Welcome to the third quarter 2008 Build A Bear Workshop, Inc. earnings conference call. (Operator Instructions). I would now like to turn the presentation over to your host for today's call, Molly Salky, Director of Investor Relations.

Good morning everyone and thank you for joining us for review of our results for the 2008 fiscal third quarter. With me this morning are Maxine Clark, Chairman and Chief Executive Bear, Scott Seay, President and Chief Operating Bear, Tina Klocke, Chief Financial Bear and [Dory Krueger], Managing Director of Strategic Bear Planning. In a moment I'll turn the call over to Maxine to provide her comments on the quarter and Tina will follow with additional comments on our financial results. Please know that our call is being recorded and broadcast live via the Internet. The earnings release is available on our investor relations website, and a replay of both our call and webcast will be available later today in the investor relations portion of our corporate website. Before we get started, just a reminder the forward-looking statements are inherently subject to risks and uncertainties. Our actual results could differ materially from those currently anticipated, due to a number of factors, including those set forth in the risk factor section in our 2007 Annual Report on Form 10-K, filed with the SEC, and we undertake no obligation to update or revise any forward-looking statement. Now, I'd like to turn the call over to Maxine Clark for her comments.

Thanks, Molly and good morning everyone and thank you for joining us to review our third quarter results. I think everyone's aware of the significant challenges all retailers face in the third quarter – declining mall traffic, hurricane disruptions to stores and consumers across the Gulf Coast and Florida, and the ongoing fear and uncertainty related to the financial crisis. In the midst of this turmoil, while not losing sight of our long-term growth objectives, we're using this highly extraordinary time to provide our guests with a break from the day-to-day malaise, and bring some relief from the economic news. I'll discuss our problems and begin today in detail in a few – our programs, excuse me, that begin today in detail in a few moments. In these challenging times, we remind ourselves that while our business may be more sensitive to some other retailers and downturns in the economy, it is also more responsive to upswings. In good times and challenging times, a fundamental strength of our company remains our strong store model, which has the ability to deliver profits and positive cash flow, in a wide-range of economic climates. Our stores are highly productive, generating above-average sales per square foot and positive cash flow. That is still the case today. But we know too, that we provide an outlet for over-stressed families to provide children with a fun and interactive experience that lets them escape from the pressures of the outside world, and that is needed now more than ever. In our call today, I'd like to give you some details on how we are responding to the current economic turmoil, what product and programs we've put in place to celebrate the holiday season this year, and finally, how we are investing in the long-term staying power of…

Thanks, Maxine and good morning everyone. I’ll provide additional details related to our 3rd quarter financial performance. As Maxine discussed earlier, our European operations delivered a strong performance in the third quarter, ending the quarter with 53 stores in Europe. We continue to estimate our chance will ultimately be about 70 stores in the UK and Ireland. Plans in 2009 are to add two additional stores in the UK. The decline in the third quarter total revenue of $2.6 million was driven by the decrease in North American comp store sales. The decline was partially offset by new stores open in the last 12 months and an increase of comp store sales in Europe. Total revenues include international franchise fees which increased 5% to $982,000 compared to the 2007 3rd quarter. During the quarter franchisees opened two stores, the ninth store in Japan. And the ninth store in South Africa and ended the quarter with 60 stores. There were no store closings in the quarter. We expect franchisees to open approximately 10 new stores this year net of closing. The pace of store expansion and international locations continues to be highly dependent on the availability of the right real estate location for our stores which in many countries can take time to identify and negotiate. Through additional oversight of our North American operations we continue to work hard to improve the performance of our existing base of franchisees. This oversight is not only includes real estate but extends to inventory planning, marketing programs, store operations and training. Full year revenues from franchisees are targeted at approximate $4.5 million, up from $3.6 million in 2007. For licensing revenues we remain on track for revenues of approximately $2.4 million, down slightly compared to last year. Our gross margin rate in the 3rd…

Thanks Tina and Maxine. And now we’ll open the call up to your questions. Maxine, Scott, Tina and [Dory] are all available to answer your questions.

(Operator Instructions) Your first question will come from [Tracy Cogan] – Credit Suisse. [Tracy Cogan] – Credit Suisse: Thanks. Good morning, everybody. I was wondering if you guys could talk a little bit about trends by month and maybe give us a sense for how some of those product launches like High School Musical Bear and Hannah Montana performed relative to your expectations? Thank you.

We don’t report on sales by month, but I will tell you that product launches have been very successful this past year, particularly High School Musical and Hannah Montana have been very strong and have, in some cases, exceeded our expectations. We’ve been – we actually went back in and reordered both of those products and intended to – I know you’re not just talking about those, but just to focus on those for a moment. We have backup materials and just in case it did exceed our expectations, and it did, we decided to extend those products into the first quarter of 2009 where we originally had planned to have them in and out by the end of 2008, but they have been very successful, and have also been very successful in Canada and the United Kingdom. In terms of products that you’re asking about, are you talking about the things that we measure today, or are you talking about things that we’ve launched in the past? Okay. Oh, if you have any further questions about that, Tracy, why don’t you get back to me and we’ll talk about it specifically.

Your next question will come from Sean McGowan – Needham & Company. Please proceed. Sean McGowan – Needham & Company: Yes, can you talk about any benefits that you’re starting to see already, if any, from lower fuel costs, you know, directly related to transportation?

Obviously the diesel fuel costs are slightly ahead of what we see at the gas pump today. It has come down slightly, but at a peak we were almost 50 plus percent in fuel costs during the summer. We’ve seen that drop to the low 40’s. We continue to watch them as part of what we watch on a weekly basis and we’re working very closely with our vendors on that. One of the other reasons for the LTL program is exactly that, so we share that cost with other providers.

Your next question will come from Brad Leonard with BMO Capital Market. Brad Leonard – BMO Capital Market: Hi. What was the strategic review costs? Were any in the Q3 in the year-to-date?

In year-to-date 2008, no.

(Operator Instructions). Your next question will come from Mike Smith – Kansas City Capital. Mike Smith – Kansas City Capital: You didn’t really talk too much about Build-A-Bearville and how you’re trying to integrate that into your business. Can you give us an update on what’s going on there as to how many members you have? How many people use them on a daily basis and that sort of thing?

Yes. Actually it’s integrated so much into our business on a daily basis. I’m sorry if I wasn’t clear on that. We have over six million characters that have been made by our guests in Build-A-Bearville. That’s not necessarily a measure of how many people use it every day, and there are different scores that are measured on the Internet that we actually don’t publish because those are highly competitive information. But we are finding, because of some of the things that we have put on the website, like daily prizes and new launches every week, something new coming on on Build-A-Bearville that may not come out in our stores. There’s always gifts that you can pick up if you click on this or you click on that. But our entire merchandizing program, everything that we do at Build-A-Bear Workshop in our stores is integrated online. So, if we’re having a launch of a product, like High School Musical or Hannah Montana, it’s always featured on line. In terms of those particularly we created a whole new theater, had new dance moves, had new costumes, all kinds of things that could be tied to that. Right now it’s Halloween and Fall in Build-A-Bearville.com and there is a tremendous amount of activities in costumes and new – we decorated the barn. Kids are playing on there all the time, lots of activities. And our entire Fall program especially the ones developed around our new characters Hal and Holly Moose is developed for activity online, including a new world that you’ll be able to – I use world in the abstract, but it’s a new place you can go to that will be open starting the day after Thanksgiving where you can go and see what’s going on there and it’s tied…

Our next question will come from Derek Johnson – BMO Capital Market. Please proceed. Derek Johnson – BMO Capital Market: Good morning. Can you tell us what total international sales growth, as well as international comp store sales growth would have been in local currency?

We describe our comp store sales in local currency. So, in Europe it was 8.2% increase this quarter.

On a comp basis.

Your next question is a follow-up question from Sean McGowan – Needham & Company. Please proceed. Sean McGowan – Needham & Company: I just wanted to revisit for a second the fuel question and then ask another question about Europe. Scott, on the fuel if the prices of the fuel stayed where they are right now, I would imagine in comparison it gets easier as you go forward, so are you expecting to see a significant benefit in the coming months?

Well, there still hard to judge. The fuel prices are dropping – they dropped again this morning, but we do hope to see that. It all really depends on how – we are slightly head of what you’ll see at the gas pumps. When we had our drop, we probably had it a month ago to start seeing it come down and still dropping. But it’s in the low 40s still. So, that’s still much higher than it was last year. But the LTL was really the model, and the reason we went to that model was to share those costs and to kind of take some of that leverage away from just being on fuel cost surcharges for – so we can concentrate on the regular trucking costs. But we’re still seeing it in the low 40s. So until it drops below to the mid to low 30s it’s still above last year. So, it’s still an issue.

And your question will come from Brad Leonard – BMO Capital Market. Brad Leonard – BMO Capital Market: The answer to my last question was inaudible. I did not hear that on the strategic review, and then my follow-up question would be the stock buy back here. We’ve got $27 million in cash. You’re going to spit off a bunch of cash in Q4. You have the benefit of now having a dramatically lower stock price from even 30 days ago. The valuation is getting to a point where you’re marginally training above a reasonably estimated year end cash balance. You have the change to take on dramatic amount of stock I think if you want to, and that’s the only benefit about being waiting is that you’ve got a rock bottom valuation. So, I guess I’d like to hear Maxine’s thoughts on that and what she has to say. Thanks.

Well, Tina can answer the strategic comments, or if we can't answer that certainly we can talk about it off line. I think that watching our cash very closely and this is a very high time of using cash and paying our vendors for the merchandise. So, we are looking at that ongoing, an ongoing basis. Needless to say, we are very aware of the stock price and of what you’re saying, and understand exactly what you’re saying, Brad. But we have to look at it week by week and we do. And I think that if there’s opportunities that present themselves because we can see that the cash is in excess of what we thought would need to operate our business in a normal basis. And we’re also trying to look and forecast into 2009 and how the economic issues will affect us there. Also, we sell a lot of Bear Bucks in the holiday season. And if that would change it significantly, that will impact our first quarter of business and cash needs could be different then and could hurt us. But we’re very positive about the opportunity and we think that with our bank line of credit and the funds that we made closing as we look at our business we’ll be able to consider options there.

Brad, our strategic review ended in March of this year and so other than finalizing accruals and things that we pay for, there were relatively minor adjustments in the third quarter that aren’t even material to even mention.

Your next question is a follow-up from Mike Smith – Kansas City Capital. Mike Smith – Kansas City Capital: Well, one comment first before I ask a question. I would suggest you don’t buy any stock back because people can postpone buying bears for a long time, and cash is king. However, I do have a question. Two questions actually. You mentioned that you were going to look into the leases and renew in ’09 and ’10 and I was wondering how many leases are there that are expiring in those two years? And then secondly, if all we’ve had provided earnings guidance and I noticed that this seems to be absent with this conference call, and whether you’d like to state whether you continue to think you’ll meet the Street's expectations.

On the lease question, we have some of the leases that were originally expiring in ’09 and ’10 we’ve already addressed prior to this. So, we’re really looking at 10 to 15 leases that are kind of up in the air that we’re working with landlords on. On an ongoing basis we have the kick-out clauses from our leases. Those can be a number at any given time because generally we have one if not two kick out options. So, it’s something that we’re review on a market-by-market basis in a comprehensive way on an ongoing basis, even looking as forward into '10,' 11 and ’12 that we can build a long-term strategy for each market as we make the decision on the immediate leases that we’re reviewing.

Mike, while our internal claims have not changed much since July, much about the consumer and retail environment have changed, and that makes it difficult for anybody to really predict consumer’s buying behavior in this critical holiday season. And so, we are not resuming a practice of providing earnings guidance.

Your next question is a follow-up question from the line of [Tracy Cogan] with Credit Suisse [Tracy Cogan] - Credit Suisse: Thanks. I just had a question on the value pricing. You guys mentioned that you have more bears at opening price points, and I was wondering if you’ve lowered any price points on any of the accessories. Thanks.

We have lowered some prices – not lowered prices you know we brought in products that will be at prices that are very attractive to our customers, that we know are strong you know price points, per se. So, throughout our line there are things that are key items that are at very you know sharp retails, maybe relative to what they might have been. We've worked really hard with our vendors to you know try to project the quantities and the items and give our customers, in every category, something of substance, of huge value to them. They'll recognize that those are – but, they've been customers; they'll recognize that those are good prices. And if they're new customers, they'll be very, very good prices, and it's an ongoing changing. We do this. We always have, we think, good value, but actually we're, I would say, making this a larger part of our assortment planning as we go into 2009, as well. This isn't just something for the holiday. We don't believe these are our times or just for a few months. We think that we're in something that's going to be there for the foreseeable future, and that it's important for us to be able to focus in on some key price points. A large percentage of our inventory has always been well under $20, but I think that – and our average price of an animal that we sell has always been about $16. But, now we're going to put a bigger percentage of our inventory you know at about $15 and under, as we go into 2009. And, we think that that'll be – and the size of our animals is substantial, and again, where we always had that. And, even for the last year, we've had Build-A-Bearville. If you compare it to some of the products that we carry you know five years ago, 10 years ago. Now, everything includes the added value of Build-A-Bearville, as well as the added value of our Frequent Shopper Program for our customers. So, what we you know it's in essence here lowering, you're going to have lower retails than you have had, and you're going to be giving the customer a lot more for their money.

Your next question is a follow-up question from Brad Leonard – BMO Capital Markets. Please proceed. Brad Leonard – BMO Capital Markets: If we could just talk about the cost cutting a little bit, you mentioned some metrics here for savings, and I didn't catch all that, and then I want other opportunities to maybe right size the cost structure to make the business more profitable on a lower sales volume. Thanks.

But certainly the store model is one item that we looked to impact them, as we talked to our payroll structure, we are looking at taking one of our full-time management positions into a part-time associate manager position, which allows us that flexibility on our base payroll. And that's what we really need to affect, as we see the decrease in our first-store volume. And that's what we talked about we can get in excess of $0.5 million on a full year basis. And that's been our mainstay on the store operations side. Also, on the LTL side to help us with the margin side, as we see the prices of our goods be affected by fuel prices, and also by the labor laws in China, we're trying to affect that and impact our gross margin with our LTL model.

(Operator Instructions) Your next question is a follow-up question from Michael Smith – Kansas City Capital. Michael Smith – Kansas City Capital: Well, it's good that you're giving the customer a good deal in the fourth quarter, but how should that, if we translate this into the gross margin that you expect to achieve? I noticed it was up 330 bases points in the third quarter. Will we expect to see the same kind of change in the fourth quarter?

Yes, I think that the Build-A-Bear sales model includes really high initial markup. And, the margin impact will really depend on top-line sales, the way that you the products are based, like the noose that we don't have any royalties to pay. That's strictly you know our merchandise that we developed, so that makes it a potentially much higher gross margin and markup products. But, we want to stay close to our customers during this time. I think that discretionary purchases are under tremendous pressure, so we absolutely think that this will help our top-line sales. We may not see as much of the impact of that as we were able to sort prove that in our testing in the summertime, because the times are so significantly different. But we think that it will absolutely impact the customer positively, from the level of marketing that we're doing, not only the outside marketing, but the signing in the stores, that the clarity of product offering in the stores. And it'll drive us, so the customer might start with a lower price bear, but they'll be able to afford the added-on accessories, which is really big and will drive those margin dollars, which is really important in our flow through as you know on our business is very, very high. So, any change in that, that's been a positive, is definitely a plus to us and helps us. And, remember our margins that you see are you know our total margins are store rents; everything's in there. And we think that we've been able to achieve still very, very high merchandise margins that will flow through to the bottom line and impact, and to help us better leverage the store margins that are impacted by, that could be impacted if we don't get the sales, but will positively impact if we bring our traffic up, significantly, get our share of the traffic that's in the malls.

Your next question is a follow-up question from Brad Leonard – BMO Capital Markets. Brad Leonard – BMO Capital Markets: Yes, on the cost cutting, and what did you mention on the corporate side? I mean, you still have this business, Maxine, that is high sales per square foot. You have high merchandise margins, and with the impact and now our lower volumes, and your SG&A cost structure, your advertising, your rent, I mean how do you right-size this to for a continued weakness in traffic? And, how much can you take out of the corporate, and what is the pace of the cost cutting that's going to go forward?

Well, we're cutting everyday. We're, as I've said, we've eliminated positions here. We've cut down on travel. We've cut down on some of our training expenses you know anything that we've, some of the things that we've done that actually a part of our culture that we've been doing for a long time. We've really you know reached out to our associates to understand that and have more you know kind of communications I have with them that is not in person, but you know on the phone and through email, trying to make them still feel connected to our business, so that they can help us achieve the goals that we have. We've cut outside services. A lot of things that we normally do on a day-in and day-out basis, from some of the market research and in-depth business settings that we do, that we've tried to manage more, internally, rather than externally. You could close out all the people that, if you wanted to, and you have some other things you could do. But, I think we've cut – we have a lot of systems here that tell us how many people we need to be on our phone board, how many people we need in our web, but I think that we're doing things that are appropriate. We feel that we'll make those changes as we need to. I mean, we're really looking on a day-by-day, week-by-week basis, depending on what area it is, and cutting that much down as we can. And, I think after Christmas we'll be able to see. Right now, because we've cut it to the bone of what we need for Christmas business, and we'll look at it right after the first of the year. We'll look at it every week and if it doesn't materialize, but we'll also look at it even more so after the first of the year and see what else can be eliminated. That's what we're doing every single day in every single store and also here. We've put a lot of programs in place that have helped us save the money that we saved, and I think manage it as best we can.

And, our next question is a follow-up from Brad Leonard – BMO Capital Markets. Brad Leonard – BMO Capital Markets: What would be the projected year end cash balance, if you could just give me a range? Of course I can estimate my own, but I'd like to hear what you have to say on that.

We haven't given any projections on you know balances for the end of the year. Again, it's you know we're going to monitor our cash, as Maxine said, on a daily, weekly as we always have and utilize it in the appropriate fashion.

And, at this time, we have no questions in queue. I would now like to turn the conference back over to Molly Salky for closing remarks.

Thank you, operator, and thanks, everyone, for your participation today. I'll be adding some new PowerPoint presentations to our IR website, later this week, and that presentation will include photos of our holiday product lineup. So, I encourage you to check that out. Finally, if you have any follow-up questions from today's presentation, feel free to call or email me. Thanks again, and have a great day.

Thank you for your participation in today's conference. This concludes your presentation.