Greetings and welcome to the Build-A-Bear Workshop Third Quarter 2013 Results Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allison Malkin of ICR. Thank you, Ms. Malkin, you may begin.

Good morning. Thank you for joining us. With me today are Sharon Price John, CEO; and Tina Klocke, COO and CFO. Before I turn the call over to management, I want to remind members of the media, who may be on our call today to contact us after this conference call with your question. We ask that you limit your questions to one. This way we can get to everyone's question during this one hour call. Feel free to re-queue, if you have further questions. Please note, the call is being recorded and broadcast live via the internet. The earnings release is available on the Investor Relations portion of our corporate website. And a replay of both our call and 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 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 Factors section in the Annual Report on Form 10-K, and we undertake no obligation to revise any forward-looking statement. And now, I would like to turn the call over to Sharon Price John.

Thanks, Allison. Good morning everyone. On today's call I will begin with an overview of our third quarter results, provide a few fourth quarter highlights, turn the call over to Tina to review financial details, and then we will take your questions. As outlined in this morning's press release, in the third quarter we delivered consolidated comparable store sales growth of 6.4%. This marks our fourth consecutive period of comparable store sales growth in North America and our third consecutive increase in Europe. We also expanded gross margin by 360 basis points, and had a $ 3 million improvement in operating performance, reducing our pre-tax loss to $1 million compared to last year's third quarter pre-tax loss of $4 million. We attribute these results to increased discipline of expense management, improved leverage and occupancy cost, and a balanced merchandized offering integrated with marketing, which allowed us to reduce overall promotional activity compared to last year. Specifically we saw solid performance in our Build-A-Bear Workshop proprietary core animals and fashions while driving new license introductions. The launch of My Little Pony animals and accessories performed well across geographies and the launch of products featuring the popular singing group One Direction was especially successful in the UK. This compelling product offering, plus refocused marketing, allowed us to reduce a number of discount driven promotion. As an example we successfully eliminated our all store $29.99 bundle promotion that we had run in the third quarter for the past four years in North America. Looking ahead, we have a solid plan in place to capitalize on the fourth quarter. This year's holiday scene is towards the fund for Christmas and was strategically developed to encourage kids and families to experience Build-A-Bear Workshop during the holiday season. In support of the concept, our product line…

Thanks, Sharon, and good morning everyone. For the third quarter, net retail sales were $84 million, while operating 31 fewer stores. To put them in perspective the 31 fewer stores resulted in 10% fewer operating weeks in the quarter, while our net retail sales declined less than 1%, excluding the impact of foreign exchange. Consolidated comparable store sales increased 6.4%, driven by a 6.2% increase in transaction value and a two-tenth increase in transactions. By geography, comparable store sale rose 7.6% in North America, and 2.3% in Europe. Real estate optimization strategies drove approximately 30% of the comparable store sales increase in North America in the quarter with the balance coming from organic growth in our base. E-commerce business was up 1.1%, excluding the impact of foreign exchange. Retail gross margin was 40.1%, compared to 36.5% in last year's third quarter. The 360 basis point improvement was primarily driven by decreased promotional activity and leverage and occupancy expense. SG&A was $36 million, down slightly compared with the third quarter last year. SG&A was 42.2% of revenues compared to 42.5% last year. Included in this year's SG&A was $600,000 in management transition and store closing cost. Excluding these costs, SG&A was 41.6% an 80 basis point improvement versus last year. Adjusted net loss per share improved to $0.05 from $0.25 per share last year. For the first nine months net retail sales rose to $257 million while operating 31 fewer stores compared to $259 million in the first nine months last year. Again to put this in perspective the 31 fewer stores led to a 7% decline in total operating weeks in the first nine months of the year, while net retail sales rose 3.4% excluding impact of foreign exchange. Our consolidated comparable store sales rose 8.2%, driven by 4.5% increase…

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Our first question comes from James Fronda with Sidoti & Company. Please proceed with your question. James Fronda - Sidoti & Company: Could you discuss I guess a little more in detail what's causing the strong comp growth? Do you think it was specifically related to My Little Ponies products or are the products doing well as well?

James, I think that it's a combination. This is a Sharon. It's a combination of things. As we said, we have a balanced product offering, proprietary Build-A-Bear products that are driving sales as well as some Vikings products including My Little Pony, and as we mentioned One Direction. We're very pleased that it's a balanced approach. James Fronda - Sidoti & Company: Okay. And did you record any decent I guess gift card sales during the quarter or that's primarily during the fourth quarter?

We have actually improved our gift card sales over the first nine months as well.

Our next question comes from Jack Ripsteen with Potrero Capital Research. Please proceed with your question.

For next year if you look at, what kind of expenses do you think you could drive out of the middle of the P&L as you shrink the store-base?

Thanks Jack. It's Tina. And I would say, on a go forward basis, we'll continue to look at our supply chain from the point where we manufacture the product and try to all the way to where we take it into the store. And so, we're embarking on that. So we believe that there is some leverage that we can find there whether it be the product makeup, whether it be transportation, how we do things. And so we think that there will be some expansion in that area. But also as we continue to close stores and have the benefit of a full year of those store closures we should see improvement in not only that piece of the gross margin but also in SG&A.

And in terms of SG&A, I mean, last year it was on about 165. I mean, can that come down to like 150 with this new store base? Just generally speaking, how much is left to come out of that?

Well, I think from that perspective it's the cost to operate the store from a salary perspective, payroll perspective, and other supplies and that type of stuff. So I think there is some room there. And as we get deeper into the store closings we will come and come back to you all with a target number that we think we can hit.

Okay. And Jack --

Yes.

This is Sharon. On that front, we are doing a complete supply chain effort right now. We're looking at taking cost out on every link of the value chain and we will be driving some value engineering, as well into the product lines. But just as you know that takes a while for it to flow. So we might be able to see some improvement in SG&A before we are able to see some improvement on the cost.

Okay. But I was just kind of curious because obviously you're shrinking the store base but you want to transfer the sales and -- but you stop to spend a certain amount of SG&A dollar towards marketing?

Yes.

So can we see some improvements, is there a way to grab some efficiencies there as well, even though you're still trying to achieve the overall branding and marketing campaign?

Yes, there will be efficiencies overtime. We are transferring as we said on average about 20%. And there is some marketing expenses associated with that on a one-time basis to communicate to the consumers that we are more familiar with the store that's closing, to ensure that they understand that there is some times a newly imagined store open -- being opened near them or to tell them to go to in a different store in their location, near their location generally within 5 or 10 miles. So that expenses in there that won't be an ongoing expense. But we also see that we might have some opportunities with more elevated and integrated marketing that have a little better ideas over the course of time.

Yes. I'm just trying to -- if I look back like a Q4-to-Q4 comparison that's coming up, at one point in -- like say a '11, I think the SG&A was $42 million, and you had roughly the same sales and in the next year it jumped to $51 million and I'm just trying to discern what's the right number because clearly the sales were about the same of the SG&A, almost $10 million higher?

Yes that was a process I think which was a good process for the company to go through rebalancing the marketing communication, which included, brand marketing and product marketing. And some of that brand marketing was inclusive of advertising to moms in a more robust manner and mom's TV is a little more expensive to kid's TV. But I think over the course of time now we are really learning what that right balance is. And as I say, I'm hopeful that we will have a better ideas as we go forward. One other things that we're doing was the "Twas the Fun Before Christmas" campaign for example, is ensuring that the communication points are the same from moms to kids and were saying, were pulling everything together throughout all touch point to the consumer, so that again elevated and integrated approach really drives generally some efficiencies in the process.

So what you say if it's into that $50-ish million is kind of the high watermark and we wouldn't expect to see that going forward?

I would certainly hope so.

Okay. Great.

I mean, it would be relative of course if we continue to drive sales, right --

Right. But just closing store sales.

Dollars will go up and (inaudible) will go down, yeah.

Right. But just closing. I mean, so even if you improve sales you still are sort of flat right on revenues, sort of taking the levels that will have come down, right?

Right. Well, there should be some leverage there, sure.

(Operator Instructions) Our next question comes from Tucker Golden with Solas Capital. Please proceed with your question.

I had a question about the balance sheet. So if we look at the cash position versus about a year ago it's declined to $8 million or $9 million and it seems to me that you're basically spending all your EBITDA no more, no less on various capital initiatives and store remodels systems and it looks like working capital really accounts for the vast majority if not all of that reduction in cash. So wondering if you could just go through the items there, looks like receivables are over $10 million, like it's never been that high in my memory, inventory and payables, smaller moves and I think you explained in the release that you're making a small incremental that on the fourth quarter and so maybe that's why inventories are a little higher per foot. But really receivables is the thing one that's big shock to me, which is we just like to understand why that kind of sucked up $6 million of cash over the last year and whether we can expect that to come back and see that kind of year ending cash balance back at that sort of $45 million level what was last year or hopefully better?

Sure Tucker, its Tina. To answer your question about cash and the receivables pieces as you highlighted a portion of it is the increase in inventory. The other portion is this we build these stores we get tenant allowance, construction allowance from our landlords and so that's the portion that we need to collect as these stores are completed. Since we only built only six stores last year and we're on the road path to do 25 that's going to increase that. But that will go down by the end of this year beginning in the first quarter of next year. And the other pieces is ad we've highlighted in our 10-Q we have a dispute going with the customs authority in the UK and that in order to continue to go through the process we had to make a deposit or we put it on the books as a receivable and that totals about $2.5 million and as we proceed through that late hearings in that we should -- we will either have to pay that or will get it back. It's just as part of the overall.

So may be $2.5 million from this customs dispute and the other kind of $4 million -- $3 million, $4 million from tenant allowances correct?

Correct.

Just being kind of higher than last year?

Right. And then a couple million in inventory and then the capital is slightly higher and so that balance is with really the change in cash.

Right, again remember this is our low point. Q3 is always our low point as we build inventory and as we head into the holiday season and that we will have -- we'll be pretty close to our setting cashes last year, at the end of this year as we, as the sales come in, gift cards come in and the like.

Yeah, I just wanted to confirm that the change versus the disappoint last year was not permanent. Thank you.

Okay, great. Thanks.

(Operator Instructions) Our next question comes from Joey Baum with Delta Incorporated. Please proceed with your question.

Hi, you guys are doing a great job helping Build-A-Bear realize its real value as a business. But closing on profitable stores will only get you still far. Can you give some more details on how you're planning to help Build-A-Bear realize its growth prospects?

Okay Joey, yeah. The -- if this is a multifaceted approach to return into sustainable profitable growth. So the real estate optimization program was a necessary part of this and we realized that the closure of the unprofitable doors is only a portion of the solution and that is why it's not the only part of what we're doing. As we mentioned we are rebuilding the marketing program by rebalancing the communication and ensuring that we're branding as much as we are, driving products, and we're at the same time reducing our promotional activity and discount activity because we know the strengths of the brand. When you really back away from it though and recognize what's going on with the store closures, we still are having growth, the whole water level is rising because we're having organic growth from the stores on the comp, where our comp base is 70% from the organic doors versus the newly remodeled doors. So it's not just a closure of the doors that's helping us. It's everything that we're doing to drive the brand overall. It is the combination of driving the top-line and as well as improving our bottom-line by closing all possible doors.

There are no further questions in queue at this time. I would like to turn the call back over the management for closing comments.

Thank you again for joining us today and I remain confident in our business prospects as we enter the final quarter of the year. The strategies we've implemented have led to improvements in our comparable store sales and margins and profitability and we expect to build upon our progress during the holiday season and into 2014. We would look forward to speaking with you when we report fourth quarter results in February.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.