Elizabeth Sharp - Vice President-Investor Relations P. James Debney - President, Chief Executive Officer & Director Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive VP

Cai von Rumohr - Cowen and Company, LLC Brian W. Ruttenbur - CRT Capital Group LLC Scott L. Stember - Sidoti & Co. LLC Chris Krueger - Lake Street Capital Markets LLC

Good day, ladies and gentlemen, and welcome to the Q3 2015 Smith & Wesson Holding Corporation's Conference Call. My name is Tia, and I'll be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. I would now, let's turn the call over to your host for today Liz Sharp, Vice President of Investor Relations. Please proceed. Elizabeth Sharp - Vice President-Investor Relations: Thank you, and good afternoon. Our comments today may contain predictions, estimates and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intend, believe and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding revenue, earnings per share, fully diluted share count and tax rate for future periods, our product development, focus, initiatives, objectives and strategies, our market share and market demand for our products, market and inventory conditions related to our products and in our industry in general, growth opportunities and trends, and the expected benefits of our acquisition of Battenfeld Technologies. Our forward-looking statements represent our current judgment about the future and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings, including our Forms 8-K, 10-K and 10-Q. You can find those documents, as well as a replay of this call on our website at smith-wesson.com. Today's call contains time-sensitive information that is accurate only as of this time and we assume no obligation to update any forward-looking statements contained herein. Our actual results could differ materially from our statements today. I have a few important items to note with regard to our comments on today's call. First, we reference certain non-GAAP financial measures on this call. Note that the reconciliations of GAAP financial measures to non-GAAP financial measures can be found in today's 8-K filing, as well as today's earnings press release, both of which are posted to our website. Also when we reference EPS, we are always referencing diluted EPS. And finally, please note that this call references only our continuing operations. For the results of our discontinued operations, please refer to our 10-Q for the period ended January 31, 2015, which filed this afternoon. I will now turn the call over to James Debney, President and CEO of Smith & Wesson. P. James Debney - President, Chief Executive Officer & Director: Thank you, Liz. Good afternoon, everyone, and thanks for joining us. With me on today's call is Jeff Buchanan, our Chief Financial Officer. Later in the call Jeff will provide a recap of our financial performance, as well as our guidance outlook. Our third-quarter results reflect our successful navigation of the post-surge consumer firearms environment, combined with ongoing execution of our long-term strategy. Our sales exceeded our updated expectations and we maintained our market share in a very competitive environment. At the same time, we introduced several new products and we completed an important strategic acquisition. Let me cover a few highlights. Sales in our firearm division were lower on a year-over-year basis as expected, encouragingly they exceeded our updated guidance and reflected solid orders from our distributors and key retailers, lower sales of long guns, including modern sporting rifles or MSRs, drove most of our third quarter sales decline, while the decline in handgun sales was much smaller. Strong sales of our concealed carry, polymer pistols and revolvers reflect the consumer's ongoing need and desire for concealed carry firearms. Sales into the professional channel were $14.1 million. This part of our business can be lumpy in nature and our results represent about a 7% decrease from the year ago quarter. Year-over-year adjusted mixed figures, for the period, increased 5.7% and our unit sales to distributors and retailers in the consumer channel declined by about 12.1%. As I've noted before while we would normally use this comparison to tell us whether we gained or lost market share, movement of industry-wide inventory levels and noise in the channel during the period makes that comparison less meaningful. Therefore we're relying primarily on our internal monthly analysis and key distributor feedback for more accurate market share information. Both of those resources continue to indicate that our broad product offering remains popular with consumers and that we remain the market leader in the handgun and modern sporting rifle categories. We continue to expand our product offering and at the SHOT Show in January, we unveiled several new M&P Smith & Wesson Performance Center and Thompson Center firearm models, which were well received. In general, we believe that the industry-wide channel inventory situation improved across most product categories in the third quarter, recovering somewhat from the channel over-replenishment that existed following the last consumer surge in firearm purchasing. Importantly, our internal firearm division inventory declined, while distributor inventory of our products remained flat at about a 118,000 units at the end of the third quarter, which was a tad over our target threshold of eight weeks of cover. Since then, distributor unit inventory have declined and distributor sales have accelerated. Therefore, we believe that distributor inventory of our products in terms of weeks to cover has now reduced to a level substantially below our eight-week threshold. Lastly, during the quarter, we completed the acquisition of Battenfeld Technologies or BTI, an industry leading provider of hunting and shooting accessories. This acquisition provides a broad established platform for organic and inorganic growth in our firearm accessories Business. Before I share more detail on the quarter, Jeff will review our financial results. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive VP: Thanks, James. As a result of the strong order pattern in January mentioned by James, revenue for the quarter was $130.6 million, well above our revised guidance. As expected however, revenue was down 10.5% from the prior year. Gross margin for the quarter was 33.6% as compared to 40.2% in the prior year. The decrease in margin was mostly due to reduced sales of our higher margin on products, increased promotions and lower cost absorption from reduced volumes. Gross margin would have been 35% without taking into account the amortization of the inventory step-up related to the BTI acquisition. Operating expenses were $28.1 million or 21.5% of revenue, compared with $27.5 million or 18.9% of revenue in the prior year. In the firearm division, operating expense dollars were down mainly because of decreases in incentive compensation and ERP-related expenses. Overall however, operating expenses rose as a result of a partial, the quarter of the regular ongoing expenses of BTI, as well as $2.9 million in deal costs and ongoing purchase accounting amortization relating to that acquisition. Excluding those BTI acquisition costs, operating expenses would have been $25.2 million or 19.3% of revenue. Operating margin was 12% in Q3 as compared to 21.3% in the prior year. Excluding BTI acquisition cost and purchase accounting expenses, operating margin would have been about 15.7%. Net income came in well above the top of our guidance at $8.2 million or EPS of $0.15, as compared with $0.35 in the prior year. Non-GAAP EPS which excludes expenses relating to acquisitions was $0.20. Adjusted EBITDAS in Q3 was $28.7 million or an EBITDAS margin of 22%, as compared with $37.5 million or an EBITDAS margin of 25.7% in the year ago period. The company goal is to maintain our adjusted EBITDA margins above 20%. So turning to the balance sheet, we ended the quarter with $59 million in cash, $100 million drawn down on our revolver, which was borrowed as a result of the BTI acquisition and $175 million of outstanding senior notes issued into tranches. The interest rate on the revolver is 2.4% and the blended interest rate on the senior notes is 5.5%. And thus, as long as the revolver remains unpaid, our ongoing quarterly expense will be about $3 million. Despite adding $11.9 million of inventory through the acquisition of BTI, we lowered our overall inventory in Q3 by $2.2 million, which means we've reduced our firearm division inventory by $14.1 million, a reduction with which we are very pleased. And we did that without raising inventory in the channel. We expect additional reductions in inventory through the end of our fiscal year. That inventory reduction helped us drive strong operating cash flow in Q3 of $33.4 million. Our cash in the quarter was reduced by 5 points, or $4 million however, driven primarily by $36.2 million of cash that we used on the BTI purchase, as well as capital spending of $3 million. Thus far, we have spent a little over $24 million in CapEx this fiscal year and we expect to spend another $10 million in Q4, resulting in a total CapEx for the fiscal year of approximately $34 million. Despite that CapEx spending in Q4, we expect our cash balances to rise during Q4 as it is seasonally our strongest cash generation quarter. So now turning to our outlook. For the fourth quarter of fiscal 2015, we expect net sales to be between $160 million to $166 million and GAAP EPS to be between $0.24 and $0.26. On a non-GAAP basis, which excludes the impact of acquisition accounting expenses. We expect EPS to be between $0.29 and $0.31. For full fiscal 2015, we are raising the midpoint of our revenue guidance approximately $6 million, and now expect net sales to be between $532 million and $536 million. We are also raising the midpoint of our GAAP EPS guidance by about $0.06 with an expected range of between $0.75 and $0.77. On a non-GAAP basis, which excludes the impact of acquisition accounting expenses, we expect EPS to be between $0.87 and $0.89. All of these estimates are based on our current share count of 55.2 million shares, and we expect the effective tax rate for the rest of the current year to be approximately 37%. James? P. James Debney - President, Chief Executive Officer & Director: Thank you, Jeff. Mixed background checks during our third quarter indicators the consumer demand continues to trend to its normal seasonal pattern. Mixed results in November, December, January and now February each came in as the second highest on record. This is very encouraging. Since we believe that seasonality and strength in consumer purchasing will help to further reduce high-levels of competitive inventory in the channel that occurred following the recent surge in consumer firearm demand. Overall, we believe channel inventories remain somewhat elevated for certain products, such as MSRs including ours. And, I would note here that this does not pertain to our opening price point product in these category, the M&P15 Sport, which remains the market leader, despite the competitive environment. On the whole, we believe channel inventory situation has greatly improved since last quarter. We are currently approaching the end of our industry show season in which distributors and buying groups host order writing shows for their retailers. So let me provide you now with an update. First, show season has been very encouraging. The shows have all been well attended by dealers who were clearly there to do serious business, order strength has been what we would consider typical for a non-surge environment and many dealers have told us they're pleased with that business. Our observation is that those dealers who are working hard to promote their businesses are benefiting from the strength we've seen in recent mix numbers. Second, our promotions, which were designed to offset any potential market share loss in the competitive environment was successful. This is demonstrated by the fact that our sales beat our guidance. It is also demonstrated by the large decline in our internal firearm division inventories by more than $14 million. While our level of product to distributors remained fairly flat, clearly sales velocity has increased. Moreover, with our firearm division inventory $85 million, we are well positioned to achieve our year-end goal of $75 million to $80 million of internal firearm division inventory. New products remain an important part of our strategy. At SHOT Show in January, we expanded our product offering with several new models geared toward personal protection and recreational shooting. Our new M&P models further expand our lineup of high quality, purpose-driven firearms and a design to accommodate the needs of the growing number of participants within the personal defense and shooting sports markets. We also added newer (16:40) Performance Center and Thompson Center hunting firearms to our offering. We remain committed to developing new products that deliver exceptional value and benefit to our diverse and growing consumer base. Despite improving channel conditions, we intent to remain very actively engaged as we've always done with our distributors, buying groups and major retailers to ensure their inventories fully represent our products. Our objective is to make sure the consumer has the choice at the retail counter that includes our products and that we are front of mind when making a purchase decision. We will do this by continuing to drive brand and product awareness with the consumer through innovative advertising and marketing campaigns. So with that, let's turn to an update on our new accessories division and our BTI acquisition. Growing our accessories business has been an objective on our strategic plan for some time. The acquisition of BTI represents an acceleration of our timeframe for that objective. It fits firmly within our core firearm business and provides us with an opportunity to delve further into the shooting and hunting space. It also provides us with a new business segment that should deliver double-digit revenue growth over time. As an aside, it has the benefit of not typically being driven by consumer surge environments. Well known for its innovative and high quality shooting and hunting accessories, BTI serves as a platform on which to organically and inorganically grow our existing and highly profitable firearm accessories business. We have already made progress on both fronts organically and in the short time since the acquisition, BTI's product development team has identified many potential Smith & Wesson branded accessories and entered them into the product development process. This is on the back of 38 new products this team unveiled at the SHOT Show. Inorganically, and shortly after the acquisition in December, we purchased Hooyman, a manufacturer of specialized tree saws popular with hunters. The Hooyman saw allows hunters to clear tree limbs and brush, as they set up their tree stands, allowing a clear line of sight for more successful hunts. While we have not yet completed a full quarter, we are pleased with the establishment of our accessories division and our progress in folding our accessories business – our existing accessories business into the BTI infrastructure, we are focusing first on Thompson Center accessories. The teams are now working on data migration and integrating forecasting processes, sales and operations planning and product development. BTI systems are well developed and efficient, so this should be a smooth process. BTI is a company with great brands, strong management and a track record of attractive growth and gross margins. We are excited about the multiple opportunities for growth in our new accessories division. Our third quarter, was an exciting and successful one, the team did an outstanding job navigating the post-surge environment, delivering solid results in sales, operations and new product development, while making important headway on our strategic plan with the acquisition of BTI. We continued to believe that our industry is in the midst of a long-term underlying growth trend and we look forward to growing our company and its share of our market. With that operator, please open up the call for questions from our analysts.

The first question comes from the line of Cai von Rumohr with Cowen and Company. Please proceed. Cai von Rumohr - Cowen and Company, LLC: Good performance, guys. Very impressive. P. James Debney - President, Chief Executive Officer & Director: Thanks, Cai. Cai von Rumohr - Cowen and Company, LLC: Can you give us a little color on what are you seeing in terms of the impact of foreign currencies going down? Are we seeing more competition from some of the competitors like Beretta and Glock in terms of price cutting? And maybe talk generally about what you're seeing in terms of price cutting during the quarter and entering this quarter? P. James Debney - President, Chief Executive Officer & Director: Just on overseas competitors, we do track import data quite closely and we're actually seeing that decline – the volumes – in terms of units decline. We don't believe that currency is giving them a benefit that is translating into more aggressive cost price promotions and again we closely monitor that situation as well. I'm sorry, Cai, what was the second part of the question? Cai von Rumohr - Cowen and Company, LLC: Just general pricing trends. What were they in the quarter? What are you seeing, the color in terms of as we've gone into the current quarter, has it improved or just any color on demand? P. James Debney - President, Chief Executive Officer & Director: Okay. Staying within the third quarter, we pretty much saw what we said last time just a continuation of a lot of discounting going on at retail, as retailers were looking to move on some of the inventory where they were heavy, this particular product categories where that is much more clear. I mentioned one, Modern Sporting Rifles, 1911s for example is another one, where you do see a lot of discounting going on. You also see it with certain full-size polymer pistols as well. So numerous rebates at the counter, a lot of those are cash rebates and some of them are for example two free magazines, should you buy this firearm and so on. So, not much change there I would say. Cai von Rumohr - Cowen and Company, LLC: Okay. And then it looks like you're going to have another $4.8 million of accounting-related issues to BTI and Hooyman in the fourth-quarter. Can you give us some color how those split, how much is acquisition, transaction costs for Hooyman? And how much is going to be in gross margin, how much is in amortization in G&A? Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive VP: Right. Cai, this is Jeff. There's no acquisition cost in Q4, it really breaks down just between the inventory step-up, which will only occur one more quarter, which is, I think, it's going to be about two points, at $4 million in Q4. Cai von Rumohr - Cowen and Company, LLC: Okay. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive VP: And then the ongoing amortization, which will be in G&A and that's going to be ongoing for a long time and that's about the same. So..... Cai von Rumohr - Cowen and Company, LLC: $4 million? Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive VP: No. $2.3 million, I'm sorry it's about, yeah, so we have about $2.4 million above the line and which is just albeit going to occur for one more quarter. And $2.3 million below the line in OpEx is going to occur every quarter. Cai von Rumohr - Cowen and Company, LLC: Got it. That's great. And the Hooyman acquisition, how big was that profitability? Little color? P. James Debney - President, Chief Executive Officer & Director: It was very small. We haven't really disclosed a lot of information on there. We are not going to breakout, the really small acquisitions, but it was under a couple of million dollars. It's part of the strategy of BTI, where they purchase in essence of product. And so they didn't take any SG&A expenses where that they basically bought a product that was well developed and had a great brand and then just folded it into their business. Cai von Rumohr - Cowen and Company, LLC: Got it. Last one. You did great in terms of the cash flow and certainly looks like you're going to do great again in the fourth quarter. What are you thinking about doing with the cash potentials to reduce the debt? Just talk a little bit about that? Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive VP: Yeah, I mean, we're probably get in, in the quarter with between $90 million and $100 million of cash. So there's obviously lots of choices and we're going to have to just wait and decide – you can pay down the revolver, a portion of the senior notes are going to be pre-payable or callable after June of this summer. Yeah, those are the higher interest rates – the ones that are callable at close to 6%. So you could do that, or if there is other inorganic acquisition or there's other acquisitions that we're interested in. So, we'll just have to wait and you could also buyback stock. And as James always says, we look at the best use of cash for the company and I think we're going to wait and make any decisions with respect to the balance sheet until after Q4. Cai von Rumohr - Cowen and Company, LLC: Thank you very much. Good work. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive VP: Thanks, Cai.

The next question comes from the line of Brian Ruttenbur with CRT Capital. Please proceed. Brian W. Ruttenbur - CRT Capital Group LLC: Yes. Thank you very much. I had a question regarding the market. If you could talk a little bit about what you're seeing in terms of the proposed ban on 556 that everybody is talking about and if you're seeing any impact to your business because of that? P. James Debney - President, Chief Executive Officer & Director: In terms of impact to our business, we haven't really observed anything yet. In Q3, as I really said in the script – we're doing very well with our M&P15 Sport, modern sporting rifle. In terms of ammo, in discussions with some of the ammo manufacturers, one in particular, if that does seem to be renewed interest with the consumer in terms of that part of the ammo categories, so 223 and 556. Even skews outside of that type of ammo that are in 223 and 556 are actually seeing some renewed interest from the consumer. Brian W. Ruttenbur - CRT Capital Group LLC: Can you talk a little bit about if you have any plans on the hunting rifle side? And then also if you could talk a little bit about how you did, and you don't normally talk about this, breaking it down, giving us a little bit more color on revolvers versus pistols? Are you seeing an uptick from the shows in one category or the other or are you seeing any uptick in MSRs? There was a lot of questions all together. P. James Debney - President, Chief Executive Officer & Director: That was an awful lot of questions together.... Brian W. Ruttenbur - CRT Capital Group LLC: Do you want me to break it down? Let's start off with just rifles. How about that? Hunting rifles? P. James Debney - President, Chief Executive Officer & Director: I'd like to say, an awful lot that we really don't breakout, as you know we only go down to handgun and long gun and that's it and we don't go beyond that. I just go back and say definitely overall, in terms of smaller handguns designed for concealed carry are extremely popular. The SHIELD itself, is very much a dominant player when it comes to market share in that part of the category, so doing very well. Smaller frame revolver is, obviously doing very well as well. In terms of long guns, not much really to add other than I've said. We have three brands, one of those is a hunting brand Thompson Center and remains very much a strategic focus of ours. Certainly, as we've said the acquisition of BTI helps us delve further into the hunting part of the market and we're very excited about that as we explore that and understand it more. Brian W. Ruttenbur - CRT Capital Group LLC: Great. Well, thank you very much. P. James Debney - President, Chief Executive Officer & Director: Thank you.

The next question comes from the line of Scott Stember with Sidoti. Please proceed. Scott L. Stember - Sidoti & Co. LLC: Hi, that's Stember. Thank you. Question on commentary about how sales picked up in January and it seems as if since then, given your commentary, that business has accelerated. Can you maybe just talk about going forward, what we can expect as far as a mix of product? I know that you were selling some of the lower margin products in recent quarters. Can you just talk about what you've seen in recent months since the quarter as far as the mix of product going up? P. James Debney - President, Chief Executive Officer & Director: Tough to really comment. I mean obviously, as you know we give guidance, we build everything into guidance. Going back to Q3, yes, in terms if you're talking about lower margin, I'm not quite sure where you're going there. Certainly, opening price point products for sure generally carry a lower gross profit, obviously, in the current environment, some of those in certain product categories have proved extremely popular with the consumer. We've definitely observed that, but it's tough, sorry Scott to go into much more detail. Scott L. Stember - Sidoti & Co. LLC: Okay. Fair enough. And on the professional side it was off 7% and you said, talking about general lumpiness there. Can you maybe give a little bit more color on what you saw in the segment in the quarter? P. James Debney - President, Chief Executive Officer & Director: Yeah. It's really just peaks and troughs in terms of when we win large contracts, that's what we really refer to in the lumpiness of professional part of our business. And as you know, it's a small part of our business, generally making up around 9% to 10%. So that's all, it's really on a global basis when we acquire and supply these larger contracts. But we remain very committed to it. There are some large departments out there that we're still targeting, that we're working very closely with them as they go through their bid processes. Obviously, the largest one in the professional community that we're working towards right now is the U.S. Military with Modular Handgun system. And just a quick update on that, their request for proposal, the RFP was actually delayed about 60 days to 90 days. We do think, there will be a full industry day coming. So, that is progressing, but a little bit more slowly than perhaps people were anticipating, but again that can quickly pickup pace and more news on that to come. Scott L. Stember - Sidoti & Co. LLC: Great. And one last question, Jeff. You spoke about potential uses of cash with prepaying some of the – a small portion of the notes. Can you maybe just clarify which notes we're referring to? Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive VP: Well, there is the – like the notes that are due in 2017 are callable in June of 2015. Those are the 5.875% notes. Scott L. Stember - Sidoti & Co. LLC: Okay. All right. Great. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive VP: It's the highest interest rate notes that we have. Scott L. Stember - Sidoti & Co. LLC: Got you. That's all I have. Thanks, guys. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive VP: Thanks, Scott.

The next question comes from the line of Chris Krueger with Lake Street Capital Markets. Please proceed. Chris Krueger - Lake Street Capital Markets LLC: Good afternoon. I just have one question. It's been over a year since those restrictions in the State of California went into effect and you had to kind of reconfigure how you go to that market. Can you give us an update of how that market has been for you this past year and just an overall update on that? P. James Debney - President, Chief Executive Officer & Director: Sure. In terms of mix checks, Chris, it remains a very strong market for us, particularly with the products that we've kept on the roster, really in terms of products on the roster since we updated a year ago, there hasn't been any change. But the most important thing to note here is that we have a couple of very important products on the roster and that's both our SHIELD 9-millimeter and 40-caliber and our SDVE opening price point polymer pistol both in 9-millimeter and 40-caliber as well. So those products nationwide proved to be extremely popular with the consumer. We have touched on the SHIELD many times before on how successful that's been and those are readily available for sale in the State of California. Chris Krueger - Lake Street Capital Markets LLC: All right. Great. Thanks. That's all I've got. P. James Debney - President, Chief Executive Officer & Director: Thanks, Chris.

There are no more questions in queue at this time. I would now like to turn the call back over to management for closing remarks. P. James Debney - President, Chief Executive Officer & Director: Thank you, operator. Please note that we will be participating in the UBS Consumer Conference, which takes place tomorrow in Boston. Please feel free to join us via webcast, which will be accessible on our website. In closing, I'd like to welcome, everyone, of Battenfeld Technologies to the Smith & Wesson family. I also want to thank all of our employees on maintaining their focus on delivering solid results. Thank you all for joining us and we look forward to speaking with you next quarter. Elizabeth Sharp - Vice President-Investor Relations: Conference is Thursday, I'm sorry, my fault. Thursday. P. James Debney - President, Chief Executive Officer & Director: Sorry. Correction, the UBS Conference is on Thursday of this week in Boston. Elizabeth Sharp - Vice President-Investor Relations: Thank you. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive VP: Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. That concludes the presentation. You may now disconnect. Have a great day.