Good day, ladies and gentlemen. And welcome to the Fourth Quarter 2010 Build-A-Bear Workshop Inc. Earnings Conference Call. My name is Kristalin, and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, today's conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Ann Truman [ph] with ICR. Please proceed.

Thank you. Good morning, everyone and thank you for joining us. With me this morning are Maxine Clark, Chairman and Chief Executive Bear; John Haugh, our President 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, to 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 can get to everyone's questions during this one-hour call. Feel free to re-queue if you have further questions. Please note 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 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 our annual report on Form 10-K, and we undertake no obligation to update or revise any forward-looking statements. And now, I’d like to turn the call over to Maxine Clark. Maxine?

Thank you, Ann, and good morning, everyone. Thank you for joining us to discuss our fourth quarter and fiscal 2010 results. For our call this morning, I'll begin with comments on our full year accomplishments and fourth performance and introduce the priorities we are focus on with the start of fiscal 2011. John Haugh, our President will provide additional insight into our product and marketing strategy, and then Tina Klocke, Chief Operating and Financial Bear will review our financial results and outlook. Following our prepared remarks, we’ll open the call to take your questions. We are pleased to report positive net income for the fourth quarter and the year demonstrating the progress we made toward achieving our number one objective to increase shareholder value by profitably growing our sales. While the 3.7% comp store sales decline in the fourth quarter is disappointing, for the year we stabilized our sales trend, increased our average transaction and improved our margins as compared to 2009. We elevated our traditional product launches and introduced the new proprietary product lines small fry’s. We also improved the alignment of our marketing and operations to drive sales even as we reduced total marketing expense versus 2009. We opened 11 pop-up stores and also tested new products outside of our core Build-A-Bear Workshop offering to broaden our sales and customer reach. We recognized that we have more work to do in order to achieve our sales growth goals and have yet except strategies in place to achieve this. Let me review the highlights of our fiscal 2010 accomplishments. In North America, we improved our comp trend by 15 points over 2009. In 2010, comps in North America were down slightly at 1.2%, as compared to negative 16.7% in 2009. On a consolidated basis, our comp store sales declined…

Thank you, Maxine. As indicated, we are placed with our overall progress, which includes stabilizing our North America sales trend, increasing retail gross margins and generating a significant improvement in profitability. I’m going to start with an update on the initiatives we put in place at the start of 2010 and how they will evolve to advance our key objectives as we begin fiscal 2011. First, product innovation, the introduction of larger merchandise stores in limited edition products will continue to be a key focus for us in 2011. We will maintain our emphasis on offering a new themed collection approximately every month supported by coordinated marketing and powerful store visuals. In keeping with this strategy, our Darling Doggy's limited edition collection was introduced following Christmas to capitalize on gift card redemption opportunities and the increase in mall traffic associated with school publications. In January, we launched our Love Bug and Love Bear for Valentine's Day. This year we featured two animals versus one last year and for the time ever we partnered with Sweethearts to present a Candy Giveaway! for the qualifying purchase to provide additional value. And in March, Build-A-Bear Workshop will once again transform into the headquarters for Easter with the launch of our Daisy Bunny and Floppy Lamb to add to our Easter offering, we are excited about the introduction of EB, the feature bunny character in the Universal Studios film Hop, that is due out April 1st and we believe will be a big hit with kids. This should be a good offset to last years Avenant Britney [ph], which was timed with the release of their DVD. Overall, we feel very good about our current product introductions, as well as the inventory we've made, inventory commitment we've made. Second, we will continue to execute…

Thanks, John, and good morning, everyone. Because of this quarter and year end, I have a lot of detail to go through that should answer most of your questions. For the fourth quarter, total revenue increased $125.8 million from $123.1 million last year, an increase of 2.2%. Consolidated net retail sales were $123.2 million, an increase of $2 million, a $1.7 compared to last year's fourth quarter. Excluding the impact of foreign exchange, net retail sales increased 2.7%. The fourth quarter included a $4.3 million adjustment in deferred revenue related to our loyalty program and a corresponding increase in that retail sale. In 2010, we changed the method although used to estimate this liability to more accurately reflect our expectations for future customer usage patterns. As consistent trends in loyalty program emerge, we will continue to adjust our liability as necessary. As a reminder, with the exception of 2009, an adjustment has been made every year since the program's inception. Net retail sales from European operations were $25.5 million in the fourth quarter, which compares to $26.7 million last year. Excluding the impact of foreign exchange net retail sales declined $0.09 of percent. For the quarter, consolidated comparable store sales declined 3.7%, which included a 5% decrease in transactions and 1.4% increase in average transaction volume. While overall consolidated comparable store sales declined 2% for the full year, the North American comp decline of 1.2% marks a considerable improvement over a negative 16.7% comps in 2009. For the full year, total revenue increased to $401.5 million from $395.9 million last year, an increase of 1.4%. Fiscal year total revenues included $6.4 million from non-reoccurring commercial transactions. Consolidated net retail sales were $387.2 million, a decrease of $1.4 million. Excluding the impact of foreign exchange net retail sales increased one-tenth of…

(Operator Instructions) Today's first question comes from the line of Gerrick Johnson with BMO Capital Markets. Please proceed. Gerrick Johnson – BMO Capital Markets: Hi, good morning. I was wondering if you could discuss how your comp trends have progressed through the quarters, specifically how they look in December?

Sure, Gerrick. It's John. How are you? Gerrick Johnson – BMO Capital Markets: Hi. Good.

We gave where we followed the quarter. We actually were kind of about the same month by month by month. We frankly, as Maxine mentioned and we talked about, we felt like we really had a great holiday promotion, Rudolph & Clarice and Bumbo, significantly outsold our holiday presentation last year. We had some great GDPs. We just – the one big miss we had was lower comp SpeakerStarz. In 2009, we had Alvin and the Chipmunks and a lot of support by Fox Studio and it was a really good product for us. We were hoping SpeakerStarz with the launch in kind of mid-December would give us that shot in the arm. We just didn't deliver and if we look at the units we missed, Alvin versus this year SpeakerStarz and do kind of our average transaction at 35 bucks would have been right there at kind of a flat comp for the quarter. So good news is Dennis is really getting where we wanted to go. Good news is, we've identified it and think we got it corrected for Q4, 2011. So that kind of – that's how quarter four came out for us.

Our next question comes from the line of Sean McGowan with Needham & Company. Please proceed. Sean McGowan – Needham & Company: Thank you. I was wondering Maxine, if you could repeat or John, if you can repeat the store plans for 2011 and comment a little bit on what the timing would be?

We said that we would be opening up three to five new stores net of closing and those usually start around, we will open our first airport store in April, mid-April or early-May and then we'll have a few stores after that. And then we have three to five relocation stores that we’re moving within the same mall that are being downsized or reformatted. Again, most of those will happen towards the later half of the year.

Our next question comes from the line of Janet Kloppenburg with JJK Research. Please proceed. Janet Kloppenburg – JJK Research: Good morning, everybody. I was wondering if you could talk about the success of the pop-up stores and if that is going to be a viable avenue for growth for you in the upcoming holiday season. And I also – I'm hearing a lot about product cost increases from some of the apparel companies that I follow. And I was wondering what was happening on that front for Build-A-Bear? Thank you.

Hi, Janet. Maxine, I'll talk about the pop-up. We are – as I said in my comments, we looked at our pop-up stores, our first 11 that we did, one of them was actually a replacement to our Opry Mills stores that closed – due to the floods in Nashville and so we don't look at it exactly the same way. But the 10 other stores, we look at them before we went into them as which ones could possibly be a replacement location for Build-A-Bear as we look at our real estate portfolio that is coming up for renewal or just because we want to try some other kinds of locations, strip centers, all kinds of things like that. So some of them are looked at for that, others were looked at for just being in a market that we might not have been in yet and was the market good enough to support a store full-time or possibly part time. And so we've been evaluating those results. Because Build-A-Bear does so much business from Christmas, Valentine's Day and Easter, will be in the up most of these those through that time period and we think that we'll have much better idea after that. But we have seen in every market that we've entered that our sales as a market have increased, even though we've had modest, in some cases modest cannibalization of sales but we have been growth. And our plans would be not necessarily to have those two stores in the mall, one might have replaced the other one. So we're looking at all of that through all the demographics and quite an intensive review. But we do believe that we will be closing some of these, turning some of them into permanent stores and then opening up different and more pop-up stores possibly in the fourth quarter of this year.

Why don't I – second question, but let me hear it, the product question. Tina mentioned inventory was up slightly over last year although significantly better than third quarter, just to address that it could be primarily driven by Chinese New Year and making sure our product was put in before that and also kind of longer related times and trying to take advantage of getting product placed to offset what our whole bunch of pricing pressures that are coming from Asia. Are they real? Absolutely. But we have really tried to do, we talked about the consulting from we've got helping us. We really tried to deconstruct what we pay for product and make sure we understand what the raw materials are. We know they have gone up, some cases labor has gone up and we know we need to kind of account for that. But we don't want to necessarily let our partners just get kind of a free ride and bump in their profit margin or their distribution kind of logistics cost. So as we have gotten even more precise in there, we have worked hard to figure out what price increases we can absorb, where we might want to introduce some product redevelopment and in some cases we are going to have to take some price increases within our line. We have every intention of managing this aggressively and delivering at or above margin for 2011 versus 2010. So our goal is not – we made good progress on margin in 2010, we do not want to go backwards in 2011 despite kind of in same pressure on the marketplace. Yeah. And just I think I said it to be sure, the big task of the consulting from, Maxine mentioned and Tina mentioned, was to really help us again understand costs, how we can change our development site go, how we can drive out non-value added cost. It doesn't benefit Build-A-Bear, our shareholders or our consumers.

Our next question comes from the line of Tom Filandro with Susquehanna Financial Group. Please proceed. Tom Filandro – Susquehanna Financial Group: Hey, thanks. A quick question on new toy categories. John, is there anything going on that front in terms of testing the new categories that you would like to add to the overall mix and then can you, you may have stated this, but the inventory, I think it's in our per square foot dollar basis, it was up roughly 5%. What does that look like on a unit basis and how should we think about the level of inventory up or down for the balance of the year or I understand it's some adjustment. So if you could answer that, I'd appreciate it. Thank you.

Let me talk product for a quite and mix in approach up in two weeks. Tom we had people walking Toy Show this week and kind of over the weekend. We had people walking Toy Show in Hong Kong. We believe in small price, we have a couple of other things of our own that bring development on and will be in test in our stores pretty quickly. That said, there are still some other things in the market that are pretty high, you have seen them. Someone at some point would normally ask a question about pillow pals [ph] at this point. We didn't know if you if it was a fad. If you walk Toy Show, it's still out there in a big presence, the price hasn't really broken in the market. It's just kind of holding our SRP. So obviously, we need to be aware of something like that. There are some other things that we think could be some other grab and go items but again, what we fundamentally have to do is we got to make sure that if there are other categories that we work to bring into our store, that we put a Build-A-Bear ownership on them. So in other words, when we do something in Build-A-Bear eyes, it sell us considerably better than it would just grab kind of open market products. So our opportunity is to look for things that are going on the market, kind of bring them in potentially in an open market and say does this have legs and then we can quickly develop it into something proprietary. That's our best way to look for new ideas and that's kind of our approach on this one. You want to add anything?

No, I think that's pretty accurate. I think that there are lots of interesting things going on not only in the products that were build where would normally carried, but I think products that would apply to our licensing business. And we see that growing from some of these new kinds of products that are out there and there will be some new products coming to Build-A-Bear this year, whether it's – we've interpreted into an individual animal or a series of animals you'll see as always lots of newness, we took our ice cream bear collection that will be coming out again. We repositioned it marketing with a new partner. I think a more exciting partner and also adding attributes to the products that weren't there last year like scent. And we found ways to do that so that is not overwhelming to the customer and the customer can actually have a selection. So we see some things down the road that I think will be a product enhancement as well as tweaks but also a lot of interpretations of things as they relate our stuff animals, same in the fashion side of the business for the clothing. One of the hardest things to talk there in fashion, I know this sounds silly when we are talking about bears, but our gladiator shoes and our shoes have – bears have gladiator shoes and twinkle toes from sketches that are just blowing out of the stores as well as our stores. And then jeggings, which are leggings for humans and bears and it's just been something that sometimes hard to see in Build-A-Bear as a key item because we don't have rounders of it but we sell lots and lots of them and we just have to make sure that we're on top of all of those things. And I think we've enhanced our fashion apparel staff, significantly this past year with a new addition to our team who comes from that side of the business and were really – I think has already a great amount of fashion influence and we're starting to see that hit our floors in this next quarter. So I feel really good about what we saw. But there wasn't anything radical there, there wasn't anything – there's nothing really radical. We are testing a few things and I think we'll be able to report to you in the second quarter and certainly into the third quarter how those are doing.

Tom, let me hit inventory real quick. I'm not going to break out kind of units in dollars right now. We're up about 4-ish percent, probably about that though the course of the year. That said, part of our project again with the consulting firm is, we have – we're probably over SKUed, so we're going to look at SKU productivity and really try to drive better velocity and better turns through our stores that also to the earlier question about cost that it will helps us manage our cost. So our inventory, we think we've got it managed well. As you know, last we had a low built because of zoo-zoo, we've got that managed, we're back into kind of daily operating business. But that said, we think we can make improvement on it and it is part of this larger project that we are working on it and we should start to see benefits of that kind of Q2, Q3 of this year in terms of start to do, keep our inventory a little bit tighter and drive better velocity on the units that we carry.

But some, obviously, there are big cost increases and so some of that is coming from cost increases, not as much yet as it might come to be. But we're working on maintaining that and John said is mitigating it as best we can, but it is a reality and we have to make sure that our products are worth at that. We can – if we're going to take that cost increase, can we add a little bit more to give the product some to that or in some cases, there is something we can take out that will diminish its value to the customer. That's always harder because Build-A-Bear always gives a lot for the money but we are all looking at all aspects to that to make sure our inventory has a discretionary product, our inventory and our products are easily acceptable to the customer from a value perspective, a price point perspective.

Our next question is follow-up from line of Gerrick Johnson with BMO Capital Markets. Please proceed. Gerrick Johnson – BMO Capital Markets: Hi. I was hoping that we could discuss some of these one-time items in a little bit more detail. First of all, the deferred revenue, what lines does that impact to just the net sales line and then what were the strong asset impairments?

Hi, Gary. It's Tina. The deferred revenue impacts the top line, sales line and so I just want to – just to give a little color around it. It's a point in time adjustment. So, in reality, if you look at the beginning of the year balance to the end of the year balance, it netted too much smaller number of around $1.7 million. So over the point in time adjustment based upon the methodology, we're using to calculate the differed by stuff, our deferred revenue liability. And then the second question was store asset impairment. As we – as you know, at the end of the year we look at all of our estimates and we look at overall net contribution and it was we had to impair for, about four stores none of which were in the U.S. So very significantly down over the prior year.

We have another follow-up from the line of Sean McGowan with Needham & Company. Sean McGowan – Needham & Company: Thank you. I was wondering if you could talk a little bit about the timing of Easter and you historically in the past, how much of the revenue impact have you seen from when you used your shift from one quarter to the next?

Well, again, this is probably the latest Easter that we've had in quite a bit. And so again, we look at – you have to put together March and April and last year, I think in our call we said we were up a modest improvement over the prior year. So I think that, while we don't break our comps on a monthly basis and we don't give forward guidance, I mean, that's what you have to do because we're a calendar year end and our quarter ends in March, there could be a fairly significant impact to the first quarter. So as we get through the first quarter and get on our first quarter call, we'll definitely have a better information as to what that impact would be.

(Operator Instructions) And we have a follow-up from the line of Tom Filandro with Susquehanna. Pleased proceed. Tom Filandro – Susquehanna Financial Group: Hey, John or Maxine, can you give us a little more insight on that comment about being a little over skewed and like maybe the magnitude of which you believe you're over skewed and what implications does that have for your go-forward view of store format inside. And if I'm not mistaking, I think you tested a smaller store formats as well. So if you can give us an update on that? Thank you.

I think that Build-A-Bear always prided itself on having about around four to 500 SKUs per store. For the most part, you do have that but as the older you get, a little bit here, a little bit there, stores want this team or that team and you look at yourself and you find that you have some stores in Texas that have the Pittsburgh Steelers and we really need that. This year you would didn't need it, because it sold everywhere that we had it, but most of the time you wouldn't necessarily need that. And so we are just looking at a real closer scrutiny of our store productivity because actually what we have prided ourselves on in the years is that an A volume store and a C or D volume store have the same SKUs meaning they'll get the best end of everything. They may not get as much behind it, they get – after we set the floor with that merchandise, they get back what that they need in sales to replenish their sales. So you could go to a store in Asheville, North Carolina and buy the Love Bug, the week before Valentine's Day and you can buy it in New York City. So that small markets aren't penalized. That being said, they all have about the same number of SKUs except for Disney in New York, which may get a bigger SKU assortment plant for them around Disney costumes or New York merchandise. So we think we have – maybe an opportunity to cut 10% to 15% SKUs. And just know – that doesn't mean that SKUs gone out of our assortment, but would be out of many stores. So it might be – only in the stores that it need, so you're…

Our next question comes from the line of Brad Leonard with BML Capital Management. Please proceed. Brad Leonard – BML Capital Management: Hi.

Hi. Brad Leonard – BML Capital Management: We didn't talked about, how is your first quarter starting? What are the quarter-to-date comps, secondly?

Hi, Brad, John. We're early in the first quarter, you get some funny things with some weather, you get some funny things with separating Valentines Day and President's Day. So we're not probably at this point going to say where we are. We felt good about Darling Doggy's, which came out on top 26. We felt good about our Valentine's Day animals, we did two against one last year and frankly it sold right through Valentine's Day and in some cases broke a little bit early. I think we have to, we're really looking at the first three months of the year as kind of a first four months of the year because we've got weather – little bit of weather, you got a President's Day shift and then there was a question earlier about the later Easter. We are hopeful that when this has happened in the past, we've actually been able to get a little bit of a bump from head of that spring break and then a bump from Easter. So I think the best indicator of performance in 2011 would be where we sit at April. And we've got – we believe we've very strong product line up, we've got good marketing in place. We've got the store teams jazzed and as Tina mentioned 80 plus percent both start rating themselves. Probably too early to call and I think really April will be the best time to evaluate how well we did in "quarter one" even though it's four months.

We have a follow-up question from the line of Gerrick Johnson with BMO Capital Markets. Please proceed. Gerrick Johnson – BMO Capital Markets: Hi. Forgive me if I missed this but did you discuss the tax rate in the fourth quarter was a little low?

I didn't discuss it in the fourth quarter. I just talked about it on an annualized basis and why it was, what it was the benefit from relating to the valuation allowances in our foreign jurisdictions.

And we have a follow-up question from the line of Brad Leonard with BML Capital Management. Pleased proceed. Brad Leonard – BML Capital Management: First of all John, I'll leave it to that, could you guys obviously want to give up the comp and that doesn't make any sense to me why you can't compare 45 days in the quarter versus 45 days. We've gone through Valentine's Day, we've had all the stuff. The Easter shift is going to look ugly, I get that but it doesn't make any sense to me.

So, Brad, believe me, we always want to be as informative we can, you do have a President's Day shift, so you got to account for that. East Coast goes out next week versus this week, U.K. shifted there, what they call winter break. Okay. They have come after winter break for all of us. That would have been this week in the U.K., last year and the year we're in will be next week. So frankly, we don't want to give you something that's not accurate, it's not to dodge you, it's not to give you some that's not accurate. So I hope you'll respect that. Brad Leonard – BML Capital Management: Well, I'll leave it to that. I understand their shifts but as an owner, it's nice to have the information versus waiting till April 25 to figure out how we did. So I'll leave it to that and understand that I think it's useful. But I guess no one has asked about this, I mean, there's obviously this report you guys are going to talk about, so we're just not going to comment on this report. You guys in discussions or you haven't hired Barclays again to a potential deal. Is that just something that we're not going to discuss?

The company did not make an announcement and again it's our longstanding policy not to comment on rumors or speculation.

There are no further questions. I'd like to hand it back to Ms. Ann Truman [ph] for closing remarks.

Great. Thank you very much. Thank you, everyone for joining us today. We really appreciate your interest and your participation in our call. We look forward to update you on our next call in April to discuss our Q1 results. Thank you so much.

Ladies and gentlemen, that concludes today's conference. Thank you so much for your participation. You may now disconnect and have a great day.