<SEC-DOCUMENT>0001299933-14-001322.txt : 20140827
<SEC-HEADER>0001299933-14-001322.hdr.sgml : 20140827
<ACCEPTANCE-DATETIME>20140827124451
ACCESSION NUMBER:		0001299933-14-001322
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20140821
ITEM INFORMATION:		Results of Operations and Financial Condition
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20140827
DATE AS OF CHANGE:		20140827

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:		141067517

	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_50389.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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	August 21, 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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______________<BR>
	(I.R.S. Employer
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	of incorporation)
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	File Number)
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	Identification No.)
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	2501 McGavock Pike, Suite 1000, Nashville, Tennessee
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	&nbsp;
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	37214
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_________________________________<BR>
	(Address of principal executive offices)
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	&nbsp;
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___________<BR>
	(Zip Code)
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	Registrant&#146;s telephone number, including area code:
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	615-872-4800
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	Not Applicable
<BR>______________________________________________<BR>
	Former name or former address, if changed since last report
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	&nbsp;
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:</FONT>
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<P><FONT SIZE="2">
[&nbsp;&nbsp;]&nbsp;&nbsp;Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))<br>
[&nbsp;&nbsp;]&nbsp;&nbsp;Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))<br>
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<B>
	Item 2.02 Results of Operations and Financial Condition.
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On August 21, 2014, Kirkland's Inc. (the "Company") issued a press release and conducted a conference call regarding its sales and earnings results for its second fiscal quarter period ended August 2, 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. <br><br>
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	Item 9.01 Financial Statements and Exhibits.
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d) Exhibits<br><br>99.1 Press Release dated August 21, 2014 announcing the Company's second fiscal quarter financial results.<br><br>99.2 Transcript of the August 21, 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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	&nbsp;&nbsp;
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<I>
	August 27, 2014
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<I>
	By:
</I>
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	&nbsp;
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<I>
	/s/ W. Michael Madden
</I>
<BR>
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	&nbsp;
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	&nbsp;
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<I>
	Name: W. Michael Madden
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<I>
	Title: President and Chief Operating 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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<TD ALIGN="LEFT" VALIGN="TOP" WIDTH="77%">
<FONT SIZE="2">
Press Release dated August 21, 2014 announcing the Company's second fiscal quarter financial results.
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	99.2
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	&nbsp;
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Transcript of the August 21, 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="e40304-14238174010320bf04_1.jpg">
</FONT>

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


<DIV align="center">
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    <TD width="5%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
</TR>

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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>
President &#038; COO<BR>
(615)&nbsp;872-4898</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-size: 11.5pt">Tripp Sullivan<BR>
SCR Partners<BR>
(615)&nbsp;760-1104</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="left" style="margin-left:4%; font-size: 11.5pt; text-indent: 4%">IR@Kirklands.com


<P align="center" style="font-size: 11.5pt"><FONT style="font-size: 12.5pt"><B>KIRKLAND&#146;S REPORTS SECOND QUARTER 2014 RESULTS</B></FONT>



<P align="left" style="font-size: 12.5pt"><FONT style="font-size: 11pt">NASHVILLE, Tenn. (August&nbsp;21, 2014) &#151; Kirkland&#146;s, Inc. (NASDAQ: KIRK) today reported financial
results for the 13-week and 26-week periods ended August&nbsp;2, 2014.
</FONT>

<P align="left" style="font-size: 11pt">Net sales for the 13&nbsp;weeks ended August&nbsp;2, 2014, increased 6.6% to $103.5&nbsp;million compared with
$97.1&nbsp;million for the 13&nbsp;weeks ended August&nbsp;3, 2013. Comparable store sales for the 13&nbsp;weeks ended
August&nbsp;2, 2014, including e-commerce sales, increased 3.6% compared with a decrease of 0.2% in the
prior-year quarter. Kirkland&#146;s opened 6 stores and closed 2 during the second quarter, bringing
the total number of stores to 328 at quarter end.


<P align="left" style="font-size: 11pt">Net sales for the 26&nbsp;weeks ended August&nbsp;2, 2014, increased 6.7% to $211.7&nbsp;million compared with
$198.4&nbsp;million for the 26&nbsp;weeks ended August&nbsp;3, 2013. Comparable store sales, including e-commerce,
for the 26&nbsp;weeks ended August&nbsp;2, 2014, increased 4.3% compared with a decrease of 1.3% in the
prior-year period. Kirkland&#146;s opened 13 stores and closed 9 during the 26-week period.


<P align="left" style="font-size: 11pt">The Company reported a net loss of $1.1&nbsp;million, or $0.06 per diluted share, for the 13&nbsp;weeks ended
August&nbsp;2, 2014, compared with a net loss of $0.6&nbsp;million, or $0.03 per diluted share, for the 13
weeks ended August&nbsp;3, 2013.


<P align="left" style="font-size: 11pt">For the 26&nbsp;weeks ended August&nbsp;2, 2014, the Company reported net income of $1.0&nbsp;million, or $0.06
per diluted share compared with net income of $1.2&nbsp;million, or $0.07 per diluted share, for the 26
weeks ended August&nbsp;3, 2013.


<P align="left" style="font-size: 11pt">Robert Alderson, Kirkland&#146;s Chief Executive Officer, said, &#147;We experienced a strong start and a
strong finish to the quarter with comparable sales and margins in line with our expectations.
Slower traffic experienced in June and some delays in new store openings related to the timing of
space availability affected an otherwise solid second quarter. Early sales and margin trends in
August are encouraging, and we will look to build on that momentum through the second half of the
year. Seasonal product has also been introduced in the stores and has been well received.&#148;


<P align="left" style="font-size: 11pt"><I>Stock Repurchase Plan</I>
<BR>
During the quarter, the Company repurchased 68,000 shares of common stock for a total expenditure
of $1.2&nbsp;million, or an average price of $18.20 per share. As of the end of the second quarter, the
Company had $28.8&nbsp;million remaining under its current share repurchase authorization.


<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 Second Quarter Fiscal 2014 Results
<BR>
Page 2
<BR>
August&nbsp;21, 2014
</FONT>
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<TR valign="bottom" style="font-size: 11pt">
    <TD colspan="3" valign="top" align="left"><I>Updated Fiscal 2014 Outlook</I></TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD align="left" valign="top"><B>Store Growth:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">For the 52-week period ending January&nbsp;31, 2015 (&#147;fiscal<BR>
2014&#148;), the Company expects to open approximately 35 new<BR>
stores and close approximately 15 stores.</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 7% to 8.5% compared with fiscal 2013. This<BR>
level of sales performance would imply a comparable store<BR>
sales increase of approximately 3% to 4.5% for fiscal<BR>
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 increase<BR>
in stores and incremental investments in corporate<BR>
headcount to support our growth initiatives. The Company<BR>
is also anticipating approximately $0.04 per diluted share<BR>
in additional costs associated with its second half lease<BR>
expiration and transition to replacement corporate<BR>
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 diluted share to be in the range of $0.87 to<BR>
$0.97. 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 range<BR>
between $31&nbsp;million and $34&nbsp;million. Based on the above<BR>
assumptions, the Company expects to generate positive cash<BR>
flow in fiscal 2014, excluding potential share<BR>
repurchases.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 11pt"><I>Third Quarter Fiscal 2014 Outlook</I>
<BR>
The Company issued guidance for the third quarter ending November&nbsp;1, 2014, of net income of $0.02
to $0.04 per diluted share. Net sales are expected to be in the range of $113&nbsp;million to $115
million with a comparable store sales increase in the range of 3% to 4.5%. The Company expects to
open approximately 13 stores and close approximately 2 stores during the quarter. Costs associated
with the Company&#146;s move to a replacement headquarters building will amount to approximately $0.02
per diluted share in the third quarter.


<P align="left" style="font-size: 11pt"><I>Investor Conference Call and Web Simulcast</I>
<BR>
Kirkland&#146;s will host a conference call on August&nbsp;21, 2014, 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, August&nbsp;28, 2014, by dialing (402)&nbsp;977-9140 and entering the confirmation number,
21706374.


<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=100164</U> on August&nbsp;21, 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 328 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 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>.


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



<P align="left" style="font-size: 11pt">KIRK Reports Second Quarter Fiscal 2014 Results
<BR>
Page 3
<BR>
August&nbsp;21, 2014


<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: 11.5pt">-MORE-</FONT>



<P align="left" style="font-size: 11.5pt"><FONT style="font-size: 11pt">KIRK Reports Second Quarter Fiscal 2014 Results
<BR>
Page 4
<BR>
August&nbsp;21, 2014
</FONT>

<P align="left" style="font-size: 11pt"><B>KIRKLAND&#146;S, INC.</B>
<BR>
<B>UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS</B>
<BR>
<B>(In thousands, except per share data)</B>

<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>13-Week</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>13-Week</B></TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period Ended</B></TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>August 2,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>August 3,</B></TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2014</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2013</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">103,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">97,123</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,480</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">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,643</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">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:40px; text-indent:-10px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,767</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,950</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 loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,871</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,074</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">Other (income)&nbsp;expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(159</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</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">Loss before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,712</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,093</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income tax benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(657</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(516</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:50px; text-indent:-10px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(1,055</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(577</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">Loss 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 nowrap align="right">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.03</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 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 nowrap align="right">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.03</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">Shares used to calculate loss 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:40px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,174</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:40px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,174</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"><FONT style="font-size: 11pt">KIRK Reports Second Quarter Fiscal 2014 Results
<BR>
Page 5
<BR>
August&nbsp;21, 2014
</FONT>

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

<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>26-Week</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>26-Week</B></TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period Ended</B></TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>August 2,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>August 3,</B></TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2014</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2013</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">211,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">198,356</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,307</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">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">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:40px; text-indent:-10px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,546</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:40px; text-indent:-10px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,741</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">1,488</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,762</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">Other (income)&nbsp;expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(172</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</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">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,737</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 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">$</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,196</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">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 align="right">$</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.07</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 align="right">$</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.07</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">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:40px; text-indent:-10px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,129</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:40px; text-indent:-10px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,535</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"><FONT style="font-size: 11pt">KIRK Reports Second Quarter Fiscal 2014 Results
<BR>
Page 6
<BR>
August&nbsp;21, 2014
</FONT>

<P align="left" style="font-size: 11pt"><B>KIRKLAND&#146;S, INC.</B>
<BR>
<B>UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS</B>
<BR>
<B>(In thousands)</B>

<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&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"><B>August 2, 2014</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>February 1, 2014</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>August 3, 2013</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:50px; text-indent:-10px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">$</TD>
    <TD align="right">68,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">89,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">63,489</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">57,364</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">53,979</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">2,828</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">1,630</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">12,534</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">12,258</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">141,194</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">131,356</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:50px; text-indent:-10px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,201</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">77,537</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">2,065</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">1,757</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:50px; text-indent:-10px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">229,460</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">210,650</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:50px; text-indent:-10px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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:50px; text-indent:-10px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</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:20px; text-indent:-10px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">22,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21,442</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:20px; text-indent:-10px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</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:20px; text-indent:-10px">Other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,440</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">21,470</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">44,874</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">42,912</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:50px; text-indent:-10px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">Non-current deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,274</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">3,074</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">44,935</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">43,647</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">93,083</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">89,633</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:50px; text-indent:-10px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">Net shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,377</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">121,017</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</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">Total liabilities and shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">229,460</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">210,650</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"><FONT style="font-size: 11pt">KIRK Reports Second Quarter Fiscal 2014 Results
<BR>
Page 7
<BR>
August&nbsp;21, 2014
</FONT>

<P align="left" style="font-size: 11pt"><B>KIRKLAND&#146;S, INC.</B>
<BR>
<B>UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS</B>
<BR>
<B>(In thousands)</B>

<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="62%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 11pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>26-Week</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>26-Week</B></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"><B>Period Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Period Ended</B></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"><B>August 2, 2014</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>August 3, 2013</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Net cash provided by (used in):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</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 nowrap align="right">$</TD>
    <TD align="right">(4,518</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,979</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">(14,827</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,841</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 nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,237</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">554</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"><B>Cash and cash equivalents:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 11pt">
    <TD><DIV style="margin-left:30px; text-indent:-10px">Net decrease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20,582</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,308</TD>
    <TD nowrap>)</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">$</TD>
    <TD align="right">68,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">63,489</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:10px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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




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




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<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>exhibit2.htm
<DESCRIPTION>EX-99.2
<TEXT>
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<HEAD>
<TITLE> EX-99.2 </TITLE>
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<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. SECOND QUARTER 2014</B></FONT>



<P align="center" style="font-size: 12pt"><B>Moderator: Robert Alderson, Chief Executive Officer<BR>
August&nbsp;21, 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="5%">&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. And welcome<BR>
to Kirkland&#146;s Inc. second quarter 2014 conference call.<BR>
During the presentation, all participants will be in a<BR>
listen-only mode.</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">Afterwards we will conduct a question and answer session. At<BR>
that time, if you do have questions, you may press the 1<BR>
followed by the 4 on your telephone. If you require operator<BR>
assistance at any time during the conference, simply press<BR>
star 0.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">As a reminder, this conference is being recorded, today,<BR>
Thursday, August&nbsp;21, 2014. It is now my pleasure to<BR>
introduce Tripp Sullivan with SCR Partners. Please go ahead,<BR>
Mr.&nbsp;Sullivan.</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">Thank you, (Fran). Good morning and welcome to this<BR>
Kirkland&#146;s Incorporated conference call to review the<BR>
company&#146;s results for the second quarter of fiscal 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">On the call this morning are Robert Alderson, chief<BR>
executive officer, Mike Madden, president and chief<BR>
operating officer, and Adam Holland, vice president of<BR>
finance and chief accounting 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 noted), to the accessibility of<BR>
this conference call on a listen only basis. Over the<BR>
Internet, we released earlier this morning, and a press<BR>
release that has been covered by the 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<BR>
conference call, the statements made by company management<BR>
are forward looking and made pursuant to the Safe Harbor<BR>
Division of the Private Securities Litigation Reform Act of<BR>
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<BR>
and uncertainties which may cause Kirkland&#146;s actual results<BR>
and future (periods)&nbsp;to differ materially from forecasted<BR>
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">Those risks and uncertainties are more fully described in<BR>
Kirkland&#146;s filing with the Securities and Exchange<BR>
Commission including the company&#146;s annual report on Form&nbsp;10K<BR>
filed on April&nbsp;17, 2014. With that said, I&#146;ll turn the call<BR>
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 second<BR>
quarter, net sales were $103.5&nbsp;million. That&#146;s a 6.6%<BR>
increase versus the prior year quarter. Comparable (store)<BR>
sales, including ecommerce sales, increased 3.6%.</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 brick and mortar sales were up 2.6%; ecommerce<BR>
revenue was $5.6&nbsp;million for the quarter, a 27% increase<BR>
over the prior year quarter. At the store level, the comp<BR>
sales gain was driven by a 4% increase in transactions<BR>
offset by a decrease in the average ticket.</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 increase in transactions resulted from a 3% lift in the<BR>
conversion rate combined with a slight increase in traffic.<BR>
The decrease in the average ticket was a result of a<BR>
decrease in the average unit retail price partially offset<BR>
by an increase in items per transactions.</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 continues positive trend going into the second<BR>
quarter but slowed a bit during the month of June. It then<BR>
rebounded in July; allowing us to finish with positive<BR>
momentum going into third 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">From a geographic standpoint, sales results were generally<BR>
consistent across most of the country. Texas and Florida,<BR>
which combined, represents over 90 stores in the chain, both<BR>
performed slightly better than the company average.</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">Merchandised categories recording strong sales performance<BR>
during the quarter were fragrance and accessories, textiles,<BR>
art, holiday, housewares and wall d&#233;cor. These increases<BR>
were partially offset by declines in furniture, decorative<BR>
accessories and floral.</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 opened six new stores and closed two stores during the<BR>
second quarter. The timing of space availability from<BR>
landlords during the second quarter delayed some new store<BR>
openings during the second quarter and pushed two stores to<BR>
open in the third 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">Of the 328 stores at the end of the quarter, 91% were in<BR>
(house mall) venues and 9% were located in closed malls. At<BR>
the end of the quarter, we had 2.47&nbsp;million square feet<BR>
under lease. It&#146;s a 6% increase from 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">Average store size was up 2% at 7532 square feet. Gross<BR>
profit margin for the second quarter decreased 10 basis<BR>
points to 36.6%. The first component of gross profit margins<BR>
- merchandise margins increased 72 basis points to 54.2%.</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">Lower year over year inbound freight costs helped our<BR>
merchandise margin during the second quarter providing a<BR>
benefit of approximately 20 basis points. Favorable results<BR>
from our annual physical inventory counts, which took place<BR>
during the second quarter, have also contributed 20 basis<BR>
points in merchandise margin improvement over the prior<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">Aside from the freight and shrinkage benefit, merchandise<BR>
margins also improved due to lower mark down to promotional<BR>
discounts compared to 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">Store occupancy costs were flat as a percentage of sales<BR>
versus the prior year. Outbound freight costs were up 46<BR>
basis points as a percentage of sales primarily due to the<BR>
increase in the ecommerce 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">Rate pressure on distribution center to store truck routes<BR>
also contributed to the increase. Central distribution costs<BR>
were up 37 basis points as a percentage of sales, reflecting<BR>
an increase in labor costs associated with the expanding<BR>
ecommerce 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 quarter were $35.3&nbsp;million or a<BR>
34.1% of sales as compared to 33.7% of sales in the prior<BR>
year quarter. Comp leverage provided declines in various<BR>
categories of expenses as a percentage of sales particularly<BR>
store payroll, our largest operating expense, which declined<BR>
28 basis points as a percentage of sales versus the prior<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 also continued to see positive trends in our<BR>
self-insurance reserves reflecting better claims experience.<BR>
These benefits were offset by an increase in marketing<BR>
expenses of about $300,000 versus the prior year quarter,<BR>
higher utility costs and an increase in corporate payroll.</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 associated with ecommerce also increased<BR>
approximately $400,000 versus the prior year quarter.<BR>
Depreciation and amortization increased 21 basis points as a<BR>
percentage of sales reflecting the increase in capital<BR>
expenditures in recent fiscal periods and in implementation<BR>
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 benefit was $657,000 or 38.4% of pre-tax income<BR>
versus a benefit of $516,000 or 47.2% of pre-tax income<BR>
reported in the prior year quarter. The prior year quarter&#146;s<BR>
(raid)&nbsp;included the discreet benefit related to a prior<BR>
period item.</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<BR>
the end of the quarter, we had $68-1/2&nbsp;million of cash on<BR>
hand as compared to $63-1/2&nbsp;million at the end of the prior<BR>
year period.</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 were $57.4&nbsp;million reflecting an increase in<BR>
total inventory at 6% over the prior year quarter. The<BR>
increase primarily relates to growth in store count as well<BR>
as in the ecommerce business. Per retail store, inventories<BR>
were flat.</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, no borrowing for<BR>
outstanding (in our) revolving line of credit. For the<BR>
second quarter, cash used in operations was $4.5&nbsp;million.<BR>
Working capital (shifts)&nbsp;specifically increases in income<BR>
tax payments and incentive bonus payouts led to the increase<BR>
in cash used in operations.</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 $14.8&nbsp;million for the quarter due<BR>
primarily to an increase in new store openings &#151; 13 this<BR>
year, year to date, versus 7 last year, and the launch of<BR>
our multichannel order 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">In late May, we announced the authorization of a share<BR>
repurchase plan provided for the purchase of up to $30<BR>
million worth of our outstanding common stock over a two<BR>
year period.</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, we purchased 68,000 shares of common<BR>
stock for a total purchase price of approximately $1.2<BR>
million or an average share price of $18.20.</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 purchases were accomplished through an open market<BR>
trading plan subject to Safe Harbor guidelines and through<BR>
the use of (Attendee 5-1) trading plan.</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 of August&nbsp;2, 2104, we had 17.3&nbsp;million shares<BR>
outstanding. Subsequent to quarter end, through yesterday,<BR>
we had purchased an additional 14,000 shares of stock<BR>
resulting in a total of 82,000 shares purchased to date<BR>
within the authorization.</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">Moving on to our outlook for the third quarter, we expect<BR>
total sales to be in the range of $113&nbsp;million to $115<BR>
million reflecting an increase in comparable store sales of<BR>
3% to 4-1/2% compared with net sales of $106.1&nbsp;million and a<BR>
comparable store sales increase of 4.9% in the prior<BR>
quarter.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We anticipate opening 13 stores and closing 2 stores during<BR>
the quarter. As mentioned in the press release, costs<BR>
associated with the (move)&nbsp;to our replacement headquarters<BR>
building, are expected to have a negative impact on earnings<BR>
of approximately 2 cents 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 third quarter, comp sales trends can continue<BR>
to run positive for the first 2-1/2&nbsp;weeks in August.<BR>
Conversion remains strong and traffic trends were<BR>
essentially flat on a year over year basis.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Merchandise and margin trends have continued to share<BR>
strength and are expected to gain on the prior year during<BR>
the quarter. We expect inbound freight to be neutral to<BR>
merchandising margin for the remainder of fiscal 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">Operating expenses are expected to increase on a dollar<BR>
basis as compared to last year, due to an increase in store<BR>
count, increase in corporate personnel and higher<BR>
depreciation expense.</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 approximate 2 cent impact to earnings, due to one-time<BR>
charges associated with our move to the new headquarters<BR>
building, will also be included in operating expenses for<BR>
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">As a result, we expect to report income to 2 to 4 cents a<BR>
share as compared with earnings of 6 cents per share in the<BR>
prior year quarter. We plan on opening 13 stores and closing<BR>
2. I already said 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">Inventories at the end of the third quarter are expected to<BR>
be up versus the prior year, in total, due to a higher store<BR>
count and ecommerce growth and that would result in<BR>
per-store inventory to be slightly up on a year over year<BR>
basis at the end of Q3.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">For the full year fiscal 2014, as it relates to store count<BR>
and store growth, we now expect to open approximately 35 new<BR>
stores and close approximately 15 stores. The majority of<BR>
the remaining new store openings will occur by Thanksgiving<BR>
with the balance opening after the holiday period. Remaining<BR>
store closings will occur primarily after the holiday<BR>
period.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Based on our updated store opening and closing guidance, we<BR>
expect total sales for fiscal &#146;14 to increase 7% to 8-1/2%<BR>
over fiscal &#146;13. This level of sales growth would imply<BR>
comparable store sales in the range of 3% to 4-1/2% for the<BR>
fully 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 expect merchandise margins to improve year over year<BR>
driven by an improved mix, coupled with controlled<BR>
promotional activity. Sales leverage will help offset<BR>
increases in corporate overhead and ecommerce, multichannel<BR>
capabilities.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We expect marketing expenses to increase slightly in total<BR>
dollars for fiscal 2014 but remain flat as a percentage of<BR>
sales. For the back half, on a year over year basis, we<BR>
expect marketing expenses to be down in the range of<BR>
$300,000 versus the prior period.</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 mentioned in our sales release, we have recently begun<BR>
the move &#151; or begun the process to move our people to<BR>
replacement corporate headquarters building and expect to be<BR>
completely moved by the end of Q3.</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 estimate that the relocation will have a total impact of<BR>
approximately 4 cents during the back half of the year on<BR>
operating expenses, 2 cents of which will hit in the third<BR>
quarter as I previously mentioned.</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 still reflects the lack of<BR>
certain job tax credits such as the work opportunity tax<BR>
credit that is yet to be removed by congress. Should the<BR>
renewal of those credits be addressed during fiscal &#146;14, we<BR>
would record the credits as tax (rates)&nbsp;in that quarter<BR>
where they 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 expect to generate positive<BR>
cash flow in 2014 excluding share repurchase activity. We do<BR>
not anticipate any usage of our line of credit during the<BR>
year and expect capital expenditures to range between $31<BR>
million and $34&nbsp;million in fiscal 2014 before accounting for<BR>
landlord construction allowances.</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 (extensions)<BR>
reflect the increase in store openings, the office<BR>
relocation, multichannel and information technology projects<BR>
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 $14&nbsp;million to $16<BR>
million of the total CapEx will relate to new store<BR>
construction, $9&nbsp;million to $10&nbsp;million will relate to<BR>
multichannel capabilities and information technology, $2<BR>
million to $3&nbsp;million will relate to the distribution center<BR>
supply chain with the balance relating to the office<BR>
relocation and with normal capital maintenance items. Thank<BR>
you 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. In addition to the<BR>
second quarter results, the big news announced by Kirkland&#146;s<BR>
today was the promotion of our former CFO, Mike Madden, to<BR>
president and chief operating 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 investment community has been waiting for a while for an<BR>
announcement signaling our direction in transitioning<BR>
leadership of the company subsequent to my retirement.</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 board has engaged in a process for more than a year<BR>
designed to very carefully address that transition and we&#146;re<BR>
very pleased with the result. Mike is highly qualified and<BR>
very experienced, 14&nbsp;years with Kirkland&#146;s and before that,<BR>
our audit manager out of PwC.</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">He&#146;s a very disciplined and conservative planner and leader.<BR>
Most of you know him very well from our investor relations<BR>
interaction. He&#146;s been an integral member of our executive<BR>
management group since 2008 and heavily involved in our<BR>
turnaround and all decision making thereafter.</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 expect Mike to be a great success and we will team very<BR>
closely or even closer in the next few months to make sure<BR>
that handoff goes extremely smoothly and productively.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mike will handoff the chief accounting officer role to Adam<BR>
Holland, a key member and leader of our financial group<BR>
who&#146;s gained invaluable experience as a member of our<BR>
management team, leading numerous big projects from planning<BR>
to execution, such as the buildup and implementation of our<BR>
ecommerce channel.</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 very excited that Adam&#146;s demonstrated the ability,<BR>
skillset and his potential to lead our financial team. At<BR>
the same time, we announced some key elements of internal<BR>
reorganization with our senior vice president and director<BR>
of stores, Michelle Graul, being named Executive Vice<BR>
President of Stores and Merchandising.</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">Michelle brings an abundance of highly successful retail<BR>
experience at Kirkland&#146;s and other sector retailers and<BR>
store operations, human resources and visual merchandising<BR>
to her expanded role.</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 highly confident that Michelle, Mike and our vice<BR>
president&#146;s group in merchandising, stores, finance and<BR>
marketing will form an even more formidable merchandising<BR>
team to execute the primary business of our company as we<BR>
look toward a period of accelerated top and bottom line<BR>
growth and expanding the reach of our brand to that of a<BR>
national player in the home d&#233;cor sector in both brick and<BR>
mortar 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">I&#146;m tremendously excited about the bright future of our<BR>
company as we confront and embrace new challenges and<BR>
opportunities with a new and highly capable, young and<BR>
energetic leadership team.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Now to the second quarter results. We experienced solid<BR>
performance with comparable sales and earnings within the<BR>
range of our guidance despite continued pressures on home<BR>
retail from a persistently sluggish economy.</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 were especially pleased that traffic for comp stores<BR>
turned slightly positive after months of (signs)&nbsp;in our<BR>
retail metrics suggesting that we were turning in that<BR>
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">While net yet robust in Q2, positive traffic, plus even<BR>
stronger results in conversion, transactions and items per<BR>
transaction produced a positive comp sales result.</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 predicted, merchandise gross margins showed continued<BR>
quarter over quarter improvement but not quite to the level<BR>
expected of about 30 basis points due to the promotional<BR>
nature of the second quarter in a somewhat tepid retail<BR>
environment.</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 were pleased to see the combination of gross margin<BR>
conversion and transaction results as validation that our<BR>
merchandise mix continues to resonate with our customers and<BR>
bring them to both our brick and mortar and Web 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">Early Q3 results have been positive based on August<BR>
comparable sales and merchandise margin. While pleased with<BR>
the quarterly sales results in both brick and mortar stores<BR>
and online, we are reminded of the inconsistency of retail<BR>
activity in a no or slow growth economy by the consumer<BR>
spending law in mid to late June and the down trending<BR>
results nationally in April through June.</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 guidance for the year has been trimmed by 3 cents<BR>
primarily to account for timing issues with new store<BR>
openings. But we would still prefer a better jobs<BR>
environment and a housing market to feel more comfortable<BR>
with the state of consumer. Sustained economic optimism and<BR>
predictable growth are required to produce both.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">In a world for of political discord and danger and in a<BR>
country mired in political stalemate and totally lacking<BR>
focus on economic growth, it&#146;s exceedingly difficult to<BR>
expect a return to historic levels of economic growth or a<BR>
return of sustained optimism to nurture a healthy jobs<BR>
market and a growing housing market any time in the near<BR>
term.</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 environmental influences, we&#146;re still optimistic<BR>
about the near term prospects for Kirkland&#146;s. First, we<BR>
don&#146;t view the consumers without resources and interest in<BR>
shopping. While it&#146;s been an historically limp and erratic<BR>
recovery, there&#146;s been a recovery of sorts.</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">Importantly, our business continues to improve its<BR>
consistency and produce solid results as our years of<BR>
financial investment and foundational work in systems,<BR>
process and people have yielded a capable and productive<BR>
business platform from which to grow the top and bottom line<BR>
and produce store unit growth necessary to, in time, create<BR>
a high recognizable national retail brand.</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">Accelerated but proven growth is presently moderately<BR>
difficult. Not impossible, just challenging with limited<BR>
space available from existing or new centers, acceptable<BR>
occupancy cost to Kirkland&#146;s.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">New retail developments are coming online very slowly as we<BR>
previously noted and it now appears it may be years to pull<BR>
a very significant increase in new power strip centers<BR>
shopping space due to slow economic and housing growth,<BR>
tougher lending underwriting for developmental loans and the<BR>
effect of environmental and other governmental regulations.</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 continue to compete for viable retail spaces and we<BR>
will win our share. The viability to Kirkland&#146;s means a high<BR>
probability of profitability and a reasonable return on our<BR>
investment in addition to a good retail location in a<BR>
desired market and development.</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 are happy to announce that we&#146;re augmenting our real<BR>
estate effort. We have a new hire at the vice president<BR>
level who starts next month. And we expect to (invoke)&nbsp;many<BR>
more resources to building a larger universe of potential<BR>
deals and to augmenting our real estate team.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We opened six new stores during the second quarter and<BR>
closed to mall stores, two fewer openings than projected.<BR>
Space delivery delays had adversely affected our new store<BR>
openings schedule as Mike noted.</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 finish 2014 a tad shy of our goal of 10% annual square<BR>
footage growth but we should have 30 openings by<BR>
Thanksgiving with a balance of the 2014 class, four to six<BR>
stores probably, opening in January.</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">Therefore, 2014 class will not open on time schedule to<BR>
provide the full complement of planned current year new<BR>
store revenue to our 2014 fiscal plan. Closings are running<BR>
close to or very slightly behind our projection of 15 at<BR>
this 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">Delays notwithstanding, our sales run rate for the 2014<BR>
class of new stores thus far, is nicely above plan<BR>
suggesting the possibility of additional revenue<BR>
availability if the trend continues.</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">Thus, we announced a slight adjustment to the back half<BR>
guidance despite the sales opportunity that we have in the<BR>
fourth quarter this year, with more moderate weather during<BR>
the critical weekend holiday shopping periods.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So we still believe the 10% annual square footage growth<BR>
plan we announced at the end of last year is both desirable<BR>
and doable. But we will not unduly moderate our deal<BR>
standards to hit an annual new store opening goal.</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 know the results and ignoring and accepting high<BR>
occupancy cost or accepting secondary locations in order to<BR>
hit a store opening or store revenue goal. That said our<BR>
goal for brick and mortar stores remains largely unchanged<BR>
for future periods.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And vigorous growth of the online channel is expected to<BR>
continue on several fronts as we seek to expand our site<BR>
offering, improve site performance and accessibility<BR>
together with improved buying convenience for customers,<BR>
communicate better with customers about opportunities, drive<BR>
store visits and make the site rich in information about our<BR>
product.</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 we&#146;ve said more than once, our brick and mortar unit<BR>
growth will always be tempered by the effects of growth in<BR>
ecommerce. Mike provided some earlier detail as to<BR>
merchandise category performance for the quarter and our end<BR>
of quarter inventory position which is very acceptable given<BR>
the growth in ecommerce.</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 biggest takeaway for our Q2 category performance is a<BR>
very solid and consistent across the board comp performance<BR>
in our major categories. The only decorative accessories and<BR>
none of the major categories was down significantly to last<BR>
year in plan as we continue to moderate our skew offering<BR>
and rebuild this very important category from core success.</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 had successful Mother&#146;s Day<BR>
and big sale events, the two largest events on the<BR>
promotional calendar for the first half. We were pleased<BR>
with a trail of summer-appropriate seasonal product in the<BR>
second quarter which will influence our buying in the first<BR>
half of 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">As I mentioned, retail was erratic in the second quarter so<BR>
we did experience the need to drive sales with more<BR>
promotions during the middle of the quarter through a<BR>
combination of limited time flash sales and promotional<BR>
store flyers that produced customer excitement and<BR>
significant increases in traffic and sales without having to<BR>
promote specific categories, classes or 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">These promotions were helpful to the quarterly sales results<BR>
but did affect our average unit retail and average ticket,<BR>
the only two retail metrics not positive for the period.</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 reminded that the middle and back half of the second<BR>
quarter and especially July remain important to the customer<BR>
as a period of promotional expectation.</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 back-to-campus event continues to perform very well from<BR>
the second quarter into the third with a different and more<BR>
focused aim point than typical back to school.</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 we look to our third quarter, we&#146;re experiencing above<BR>
expectation early sales of our seasonal product and<BR>
Halloween (harvest). Christmas product will appear in the<BR>
stores next month.</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 seasonal sales are very important to enable us to<BR>
deliver healthy product margins during the back half. Based<BR>
on the repetitive successes over the past several years with<BR>
seasonally appropriate product and our anticipation about<BR>
this year&#146;s product selection or the success of this year&#146;s<BR>
product selection, we expect to realize strong sales crews<BR>
and nice gross margins on our fall and holiday seasonal<BR>
assortments in the back half of this year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We&#146;re pleased with our positioning as we look forward to<BR>
many positive changes in the next few months. We&#146;ll continue<BR>
to move forward with the ecommerce platform changes such as<BR>
order management and the function enhancements to Oracle for<BR>
allocation and planning, both of which we&#146;ve discussed with<BR>
you previously.</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 excited to report that we&#146;re partially moved into our<BR>
new headquarters building with the remainder of the national<BR>
team set to move in on or about October 1.</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 see a bright future for Kirkland&#146;s as we consider the<BR>
potential of a newly constituted, highly talented and<BR>
focused management team located in a new expanded and more<BR>
efficient environment with state of the art information<BR>
systems and operating a highly edited store base.</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 look forward to seeing you in our stores very soon<BR>
and talking about Kirkland&#146;s. Thank you for your time and<BR>
interest. And, operator, we&#146;re ready for 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, Mr.&nbsp;Alderson. Ladies and gentlemen, if you would<BR>
like to register for a question, please press the 1 followed<BR>
by the 4 on your telephone. You will hear a three-toned<BR>
prompt to acknowledge your request.</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">If your question has been answered and you would like to<BR>
withdraw, please press the 1 and the 3. And if you are using<BR>
a speakerphone, please lift your handset before entering<BR>
your request. Once again, to register, you may press the<BR>
1-4. And our first question is from the line of (Neely<BR>
Timinga) with Piper Jaffray. Please go ahead.</DIV></TD>
</TR>
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    <TD>(Neely Timinga): Great. Good morning. I just want to offer up my congratulations to Mike upfront.
Very well deserved as an opportunity and it&#146;s going to be fun to watch you rise to the
occasion which we know you can.</TD>
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    <TD>Mike Madden: Thank you, (Neely).</TD>
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    <TD>(Neely Timinga): I just &#151; yes, you bet. So I have about three questions I want to walk through, if
I may. First, would love to talk a little bit more about that real estate dynamic, so as we
kind of think about the three (signs)&nbsp;that you indicated that are impacting the full year, you
know, is &#151; was that &#151; some of that reflected in the Q2? How much of that is Q2, Q3, Q4, you
know, in terms of the delay of those openings and the impact of having to, you know, count for
rent, et cetera? That&#146;d be helpful.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">And then, I guess the bigger, better question is, you know, is this, you think,
unique to, you know, a category in which you serve or the size of box that
you&#146;re serving, just kind of trying to get a little bit more sense of what&#146;s
really sort of behind the situation and whether or not you think it&#146;s, you know,
contained or not.



<P align="left" style="margin-left:10%; font-size: 12pt">Secondly, two, if I may, could you also talk through decorative accessories a
little bit more? You know, what are you doing to address that as a category? And
how much of that did it represent, really, in Q2 and how much should that
typically represent for that season really (camps)&nbsp;up in the back half, but how
much is decorative accessories in the back half? And the overall assortment and
what are you kind of doing there? And I will have follow up as well. Thanks.

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    <TD align="left" valign="top">Man:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks (Neely). Yes, I&#146;ll start, (Neely), on the real estate<BR>
timing that you asked about. We&#146;re essentially at the lower<BR>
end of the previous end we gave on new store openings and<BR>
closings so 35 and 15.</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 impact on Q2 was relatively minor. I mean, we&#146;re pushing<BR>
two stores from Q2 into Q3. We had a couple of &#151; a week or<BR>
two delay on some of the stores we did open in Q2. So I<BR>
would put that at, you know, less than a half a million<BR>
dollars on Q2.</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 way to think about the back half, though, is you know,<BR>
if you &#151; let&#146;s say, if you move five stores from the<BR>
beginning of Q4 to the end of the year, you&#146;d still get them<BR>
open by the end of the year, but you move it and you miss<BR>
the fourth quarter, that&#146;s about $2&nbsp;million worth of sales,<BR>
maybe a little bit more.</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 if you flow that through at, say, 40%, you know, that&#146;s<BR>
about a nickel just on the sales. Now, you do pick up some<BR>
of that rent being lower and some other expenses. I try to<BR>
account for that in the 40% when I explain it, but that&#146;s<BR>
the impact.</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">Now, Robert did allude to, in his comments, that the new<BR>
stores that we&#146;ve opened today have been opening pretty<BR>
strong, so that offsets it a bit. But that&#146;s how I would<BR>
explain the impact that has &#151; as it had on the guidance on<BR>
the real estate.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Man:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">You know, I would just add, while we&#146;re not happy that the<BR>
(class)&nbsp;this year go pushed again a little bit downstream<BR>
and that we didn&#146;t end up at 40 or 42 openings instead of<BR>
35. That&#146;s what we would&#146;ve liked to have happen.</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 sometimes you just can&#146;t approve everything that is out<BR>
there and the delays are just not within our ability to<BR>
conquer. So I think the way we have approached it is, okay,<BR>
we tried that for three years now and that&#146;s been the<BR>
result. Surely, we can learn from 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">And so we have hired a guy to come in who&#146;s very<BR>
experienced. He&#146;ll be here next month, as I mentioned. We&#146;re<BR>
going to build a little bit bigger team and approach this<BR>
with the idea that we need to have more deals in the<BR>
pipeline.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We had tried to be very efficient with that and that&#146;s<BR>
always been the way Kirkland&#146;s has reacted because we would<BR>
like to pay as little as we can in occupancy costs and the<BR>
closer you are to the moment in the deal, the better chance<BR>
you have to get a market or more favorable deal.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So we just need a bigger universe to work with and we need<BR>
to slide that universe further forward so that we can open<BR>
an acceptable number prior to the first of November and<BR>
that&#146;s the goal that we&#146;re working toward.</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">(Neely Timinga):
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">That&#146;s helpful. Robert of.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Man:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">If we go to the decorative accessories.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">(Neely Timinga):
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes, decorative.</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">Man:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The question on decorative &#151; I&#146;m sorry, I&#146;m getting a<BR>
feedback here or is that her? Okay. On an annual basis, dec<BR>
is 7% to 8% of our business annually. So it&#146;s an important<BR>
category but it&#146;s been a category that has been running at<BR>
comp rates off of, let&#146;s go back to say, 2011 and &#146;12, we&#146;ve<BR>
been running down until this year and for a couple of years<BR>
there were running down double digits on the comp.</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 that has been a function of changes that the consumer<BR>
does from time to time and, you know, we&#146;ve been the best we<BR>
could to adjust to that. When we see that we&#146;re not making<BR>
quick progress in adjusting, our typical pattern, as you<BR>
know from following us for a while, is that we will tear a<BR>
category down and go back to core.</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;ll get all we can out of core and then we&#146;ll start<BR>
very carefully looking for new directions and new skews and<BR>
try to build that category back slowly to the productivity<BR>
level that we previously enjoyed or finding a different<BR>
level where we can produce comp sales and the margins that<BR>
we want.</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 it&#146;s looking for the balance of productivity. We&#146;ve done<BR>
that recently over &#151; I&#146;d say over the past three or four<BR>
years in (art), in alternative wall d&#233;cor, in mirrors, in<BR>
textiles. You know, it&#146;s &#151; whenever we have a problem pop up<BR>
out of 13 categories, we deal with it.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And so that&#146;s what we&#146;re doing right now and that was the<BR>
reason for the call out. We&#146;ve had a really nice recovery in<BR>
furniture recently where we went through about a year<BR>
process. We&#146;re not quite where we want to be there but it<BR>
looks pretty good.</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 (Neely), the numbers on that is about 8% of business in<BR>
Q2 and it&#146;s planned to be about 6 in Q3. The reason why that<BR>
goes down is primarily due to seasonal selling starting to<BR>
creep in and take more of the share. And we won&#146;t see that<BR>
begin to go the other way until probably mid-December.</DIV></TD>
</TR>
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    <TD width="1%">&nbsp;</TD>
    <TD>(Neely Timinga): Okay. That&#146;s really helpful. And I have just one follow up question, then I&#146;ll
pass it on to the next one. But on Omni-channel, you know, we&#146;re really excited about all the
initiatives coming together for you guys in the back half. And we&#146;re really kind of flipping
the switch to really see this full fruition of your Omni-channel capabilities in the back
half.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">Just wondering &#151; it sounds like your expenses are embedded obviously in the
guidance, you know, related to that and all the build that goes into it. Have
you included some revenue lists as well in your comp guidance? Or is that kind
of a TBD?

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    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I would say it&#146;s somewhat of a TBD (Neely). And those that run rank we kind of projected on the ecommerce side is<BR>
maybe slightly better than what we&#146;ve experienced year to date. We are turning on this order management<BR>
functionality in late September. And we will continue to add to that as we move forward into the season.</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 &#151; especially as we go into next year when we can start really turning on some key capabilities there<BR>
that can drive the top line such as third party selling, a better way to fulfil inside the store as opposed to<BR>
having to touch every item every time there&#146;s an order in the DC.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So there&#146;s a lot of opportunity. I wouldn&#146;t say that we&#146;ve, you know, driven that projection up dramatically<BR>
inside fiscal &#146;14 yet.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">(Neely Timinga):
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Okay. That&#146;s really helpful you guys. Good luck out there. Thank you.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">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 from the line of (Brad Thomas) with Key Bank Capital Markets. Please go ahead.</DIV></TD>
</TR>
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    <TD>(Brad Thomas): Hey. Good morning Robert and (Mike). And let me add my congratulations as well to
(Mike) on the new opportunity &#151; very excited for you.</TD>
</TR>

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    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Mike): Thank you very much &#151; appreciate it.</TD>
</TR>

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    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Brad Thomas): I wanted to follow up on that subject about the leadership team. And obviously
(Michelle) and (Adam) will be taking on additional responsibilities. But as you look at the
team, are there any, you know, holes that you believe you have to fill or areas that you need
to add as you take on a bigger role within the company?</TD>
</TR>

</TABLE>

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<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">This is Robert. I&#146;ll answer a little bit for (Mike) here,<BR>
and then I&#146;ll obviously let him chime in.</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, I think this is really &#151; the changes that we<BR>
announced today of course about (Mike) are, you know, they<BR>
speak for themselves. And obviously with that change,<BR>
suggested that we needed, you know, something different to<BR>
be happening in the financial side. So (Adam) is eminently<BR>
capable and we&#146;re excited about his potential as I&#146;ve said<BR>
in my remarks.</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 internal reorganization is really a continuation of an<BR>
effort of a couple of years, even going back when we first<BR>
reorganized stores in 2010 to unify the intent of buyers<BR>
with the execution in stores and the presentation in stores<BR>
and the way that we set up stores and the way that we<BR>
operate our marketing and our promotions.</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 it&#146;s an attempt to start to even close that &#151; those gaps<BR>
if we have any even closer. And I think we&#146;re really putting<BR>
some very, very capable people into a position to play off<BR>
of each other&#146;s talents and strengths, and for us to work<BR>
even closer as a merchandising group.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So there is a strategic design behind that and in &#151; that<BR>
doesn&#146;t have anything to do with, you know the succession. I<BR>
think we would have wanted to this anyway. So now (Mike).</DIV></TD>
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    <TD width="1%">&nbsp;</TD>
    <TD>(Mike): Yes. (Brad), you know, I&#146;m excited about the opportunity here. And I think that it&#146;s good
to be going into with a team that I&#146;ve been working with for a long time. And we&#146;ve got good
tenure across the leadership group. We&#146;ve got some new faces as well.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">It&#146;s a new start for us in a lot of ways and a new office. And, you know, this
transition is going to be an important time for me to really, you know, dig into
some of the areas of the business that, you know, I haven&#146;t had as much exposure
to even though I have great exposure in every area.



<P align="left" style="margin-left:10%; font-size: 12pt">But I feel like to work with (Michelle), (Carla) and some of the merchants, you
know, is a big opportunity for me. And we&#146;ll see where that goes. And I&#146;m
optimistic that we&#146;ll get to, you know, a good place.

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    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I wanted to just add about the new slots that you asked<BR>
about &#151; any needs that we had. You know I just announced a<BR>
moment ago &#151; first time we said anything &#151; that we were at a<BR>
place where we could say that we had a hire in real estate.<BR>
So we&#146;re good to go there.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And, you know, recently we announced that we made a hire in<BR>
logistics. We brought (Gary Jordan) in to run our supply<BR>
chain &#151; a former guy from Asics. And we&#146;re looking, you<BR>
know, we&#146;re at the beginning of a very deep dive into where<BR>
do we go from $25, $30&nbsp;million in sales in ecomm, and how do<BR>
we get to 50, 75, 100 or wherever the water level tells us<BR>
is the right number as we also grow the brick and mortar<BR>
base?</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 be looking at that to see what additional talent<BR>
that we need to bring in. We made a recent add in our IT<BR>
group to help us with some of our capability online and<BR>
otherwise. We brought (Ken Butner) in as Vice President from<BR>
Tractor Supply.</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 feel good about the moves we made with the team. And<BR>
(Mike)&#146;s going to be looking at that I know very carefully<BR>
over the next few months to determine what he believes he<BR>
needs in the go forward period to be able to get the job<BR>
done. And we&#146;re certainly &#151; speaking as a board member -<BR>
we&#146;re very supportive of that because that&#146;s what we want to<BR>
do. We want to maximize the productivity and maximize the<BR>
value to our shareholders.</DIV></TD>
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    <TD>(Brad Thomas): Very helpful. If I could follow up with two questions on &#151; one on sales and one on
the new store performance. With respect to this third quarter, you know, you all are going to
be up against a much more difficult comparison. I think it sounds like comps are positive thus
far in August.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">You know is it possible to give us a little more color around how things are
trending, what the comparisons looked like last year in the third quarter? I
think you &#151; that was a quarter where transactions improved through the quarter
if I&#146;m not mistaken.



<P align="left" style="margin-left:10%; font-size: 12pt">And, you know, just your level of confidence that you could hit a 3 to 4.5% comp
that you&#146;re guiding to here.

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    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Right. Well first of all on the guidance &#151; the comp guidance<BR>
- we certainly &#151; a big part of that is just the trend that<BR>
we&#146;re seeing in the business. And I think it would be fair<BR>
to say that we&#146;re trending in the guidance range that we<BR>
gave thus far in August.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">We have a seasonal assortment that hadn&#146;t got &#151; took its<BR>
start, and we&#146;re optimistic about. Yes, last year was a<BR>
better comp for us at 4.9. We did pretty well with the<BR>
seasonal, but we felt like we had more opportunity there<BR>
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">And the consistency in the business has been there for us so<BR>
far this year. So there&#146;s some factors there that I think<BR>
lead to a comfort level with that guidance at this time that<BR>
- and that&#146;s why we ended up there.</DIV></TD>
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    <TD width="1%">&nbsp;</TD>
    <TD>(Brad Thomas): Great. And then just a housekeeping item on the new store performance &#151; it sounds
like they&#146;re doing very well. Any more clarity on how some of the new markets are doing versus
the fill in stores would be helpful.</TD>
</TR>

</TABLE>

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    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes. Looking at the stores we&#146;ve opened so far this year,<BR>
it&#146;s somewhat of a mix between fill in and new. Looking at<BR>
the list right now, I mean we got certainly really strong<BR>
performance at some of the fill in markets like Jackson,<BR>
Mississippi, Johnson City, Tennessee.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">But we also &#151; we opened a store in Novi, Michigan which is<BR>
just off of, you know, kind of a suburb of the Detroit area<BR>
- strong opening. We only have 30 stores in that state, so<BR>
that&#146;s definitely a new market in our &#151; the way we look at<BR>
it.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So a good mix &#151; good results so far. And hopefully that will<BR>
continue into the remainder of the class.</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 to hear. Thanks so much.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Thanks (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 from the line of (David Magee) with Sun<BR>
Trust. Please go ahead.</DIV></TD>
</TR>
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</TABLE>
</DIV>


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    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(David Magee): Yes, hi everybody and congrats as well from me. Robert, congrats on being a step
closer to Nirvana. And (Mike), (Michelle), congrats as well.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">A couple of questions I have &#151; one is the, you know, you sound, you know,
increasingly confident regarding the fourth quarter. Obviously that&#146;s by far the
biggest quarter all year. You know hopefully we won&#146;t have the same weather -
we&#146;ll have a better calendar.



<P align="left" style="margin-left:10%; font-size: 12pt">And you mentioned something maybe about seasonal &#151; doing something different
with that. Is that a &#151; I&#146;m interested in what you might be doing differently
there or any other opportunities that sort of help the visibility of the fourth
quarter this year versus last.

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    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well without talking about specific merchandise initiatives<BR>
right now, as you know that&#146;s a highly competitive sector.<BR>
We bought it up. We felt like as strongly as we performed<BR>
last year in the fourth quarter in seasonal, we felt like<BR>
there was additional opportunity.</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&#146;s certainly no secret that Christmas art has been a<BR>
growth area. And that&#146;s something that we continue to be<BR>
innovative in our merchandise offering. And it&#146;s something<BR>
that we enjoy doing because we know a lot about selling art.</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 there are numerous opportunities in the seasonal<BR>
category. We&#146;re making it enter the stores differently this<BR>
year &#151; a little bit of timing difference, slightly earlier.<BR>
But the way that we&#146;re flowing it to the stores will set<BR>
specific collections at a time rather than giving a little<BR>
bit of everything to the store this time and next 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">And so it takes several trucks over several weeks to build<BR>
the full collection in the stores. So we&#146;re trying to do<BR>
some things that we think are going to make that product<BR>
sell even better than it did last year. And we have a good<BR>
bit of experience in our system now that&#146;s helping us as we<BR>
look at buys.</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 actually can &#151; even in a seasonal context &#151; think about<BR>
some core product that should be repeated. And that&#146;s been a<BR>
very pleasant experience for our buyers as we look at the<BR>
fourth 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">The fourth quarter is not all about seasonal. And so you&#146;ve<BR>
got to have reasonable success with the rest of your<BR>
merchandise mix. And I think some of the emphasis that we&#146;ve<BR>
switched over the past few quarters to building housewares<BR>
and textiles and accessories and some of those categories<BR>
that lend themselves to gifting and to rapid turnover and to<BR>
building of excitement with customers who want to see what&#146;s<BR>
new that rolls in on a fairly frequent basis.</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 that&#146;s been helpful to our fourth quarter business<BR>
also. It&#146;s not been particularly helpful to our average unit<BR>
retail because it does affect it some. But, you know, we&#146;ll<BR>
deal with that as we go into 2015.</DIV></TD>
</TR>
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    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(David Magee): With regard to the success you&#146;re seeing with ecommerce, are you seeing any signs of
cannibalization at this point with the stores? And then as part of that, are you seeing the
change in terms of the transaction size with ecommerce?</TD>
</TR>

</TABLE>


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

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Mike): Yes, I&#146;ll cover that. You know I think there&#146;s naturally going to be some cannibalization.
It&#146;s hard to measure. But we feel like a lot of it is incremental when you look at what we&#146;re
pushing and the percentage of our business that&#146;s coming through paid search advertising.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">There&#146;s other ways that &#151; those ways that we look at it certainly suggest that
we&#146;re attracting customers. But, you know, about 50% of what we sell online are
items that we also sell in the store. About 40% of the revenue that we generate
on line and ship to store &#151; not 40% of the orders but 40% of the revenue.



<P align="left" style="margin-left:10%; font-size: 12pt">So there&#146;s definitely a connection there. And part of this is we&#146;re giving our
customer more choice in how they shop with us. And that&#146;s a natural, you know,
outflow of this and reason we&#146;re doing it.



<P align="left" style="margin-left:10%; font-size: 12pt">So there&#146;s some cannibalization. But, you know, we feel like we need to be
positioned to handle what the customer is asking for through the site.

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<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(David Magee):
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">And then.</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(Mike):
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">What was the (unintelligible) (David).</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(David Magee):
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Yes.</TD>
</TR>
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</TABLE>
</DIV>


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

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    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Mike): We&#146;re selling more SKUs on the site. You know we&#146;re up above 5000 SKUs now. And I think
that&#146;s naturally led to a little bit lower average item on the site which we kind of &#151; it
depends on the season &#151; kind of ranges between say $25 and $45 on the site. And it&#146;s a little
lower this year.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">We&#146;re pushing more units and that&#146;s a little taxing on the operation. And we&#146;re
working on that to better define what sells well on line at a profit versus, you
know, what doesn&#146;t.


<P>
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    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(David Magee): Thank you (Mike). And lastly are you seeing or have you talked about the sourcing
costs from China &#151; any change there?</TD>
</TR>

</TABLE>


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

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Robert Alderson: You know (David), we haven&#146;t seen anything that has been significant. The back
half is of course dominated by seasonal which we bought in February, March and April. So we&#146;ll
be buying that again in a few months. And we will see what happens there.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">But structurally we haven&#146;t seen significant changes. Our shipping costs have
been largely static this year based on some deals that we did. That&#146;s on the
inbound side. So, you know, so far not affected dramatically, but we&#146;ll see.

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    <TD width="76%">&nbsp;</TD>
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<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">Great. Thanks a lot and good 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.</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 from the line of (Mark Montanya) with<BR>
Avondale Partners. Please go ahead.</DIV></TD>
</TR>
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</TABLE>
</DIV>


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

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Mark Montanya): Hi &#151; just a question about marketing. Hoping you can just give us an update in
terms of your elimination of TV marketing in some markets, increased print ads and, you know,
what further changes do you think you&#146;re going to make that result in cost savings or just
keeping marketing flat?</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">And what about a change in message &#151; is there any change?

<DIV align="center">
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    <TD width="77%">&nbsp;</TD>
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<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">Okay. Well to summarize where we are with the advertising<BR>
right now, during the first half and second quarter we were<BR>
in 25 markets &#151; covered about 141 stores which is about 43%<BR>
of the chain. We had five drops in Q2.</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">They were a combination of freestanding inserts in the<BR>
newspaper, shared inserts in the newspaper, shared mail<BR>
delivered to the mailbox. We are going to continue in most<BR>
of those markets in the back half.</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 mentioned earlier that in terms of year over year on the<BR>
marketing expense in the back half, we&#146;re going to be<BR>
slightly down. So we are going to end the year with roughly<BR>
the same marketing spend &#151; maybe a little higher &#151; not much<BR>
though as we had last year, and about the same as a<BR>
percentage of sale.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">What we&#146;re learning and why we moved kind of away from the<BR>
TV for the moment was just the cost and the impact on the<BR>
return that we saw. We did that throughout last year. We ran<BR>
television throughout last year &#151; in fewer markets, but<BR>
enough certainly to get a read on the impact. And we shifted<BR>
more to the print this year. And the costs are lower and<BR>
we&#146;re seeing a better return on 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">What we&#146;re doing right now though is we go into the back<BR>
half in analyzing each market. Some markets are more<BR>
efficient, more dense for us and more effective. So we are<BR>
going to tweak that a little bit. And I think it will result<BR>
in a little bit less being spent in the back half than in<BR>
the first half.</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 overall, the statement would be we&#146;re committed to<BR>
continuing these forms of external advertising. We feel<BR>
like, you know, we need to reach a new customer. We&#146;re doing<BR>
a pretty good job of reaching the existing customer through<BR>
loyalty, through the web site, through our email database<BR>
and other tools. We&#146;ve got to start bringing in these new<BR>
customers.</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 are seeing awareness kick up. Yes, we&#146;re looking at<BR>
the returns hard from a financial standpoint and trying to<BR>
control the impact of the expense line. But we are seeing<BR>
awareness lift in these markets. And down the road that<BR>
means a lot to us.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">In terms of the creative, you know, we&#146;re constantly<BR>
tweaking that. You know we focused a little bit on this<BR>
theme of, you know, home &#151; the family aspect of home &#151; the,<BR>
you know, the welcoming nature of the store. And you see our<BR>
messaging kind of hit on those kind of feel good topics.</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;ll continue to do that. But how it shows and looks,<BR>
we&#146;re always trying to tweak that and it evolves.</DIV></TD>
</TR>
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Mark Montanya): Okay &#151; and then just a follow up. You know your comps are really pretty
impressive this year and the guidance going forward looks good. So, you know, naturally you&#146;d
expect some additional leverage to flow to the bottom line.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">But is all that additional leverage just being eaten up by the ecommerce and
nothing else &#151; which would actually be a good thing if it&#146;s all in just
ecommerce? And when did that ecommerce expense start to ramp up and when should
it level off?

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    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes. We started that site from scratch back in<BR>
2010. So we&#146;ve been investing pretty heavily since<BR>
then. And it comes in the form of the supply chain<BR>
corporate personnel that support all these efforts<BR>
- technology, people in technology.</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 a lot of it is that (Mark). And yes, we&#146;ve<BR>
increased the marketing budget which has been part<BR>
of it as well for the overall company, and then<BR>
just the people. So we&#146;ve kind of segregated into<BR>
really three buckets &#151; the ecommerce, expenses and<BR>
the need we felt to invest so that we could<BR>
support all these additional capabilities that it<BR>
brings the business.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">That kind of overlaps into corporate personnel<BR>
because a lot of those adds that we&#146;ve made relate<BR>
directly to that Omni-channel approach that we&#146;re<BR>
taking. And then on the marketing side &#151; just the<BR>
pure marketing &#151; you know, we really didn&#146;t do<BR>
much of that in the past. And we had a big lifting<BR>
of the bar there, and we&#146;re trying to manage that<BR>
cost now that we&#146;ve got it kind of built into the<BR>
P&#038;L as best we can to our earlier discussion here.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So stepping back from it, I think we haven&#146;t had<BR>
the growth on the top line combination of comps<BR>
and new store activity catch up with those<BR>
investments yet. And that&#146;s what you&#146;re seeing in<BR>
Q1, Q2 and into Q3. But as we get to Q4 I think<BR>
there&#146;s a better flow through in Q4 because we&#146;re<BR>
going to have more stores open. We&#146;re going to<BR>
have more of a lift on that 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">And as we go into the &#146;15 the expense increase<BR>
should drop. And a lot of what we&#146;ve done is in<BR>
place. So the sales lift combined with a lower<BR>
increase on the expense side is how I would look<BR>
at &#146;15 here early on.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">(Mark Montanya):Okay. That&#146;s fantastic &#151; thank you.</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 from the line of (Joan Storms)<BR>
with Webpush Securities. Please go ahead.</DIV></TD>
</TR>
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</DIV>


<P>
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<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Joan Storms): Hi &#151; good morning. Congratulations to (Mike), (Michelle) and (Adam). And both of my
questions have been answered &#151; but I guess just a couple of quick ones.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">On the freight &#151; we just got off the Dollar Tree call as well. They were talking
about freight expenses being higher due to driver shortages. And I believe you
guys had mentioned that in the past. Do you have a &#151; you talked a little bit
about inbound was a little neutral. But can you comment on that at all?

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    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sure. Inbound is neutral. That&#146;s container costs coming from<BR>
overseas. And I feel like that&#146;s not going to have much of<BR>
an impact for the balance of the year. We&#146;ve got fixed rates<BR>
through the spring.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">On the outbound side as you alluded to, a lot of our &#151; our<BR>
ecommerce shipping flows through that line item on our P&#038;L<BR>
so that the lift in that business has had an impact on that<BR>
comparison. But also as you mentioned, the driver shortage<BR>
issue &#151; it is tougher for us to get the number of bids on<BR>
routes and pricing that we had in the past. That&#146;s become<BR>
more difficult.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And, you know, we try to manage around that as best we can.<BR>
But it&#146;s something that&#146;s going on macro wise that everybody<BR>
is having to react to. And it did play a part in some of<BR>
that deleverage that we saw on that line item.</DIV></TD>
</TR>
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</DIV>


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    <TD width="1%">&nbsp;</TD>
    <TD>(Joan Storms): Okay. And then also on the ecommerce, you know, you said it was up 27% in the
quarter. Just remind us what the growth rate had been the past couple of quarters, and maybe I
think you said you&#146;re expecting a little bit higher growth rate in the back (unintelligible).</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 12pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="18%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

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<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes. It&#146;s been around that range (Joan), you know, that 30,<BR>
35% range. So it was a little lower than the growth rate.<BR>
But the volume did pick up &#151; I think about $600,000 or so<BR>
from Q1 to Q2. So sequentially we&#146;re increasing the business<BR>
even though Q2 for the company overall is probably our -<BR>
it&#146;s our lowest quarter of the year.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">I mean it&#146;s the one that makes the least amount of impact on<BR>
the overall year. So we did see that lift, and we do have<BR>
embedded in the guidance a little bit higher growth rate<BR>
than 27% for the back half.</DIV></TD>
</TR>
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</TABLE>
</DIV>


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    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Joan Storms): Okay. And then lastly &#151; so the deviation from your guidance for the third quarter
versus where we were on the street at the 8 cents over the 6 cents is primarily due to the 2
cents from the corporate headquarter relo and then some ecommerce investments?</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 12pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="18%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

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<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">More or less, yes &#151; the 2 cent impact for the relocation.<BR>
Keep in mind a penny &#151; it doesn&#146;t take much whether it&#146;s 17<BR>
million share count. You can move that with a couple hundred<BR>
thousand dollars of pretax profit or expense.</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 it&#146;s kind of &#151; some of it&#146;s just kind of where it ended<BR>
up. But I would say it&#146;s the relo and it&#146;s also just higher<BR>
cost to process ecommerce orders. With our ticket being a<BR>
little lower this year, it&#146;s more units, it&#146;s more work,<BR>
it&#146;s more labor, it&#146;s more packaging.</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 that grows we&#146;re trying to keep up with it as best we<BR>
can and be efficient at the same time. And right now we&#146;re<BR>
not at that point of optimal efficiency.</DIV></TD>
</TR>
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    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Joan Storms): Oh, and also part of that too is your sales being &#151; the new stores being shifted to
post holiday too probably.</TD>
</TR>

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    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Robert Alderson: Yes. There&#146;s an impact there too as well.</TD>
</TR>

</TABLE>


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

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    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Joan Storms): Okay, great &#151; perfect. Okay, thank you very much and good luck going forward.</TD>
</TR>

</TABLE>

<DIV align="center">
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<!-- Begin Table Head -->
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    <TD width="5%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

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<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 (Joan).</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 from the line of (Anthony Libozinski) with<BR>
Fidelity and Company. Please go ahead.</DIV></TD>
</TR>
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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

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    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Anthony Libozinski): Good morning. Congrats to (Mike), (Michelle), (Adam) and Robert. So just a
follow up on the ecommerce question &#151; so, you know, looking at last year ecommerce was about
$20&nbsp;million in revenue. And this year looks like it should be around $27&#043; million.</TD>
</TR>

</TABLE>



<P align="left" style="margin-left:10%; font-size: 12pt">So just wondering at what level of sales do you guys need to make this a
contributor to the bottom line.

<DIV align="center">
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    <TD width="18%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

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<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 that&#146;s a toughie because it depends on what you include<BR>
in there, you know. And as we start to interact more with<BR>
the store and actually fulfill orders inside the store,<BR>
that&#146;s going to help our overall profit picture because<BR>
we&#146;re not having to touch it and move it like we are today.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">But it&#146;s company wide sales, so that, you know, that will be<BR>
a better profit scenario for us when we&#146;re able to in store<BR>
fulfill instead of ship to stores as much going forward. And<BR>
as we start to engage with third parties, that&#146;s very little<BR>
impact on us in terms of cost because as we engage with<BR>
third party vendors, you know, they&#146;re managing the<BR>
inventory. They&#146;re doing the shipping. It&#146;s kind of just a<BR>
margin for us, so those two dynamics kind of start to play<BR>
into the overall ecommerce scenario for Kirkland&#146;s.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">That&#146;s going to have a lot to say about profitability. As I<BR>
sit here today looking at it, I mean we&#146;re marginally<BR>
profitable at this level. And it&#146;s taking a lot of energy to<BR>
keep up with the volume as currently constructed.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And, you know, if we were to increase it, you know, it&#146;s<BR>
actually costing us at the same time it increases based on<BR>
the way we fulfill today. But again we&#146;re working on two<BR>
major things that will offset a lot of costs and lead to a<BR>
better flow through for that business.</DIV></TD>
</TR>
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</TABLE>
</DIV>


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

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Anthony Libozinski): Okay. So can you just remind us as to when you expect third party fulfillment
as well as the in store fulfillment?</TD>
</TR>

</TABLE>

<DIV align="center">
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    <TD width="18%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

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<!-- Begin Table Body -->
<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 working on both initiatives. A precursor to that is<BR>
getting this order management system in and up and running<BR>
which is going to be happening September. That is a<BR>
foundational 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">So it&#146;s the type of technology that you get in place. And<BR>
then you start turning features of it on. We&#146;ll get some<BR>
immediate benefits in terms of how we communicate with<BR>
customers about their order as it&#146;s in process and how we<BR>
choose how to fulfill orders in a more effective way &#151; so<BR>
there&#146;s immediate benefit.</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 turning on the supplier direct fulfillment will be 2015<BR>
- hopefully early in the year. But we&#146;ve got some work to do<BR>
to finalize that. And then on the in store fulfillment,<BR>
again we&#146;ve got to get past the holidays because that&#146;s a<BR>
big training effort for the stores. And we want to go out,<BR>
you know, really ready to execute there. So that would be<BR>
early next year as well.</DIV></TD>
</TR>
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</TABLE>
</DIV>


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

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Anthony Libozinski): Okay, that&#146;s helpful. And can you give us an update on your customer loyalty
program? How many members do you have in that? What&#146;s the average spending per customer? Any
relevant metrics for that would be helpful.</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 12pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
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    <TD width="18%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
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<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yes. We are up to &#151; well looks like a little over 2.5<BR>
million enrolled. And I would characterize or dig into that<BR>
a little further just to give you some color.</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">Those that are really actively, you know, we would say<BR>
repeat, you know, high level loyalty people within that 2.5<BR>
million or around 700,000 people. And if you look at that<BR>
slice of it, we&#146;re seeing an ADT that&#146;s in the $45 range<BR>
which is, you know, about 16% more than the average for the<BR>
company.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">And even those that are in the K club program which is the<BR>
full 2.5&nbsp;million, that ticket&#146;s about 5 or 6% more. So we&#146;re<BR>
encouraged by that. It&#146;s about overall &#151; when you include<BR>
the credit card program and the loyalty program by itself,<BR>
it&#146;s approaching two thirds of the business.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">So we are starting to get to a point where we can segment<BR>
better and speak to customers in a different way. We&#146;re<BR>
looking forward to being able to report back more detail on<BR>
that as we go forward.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

<TR valign="top" style="font-size: 12pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="right">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(Anthony Libozinski): Okay. And lastly, you know, as far as new store openings for next year, I
know you haven&#146;t given guidance for that. But any ballpark estimate as to what your
expectations are would be very helpful. Thank you.</TD>
</TR>

</TABLE>

<DIV align="center">
<TABLE style="font-size: 12pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="19%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="76%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<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&#146;ve said 10% square footage growth which, you<BR>
know, for us I think next year is for now and just to<BR>
think about we will refine this later to be clear. But,<BR>
you know, a net 30 kind of number is probably what<BR>
we&#146;re pushing for.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD colspan="3" valign="top" align="left">(Anthony Libozinski):Thank you very much.</TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Operator:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mr. Alderson, there are no further questions at this<BR>
time. I&#146;ll return the call back to you. You may<BR>
continue with your closing remarks sir.</DIV></TD>
</TR>
<TR valign="bottom" style="font-size: 12pt">
    <TD align="left" valign="top">Robert Alderson:
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Well thank you very much everyone for your interest and<BR>
time. And we&#146;ll see you later in the year to talk about<BR>
Q3. 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">Ladies and gentlemen, this does conclude the conference<BR>
call for today. We thank you all for your participation<BR>
today. Have a great day everyone.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 12pt">END




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