<SEC-DOCUMENT>0001299933-14-000850.txt : 20140529
<SEC-HEADER>0001299933-14-000850.hdr.sgml : 20140529
<ACCEPTANCE-DATETIME>20140528173120
ACCESSION NUMBER:		0001299933-14-000850
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20140522
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Regulation FD Disclosure
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20140529
DATE AS OF CHANGE:		20140528

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:		14873677

	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
<SEQUENCE>1
<FILENAME>htm_49913.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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	May 22, 2014
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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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	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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	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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[&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 May 22, 2014, Kirkland's Inc. (the "Company") issued a press release and conducted a conference call regarding its sales and earnings results for its first fiscal quarter period ended May 3, 2014 (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.
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	Item 7.01 Regulation FD Disclosure.
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On May 22, 2014, the Company announced that its Board of Directors authorized a stock repurchase plan providing for the purchase in the aggregate of up to $30 million of the Company&#x2019;s outstanding common stock from time to time over the next 24 months. The timing, price and volume of repurchases will be based on market conditions, relevant securities laws and other factors. The stock repurchases may be made from time to time on the open market or in privately negotiated transactions. The stock repurchase program does not require the Company to repurchase any specific number of shares, and the Company may terminate the repurchase program at any time. A copy of the Press Release is attached hereto as Exhibit 99.1.
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	Item 9.01 Financial Statements and Exhibits.
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d) Exhibits<br><br>99.1 Press Release dated May 22, 2014 announcing the Company's first fiscal quarter financial results and other information.<br><br>99.2 Transcript of the May 22, 2014 conference call conducted by the Company. <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>
	May 28, 2014
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<I>
	By:
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	&nbsp;
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<I>
	/s/ W. Michael Madden
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	Name: W. Michael Madden
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	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 May 22, 2014, announcing the Company&#x2019;s first fiscal quarter financial results and other information.
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	99.2
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	&nbsp;
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Transcript of the May 22, 2014 conference call conducted by the Company.
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<P align="left" style="font-size: 10pt"><FONT style="font-size: 12pt"><img src="e39918-14147173827317e2f7_1.jpg">
</FONT>

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


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    <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: 12.5pt"><B>KIRKLAND&#146;S REPORTS FIRST QUARTER 2014 RESULTS</B></FONT><BR>
<FONT style="font-size: 11pt"><I>Announces $30 Million Share Repurchase Authorization</I></FONT>



<P align="left" style="font-size: 11pt">NASHVILLE, Tenn. (May&nbsp;22, 2014) &#151; Kirkland&#146;s, Inc. (NASDAQ: KIRK) today reported financial results
for the 13-week period ended May&nbsp;3, 2014.


<P align="left" style="font-size: 11pt">Net sales for the 13&nbsp;weeks ended May&nbsp;3, 2014, increased 6.9% to $108.3&nbsp;million compared with
$101.2&nbsp;million for the 13&nbsp;weeks ended May&nbsp;4, 2013. Comparable store sales for the first quarter of
fiscal 2014, including e-commerce sales, increased 5.0% compared with a decrease of 2.3% in the
prior-year quarter. Kirkland&#146;s opened 7 stores and closed 7 during the first quarter, leaving the
total number of stores at 324 at quarter end.


<P align="left" style="font-size: 11pt">The Company reported net income of $2.1&nbsp;million, or $0.12 per diluted share, for the 13&nbsp;weeks ended
May&nbsp;3, 2014, compared with net income of $1.8&nbsp;million, or $0.10 per diluted share, for the 13&nbsp;weeks
ended May&nbsp;4, 2013.


<P align="left" style="font-size: 11pt">Robert Alderson, Kirkland&#146;s President and Chief Executive Officer, said, &#147;We are pleased with the
sales momentum during the quarter in our stores and online after the slower start related to
adverse weather events. Despite a somewhat more promotional environment late in the quarter, sales
remained strong leading to earnings performance at the high end of our guidance. The year thus far
is proceeding according to our plan, and we continue to expect benefits for the balance of the year
from our investments in store growth, merchandise systems, e-commerce and branding initiatives.&#148;


<P align="left" style="font-size: 11pt"><I>Stock Repurchase Authorization of $30 Million</I>
<BR>
The Company also announced that its Board of Directors authorized a stock repurchase plan providing
for the purchase in the aggregate of up to $30&nbsp;million of the Company&#146;s outstanding common stock
over the next 24&nbsp;months. The shares may be repurchased from time to time in open market or
negotiated transactions, and the amount and timing of those purchases will be based on a variety of
factors, including stock acquisition price, regulatory limitations and other market and economic
factors. The stock repurchase program does not require the Company to repurchase any specific
number of shares, and the Company may terminate the repurchase program at any time. As of May&nbsp;21,
2014, the Company had 17.3&nbsp;million common shares outstanding.


<P align="left" style="font-size: 11pt">Mr.&nbsp;Alderson added, &#147;We maintain a strong balance sheet, and our unique store model continues to
suggest future cash flow generation. As we opportunistically increase the growth rate of the
business, the Board&#146;s decision to authorize another round of share repurchases signals our
confidence in the future of Kirkland&#146;s.&#148;


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



<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">KIRK Reports First Quarter Fiscal 2014 Results
<BR>
Page 2
<BR>
May&nbsp;22, 2014
</FONT>
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    <TD align="left" valign="top"><I>Fiscal 2014 Outlook</I><BR>
<B>Store Growth:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><BR>
For the 52-week period ending January&nbsp;31, 2015 (&#147;fiscal<BR>
2014&#148;), the Company expects to achieve approximately 10%<BR>
square footage growth with 35 to 40 new store openings<BR>
and 10 to 15 store closings. New store openings will be<BR>
weighted more toward the second half of the year, and<BR>
store closings will be weighted more toward the first<BR>
half of the year.</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">Total sales for fiscal 2014 are expected to increase<BR>
approximately 8% to 10% compared with fiscal 2013. This<BR>
level of sales performance would imply a comparable store<BR>
sales increase of approximately 3% to 5% for fiscal 2014.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Margin &#038; Expenses</B>:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The Company expects year-over-year improvement in<BR>
merchandise and gross profit margins that is expected to<BR>
result from a lower markdown rate, lower inbound freight<BR>
costs, and sales leverage. Operating expenses are<BR>
expected to increase on a dollar basis due to the<BR>
increase in stores and incremental investments in<BR>
corporate headcount to support our growth initiatives.<BR>
The Company is also anticipating approximately $0.03 to<BR>
$0.04 per diluted share in additional costs associated<BR>
with its second half lease expiration and transition to<BR>
replacement corporate headquarters space.</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, without regard to share<BR>
repurchase activity, the Company expects fiscal 2014<BR>
earnings per share to be in the range of $0.90 to $1.00.<BR>
The Company expects its full year tax rate to be<BR>
approximately 39%.</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">Capital expenditures in fiscal 2014 are estimated to<BR>
range between $33&nbsp;million and $36&nbsp;million. Based on the<BR>
above assumptions, the Company expects to generate<BR>
positive cash flow in fiscal 2014, excluding potential<BR>
share repurchases.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 11pt"><I>Second Quarter Fiscal 2014 Outlook</I>
<BR>
The Company issued guidance for the second quarter ending August&nbsp;2, 2014, of a net loss of $0.03 to
$0.06 per diluted share. Net sales are expected to be in the range of $104&nbsp;million to $105&nbsp;million
with a comparable store sales increase in the range of 3% to 4%. The Company expects to open
approximately 8 stores and close approximately 2 stores during the quarter.


<P align="left" style="font-size: 11pt"><I>Investor Conference Call and Web Simulcast</I>
<BR>
Kirkland&#146;s will issue its earnings release for the first quarter before the market opens on
Thursday, May&nbsp;22, 2014, and will host a conference call on the same day at 11:00&nbsp;a.m.&nbsp;ET. The
number to call for the interactive teleconference is (212)&nbsp;231-2918. A replay of the conference
call will be available through Thursday, May&nbsp;29, 2014, by dialing (402)&nbsp;977-9140 and entering the
confirmation number, 21706373.


<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=99176</U> on May&nbsp;22, 2014, 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>About Kirkland&#146;s, Inc.</I>
<BR>
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 326 stores in 35 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


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



<P align="left" style="font-size: 11pt"><FONT style="font-size: 11.5pt">KIRK Reports First Quarter Fiscal 2014 Results
<BR>
Page 3
<BR>
May&nbsp;22, 2014
</FONT>

<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">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
<U>www.kirklands.com</U>.
</FONT>

<P align="left" style="font-size: 11pt"><FONT style="font-size: 10pt"><I>Forward-Looking Statements</I>
</FONT><BR>
<FONT style="font-size: 10.5pt"><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;17, 2014.
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: 10.5pt"><FONT style="font-size: 11pt">-MORE-</FONT>



<P align="left" style="font-size: 11pt"><FONT style="font-size: 11.5pt">KIRK Reports First Quarter Fiscal 2014 Results
<BR>
Page 4
<BR>
May&nbsp;22, 2014
</FONT>

<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>
(In thousands, except per share data)
</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">13-Week</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">13-Week</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Period Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Period Ended</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">May 3,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">May 4,</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">2014</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2013</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">$</TD>
    <TD align="right">108,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">101,233</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">65,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,827</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">42,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,406</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">34,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,779</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">4,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,791</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">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,836</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Other (income)&nbsp;expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</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">3,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,830</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">1,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,057</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">$</TD>
    <TD align="right">2,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,773</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">$</TD>
    <TD align="right">0.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.10</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">$</TD>
    <TD align="right">0.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.10</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">17,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,083</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">17,825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,433</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 First Quarter Fiscal 2014 Results
<BR>
Page 5
<BR>
May&nbsp;22, 2014


<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">KIRKLAND&#146;S, INC.
<BR>
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
<BR>
(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="61%">&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>
    <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: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">May 3, 2014</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">February 1, 2014</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">May 4, 2013</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>
    <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>
    <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">$</TD>
    <TD align="right">82,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">89,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">74,111</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">50,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,889</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">2,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,638</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">8,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,591</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>
</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">144,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,229</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">82,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,964</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">2,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,680</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>
</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">229,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">235,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">209,873</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>
    <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>
    <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>
    <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">$</TD>
    <TD align="right">19,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20,933</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">866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</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">22,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,719</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>
</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">43,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,652</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">3,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,057</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">44,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,778</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>
</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">91,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,487</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>
</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">137,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,386</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>
</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">229,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">235,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">209,873</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>
    <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 First Quarter Fiscal 2014 Results
<BR>
Page 6
<BR>
May&nbsp;22, 2014


<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>
(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="54%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">13-Week</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">13-Week</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Period Ended</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">Period Ended</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">May 3, 2014</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left">May 4, 2013</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>&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 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">$</TD>
    <TD align="right">221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,561</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">(6,930</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,322</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">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</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 (decrease)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,632</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,314</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Beginning of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,797</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 the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">82,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">74,111</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>
<!DOCTYPE html PUBLIC "-//W3C//DTD HTML 3.2//EN">
<HTML>
<HEAD>
<TITLE> EX-99.2 </TITLE>
</HEAD>
<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. FIRST QUARTER 2014 EARNINGS CONFERENCE CALL</B></FONT>



<P align="center" style="font-size: 12pt"><B>Moderator: Robert Alderson<BR>
May&nbsp;27, 2014<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="21%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="79%">&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 Inc. first quarter 2014<BR>
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 on<BR>
your telephone. If at any time during the conference you need to reach an operator please press star 0.<BR>
As a reminder, this conference is being recorded today, Thursday, May&nbsp;22, 2014.</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 Corporate Communications. Please go<BR>
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 the Kirkland&#146;s conference call to review the company&#146;s results for the first<BR>
quarter of fiscal 2014. On the call this morning are Robert Alderson, President and Chief Executive<BR>
Officer; and Mike Madden, 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 the notice of the accessibility in this conference call on a listen-only basis<BR>
over the Internet were released earlier this morning in a press release that has been covered by the<BR>
financial media.</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">Except for historical information discussed during this conference call, the statements made by company<BR>
management are forward-looking and made pursuant to the Safe Harbor provisions of the Private Securities<BR>
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 Kirkland&#146;s<BR>
actual results in future periods to differ materially from forecasted results. Those risks and<BR>
uncertainties are more fully described in Kirkland&#146;s filings with the Securities and Exchange Commission,<BR>
including the company&#146;s Annual Report on Form&nbsp;10-K filed on April&nbsp;17, 2014.</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 now turn the call over to Mike for a review of the financial results. Mike.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks Tripp and good morning everybody. For the first quarter net sales were $108.3&nbsp;million, that&#146;s a<BR>
6.9% increase versus 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">Comparable store sales, including e-commerce sales increased 5%. Comparable brick-and-mortar sales were<BR>
up 3.7%, despite the impact of winter weather early in 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">During February and through the first week of March we lost 90 store days and then additional 225&nbsp;days<BR>
were delayed or closed early due to the weather. The weather became less of an issue as the quarter<BR>
progressed. E-commence sales were $5.4&nbsp;million for the quarter, a 38% increase over 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">At the store level the comp sales gain was driven by 3% increase in transactions combined with a slight<BR>
increase in the average ticket. The increase in transactions resulted from a 4% lift in the conversion<BR>
rate, partially offset by a 1% decline in traffic. The increase in the average ticket was the result of<BR>
an increase in items per transaction that overcame a small decline in the average unit retail 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">From a geographic standpoint, sales were generally strong across most of the country, particularly in<BR>
Texas, Florida and throughout the South East. Most merchandise categories recorded strong sales<BR>
performance during the quarter, most notably textiles, lamps, housewares and holiday. These increases<BR>
were partially offset by declines in outdoor living, frames and floral, relatively small 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">Of the 324 stores at the end of the quarter, 91% were in off-mall venues and 9% were in enclosed malls.<BR>
At the end of the quarter we had 2.44&nbsp;million square feet under lease, that&#146;s a 5% increase from the<BR>
prior year. The average store size was up 3% at 7,516 square feet.</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 first quarter increased 40 basis points to 39.4%. The increase was primarily<BR>
due to an increase in our merchandise margin, which increased to 80 basis points to 55.9%.</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, lower year-over-year inbound fright costs helped our merchandise margin during the first<BR>
quarter, providing a benefit of approximately 45 basis points. Aside from the inbound fright tailwind,<BR>
merchandise margin improved due to lower markdowns and promotional discounts.</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 earlier part of the quarter provided the largest portion of the year-over-year merchandise margin<BR>
lift. Promotional activity picked up later in the quarter over the Easter holiday period lessening the<BR>
year-over-year gain.</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">Store occupancy cost decreased 10 basis points versus the prior year quarter. Outbound fright costs were<BR>
up 25 basis points as a percentage of sales, primarily due to an increase in e-commerce businesses.</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">Rate pressure on distribution center to store truck routes also contributed to the increase. Central<BR>
distribution costs were up 25 basis points as a percentage of sales, reflecting an increase in labor<BR>
costs associated with the expanding e-commerce 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">Operating expenses for the fourth quarter were at $34.9&nbsp;million, that&#146;s 32.3% of sales as compared to<BR>
32.4% of sales in the prior year quarter. Comp leverage provided declines in various categories of<BR>
expenses as a percentage of sales, particularly store payroll, our largest operating expense, which<BR>
declined 24 basis points as a percentage of sales versus 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">We also continued to see positive trends in our self-insurance reserves, reflecting better workers<BR>
compensation and general liability claims experience.</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">These benefits were offset partly by an increase in marketing expenses of about $300,000 versus the prior<BR>
year, $230,000 in severance benefits related to the departure of our former SVP of supply chain and an<BR>
increase in corporate headcount and operating expenses associated with our multi-channel initiatives.</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 23 basis points as a percentage of sales reflecting the increase<BR>
in capital expenditures in recent fiscal years and the implementation of major technology upgrades.</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 $1.3&nbsp;million or 39.1% of pretax income versus expense of $1.1&nbsp;million of 37.3% of<BR>
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">Turning to the balance sheet and the cash flow statement. At the end of the quarter, we had $82.4&nbsp;million<BR>
in cash on hand, compared to $74.1&nbsp;million at the end of the prior year period. This increase in cash<BR>
reflects the improvement in our operating performance, along with the reduction in capital expenditures<BR>
last 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">Inventories ended the quarter at $50.7&nbsp;million, reflecting an increase in total inventory of 6% over the<BR>
prior year quarter. Per-retail store inventories were up 1.6%. The remainder of the increase relates to<BR>
an additional seven stores versus the prior year and the growth in the e-commerce 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">At quarter end we had no long-term debt and no borrowings were outstanding under our revolving line of<BR>
credit. For the first quarter cash provided by operations was $221,000, reflecting the improved operating<BR>
performance, but offset by working captain shifts such as increases in income tax payments and incentive<BR>
bonus payouts versus 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">Capital expenditures were $6.9&nbsp;million for the quarter, due primarily to an increase in new store<BR>
openings, that&#146;s seven this year versus one last year and the launch on our multi-channel order<BR>
management system project.</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 part of our release this morning we also announced the authorization by the Board of Directors of a<BR>
share repurchase plan, providing for purchases in the aggregate of up-to $30&nbsp;million for our outstanding<BR>
common stock over the next few years.</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 improving trends, the strength of our balance sheet in cash division, our ability to generate cash<BR>
and our positive long term outlook for the business, we see the share repurchase authorization as an<BR>
opportunity to return value to share holders in addition to continuing the investments already begun in<BR>
stores and online.</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 to our guidance for the second quarter of fiscal 2014, we expect total sales to be in the range<BR>
of $104&nbsp;million to $105&nbsp;million, which reflects an increase in comparable store sales of 3% to 4%,<BR>
compared with net sales of $97.1&nbsp;million and a comparable store sales decrease of 0.2% in the prior year<BR>
quarter. We anticipate opening eight stores and closing two 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">Early in the second quarter comp sales trends continue to run positive, however much of the quarter<BR>
remains in front of us, including our big semi-annual sale event in July.</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">Traffic trends continue to improve sequentially and are now essentially flat on a year-over-year basis,<BR>
while merchandise margin continues to be slightly over the prior year, albeit not at the levels reported<BR>
in Q1.</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">Encouragingly and similar to last year, we were able to secure fixed container rates through the sprint<BR>
of 2015 that are slightly lower than our current rate. As a result, we do not expect inbound fright to<BR>
have a negative impact on our merchandised margins during fiscal &#146;14 or into early fiscal 2015.</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 anticipated operating expenses to increase 79% during the quarter, reflecting higher depreciation,<BR>
corporate personnel and e-commence expenses. As a result we expect the loss of 3 cents to 6 cents per<BR>
share as compared to a loss of 3 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">Inventoriess at the end of the second quarter are expected to be up slightly versus the prior year, in<BR>
total due to a higher store count, but flat on a per store basis. For the full year fiscal 2014 our<BR>
top-line and earnings guidance remains unchanged and does not take into account share repurchase<BR>
activity.</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 far as our margin and expense assumptions for the full year, we expect inbound fright cost to be<BR>
slightly lower on a year-over-year basis for the balance of the year. Excluding the inbound fright<BR>
impact, we expect merchandise margin to improve year-over-year as we continue to leverage the investments<BR>
made in merchandising systems and processes.</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">Sales leverage will serve to offset increased expenses in corporate personnel, e-commence, multi-channel<BR>
capabilities. We expect marketing expenses to approximate that of last year or increase slightly as we<BR>
refine our branding activities and focus on the most successful components of the test we performed last<BR>
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">We have now signed a lease for our corporate office relocation and this relocation is expected to begin<BR>
in the summer and be complete by the end of Q3. We estimate that the relocation will have an impact of<BR>
approximately 3 cents to 4 cents during the back half on our 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">Our 39% tax rate assumption reflects the lack of certain job tax credits such as the work opportunity tax<BR>
credit that have yet to be renewed by congress. Should congress address the renewal of these credits this<BR>
year, we will record a credit to the tax rate during the quarter in which the credits are reinstated.</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 still expect to generate positive cash flow for 2014, excluding share<BR>
repurchase activity. We do not anticipate any usage of our line of credit during the year and expect<BR>
capital expenditures to range between $33&nbsp;million and $36&nbsp;million in 2014 before landlord construction<BR>
allowances for new 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">As I mentioned last quarter, these CapEx assumptions reflect the increase in store opening, the office<BR>
relocation, multi-channel and information technology projects and distribution center 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 currently estimate that approximately $17&nbsp;million to $18&nbsp;million of the total CapEx will relate to new<BR>
stores, $9&nbsp;million to $10&nbsp;million relate to multi-channel capabilities and information technology; $2<BR>
million to $3&nbsp;million will relate to the distribution center and supply chain, with the balance of our<BR>
CapEx relating to the office relocation and maintenance items.</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 and I&#146;ll now turn the call 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 and good morning everyone. We had a very good quarter featuring a strong comparable sales<BR>
gain and earnings per share at the top of the guidance range, overcoming a slow start to the quarter from<BR>
persistent total temperatures in most of the country and another series of mostly February winter storms.</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 business improved nicely in March and only moderated slightly in April, as more normalized weather<BR>
patterns finally signaled the advent of spring. We were perhaps most pleased to see store traffic<BR>
continue at a steady improvement and almost flat to the prior year, resulting in a positive sequential<BR>
impact on transactions that should continue throughout 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">All in all, it was a solid and balanced performance and continues to suggest that Kirkland&#146;s is providing<BR>
its customers with an improving and compelling merchandise mix and store experience.</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 incremental improvement in merchandise margin was pleasing and resulted from the combination of<BR>
better information from technology gains, lower inbound freight and fewer markdown promotions from a<BR>
nicely balanced merchandise mix.</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 anticipate benefits in late 2014 and beyond from additions to our retail enterprise and<BR>
e-commerce technology, both recently installed and coming online later this year, specifically planning<BR>
and allocation and order 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">The retail climate remains somewhat murky, the retail bellwether Wal-Mart, along with several others,<BR>
unexpectedly delivered what was viewed as disappointing quarterly results.</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 our businesses remain steady and continues to evidence the consistent improvement we began in early<BR>
2013, it&#146;s always concerning to see these broader trends as we try to project future performance.</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 downward trend of consumer spending in the US during March and April, with April negative to the<BR>
prior year quarter, seems to signal continued slow growth, which could effect retail sales 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 remain mindful of the importance of the real value and the right style of the customers who smartly<BR>
continue to exercise prudent caution in their family and personal spending, after experiencing years of<BR>
slow economic growth historically high unemployment and devalued housing.</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">Occasional signs of improvement are not sustained, so as to develop a broad consensus of confidence in<BR>
the minds of consumers and investors. We continue to focus on the basics, that&#146;s delivering discernable<BR>
value in the form of right style, right trend, right price and a favorable store experience.</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;ve been very pleased with the continued impact of our K Club loyalty program as we now enrolled more<BR>
than $2&nbsp;million super customers since the program rolled out in late 2013.</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">These super customers tend to spend more and visit our stores much more frequently, and its exciting to<BR>
consider the downstream opportunities this program can offer, to augment our enhanced internet and<BR>
traditional media marketing contracts, which we expect to develop.</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 e-commerce channel continues to deliver on plan results in sales and margin with strong gains in<BR>
categories like housewares, floral, clocks and decorative accessories. The number of skews available<BR>
online continues to increase almost 5,000 now, up more than 100% to the prior year quarter and<BR>
representing strong growth over the first 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">Web exclusive items continue to be more than 40% of the total quarterly revenue. Increases in customer<BR>
visits, site and process enhancements, along with robust sales gains suggest that we are resonating with<BR>
customers in this channel, yet we are very aware that we are still early stage in realizing the potential<BR>
of this businesses. We are also driving additional traffic to our stores through the site with over 40%<BR>
of our online business being shipped to stores for customer pickup.</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 quarter textiles, houseware, fragrance, clocks, ornamental wall d&#233;cor joined the resurgent art<BR>
and decorative accessory categories, lamps furniture and mirrors to provide a strong, across the broad<BR>
merchandise performance in the key categories that drive our day-to-day in store 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 remain pleased with the category balance and the consistent performance and contribution of our core<BR>
item category, which is delivering 30% or so of our revenue. We are still learning how to leverage our<BR>
new store systems ability to most efficiently maintain core items, while retaining our historic hook of<BR>
new and different merchandise.</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">Despite the economic low and recent spate of disappointing retail results, Kirkland&#146;s expects steady<BR>
sales in merchandise margin performance in Q2, thus Mike&#146;s earlier guidance to positive comparable 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">Our spending in the form of investment in people to execute our growth plans has necessarily increased<BR>
versus the prior year quarter and the second quarter is historically our most difficult. We believe that<BR>
we are getting close to right size in our support group for the plans we&#146;ve made.</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 while we&#146;ll continue to add required talent, we realize its time to concentrate on leveraging those<BR>
investments in all areas of our business to drive our top-line 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">During the second quarter we expect to open eight to 10 stores and close two after our first quarter of<BR>
seven opening and seven closings. Store development activity will naturally accelerate in Q2 and<BR>
especially Q3 as more space turnovers occur.</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 12 new stores scheduled now for Q3, but expect that number to move around hopefully in a positive<BR>
way, with both additions and deletions as we reach the busiest time of the year for construction.</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 our last call we announced our plan for 10% annual square footage growth in 2014 and beyond, depending<BR>
as always on relatively on-time space delivery from strip center landlords, never a given.</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 will update you periodically as the development year materializes and the situation on store closings<BR>
becomes more transparent. Store growth is, not surprisingly, one of our most initiatives for top line<BR>
growth, given our unique organic store growth opportunity in the home sector.</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 am pleased to be reporting to you today on behalf of the company and to be involved in so many exciting<BR>
initiatives in our company. Our Broad, Committee of Independent Directors is still engaged in the process<BR>
of finding the transition of our leadership to a successor CEO.</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 do not have an announcement at the moment, but its important to note that the Board is not pressed by<BR>
my timing to deliver a successor within a particular timeframe and is free to consider all possibilities<BR>
and exercise all prudent caution.</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 company continues to perform very well and has big plans to grow and perform even better. I&#146;m<BR>
actually quite pleased to have a bit more time to be personally involved in some key initiatives beyond<BR>
recovery and major foundational reset that began during my watch and which I have heavy personal interest<BR>
and investment.</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">This is a highly engaged and committed management team and you have our assurance it will remain both a<BR>
team and total engaged, while the Board does its work. As a fellow shareholder, I am very satisfied with<BR>
our Board&#146;s approach and actions and believe it will deliver a well-considered solution at the<BR>
appropriate time.</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 for your time today and your interest in Kirkland&#146;s, and operator, we are ready to answer<BR>
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">Thank you. Ladies and gentlemen, if you&#146;d like to register a question please press the 1 followed by the<BR>
4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has<BR>
been answered and you would like to withdraw your registration please press the 1 followed by the 3. If<BR>
you are using a speakerphone please lift your handset before entering your request. One moment please for<BR>
the 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">And our first question comes from the line of Neely Tamming with Piper Jaffray. Please go ahead.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Neely Tamming:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Oh great. Good morning and congratulations you guys. It&#146;s great to see the progress in your business.</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">Neely Tamming:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You bet. So if I could just ask, Mike you mention that the merchandise margin so far, quarter to date is<BR>
kind of up slightly. Could you give a little bit more color of what&#146;s behind that? Is it tied to some<BR>
sort of product mix situation or is it just kind of overall healthier, fuller price type sales. And then<BR>
I just have a follow-up housekeeping question to that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. Well, I think we mentioned we were up 80 basis points in the first quarter and we are not up 80 to<BR>
start Q2. As I said, we are up slightly. The quarter ended on a little bit more promotional note, I think<BR>
around the Easter and Mother&#146;s Day timeframe.</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, the retail environment was pretty promotional and we participated in that, but I think the good<BR>
news here is it&#146;s not, it&#146;s not a dramatic effect on our margin and we were able to generate sales as the<BR>
quarter closed out, that were very profitable sales and we go into the second quarter with that trend<BR>
intact.</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 wouldn&#146;t say there is that much of shift in the mix right now. You know, we&#146;ve got pretty much most<BR>
categories performing pretty well as we stated and hopefully that continues as we move through Q2.</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">Neely, I&#146;d just reiterate. I think on the last call I think I said, you know, we would like to see<BR>
continued improvement and expected continued improvement incrementally this year. And if we got 40 to 60<BR>
basis points, so quarterly improvement as we move through 2014, we&#146;d be very pleased.</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 get some of that now with our inbound freight deal. That will continue to take some pressure off.<BR>
But I think I mentioned a couple of times and I think Mike mentioned it or alluded to it is that we have<BR>
a really good balance in our mix right now.</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 some of the categories that were a little bit of a drag on us previously have shown some nice<BR>
improvement in recent months as we&#146;ve worked really hard to make the improvements. And we think we&#146;re on<BR>
the right train, the right style and that we have great pricing still, so we&#146;re reasonably happy with how<BR>
that&#146;s going.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Neely Tamming:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">That&#146;s great. And then I just have a high level-ish and house keeping question here on e-commerce and<BR>
mobile. So if I&#146;m interpreting this all correctly, basically your traffic is getting better. You&#146;re still<BR>
seeing a pretty decent acceleration in your e-commerce business. Mobile continues to be potentially a<BR>
driver for both conversion and traffic.</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">Is this all after your getting a whole new customer basically into your store and that&#146;s, you know, part<BR>
of this next phase of the Kirkland story, is that your attracting &#151; by being more of a footprint online,<BR>
you actually are attracting a new customer altogether. Is that your read and interpretation of that?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Neely, I think that there&#146;s certainly components of what you covered there that we&#146;re seeing. It&#146;s early<BR>
and we are &#151; the combination of some things give us that impression. I mean even on our loyalty program,<BR>
we&#146;re finding that half of those people that are signing up weren&#146;t even in our email database, which<BR>
suggests that we&#146;re not connecting as well with the traffic that&#146;s coming in. So that&#146;s the store level<BR>
observation.</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 you get to the online piece, about a third of our unique site visits are coming from a mobile phone,<BR>
which is, you know, that&#146;s an important statistic. That kind of directs where we&#146;re going to be spending<BR>
our effort.</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">Tablet; we optimized the tablet recently and that&#146;s like a little less than 20% of the visitors are<BR>
coming from a tablet. So you&#146;ve got to be in a &#151; so that&#146;s half of your traffic essentially that is<BR>
non-PC related. And we&#146;ve got to adapt to that, everybody does, but we&#146;re trying to do that and I think<BR>
that is a younger, maybe slightly different customer that we reach by doing that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Neely Tamming:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">That&#146;s great. It&#146;s going to be fun to watch that unfold. All right, congratulations you guys. Keep up the<BR>
good work. Thanks.</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 Neely.</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 David Magee with SunTrust. Please proceed with your question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Magee:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes hi. Good morning guys and good quarter.</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">David Magee:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A couple of questions. One is the, given that the macro is still weak and, you know, there hasn&#146;t been,<BR>
you know, a commitment made to change advertising just sort of based on the test of last year. What&#146;s<BR>
behind the traffic improving so nicely on a sequential basis?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I&#146;d say part of that, David, is just a, you know, progression through the last few quarters where we have<BR>
seen, you know, an improving mix, which is showing in the conversion rate being up.</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 &#151; I&#146;m kind of tying it back to our history when we&#146;ve seen a prolonged conversion lift that kind of<BR>
turns into a traffic benefit. Its kind of a lagging indicator I guess. So I think some of it is just kind<BR>
of getting a little better each quarter and building up to that.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Magee:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I was hoping.</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">David Magee:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">...people are happy even it could come back sooner I guess I guess, right.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">More frequently, yeah, yeah.</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 agree with Mike. I think the improvement in the mix that we&#146;ve seen, which has been evidenced by<BR>
metrics, you know, I think we predicted consistently throughout 2013 and even in the beginning of this<BR>
year that we would see this happen because of what we were seeing in reaction to the mix.</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 also say that I think although we&#146;re not spending that much more in advertising this year, I<BR>
think we&#146;re directing it a bit differently and using the learnings of last year in order to maximize<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">We&#146;re also expanding some markets that are going to get some exposure and we continue to press on the<BR>
social side of contact with customers and the email side and the loyalty program.</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 all of those together and I would also kind of once again put a spotlight on the loyalty program,<BR>
the lift from it and say that this is a somewhat naturally, about a widespread effect that&#146;s cumulatively<BR>
lifting the boats.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And David, I&#146;d like to add just one bit to that. The marketing that Robert alluded to, although we&#146;re<BR>
spending about the same amount of money this year, for example this quarter coming up here, we&#146;ll be in<BR>
25 markets in primarily print form versus 10 in the prior year task.</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 we&#146;re reaching more people with the same amount of dollars. It&#146;s just by focusing a little bit more on<BR>
print and a little less on TV and we&#146;re seeing brand awareness tick up in traffic and sales in those<BR>
markets. So it&#146;s not an insignificant part of the traffic progression that we&#146;ve seen, but we just<BR>
haven&#146;t been in that many markets to say that it&#146;s affecting the whole chain yet.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Magee:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I see. And then I guess is it fair to assume based on what you said earlier that a large part of your<BR>
online business is coming from customers that are close to your stores. Didn&#146;t you say a large percentage<BR>
choose to pick it up in the store.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes, that number is about 40% of our orders that are delivered to the store for the customer, yes.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Magee:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, it seems like that could be a big opportunity as well, developing the customer base in areas in<BR>
which you don&#146;t have stores.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Absolutely. I think, you know, it goes hand-in-hand. As we grow into some of these markets, you know,<BR>
that helps the web as well; it works both ways. We don&#146;t have presence in some of these markets and we&#146;re<BR>
getting some Internet sales from them. It&#146;s to your point right now it is more confined to our existing<BR>
footprint, but we&#146;re working to change that through online marketing as well; we do a lot of 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">And I would also say David, if we don&#146;t convert a in-store pick up customer, you know, shame on us. We&#146;re<BR>
trying to provide incentives for that and to make that, you know, a point of emphasis in our stores,<BR>
because that&#146;s a proven customer who is highly motivated to come in the store that day.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">David Magee:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Right. Well great, thank you and best of luck here.</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, David.</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, as a final reminder to register a question press the 1 followed by the 4. Our next<BR>
question comes from the line one Anthony Lebiedzinski with Sidoti &#038; Company. Please go ahead.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Anthony Lebiedzinski:Good morning. I just wanted to ask you as part of the branding campaign. So you mentioned Mike that you&#146;re</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">doing this in 25 markets versus 10 markets. So when you look at your whole business, how many markets actually did you have</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">internally?
</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">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, just to put it in perspective, the 25 is 133 stores, that&#146;s about 40% of the chain.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Anthony Lebiedzinski:Okay.
</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">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So, you know, it depends on what you define as a market. I mean, we have stores in very small towns and<BR>
we have stores in major metros.</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 of the things that I would point out on the 25 is that it does include some larger markets in the<BR>
mix. And the test last year is from a cost standpoint and well mainly from a cost standpoint, we did not<BR>
go into the Dallas&#146;s and the Houston&#146;s and we are able to do that in this marketing, because the cost and<BR>
the entry point is a little easier to take on.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Anthony Lebiedzinski:So at what point can we expect that you&#146;ll be reaching out your entire store base or close to the entire store</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">base with these efforts.
</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">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, lets see, we&#146;re in year two of the test and we&#146;re from no markets to 40%. I don&#146;t know that it will<BR>
progress along the same lines, because again, we&#146;re geographically dispersed such that some markets are<BR>
not very efficient for us to enter.</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 we&#146;ve been trying to keep a balance between, you know, expanding a lot of SG&#038;A on a new marketing<BR>
capability, you know, with some &#151; we want to control those costs as best we can and not go into some of<BR>
these markets that you don&#146;t have the presence or the ability to spread it around to enough volume to<BR>
make it make sense.</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 some of that we&#146;ll go with as we grow the real estate, so I think it will take a few years. It could<BR>
take a couple of years to get to a &#151; you said a 100%. I don&#146;t see that right now, because we got to grow<BR>
the company a little bit.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Anthony Lebiedzinski:Right, okay. So in other words you need a certain amount of critical mass of source in the market to make this</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">worth your investment.
</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">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yeah, I think we did a study at one point. I want to say, don&#146;t quote me on the number, it&#146;s close but I<BR>
want to say that to hit max efficiency we would only be reaching about two-thirds or 70% of the chain and<BR>
that was about a year ago.</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 we&#146;ll keep looking at that, but it also needs to, you know, correspond with what&#146;s working and we&#146;re<BR>
trying to take a step by step approach to that and adjust as we move forward and see what really is<BR>
making a difference.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Anthony Lebiedzinski:Okay, that makes sense and also, how much of your same store sales gain would you say was attributable to</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">having a better merchandize system in place.</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, that&#146;s a hard one to really quantify. I think what we try to monitor there is some in-stock levels<BR>
on some of the items that we put a focus on as core. We look at our merchandize margin in concert with<BR>
the sales. We reflect on how we&#146;re using the system and see where it&#146;s making a difference. I would<BR>
hesitate to assign a number to the comp gain, but we think it&#146;s a benefit for sure.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Anthony Lebiedzinski:Okay, and in terms of the overall expected benefits from having this improved merchandize system. If you were</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">to use a baseball analogy, I mean what inning are we in, in terms of expected benefit from this.</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&#146;d say third inning. You know, we are still early stage. We don&#146;t have everything fully loaded on it<BR>
yet. We don&#146;t have experience time with it. There&#146;s so much area of growth and opportunity and it really<BR>
is about how you continue to adapt personnel and process to higher capability or better capability and<BR>
we&#146;re trying to take a very holistic approach as to how we look at it and how we approach those or that<BR>
intended improvement.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">Anthony Lebiedzinski:Okay, thank you very much.</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 Brad Thomas with KeyBanc Capital Markets. Please proceed with<BR>
your question.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Brad Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks. Good morning Robert and Mike. Let me add my congratulations 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">Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Brad Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I wanted to just follow-up on the margin question. Primarily Robert I think you were saying that you&#146;d be<BR>
pleased to see 40 to 60 basis points. I just want to clarify, is that merchandize margin your talking<BR>
about or the gross margin that your talking about 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">Merchandize margin.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Brad Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. And so as we think about the net effect on the gross margin and I guess this would be a question<BR>
for Mike, how should we think about the net of the different outbound for freight and central<BR>
distribution costs. Would you expect those to be headwinds?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, what I would say collectively with all those items, other than merchandize margin, which is if we<BR>
hit kind of what Robert said, if you call it 40 to 60 or whatever, that the gross margin would be a tick<BR>
higher than that, because your going to leverage occupancy with a comp gain and your going to probably<BR>
have a little headwind on the outbound piece, because of more of our business maybe shifting to<BR>
e-commerce.</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 more labor to deal with that in our DC that we&#146;re kind of working through right now, because<BR>
we&#146;re starting to hit a point where we&#146;ve got insert some efficiencies in that process. So there&#146;s some<BR>
slight headwind, maybe on the outbound and the central DC. Not too much, but I think net occupancy<BR>
outbound DC, your going to leverage a little bit with the comps that are forecast.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Brad Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay, that&#146;s great. I just wanted to make sure we were all clear on that given your starting to lapse on<BR>
the success that you had last year. And to that point, if I could just follow-up on comps, the recent<BR>
trends in traffic sound very encouraging. What are you expecting in terms of the balance of the comp<BR>
going forward as we think about ticket and traffic?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">In terms of where it&#146;s coming from in the transaction statistics?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Brad Thomas:
</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">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes. Well, I think it&#146;s a combination. We are seeing better traffic trends sequentially. We&#146;re not to the<BR>
point where we&#146;re saying we&#146;re up year-over-year consistently yet, but we are basically on where we were<BR>
last year now in terms of count and the trend is going in the right direction.</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 that could conceivably help comps in the back half if that continued. I don&#146;t think we&#146;re baking too<BR>
much of that into our guidance. I think its more still in line with conversion and ticket, but it does<BR>
kind of help to put that out there and to know that your traffic is stabilized a bit or is in a better<BR>
place.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Brad Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Great, and if I could just ask one more on the share repurchase program, I can imagine there&#146;s not a lot<BR>
you could say, but the last program that you put into place I think was about an 18&nbsp;month window for<BR>
authorization. You completed the program in 12&nbsp;months. Anything you can tell us about your, I guess level<BR>
of excitement to get out and purchase shares at this current price.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well, we&#146;re probably not ready to comment to that. We got some work to do in terms of, you know, putting<BR>
a plan in place to actually execute and we&#146;re working on that with our board.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Brad Thomas:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Great. Thanks so much guys and keep up the great work.</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, Brad.</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 David Berman with Berman Capital. Please proceed with your<BR>
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">Hi 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">Hey 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">A few questions. The first one is on capital expenditures. You&#146;re saying that your capital expenditures<BR>
are gone up to about $35&nbsp;million and that&#146;s almost double last years capital expenditures of about $17.9<BR>
million. And I think one of the great success stories of your great turnaround since 2008 has just been<BR>
your cash flow and how you&#146;re building the cash.</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, you know, with the net cash from operations being about between $30&nbsp;million and $40&nbsp;million for each<BR>
of the last three years, it seems like your capital expenditures are going to eat up most of your cash<BR>
flow.</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 just trying to understand why you have decided to double your CapEx this year and if you can just<BR>
embellish on it, you mentioned some of the things you&#146;re spending it on, but can you just embellish on<BR>
that please?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sure. A big part of the increase is stores. We&#146;re going to build, you know, more stores than we built<BR>
last year. I think we got guidance of 35 to 40 and last year we did 24, so that&#146;s a part of it. And<BR>
remember that our CapEx is gross, its gross dollars. As we talk about our store model and you got to also<BR>
think about that we&#146;re getting a big contribution from the landlord to build that store, so, you know, on<BR>
that.</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">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The last two years, that&#146;s been about $5&nbsp;million here, $4&nbsp;million to $5&nbsp;million.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Just on a per store basis I would say its $250,000 to $300,000 on a $450,000 gross build out. So it&#146;s a<BR>
big part of it and it will be more than $5&nbsp;million this year, because we&#146;re building more stores, so<BR>
that&#146;s a big piece of the increase. The other one is just our investment in quarter management as a major<BR>
project on the e-commerce side and, you know, when we get past that project, which is.</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">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">How much is that?</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Mike Madden:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kind of a $4&nbsp;million to $5&nbsp;million all in with the integrations and, you know, the connection with all<BR>
the other systems and all the functionality we&#146;re trying to turn on. When you get past that, I think to<BR>
Robert&#146;s point earlier in the call, I mean we&#146;ve added some people on the SG&#038;A 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">We&#146;ve done some projects to kind of position us to be able to operate in this brick and mortar and online<BR>
world and I think you&#146;d see CapEx drop next year is what I&#146;m saying. So that&#146;s a few major different<BR>
ones.</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">David Berman:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The idea of jumping to 35 to 40 new stores, because you&#146;ve had flat store growth on a net basis for the<BR>
last few years right. Looking at 324, 323, 310, you know, is this like a sudden change in philosophy to a<BR>
sudden increase in the number of 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">Well, I think philosophy only to the extent that I think we understand with all the foundational work and<BR>
the investment that we&#146;ve made in the last three to four years, its time for this company and we&#146;re<BR>
positioned now to opportunistically grow and build our top line and become a more relevant player in the<BR>
sector.</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 never going to be out of control and we suggested that a 10% square footage, net square footage<BR>
growth rate would be a positive step in that direction and one that we felt like we could easily control.<BR>
Its not more stores than we built before. We&#146;ve done this before.</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">And you still got &#151; you haven&#146;t built any so far this year in Q1. So the 35 to 40 are going to come -<BR>
you&#146;ve got a few in Q2 coming, but most of its going to be &#151; are you on track for that for Q3 and Q4, at<BR>
least 30 stores plus, 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">No, no, no. We&#146;ve already opened seven in Q1, if I&#146;m understanding 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">Oh, that&#146;s right.</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">And we&#146;ll be somewhere &#151; I&#146;m going to guess we&#146;ll be, well, we&#146;ll be minimum 12 as I said earlier; we&#146;re<BR>
maybe more in Q3. Now we occasionally opened stores in Q4, but it&#146;s typically on the backside of the<BR>
holiday season when it&#146;s not an impact on the most critical selling weeks, 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">And are you finding that the bigger stores or better? Because I mean I&#146;ve noticed that your average -<BR>
your net sales per square foot has gone down 15% in the last five years. Is that because your stores are<BR>
just bigger or what is that from?</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">Largely because of slightly bigger stores, but our stores are &#151; I think we called out 7,516 square feet<BR>
on average and the ones that we opened today would be in the typically around 7,500 to 8,000 square feet.</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 to maintain &#151; when we look at those deals, we look at them with the idea of maintaining and<BR>
controlling our occupancy percentage. So, you know, I think we&#146;re, you know, below 10% as a chain.</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 as we look at new deals going forward, if we get into more expensive parts of the country, on an<BR>
individual basis they are not going to all be, you know, 7%, 8%, 9% occupancy cost deals, but it we&#146;ll<BR>
still be in a very, very advantageous place, vis-&#224;-vis most retail chains in terms of the occupancy size.</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 long as we remain cautious about what we do, we don&#146;t get crazy and we would only open a 15,000<BR>
square foot store if we could get that footage for the price we paid for 8000.</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, right. I guess when I look at the big picture I get a little nervous. And, you know, first of all,<BR>
you know I&#146;m not a fan of the buyback program. We joke about that, but I mean I don&#146;t understand, you<BR>
know, because one of the exciting things about investing in your company is that you got this big cash<BR>
balance, which you know you&#146;ve been through a really bad period in 2007, 2008 and so you sort of need to<BR>
have a bigger cushion than maybe most other companies and that is there sort of to pay out as a dividend<BR>
one day.</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, wouldn&#146;t it be, I mean, I understand the board to look through all this, but, you know, do<BR>
management get compensated if there&#146;s a long time dividend; probably not right? Because, I mean, we&#146;d<BR>
rather see that happening, then use the cash. I mean, but, you know, Robert especially given that, you<BR>
know, your earnings per share, you know, is pretty flat, you haven&#146;t earned over $1 in about three years<BR>
now.</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&#146;m having a little bit of a trouble hearing you, the specifics of your question. But let me say<BR>
it, let me respond this way.</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">We are not incentivized on share price in terms of how we get paid. We&#146;re incentivized on the operating<BR>
line, operating net income and so our job is to deliver operating income and earnings at the same time.<BR>
So there&#146;s a balance that&#146;s required there and when we&#146;re dealing with a share buyback, it doesn&#146;t have<BR>
anything to do with how management gets paid.</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">All right, I understand that, but anyway, I would rather you did a one-time dividend. I guess it&#146;s too<BR>
late for that.</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">Well, it is too late for that. I would also say, David, that our board has never taken anything off the<BR>
table and we&#146;ll continue to look at all alternatives and we talk about every one of them at that time and<BR>
we do that with our advisors. So continue to remind us.</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">Look, I want to share your optimism for the earnings going forward. You know, 5% is a great comp this<BR>
quarter, well done. You know, the concern is that we&#146;re in a (unintelligible). Every retailers is missing<BR>
numbers, the more traffic is going down, the internet is taking over, and your earnings have been<BR>
stagnant for three years and in many ways in no fault of your own, given all these changes you talk about<BR>
and yet your increasing the 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">I&#146;m just a little concerned about the direction. You know, it&#146;s not like back in 10&nbsp;years ago, you know,<BR>
where you get paid for growth and your not getting earnings improvement, and of course it&#146;s costing you a<BR>
lot of money with your CapEx, so I&#146;m just.</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">Well, we haven&#146;t done it yet, so why don&#146;t we talk about that in a year and see whether we made the<BR>
progress or not that you&#146;re talking about. I don&#146;t think it necessarily follows that we get that result.</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">Yeah, I understand. Look, I know with you sitting there and it&#146;s frustrating not to get the top line<BR>
growth over the last four years, you know, but, you know, it&#146;s great to see you as a cash flow company<BR>
with decent returns. Even if you&#146;re not a growth company and you see the cash grow and grow and grow, you<BR>
know, that to me seems like the competing part of your story and I wouldn&#146;t too dissatisfied with 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">We&#146;re not and as I think Mike made the point earlier that even in a higher CapEx year this year, we<BR>
expect cash to grow and we expect to have less CapEx next year and therefore we would expect cash to grow<BR>
more next 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">Well, the one thing about this model is that throws all ample cash for what I believe is a very safe<BR>
position for the balance sheet of this company. I don&#146;t think we&#146;re going to jeopardize 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">It does, it does, but this year is cutting it fine. I mean $35&nbsp;million in CapEx, $40&nbsp;million is the high<BR>
in the last five years of your cash flow, its just cutting it fine. You know, I&#146;d just like to see a bit<BR>
more leg room, because we are in a very tough environment here, Robert. I mean it&#146;s not that peachy to<BR>
do, you know, the numbers with good margins and top line in this environment. It&#146;s a strange world out<BR>
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">Thank you. We do appreciate your concern.</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">Anyway, I appreciate all your good work and I appreciate the cash flow. Please go easy on the buying back<BR>
of the shares, all right. Thanks a lot.</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">Mr. Alderson we have no further questions at this time. I&#146;ll now turn the call back to 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">Well, we thank everybody for their time today and of course their interest in Kirkland&#146;s and we&#146;ll be<BR>
talking to you in a few months about Q2, so thanks.</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, that does conclude the conference call for today. We thank you for your<BR>
participation and ask that you please disconnect your.</DIV></TD>
</TR>
<!-- End Table Body -->
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<P align="center" style="font-size: 12pt">END




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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
