Good day ladies and gentlemen and welcome to the third quarter 2008 Smith and Wesson Holding Corporation earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, Ms. Liz Sharp, Vice President of Investor Relations. Please proceed madam.

Thank you and good afternoon. Before we begin the formal part of our presentation let me tell you that what we’re about to say, as well as any questions we may answer, could contain predictions, estimates and other forward looking statements. Out use of words like project, estimate, forecast and other similar expressions is intended to identify those forward looking statements. Any forward-looking statements that we might make represent our current judgment on what the future holds. As such those statements are subject to a variety of risks and uncertainties. Important risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings including our forms SEC, 10-K and 10-Q. I encourage you to review those documents. A replay of this call can be found on our website later today at www.smith-wesson.com. This conference contains time sensitive information that is accurate only as of the time hereof, if any portion of this presentation is rebroadcast, retransmitted or redistributed at a later date we will not be reviewing or updating the material content herein. Our actual results could differ materially from these statements. Our speakers on today’s call are Mike Golden, President and CEO; and John Kelly, Chief Financial Officer. And with that I will turn you over to Mike.

Thank you, Liz. Hi everyone and thanks for joining us. Let me give you the agenda for today’s call. First, John will review our financial results. Then I will share my thoughts with you regarding our performance for the quarter as well as our strategy and outlook for the future. After that we will open up the call for questions from our analysts. Go ahead John.

Thanks Mike. Sales for the three months ended January 31, 2008 were 66.1 million dollars, at 12.2 million or 22.6% increase over sales of 53.9 million, for the three-month period ended January 31, 2007. Firearm sales, our core business decreased by 10.8 million dollars, or 21.3%, over the comparable three month ended for the previous year. Net loss of 1.8 million or 4 cents per diluted share for the three months ended January 31, 2008 compared with net income of 1.6 million of 4 cents per diluted share for the three months ended January 31, 2007. The increase in firearm sales in the three months ended January 31, 2008 was entirely was entirely attributable to the addition of Thompson Center Arms, which we acquired in January 2007. Official sales for the three months ended January 31, 2008 were 1.5 million below the comparable period last year. The decrease is attributable to the 2.2 million dollars in shipments that the California Highway Patrol, in the third quarter of fiscal 2007, which should not recur this year. Sales of the M & P Pistol grew at a rate of 42.7% for the three-month period reflecting strong sales in the law enforcement camp. In fact, excluding shipments to the California Highway Patrol in the comparable quarter, law enforcement sales in the third quarter of the current period grew more than 40%. Revolver sales increased 2.1% for the three-month period reflecting the soft domestic consumer market. In the long gun category, sales of both shotguns and high bolt rifles were below our expectations. Shipments of these products commenced as the market conditions were deteriorating and distributors were reluctant to take on these products. Our elite silver over and under shot guns have been adversely affected by production start-ups. Elite silver and elite gold series…

Thanks John. While the tough consumer channel and worsening economic environment in the third fiscal quarter dealt us a difficult hand, the quarter was not without its bright spots. Before I talk about those, let me recap for those who may be new to our story, those factors we believe that led to the challenging environment we have experienced in the middle and second half of fiscal 2008. The domestic consumer firearms market experienced a decline in demand during the third fiscal quarter as a result of lower retail traffic. The period was marked by an escalation of the sub-prime loan crisis, a tightening in the credit markets, the continued worsening of the housing market, increasing fuel prices, less than robust employment growth and generally weak economic conditions. Those factors contributed to a general slowdown of consumer spending across a wide variety or industries and product lines. Against this environment unseasonably warm weather throughout most of the United States adversely affected the retail traffic in the sporting goods channels. At the same time, significant distribution channel purchases, in anticipation of a strong hunting season, resulted in excess inventory level, which limited the ability of the distribution channel to purchase additional products. Now there are two data points we tend to go to in the firearms industry as a barometer of activity. First, federal excise taxes give us a general indication of what manufacturers are building and putting in to this channel. Second, is NIC’s data, NIC’s data gives us the number of federal background checks that are concluded over a period, conclude, conducted over a period and this data point gives us a general idea of the trends and the consumer purchases. Couple of notes, first, FET data is not immediately available to us, these quarterly reports are generally published…

(Operator Instructions) Your first question comes from the line of Mr. Paul Simon with Stevens, please proceed. Paul Simon – Stevens: Hello can you hear me?

Hey Paul how are you doing? Paul Simon – Stevens: Hey, how are you doing? Good evening to you I guess. My first question was on the way the weather patterns played out. Did you see any strength from Thompson Center, because it did get very cold in December despite how warm it was earlier in the year and obviously some of their seasons are later? Just, the question is given their establishment in the market did they see a pick up or a strong December as the weather got colder?

You are exactly right Paul. Many places the black powder hunting season is later in the season. And they did actually see a pick-up in their business and we saw a difference in that and what we are seeing in the rest of the industry. Paul Simon – Stevens: So, they were comparatively soft earlier in the year when it was unseasonably warm but then they out paced in December/January. Would that be fair?

They were seeing the same things through the rest of the industry saw but they did have fairly decent third quarter. Paul Simon – Stevens: OK, and given that Greg, Ritz is head of that division now of hunting I noticed already at the Shot Show you are making some tweaks here and there. What do you think you are going to do differently in the hunting category in general for fiscal 2009?

Well let me start off, Paul, by saying, we….the acquisition of Thompson Center, as I said in the prepared remarks, we are very pleased with. We really are just getting in to the long gun business. We have got our first year of it, and our sales in the first year will equal about 10% of that market. You saw at the Shot Show we have expanded the line of bold action with the icon classic have a number of new SKUs that are in there, we had the iBolt had some new SKUs at the Shot Show. We did not really do any promoting of the Smith and Wesson, ah, hunting products this year because we were late coming into the season. So this, this is really our first full season calendar year 2008 of really being in the long gun business. Paul Simon – Stevens: As you are more stabilized in the acquisition in calendar 2008 are there any specific savings now that you are making all your long barrels yourself? And do you see opportunities in the factory in New Hampshire?

There are, as we said all along Paul, we knew there were a number of synergies we would pick up. Barrels are one of them. Castings we outsource castings at Springfield and we can do them up at Thompson. We outsource heat treats from Thompson, and we have a heat treat operation here in Springfield. So there are a number of synergies that we expected and are seeing. The barrels, you….you’re right, the barrels coming to the M & P, rifle, the barrel for the iBolt rifle. So there are a number of synergies. We are not talking about ones that we are still working on because, you know, we have relationships and you know we have got to see how they all play out. But here have been a number of, of things, which we expected, in the acquisition. Paul Simon – Stevens: OK, thank you.

OK, thanks Paul.

Your next question comes from the line of Sean Melarez of Sedonie and Company. Please Proceed. Sean Melarez – Sedonie and Company: Hi, good afternoon.

Hi Sean, how are you doing?

Hi, Sean! Sean Melarez – Sedonie and Company: I am doing well. My first question is…. are you more or less confident of the near-term business outlook today versus mid-January when guidance was suspended?

Ah….I did not hear the beginning of the question Sean. Sean Melarez – Sedonie and Company: Are you more or less confident in the near-term business outlook today versus mid-January when the guidance was suspended?

Well, you know, we are not giving guidance at this point in time but as I said in my prepared remarks, we are seeing signs that are encouraging from dealers and from our distributors. Sean Melarez – Sedonie and Company: And in terms of seeing signs that the situation is improving, I recall that back in December on the last conference call that you also mentioned that there were some initial signs that that things were improving. So how is like your thoughts in terms of industry improving different today versus back in December when you thought things were improving?

Well we only had, I forget what it was, only five days of data under our belts back in December. Ok, and if you look through we said, I think John may have been the one who said it at the time that it appeared to us that when there is an inventory back build-up it takes about a quarter or so for handguns to work its way through and about six months on long guns. And that is about what we are seeing. There is still long gun inventory out in the channel. Sean Melarez – Sedonie and Company: And, the next question would be…..could you elaborate on the comment in the press release um stating that the company expects that once inventory levels correct the distributor buying patters would be much more conservative compared to the last year. I mean, does that mean that as we consider our financial models that you are expecting sales to be down in the fourth quarter and the first quarter of F09?

I am not going to comment on specific quarters, but what we mean by that is there was a number of factors that have affected the industry and caused this inventory build up. Certainly weather was one of them, certainly the economy all, you guys know better than I do all the things going on out there. We believe that the distributors buying practices will take into consideration the uncertainty in the market place and they will simply buy more conservatively.

You know what they went through is pretty fresh in their minds at this point. So, it is going to color them, particularly with the economy the way it is right now. You can expect them to be cautious. Sean Melarez – Sedonie and Company: And my last question is, on the possible acquisition front. Is the current industry weakness and also on the balance sheet being fairly leveraged? Does that make it less likely that and acquisition would occur?

We are continuing to look at the opportunities out there for us. There are a number of ways that we could go back and support an acquisition. We have got a number of relationships with a number of banks and so it really does not change our strategy. You know we are not going to rush into anything, we did not rush into Thompson, we looked for awhile until we found something that really was in our will zone, I do not want anybody to think our strategy has been changed because it has not. Sean Melarez – Sedonie and Company: This question may be more for John, in terms of the balance sheet, like leverage, like about a 60% debt pull capacity ratio, are you comfortable with that level?

The debt level is something we are comfortable with. We play it out, some of it fluctuates obviously with the seasonal patterns, with the hunting season and as we work through this inventory situation that is a factor in that. But we are comfortable as we work this inventory down, of where we are in our financial model. We have adequate space on our lines of credit. So, we are comfortable in our position and our ability to move forward and do additional things if we need to. Sean Melarez – Sedonie and Company: OK, thank you very much guys.

OK, thanks Sean.

Your next comes from the line of Tyvon Humar with Allan and Company, please proceed. Tyvon Humar – Allan and Company: Yes thank you. Hey, good job….good job on starting to get that inventory to come down.

Thanks, Ty, appreciate it. Tyvon Humar – Allan and Company: A couple of technical questions, can you give us, what was backlog at the end of the quarter? And what were the international export sales in the quarter?

Hold on for a second, John’s looking in the Q for that. Our international export sales were down for the quarter and that was driven by licensing from the State Department that we thought was going to come in the quarter and actually is going to fall into this quarter. There still up for the year though, the first nine-months are up, I want to say, 30% Ty. Tyvon Humar – Allan and Company: Right, I know, but so if they were down this quarter let me just, I am trying to get to my numbers, so they might have been, so they were under 5 million probably in this quarter. So do you….

A little bit more than 5 million, Ty Tyvon Humar – Allan and Company: Excuse me?

A little more than 5 million like 5.2. Tyvon Humar – Allan and Company: OK, great. And then, and then do you expect them….I mean, I assume you said that you had something was delayed do you expect that issue should be better in the final quarter?

Ok, that will come into this quarter. We will end up about 30% in international and we will continue to be up for the full year. Tyvon Humar – Allan and Company: How big was that license, out of curiosity?

About a million dollars and that is what triggered the Congressional approval process versus just the State Department. Tyvon Humar – Allan and Company: How big was it again?

About a million bucks. Tyvon Humar – Allan and Company: A million bucks, ok. And then, do you have the backlog number?

Ok, with everything going on with the details, with the specific backlogs I can tell you that the backlog has improved in the same trends as it improved last year. It is a little lower than it was in the previous years, which is factored in somewhat because we had the CHP order in there last year, but the trend is mirroring what we saw last year as the backlog built because of all the buying group shows, and the distributor shows that happened in the first part of the year. So, we have the normal seasonal build in the backlog at this point …. Tyvon Humar – Allan and Company: It is still lower than then 15 million you had last year at this time.

Yes.

Yes, and last year at this time, I remember, right Shot Show was in January of last year and we had all the, the orders for Thompson Center’s introduction of the icon plus the CHP, which really….and the triumph, muzzle order, so it was kind of anomaly for Thompson there to have such a huge backlog in January and this year Shot Show was in February so it distorts some of the numbers there from year over year. Tyvon Humar – Allan and Company: So can you give us any color, I guess normally at Shot Show, you know the dealers place their initial orders for the upcoming season, um, any color on that? I assume the icon is doing relatively well, although you have issues with the iBolt and the 1000.

Well, first lets back up guys, people do not place orders at the Shot Show with manufacturers. They begin to look at the array of products and start to wrap their minds around what their going to do in that calendar year. So, it is not an order writing show, ok? What we are seeing on the, the probably the best barometer is Thompson because they have been in the hunting business. And the booking orders are coming in around flat to last year, which is what we would expect. And, and what we think is going to happen is there, if the business, if the season is a good season then there will be more in season buying, from distributors, versus the way, just think regular booking orders. And that works with us, is favorable for us because of our flexibility in manufacturing. What was the second part of your question? Tyvon Humar – Allan and Company: That was the major part of it. I guess, the one substantive one is, you mentioned problems with the iBolt, the competitive problem and then the 1000 you had the start-up problems. Do you feel you need to redesign either of those products and are there any quality issues with the iBolt that need to be freshened up?

Ok, let me tell you how we see this, ok? One, we are very excited about the long gun business. This is a big opportunity for our company. We got a late start on the Smith and Wesson side. Thompson, we continue to be very pleased with. On the Smith and Wesson side, we got a late start so we really did not have a chance, we did not get much product out there, and it is just that simple. But what has happened is the at the recent Shot Show there were a number of manufacturers that launched new bolt action rifles that are not relatively, very low price points. And we are trying to understand what kind of costs can be taken out of the iBolt manufacturing. Not taking features out, there are other things we can do to be competitive in that with this new lower price points that is out there. On shotguns, our Elite Gold and the Elite Silver are positioned very well. In fact Elite Gold won Shotgun of the Year so there we are very pleased with where they are. What we are finding on the semi-auto is that the price points, because the market for shotguns, which was a very soft market last year. Competitors did a lot of very severe price discounting on shotguns that really make our semi-auto not competitive at the price point it’s in. What….we’re trying to think that all the way through and understand how we address this and what have you? We love the business we love what we are seeing with the Gold and Silver Elite, we love the Thompson Center business and the Icon business but there is a couple areas that the guys are working on and rethinking. Tyvon Humar – Allan and Company: Ok, and the last one you had mentioned you are aware of some inventories at some of your competitors not really out effect at the distributors. Are you seeing increased price discounting to kind of move that inventory over the last couple of months? Or is price discounting abating?

Hi, this is John. The price discounting we are seeing that. There were some people at the show that were advertising substantial discounts. There is more….what we have seen is more of the push to get stuff into distributors rather than the retail promotions, and the retail promotions, while expensive, are really he way we have been pursuing it because they pull inventory through the channel and I think part of the reason why we have seen the recovery we have is because of those promos in terms of getting that out of there and I do not think some of the other players, with some of the feedback we have had, have been able to do that. We have gotten feedback from distributors of high inventory level of certain competitor product line, as well as looking at some other sources of data their own inventory levels are probably high. So they got to figure out what to do with that. And that is part of this uncertainty that we are still dealing with and how why we are continuing the promos into the fourth quarter. Tyvon Humar – Allan and Company: Ok, great. Thank you very much.

Ok, Ty, thanks a lot.

Your next question comes from the line of Spencer Ferrar, with Cowan and Company. Please proceed. Spencer Ferrar – Cowan and Company: First question Mike is directed toward you. If you can kind of give your take on some of the legislative trends going on in the gun industry right now. Specifically, I believe it was in the January 08 edition of American Rifleman, published courtesy of the NRA, ah, there’s an article that says a Congressman from New Jersey is introducing a Resolution to mirror the micro-stamping law that took place in California a few months earlier. Just wanted kind of your, your….take once again about this law in particular, this proposal and sort of the apparent, ah shifting of sentiments from Congress toward more restrictive measures. How do you think this is going to impact the gun market in the next administration or in the near term and what other legislative issues are you addressing currently in Washington in your lobbying efforts there right now?

Ok, let me take these one at a time Spencer, because there is a number of things in there. On the micro-stampings we certainly understand what that is, there was Bill passed in California that requires, effective January of 2010 that any new pistol SKUs, in other words new products, that were shipped in sold in California must have what they are calling micro-stamping. What micro-stamping does is when the gun is fired it stamps the serial number onto the shell of the ammo or the bullet and it and if you know with a pistol it ejects and it is on the ground and they can figure out whose pistol it was. The industry is point of view on that is, is we are not necessarily an industry against micro-stamping we, this doesn’t work. And the reason it doesn’t work is one, it is very easy to with a nail file someone could, could rub out the serial number that would be on the striking pin. So it’s very easy to defeat. Second, is it does not apply to products that are already being sold in California. So like the M & P, for example products like that it do not apply to that. And third, that does not apply to revolvers because the shell does not eject. So, if there are two studies one from University of California, University of Southern California, I forget where the other one’s from, that very clearly say that this is a flawed technology and does not work. It is being pushed by the manufacturer of the technology who’s the sole proprietor of the technology. So, this is a bit of a, kind of an interesting deal. So, the industry is taking a stand to try and get that, that undone. If it does not get undone, you know, then, you know, we will have to find a way to be compliant with it. A lot of it is a logistics issue with the factory because we typically put the serial number on the gun at the end of the line and if you have to match the serial number on the striking pin with the gun, it’s complicating. So that is the position we are taking on that, if it is something that we have to, ah, have to adhere to, if we will have to there will be a cost to that and we will just add that to the cost of the product. It does not to me sound like it is an extraordinary cost but I am….I am not sure of that. What are we working on in Washington? Is that the second one? Spencer Ferrar – Cowan and Company: Yes just kind of generally can you qualifiedly describe what is going on right now?

Yea, ok. This move to get the…that where the Air Force sent in this request for a 100,000 pistols I really look at as a really a positive thing. If I am in Washington now my focus will not be so much on, we need to get a new pistol, we need to get someone to put that forward, we need to get this funded that’s a totally different tactic that we will take down there. I really salute the air Force for taking this lead, and they are very determined to make sure this happens. So, we will see how, how that all works. The other issue that everyone I think is aware of is the Supreme Court is hearing a case on the Second Amendment. The Washington, DC, their ruling on the Constitutionality of the Washington, DC gun ban. The hearing is in March, they expect a decision to come out in April. I just came back from an industry board meeting and I have not found anybody who thinks that the Supreme Court is going to rule that the Second Amendment is not an individual right. So we will just have to wait and see how they rule on that but I think that is the main thing. Did I miss anything? Spencer Ferrar – Cowan and Company: I, think you covered it. And a final question, if I can, on shotguns.

One other thing that I think is important. Spencer Ferrar – Cowan and Company: Ok, ok

Sorry Spence, Spencer Ferrar – Cowan and Company: No, no problem.

The Defense Authorization Bill, we were fortunate enough Senator Collins and Senator Lieberman really led that charge for us. The orders that the Federal government, the Defense Department, had to buy for handguns in Iraq, we got the last four pistol contracts for Afghanistan. Those contracts were competed. For Iraq, the Defense Department was not bidding the contract; they were simply placing out solicitations for orders of Glock. And now that is against the law, so we think that is a big deal and we very much appreciate the two Senators for helping us out with that. And, the fact that the US, that they have to do competition and US companies can not be excluded is a big deal. OK what was your other question? Spencer Ferrar – Cowan and Company: Sure on shotguns, I believe you said it was about 200,000 for the quarter for shotguns. Was that correct?

Right Spencer Ferrar – Cowan and Company: Which I believe, even by your standards, is somewhat paltry. So, at what point do you kind of have to decide if you need to chance strategy about shotguns? Do you have a branch plan i.e. developing pump action guns or, some other strategy in mind here? Because it seems like you have been engaged now in the shotgun market for a year, and granted there are these exogenous activities taking place but, at what point do you decide, enough is enough, and you need to take a different approach or different avenues?

Well, let me answer that. You probably missed that because Ty already asked that question. Spencer Ferrar – Cowan and Company: Oh, ok, well in that case I’ll refer to the notes.

Let me just quickly say we like the shotgun business our fixed action, the Gold Elite, won the NRA Shotgun of the Year, we think they are positioned well. We got into the season very late, in fact the Silver. I do not know, we just started shipping them recently so, just now we really only had a very, very small toe in the water there. We are rethinking the semi-autos because obviously that market has changed. There are some very severely lower prices have come in to the market on that make it difficult for that piece to be profitable. And we do not need to be in business if we can not make money at it. So we are rethinking that. Spencer Ferrar – Cowan and Company: Ok, thank you very much.

Ok, thanks Spence.

Your next question comes from the line of Reed Anderson with D.A. Davidson. Reed Anderson – D.A. Davidson: Good afternoon. See in terms of margins. I am not sure if this is Mike or John, but given what we have known you have been doing for promotion to clean up the channel, what is out there in retail, and what we saw in the third quarter does it make sense that that is the level, at least from a gross margin standpoint, that we might see over the near term or could it get a lot worse?

Well, we are not going to give guidance on that Reed. But we are continuing promoting through this quarter and we had a three week shut-down in the third quarter in the factory, which obviously has a negative effect on gross margin. That is not planned to be duplicated in the fourth quarter in Springfield. Reed Anderson – D.A. Davidson: Ok

Reed, this is John. Reed Anderson – D.A. Davidson: Yea

The shut-down adversely impacted gross margin by about 2.25 million dollars. Reed Anderson – D.A. Davidson: Ok

That is about close to 3 points in itself on the margin. Reed Anderson – D.A. Davidson: Ok, that is helpful, good….and then continuing down just looking at the expense side because most of my questions have been answered. If you look at SG & A for example, it is more or less flat with the way we were in Q2, but it is certainly up relative to sales. What component of that is more or less steady stage fixed and what makes sense as we look at that number going forward?

You know Reed, it is John. From an SG&A standpoint generally it’s fairly fixed as a group, as a category. The only thing that would really vary in significantly SG&A is you probably have the Shot Show, which kind of flipped from last year, the expenses for that were in….in, January last year. They are going to be in February this year. And that is probably somewhere between 750,000 and 1 million dollars in total expenses for the show. And that is the big fluctuation in the selling side. Then the only other thing in the SG&A side would be profit sharing, which will fluctuate with the operating profits. So, that is pretty much otherwise it’s pretty much fixed. Reed Anderson – D.A. Davidson: Ok, and then again back to….to you Mike, and just kind of building on or adding, just finishing off the last couple questions, or groups of questions, but as you look at what you have done in long guns, I mean, clearly Thompson Center’s been a terrific acquisition virtually any way you look at it, but what you have done on your own organically has really been very challenged, particularly in the long gun side. And, I mean, some of that is timing, but I guess as you look at it, do you now sit here and think that maybe it is going to be harder to extend your great brand in long hand guns to long guns? Or do you….or is it too early to make that judgment?

Well, I think there are a couple things. Our M&P 15 is a long gun and that is doing very well, it was up 67% last quarter. Reed Anderson – D.A. Davidson: True

That is a Smith and Wesson product. The Thompson brand, we did not buy Thompson for the brand, but I got to tell you, the Thompson brand is a very, very strong brand with hunters. Well you are a hunter and we are trying to decide as we go forward, we are going to be in this business, our intent has not changed from where it was when I first said we were getting in the long gun business as we expected to be a major player and have a share similar to our share in handguns. We have two brands in Smith and Wesson and in Thompson that both are terrific brands. So how we utilize them as we go forward will be an item by item decision that we make. But, I’m just totally pleased when I listen, when I stand in the booth and I see consumers come in and they are dealers at these distributor shows and the way they just fondle the Thompson products. Reed Anderson – D.A. Davidson: I agree. Thank you.

Ok, thanks Reed.

Your next question comes from Chris Crewgo with Nordland Securities. Please proceed. Chris Crewgo – Nordland Securities: Hi, good afternoon guys.

Hi Chris, how are you doing? Chris Crewgo – Nordland Securities: Good. Most of my questions have been answered, but just can just walk us through a little bit more on what you are hearing and seeing really at the retail consumer type level? Ah whether it is more affluent neighborhoods or markets versus the less affluent ones? Are value priced products selling more and maybe the impact of ammunition pricing on the market? That is all I have got, thanks.

Yes Chris certainly the economy is doing a number on all retail businesses. I mean, you just have to read the paper and you see that. Our promotions appear to be doing very well. And we have heard that all along, so, there but you are seeing, as I was saying on things like shotguns, you are seeing manufacturers who may take huge discounts on price to get themselves priced lower. I am sure that is so they can sell some stuff through. So, the retail environment continues to be unsettled, and the good news that we are seeing is the inventories, that were really the roadblock are coming down. As we said, we think on certainly on our handgun side, we are about through that adjustment but we are not seeing, we continue to take market share, we have pretty good numbers that show us that but, we are not seeing the level of retail activity that we were seeing, let us say this time last year. Chris Crewgo – Nordland Securities: Are there any thoughts on ammunition pricing?

Ammo pricing has been going up for the last… I’m going to say between…..gone up for the last year and a half to two years. Ah, we are starting to hear that, like, five by six and 223 ammo may be coming down in pricing, kind of the word we are hearing in the industry. So I do not want to start any rumors on that, but certainly there are a number of factors here that are doing some adjustment on the industry. Chris Crewgo – Nordland Securities: Alright, thanks.

Ok, great

Your next question comes from Eric Wold with Merriman Curhan Ford. Please proceed. Eric Wold – Merriman Curhan Ford & Co: Hey, good afternoon.

Hey Eric, how are you doing? Eric Wold – Merriman Curhan Ford & Co: Good, a general question on the industry. Do you get the sense that the weakness of the industry in terms of the sales, the build-up of inventory at specific guides out there, has it been bad enough that you’re going to see some of these smaller competitors get shaken out, and either go out of business or get absorbed by somebody else? Has it been that bad, in your opinion? Or is it really kind of more of a hiccup?

I, I think it is more of a hiccup Eric. I have not seen any signs of the former of what you have said. Eric Wold – Merriman Curhan Ford & Co: Ok

Eric, this is John. I think these guys; most of these are mom and pop operations. A lot of these places are privately owned, these things have happened in the past and they have, they have worked their way through them, so it is a situation where they expect it and they will battle through it and they look at it and I talked to one privately owned company and they had a good year last year and they just expect this year to be softer. Because the economy and that. So, it is not a case where they are in any situation. There may be some really small guys that have some trouble, but by and large I think most of the players are relatively healthy. Eric Wold – Merriman Curhan Ford & Co: Ok. And then going to gross margin, I am not trying to get too specific. I am not saying any guidance out of this anyway, but in Q3 I know you said about tree points of that decline was the shut down. Or three point; the shut down caused about 3 points impact on the margin. If I think about going forward, if sales cause obviously 25% margin versus the 32/36 you had in the first half of the year, going forward, if you get sales back to where it was in the first half of the year on a quarterly basis is anything now that would keep you from getting back to that same margin?

When the market gets back to normal is what you are saying right? Eric Wold – Merriman Curhan Ford & Co: Yea, if you like in the first half of the year you were doing 70-75 million a quarter.

Yea, I got you. Here is how I think about this, Eric, I think about our business there has been an issue in the retail market that we have had to address and we believe it is temporary and we have gone through it ad nauseum all the factors involved but we have no new competitors, we have not lost any customers, nothing has fundamentally changed, other than the retail environment we are working our way through. That is how I would think about it. Eric Wold – Merriman Curhan Ford & Co: So, how much of the discounting or promotions that you guys do goes through the gross margin line versus the sales and marketing line?

All of the 4.7 million dollars we talked to is gross margins. Eric Wold – Merriman Curhan Ford & Co: Ok. And then lastly on the inventory side, I do not want to get to granular but, can you give me a general sense of the inventory you have got? I guess handgun versus long gun, if you want to do broadly…

The inventory is pretty well distributed. I do not think there is any particular category that would be any cause for concern. There are no SKUs where we have tremendous quantities, it is very well distributed. Some of the inventory obviously we have got a significant increase there and we are working that down. But, some of that was relative to our start up the long gun operation. Both the iBolt, the Triumph, the Icon, and, really getting the production on the M&P15 in house, and sort of those pieces. So, we anticipated somewhat of a build, maybe in the 3 to 4 million dollar range of that, when we are looking at them over the course of the year. So, we have still got some issues that we need to address. We have got plans in place that we are continuing to monitor and work on, the operations guys are working on things in the wip and the parts areas and we are looking at production as relates to market situation and adjusting accordingly. Eric Wold – Merriman Curhan Ford & Co: Perfect. Well thank you guys, I appreciate it.

Eric, thank a lot.

And you have a follow-up question from the line of Sean Melorez Cedonia Company. Sean Melarez – Sedonie and Company: My follow-up was answered already. Thank you.

Ok, thanks Sean.

And your next question comes from the line of Matt Hacker from Sega Partners. Please proceed. Matt Hacker – Sega Partners: Could you guys give us the detail on the finished good portions of the inventories?

Matt, this is John Kelly. The finished goods is pretty well distributed throughout the, area. I mean, the promotions have balanced off the inventories. They have had their desired effect there, from our finished goods are down about 5 million dollars from where they were in November. So, we have balanced things off with the shut down we were able to do that as well. Matt Hacker – Sega Partners: Right

At the same time we altered our production levels so this quarter has been one where we have been able to balance the inventories off. Matt Hacker – Sega Partners: I just wanted to focus on that one number. I think the finished goods balance in October was 20.2 million and I think you just mentioned roughly 15 by the end of the reporting period. I am just trying to sense for how much of that total inventory balance is finished goods versus parts and work in progress.

It is about 16 million Matt Hacker – Sega Partners: OK, thanks guys.

Ok, thanks

And you have no further questions at this time.

Ok, I want to thank everyone for calling in and the support and we will look forward to talking to you again next quarter.

Thank you for your participation in today’s conference this concludes the presentation. You may now disconnect. Have a good day.