Good day ladies and gentlemen and welcome to the third quarter of 2009, Build-A-Bear Workshop earnings conference call. My name Keisha and I will be your operator today. At this time all participants are in a listen-only mode. We will conduct a question and answer session a question and answer session towards end of this conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Molly Salky, Managing Director of Investor Relations.

Good morning everyone and thank you for joining us. With me this morning are Maxine Clark, Chairman and Chief Executive Bear, Tina Klocke, Chief Operations and Financial Bear and John Haugh, President and Chief Marketing and Merchandising Bear. In a moment, I will turn the call over to Maxine to provide her comments on the third quarter. Tina will follow with additional comments on our financial results. At the end of our remarks, we will open the call up for your questions. Members of the media who may be on our call today should contact us after this conference call with their questions. We ask that you limit your questions to one question at a time. This way, we will get to everyone’s questions during this one hour call. Do feel free to re-queue if you have further questions. Please know that our call is being recorded and broadcast live via the internet. The earnings release is available on our Investor Relations portion of our corporate website and the replay of both the call and the webcast will be available later today on the IR site. Before we get started, I will remind everyone that forward looking statements are inherently subject to risk and uncertainties. Our actual results could differ materially from materially from those currently anticipated due to a number of factors including those set forth in the risk factor section of our annual report on form 10-K and we undertake no obligations to update or revise any forward looking statements. Now, I would like to turn the call over to Maxine Clark.

Thank you Molly. Good morning everyone and thank you for joining us to review our third quarter 2009 results. Although our third quarter performance continued to reflect the tough economy and reduced discretionary spending, we did see an improvement in our sales trend which is encouraging. The innovation we delivered in product marketing and our value initiatives resulted in both trend improvement in both comparable store sales and average transaction value. We are pleased to see a continuation of this trend improvement in October. In the fourth quarter, we have additional plans in place to build on these initiatives in order to maximize the critical holiday season. We are comfortable with the level and composition of our inventory as we head into the fourth quarter. During the third quarter, we also achieved better than planned cost reductions. So far this year, we have realized $18 million in pre-tax cost savings and are now targeting approximately $20 million in full year savings. We also completed the renewal of our bank line of credit with our long-time business partner, US Bank. Our line remains at $40 million with a $50 million seasonal overline and extends until December 2011. This agreement adds additional flexibility to our solid capital structure and puts our renewal process on a 2 year cycle. We remain confident in the strength of our balance sheet and positive cash flow outlook. Now let me provide a quick review of our marketing and product strategies initiated in the quarter that contributed to our trend improvement. As we said last quarter, we are aggressively focused on making our marketing programs work harder for us. We have placed more emphasis on promotions and traffic driving initiatives versus general brand building messaging. We are focusing on marketing efforts to make it easy for moms…

Thanks, Maxine, and good morning, everyone. I will provide some additional details related to our third quarter financial performance. Let me start with our recently renewed bank line of credit which essentially replicates our existing line with a few modest changes. The agreement was extended for 26 months, expiring in December 2011. Our borrowing capacity remains at $40 million with a seasonal overlying increase of $50 million. Our borrowing interest rate increased modestly from LIBOR plus 130 basis points to LIBOR plus 205 basis points. While we, again, did not use the credit line in the third quarter we are pleased to have this renewal complete. As we outlined in our earnings release today Ridemakers have undertaken a major restructuring of its operations. To date they have closed seven of nine mall-based stores and opened one new temporary store in downtown Disney in the Disneyland Resort in Anaheim, California. These moves are consistent with their strategy to operate primarily in tourist venues and to develop products for sell to third party retail outlets. We recognized a non-cash, net-of-tax charge of $2.3 million resulting from the allocation of losses from Ridemakers. Our investment in the company now stands at approximately $4 million including receivables. Importantly, our lost allocation cannot exceed the extent of our investment. With regard to foreign exchange, the strengthening of the US dollar versus the British pound continued in the third quarter although less significant than earlier in the year with the translation of foreign currency negatively impacting third quarter retail sales by $2.6 million. Moving now to the income statement, net retail sales declined 15% excluding the impact of foreign currency. The decline was primarily driven by the 16% decrease in North American comparable stores sales. The comp decline was made up of both a decrease in…

Thanks, Tina. We are now ready to open the call up for questions. Maxine, Tina and John are available to answer your questions. Operator, can we now begin the question-and-answer session?

(Operator Instructions) Your first question comes from Paul LeJuez - Credit Suisse.

It's actually Tracy filling in for Paul. I had a question on that you mentioned that the fourth quarter sales trends are improving versus third quarter and was wondering if that was related to a specific promotion or initiative like maybe McDonalds? Or has traffic just generally gotten better? And then was also wondering in Europe are you doing similar things to what you've done in the US in terms of the $29.99 promotion? Thanks.

We do believe that October, which starts our fourth quarter, did have a positive impact from the McDonalds promotion and that it's hard to tell whether overall traffic is improving. I think our merchandise mix is right and we are getting an improved HPG as our inventory balances out better in the mid to higher parts of our price points, the Jonas Brothers. End of September, it was the last weekend in September and also it's available now in October, so that also helps. So I think that's all positive. We run similar marketing promotions in the UK to what we do in the United States but we did not run the $29.99. We do not run the McDonalds, that the McDonalds promotion and they don't necessarily run the same things in other parts of the world that they run in the United States. It's all different. So from time to time there are different offers, but generally speaking they're usually the same thing. This month it happens to be significantly different. Back to school and their back to school timing is slightly different than ours too but September and October promotions differ pretty dramatically.

Your next question comes from the line of Mike Smith - [Density] Capital. Michael Smith - [Density] Capital: I was trying to write down fast but I wasn't good at that. Ridemakers, how much are you on the hook for with them and they're down to it sounds like three stores?

They're actually down to two stores that are tourist venues and three other stores that are continuing to operate in mall venues. Our net investment after the third quarter write-off was about $4 million which is inclusive of the receivables. And we did open a temporary store in Disney Land in Anaheim, California.

(Operator Instructions) Your next question comes from the line of Brad Leonard - BMO Capital Management.

Maxine, in your prepared remarks on the press release it says steady improvement in our comparable trends throughout the third quarter. Do we see improvement sequentially month to month there and then also into October?

Yes.

Can we quantify that a little bit?

We don't give out a sales by month and also in the case of October we still have Halloween, which falls on Saturday this year, too. We're not sure exactly how much that will impact but we believe that our marketing promotions and the content of our inventory is - and the October event from McDonalds has helped our business trends pretty positively. That doesn't mean that the sales are positive but they're much less negative than they have been.

Thank you and please stand by for further questions. And we have a follow-up from the line of Brad Leonard.

Maxine, lastly, on the SG&A here, it looks like we've already saved $17 million, so guidance for the year would be $18 million plus the $2 million that's coming out of, wherever, the gross margins, which seems like kind of a conservative estimate considering the fourth quarter's got one less week, which should at least get you that $1 million in savings. Is there something I'm missing on that or are we just being conservative?

Tina, why don't you grab that?

Again, one of the things that in the fourth quarter, again, it's our biggest quarter of the year and we'll be using some of our marketing dollars that we may have saved from the prior quarters into that, which as you recall when we talked about this at the beginning of the year we said at least $8 million of the original $15 million was going to come from our marketing. So there is a bit of some timing in the fourth quarter.

Your next question comes from the line of Tom Filandro - SIG.

Can you guys tell us and help us understand this skin mix in terms of pricing for the fourth quarter versus last year? How should we think about the average unit cost, what's been occurring in the business for you and how do we think about IMU? And then I have a follow-up question.

What we are doing, as I think you know, last year we, in response to kind of unprecedented economic conditions we put a lot of energy at a $10 and $12 price point. And that drove our average skin down. And we track, if an item goes out at $12 a skin, also how much apparel and shoes and total transaction that is and it goes out at $16 and it goes out at $20, so our goal is to get back into our sweet spot of $16, $17, $18. Our historical average has been in about the $16-ish range. So this year we plan, not to get all the way back to a 2008 level, excuse me, to a 2007 level, but we do plan to be better than 2008. So we're trying to work our way back to our high water mark. So our average skin price we are targeting to go up in Q4. Now none of us know yet what the promotional environment will be like. We might have to do some things to be competitive out there in the marketplace but at least as we're planning right now we think we will move our skin price up which will then move the entire average transaction up as well.

John, to be clear, so you have an opportunity to move the average skin price in the fourth quarter over time about more than 30%, is that what I’m hearing?

I don't think we would quantify the 30%. I think what we're trying to look at is look at some of our high water marks and figure out where we have been. 30% I think would be considerably high. We have been again in the - maybe I was confusing, sorry. We've been in roughly the $16 price range. That's where we like to be. Last year there was a lot of emphasis at $10 and $12. That doesn't mean our average skin came all the way down to $10 or $12. Last year it came down but it didn't come down that far. So we are trying to get closer back to our average and we think that's where we'll be this Q4. So it is an improvement but it's not a 30% improvement.

Your next question is a follow-up from the line of Paul LeJuez - Credit Suisse.

I was wondering if you guys could tell us your initial thoughts on CapEx and store growth for next year.

We're really finalizing those plans, haven't put too much yet behind them. We're really waiting to see on the holiday season how some of the things we're doing happen. And then as I mentioned we are working on our new store prototype. And we are going to test that out in a couple of locations but also may send some of our money to retrofit and adapt some of those learnings to our existing stores. That's our goal. But we haven't quantified that yet. We'll keep you updated as that becomes clearer.

And your final question is a follow-up from the line of Tom Filandro - SIG.

Hey, John, I wanted to come back the IMU question. You gave us sort of the front piece of that in terms of what you are thinking in terms of the AUR, how are you positioned from a cost-stages with average unit cost so how should we think about eyeing you in the first quarter and into 2010, then I do have a follow-up question for Maxine.

From an IMU or a R-margin, we are working to improve that. Obviously, when we had to take pricing action last year, items were purchased and pricing was set so as we have been able to plan for Q4 for 2009 as well as rolling into 2010, we are more forward looking and will work to get back to our traditional gross margin levels at an IMU level. Obviously, we need to ultimately drive store business to get our overall gross margin up and to get our leverage back. But from an IMU standpoint, we are also looking to get back to historic levels. We will make some progress this Q4 and it is a target for us to continue to improve going into 2010.

Okay. If you could Maxine, could you give us an understanding of the thought process behind the holiday launches this year in terms of historically or at least the last few years, you have come up with a new, or at least I call it, holiday-centric skin which was different from the prior year and then we did bring back Rudolph at one time. This year, it is something that you had in the past, Holly and Hal and also, I think you said, Frosty the Snowman which you had in the past. Can you just give us a thought process around the merchandising for the holiday season please.

Last time we had Frosty the Snowman was in 2005. We have a considerable amount of new guests that were not even born in 2005, so a new wave of customers that this will be new for. It is also different than the one, even though it is a snowman and it is Frosty, it has some new technology that is improving it. But most of that we expect will come from new customers who weren’t even in our customer database at that time. That is exactly what happened with Rudolph when we brought him back. He was in 2004 and we had him in 2007, so that was even closer together. Holly and Hal are in our inventory with a new addition, their little friend Hal and their new clothes and that comes for the fact that the movie is going to be on ABC Family on the 24th of November and also again in the morning on the Saturday after Christmas and we believe very strongly in all of the promotion that is going on after, I am sorry, the Saturday after Thanksgiving. We believe in all of the promotion that is going with that, with ABC Family and with ourselves and we have gotten quite a bit of press about that already. It is one of the cutest movies, we are a little biased, of course. But, it really turned out great. I think it will be very positive and last year, no one even knew who Hal and Holly were so with this addition, again, we don’t have as many of those as we did last year that bought it with good reason, but again, we can track that specifically in our database and we are very excited about Alvin and the Chipmunks. It is a…

And we do have a question from the line of Brad Leonard, with BMO Capital Management. Go ahead.

Maxine, I believe on the last call, you told me that you thought merchandise margins would be up in the second half in North America. How do you feel about that now going into the fourth quarter?

The merchandise margins, meaning the mark-up, I feel that we are moving in the right direction. Again, other set pressures, leverage of the sale, occupancy costs effect what you see as margins, but our merchandise mark-up as John talked about is in the right direction and we have been working with our vendors and we have a very strong product line-up for the fourth quarter that I think will add to that greatly, assuming there is no major changes to what we see and we have to take any unusual markdowns or changes in our retail price points. But, assuming that things are as they have been in the last few months, and moving into the fourth quarter, I feel that we will be positive in the area of improvement.

There are no further questions in queue, I would now like to turn the call back over to Molly for any closing remarks.

Thank you Operator and thank you to everyone for your participation today. If you have any follow-up questions, please send me an email or give me a call. Thanks, and have a great day.