<BR>
to execute that. And we can have a better store experience in our stores if we are committed to it and<BR>
have the will to do it.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Bradley Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Great. Thanks very much.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Our next question comes from the line of Rob Wilson with Tiburon Research.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Please go ahead with your question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Rob Wilson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes, thanks for taking my call.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Robert, you mentioned the freight surcharges that you saw pick up last week. And I was wondering if<BR>
this thought process was possibly incorporated into your guidance that you&#146;ve given for the year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well I think all of the facts that we accumulate certainly are part of that overall consciousness that<BR>
we bring to the process of trying to be fair, forthcoming, and yet at the same time &#151; you&#146;ve known us<BR>
for a long time &#151; we&#146;re a fairly conservative management team. We don&#146;t try to over or understate<BR>
anything. We try to give you the best information we can.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So yes &#151; the answer is yes, this is part of all that overall consciousness that goes into those<BR>
decisions.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, Rob, on that, just some &#151; a little bit more on that. Those surcharges were fuel related. And so<BR>
you can take from that that they&#146;re not as significant as what we saw last year when the issue on the<BR>
inbound freight was more a supply-and-demand driven and we saw major increases in container costs.<BR>
These are maybe a little earlier than we had thought we&#146;d see fuel surcharges, but it&#146;s not, you know,<BR>
comparable to what we saw last year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And I will say that the industry did begin to adjust surcharges to drop some of them as they got<BR>
through the calendar year 2010. So we saw the year &#151; calendar year beginning with more normalized,<BR>
more historically at normal rates. And that&#146;s a little bit about what &#151; that&#146;s sort of the way we<BR>
expect the year to go assuming that we don&#146;t have something really unusual happen in the oil-producing<BR>
world.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Rob Wilson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">That&#146;s very helpful.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Are you &#151; Mike, are you going to include the Web sales in your comp store sales or are you going to<BR>
break that out separately?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We&#146;re going to break it out separately.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Rob Wilson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. And then, finally, did you go into any new markets in 2010 or are you planning on going into any<BR>
new markets in 2011?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I don&#146;t think we &#151; when you talk about a market, I mean I don&#146;t think we really open some &#151; we<BR>
reentered in.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">((Crosstalk))
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><BR></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...Mid-Atlantic and then we went back into Denver. We did a store in Lake Havasu out in Arizona which<BR>
we&#146;ve not been in that market before. That&#146;s sort of a one-store market. We opened in Fresno in<BR>
California, which is really sort of an extension of the nucleus of that store base out there which is<BR>
largely Southern California.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And the significance of that is, is that I think we&#146;ll expand into the Central Valley out there very<BR>
carefully to Sacramento. And that&#146;ll give us plenty of California growth for a few &#151; you know, for a<BR>
while. And we&#146;ll be very content with that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We&#146;ll do some more Upper Midwest stores in the new format. And I think we&#146;re doing extremely well in<BR>
Pennsylvania and, by extension, down into the Mid-Atlantic. And I would really like to see us exploit<BR>
a great opportunity that we have there for Kirkland&#146;s.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So I don&#146;t think it&#146;s going to be anything extraordinary that you&#146;re going to be very surprised about.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Rob Wilson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay, final question, when you go into a new market, I mean let&#146;s just call Fresno a new market, how<BR>
does that store perform relative to the other stores in your, let&#146;s say, your 2010 class?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, in that particular situation, very well. That store had a very strong opening. Now it&#146;s only<BR>
been open for, what, three or four months.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">But it was really strong and it&#146;s comparable to the rest of the class.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Rob Wilson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So no material divergence between Pennsylvania or Fresno versus the rest of the class?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">No.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Not really.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Rob Wilson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You know, what you&#146;re looking for is staying power. And, you know, sometimes that&#146;s about management<BR>
and other things, but so far so good on those. I think that&#146;s one of the things as we look at classes<BR>
and try to draw circles around things and try to understand what&#146;s happening in a real estate class.<BR>
It&#146;s just one of the pleasant surprises that we had about in 2010.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Rob Wilson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">All right, well thanks for taking my call. Good luck.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks. Thanks, Rob.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And our next question comes from the line of Chuck Griege, Blue Lion Capital.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Please go ahead with your question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And, Mr.&nbsp;Griege, your line is now open for questions.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Good morning. Just a couple of questions; first, could you break down for us your OPEX in the quarter?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">In what way?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, just how you would in your Q, comp and benefits versus other.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Oh. I don&#146;t have that. We&#146;ll put that out in the Q or in the K.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I don&#146;t have that right with me today.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">There is nothing unique in the trends and the split between comp and benefits and other that I would<BR>
call out in response to your question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. And can you talk a little bit about how you see the inbound freight impact lessening as we move<BR>
through the year? And are there ways you can mitigate that?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well I think, you know, we&#146;re certainly working really hard to fill every container, trying to drive<BR>
the percentage of fill on every container we bring from Asia to its maximum. It&#146;s very difficult to<BR>
fill 100% all the time, but that&#146;s what we&#146;re working toward.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">In some cases, we change materials on items at how we make it. I think you&#146;ll see some substitutions<BR>
for resin-based product begin to flow into our store and others over the course of the year; price of<BR>
oil stays any appreciable time at an extraordinary level historically.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We sometimes just don&#146;t buy something if we think that it can&#146;t be sold at a price that would be<BR>
attractive to the customer and represent value. There&#146;re a lot of ideas out there. And to say no on a<BR>
particular item if we don&#146;t think we can get the margin spread we need is not unusual.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We ask vendors sometimes to help us. The factories help us sometimes. But, you know, I think you&#146;ll -<BR>
I think we&#146;ll see less factory help on pricing as we go through 2011, given the pressure on wages that<BR>
we&#146;re seeing in China. And I think the unknown out there in terms of all that would be the<BR>
relationship between the Chinese currency and the dollar, how much that changes over the course of<BR>
2011. So far, Chinese are doing a very good job of keeping that in line. But I think if it appreciated<BR>
5% over the course of the year, I don&#146;t think anybody would be surprised. That would certainly be a<BR>
bit of a difference maker.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">On the question about how that, you know, that would play out, the inbound freight, right now, I mean<BR>
as we sit here today, looking ahead, it looks better than it did last year. We&#146;ve seen rates come<BR>
down. I think some of the issues in the industry have settled out. They got &#151; they had good years last<BR>
year and things are a little bit more normalized. And we&#146;ve seen those come down.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I think the variable here is likely fuel cost and where those go. But you know, setting that aside, I<BR>
think the outlook there is better for inbound cost as it relates to containers for 2011 versus 2010.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. And then back to the OPEX, I think you said in your opening remarks that you delevered 64 BPS to<BR>
do &#151; on the store labor side, and then.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Right.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...marketing expenses were up 32 BPS.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So that&#146;s just under 100 BPS. And it looks like your OPEX as a percent of revenue was up 200 BPS. Is<BR>
there any other meaningful.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, I have 32.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">((Crosstalk))
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><BR></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...- well there was 32 related to stock compensation, valuations.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...being higher. So that&#146;s part of it. And then I think the balance of it is &#151; there&#146;s a lot of<BR>
individual line items that we could look at. But I think more or less, you can group that up as &#151; when<BR>
your comp is down 8%.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">It&#146;s just a bunch of cats and dogs?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes, when your comp is down 8%, you&#146;re going to delever.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. And then.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...your new stores that you&#146;re opening, can you just talk a little bit about &#151; you know, I think you<BR>
said earlier you had about ten stores, both mall and off-mall, that were losers.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Can you give us a sense as to how many of those you expect to close in 2011?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We &#151; I don&#146;t now. It depends on the lease. And I think that there&#146;s a handful of those that are<BR>
scheduled to close. But, you know, obviously, when a store is unproductive, we want to get out of it<BR>
as soon as we can. And &#151; but we&#146;re limited to some degree by the lease term. And those are &#151; now what<BR>
- most of those are borderline negative, too. They&#146;re not any that are really bleeding really badly.<BR>
So.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You know, last time I looked at this, it was seven. And if you aggregated the negative four-wall<BR>
contribution, it&#146;s really pretty (insignificant).</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">It&#146;s probably like a $500,000 to.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...$700,000.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...or something like that altogether.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Really not material. And I think, you know, we will.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">That&#146;s combined for the ten stores?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes. I mean a lot of those were, you know, just, what I&#146;ll just say, borderline, you know, zero to<BR>
negative $50,000. And there&#146;s a couple in there that are, you know, in the $100,000 to $200,000 range,<BR>
but those are very much outliers.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. And, you know, someone else mentioned the use of your cash. You&#146;re self-funding at this point.<BR>
Can you talk a little bit more about, you know, shareholder-friendly uses of that cash, either a<BR>
dividend or a stock buyback at this point?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We really haven&#146;t commented any further, Chuck.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Right. I&#146;m just hoping to ask the question. I mean, you&#146;re self-funding. You had good margins. You&#146;re<BR>
approaching your store openings in a very deliberate and measured manner. And you&#146;ve got $4.50 a share<BR>
or thereabouts in cash. It&#146;s becoming.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">((Crosstalk))
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><BR></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...pretty common in the industry that, you know, a lot of retailers who historically hadn&#146;t paid a<BR>
dividend or hadn&#146;t done much of a stock buyback have begun that. And I.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...just wanted to get your sense as to how you felt about that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes. Well, and we understand all that and we watch all that. And we&#146;re very happy that our balance<BR>
sheet is as strong as it is given where we&#146;ve been, and our priorities and use of cash, our growth.<BR>
And we want to be able to exploit opportunities as they arise in that regard. But, you know, we get<BR>
it. We got a credit facility we need to work through this year that has a play here in all of this.<BR>
And.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Does it restrict you?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">It does somewhat, yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Can you just let us know what those restrictions are?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, dividends and levels of any repurchases. So we&#146;re working through that because the deal expires<BR>
in October of this year. So, you know, beyond that, I think we &#151; you just got to wait for us to, you<BR>
know, comment further. We don&#146;t have anything.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sure.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...further to say about it right now.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And can you tell me who the lead bank is on that facility?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">It&#146;s Bank of America.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Chuck Griege:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. Thanks a lot. I appreciate it.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">((Crosstalk))
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><BR></DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sure.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mr. Alderson, there are no further questions at this time. I will now turn the call back over to you.<BR>
Please continue with your presentation and/or closing remarks.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well thank you very much everyone for your interest and time, and we look forward to talking with you<BR>
in a few months.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Michael Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And ladies and gentlemen, that does conclude the conference call for today. We thank you for<BR>
participation and ask that you please disconnect your lines.</DIV></TD>
</TR>
<!-- End Table Body -->
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M`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`4444`%%%%`!1110`
..4444`%%%%`!1110!_]D_
`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
