Welcome to the fourth quarter and full fiscal 2008 Smith & Wesson Holdings Corporation earnings conference call. (Operator instuctions) I would like to turn the call over to Liz Sharp, Vice President of Investor Relations.

Thank you, and good afternoon! Before we begin the formal part of our presentation, let me tell you that what we are about to say as well as any questions we may answer could contain predictions, estimates, and other forward-looking statements. Our use of words like project, estimate, forecast, and similar expressions is intended to identify those forward-looking statements. Any forward-looking statements that we might make represent our current judgement 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 securities filings including our forms S3, 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’ll turn the call over to Mike.

Thank you Liz, and thanks everyone 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 our strategy and outlook for the future. After that, we’ll open up the call for questions from our analysts. Go ahead John.

Thanks Mike. Sales for the year ended April 30, 2008, were $293.3 million, up $59.1 million or 25.2% increase over sales of $234.8 million for the year ended April 30, 2007. Firearm sales increased by $53 million, or 23.9% over the previous year. Net income for year ended April 30, 2008, was $9.1 million or $0.22 per diluted share, compared with $13 million or $0.31 per diluted share for the year ended April 30, 2007. $: Gross profit for the year ended April 30, 2008, increased by approximately $16 million over the previous year. On a quarterly basis, gross margins of 30.6% for the quarter of fiscal 2008 showed dramatic sequential improvement over gross margins of 25% for the third quarter of fiscal 2008. Gross margins as a percentage of sales and licensing was 31.2% in fiscal 2008, compared with 32.3% in fiscal 2007. Gross margin was adversely impacted by approximately $8.9 million in promotional costs and $2.6 million in unabsorbed fixed costs related to plant shutdowns, a 3-week shutdown at our Springfield facility in the third quarter and a 1-week shutdown at our Rochester facility during the fourth quarter. Historically, we have always scheduled a 1-week holiday shutdown in Springfield during the third quarter. This year, that shutdown was extended by 2 additional weeks to reduce inventories. Cost of goods sold for the year ended April 30, 2007, included $2.7 million and increased cost related to the effects of purchase accounting on Thompson’s inventory. Operating expenses for the year were $68.2 million, $16.3 million higher than fiscal 2007. Approximately $13 million of the increase was attributable to a full year of Thompson operating expenses. As a percentage of sales and licensing, operating expenses were 23.1% compared with 21.9% fiscal 2007. Operating expenses also included $4.1 million in amortization of…

Thanks John. When I spoke to you all last year at this time, I laid out several objectives that we intended to deliver on in fiscal 2008. Those were growth in our core firearms business, growth in new markets with a focus on professional products, regular visits to Washington to heighten awareness of our capabilities, and a focus on profitable growth with each initiative. Despite the exceptionally tough challenges in both the general economy and the firearms industry, particularly during the second half of fiscal 2008, we were able to deliver partially or entirely on each of these commitments. I want to first talk to you about the current environment and how we have addressed and will continue to address the challenges there. Then, I will recap our fiscal 2008 highlights and accomplishments in detail, and lastly, I will address our strategy for diversification and growth, a strategy that has remained intact despite the challenging environment that we’ve been facing. As you all know, the domestic consumer firearms market experienced a decline in demand during our third fiscal quarter due to lower retail traffic driven by a variety of weak economic factors that caused a general showdown of consumer spending across many industries and products. Additionally, on unseasonable warm autumn weather throughout most of the United States also adversely affected retail traffic in the sporting goods channel. At the same time, significant purchases by distributors and retailers which had occurred earlier in the year across the industry in anticipation of a strong hunting season created unexpected high inventory levels in the channel and limited the ability of distributors and retailers to purchase additional products. We have taken many actions to address this situation. Let me give you an update. Many of you have heard me explaining our use of the…

(Operator Instructions). Your first question comes from the line of Paul Swinand from Stephens Incorporated. Paul Swinand – Stephens, Inc.: Good afternoon, and congratulations on navigating this touch environment. First question was with handguns up 12%, I think that’s by my quick math $6 million approximately; tactical rifles up 30%, I know you’re lacking comps with the acquisition in January last year, something must have backed up. What particularly in the product line was weak?

Basically, Paul, what we had was pistol sales were weak as we talked about. We had two large orders last year for Afghanistan and California Highway Patrol. They total about $15 million, and that’s primarily the driver on the pistol side, which is about $8.5 million below last year. Paul Swinand – Stephens, Inc.: Okay, maybe I’m misunderstanding then. In the fourth quarter though, handguns were up. Is that correct?

Handguns were relatively flat in the fourth quarter. Paul Swinand – Stephens, Inc.: Okay, I misunderstood then, but was Thompson a net increase in sales in the fourth quarter, or was it year over year or just for the fourth quarter a negative comparison?

Thompson sales were down in the fourth quarter. Paul Swinand – Stephens, Inc.: Okay. I’ve noticed like at retail you’ve promoted tactical rifiles, the Sigma and in some cases even the M&P, even though the retailers that we talk to are saying that those are all selling quite well. Is that just part of the normal cadence now, or why would you be promoting those if they’re selling well?

Paul, this is Mike. We put the promotions in place late October to November that went through the end of April. It was a fairly strong promotion. We always are promoting products. That’s just the normal course of our business. What we have done going into the current fiscal year is that we are scaling back those promotions from what we had done during the third and fourth quarter, but it’s a conservative business and we do promote it. Paul Swinand – Stephens, Inc.: So, it’s part of the normal cadence now, essentially?

Yes. We’re watching it carefully obviously, and we’ll adjust it accordingly as we see the way the market goes, but even two years ago, we were promoting. Paul Swinand – Stephens, Inc.: We talked about on the last conference call the synergies that you’re talking about now in Thompson. If I was trying to make a quick estimate on what the savings could be on barrels, is it $1 million that you could save next year, or you care to comment on that?

We really don’t give those kinds of details out on the barrel itself. Picture a rifle, and the barrel itself. It was a relatively significant savings, and we think a quality improvement coming out of the Thompson Center. That was one of the reasons we liked the company, their ability to make barrels. There were a number of different things that we had done between Thompson and Smith & Wesson. You have the two that I talked about. We have a heat treat operation. They have a casting foundry up there, leased outsourced casting, leased outsource heat treat. We synergize the sales organization. So, we knew when we were looking at the company that there were a lot of things that we could do by bringing the two organizations together and there were synergies that businesses would benefit by. Paul Swinand – Stephens, Inc.: I’ll just ask one more. On the channel clearing that you’re talking about for the long guns, what’s the time period? Obviously the hunting season starts around September. You’ve got some shipping in August. Can you give us any kind of feeling for the magnitude of how that clearing is going to play out? Is that obviously going to hit gross margin?

That’s part of the uncertainty, Paul. Certainly, the economic environment and the retail environment are going to have an impact on that as to how quickly would they actually sell through. I think our distributors are doing the right thing. They’re looking at here’s what I’ve got in the backroom, and they’re going to look at their upfront purchases more conservatively going into the hunting season this year because of the uncertainties in the economies. So those two factors would really have an effect on that, and that is how quickly the retail demand comes back as we get into the fall. Paul Swinand – Stephens, Inc.: So it’s sounds like you’re saying it’s been handled more through reduced purchases than discounting. Is that fair?

It’s a combination of both, Paul. They’re managing their inventories going through. That’s why we talked about Thompson’s sales being down in the fourth quarter, which is part of that mandatory process. There is discounting going on by some of the competitors, which you can see there. I think as we go forward, we’re going to do the same things we’ve done for the last six months in terms of promotions and assess what we need to do at the consumer level to pull that product through the channel.

Yes. A couple of specific things, Paul. We’re going to focus our sales guys on kick-starting this business here. We’re going to have preseason blitz with our sales force to the key retailers to make sure people are trained on our products. We have consumer promotions that will be in place. We will have some TV on the long guns that will be featured on the outdoor networks, and that’ll include the i-Bolt shotgun and then the Thompson product which has been on TV in the past. So, we’re going to try to spend our money wisely. We said all along that we intend to be a major market share player in long guns over time, and we fully mean that.

Your next question comes from the line of Cai von Rumohr from Cowen & Company. Cai von Rumohr – Cowen & Company: Nice profitability for the sales you’ve achieved guys! Could you give us the number for where you were with hunting rifles and shotguns for year, so we can kind of see how they did in the fourth quarter?

Hunting rifles for the fourth quarter were about $10 million, versus about $14 last year, so there were down about $4.4 million, about 30% for the quarter, Cai. Cai von Rumohr – Cowen & Company: And the shotguns?

Shotguns were up slightly on very low comp. Remember, we weren’t shipping shotguns last year. We have shotguns that are in distribution that some of the promotion programs I just mentioned to Paul, like the blitz and getting the retail place. We have to get pull that product through distribution. Cai von Rumohr – Cowen & Company: Did you do about $1 million or close to that in the fourth quarter or was it even lower than that?

No, it was less than half a million dollars, Cai. Cai von Rumohr – Cowen & Company: Revolvers, were they down in the fourth quarter? Where were they?

Revolvers had a very strong fourth quarter. It was up $3.4 million, about up 19%, so we had a very good quarter in revolvers. Cai von Rumohr – Cowen & Company: And the Walter numbers were really incredibly strong, given the currency. How is that affecting their sales? I mean is the product just pushing the sales out the door, and to what extent is the currency helping?

They have a couple of things going for them. They are certainly benefiting from our direct sales force out there, Cai, you know calling on the dealers and getting placement of the product. Their P22 was just listed in a recent publication as the number one .22-caliber pistol in the marketplace and continues to grow. They launched two new products within the last several months that are doing very, very well, so there’s some momentum there with new products just like we see when we had new products at Smith &Wesson. Cai von Rumohr – Cowen & Company: Okay, so I mean really the picture is if we take out the law enforcement in Afghanistan, the hand gun sales look actually good to very good across the board in the fourth quarter, and frankly the hunting rifle shotguns were pretty bad.

What our distributors and retailers are telling is that the inventory that was the issue on the handgun side has worked its way through, and you can see that, and that’s the combination, but what we’re hearing from dealers is that the handguns are regaining their momentum. Long runs, remember, we are out of season on long guns, so it’s very fair to expect the long guns to be slow this coming year even in a good year on sell through because it’s out of season. Cai von Rumohr – Cowen & Company: Right. Do you have any sense of what the sell through of long guns just in total might have been in the fourth quarter versus your sales?

You’re talking about in our fiscal fourth quarter? Cai von Rumohr – Cowen & Company: In your fiscal fourth quarter?

I don’t think there was a whole lot of movement on long guns during the fourth quarter. It’s out of season. There may have been some adjustment, but nothing dramatic. Cai von Rumohr – Cowen & Company: There’s been all the talk about now with Obama as the democratic candidate concern among potential handguns buyers that there may be changes in legislation. Are you seeing any impact of that in terms of if that’s an issue raised by your distributors, because it looks like you had pretty good momentum in the fourth quarter. Seasonally, July isn’t as good a quarter, but are you seeing momentum on the presidential election impact?

That’s kind of a hard thing to measure, Cai, and I’d certainly probably be naïve if I said there was none, but I think it’s pretty fairly known that the Senate and the House are still very pro-gun regardless of who ends up in the White House, and also that the Second Amendment has been built into the fabric of families in our country. You don’t see Obama talking much about the Second Amendment because they know it’s part of the fabric of the country. So is it affecting sales somehow now and up to the election? That’s hard to read. People that have been in the industry for a long time will tell you it did back in the 90’s, but how do you measure why someone is buying one thing versus another. It’s kind of hard. Cai von Rumohr – Cowen & Company: You mentioned expanding in the law enforcement area and acquisitions. Can you be any more specific? To the extent the way you framed it, it sounded like you have a couple of things in your sights and we might see something in the next 3 to 6 months. Is that possible?

I can tell you, Cai, that diversifying through acquisitions has always been part of our strategy from the time that I’ve been here, and we continue to look for different opportunities, and we’ve said all along that we’re looking at businesses that are within firearms and categories that we’re not in today that may be appealing to us. There are categories of law enforcement products which are anything that a police officer uses to protect himself, to protect citizens, or to perform his duties. We think those are fair game businesses for us to look at, and on the defence side, really, the foot soldier, what they use to perform their duties that we think and many times that’s similar to what law enforcement uses, but we continue to look. There’s nothing imminent, but we certainly continue to look and like the opportunities that could possibly exist for our company. Cai von Rumohr – Cowen & Company: What are the financial metrics you’re looking for as you look at these acquisitions? Specifically, do you have to say it’s got to be accretive out of the box, or has to be at this price? Can you give us any guidelines?

The way we think about it is certainly our plan would be that it would be accretive in the first year; however, there could be an opportunities and I’ve always said this caveat that was so obviously an enormous opportunity for our company that it may be 2 years before it’s accretive, but that would have to be a special situation, I think. John, do you want to say anything?

I mentioned this before that I don’t think we’d be looking at something that needs some type of a rebuilding effort that will be 2 to 3 years out from that perspective before it generated a positive payback, so I think from that perspective, we realize that it’s got to have a relatively short, 18 months or better, time to turn accretive.

Your next question comes from the line of Reed Anderson from D.A. Davidson & Company. Reed Anderson – D.A. Davidson & Company : Mike, on the pistol side, just kind of following up on one of the last ones. You guys have had terrific growth, particularly if you kind of normalize the bigger events from last year. Is there any reason to think, given that you’ve added a lot of products and you continue to do very well gaining share, that that business won’t at least grow in ’09? I know you don’t have a crystal ball, but doesn’t that make sense at least based on what you know today?

The pistols, Reed, if you take a look at it, in business that we’re in the type of product that we’re in in pistols and categories, we don’t have anything that is dramatically different out in the market place that would change the landscape. Again, it’s our M&P pistols really what is leading the charge. Law enforcement continues to be a very large opportunity for us as you know. We continue to win it at 80% rate, but we’ve got a long way to go there, a lot of opportunities that are out there, and we don’t know what’s going to end up happening with the military, but certainly that’s a pistol and not a revolver that we’re talking about, and internationally, the M&P is continuing to take hold internationally. They are government contracts and they will take longer to do the T&E’s, but we are seeing the success that we had predicted there. So the real wildcard on it all is the retail environment, but the other pieces continue to churn right along.

We’re down about 10.9% for year in pistols, but when you think about the fact that you had the Afghan order and the CHP order and you take those out, we grew by a little over 10%, and there were some significant promotions that took place because of the economy during this quarter which further eroded that sales dollars? So, I think we’re seeing unit growth was up year over year. The M&P was up 38% for the year, so there are a lot of good signs in there, and those large one-time orders last year are kind of masking some of that.

Just a caveat, Reed, I was in the office here all day, so maybe the economy just got sparkling good today, but I doubt it, and that’s the wild card. Reed Anderson – D.A. Davidson & Company : Absolutely, and as you look at where it’s selling, you talked about in the quarter being up 12% in the sporting good channel, just curious, as you look at where your product sells in retail, is it your sense Mike that the big chains that you sell to, which are maybe a quarter of your business, are they doing worse or better do you think than your overall customer base?

We really have refocused our efforts on the big boxes. We put this new sales force in place, which was about 2 years ago, I guess, now. We focused on the larger dealers, I guess the top 1000 dealers our guys call them, and the big box stores which we had not been focusing on in the past, and we have some people in our organization that have worked with big boxes in other industries, you know the Home Deport, Wal-Mart, and Loews sort of guys, who understand how to program these guys and put longer horizon strategies in place than you would with an individual dealer, so we’re seeing some pretty good growth at the big boxes. It’s a combination of a couple of things. Playing attention and focusing on it because it’s an important channel for us, which we really hadn’t done aggressively in the past, and by having talented people that can go in and work with the merchants in those companies and the way they are trying to run their business and tie our business into it, so it’s a pretty good combination right now. Once we get POS from them, we’re seeing pretty good POS. Reed Anderson – D.A. Davidson & Company : John, on the gross margin, you guys had a very good quarter relative to my expectations, and my sense is that we saw the worse of margins based on what we know today in your third quarter. Anything out there whether it’s a production scale back or promotion that’s unusual that we’re not seeing today that would cause gross margins to be unusually moving one way or the other over the next year? I know you don’t want to give guidance, but just any color you can provide would be good.

Reed, as part of everything that took place during the third quarter in terms of the production shutdown and we did some things in terms of eliminating some temporary help, and we’ve done reduction in forces where necessary, and we’ve kind of reset the production levels looking forward. So, we’ve made all those adjustments in the third quarter. There’s nothing planned in terms of any future shutdowns. We did shut down for a week at Thompson for the first week of the fiscal year to kind of help get the inventories in line here and get a little balance. Once of the things that we pride ourselves on is that we have a very good way of addressing flexibility in terms of adjusting productions between the various lines. It’s part of the strength of the business. So, I think we’ve got that flexibility, and it’s one of these things that’s we’re going to have to see how things play out in the hunting channel. That’s going to be the key driver I think over the next months.

As we go into the back half, if the economy continues to play havoc on the business and the other factors cause the hunting season to be a slower season, then we’re going to have to make some adjustments. That’s why I’m trying to be very cautious. There are factors that are in the economy and the inventory that’s out there that has to work its way through. Reed Anderson – D.A. Davidson & Company : I’ll stop there and let somebody else in. Thank you.

Your next question comes from the line of Chris Krueger from Northland Securities. Chris Krueger – Northland Securities: Just a couple of quick questions. In your press release you indicated there are two large international orders hung up in Congress. Can you indicate roughly the size of these orders and what’s the potential timing of this?

They’re two separate orders for two separate countries. We really don’t want to divulge how big they are, but we’re expecting to hear over the next couple of weeks on one of them, and the second one, we are hoping we will hear from in the quarter. These things get pretty slow when they get in Congress. Remember, there’s a threshold of $1 million when they get kicked back up to Congress, and they’re just slow when that happens. Chris Krueger – Northland Securities: Would it be something that would be announced, or if it’s just a million or two, would that be something that’s just too low for…?

What we try to announce to you guys, Chris, is something that is meaningful for either strategic purposes or moves the dial somehow or other, and I really don’t want to comment on these at this time, and I’m not trying to mislead you to think these are like enormous $50 million contracts. That’s not the case, but we don’t try to give this stuff out when they’re still pending because of competitive purposes. Chris Krueger – Northland Securities: You went over the election-related thoughts. Any thoughts on what the retailers and distributors are saying about the tax stimulus checks, if that’s having a positive impact in the near term.

I’ve been reading a little bit and you guys probably have too on some of the positives. I guess retail numbers came out better today than people thought for the month of May, total retail numbers, and the stimulus package is part of what they’re claiming. From what I understand, apparently the last time there was a stimulus when a rebate check came out, it did have an effect on gun sales. That’s like the question I was answering for Cai on the election. It’s pretty hard to measure that. Chris Krueger – Northland Securities: Last question. One of the big box retailers indicated an increase in the sale of used weapons, and it’s an initiative that they’re pushing through. Just wondering if you had any thoughts on that. If that’s unique to that particular retailer or if you’re seeing that out there too.

We are seeing some of that, Chris, and that’s certainly due to the economy, but I can tell you the retailer you’re talking to at least from our perspective is having some pretty good Smith & Wesson handgun sales also, so on guns at least they’re performing well. I don’t know about everything else in the store, but on guns, they’re performing fairly well.

I would now like to turn the call back over to Mr. Michael Golden for closing remarks.

Thank you operator, and thanks to everyone for joining us, and we’ll see you next quarter.