Smith & Wesson Brands : 2025 Annual Repor

About this update from Smith & Wesson Brands, Inc.

FOR OVEB 170 YEARS SmithAWks*son 2025 Ann poyt Fiscal 2025 demonstrated the resiliency of our business model, the dedication of our amazing employees, and our ability to be flexible and react quickly to the cyclicality that is typical in the firearms industry. With consumers continuing to face rising prices from stubborn inflationary pressure, demand for firearms softened from prior year levels. In these market conditions, innovation is paramount to stimulating demand and maintaining market share. And our new products delivered in fiscal 2025. In spite of the soft market, our new product introductions continued to outperform expectations, led by the Body Guard 2.0 - which has quickly become the top selling concealed carry pistol on the market -and new caliber offerings of our 1854 Lever Action Rifle. In addition, we added two exciting new calibers to our Folding Pistol Carbine line and launched several exciting handguns, including the CSX E-Series, No Lock Revolver Classics, and Ultimate Carry Revolvers. In total, during fiscal 2025, we again launched over 100 new products, sales of which accounted for nearly 43% of our total revenue. Although our inventory grew during the fiscal year due to slower than expected demand, particularly early in the fiscal year, we leveraged our flexible manufacturing model to right size our operations and drove inventory down in our fourth quarter. We also continued to execute our capital allocation strategy by returning $48.6 million to our stockholders in the form of dividends and share repurchases. As an iconic American brand, Smith & Wesson has always fought for the Second Amendment rights of American citizens. During fiscal 2025, we took this battle all the way to the Supreme Court when Mexico, in collaboration with U.S.-based anti-Second Amendment activist groups, sought to hold us and our industry responsible for cartel violence in Mexico. In June 2025, the Supreme Court unanimously ruled in our favor. This decision represented a win not only for Smith & Wesson, but our industry, American sovereignty and, most importantly, every American who wishes to exercise his or her Second Amendment rights. In closing, we could not be more proud of our teammates, who have worked tirelessly this year to navigate a challenging market -as they have many times before. Because of them - Smith & Wesson remains strong and healthy and we will continue providing consumers with innovative. high-quality products that Empower Americans. Mark P. Smith President, Chief Executive Officer Robert L. Scott Chairman of the Board Equiniti '* Kevin A. Maxwell lxanorcxawcNT Email: investorrelations'osmith-wesson.com Invc> iux inrURMATl0N § S M I T H 8 W E S S 0 N A N N U A L R E P 0 R T 2 0 2 5 BOARD OF DIRECTORS Micnelie J. Lonmeier, Directo r ooo EXECUTIVE OFFICERS Mark P. Smith Deana L. McPherson, CPA Anita O. Brltt, Director OOO SAFETY & RESPONSIBILITY sO SUNSMARTS As a leading American manufacturer of firearms since 1852, we are proud of our rich history, which includes a number of long-standing initiatives to support the safe and legal possession and use of our products. In addition, through membership in and contributions to our industry's trade association, the National Shooting Sports Foundation, we support initiatives to promote the safe ownership, operation, storage, and safekeeping of firearms, including: E OPERATION 55!..' , STORE P R O J E C T SAFETYLOCKS We were among the first firearm companies to voluntarily provide a cable-style firearm safety lock included in the box with every firearm we make. We began this practice many years ago and have since given away millions of free firearm safety locks. OWNER'S MANUALS We call out and prominently display in our owners' manuals information on responsible firearm ownership, safe handling, and safe storage, and we place a warning on the box of each firearm we make that refers owners to these provisions in the accompanying owner's manual. BASIC PISTOL HANDBOOK We have long been a contributing author to and a sponsor of a nationall ' known firearms safety instruction manual that is broadly distributed to firearms consumers each year. FIREARM SAFETY LITERATURE AND VIDEOS * Our sponsorships provide support for NSSF's firearms safety literature and videos, which include Firearms Responsibility in the Home, Firearms Safety Depends on You, and Firearms Safety in Vehicles. FIXNICS' The firearms industry has led the way in improving the FBI National Instant Criminal Background Check System (NICS) to help keep guns out of the hands of criminals and prevent anyone who cannot legally have a gun from getting one. A background check system is only as good as the records in it-through PROJECT CHILDSAFE' Conducted by the NSSF in partnership with more than 15,000 law enforcement agencies, Project ChildSafe is the largest, most comprehensive firearm safety education program in the United States, promoting firearm safety through the distribution of safety education materials and free firearm safety kits. Since 1999, Project ChildSafe has distributed more than 38 million firearm safety kits, including cable-style locks to firearm owners. The project's "Own It? Respect It. Secure It" campaign gives NSSF industry members an ongoing platform to promote and encourage firearm safety and the safe storage of firearms. DON'T LIE FOR THE OTHER GUY Don't Lie for the Other Guy is a national campaign launched by the NSSF in 2000, in partnership with the ATF to help prevent prohibited persons from getting their hands on firearms through illegal "straw purchases." Don't Lie for the Other Guy assists firearms retailers to identify and deter straw purchases and to raise public awareness that straw purchasing is a serious crime. SUICIDE PREVENTION The NSSF works with the Veterans Administration, the Department of Defense, the State of Utah, and mental health agencies to help educate firearm owners and the public on how to keep firearms out of reach of those who, during a period of despair, might do themselves harm. We join the NSSF in supporting the American Foundation for Suicide Prevention's Project 2025, an initiative to reduce the annual suicide rate. OPERATION SECURE STORE' Operation Secure Store is a cooperative initiative between the NSSF and the ATF to provide rewards for information leading to the successful arrest of criminals responsible for stealing firearms from an FFL. Additionally, the NSSF is helping educate FFL holders on steps they can take to reduce the chance firearms will be stolen from them. We join the NSSF in supporting our FixNICS " initiative, NSSF helped improve laws passage of the Federal Firearms Licensee Protection Act of 2019, at the federal level and in 16 states, the number of disqualifying mental health records in the system has increased by 241 percent, and the work is ongoing. to strengthen criminal penalties for theft of firearms from an FFL holder, and to impose mandatory minimum sentences to help deter criminals and help prevent firearms from falling into the wrong hands. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended April 30, 2025 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD Commission file number 1-31552 Smith & Wesson Brands, Inc. (Exact Name of Registrant as Specified in Its Charter ) Nevada 87-0543688 (State or Other Jurisdiction of Incorporation or Organization ) 1852 Proffitt Springs Road Maryville, Tennessee 37801 (800) 331-0852 (I.R.S. Employer Identification No.) (Address including zip code, and telephone number, including area code, of principal executive offices) Securities registered pursuant to Section 12(b) of the Act: (Title of Class) Trading Symbols (Name of Each Exchange on Which Registered) Common Stock, Par Value $.001 per Share SWBI The Nasdaq Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404 (b) of the Sarbanes-Oxley Act (15 U.S.C. 7262 (b)) by the registered public accounting firm that prepared or issued its audit report. ☐ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☒ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ The aggregate market value of Common Stock held by non-affiliates of the registrant (43,661,996 shares) based on the last reported sale price of the registrant's Common Stock on the Nasdaq Global Select Market on October 31, 2024, which was the last business day of the registrant's most recently completed second fiscal quarter, was $565,859,468. For purposes of this computation, all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the registrant. As of June 18, 2025, there were 44,309,940 shares of the registrant's common stock outstanding at a par value of $.001 per share. Documents Incorporated by Reference Portions of the registrant's definitive proxy statement for the 2025 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K. Auditor Firm Id: 185 Auditor Name: KPMG LLP Auditor Location: Nashville, TN, USA SMITH & WESSON BRANDS, INC. ANNUAL REPORT ON FORM 10-K For the Fiscal Year Ended April 30, 2025 TABLE OF CONTENTS Page ITEM 1. PART I BUSINESS 1 ITEM 1A. RISK FACTORS 14 ITEM 1B. UNRESOLVED STAFF COMMENTS 32 ITEM 1C. CYBERSECURITY 32 ITEM 2. PROPERTIES 33 ITEM 3. LEGAL PROCEEDINGS 33 ITEM 4. MINE SAFETY DISCLOSURES 33 ITEM 5. PART II MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 34 ITEM 6. ITEM 7. RESERVED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 35 36 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 43 ITEM 8. ITEM 9. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 43 43 ITEM 9A. CONTROLS AND PROCEDURES 43 ITEM 9B. OTHER INFORMATION 44 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 45 ITEM 10. PART III DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 46 ITEM 11. ITEM 12. ITEM 13. EXECUTIVE COMPENSATION SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 46 46 46 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 46 ITEM 15. PART IV EXHIBITS AND FINANCIAL STATEMENT SCHEDULE S 47 ITEM 16. FORM 10-K SUMMARY 50 SIGNATURES 51 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1 Smith & Wesson®, S&W®, M&P®, M&P Shield®, Performance Center®, Abyss®, Airlite®, Airweight®, American Guardians®, Armornite®, Arrow®, Aurora-II®, Blast Jacket®, Bodyguard®, Carry Comp®, Chiefs Special®, Club 1852®, Competitor®, CSX®, Dagger®, Empowering Americans®, Eg-Series®, ETM®, EZ®, Flexmag®, G-Core®, Gemtech®, Gemtech Suppressors®, GM®, GM-S1®, GMT-Halo®, Governor®, GVAC®, Integra®, Lady Smith®, Lever Lock®, Lunar®, M&P FPC®, M2.0®, Magnum®, Mist-22®, Mountain Gun®, Protected by Smith & Wesson®, Put A Legend On Your Line®, Quickmount®, Shield®, Silence is Golden®, Smith & Wesson Collectors Association®, Smith & Wesson Performance Center®, Smith & Wesson Precision Components®, Smith & Wesson Response®, SW Equalizer®, SW22 Victory®, TEMPO®, The S&W Bench®, The Sigma Series®, Trek®, Volunteer®, and Weather Shield® are some of the registered U.S. trademarks of our company or one of our subsidiaries. This Annual Report on Form 10-K also may contain trademarks and trade names of other companies. This Annual Report on Form 10-K includes market and industry data that we obtained from industry publications, third-party studies and surveys, government agency sources, filings of public companies in our industry, and internal company surveys. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. Although we believe the foregoing industry and market data to be reliable at the date of the report, this information could prove to be inaccurate as a result of a variety of matters. Statement Regarding Forward-Looking Information The statements contained in this Annual Report on Form 10-K that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained or incorporated herein by reference in this Annual Report on Form 10-K, including statements regarding our future operating results, future financial position, business strategy, objectives, goals, plans, prospects, markets, and plans and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "estimates," "expects," "intends," "targets," "contemplates," "projects," "predicts," "may," "might," "plan," "will," "would," "should," "could," "may," "can," "potential," "continue," "objective," or the negative of those terms, or similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. Specific forward-looking statements in this Annual Report on Form 10-K include statements regarding the impact, if any, of statements regarding our objectives, goals, strategies, plans, and focus, including our objective to be the undisputed market leader in the firearm industry; our plan to continue to introduce new products in fiscal 2026; our belief that by offering high-quality products and services on a timely and cost-effective basis, as well as providing world-class customer service, training, and support, we will drive customer satisfaction and loyalty; our intent to continue to streamline and standardize certain administrative functions of our business with a goal toward driving profitability and improving the ease with which our customers are able to do business with us; our intent to continue investing in systems to further enhance our efficiency, improve information reporting, and strengthen internal controls; our intent to continue our focus on developing, growing, and protecting our iconic firearm brands and using our cash flow from operations on actions that will maximize our return on invested capital, including by investing in machinery, equipment, and new product development; our intent to introduce new products to enhance our competitive position and broaden our participation in the overall market; our belief that our M&P branded pistol products are the most ergonomic, feature-rich, and innovative products on the market today; our belief that our manufacturing services provide us with increased flexibility and reduced supply chain risk; our belief that business-to-business sales provide profitable revenue stream diversification and enable us to maximize capacity utilization of our manufacturing assets; our belief that the loss of one or more of our top five commercial distributors in the United States would not materially impact sales; our belief that our digital platforms support future sales growth and profitability; our belief that our business is not materially dependent on any single patent; our belief that our Smith & Wesson and Gemtech brands, including our S&W monogram trademarks, are known and recognized by the public worldwide and are important to our firearm business; our intention to vigorously pursue and challenge infringements of our patents, trademarks, service marks, trade dress, and copyrights, as we believe the goodwill associated with them is a cornerstone of our branding strategy; our belief that we can effectively compete with all our present competitors; our belief that microstamping laws may restrict our ability to sell our products into certain jurisdictions; our concern that we may be required to remove hazardous waste or remediate the alleged effects of hazardous substances on the environment associated with past disposal practices at sites not owned by us; our concerns that we may become involved in various proceedings relating to environmental health and safety matters; our expectation, based on information known to us, that current environmental regulations or environmental proceedings and claims will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows; our belief that additional or changing environmental regulation may become more burdensome in the future and any such development could materially and adversely affect us; our belief that our training and development programs lead to more valuable contributions and satisfaction for our employees within their existing roles and also positions employees for roles they aspire to attain; our belief that our employee relations are good and that the high quality of our employee base is instrumental to our success; our belief that the demand for our products is currently being, and may continue to be, impacted by unified Republican control of the executive and legislative branches of the federal government; our expectation that we will continue to incur expenditures in order to comply with environmental requirements; our belief that we may become subject to governmental proceedings and orders pertaining to waste disposal, air emissions, and water discharges from our operations into the environment; our belief that our operations may cause contamination in the future; our belief that we could incur additional costs to clean up contamination that exceed the amount of our reserves, and our reserves may increase from time to time; our concern that our failure to comply with laws, regulation, and other requirements could cause us to incur fines and penalties, lead to restrictions on our ability to manufacture and sell our products and services, or otherwise negatively impact our ability to import or export the products that we sell; our concern that allegations that we have failed to comply with laws, regulation, and other requirements could also expose us to litigation and harm our reputation; our belief that high levels of inflation may continue to depress consumer demand for our products and reduce our profitability; our anticipation that we will continue to incur significant capital and other expenditures with respect to our Springfield facility, but we may not be successful in continuing to improve efficiencies; our concern that we may be more likely than other companies to be a target for malicious disruptive activities or physical attacks on our senior leadership team or facilities given the industry within which we operate and our brand; our belief that maintaining a high level of brand recognition and a strong reputation are critical to our success, particularly with respect to retaining existing customers and attracting new customers; our belief that the value of our brand depends, in part, on the value consumers place on the quality of our products; our anticipation that we will continue to be involved in litigation, including product liability cases and claims in the future; we may be subject to governmental investigations and inquiries; our belief that period-to-period comparisons of our operating results may not be meaningful in the short term, and our performance in a particular period may not be indicative of our performance in any future period; our concern that we may struggle to identify qualified candidates who are comfortable or enthusiastic to work for a firearm business; our concern that if we fail to attract, motivate, train, and retain qualified personnel, or if we experience excessive turnover, we may experience declining sales, manufacturing delays or other operating inefficiencies, increased recruiting, training, and relocation costs, or other difficulties, and our business, financial condition, and results of operations may be materially and adversely impacted; our concern that the loss of key executive and management personnel to manage our business efficiently and effectively, particularly during a challenging market of attracting and retaining employees, could materially and adversely affect our business, financial condition, and results of operations; our estimation that the annual domestic non-military firearm market based on industry shipments is approximately $2.8 billion for handguns and $1.9 billion for long guns, excluding shotguns; our belief that an expanding base of consumers combined with our strong brand reputation and attractive price points lend support to our goal of continuing to increase our market share; our expectation that our inventory levels will moderately decline during fiscal 2026; our current expectation that we will spend between $25.0 million to $30.0 million on capital expenditures in fiscal 2026; our belief that, based upon our current working capital position, current operating plans, and expected business conditions, our existing capital resources and credit facilities will be adequate to fund our operations for the next 12 months; our expectation that inflation will continue to impact us during fiscal 2026; our assessment of the effect of a variety of economic, social, political, legislative, and regulatory factors on our business; our view of the outcome of the lawsuits and claims to which we are subject and their effect on us; our assessment of future investments for capital expenditures; our assessment of future products and product developments; our belief about the features and performance of our products; our belief about the success of particular product or marketing programs; our view on future enterprise resource planning implementations and system improvements; our view on future enhancements to our manufacturing capabilities, and liquidity; and our anticipated cash needs and availability. All forward-looking statements included herein are based on information available to us as of the date hereof and speak only as of such date. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. The forward-looking statements contained in or incorporated by reference into this Annual Report on Form 10-K reflect our views as of the date of this Annual Report on Form 10-K about future events and are subject to risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ significantly from those expressed or implied in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, performance, or achievements. A number of factors could cause actual results to differ materially from those indicated by the forward-looking statements. Such factors include, among other, economic, political, social, legislative, regulatory, inflationary and health factors; the potential for increased regulation of firearms and firearms-related products; actions of social activists that could have an adverse effect on our business; the impact of lawsuits; the demand for our products; the state of the U.S. economy in general and the firearm industry in particular; general economic conditions and consumer spending patterns; our competitive environment; the supply, availability, and costs of raw materials and components; the impact of tariffs; speculation surrounding fears of terrorism and crime; our anticipated growth and growth opportunities; our ability to increase demand for our products in various markets, including consumer, law enforcement, and military channels, domestically and internationally; our penetration rates in new and existing markets; our strategies; our ability to maintain and enhance brand recognition and reputation; our ability to introduce new products and the success of those products; our ability to expand our markets; the potential for cancellation of orders from our backlog; and other factors detailed from time to time in our reports filed with the Securities and Exchange Commission, or the SEC, including the factors discussed under Item 1A, "Risk Factors." Risk Factors Summary Our business, operating results, and financial condition may be materially and adversely affected by the nature and impact of certain risks. Set forth below is a summary list of the principal risk factors as of the date of the filing of this Annual Report on Form 10-K. Our performance is impacted by a variety of economic, political, social, legislative, regulatory, and inflationary factors. Our business is subject to extensive regulation. We face risks associated with international activities. We are exposed to protectionist trade restrictions, including tariffs and potential trade laws. High levels of inflation have adversely affected us, and may continue to adversely affect us. We must continue to introduce new products that are successful in the marketplace. We are subject to risks associated with the Relocation. Our operating facilities are critical to our success, and we may incur business disruptions. We rely on our supply chain for our production, and any interruptions in these arrangements could disrupt our ability to fill our customers' orders. We may be unable to forecast demand for our products accurately. We may fail to align our capacity with demand for our products. Shortages of and price increases for components, parts, raw materials, and other supplies may delay or reduce our sales and increase our costs. Our business is highly dependent upon our brand recognition and reputation. Poor product quality or performance, or defects in our products, could harm us. We face intense competition. We may be unsuccessful in making and integrating mergers, acquisitions, and investments, and completing divestitures. We may have difficulty collecting amounts owed to us. Liability insurance coverage is expensive and may be difficult to obtain at commercially reasonable rates, or at all. We are subject to lawsuits and governmental investigations and inquiries. Our business involves the potential for product recalls and product liability and other claims against us. We produce or source and sell products that create exposure to potential product liability, warranty liability, and personal injury claims and litigation. We may be unable to protect our intellectual property or obtain the right to use intellectual property from third parties. We may incur substantial expenses and devote significant resources in prosecuting others for their unauthorized use of our intellectual property rights. Interruptions in the proper functioning of our information systems or other issues with our ERP systems could disrupt our operations. We are subject to cybersecurity risks, including risks related to customer, employee, vendor, and other company data. Our operating results may involve significant fluctuations. The trading price of our common stock has fluctuated widely in the past and may fluctuate widely in the future. We are subject to risks related to corporate social responsibility. Actions of stockholder activists could cause us to incur substantial costs and divert management's attention and our resources. Our ability to operate our business efficiently may be adversely impacted if service providers and other businesses that permit firearm-related activities refuse to work with us. We operate in a challenging market for talent and may fail to attract, motivate, train, and retain qualified personnel, including key personnel. Nevada law could make it more difficult for a third party to acquire us and discourage a takeover. We have identified a material weakness in our internal control over financial reporting that may, if not remediated, result in material misstatements in our financial statements. [THIS PAGE INTENTIONALLY LEFT BLANK] PART I Item 1. Business Introduction General We are one of the world's leading manufacturers and designers of firearms. We manufacture a wide array of handguns (including revolvers and pistols), long guns (including modern sporting rifles, pistol caliber carbines, and lever-action rifles), handcuffs, firearm suppressors, and other firearm-related products for sale to a wide variety of customers, including firearm enthusiasts, collectors, hunters, sportsmen, competitive shooters, individuals desiring home and personal protection, law enforcement and security agencies and officers, and military agencies in the United States and throughout the world. We sell our products under the Smith & Wesson and Gemtech brands. We manufacture our products at our facilities in Maryville, Tennessee; Springfield, Massachusetts; and Houlton, Maine. We also sell our manufacturing services under our Smith & Wesson and Smith & Wesson Precision Components brands to other businesses to attempt to level-load our factories. During fiscal 2024, we began manufacturing and distribution activities from our Maryville facility. During the fiscal year ended April 30, 2025, we discontinued operations at our Deep River, Connecticut facility and vacated the premises. See Note 14 - Commitments and Contingencies and Note 15 - Restructuring for more information. Smith & Wesson was founded in 1852 by Horace Smith and Daniel B. Wesson. Mr. Wesson purchased Mr. Smith's interest in 1873. The Wesson family sold Smith & Wesson to Bangor Punta Corp. in 1965. Lear Siegler Corporation purchased Bangor Punta in 1984, thereby acquiring ownership of Smith & Wesson. Forstmann Little & Co. purchased Lear Siegler in 1986 and sold Smith & Wesson shortly thereafter to Tomkins Corporation, an affiliate of U.K.-based Tomkins PLC. We purchased Smith & Wesson from Tomkins in May 2001 and renamed our company Smith & Wesson Holding Corporation. In January 2017, we changed the name of our company from Smith & Wesson Holding Corporation to American Outdoor Brands Corporation. In May 2020, in preparation for the spin-off of our outdoor products and accessories business, or the Separation, which was completed on August 24, 2020, we changed our name to Smith & Wesson Brands, Inc. On September 30, 2021, we announced our plan to move our headquarters and significant elements of our operations to Maryville, Tennessee in 2023, or the Relocation. We maintain our principal executive offices at 1852 Proffitt Springs Road, Maryville, Tennessee 37801. Our telephone number is (800) 331-0852. Our website is located at https://www.smith-wesson.com . Through our website, we make available free of charge our Annual Reports on Form 10-K, our proxy statements, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and amendments to any of these documents filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. These documents are available as soon as reasonably practicable after we electronically file them with the SEC. We also post on our website the charters of our Audit, Compensation, Nominations and Corporate Governance, and Sustainability Committees; our Corporate Governance Guidelines, our Code of Conduct, and any amendments or waivers thereto; and any other corporate governance materials contemplated by the regulations of the SEC and the Nasdaq Global Select Market. These documents are also available in print by contacting our corporate secretary at our executive offices. Unless the context indicates otherwise, the terms "we," "our," "ours," "us," and "our company" refer to Smith & Wesson Brands, Inc. and its consolidated subsidiaries. "Common stock" refers to the common stock, par value $.001 per share, of our company. Our most recently completed fiscal year ended on April 30, 2025, or fiscal 2025. Our objective is to be the undisputed market leader in the firearm industry. Key elements of our strategy to achieve this objective and deliver long-term stockholder value are as follows: drive organic growth by leveraging our brands and maintaining a robust product pipeline to increase market share in markets in which we participate; design, produce, and market high-quality, innovative firearms and related accessories that meet the needs and desires of our consumer and professional customers and that drive customer satisfaction and loyalty; create a leverageable infrastructure by streamlining and standardizing our business operations; and deploy our cash flow in such a manner so as to maximize return on invested capital. Strategy Our objective is to be the undisputed market leader in the firearm industry. Key elements of our strategy to achieve this objective are as follows: Drive Organic Growth by Leveraging Brands and Designing Innovative New Products We are focused on driving organic growth by producing a robust new product pipeline and leveraging our brands to help us to increase market share in the markets in which we participate and to expand into adjacent and complementary markets by (1) capitalizing on the goodwill developed through our historic, more than 170 year old "Smith & Wesson" brand; (2) enhancing our relationships with distributors, key retailers, and buying groups; and (3) introducing new products. During the last two fiscal years, we have introduced numerous new products, including variations and product lines around the Smith & Wesson and Gemtech brands. We plan to continue to introduce new products in fiscal 2026. Design, Produce, and Market High-Quality Products that Drive Customer Satisfaction and Loyalty We are focused on designing, producing, and marketing high-quality, innovative firearms and related accessories that meet the needs and desires of our consumer and professional customers and that drive customer satisfaction and loyalty. Our research and development, product engineering, product sourcing, marketing, and distribution activities are critical components of our ability to offer successful products. We believe that by offering high-quality products and services on a timely and cost-effective basis, as well as providing world-class customer service, training, and support, we will drive customer satisfaction and loyalty. We regard our high-quality, innovative products as the most important aspect of our customer satisfaction and loyalty, but we also offer customer service and support with various programs, such as toll-free customer support numbers, e-mail customer question and answer communications, broad service policies, and product warranties. Create a Leverageable Infrastructure by Streamlining and Standardizing our Business Operations We intend to continue to streamline and standardize certain administrative functions of our business with a goal toward driving profitability and improving the ease with which our customers are able to do business with us. A streamlined and standardized approach requires investing in an integrated and configurable technology infrastructure in areas such as enterprise resource planning, or ERP, and compliance. We intend to continue investing in such systems to further enhance our efficiency, improve information reporting, and strengthen internal controls. Deploy our Cash Flow in Such a Manner so as to Maximize Return on Invested Capital During fiscal 2025 and 2024, we generated a total of $99.5 million in cash from operations. During the same period, we invested $112.7 million in cash to acquire property, equipment, and patents, of which $84.3 million was to fund the Relocation, repurchased $35.7 million of our outstanding stock, distributed $45.1 million in dividends, and borrowed $55.0 million from our revolving line of credit. We intend to continue our focus on developing, growing, and protecting our iconic firearm brands and using our cash flow from operations on actions that will maximize our return on invested capital, including by investing in machinery, equipment, and new product development. Products Introduction Our products combine our legacy of more than 170 years of American manufacturing and engineering expertise with modern technological advances. Driven by the needs of the individual firearm owner, we continually strive to improve the experience of buying, owning, and shooting a firearm. We also strive to leverage our tradition of innovation in materials, performance, and engineering, along with our proven history of reliability, to produce feature-rich, safe, durable, accurate, and high-performing firearms that satisfy the needs of our broad range of customers. Our introduction of new products is intended to enhance our competitive position and broaden our participation in the overall market. We have always been a leader in the revolver market. We have substantially enhanced the breadth and quality of our portfolio of products over the years. The introduction of our popular M&P pistol in 2005 resulted in us becoming one of the leaders in the polymer pistol market as well, serving both the consumer sporting goods market and law enforcement agencies. The launch of our M&P modern sporting rifle in 2006 enabled us to capture what we estimate is the leading share of the modern sporting rifle market. In 2023, we further expanded and strengthened our position in the broader long-gun market with the introduction of new pistol caliber carbine offerings, the M&P FPC and Response rifles. In 2024, we introduced our first ever lever-action rifle, the Model 1854. The addition of our Gemtech branded firearm suppressor products in 2017 expanded our firearm-related product offerings. Our firearm suppressors are compatible with most pistols and rifles on the market and complement our firearm products. We currently participate in three categories of the long gun market: semi-automatic rifles, lever-action rifles, and shotguns, and both core categories of the handgun market: semi-automatic pistols and revolvers. Product Development All of our firearms and firearm-related products are sold under our Smith & Wesson and Gemtech brands. Our customers include distributors; federal, state, and municipal law enforcement agencies and officers; government and military agencies; and retailers. Our product development strategy is to understand our consumers' needs and preferences and then design and develop products to uniquely meet those requirements. Throughout this process, we test multiple concepts with firearm owners and potential purchasers. We compare these test results against a growing database of prior concepts to identify those with the greatest market potential. We complete additional market research to optimize the desired features and benefits. While this development process is ongoing, our launch timing for new products depends on market conditions to maximize sales across the entire product portfolio. In fiscal 2025, we introduced a number of new products, including (i) the BodyGuard 2.0, a micro handgun concealed carry pistol; (ii) several new variants of our Model 1854 Lever-Action Rifle series; (iii) the expansion of the M&P FPC in 40 caliber and 10mm; (iv) the CSX E-Series, our next generation offering of the hammer-fired, metal-framed CSX featuring several new upgrades and chambered in 9mm; (v) expansion of our revolver line to include several new no-lock Classic revolvers and our innovative Ultimate Carry revolvers; and (vi) the M&P 4, select-fire rifle, chambered in 5.56mm NATO. We received several innovation awards in 2024, including from Guns & Ammo magazine, NRA Publications, and the National Association of Sporting Goods Wholesalers. Our customers continue to demand premium firearms that provide a competitive edge in sport shooting and hunting. Our Performance Center products are engineered and manufactured to meet this need, and they incorporate many custom features not found in our standard products, such as enhanced triggers for smoother trigger pull, ported barrels for better muzzle control, and specialty sights for quicker target acquisition. In fiscal 2025, we introduced our fifth annual Performance Center Spec Series M&P pistol. This limited edition 2025 model features a heavy-duty steel frame construction, an integrated compensator, enhanced trigger and ergonomics, and a sharp aesthetic with Smith & Wesson blue highlights. We also introduced several line extensions for our popular Performance Center M&P9 Carry Comp lineup that offers premium features, including an integrated port and tuned trigger for reduced felt recoil and better on-target performance. In fiscal 2025, we also introduced innovative new products in our Gemtech line of firearm suppressors, including the Abyss 5.56 and our Neutron 7.62 in direct thread models. Handguns We manufacture an extensive variety of handgun models that includes revolvers and pistols. A revolver is a handgun with a cylinder that holds the ammunition in a series of rotating chambers that are successively aligned with the barrel of the firearm during each firing cycle. There are two general types of revolvers: single-action and double-action. To fire a single-action revolver, the hammer is pulled back to cock the firearm and align the cylinder before the trigger is pulled. To fire a double-action revolver, a single trigger pull advances the cylinder as it cocks and releases the hammer. A pistol is a handgun in which the ammunition chamber is an integral part of the barrel and which is fed ammunition from a magazine contained in the grip. The firing cycle ejects the spent casings and loads a new round into the chamber. We have long been known as an innovator and leader in the revolver market and most of our revolvers are currently marketed under the Smith & Wesson brand. We sell a wide range of sizes from small-frame revolvers used primarily for concealed carry and personal protection to large-frame revolvers used primarily for recreational and competitive sport shooting. Our extra-large frame revolvers primarily address the handgun-hunting market. Our small-frame revolvers have been carried by law enforcement personnel and personal defense-minded citizens for over 150 years. Our revolvers are available in a variety of models and calibers, with applications in virtually all professional and consumer markets. In fiscal 2025, we expanded our line of revolvers that are designed to enhance the personal carry experience, continuing our innovative leadership in the category. These Ultimate Carry revolvers are chambered in 38 Special and 32 H&R Magnum and feature enhanced grips, sights, and triggers that are designed to enhance the shooting experience. Our "Classics" department makes it possible to own historic firearms that are manufactured today but modeled after original favorites, such as the Model 29, which was made famous by the movie character Dirty Harry. These firearms are newly crafted with designs that take advantage of some of the most famous and collectible firearms that we have ever made. Our Classics department also makes commemorative firearms and employs master engravers to craft one of a kind custom firearms. These custom-made firearms are intended to reflect the skill and vision of the master engraver and the artistic expression of the owner. We offer a number of catalog variations of Classics and engraved Classics to our customers. We offer pistols under our Smith & Wesson brand. Our full size and compact M&P line of pistol products have been engineered with input from professional users and are designed to offer performance, safety, and durability that meet the standards of global law enforcement and military personnel, as well as features attractive to consumers. We believe that our M&P branded pistol products are the most ergonomic, feature-rich, and innovative products on the market today. Our range of full-size and compact M&P pistol products are made with a polymer or aluminum frame, a rigid stainless-steel chassis, and a black, through-hardened corrosion resistant finished stainless-steel barrel and slide for durability. Our M&P pistol products feature patented and easily changed palm swell grips in four sizes, allowing the user to customize grips in a matter of seconds; a passive trigger safety to prevent the pistol from firing if dropped; an enlarged trigger guard to accommodate gloved hands; a sear lever release that eliminates the need to press the trigger in order to disassemble the firearm; an ambidextrous slide stop and reversible magazine release to accommodate right- and left-handed shooters; an optional internal locking system and magazine safety; and a universal equipment rail to allow the addition of accessories, including lights and lasers. In fiscal 2012, we entered the growing personal protection and concealed carry market with the launch of the M&P Shield pistol. The M&P Shield features a slim concealable profile, 9mm, 380 Auto, 40 S&W, and 45 Auto calibers, and M&P ergonomics. Since the launch of the M&P Shield, we have introduced several additional models, including the Shield Plus with enhanced features and capacity, and most recently, the award-winning Bodyguard 2.0. Our Performance Center department has been providing specialized products and services for the most demanding shooting sports enthusiasts since 1990. To meet the requirements of law enforcement professionals, competitive shooters, collectors, and discriminating sports enthusiasts who demand superior products, our Performance Center personnel conceptualize, engineer, and craft products to create enhanced versions of our standard products. Our craftsmen are highly skilled and experienced gunsmiths. Performance Center products are typically made in limited production quantities, although we offer a number of catalog variations in order to increase product availability. Long Guns Our modern sporting rifles are designed to satisfy the functionality and reliability needs of recreational, personal, defense, and professional users, including global military, law enforcement, and security personnel. These long guns are popular with consumers as hunting, personal protection, and sporting target rifles. We offer two pistol caliber carbines, the M&P FPC chambered in 9mm, 40 S&W, and 10mm, and the Response, chambered in 9mm. We offer the M&P and Volunteer series modern sporting rifles in five different calibers (22LR, 5.56mm NATO (223), 308 Winchester (7.62x51mm), 6.5 Creedmoor, and 6mm ARC). We also offer upper assemblies so firearm owners can easily modify their modern sporting rifles to suit the needs and tasks of the various forms of sport shooting and hunting. Our broad product portfolio of modern sporting rifles includes a .22 caliber model, an opening price-point sport model, a hunting caliber model for longer range effectiveness, and several models designed for professional users. In fiscal 2025, we continued to expand our lever-action offerings, building on the success of the Model 1854, which was introduced in fiscal 2024. This expansion included new caliber introductions in 45 Long Colt, 357 Magnum, and our first long-action rifle cartridge offering in 45-70 Government. The expansion also included our Stealth Hunter series. We introduced the M&P 4 select-fire rifle, chambered in 5.56mm NATO, which is our first such offering to our law enforcement and military customers. Other Products and Manufacturing Services Our other products and manufacturing services include the following: Parts: We sell parts to support our firearm business, including barrels and magazines that are manufactured at our facilities or purchased from third parties. Handcuffs: We are one of the largest manufacturers of handcuffs and restraints in the United States. We fabricate these products from the highest-grade carbon or stainless steel. Our patented Lever Lock cuffs offer a double-locking system for added security and comfort, without extra tools or keys. Internal locks help prevent tampering and smooth ratchets allow for swift cuffing and an extra measure of safety. We have the ability to customize handcuffs to fit customer specifications. Firearm Suppressors: We are one of the nation's oldest firearm suppressor manufacturers and an active participant in the firearm suppressor market around the world. We believe our Gemtech branded firearm suppressors have been involved in setting standards used by the military in suppressor testing, implementation, and safety. Our firearm suppressors are constructed from high grade aluminum, steel, or titanium and are compatible with every major type of rimfire and centerfire pistol and centerfire rifle caliber currently on the market. Manufacturing Services: We utilize our substantial manufacturing capabilities to provide services to third-party customers. Our manufacturing services include forging, heat treating, rapid prototyping, tooling, finishing, plating, and machining. We believe our manufacturing services provide us with increased flexibility and reduced supply chain risk. We also believe that business-to-business sales provide profitable revenue stream diversification and enable us to maximize capacity utilization of our manufacturing assets. We market our manufacturing services under the Smith & Wesson and Smith & Wesson Precision Components brand names. Marketing, Sales, and Distribution General We go to market in a variety of ways, including two-step distribution, strategic retailers, and buying groups consisting of certain large, regional retailers, utilizing direct sales employees to service these customers. We also sell firearms directly to law enforcement agencies and manufacturing services directly to other businesses. We sell internationally, primarily through distributors, which in turn, sell to retail stores and government agencies. Our top five commercial distributors in the United States accounted for a total of 45%, 46%, and 44% of our net sales for the fiscal years ended April 30, 2025, 2024, and 2023, respectively. Those commercial distributors are not regionally exclusive and have many of the same dealer customers. Therefore, we believe that the loss of one or more of these distributors would not materially impact sales as the remaining distributors would be allocated additional sales. We sell our products worldwide. International sales accounted for approximately 5%, 5%, and 4% of our net sales for the fiscal years ended April 30, 2025, 2024, and 2023, respectively. Our businesses own tooling that is located at various suppliers in Asia and North America. For the fiscal years ended April 30, 2025, 2024, and 2023, marketing, advertising, and promotion expenses were $15.2 million, $14.7 million, and $14.7 million, respectively, excluding the cost of rebates and promotions reflected in gross profit. We market our products using a multi-faceted approach to consumers through independent dealers, large retailers, in-store retail channels, direct to consumer, and range operations using focused marketing and promotional campaigns, which include print, broadcast, and digital advertising campaigns; social and electronic media; and in-store retail merchandising strategies. We are prominently featured in vertical print media, including editorial coverage in an extensive list of leading firearms and outdoor magazines, including Guns & Ammo , American Rifleman , Shooting Times , American Handgunner , Shooting Illustrated , American Hunter , Outdoor Life , and Field & Stream . We also sponsor many outdoor television, internet, and online programs that generate significant editorial exposure. We sponsor a number of firearm safety, shooting, and hunting events and organizations. We print various product catalogs that are distributed to our dealers and mailed directly, on a limited basis, to consumers. We also attend various trade shows and expositions, such as the Shooting, Hunting, Outdoor Trade, or SHOT Show, the National Association of Sporting Goods Wholesalers Annual Expo, the International Association of Chiefs of Police Annual Conference & Expo, the Association of the United States Army, or AUSA, Annual Meeting & Exposition, the IWA OutdoorClassics international trade fair in Europe, and various distributor, buying group, and consumer shows. Digital Marketing We utilize our websites, including https://www.smith-wesson.com and https://www.gemtech.com , to market our products and services and to provide a wide range of information regarding our company to customers, consumers, dealers, distributors, investors, and government and law enforcement agencies worldwide. Social media platforms, such as Facebook, Instagram, YouTube, LinkedIn, and X (formerly Twitter), are effective ways for us to communicate the features and benefits of our products. Our direct-to-consumer e-mail marketing helps us to further engage our consumers and communicate the value of our brands. We continue to invest in new digital marketing capabilities to provide best-in-class customer experiences. Our websites are designed to inform, inspire, and prepare our customers for the next step in their firearms journey. We believe our digital platforms support future sales growth and profitability. In fiscal 2025, we introduced a direct-to-consumer e-commerce website to offer non-serialized parts, accessories, and branded goods. Service and Support We utilize a variety of methods for supporting our consumers and dealers. We have a toll-free customer service number, e-mail, and social media messaging to answer questions and resolve issues regarding our products. In addition, we offer a limited one-year warranty program and a lifetime service policy under which we repair defects in material or workmanship in our products, without charge, for as long as the original purchaser owns the firearm. We also maintain a number of authorized warranty centers throughout the world and provide both warranty and charge repair services at our facilities. Suppliers We manufacture most of the components for our firearms, but purchase certain components and parts, including bolt carriers, rifle receivers, magazines, small parts, and rifle stocks, from third parties. We also purchase ammunition for product testing. Most of our major suppliers are U.S. based and provide materials, components, and parts, such as steel, polymer components, and metal-injected-molded components. The costs of these materials, components, and parts are at competitive rates. We have become less dependent on any particular supplier by strategically sourcing parts and raw material from multiple suppliers based on quality, cost, and risk. Whenever appropriate, we ensure that we have primary and secondary sources of supply for critical parts and components. We are also able to leverage our supply base to supplement our internal capacity and provide flexibility in our response to changes in market conditions. We use numerous raw materials, such as steel, wood, lead, brass, and plastics, in producing and testing our products. We have alternative sources for these raw materials. Facilities We have four manufacturing facilities at which we produce our products: a 645,000 square-foot facility located in Maryville, Tennessee; a 575,000 square-foot facility located in Springfield, Massachusetts; and two facilities totaling 44,000 square-feet located in Houlton, Maine. We conduct plastic injection molding, assembly, and distribution services from our Maryville facility. We conduct certain machining, assembly, and manufacturing services at our Springfield facility. We machine non-serialized firearm parts and manufacture handcuffs and other restraint devices in our Houlton facilities. As part of the Relocation, we discontinued operations at the Deep River facility during fiscal 2025. All of these facilities are ISO 9001 certified. We perform most of the machining and all of the assembly, inspection, and testing of the firearms that we sell in our own facilities. We produce our major firearm components utilizing computer-assisted machines. Our skilled employees use sophisticated automated testing equipment to ensure the proper functioning of our firearms. Every firearm is test fired before shipment. Our Maryville facility operates primarily on three shift patterns: a five day, 8-hour shift schedule. Our Springfield facility operates primarily on two shift patterns: a seven day, 12-hour rotating shift schedule and a five day, 8-hour shift schedule. Our Houlton facilities operate primarily on three shift patterns: a seven day, 12-hour shift schedule, a five day, 8-hour shift, and a four day, 10-hour shift schedule. We are party to a lease agreement, dated October 26, 2017, between us and Ryan Boone County, LLC, or the Original Missouri Landlord, concerning certain real property located in Boone County, Missouri on which we had been operating our distribution center, or the Missouri Lease, as well as a related payment and performance guaranty, dated October 26, 2017, in favor of the Original Missouri Landlord. As part of the Relocation, on January 31, 2023, we entered into (i) an assignment and assumption agreement with American Outdoor Brands, Inc., our former wholly owned subsidiary, or AOUT (which became effective on January 1, 2024), pursuant to which AOUT assumed all of our rights, entitlement, and obligations in, to, and under the Missouri Lease, or the Assignment and Assumption Agreement, and (ii) an amended and restated guaranty in favor of RCS-S&W Facility, LLC, as successor in interest to the Original Missouri Landlord, pursuant to which Smith & Wesson Sales Company was added as a guarantor, or the Amended and Restated Guaranty. Because of the Amended and Restated Guaranty, we continue to account for this lease as we have since prior to the Relocation. Effective January 1, 2024, we vacated the Missouri distribution center. Assets from the Missouri distribution center that we could no longer use were sold to AOUT, and we relocated all remaining assets to our Maryville facility. In addition, we relocated a portion of our plastic injection molding operations to the Maryville facility. As of April 30, 2025, the plastic injection molding machinery and equipment previously utilized in our Deep River facility had been relocated to the Maryville facility or disposed of. We did not recognize a material impairment related to the assets previously utilized at the Deep River facility. We seek to minimize inventory costs through an integrated planning and production system. All facilities operate utilizing SAP, a fully integrated ERP system. Research and Development Through our advanced products engineering departments, we enhance existing products and develop new products for our business. Through our research and development personnel, we conceive, design, and develop potential products that we believe will be attractive to our customers and help address the needs, wants, and desires of our target consumer base. In so doing, we must seek to anticipate and respond to trends and shifts in consumer preferences by continually adjusting our product mix with innovative features and designs and marketing them in an effective manner. Prior to introducing any product, we assess its cost of production and delivery, estimate its potential sales volume and margin, and conduct vigorous prototype and production-quality sample testing. In fiscal 2025, 2024, and 2023, our gross spending on research activities relating to the development of new products was $9.6 million, $7.3 million, and $7.6 million, respectively. As of April 30, 2025, we had 45 employees at our various facilities engaged in ongoing research and development activities for all of our brands. Patents, Trademarks, and Copyrights We recognize the importance of innovation and protecting our intellectual property. Accordingly, we own numerous patents related to our products. We apply for patents whenever we develop innovative new products, unique designs, or processes of commercial importance. We do not believe that our business is materially dependent on any single patent. Because of the significance of our brand names, our trademarks, service marks, trade dress, and copyrights are also important to our business. We have an active global program of trademark registration, monitoring, and enforcement. We believe that our Smith & Wesson and Gemtech brands, including our S&W monogram trademarks, are known and recognized by the public worldwide and are important to our firearm business. We intend to vigorously pursue and challenge infringements of our patents, trademarks, service marks, trade dress, and copyrights, as we believe the goodwill associated with them is a cornerstone of our branding strategy. Competition We encounter rigorous competition in the firearms industry from both domestic and foreign manufacturers. Although some competitors manufacture as wide a variety of firearms as we do, most of our competitors manufacture only certain types of firearms. We are one of the largest manufacturers of handguns, modern sporting rifles, and handcuffs in the United States. We compete primarily based upon innovation, quality, reliability, durability, price, performance, consumer brand awareness, and customer service and support. Our customer service organization is proactive in offering timely responses to customer inquiries. We believe we can effectively compete with all our present competitors. Our primary competitors are Colt, Ruger and Taurus in the revolver market; Glock, Ruger, Sig Sauer, Springfield Armory, and Taurus in the pistol market; Daniel Defense, Diamondback, Ruger, Sig Sauer, and Springfield Armory in the semi-automatic rifle market; and Ruger and Henry in the lever-action rifle market. Customers We sell our products through a variety of federally licensed distribution channels. Depending upon the product or service, our customers include distributors; federal, state, and municipal law enforcement agencies and officers; government and military agencies; and retailers. We also sell non-serialized parts, accessories, and apparel to retail consumers through our new e-commerce platform. We grant payment terms to most commercial customers ranging from 20 to 60 days. However, in some instances, we provide longer payment terms. During fiscal 2025, sales into our professional channel accounted for approximately 9.0% of our net sales, which included state and local law enforcement agencies, the federal government, and international customers. The remaining 91.0% of our net sales was through federal firearm licensees to domestic consumers. Seasonality Our business is seasonal with sales generally peaking in our fourth fiscal quarter, which ends April 30, as a result of most industry events and distributor shows normally scheduled during the early spring months. In addition, because of our operating schedule, which includes a summer and a winter shutdown of our manufacturing facilities, we have an increased number of operating days in our fourth fiscal quarter, which allows our shipping and production volumes to exceed other quarters. Seasonality, however, can be disrupted by external events, such as results of federal, state, and local elections and periodic social and political unrest, crime, and other factors that may drive sales or impact channel inventories. Governmental Regulations of Firearms Our business is primarily regulated by the Bureau of Alcohol, Tobacco, Firearms and Explosives, or ATF, which licenses the manufacture, sale, and import of firearms and firearm suppressors in the United States. The ATF conducts periodic audits of our facilities that hold federal firearms licenses. There are also various state laws, regulations, and local ordinances relating to firearm characteristics, features, sales, and firearm magazine capacities. Local firearm dealers must comply with federal, state, and local laws, regulations, and ordinances pertaining to firearm, firearm suppressor, and magazine sales within their jurisdictions. We manufacture several firearm models and magazines in various capacities that comply with those laws, regulations, and ordinances for sales in those states and localities. In Massachusetts, for example, there are regulations related to the weight of the trigger pull, barrel length, material strength, and independent testing of handguns. California, Connecticut, Maryland, New Jersey, and New York, as well as other states, the District of Columbia, and other localities, have similar laws, ordinances, and restrictions. In addition, certain states and the District of Columbia have implemented laws related to microstamping. Generally, these laws require any new pistols to contain a microstamping mechanism, which must be able to etch or imprint an array of characters that identify the make, model, and serial number of a pistol onto each cartridge case when the pistol is fired. No commercially produced firearm has utilized the microstamping process, which many consider to be infeasible, and we have no plans to utilize any microstamping feature in our firearms. While these microstamping laws do not currently restrict our product offerings as a result of ongoing viability studies or legal challenges, in the future, they may restrict our ability to sell our products into these jurisdictions. Warnings and instructions concerning the safe operation of our firearms and firearm suppressors are contained in the Safety & Instruction Manuals included in all boxes in which firearms and firearm suppressors are shipped and are also available for download from our Smith & Wesson and Gemtech websites. Environmental Health and Safety We are subject to numerous federal, state, and local laws and regulations that regulate the health and safety of our workforce, including those regulations monitored by the Occupational Health and Safety Administration, or OSHA, the National Fire Protection Association, and the Department of Public Health. Though not exhaustive, examples of applicable regulations include confined space safety, walking and working surfaces, machine guarding, and life safety. We are also subject to numerous federal, state, and local environmental laws and regulations concerning, among other things, emissions to the air; discharges to land, surface, subsurface strata and water; and the generation, handling, storage, transportation, treatment, and disposal of hazardous waste and other materials. These laws require us to make significant expenditures of both a capital and expense nature. Several of the more significant federal laws applicable to our operations include the Clean Air Act; the Clean Water Act; the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA; and the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, or RCRA. We are required to remediate hazardous waste at our facilities. Currently, we own a designated site in Springfield, Massachusetts that contains two release areas, which are the focus of remediation projects as part of the Massachusetts Contingency Plan, or MCP. The MCP provides a structured environment for the voluntary remediation of regulated releases. We may be required to remove hazardous waste or remediate the alleged effects of hazardous substances on the environment associated with past disposal practices at sites not owned by us. We have received notice that we are a potentially responsible party from the Environmental Protection Agency and/or individual states under CERCLA or a state equivalent at two sites. In our efforts to satisfy our environmental responsibilities and to comply with environmental laws and regulations, we have established, and periodically update, policies relating to the environmental standards of performance for our operations. We have in place programs that monitor compliance with various federal, state, and local environmental regulations. However, in the normal course of our manufacturing operations, we are subject to governmental proceedings and orders pertaining to waste disposal, air emissions, and water discharges from our operations into the environment. We regularly incur substantial capital and operating costs to comply with environmental laws, including remediation of known environmental conditions which we fund through cash flows from operations. We spent $1.7 million, $1.5 million, and $1.5 million in fiscal 2025, 2024 and 2023, respectively, on environmental compliance, primarily related to disposal fees and containers. In the normal course of our business, we may become involved in various proceedings relating to environmental health and safety matters, and we are currently engaged in an environmental investigation and remediation. Our manufacturing facilities are located on properties with long histories of industrial use, including the use of hazardous substances. We have identified soil and groundwater contamination at our Springfield facility that we continue to monitor and remediate, as appropriate. Based on the situation, an environmental reserve may be recorded based upon currently enacted laws and regulations, currently available facts, experience in remediation efforts, existing technology, and the ability of other potentially responsible parties or contractually liable parties to pay the allocated portions of any environmental obligations. As of April 30, 2025, we did not have an open environmental reserve recorded in our consolidated balance sheet. Based on information known to us, we do not expect current environmental regulations or environmental proceedings and claims to have a material adverse effect on our consolidated financial position, results of operations, or cash flows. However, it is not possible to predict with certainty the impact on us of future environmental compliance requirements or of the cost of resolution of future environmental health and safety proceedings and claims, in part because the scope of the remedies that may be required is not certain, liability under federal environmental laws is joint and several in nature, and environmental laws and regulations are subject to modification and changes in interpretation. Additional or changing environmental regulation may become more burdensome in the future, and any such development could materially and adversely affect us. Human Capital Creating a positive work environment for our employees is critical to our ability to successfully execute our strategy. We are committed to a strong, healthy culture focused on respect for all employees, creating and sustaining a family atmosphere united under a clear vision, with the understanding of each function and individual's responsibility for team results, collective pride in our company and our industry, and shared rewards for results. In order to ensure that we embody our values and that our culture remains healthy and strong, we place significant focus on our human resources. Training & Development Attraction, development, and retention of employees is critical to our success. We offer training and development programs to encourage advancement from within, including the following: tuition reimbursement for undergraduate or advanced degrees; computer numerical control, or CNC, machine training in conjunction with a local community college; wastewater treatment operator training leading to licensure; reimbursement for continuing professional education for our professionally licensed employees; other in-house and cross-functional training to aid with career advancement; and an intern program for college students. We believe that this training and development leads to more valuable contributions and satisfaction for our employees within their existing roles and also positions employees for roles they aspire to attain. The intern program is intended to serve as a talent pipeline for future hires, as an opportunity for us to receive fresh perspectives and ideas, to introduce college students to our brand and increase positive employer branding, and to contribute to beneficial community engagement. Finally, we conduct periodic compliance and industry training for employees on various topics that are important to our business, including sexual harassment, anti-corruption, and cybersecurity, among others. Equal Opportunity Our Talent Acquisition team focuses on ensuring that our workforce is representative of the local communities in which we operate and that our business is open and welcoming to everyone. This commitment extends to all levels of our organization, including within senior management and our Board of Directors. We are committed to hiring qualified candidates without regard to race, religion, color, sex, sexual orientation, pregnancy, gender, age, national origin, ancestry, physical or mental disability, genetic information, or any other status. Our Talent Acquisition team emphasizes recruiting and retaining a talented workforce with special focus on hiring veterans, whenever possible. Annual voluntary turnover for fiscal 2025, 2024, and 2023 was approximately 15%, 16%, and 18%, respectively. We utilize third-party tools and databases to review compensation practices on an annual basis to ensure we pay all employees fairly. We engage the services of benefit consultants to provide expert advice on the development of benefit designs and offerings, current market trends, exposure to loss, and various contract provisions. We also partner with various recruiting services to expand our ability to attract a qualified workforce, as needed. Health and Safety Our Employee Assistance Program is supplemented by Cigna behavioral health tools in order to support employees' mental, as well as physical health, needs. We have a documented education and training plan to ensure employees are well trained on safety measures throughout the organization. We offer more than 55 different types of training, including lecture, classroom setting, and hands-on training to ensure our employees have the knowledge needed to ensure their safety, as well as the safety of others. The success of our training program has allowed us to maintain a relatively low level of safety claims and reduce lost work hours. Our calendar year 2024 and 2023 total recordable incident rate, or TRIR, of 2.3 and 1.6, respectively, and lost time incident rate, or LTIR, of 0.6 and 0.5, respectively, compares favorably to the latest OSHA industry data. According to OSHA, for our NAICS industry code, the calendar year 2023 and 2022 TRIR was 2.3 and 2.5, and the LTIR was 0.6 and 1.6, respectively. Our calendar year 2024 and 2023 near miss frequency rate was 1.9 and 0.3, respectively, and we did not have any fatalities in either year. Total Rewards Competitive pay and benefits have always been a highlight of our employee experience. We offer comprehensive benefit programs to our employees that allow them flexibility of choice through our total rewards framework of pay and service recognition, health and wellness, financial well-being, work/life balance, culture and community, and learning and development. We are committed to ensuring that all of our employees are paid a fair wage. To that end, we offer generous wages and benefits to our employees, including the following: a comprehensive medical, dental, and vision plan for our employees and their families, for which we pay between 87% and 93% of the total cost; a 401(k) plan with a company match of up to 3% of the first 6% contributed by the employee; a profit-sharing plan in which employees can earn up to 15% of their eligible earnings based on company profits; individual financial planning sessions with a certified financial planner; twelve annual holidays and a paid time off program; paid and unpaid leaves of absence, including paid family and medical leave for employees working in qualified states; flexible spending and health savings accounts; life and disability insurance coverage; employee stock purchase plan; on-site cafeteria and fitness center; employee assistance programs; product discounts; and license-to-carry subsidies and reimbursement for range membership fees. Annual increases and incentive compensation for salaried and non-operations hourly employees are based on merit, which is communicated to employees upon hire and documented through our talent management program as part of the annual performance review process. Annual increases for hourly operations employees are based on a yearly market analysis for comparable jobs. Headcount As of April 30, 2025, we had 1,416 employees, including eleven part-time employees. None of our employees are represented by a union in collective bargaining with us. Of our employees, 30% have 10 or more years of service with our company and 3% have greater than 25 years of service with our company. We believe that our employee relations are good and that the high quality of our employee base is instrumental to our success. Information About our Executive Officers The following table sets forth certain information regarding our executive officers: Name Age Position Mark P. Smith 49 President and Chief Executive Officer Secretary Deana L. McPherson 54 Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Kevin A. Maxwell 49 Senior Vice President, General Counsel, Chief Compliance Officer, and Secretary Susan J. Cupero (a) 65 Vice President, Sales (a) Ms. Cupero retired on May 5, 2025. Mark P. Smith has served as President and Chief Executive Officer since 2020. Mr. Smith served as Co-President and Co-Chief Executive Officer from January 2020 to August 2020. Mr. Smith served as President, Manufacturing Services of our company and as President of Manufacturing Services for Smith & Wesson Sales Company (formerly known as American Outdoor Brands Sales Company and Smith & Wesson Corp.), a subsidiary of our company, from 2016 until 2020. Mr. Smith served as Vice President of Manufacturing and Supply Chain Management from 2011 until 2016 and served as Vice President of Supply Chain Management from 2010 until 2011. He was Director Supply Chain Solutions for Alvarez & Marsal Business Consulting, LLC from 2007 until 2010. Mr. Smith held various positions for Ecolab, Inc., a developer and marketer of programs, products, and services for the hospitality, foodservice, healthcare, industrial, and energy markets, from 2001 until 2007, including Program Manager, Acquisition Integration Manager, Senior Manufacturing Planner, Plant Engineer, and Senior Production / Quality Supervisor. Mr. Smith was a Production Supervisor for Bell Aromatics, a manufacturer of flavors and fragrances, from 1999 until 2001. Deana L. McPherson has served as Executive Vice President , Chief Financial Officer, Treasurer, and Assistant Secretary since 2020. Ms. McPherson served as Vice President, Chief Accounting Officer, Corporate Controller, and Assistant Treasurer from 2017 to 2020. Ms. McPherson served as Vice President, Corporate Controller, and Assistant Treasurer from 2009 to 2017. Ms. McPherson served as Corporate Controller from 2007 to 2009. From 2001 to 2007, Ms. McPherson held a number of increasingly responsible positions for Wood Group PLC, a $5.0 billion international energy services company, including, at her departure, Vice President of Finance for the Heavy Industrial Turbines division. From 1995 to 2001, she served as Accounting Manager of FiberMark DSI, Inc. (formerly Rexam DSI, Inc.), a producer of specialty fiber-based materials in the paper and packaging industry. From 1992 to 1995 she was employed as an auditor at Deloitte & Touche LLP. Ms. McPherson is a Certified Public Accountant registered with the Commonwealth of Massachusetts. Kevin A. Maxwell has served as Senior Vice President, General Counsel, Chief Compliance Officer, and Secretary since 2021. From 2016 to 2021, he served in leadership positions within the legal department of WestRock Company, a publicly traded paper and packaging company, including as Vice President - Associate General Counsel and Assistant Secretary. From 2010 to 2016, Mr. Maxwell held a number of increasingly responsible positions with Mueller Water Products, Inc., a publicly traded water infrastructure company, including, Vice President - Assistant General Counsel and Assistant Secretary. From 2004 to 2010, he served as a corporate associate in the London and Washington, DC offices of Skadden, Arps, Slate, Meagher & Flom. Susan J. Cupero served as Vice President of Sales of our company from 2021 until her retirement in May 2025. Ms. Cupero held increasingly higher positions with our company during her 45 years of service, including Director of Independent Distributors from 2017 until 2021, and Director of Sales Administration from 2015 until 2017. Item 1A. Risk Factors: The following summarizes the material risks of purchasing or owning our common stock. Additional unknown risks may also adversely impact our business, operating results, and financial condition. Our business, operating results, and financial condition may be materially and adversely affected by the nature and impact of the risks discussed below, as well as additional unknown risks, in which case the trading price of our common stock could be adversely affected, and investors may lose part or all of the value of their investment. You should carefully consider the risks and uncertainties described below. We have grouped these risk factors into the following general categories: Risks relating to economic, political, social, legislative, regulatory, and inflationary factors. Risks relating to manufacturing, the Relocation, raw materials and component supply, product development and performance, customer demand, and brand recognition. Risks relating to legal proceedings, product recalls, and other product liabilities. Risks relating to intellectual property, information systems, and cybersecurity. Risks relating to certain business matters and securities markets. Risks Relating to Economic, Political, Social, Legislative, Regulatory, and Inflationary Factors Our performance is impacted by a variety of economic, political, social, legislative, regulatory, and inflationary factors. A variety of economic, political, social, legislative, regulatory, and inflationary factors could materially and adversely affect our business, operating results, and financial condition. Our business may be adversely impacted by general economic conditions and consumer spending patterns. Consumer spending on discretionary items and demand for our products may be adversely impacted by a number of economic factors, including economic uncertainty, high levels of unemployment, declines in consumer confidence and discretionary income, lack of consumer credit, increases in consumer debt levels, stock market declines, poor weather conditions, high energy prices, increased energy and commodity prices, higher costs for materials and services, high levels of tax, interest rates, inflationary conditions, and increased labor costs. Economic conditions also affect governmental and budgetary policies, which may adversely affect our ability to sell our products to law enforcement, government, and military customers. Our business may be adversely impacted by political, social, and related factors. Concerns about presidential, congressional, state, and local elections, and legislative and public policy shifts resulting from those elections, can adversely affect demand for our products. For example, we believe demand for our products was negatively impacted by unified Republican control of the executive and legislative branches of the federal government during the first two years of the first Trump administration and we believe demand for our products is currently being, and may continue to be, impacted by unified Republican control of the executive and legislative branches of the federal government, in each case, as a result of the reduced risks of gun control legislation and regulation. In addition, speculation surrounding increased gun control at the federal, state, and local level and heightened fears of crime and terrorism can affect consumer demand for our products. These concerns often result in an increase in near-term consumer demand for our products and subsequent softening of demand when these concerns subside. For example, we experienced historic levels of demand for our products in parts of fiscal 2022 and 2021 as a result of the impact of COVID-19 and the social unrest experienced in the United States during the summer of 2020, with demand for our products subsequently returning to more normalized levels. As a result of these significant fluctuations in demand, our operating results can vary significantly from period to period and we may build and maintain inventory levels that are significantly in excess of customer demand. Federal and state legislatures frequently consider laws to regulate firearms, including the amendment or repeal of existing laws. Existing laws may also be affected by future judicial rulings and interpretations. Changes to existing laws or the enactment of new laws may seek to restrict the makeup of firearms, including limiting magazine capacity; mandating the use of certain technologies in a firearm; removing existing legal defenses in lawsuits; or banning the sale and, in some cases, the ownership of various types of firearms and accessories. For example, certain states (i) prohibit the sale of modern sporting rifles; (ii) restrict magazine capacity; or (iii) have adopted some form of so called "gun industry accountability" laws that attempt to facilitate the filing of civil lawsuits by the respective state government or private individuals against certain firearm industry participants. Certain states have also raised the minimum age for buying firearms and begun levying excise taxes on firearm, firearm component, and ammunition sales. Interest in gun control legislation among federal and state legislatures tends to intensify following significant events, such as mass shootings. If restrictive laws or restrictive changes to existing laws are adopted, we could find it difficult, expensive, or even impossible to comply with such laws, which could impede our ability to develop new products and distribute existing products, and it may become more difficult or costly to purchase our products. In addition, gun-control activists may succeed in imposing restrictions or an outright ban on private firearm ownership or particular firearm models, which could have a material adverse effect on our business, operating results, and financial condition. In addition to these matters, which are largely beyond our control, demand for our products may also be adversely impacted by shortages of ammunition since potential purchasers of our products may choose not to purchase our products unless supplies of ammunition to use with our products are available. Since we do not manufacture ammunition, the supply of ammunition is also beyond our control. Our business is subject to extensive regulation. Firearms Compliance. Our business, as well as the business of all manufacturers and marketers of firearms and firearm parts, is subject to numerous federal, state, local, and foreign laws, regulations, and protocols, including ATF rules and regulations. If we fail to comply with ATF rules and regulations, the ATF may limit our activities or growth, fine us, or, ultimately, put us out of business. The manufacture, sale, and purchase of firearms are subject to extensive federal, state, and local governmental regulation. The primary federal laws are the National Firearms Act of 1934, or NFA, the Gun Control Act of 1968, or GCA, and the Firearms Owners' Protection Act of 1986, which have been amended from time to time. The NFA severely restricts the private ownership of fully automatic weapons and heavily regulates other firearms defined in that law and accompanying regulations, including firearm suppressors. The GCA places certain restrictions on interstate firearm sales, among other things. Most of our exported products are governed by the U.S. Department of Commerce and regulated by its Bureau of Industry and Security, or BIS, under the Export Administration Regulations. Certain of our exported products are governed by the U.S. Department of State and subject to the International Traffic in Arms Regulations. We are generally required to obtain U.S. government authorization for exports, including licensure or other similar authorization prior to engaging in international transactions. The U.S. government has discretion as to whether to grant a license. In addition, Congress may block a proposed sale of firearms that are export controlled by the Department of State valued at $1 million or more. Consequently, we may not be able to obtain export licenses or complete profitable contracts as a result of political or other reasons that are beyond our control. In May 2024, new BIS rules took effect that, among other things, led to the revocation of certain of our previously valid licenses that authorized firearm exports to non-government end users in countries deemed "high risk" by the State Department and otherwise imposed significant changes on the licensing requirements for many firearms exports. These new restrictions negatively impacted our international sales. Failure to receive required licenses or authorizations, or the termination or suspension of our export privileges, could have a material adverse effect on our business, operating results, and financial condition. In addition to federal requirements, state and local laws and regulations may place additional restrictions or prohibitions on firearm ownership and transfer. These laws and regulations vary significantly from jurisdiction to jurisdiction. Some states or other governmental entities have enacted, and others are considering, laws restricting or prohibiting the ownership, use, sale, or importation of certain categories of firearms, firearm suppressors, ammunition, and ammunition feeding devices. For example, certain states have adopted restrictions on the sale of modern sporting rifles, and other states are considering adopting similar laws. Some states mandate, or are considering mandating, certain design features based on perceived safety or other grounds. California maintains a roster of handguns that are certified for sale in the state, and other states have adopted or are considering adopting similar rosters. Certain of our products have been removed from the California roster in the past (meaning that they can no longer lawfully be sold by retailers) and may be removed in the future. Finally, our ability to sell our products in international markets is impacted by local laws, rules, and regulations in those markets. For example, Canada has banned the sale, purchase, or transfer of various firearms within Canada, subject to certain exceptions. Such laws could have a material adverse effect on our business, operating results, and financial condition. Existing industry protections may be repealed or affected by judicial rulings. For example, the Protection of Lawful Commerce in Arms Act of 2005, or the PLCAA, was enacted by Congress in 2005 to protect firearms manufacturers and dealers from liability when their legally manufactured and lawfully sold products are later used in criminal acts. The PLCAA (or state law equivalents of the PLCAA) could be repealed, amended, or affected by future judicial rulings and interpretations. If the PLCAA (or state law equivalents of the PLCAA) were repealed, amended, or reinterpreted, firearm manufacturers could face a significant increase in litigation, which could have a material adverse effect on our business, operating results, and financial condition. Environmental Compliance. We are subject to numerous federal, state, and local laws that regulate or otherwise relate to the protection of the environment, including the Clean Air Act, the Clean Water Act, CERCLA, and the Solid Waste Disposal Act, as amended by RCRA. CERCLA and RCRA and related state laws subject us to the potential obligation to remove or mitigate the environmental effects of the disposal or release of certain pollutants at our manufacturing facilities and at third-party or formerly owned or leased sites at which contaminants generated by us may be located. We have incurred and expect to continue to incur expenditures in order to comply with these requirements. Further, we may become subject to governmental proceedings and orders pertaining to waste disposal, air emissions, and water discharges. We may not have identified all existing contamination on our properties, and our operations may cause contamination in the future. As a result, we could incur additional costs to clean up contamination that exceed the amount of our reserves, and our reserves may increase from time to time. Furthermore, it is not possible to predict with certainty the impact on us of future environmental compliance requirements or the cost to satisfy future regulatory proceedings and claims. We could also be adversely affected by future laws and regulations related to climate change, including laws related to greenhouse gas emissions. These laws and regulations could lead to increased environmental compliance costs and increased energy and raw materials costs, in addition to other impacts. Employment and Occupational Health and Safety Compliance. We are subject to a number of employment and occupational health and safety laws and regulations, including the Fair Labor Standards Act and the Occupational Safety and Health Act and the rules and regulations promulgated thereunder, that could significantly increase our operating costs and reduce our operational flexibility. In 2024, we settled a matter involving the alleged non-payment of wages and overtime in violation of the Massachusetts Wage Act and Massachusetts Minimum Fair Wage Law. Corruption Compliance. The Foreign Corrupt Practices Act of 1977, or FCPA, and local anti-corruption laws, among other things, prohibit companies and their intermediaries from making improper payments to government officials for the purpose of influencing official decisions. Our efforts to comply with the FCPA, or other applicable anti-corruption laws and regulations, may cause us to limit our international business activities, or result in reducing or impeding our sales growth in numerous foreign countries. Further, our internal control policies and procedures, or those of our vendors, may not adequately protect us from reckless or criminal acts committed or alleged to have been committed by our employees, agents, or vendors. Any such violations could lead to civil or criminal monetary and non-monetary penalties and/or could damage our reputation.

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