Kirkland's Reports Fourth Quarter And Annual Results

Investor Conference Call and Web Simulcast

Kirkland's will host a conference call today, at 11:00 a.m. ET to discuss its results of operations for the fourth quarter of fiscal 2010. The number to call for the interactive teleconference is [phone]. A replay of the conference call will be available through Thursday, March 17, 2011, by dialing [phone] and entering the confirmation number, 21510653.

A live broadcast of Kirkland's quarterly conference call will be available online at the Company's website www.kirklands.com under Investor Relations or http://www.videonewswire.com/event.asp?id=76716 on March 10, 2011, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue for one year.

Reconciliation of Non-GAAP Information

This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”). The non-GAAP measures are “adjusted net income” and “adjusted diluted earnings per share” and are equal to net income, and diluted earnings per share excluding adjustments to the Company’s valuation allowance for deferred tax assets, adjustments related to the prior year tax provision, adjustments to the state tax rate applied to the Company’s deferred tax assets, and certain income tax credits related to prior periods. Management uses these measures to focus on normalized operations, and believes that it is useful to investors because it enables them to perform more meaningful comparisons of past, present and future operating results. The Company believes that using this information, along with the corresponding GAAP measures, provides for a more complete analysis of the results of operations by quarter. Net income and earnings per share are the most directly comparable GAAP measures. Below is a reconciliation of the non-GAAP measures to their most comparable GAAP measures:

Reconciliation of Non-GAAP Financial Information
			13 Weeks Ended				52 Weeks Ended				13 Weeks Ended				52 Weeks Ended
(dollars in thousands, except per share amounts)			January 29, 2011				January 29, 2011				January 30, 2010				January 30, 2010
Net income
Net income in accordance with GAAP			$14,383				$26,431				$22,078				$34,570
Adjustments to income tax expense			($814)				($814)				($3,319)				($5,881)
Adjusted net income			$13,569				$25,617				$18,759				$28,689
Diluted earnings per share
Diluted EPS in accordance with GAAP			$0.70				$1.28				$1.08				$1.71
Adjustments to income tax expense			($0.04)				($0.04)				($0.16)				($0.29)
Adjusted diluted earnings per share			$0.66				$1.24				$0.92				$1.42

Kirkland's, Inc. was founded in 1966 and is a specialty retailer of home décor in the United States. Although originally focused in the Southeast, the Company has grown beyond that region and currently operates 296 stores in 30 states. The Company'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. The Company's stores also offer an extensive assortment of gifts, as well as seasonal merchandise. More information can be found at www.kirklands.com.

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's actual results to differ materially from forecasted results. Those risks and uncertainties include, among other things, the competitive environment in the home décor industry in general and in Kirkland'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's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K filed on April 15, 2010. Kirkland'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.

KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
			13-Week Period Ended
			January 29,				January 30,
				2011				2010
Net sales			$	139,606			$	142,797
Cost of sales				80,521				77,803
Gross profit				59,085				64,994
Operating expenses:
Operating expenses				33,371				31,015
Depreciation				3,523				3,488
Operating income				22,191				30,491
Other income (expense), net				46				(26	)
Income before income taxes				22,237				30,465
Income tax expense				7,855				8,387
Net income			$	14,382			$	22,078
Earnings per share:
Basic			$	0.72			$	1.12
Diluted			$	0.70			$	1.08
Shares used to calculate earnings per share:
Basic				19,902				19,731
Diluted				20,549				20,450

KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
			52-Week Period Ended
			January 29,					January 30,
				2011					2010
Net sales			$	415,300				$	406,194
Cost of sales				244,764					237,688
Gross profit				170,536					168,506
Operating expenses:
Operating expenses				115,745					107,063
Depreciation				12,817					14,505
Operating income				41,974					46,938
Other income, net				194					47
Income before income taxes				42,168					46,985
Income tax expense				15,737					12,415
Net income			$	26,431				$	34,570
Earnings per share:
Basic			$	1.33				$	1.76
Diluted			$	1.28				$	1.71
Shares used to calculate earnings per share:
Basic				19,855					19,696
Diluted				20,578					20,249

KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
					January 29,			January 30,
						2011			2010
ASSETS
Current assets:
Cash and cash equivalents					$	91,222		$	76,412
Inventories, net						44,452			39,355
Deferred income taxes						3,528			3,552
Other current assets						7,468			4,331
Total current assets						146,670			123,650
Property and equipment, net						46,231			36,856
Non-current deferred income taxes						1,440			4,395
Other assets						736			640
Total assets					$	195,077		$	165,541
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable					$	20,236		$	15,589
Income taxes payable						1,289			7,087
Other current liabilities						24,364			25,402
Total current liabilities						45,889			48,078
Deferred rent and other long-term liabilities						30,899			28,978
Total liabilities						76,788			77,056
Net shareholders' equity						118,289			88,485
Total liabilities and shareholders' equity					$	195,077		$	165,541

KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
		52-Week Period Ended
		January 29,				January 30,
			2011				2010
Net cash provided by (used in):
	Operating activities	$	36,736			$	49,972
	Investing activities		(22,632	)			(10,246	)
	Financing activities		706				241
Cash and cash equivalents:
	Net increase		14,810				39,967
	Beginning of the period		76,412				36,445
	End of the period	$	91,222			$	76,412

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