<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 June 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 June 30, 1998, 5,086,918 of no par value common stock of the registrant
were outstanding.
Page 1 of 13 pages
<PAGE> 2
Form 10-Q
Page 2
ELLETT BROTHERS, INC. AND SUBSIDIARIES
JUNE 30, 1998
INDEX
Part I. Financial Information
Page
----
Item 1. Financial Statements
Condensed consolidated balance sheets as of
June 30, 1998 and December 31, 1997 3
Condensed consolidated statements of income for
the three months and six months ended
June 30, 1998 and 1997 4
Condensed consolidated statements of cash flows for
the six months ended June 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 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
<PAGE> 3
Form 10-Q
Page 3
ELLETT BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, Dec. 31,
1998 1997
-------- --------
(unaudited) (see note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 215 $ 395
Accounts receivable, less allowance for doubtful accounts of $729 and $769
at June 30, 1998 and December 31, 1997, respectively 19,454 19,201
Other accounts receivable 1,416 1,820
Inventories 37,346 31,535
Prepaid expenses 2,011 1,488
Deferred income tax asset 532 534
-------- --------
Total current assets 60,974 54,973
-------- --------
Property, plant and equipment, at cost, less accumulated depreciation 6,987 6,703
Other assets:
Intangible assets, at cost, less accumulated amortization 1,809 1,936
Other assets 27 2
-------- --------
Total other assets 1,836 1,938
-------- --------
$ 69,797 $ 63,614
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 7,098 $ 4,424
Accrued expenses 1,284 1,884
Current portion of long-term debt 541 525
-------- --------
Total current liabilities 8,923 6,833
-------- --------
Revolving credit facility 30,488 26,788
Long-term debt 6,118 6,399
Non-current deferred income tax liability 246 258
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, 5,087 and 5,121 shares issued and outstanding
as of June 30, 1998 and December 31, 1997, respectively) 12,285 12,402
Unearned compensation (120) (177)
Retained earnings 11,857 11,111
-------- --------
Total shareholders' equity 24,022 23,336
-------- --------
$ 69,797 $ 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 entitled
Comprehensive Income on page 7.
<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 Six Months Ended
June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $ 31,856 $ 34,671 $ 65,888 $ 71,472
Cost of goods sold 26,108 31,994 54,235 62,452
-------- -------- -------- --------
Gross profit 5,748 2,677 11,653 9,020
Selling, general and administrative expenses 4,554 5,802 9,348 10,951
-------- -------- -------- --------
Income (loss) from operations 1,194 (3,125) 2,305 (1,931)
Other income (expenses):
Interest income 132 114 255 250
Interest expense (616) (873) (1,142) (1,590)
Other income (expense) 46 (3) 42 7
-------- -------- -------- --------
Income (loss) before income taxes 756 (3,887) 1,460 (3,264)
Income tax expense (benefit) 256 (1,261) 509 (1,030)
-------- -------- -------- --------
Net income (loss) $ 500 $ (2,626) $ 951 $ (2,234)
======== ======== ======== ========
Basic and diluted earnings (loss) per common share $ 0.10 $ (0.51) $ 0.19 $ (0.43)
======== ======== ======== ========
Weighted average shares outstanding 5,119 5,163 5,120 5,166
======== ======== ======== ========
</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>
Six Months Ended
June 30,
--------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 951 $ (2,234)
Adjustments to reconcile net income to net cash used in operating activities:
Non-cash charges to income 592 (332)
Changes in assets and liabilities:
Accounts receivable 110 (2,338)
Inventories (5,811) (542)
Prepaid expenses (523) 1,049
Accounts payable, trade 2,674 489
Accrued expenses (600) (449)
-------- --------
Net cash used in operating activities (2,607) (4,357)
-------- --------
Net cash used in investing activities (670) (905)
-------- --------
Cash flows from financing activities:
Gross borrowings on revolving credit facility 70,909 76,529
Gross repayments on revolving credit facility (67,201) (70,676)
Principal payments on capital lease obligations (8) (24)
Principal payments on long-term debt (250) (225)
Exercise of stock options by certain executive officers -- 24
Subscription receivable 38 --
Common stock repurchase (187) (219)
Dividends to shareholders (204) (206)
-------- --------
Net cash provided by financing activities 3,097 5,203
-------- --------
Net increase (decrease) in cash and cash equivalents (180) (59)
Cash and cash equivalents:
Beginning of period 395 139
-------- --------
End of period $ 215 $ 80
======== ========
</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)
JUNE 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 six months ended June 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:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------- -------
<S> <C> <C>
Finished goods $36,256 $30,406
Raw materials 1,057 885
Work in process 33 244
------- -------
$37,346 $31,535
======= =======
</TABLE>
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 the
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 June 30, 1998 and December 31, 1997 were $413 and $452, respectively,
which are shown as an offset to equity. The Company reacquired 46 and 10 shares
in June and December of 1997, respectively, and recorded it using the cost
method of accounting for treasury stock.
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.
<PAGE> 7
Form 10-Q
Page 7
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 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 six month
period ended June 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 six months ended June 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 six month periods ended June 30, 1998
was $970 and a net loss of $2,234 for 1997. Information concerning the Company's
other comprehensive income for the six month periods ended June 30, 1998 and
1997 is as follows:
1998 1997
---- ----
Net unrealized gains on available for sale securities $ 31 $--
Income tax expense relating to unrealized gains
on available for sale securities (12) --
---- ----
Other comprehensive income $ 19 $--
==== ====
6. 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> 8
Form 10-Q
Page 8
7. CLOSING OF SUBSIDIARY OPERATION
In June 1997, Executive Management and the Board of Directors concluded that
ongoing operations 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. This reserve was composed of the
following components;
Inventory Reserve $ 3,548
Accounts Receivable Reserve 207
Accrued Expenses 255
Current Tax Benefit (1,285)
Total Reserve $ 2,725
The results (unaudited) for the three and six months ended June 30, 1997,
without the impacts of the Safesport subsidiary, would have been;
Three Months Six Months
------------ ----------
Sales $ 32,882 $ 67,963
Gross Margin 5,889 11,721
Operating Income 1,269 2,611
Net Income 465 1,043
Earnings Per Share $ 0.09 $ 0.20
<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 June 30, 1998 were $31.9 million, as compared
to $34.7 million for the same period in 1997, a decrease of $2.8 million, or
8.1%. Sales for the six months ended June 30, 1998 were $65.9 million, as
compared to $71.5 million for the same period in 1997, a decrease of $5.6
million, or 7.8%. Included in these amounts were sales from the subsidiaries of
$320,000 and $741,000 for the three and six months ended June 30, 1998,
respectively, and $2.7 million and $4.7 million for the three and six months
ended June 30, 1997, respectively.
The results of operations for the second quarter of 1997 were impacted by the
decision to close the Safesport Manufacturing subsidiary (see Note 6 to the
financial results). If the impact of the operations of Safesport were excluded,
sales for the three months ended June 30, 1997 would have been $32.9 million as
compared to $31.9 million in the same period of 1998, a 3.1% decrease. On the
same basis, sales for the six months ended June 30, 1997 would have been $68.0
million as compared to $65.9 million for the same period in 1998, a 3.0%
decrease.
Sales in the distribution business showed a combined modest decline of 1.4% as
compared to the second quarter of 1997. Marine accessory products, aided greatly
by unusually hot and dry weather throughout much of the country, produced record
quarterly sales numbers and had a 13.4% increase when compared to 1997. These
same weather conditions, though, had a negative impact on camping, archery and
outdoor accessories sales, which declined 1.7%. The sales of hunting and
shooting sports products continued to be impacted by soft market conditions, as
well as by the weather, and declined by 7.4% in this quarter.
Subsidiary operations, excluding Safesport from last year's numbers, declined in
sales as compared to last year's second quarter. This was primarily a result of
a large order that shipped last year in the middle of June, but this year was
shipped at the beginning of July.
Gross profit was $5.7 million (18.0% of sales) for the three months ended June
30, 1998, as compared to $2.7 million (7.7% of sales) for the same period in
1997, an increase of $3.0 million. Gross profit for the six months ended June
30, 1998 was $11.7 million (17.7% of sales), as compared to $9.0 million (12.6%
of sales) for the same period in 1997, an increase of $2.7 million. A $3.5
million inventory reserve was established in the second quarter of 1997 for the
closing of the Safesport operation. Excluding the impact of the creation of the
inventory reserve and the Safesport operation, gross profit would have been $5.9
million (17.9% of sales) and $11.7 million (17.3% of sales) for the three and
six months ended June 30, 1997, respectively. Gross margins as a percentage of
sales in our key hunting and shooting sports products area increased 89 basis
points for the quarter and 66 basis points for the six months, as compared to
the same periods in 1997. Furthermore, in the past year, we have worked to
improve manufacturing efficiencies in the two subsidiaries, with the outcome
being substantially improved gross margins as a percentage of sales as compared
to the same periods in 1997.
Selling, general and administrative ("SG&A") expenses for the three months ended
June 30, 1998 were $4.6 million (14.3% of sales), as compared to $5.8 million
(16.7% of sales) for the same period in 1997, a decrease of $1.2 million, or
21.5%. SG&A expenses for the six months ended June 30, 1998 were $9.3 million
(14.2% of sales), as compared to $11.0 million (15.3% of sales) for the same
period in 1997, a decrease of $1.7 million, or 14.6%. In the second quarter and
six months of 1997, SG&A expenses included $462,000 from the creation of the
Safesport reserve. Excluding Safesport from the expenses in 1997, the SG&A
expenses for the second quarter were $4.6 million (14.1% of sales) and for the
six months were $9.1 million (13.4% of sales).
Interest expense was $616,000 (1.9% of sales) for the three months ended June
30, 1998, as compared to $873,000 (2.5% of sales) for the same period in 1997, a
decrease of $257,000, or 29.5%. Interest expense for the six months ended June
30, 1998 was $1.1 million (1.7% of sales), as compared to $1.6 million (2.2% of
sales) for the same period in 1997, a decrease of $500,000, or 28.2%. Lower
borrowings in the first half of 1998, as compared to the same period in 1997,
along with lower interest rates, resulted in lower interest expense.
<PAGE> 10
Form 10-Q
Page 10
Income tax expense was $256,000 for the three months ended June 30, 1998, as
compared to a $1,261,000 tax benefit for the same period in 1997. Income tax
expense was $509,000 for the six months ended June 30, 1998, as compared to a
$1,030,000 tax benefit for the same period in 1997. Of the tax benefit,
$1,285,000 was derived from the creation of the Safesport reserve. The effective
tax rate for the three months ended June 30, 1998 was 33.9%, as compared to a
tax benefit for the same period in 1997. The effective tax rate for the six
months ended June 30, 1998 was 34.9%, as compared to a tax benefit for the same
period in 1997. The 1998 rate is impacted by the state tax credits from the
subsidiary losses.
The net income for the three months ended June 30, 1998 was $500,000 (1.6% of
sales), as compared to a net loss of $2.6 million (-7.6% of sales), of which
$2.7 million (-7.9% of sales) resulted from the creation of the Safesport
reserve for the same period in 1997. Net income for the six months ended June
30, 1998 was $951,000 (1.4% of sales), as compared to a net loss of $2.2 million
(-3.1% of sales) for the same period in 1997. If the total impact of the
operations of Safesport were excluded, net income for the three months ended
June 30, 1997 would have been $465,000 (1.4% of sales). On the same basis, net
income for the six months ended June 30, 1997 would have been $1.0 million (1.5%
of sales).
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 remaining
subsidiaries are very seasonal, producing significantly higher sales and gross
profit during the third and fourth quarters, with losses 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.
Net cash used in operating activities was $2.6 million for the six months ended
June 30, 1998, as compared to net cash used in operating activities of $4.4
million in 1997. The net cash used in 1998 was due primarily to an increase in
inventory, which normally takes place in the first six months, partially offset
by an increase in accounts payable.
Net cash used in investing activities was $670,000 for the six months ended June
30, 1998, as compared to $905,000 for the same period in 1997. The net cash used
in 1998 was primarily for computer equipment and information systems upgrades.
These system upgrades will be year 2000 compliant.
Net cash provided by financing activities was $3.1 million for the six months
ended June 30, 1998, as compared to $5.2 million for the same period in 1997.
During the six months ended June 30, 1998, the Company's net borrowings were
$3.7 million, as compared to $5.9 million during the same period in 1997.
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
<PAGE> 11
Form 10-Q
Page 11
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
generally increase during the first half of the year to accommodate the sales
expected in the third and fourth quarters. Accounts receivable generally 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 $267,000, 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 $298,000 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, and debt
service requirements for the remainder of 1998 and the foreseeable future.
YEAR 2000 ISSUE
During the period ended June 30, 1998, the Company continued the efforts to
upgrade its computer equipment and information systems. The total cost of the
computer upgrades, including 1996, 1997, and 1998 expenditures, is expected to
be approximately $3.0 million, of which approximately $1.1 million is planned
for 1998. These system upgrades will be year 2000 compliant. The Company is in
dialogue with all its vendors as to their preparedness for year 2000. Where
appropriate, the Company is requesting documentation and certification of the
vendors' preparedness.
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
None.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
three months ended June 30, 1998.
<PAGE> 13
Form 10-Q
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: August 14, 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 SIX MONTHS ENDED JUNE 30,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 215
<SECURITIES> 0
<RECEIVABLES> 20,183
<ALLOWANCES> 729
<INVENTORY> 37,346
<CURRENT-ASSETS> 60,974
<PP&E> 14,042
<DEPRECIATION> 7,055
<TOTAL-ASSETS> 69,797
<CURRENT-LIABILITIES> 8,923
<BONDS> 6,118
0
0
<COMMON> 12,285
<OTHER-SE> 11,737
<TOTAL-LIABILITY-AND-EQUITY> 69,797
<SALES> 65,888
<TOTAL-REVENUES> 65,888
<CGS> 54,235
<TOTAL-COSTS> 54,235
<OTHER-EXPENSES> 9,348
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,142
<INCOME-PRETAX> 1,460
<INCOME-TAX> 509
<INCOME-CONTINUING> 951
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 951
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
