<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number: 0-21632
ELLETT BROTHERS, INC.
(Exact name of Registrant as specified in its charter)
South Carolina 57-0957069
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
267 Columbia Avenue, Chapin, South Carolina 29036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (803) 345-3751
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 periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of September 30, 1998, 4,945,018 shares of no par value common stock of the
registrant were outstanding.
Page 1 of 14 pages
<PAGE> 2
Form 10-Q
Page 2
ELLETT BROTHERS, INC. AND SUBSIDIARIES
SEPTEMBER 30, 1998
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets as of September
30, 1998 and December 31, 1997 3
Condensed consolidated statements of income for the
three months and nine months ended September 30, 1998
and 1997 4
Condensed consolidated statements of cash flows for
the nine months ended September 30, 1998 and 1997 5
Notes to condensed consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Page
----
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE> 3
Form 10-Q
Page 3
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
ELLETT BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, Dec. 31,
1998 1997
-------- --------
ASSETS (unaudited) (see note)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 114 $ 395
Accounts receivable, less allowance for doubtful accounts of $831 and $769
at September 30, 1998 and December 31, 1997, respectively 24,411 19,201
Other accounts receivable 980 1,820
Inventories 36,129 31,535
Prepaid expenses 1,872 1,488
Deferred income tax asset 538 534
-------- --------
Total current assets 64,044 54,973
-------- --------
Property, plant and equipment, at cost, less accumulated depreciation 7,222 6,703
Other assets:
Intangible assets, at cost, less accumulated amortization 1,745 1,936
Other assets 2 2
Total other assets 1,747 1,938
-------- --------
$ 73,013 $ 63,614
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 9,237 $ 4,424
Accrued expenses 1,498 1,884
Current portion of long-term debt 554 525
-------- --------
Total current liabilities 11,289 6,833
-------- --------
Revolving credit facility 31,265 26,788
Long-term debt 5,947 6,399
Non-current deferred income tax liability 211 258
Shareholders' equity:
Preferred stock, no par value
(5,000 shares authorized, no shares issued or outstanding)
Common stock, no par value
(20,000 shares authorized, 4,945 and 5,121 shares issued and outstanding
as of September 30, 1998 and December 31, 1997, respectively) 12,119 12,833
Unearned compensation (92) (177)
Unrealized gain on IRB reserve 57 21
Subscription receivable (418) (452)
Retained earnings 12,635 11,111
-------- --------
Total shareholders' equity 24,301 23,336
-------- --------
$ 73,013 $ 63,614
======== ========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
Note: The balance sheet at December 31, 1997 has been derived from the
audited financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. See Note 5 on page 7
entitled Comprehensive Income.
<PAGE> 4
Form 10-Q
Page 4
ELLETT BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 39,625 $ 41,326 $ 105,513 $ 112,798
Cost of goods sold 32,398 34,484 86,633 96,936
--------- --------- --------- ---------
Gross profit 7,227 6,842 18,880 15,862
Selling, general and administrative expenses 5,206 5,421 14,554 16,372
--------- --------- --------- ---------
Income (loss) from operations 2,021 1,421 4,326 (510)
Other income (expenses):
Interest income 111 115 366 365
Interest expense (724) (945) (1,866) (2,535)
Other income (expense) (6) (13) 36 (6)
--------- --------- --------- ---------
Income (loss) before income taxes 1,402 578 2,862 (2,686)
Income tax expense (benefit) 518 113 1,027 (917)
--------- --------- --------- ---------
Net income (loss) $ 884 $ 465 $ 1,835 $ (1,769)
========= ========= ========= =========
Basic and diluted earnings (loss) per common share $ 0.17 $ 0.09 $ 0.36 $ (0.34)
========= ========= ========= =========
Weighted average shares outstanding 5,062 5,131 5,100 5,154
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE> 5
Form 10-Q
Page 5
ELLETT BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,835 $ (1,769)
Adjustments to reconcile net income to net cash used in operating activities:
Non-cash charges to income (loss) 833 1,028
Changes in assets and liabilities:
Accounts receivable (4,433) (9,279)
Inventories (4,594) 4,985
Prepaid expenses (384) 2,209
Accounts payable, trade 4,813 591
Accrued expenses (386) (186)
--------- ---------
Net cash used in operating activities (2,316) (2,421)
--------- ---------
Net cash used in investing activities (1,064) (905)
--------- ---------
Cash flows from financing activities:
Gross borrowings on revolving credit facility 107,038 110,329
Gross repayments on revolving credit facility (102,561) (106,055)
Principal payments on capital lease obligations (8) (39)
Principal payments on long-term debt (379) (342)
Exercise of stock options by certain executive officers 0 24
Subscription receivable 34 0
Common stock repurchase (714) (219)
Dividends to shareholders (311) (309)
--------- ---------
Net cash provided by financing activities 3,099 3,389
--------- ---------
Net (decrease) increase in cash and cash equivalents (281) 63
Cash and cash equivalents:
Beginning of period 395 139
--------- ---------
End of period $ 114 $ 202
========= =========
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
<PAGE> 6
Form 10-Q
Page 6
ELLETT BROTHERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1998
(in thousands, except per share data)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements, which
include the accounts of Ellett Brothers, Inc. and subsidiaries (the "Company"),
have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended September
30, 1998 are not necessarily indicative of the results that may be expected for
the full year ending December 31, 1998. For further information, refer to the
financial statements and footnotes thereto included in Ellett Brothers, Inc.'s
annual report on Form 10-K for the year ended December 31, 1997.
2. INVENTORIES
Inventories consisted of the following:
September 30, December 31,
1998 1997
------- -------
Finished goods $35,202 $30,406
Raw materials 737 885
Work in process 190 244
------- -------
$36,129 $31,535
======= =======
3. COMMON AND PREFERRED STOCK
In January 1997, the Company issued 112 shares of common stock to two executives
of the Company for $475. The market value of these shares on the measurement
date was $559. The shares carry restrictions over their transferability which
will be lifted over a two year period ending in January 1999. The difference
between the market value and the price at which the shares were sold to the
executives is reflected as unearned compensation and is being amortized over a
two year period. In connection with the issuance of these shares, the Company
received promissory notes totaling $452 and $23 in cash from the executives.
Balances due under the promissory notes, which bear interest at 5.6%, payable
semi-annually, become due on a pro-rata basis as the shares are sold by the
executives.
In June of 1998, the Company reacquired 34 shares from one of the former
officers and recorded it using the cost method of accounting for treasury stock.
The proceeds of this was used to reduce the promissory note. The balances on the
notes at September 30, 1998 and December 31, 1997 were $418 and $452,
respectively, which are shown as an offset to equity. The Company reacquired 142
shares in September of 1998, and 46 and 10 shares in June and December of 1997,
respectively, and recorded it using the cost method of accounting for treasury
stock. In addition, the Company reacquired 449 shares in October of 1998.
Additionally, the Board of Directors of the Company is authorized to issue, at
its discretion, up to 5,000 shares of preferred stock in one or more series with
the number of shares, designation, relative rights and preferences, and
limitations to be determined by resolution of the Board of Directors. However,
no share of stock of any class shall be subject to preemptive rights or have
cumulative voting provisions.
4. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No.
128 is designed to improve the earnings per share information provided in
financial statements by simplifying the prior computational guidelines, revising
the disclosure requirements, and increasing comparability of earnings per share
data on an international basis. This pronouncement, which became
<PAGE> 7
Form 10-Q
Page 7
effective for periods ended after December 15, 1997, required the restatement of
earnings per share data for all periods presented in the form of basic earnings
per share and diluted earnings per share. The Company had no options outstanding
or other dilutive securities during the year ended December 31, 1997 or the nine
month period ended September 30, 1998. The earnings per share calculations
reported by the Company equal basic and diluted earnings per share calculated
under the provisions of SFAS No. 128. Basic and diluted earnings per share for
the quarters and nine months ended September 30, 1998 and 1997, and the year
ended December 31, 1997 is earnings divided by the weighted average shares
outstanding.
5. COMPREHENSIVE INCOME
On January 1, 1998 the Company adopted Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income." As required by the SFAS No.
130, prior year information has been modified to conform with the new
presentation.
Comprehensive income includes net income and all other changes to the Company's
equity, with the exception of transactions with shareholders ("other
comprehensive income"). The Company's only components of other comprehensive
income relate to unrealized gains and losses on available for sale securities.
The Company's comprehensive income for the nine month periods ended September
30, 1998 was $1,858 and a net loss of $1,769 for 1997. Information concerning
the Company's other comprehensive income for the nine month periods ended
September 30, 1998 and 1997 is as follows:
1998 1997
---- ----
Net unrealized gains on available for sale securities $ 36 $--
Income tax expense relating to unrealized gains
on available for sale securities (13) --
---- ----
Other comprehensive income $ 23 $--
==== ====
6. Closing of Subsidiary Operation
In June 1997, Executive Management and the Board of Directors concluded that
ongoing operation of the Safesport Manufacturing Company subsidiary was not in
the best interest of the Company, and began liquidation of this subsidiary. An
after tax reserve of $2,725, or $0.53 per share, was established as of June 30,
1997 for the purpose of this liquidation. The reserve was reviewed as of
September 30, 1997 and adjusted to reflect the liquidation efforts through that
point. The reserves were adjusted to the values noted below, resulting in $208
of net income in the three months ended September 30, 1997. The reserve was
composed of the following components as of June 30, 1997 and as of September 30,
1997.
June 30, 1997 September 30, 1997
------------- ------------------
Inventory Reserve $ 3,548 $ 1,246
Accounts Receivable Reserve 207 580
Accrued Expenses 255 10
Current Tax Benefit (1,285) (688)
------- -------
Total Reserve $ 2,725 $ 1,148
======= =======
The results (unaudited) for the three and nine months ended September 30, 1997,
without the impact of the Safesport subsidiary, would have been:
Three Months Nine Months
------------ -----------
Sales $ 36,946 $104,909
Gross Margin 6,341 18,062
Operating Income 1,275 3,886
Net Income 457 1,502
Earnings Per Share $ 0.09 $ 0.29
<PAGE> 8
Form 10-Q
Page 8
7. New Accounting Pronouncement
During 1997, the Financial Accounting Standards Board issued the new Statement
of Financial Accounting Standards (SFAS), No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 establishes guidelines
in reporting information about operating segments in annual financial statements
and requires selected information about operating segments. It also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. This standard will be effective for the Company's 1998
fiscal year. This pronouncement is not expected to have a material impact on the
Company's financial statements.
<PAGE> 9
Form 10-Q
Page 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis provide information that management
believes is relevant to an assessment and understanding of the operations and
financial condition of Ellett Brothers, Inc. and its subsidiaries (the
"Company"). This discussion and analysis should be read in conjunction with the
financial statements and related notes presented in the Company's annual report
on Form 10-K for the year ended December 31, 1997, and the condensed
consolidated financial statements and related notes included in this Form 10-Q.
Sales for the three months ended September 30, 1998 were $39.6 million. This
compares to $36.9 million last year, excluding the sales from Safesport
Manufacturing Company which was liquidated in 1997, for an increase of 7.3%. For
the nine months ended September 30, 1998, sales were $105.5 million, as compared
to $104.9 million for the same period in 1997, excluding Safesport from the 1997
results, for an increase of 0.6%. Sales reported for the three and nine months
ended September 30, 1997 were $41.3 million and $112.8 million, respectively,
which included amounts from Safesport.
Total sales in the distribution business increased 8.6% in the three months
ended September 30, 1998, as compared to the same period in 1997. Marine
accessory products continued to achieve record sales and had a 17.7% increase,
as compared to 1997. Our camping, archery and outdoor accessories sales
experienced a 15.9% increase over 1997. Our hunting and shooting sports sales
had a 2.8% increase compared to 1997.
Sales from the subsidiaries, excluding Safesport from prior years numbers,
decreased 7.1% for the three months ended September 30, 1998, as compared to
last year. While we benefited from a shipment we had expected to occur in the
second quarter falling in the third quarter, sales were negatively impacted by
the delay of an expected order which we believe will be in the fourth quarter.
Gross profit was $7.2 million (18.2% of sales) for the three months ended
September 30, 1998. This compares to $6.3 million (17.2% of sales), excluding
Safesport, for the same period in 1997, an increase of $900,000. Gross profit
for the nine months ended September 30, 1998 was $18.9 million (17.9% of sales),
as compared to $18.1 million (17.2% of sales), excluding Safesport, for the same
period in 1997, an increase of $800,000. Gross profits reported for the three
and nine months ended September 30, 1997 were $6.8 million (16.6% of sales) and
$15.9 million (14.1% of sales), respectively, which included amounts from
Safesport. Gross margins in our distribution business for the three months ended
September 30, 1998 were up 114 basis points over the same period in 1997. For
the nine months ended September 30, 1998, they were up 53 basis points, as
compared to the same period in 1997. Our subsidiaries, excluding Safesport for
the three months and nine months ended September 30, 1998 and 1997, had a gross
margin increase of 301 basis points and 733 basis points, respectively, as
compared to the same periods in 1997. We have continued to work to improve
manufacturing efficiencies in the subsidiaries, which have resulted in improved
margins.
Selling, general and administrative (SG&A) expenses for the three months ended
September 30, 1998 were $5.2 million (13.1% of sales), as compared to $5.1
million (13.7% of sales), excluding Safesport, for the same period in 1997, an
increase of $100,000 or 2.0%. Selling, general and administrative expenses for
the nine months ended September 30, 1998 were $14.6 million (13.8% of sales), as
compared to $14.2 million (13.5% of sales), excluding Safesport, for the same
period in 1997, an increase of $400,000, or 2.8%. SG&A expenses reported for the
three and nine months ended September 30, 1997 were $5.4 million (13.1% of
sales) and $16.4 million (14.5% of sales), respectively, which included amounts
from Safesport.
Interest expense was $724,000 (1.8% of sales) for the three months ended
September 30, 1998, as compared to $945,000 (2.3% of sales) for the same period
in 1997, a decrease of $221,000, or 23.4%. Interest expense for the nine months
ended September 30, 1998 was $1.9 million (1.8% of sales), as compared to $2.5
million (2.3% of sales) for the same period in 1997, a decrease of $669,000, or
26.4%. Reduced borrowings, along with lower interest rates, resulted in lower
interest expense.
Income tax expense for the three months ended September 30, 1998 was $518,000,
as compared to $113,000 for the same period in 1997. Income tax expense was
$1,027,000 for the nine months ended September 30, 1998, as compared to a tax
benefit of $917,000 for the same period in 1997. The effective tax rates for the
three months and nine months ended September 30, 1998 were 36.9% and 35.9%,
respectively.
Net income for the third quarter was $884,000, or $0.17 per share, as compared
to $458,000, or $0.09 per share, for the same period in 1997, excluding the
impact of Safesport from the 1997 amounts. Net income and earnings per share
reported for the third quarter of 1997, including Safesport's results, were
$465,000 and $0.09 per share, respectively.
<PAGE> 10
Form 10-Q
Page 10
Excluding the impact of Safesport from the 1997 amounts, for the nine months
ended September 30, 1998, net income was $1,835,000, or $0.36 per share, as
compared to net income of $1,502,000, or $0.29 per share, for the same period in
1997, an increase of 22.2%. The net loss and loss per share reported for the
nine months ended September 30, 1997, including Safesport's impact, were
$1,769,000 and $0.34 per share, respectively.
SEASONALITY AND QUARTERLY INFORMATION
Historically, the Company's business has been seasonal. The sales of hunting and
shooting sports products, as well as camping, archery and outdoor accessories,
usually increase in the third quarter of each year, and peak early in the fourth
quarter. Sales of marine accessories usually increase in the first quarter of
each year, then peak midway through the second quarter and continue at similar
levels through the first half of the third quarter. Operations of the
subsidiaries are very seasonal, producing significantly higher sales and gross
profit during the third and fourth quarters, with losses generated in the first
and second quarters. The Company's quarterly operating results may also be
affected by a wide variety of factors, such as legislative and regulatory
changes, competitive pressures, and general economic conditions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are results of operations and
borrowings under its revolving credit facility. Pursuant to its operating
strategy, the Company maintains very minimal cash balances and is substantially
dependent on, among other things, the availability of adequate working capital
financing to support inventories and accounts receivable.
During the nine months ended September 30, 1998, net cash used in operating
activities was $2.3 million as compared to $2.4 million for the same period in
1997. The net cash used in operating activities in 1998 above the cash generated
from operations and higher payables was used for inventories and higher
receivables at the end of the quarter. The net cash used in investing activities
in 1998 of $1.0 million was primarily due to the purchase of computer software.
During the nine months ended September 30, 1998, the Company obtained the
additional cash needed to fund operations by increasing borrowings under its
revolving credit facility by $4.5 million. The Company also paid dividends of
$310,000 in the nine months ended September 30, 1998.
Working capital requirements for the Company's traditional distribution business
have historically been somewhat seasonal in nature. Accounts receivable have
generally increased in the first quarter primarily because of the customary
industry practice during the first quarter of each year whereby the Company has
offered to its customers extended payment terms for purchases of certain
products, thereby extending the payment due dates for a portion of its sales
into the third and fourth quarters of the year. Accounts receivable have
generally increased further early in the third quarter as additional 60 to 90
day extended terms have been offered to stimulate sales in advance of the
Company's highest volume quarters. Accounts receivable usually decrease in the
fourth quarter as payments are received on prior quarters' sales and a larger
percentage of current sales are made with shorter payment terms. Inventory
generally builds during the first two quarters and peaks in the third quarter to
support the higher sales volumes of the third and fourth quarters. In the fourth
quarter, the higher sales volumes have traditionally served to reduce inventory
to its lowest point at year-end.
Working capital requirements are also seasonal for the subsidiaries. Inventories
increase during the first half of the year to accommodate the sales expected in
the third and fourth quarters. Accounts receivable decline to their lowest point
in the second quarter just before the sales increase in the second half of the
year.
Principal maturities on the Company's industrial revenue refunding bonds began
in 1995. Remaining payments for 1998 will be $137,500, and maturities for 1999
and 2000 will be $567,000 and $617,000, respectively. The annual interest
charges on the Company's industrial revenue bonds, at a fixed rate of 7.5%, will
be $145,000 for the remainder of 1998, and $568,000 and $525,000 for 1999 and
2000, respectively.
Management believes that cash generated from operations and available under the
Company's revolving credit facility, will be sufficient to finance its
operations, expected working capital needs, capital expenditures, debt service
requirements, and business acquisitions for the remainder of 1998 and the
foreseeable future.
YEAR 2000 ISSUE
During the period ended September 30, 1998, the Company continued the efforts to
upgrade its computer equipment and information systems. These upgrades are
expected to be operational in the first half of 1999. The total cost of the
computer upgrades, including 1996, 1997, and 1998 expenditures, is expected to
be approximately $3.8 million, of which approximately $1.1 million is planned
for 1998. The Company has received documentation from the vendor
<PAGE> 11
Form 10-Q
Page 11
stating that these systems are Year-2000 compliant. The Company has a Year-2000
plan in place which involves an audit and test of all internal systems for
compliance as well as a survey of all suppliers for compliance. Non-compliant
internal systems will be upgraded, replaced, or taken out of service. Suppliers
will be assessed as to their compliance, with the idea of putting contingency
plans in place to deal with any non-compliant suppliers.
With respect to the audit and testing of the internal systems for compliance, as
well as the suppliers' compliance, the Company has spent approximately $2,300 on
the Year-2000 project through the nine months ended September 30, 1998.
Estimated costs for the remainder of 1998 are $15,000. For 1999, the Company is
estimating the costs associated with the Year-2000 project to be $25,000. A
further assessment of the costs will be made after all the information is
received from the suppliers and the testing of the internal systems is complete.
Advisory Note Regarding Forward-Looking Statements
Certain of the statements contained in Item 2 (Management's Discussion and
Analysis of Financial Condition and Results of Operations) that are not
historical facts are forward-looking statements subject to the safe harbor
created by the Private Securities Litigation Reform Act of 1995. The Company
cautions readers of this report on Form 10-Q that such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from those expressed or implied by such
forward-looking statements. Although the Company's management believes that
their expectations of future performance are based on reasonable assumptions
within the bounds of their knowledge of their business and operations, there can
be no assurance that actual results will not differ materially from their
expectations. Factors which could cause actual results to differ from
expectations include, among other things, reductions in, or lack of growth of,
firearm sales; potential negative effects of existing and future gun control
legislation on consumer demand for firearms; the potential negative impact on
gross margins from shifts in the Company's product mix toward lower margin
products; seasonal fluctuations in the Company's business; competition from
national, regional and local distributors and various manufacturers who sell
products directly to the Company's customer base; competition from sporting
goods mass merchandisers or "superstores" which sell in competition with the
Company's primary customer base; exposure to product liability lawsuits; the
challenges and uncertainties in the implementation of the Company's expansion
and development strategies; the Company's dependence on key personnel; and other
factors described in this report and in other reports filed by the Company with
the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Pursuant to Securities and Exchange Commission Release 33-7386 (January 31,
1997), the disclosure requirement contemplated by Item 305 of Regulation S-K in
response to this Item 3 is not currently mandated for the Company.
<PAGE> 12
Form 10-Q
Page 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
three months ended September 30, 1998.
<PAGE> 13
Page 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-Q to be signed on its behalf by the
undersigned thereunto duly authorized.
Ellett Brothers, Inc.
Date: November 13, 1998
By: /s/ Joseph F. Murray, Jr.
-----------------------------------------------
Joseph F. Murray, Jr.
President, Chief Executive Officer and Director
By: /s/ George E. Loney
-----------------------------------------------
George E. Loney
Chief Financial Officer
(principal financial and accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ELLETT BROTHERS, INC. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 114
<SECURITIES> 0
<RECEIVABLES> 26,222
<ALLOWANCES> 831
<INVENTORY> 36,129
<CURRENT-ASSETS> 64,044
<PP&E> 14,459
<DEPRECIATION> 7,237
<TOTAL-ASSETS> 73,013
<CURRENT-LIABILITIES> 11,289
<BONDS> 5,947
0
0
<COMMON> 11,701
<OTHER-SE> 12,600
<TOTAL-LIABILITY-AND-EQUITY> 73,013
<SALES> 105,513
<TOTAL-REVENUES> 105,513
<CGS> 86,633
<TOTAL-COSTS> 86,633
<OTHER-EXPENSES> 14,554
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<INCOME-TAX> 1,027
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<NET-INCOME> 1,835
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
