Good day, ladies and gentlemen, and welcome to the Q4 2015 Smith & Wesson Holding Corporation Earnings Conference Call. My name is Joyce and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Liz Sharp, Vice President of Investor Relations. Please proceed.

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 expression is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding revenue, earnings per share, fully diluted share count, tax rate and capital expenditures 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, and growth opportunities and trends. 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 and 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. 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, which are posted to our website or will be discussed on this call. In addition, please note that the primary difference between the GAAP and non-GAAP measures for fiscal 2015 referenced on today's call is that the non-GAAP measures will exclude acquisition-related expenses including the amortization of various intangibles. Also, when we reference EPS, we…

The first question comes from the line of Cai von Rumohr with Cowen and Company. Please proceed. Cai von Rumohr - Cowen & Co. LLC: Yes. Thank you very much. So, for the sales numbers, you've got, could you give us a little bit of help in terms of the margins? The margins looked lower than I think many of us might have thought. So maybe give us some color on where you expect operating expenses and where you expect gross margins. Thanks. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: Sure. I guess just in general for the year, for 2016, typically we don't give the detail but we do give our range and we do believe we'll be at the low end of our expected range. Cai von Rumohr - Cowen & Co. LLC: Low end of your expected range in terms of what? Operating expenses as a... Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: Well, I'm talking about gross margins. So what we've said is our target, our gross range is 37% to 41% and we think we're going to be in that range for gross... Cai von Rumohr - Cowen & Co. LLC: Okay. And so I guess my question would be, you did 38.4% here, you're going to have a full year of Battenfeld which has a 50%-plus margin. It looks like demand's a little bit better. How come only the 37% area? Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: Well, I mean, what we've talked about a lot in the past is that our gross margins are impacted by product mix as well as absorption. And so the product mix is a big driver because in a normalized environment right…

The next question comes from the line of Andrea James with Dougherty & Co. Please proceed. Andrea Susan James - Dougherty & Co. LLC: Thanks for taking my questions. Can you give us a sense of the market share trends that you're seeing relative to your own expectation and maybe some of the promotions you've done and how they might be driving some of those market share trends? P. James Debney - President, Chief Executive Officer & Director: Yeah, sure. I can give you some highlights in terms of what we're seeing. As you know, we set out with our promotional activity back in – I'm talking back now in fiscal 2015 Q3 as we started to enter the order writing shows, we said that we were going to be aggressive because we were going to regain any share points that we may lose or that we had observed that we lost. I think our promotional activity worked and we certainly regained what we had lost, and I think it's going a long way now to helping us think about growing the business as we go into fiscal 2016. As I said earlier to Cai, we're about taking share as well as growing with an expanding market and I think we're very strongly positioned to do that as we think about 2016 which is very exciting. And given the new products that we have in the pipeline as well, I think that's going to help us even more take more market share and strengthen our position. Andrea Susan James - Dougherty & Co. LLC: Thanks. And just maybe one-and-a-half more. What are your thoughts on renewing the revolver and the use of capital outside the CapEx that you already outlined? Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive…

The next question comes from the line of Steven Cahall with Royal Bank of Canada. Please proceed.

Yeah, thank you. Maybe a first question just on the segments. I thought the sales cadence was very helpful, but I was wondering if you could maybe give us a sense of what your organic growth rate in the firearms is expected to be for, maybe just for the year and something more granular would be great as well. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: Yeah, we really haven't, like, broken out the forecast by our segments yet. I – it's possible we might do that in 2017 but we have a new division here and, at this point, we're not going to go ahead and break it out. We have said in general that the long-term prospects, we think, for the firearm industry is in the 6% to 10% range and we've also said that Battenfeld itself has grown, like, very strongly in excess of 20% over the last multiple years. So I think we basically expect those trends to continue.

Okay. Then maybe to ask it a slightly different way, I think based on what you said it would imply that this year we're going to see firearms growth kind of implied in the guidance that is well below the recent trend, or at least certainly below the recent trend in NICS and certainly in handgun NICS. So as we just think about that, is that inventory? Is that the aggressive pricing you talked about? Is it mix? Is it just a combination of those things? And is there any one area you'd emphasize there? P. James Debney - President, Chief Executive Officer & Director: Still, yeah, I mean in terms of competitors' inventory, there's still some competitors' inventory out there for sure but I think mostly that is out of the way now and we're at the normalized environment. I would say that as we're thinking ahead and forecasting the year, to Andrea's point earlier on, we're pulling on a lot of data points and we're fairly confident, more confident than we've ever been before in terms of our forecast given both our improvements in our internal sales and operations planning process and what we're experiencing now in the market. Stepping back, I mean you have to remember we're a brand of choice when it comes to the consumer. We have one of the strongest product portfolios out there, so – and we have a highly motivated team here who really does understand the market, so very strongly positioned, lots of good things going on from the consumer channel to the professional channel. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: And I just would add one additional thing. In doing our outlook – in relating back to your question of NICS and the difference is we do look at our market share. And when we look at 2016, we are forecasting to equal or maintain our market share. So our forecast is based on our belief as to what our share of the market will be and that we're going to maintain or increase that share.

Great. Thank you. And then a couple questions on the cash. So number one, I was wondering if the CapEx guidance that you gave for the year, is this kind of a normal year in terms of run rate for CapEx, either absolute or to sales, or is there anything that's particularly notable this year that we could see CapEx coming down in future years? And then second question on cash is, it looks to me like even with the retirement of debt, you're just going to be very under-levered, you're going to have a lot of cash on the balance sheet. So how are you thinking about what you might use that cash for and timing? P. James Debney - President, Chief Executive Officer & Director: Okay, I'll take the first part. I would say, our normal range for CapEx that we would expect is somewhere between $40 million to $50 million. It's largely dependent on our capacity increases and on new product launches. That's a big factor. Obviously when we're launching new products, we are targeting white space, i.e., we don't want to cannibalize our existing product portfolio. So that will also mean that we need to increase our base capacity as well as invest in the development of the new product and invest in the tooling required to manufacture the new product as well. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: Yeah, and I just would follow up on that. So what we've said is the maintenance CapEx, that is if we're not adding capacity, we're not adding new products, is in the $25 million range. So anything above that is either a specialized IT project or a new product introduction or capacity increases generally. The second part of your question was?…

Just a final technical one... Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: (40:26)

Final technical one and then I'll pass over to someone. How are you thinking about the call that you have on the bond this year in terms of the attractiveness, since you focused on reducing the cost of capital as a high priority? Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: You're talking about the bonds that are due in one year?

I think you said they were callable in a year, if I heard that correctly. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: Yes. Yes, that's right. The call premium is usually half of the interest rate, so it's 2.5% in one year, then the year after that there would be no call premium.

Thank you so much. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: Sure. P. James Debney - President, Chief Executive Officer & Director: Thank you.

The next question comes from the line of Chris Krueger with Lake Street Capital Markets. Please proceed.

All right. Good afternoon, guys. P. James Debney - President, Chief Executive Officer & Director: Hi.

Hi. Just shifting gears over to the BTI business, you went over the seasonality of the firearms industry pretty well and pretty clearly. How should we look at the seasonality for that business? Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: That basically is a bit not – it doesn't have as a steep ramp in our Q4. It's sort of flatter, because it's got a lot of sales, like pre-fall hunting and Christmas, because you can buy those products online, and not as much goes through on distribution and order writing shows in our Q4. So in all – like, all-in-all, I'd say it's a flatter profile.

Okay. And then just one other question on BTI. I know prior to the acquisition that they had grown through a combination of their organic growth rate as well as a variety of acquisitions of, I think, quite a few different brands. Is that activity continuing and is there a pipeline of potential acquisitions within that business that we should think about? P. James Debney - President, Chief Executive Officer & Director: Yes. We're continually looking in both divisions to be perfectly honest. As I said, we're very, very pleased with the acquisition of BTI. It's a wonderful addition to the Smith & Wesson family. So we're out there looking again. Many opportunities out there but, as you know, we have a very high bar, we set that bar very high, and we're also very cautious. So we do a lot of evaluation but we're not just looking in terms of other firearms-related businesses, we're also looking in terms of vertical integrations as well. So, there are other manufacturing processes that we're heavily reliant on. Similar to how we were very reliant on plastic injection molding, which is, everybody knows now, we have DRP, so we now own that technology. So we're out there looking for other opportunities in vertical integration which are our lowest risk acquisitions as well. Both divisions act as their own platform to little roll-ups in terms of acquisitions going back to more branded firearms businesses, firearms related businesses. As we know, we look mostly for the smaller lower risk tuck-in acquisitions for each of those platforms which again the lowest risk and the lowest price in terms of a multiple of EBITDA. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: And, Chris, I would add one additional thing is BTI didn't really do that many acquisitions. Most of its growth over the last, like, 10 years has come organically. They have done a few small brands but the great majority of the brands that they have they developed themselves.

Okay. Good to know. That's all I got. Thank you. P. James Debney - President, Chief Executive Officer & Director: Thank you.

Our next question, as a follow up, from Andrea James with Dougherty & Co. Please proceed. Andrea Susan James - Dougherty & Co. LLC: Thanks. James, I wrote down the numbers you gave of your revenue subsets for Q4 and I'm not – they're not adding up to $181 million and I just want to make sure I didn't miss something. Can you go over that again? P. James Debney - President, Chief Executive Officer & Director: Sure. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: I'll do it right now if you want? P. James Debney - President, Chief Executive Officer & Director: Yeah, go ahead, Jeff. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: Well, so we had – total firearms was $166.4 million, accessories was $14.6 million. Andrea Susan James - Dougherty & Co. LLC: And then you had given a handgun, long gun breakdown. Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: Yeah, the handguns – so handguns were $120.7 million, long guns are $34.2 million and we have this thing called other of $11.5 million. Andrea Susan James - Dougherty & Co. LLC: Ah, and that $11.5 million is what I was missing. What is that? Jeffrey D. Buchanan - Chief Financial Officer, Treasurer & Executive Vice President: That is our own accessories business in Thompson, Handcuffs, some, like, B2B manufacturing processes that we do for other companies. It's just a hodgepodge of – it's also a Deep River Plastics, like, sells its services like B2B, the – so it's a hodgepodge of stuff. Andrea Susan James - Dougherty & Co. LLC: Okay, great. Will you ever your put your own accessories stuff into the Battenfeld like roll that all up together? P. James Debney - President, Chief Executive Officer & Director: Absolutely. We've declared that as well already that we are in transition mode right now. So our Thompson/Center accessories business, M&P accessories such as mags for M&P polymer pistols magazines are in the process of being transferred over right now to the accessories division. The reason for doing that is obviously so that both divisions can maintain strong focuses on what they should be focused on. And also we have an extremely talented team at Battenfeld who run the accessories division right and we feel that they can do a much better job of growing that part of the business than the firearms division has done simply because firearms division needs to focus on growing firearms. Andrea Susan James - Dougherty & Co. LLC: Helpful. Thank you. P. James Debney - President, Chief Executive Officer & Director: Thank you.

There are no further questions in queue at this time. I would now like to turn the call back over to James. P. James Debney - President, Chief Executive Officer & Director: Thank you, operator. Please note that we will participating in the Credit Suisse Conference in New York on September 17 and hope to see some of you there. Thank you all for joining us. We look forward to speaking with you next quarter.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.