Good day ladies and gentlemen and welcome to the fourth 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 listen-only mode. We will open up the 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 Ms. Jane Thorn-Leeson with ICR.

Good morning and thank you for joining us. With me this morning are Maxine Clark, Chairman and Chief Executive Bear, John Haugh, President and Chief Marketing and Merchandising Bear, and Tina Klocke, Chief Operations and Financial Bear. Before I turn the call over to management, I want to remind 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 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 Jane. Good morning everyone and thank you for joining us to discuss our fourth quarter and fiscal 2009 results. For this morning’s call, I’ll begin with an overview of our fourth quarter and fiscal 2009 performance and outline our priorities for 2010. John Haugh, President and Chief Marketing and Merchandising Bear will review our product and marketing strategies, then Tina Klocke, Chief Operating and Financial Bear, will review our financial results and outlook. Finally, I’ll make some closing comments and we’ll open the call to take your questions. Fiscal 2009 represented a year of economic challenge. It was a very tough year, but we showed solid progress. We improved our North American comp store sales trends, we continued our strong and profitable results in Europe, we surpassed our cost reduction goals, and we ended the year with positive cash flow and a strengthened balance sheet. While the economy continues to impact overall performance given the discretionary nature of our products, we are pleased with the progress we made in 2009 and are well positioned to create greater shareholder value in 2010. Let me give you more details about our fiscal 2009 results. We had a sequential improvement in our North American comparable store sales with our trends improving every quarter from a low of minus 20.5 in North America in the first quarter, finishing the year at negative 13.3 in the fourth quarter. More importantly, our comp store trend improvement continues into 2010, reaching negative single digit levels in January and for February, through yesterday, despite the difficult weather in the past few weeks, we are seeing even more significant improvement in trend in both our stores and online. In fact, our sales are flat to last year, but remember, there are still 10 days remaining in the…

Thank you Maxine and good morning, everyone. As Maxine noted, in 2009 we made great strides to improve our product, merchandising, and marketing and based on guest feedback and the performance of our current launches and events, we expect ongoing improvement in sales and profitability in 2010. Our brand continues to be very strong and positioned very positively in consumers’ minds. We know we can perform at a higher level and we are focused on five key strategies to deliver our 2010 goals. Number one, product innovation. We are improving our product offerings by enhancing the size of our launches and the design and value of our animals and related products. Number two, full integration of product, marketing, and operations, creating a sense of urgency and excitement with each new product launch with strong promotional and marketing support, including powerful store visuals to further drive traffic, increased conversion, and improved sales and profits. Number three, adding additional products to our assortment. As Maxine mentioned, we have begun to add other categories that our outside of our core plush animals, yet consistent with our interactive toy experience. Number four, we will continue to grow our virtual world engagement, as well as improve our online and e-commerce business. Number five, our sales initiatives also include new opportunities for our products to be sold outside of our current store base. Let me discuss these five strategies with you. First, to have product launches that are bigger in terms of sales volume, in store excitement, and with a presentation that changes the store. While we will introduce a similar total number of new animals in 2010 as we did in 2009, we will group the animal introductions into larger statements that will be more noticeable to our guests, giving us powerful news to feature…

Thanks, John, and good morning everyone. Our fourth quarter results showed a continued sequential sales improvement from the third quarter and included 180 basis point improvement in merchandise margin, as well as the continuation of disciplined expense and inventory management. In fact, as Maxine mentioned, we saved an additional $7.1 million in the quarter with SG&A as a percent of sales essentially flat with the fourth quarter last year. For the full year we achieved cost savings of $25 million, $10 million ahead of our original goal. Our fourth quarter GAAP net loss included the following non-cash charges: $3.9 million or $0.20 per diluted share in store asset impairment, $2.7 million or $0.14 per diluted share related to losses associated with our minority investments in Ride Makerz LLC, a startup company that began in 2007. Beginning in the second quarter of 2009, we were required to record allocations of Ride Makerz losses. With these current charges, we have written off our entire investment I Ride Makerz who continue to work on their repositioning strategies. Excluding those charges, 2009 adjusted fourth quarter earnings per diluted share were $0.29 compared to 2008 adjusted earnings of $0.45 per diluted share. Net loss for the fiscal 2009 year included the following costs: $4.1 million or $0.22 per diluted share non-cash charge related to store asset impairment, $5.9 million or $0.31 per diluted share non-cash charge associated with the company’s investment in Ride Makerz LLC, and $600,000 or $0.03 per diluted share related to the Friends 2b Made concept closure. Excluding these charges, 2009 adjusted loss per diluted share was $0.10 compared to 2008 adjusted earnings of $0.50 per diluted share. For the fourth quarter, total revenue declined 13.5% to $122.9 million from $142.1 million in the fourth quarter last year. This year’s fourth quarter…

In conclusion, we began 2010 in a strengthened financial position. Our merchandising and marketing strategies have led to steady improvements in our North American comp and online sales results throughout 2009 and we are pleased with the ongoing improvements we’re having in 2010. We also continue to improve operating efficiencies with further reductions in cost. Build-A-Bear Workshop possesses a highly passionate and dedicated team and I’m confident in our ability to generate improved performance in 2010. We are off to a good start. We look forward to updating you on our progress in the months ahead. Now I’d like to turn the call over to the Operator to begin the question and answer portion of the call.

(Operator Instructions) Your first question comes from Thomas Filandro – SIG.

My question is around that low single digit comp comment as well as the flat in February to date. That’s a pretty dramatic turnaround from what you’ve experienced thus far. Are there any anomalies in terms of comparisons and can you explain exactly what’s going on, what’s working, is it transactional based, is it AUR or a combination of that, and could you give us an insight on what you’re thinking in terms of your marketing dollar spend and specifically how are you targeting dollars this year versus last year, what variances shall we see?

I think what you want to look at it is we feel like we’re making great progress and again, we’ve got product people really want, our marketing has been spent effectively, and our store operations team is really performing at a high level. We’re not going against easy numbers last year. In fact, we had some weather going against us. If weather were better, we’d be in even better shape. Everybody says that so we’re not blaming the weather for anything. We are driving transactions, we are driving our average transaction, and we’re driving our units by really trying to bundle things together, so we feel like we’ve got a really good strong integrated program. With respect to marketing, it’s a new frontier out there. We need to, as we’ve always had the challenge, we’ve got to get moms to say yes, we’ve got to get kids to want the products. New product is what we call shin kicking, it gets the kids to say to mom “I have to get into Build-A-Bear” and then we need something for mom, whether that’s a strong promotion, whether that’s a bundling opportunity, whether it’s some kind of limited edition. So we’re trying to really drive both kid demand and give mom the ability to say yes and again, we’ve got to do it, first and foremost through product and Tina’s really done a nice job, the product assortment not only for the first two months of the year looks great but for the whole year. It’s laid out and we feel fabulous about it. Then effective marketing and effective store operations. With respect to our marketing spend, we took a bunch of money out last year. As an A to S ratio, we’re going to come down a little bit more in 2010 but it’s not about just taking money out, it’s about trying to be more strategic with how we talk to both moms and kids, drive our CPM down, and ultimately get more people into our stores.

Your next question comes from Paul LeJuez – Credit Suisse. Paul LeJuez – Credit Suisse: Just wondering what the margin looks like on the Zhu Zhu product compared to your regular assortment. Also how many stores are operating at a four wall loss and how many leases expire over the next two years? I guess I’m just also wondering if you can provide any details on rent reduction conversations that you’ve had.

From a margin perspective, as we said, we’re not going to make the same gross margin on a product like Zhu Zhu that you can find in other locations. You can find it at ToysRUs, you can find it at Wal-Mart, you can find it at Hallmark, you can find it at Justice. That said, as we look at the lineup, as we mentioned, we’ve got both product that’s available elsewhere as well as exclusive product. We will price strategically. Delivering value to our customers is very, very important. So we’re not going to chase a Wal-Mart price point but we’re also not going to gauge our customers. We’re going to have a fair price and we’re going to have product in stock when they’re looking for it, so we actually believe while we won’t get to as we said earlier our proprietary product gross margin, we do feel like we can have a good strong gross margin here in net net. It’s incremental business versus substitute business. It delivers more gross margin dollars to the bottom line.

In answer to your next question, we had a few stores in North America operating at a loss. We looked at them from an accounting perspective, from an impairment analysis, and impaired those this year as well as a few in the UK. Again, we’re not closing those stores, we’re looking at every way that we can, whether it be a rent concession or any other operating expenses that we can do to reduce costs associated with those stores so that they can become profitable again. In answer to how many leases we have coming up for renewal this year, over the next two years, it’s about 30 stores that will be up for renewal but we continue to make progress with our landlords in negotiating rent concessions for anywhere from a period of one year to several years and just as a reminder those savings are amortized over the rest of the life of the lease which is on average about 5 years.

Your next question comes from Sean McGowan – Needham & Company. Sean McGowan – Needham & Company: First just a follow up on Zhu Zhu, is this more of a unique opportunity because they’re neighbors in St. Louis or is it an indication of a different direction that you’re going in with some of the other sort of licensed products? Specifically what I’m looking for, are you going to allow consumers to actually make a moveable electronic of Zhu Zhu [inaudible].

It’s coincidence that they happen to be neighbors in St. Louis. For us what’s important is that the product is what our consumers said they are looking for. We did not jump into this lightly. We have spent time talking to our consumers. This started last summer and said, “What might a consumer expect to see” and we are about an experience, and Zhu Zhu happens to be a product that’s very experiential. It’s a big play value. So it made sense for us to bring that into our assortment, but again it’s a complement. It’s not going to be the majority of our business, it’s something that our customers said it would be nice to have so we brought it in strategically but it’s not a big percentage of our business. The second part of the question is do we fundamentally change it and make it stuffable? Probably not really. Right now that team has done a nice job with their product. They’ve got a great new product pipeline and that’s what we will capitalize on, and again, I mentioned we’ve got exclusive opportunities with them, as I’m sure some of their other partners do. So that’s how we will talk to our consumer, that we’ve got an in demand product that compliments, doesn’t substitute, Build-A-Bear Workshop and we’re going to continue to offer you what you’re looking for as a Build-A-Bear customer, both as a kid and a mom.

Your next question comes from Gerrick Johnson – BMO Capital Market. Gerrick Johnson – BMO Capital Market: I was hoping you could discuss a little more the new format store you’re talking about and then perhaps some commentary on the ToysRUs holiday express stores and how they may have impacted your business this past holiday season.

Here’s where we are on new format. We have one of the most iconic brands in retail. Kids love us. Moms love us. If kids could, they’d go to our store every single day of the year. But retail is about refresh, it’s about innovation, so what’s really critical to us is that we refresh and we innovate but we don’t lose our iconic status, so we do have a new format that will keep the core of what people really expect at Build-A-Bear, the experience, the ability to create this personalized experience. But we’re going to update it a little bit. We’re going to make it a little more contemporary, we’re going to give it a chance to tell more stories, more vignettes. As we really push for big product ideas, we want to make sure when a customer comes in they see that product holistically and they really get a chance to see the Be Mine Dalmatian with all of its outfits and with its sound and we really get to have that kind of front and center and we’re really about that for a Valentine’s Day or Easter or whatever it happens to be. So that’s where we’re going to go. We’re shooting for Memorial Day and we’re confident in it based on success it would be where we would try to go with a renewal as we talked about earlier as we start in some cases repositioning. With respect to ToysRUs, we don’t know what they did for the holidays. We’ve heard they had a good holiday season. The key is when more interest comes to kids and kids toys, all ships go with the rising tide, so we feel good about that, if they drive more people to the mall, fantastic news for us because we know we’re going to capture them.

Your next question comes from Michael Smith – Kansas City Capital. Michael Smith – Kansas City Capital: The Zhu Zhu Pet thing, will you carry the whole line of Zhu Zhu Pets like the new Ninja that’s coming out shortly?

Zhu Zhu, a complement in our business to our core. Right now it’s on a two way so it’s got about four linear feet of exposure in a store that’s 2500 or 2600 square feet. So that gives you some sense of kind of where it is. What we will do, as our customer would expect, newness and freshness and innovation, so when Zhu Zhu, Cepia, the parent company, says we’ve got a new line for summer and fall or holiday, whatever it happens to be, and we’ll take a look at that line and figure out what makes sense to go into our store in terms of what the whole market has available to them, what we want to customize for our customer, and then we’ll make the right choice but again, from a limited inventory perspective. Just to reinforce both your question as well as others, Build-A-BearVille is critical to us. We mentioned earlier about continuing to engage our kids. When they come to us via Zhu Zhu as an example, we’re also going to get them into Build-A-BearVille and that strengthens our brand and our franchise and our virtual citizen. So we kind of win both ways here. We feel really good about it.

Your next question comes from Thomas Filandro – SIG.

Can you tell us what comp you need to leverage occupancy and then can you give us some understanding of what you’re seeing in terms of the product costing side of the business? How should we think about [INUs] in 2010. Maybe you can sort of regroup us on the concept of value. We moved this strategy to more $10 and $12 skins and how that plays out in 2010 and a view of [AUR].

I think from a perspective of what we need to comp, I think once we can leverage expenses, I think if we did just a positive comp we’ll be able to have a good flow through that will actually leverage expenses. As far as initial merchandise margin, we saw an improvement in the fourth quarter and we hope to continue to see an improvement into the first and second quarter of this year.

Let me build on Tina’s point and then we’ll hit the last point about value. We have a great product development team. We have great partners and like all retailers, when we sit down together and plan 2010, we said to them, we want to grow our business together and we want you to charge us less for the product but we want to deliver more value to the customer. So we have initiatives in place to continue to work on our gross margin. Our initial markup as well as our maintained margins, so while we have a promotional strategy during key times, we talked about Alvin and Brittany so Alvin and Brittany are coming out at $22 per or 2 for $35. We have gone ahead and already planned the 2 for $35 into our gross margin so we’re going to be able to deliver to the consumer a value but also not just take $7 out of our gross margin. So that’s how we’re trying to think about it and we feel good about that. With respect to where we land our business, $10 and $12 is important to the business. It serves our party business well. Often times it’s an introduction to a new customer. Our core is $15 or $16 animal with an outfit, with sound, with shoes, and with an accessory. That’s what Build-A-Bear was built on and that’s what we continue to focus on, and that’s where we put our energies. So $10 and $12 will continue to have x% of our inventory, x% of our sales, because we want to be there, it’s what we stood for early, it’s what we still stand for, but our core business is in the $15 to $16, kind of what we call the heart, the middle of our [inaudible] wall, and that’s where we’re really going to continue to drive our innovation and our product developments.

Your next question comes from Sean McGowan – Needham & Company. Sean McGowan – Needham & Company: I was wondering if you could go over again some of the metrics on Build-A-BearVille, if you could repeat what you said already on what kind of incremental benefit you’re getting and then just give a little bit more color on where you see that going.

Build-A-BearVille has been very, very strong for us. We have over 14 million registered avatars and growing every single day over the prior year. So its engagement with our customers is increasing. As John mentioned, about a third of our customers go to Build-A-BearVille before they even come to our store to see what’s new, to see whether there’s a promotion, to see what’s happening in our stores. Then they come to Build-A-Bear and then buy. Then when they leave our store, about 40% of them in our target demographic which is girls over 8 years old come back online and register that animal for its prizes and its rewards and its accoutrements that go with it online and play with it online and just those transactions of that group altogether were $64 million in revenue last year so while we know that some people might have come to Build-A-Bear Workshop anyway, we can see their play and engagement online and that is very impressive. Then they spend almost 30 minutes online playing every time that they come on so we have a very loyal customer. It may not be the highest number of unique visitors of some of these sites that come online, but it’s a very loyal customer and they come frequently, we see points, they play games, and now we’ve started to promote back to them, giving them a reason to come to the store with a free Build-A-Bear Outfitter’s credit card, something that they can bring back again to Build-A-BearVille and become engaged with our brand. That’s the most important thing. Even in the days of a couple weeks ago when schools all over the country were closed for snow, we could see those were very, very large days of engagement with our kids. They were online playing in record numbers and if we didn’t have that, we wouldn’t have had any engagement with our kids that day, it would have just been a total white out. So we feel very encouraged by how this is growing on a month by month basis, on a week by week basis, and we can see it exactly, we can see into it, we can turn it on at any given time of the day and notice children’s engagement with our brand and parents as well.

Your next question comes from Matthew [inaudible] – private investor. Matthew [inaudible] – private investor: I understand it’s a weak environment but in 2010 you guys generated $13 million of cash and announced today on [$50] million in cash on your balance sheet. In a zero interest rate environment, isn’t that destroying shareholder value?

As we said in our conference call script, it continues to fluctuate. At the end of January, that balance was already $20 million less because of the seasonal nature of our cash flow and also as a reminder, that half of our cash is domiciled outside of the US so as you know, there are tax implications of bringing the cash back and we’re going to utilize some of our cash in foreign operations to build some new stores. So again, just as a reminder, we have a seasonal nature of cash and that again as we talked about in 2009, that we wanted to protect our balance sheet. We also made mention that we would also continue to look for opportunistically to repurchase our shares and we will continue to do that in line with our Board of Directors.

Your next question comes from Brad Leonard - BML Capital Management.

The only thing that stumped me was the North American comps. I thought they’d be a little bit better and when you look at the breakdown between traffic and ticket, I’m also a little surprised that ticket was down 4% I believe Tina said and so how did the flow through the quarter on a month to month, because on the last call Maxine said that they got better each month of the third quarter and into October. You said also that they’re kind of a lot less negative, you said while not yet positive they’re a lot less negative and I don’t know where a lot less negative falls but it make same believe that maybe through the quarter the comps weakened a little bit. I know we’ve seen a change so far year-to-date which I’m happy to hear, but any help on the comps and kind of also I really thought with the price points being higher this quarter that the ticket would have maybe flatlined or been stronger. So any help on that would be appreciated.

On the ticket price, we actually did have an improvement in our animal sale price. Our animal prices did go up but we lost a little bit in our units per transaction so the number of units that people bought, which I think is reflective of the economy. They did buy the stuffed animals and we’re seeing that growth in our animal ratios to total sales and they like the animals but the prior year remember we had a huge amount of animals sold at $10 and $12 and there were a lot of transactions of that. It may have looked like it was an easy, even we were surprised, we thought we could definitely maintain more of that traffic than we did. In the third quarter, there’s always a month up or a month down but in the end what we did in the fourth quarter better than the third quarter, even though October was better and November was slightly worse and then December was back on track towards the improvement. What we’re most encouraged about and we’ve seen that consistently since December, is that each week is getting sequentially better and then so far in February, normally we wouldn’t even talk about it because we don’t want to do anything to jinx it, encouraged by it because of the weather that impacted and the number of closed stores we had and to be at the level that we’re at even through yesterday is I think a very good sign that the customer is coming back to Build-A-Bear Workshop. Also, as John mentioned, we had very strong product introductions in January. While they were singular and not yet on the strategy that we have of multiple animal promotions or introductions, they were very strong. We had an iCarly sneak…

Your next question comes from Thomas Filandro – SIG.

Just a broad long term kind of question, is there anything structurally different in our business that would not allow you to achieve the high single digit, low double digit operating margins you’ve experienced in the past?

Structurally, obviously the climb back up in comp store sales and sales productivity for any retailer would be sequential and hopefully smooth and steady but I think that there’s nothing in the way of getting there that I know of. I think it’s incumbent upon us to continue to find a product, whether it’s Build-A-Bear product or a new product outside of Build-A-Bear now that we believe we can sell profitably in our stores to help us drive that.

Further to Maxine’s point, we feel positive about where we’re going with sales and we talked about taking $25 million of expense out last year. We didn’t put that back in in 2010 and in fact we think there’s a little bit more so if we get sales where we’re all looking for them to be, we as well as you all, we’ve already got that going for us so that I think is a big positive and I think despite crummy times last year, taking that money out and keeping that money out for 2010 is important to us and make a little more progress and that’s going to help us overall.

We have no further questions in queue at this time. I will now turn the call back to Ms. Maxine Clark for any closing remarks.

I’d like to thank everybody for joining us today and we look forward to speaking with you when we report our first quarter results in late April.