<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 March 31, 1999
--------------
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 April 30, 1999, 4,316,518 shares of no par value common stock of the
registrant were outstanding.
Page 1 of 14
<PAGE> 2
ELLETT BROTHERS, INC. AND SUBSIDIARIES
MARCH 31, 1999
INDEX
Part I. Financial Information
Page
Item 1. Financial Statements
Condensed consolidated balance sheets as of
March 31, 1999 and December 31, 1998 3
Condensed consolidated statements of income
for the three months ended
March 31, 1999 and 1998 4
Condensed consolidated statements of cash flows
for the three months ended
March 31, 1999 and 1998 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
Part II. Other Information
Page
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE> 3
Form 10-Q
Page 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ELLETT BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, Dec. 31,
1999 1998
----------- ----------
<S> <C> <C>
ASSETS (unaudited) (see note)
Current assets:
Cash and cash equivalents $ 232 $ 183
Accounts receivable, less allowance for doubtful accounts of $680 and $605
at March 31, 1999 and December 31, 1998, respectively 22,320 20,066
Other accounts receivable 61 1,716
Inventories 36,928 32,140
Prepaid expenses 1,142 948
Deferred income tax asset 477 440
-------- --------
Total current assets 61,160 55,493
-------- --------
Property, plant and equipment, at cost, less accumulated depreciation 7,902 7,567
Other assets:
Intangible assets, at cost, less accumulated amortization 1,624 1,682
Other assets 27 27
-------- --------
Total other assets 1,651 1,709
-------- --------
$ 70,713 $ 64,769
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 14,834 $ 7,149
Accrued expenses 1,163 1,239
Current portion of long-term debt 567 567
-------- --------
Total current liabilities 16,564 8,955
Revolving credit facility 24,719 26,461
Long-term debt 5,699 5,836
Deferred income tax liability 275 585
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, 4,317 and 4,297 shares issued and outstanding
as of March 31, 1999 and December 31, 1998, respectively) 9,652 9,559
Common stock subscribed -- 93
Unearned compensation (45) (55)
Subscription receivable (423) (423)
Retained earnings 14,230 13,716
Accumulated other comprehensive income 42 42
-------- --------
Total shareholders' equity 23,456 22,932
-------- --------
$ 70,713 $ 64,769
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
Note: The balance sheet at December 31, 1998 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
March 31,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Sales $ 38,946 $ 34,032
Cost of goods sold 32,198 28,126
-------- --------
Gross profit 6,748 5,906
Selling, general and administrative expenses 5,292 4,795
-------- --------
Income from operations 1,456 1,111
Other income (expenses):
Interest income 131 123
Interest expense (517) (526)
Other income 1 (3)
-------- --------
Income before income taxes 1,071 705
Income tax expense 392 254
-------- --------
Net income $ 679 $ 451
======== ========
Basic and diluted earnings per common share $ 0.16 $ 0.09
======== ========
Weighted average shares outstanding 4,301 5,121
======== ========
</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>
Three Months Ended
March 31,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 679 $ 451
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash charges to income 234 296
Changes in assets and liabilities:
Accounts receivable (895) 740
Inventories (4,788) (3,490)
Prepaid expenses (194) (982)
Accounts payable, trade 7,685 8,060
Accrued expenses (76) (237)
-------- --------
Net cash provided by operating activities 2,645 4,838
-------- --------
Net cash used in investing activities (553) (245)
-------- --------
Cash flows from financing activities:
Gross borrowings on revolving credit facility 35,570 30,190
Gross repayments on revolving credit facility (37,311) (34,805)
Principal payments on capital lease obligations -- (8)
Principal payments on long-term debt (138) (123)
Dividends to shareholders (164) (103)
-------- --------
Net cash used in financing activities (2,043) (4,849)
-------- --------
Net increase (decrease) in cash and cash equivalents 49 (256)
Cash and cash equivalents :
Beginning of period 183 395
-------- --------
End of period $ 232 $ 139
======== ========
</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)
MARCH 31, 1999
(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 months ended March 31, 1999 are
not necessarily indicative of the results that may be expected for the full year
ending December 31, 1999. 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, 1998.
2. INVENTORIES
Inventories consisted of the following:
March 31, December 31,
1999 1998
----------- ------------
Finished goods $ 35,671 $ 31,112
Raw materials 980 881
Work in process 277 147
----------- ---------
$ 36,928 $ 32,140
=========== =========
3. COMMON AND PREFERRED STOCK
In January 1997, the Company issued 112 shares of common stock for total
consideration of $475 ($452 in promissory notes and $23 of cash) to two
executives of the Company in exchange for the cancellation of 112 fully vested
and outstanding options of the officers with an exercise price of $7.00 per
share. The promissory notes bear interest at 5.6%, payable semi-annually, and
become due on a pro-rata basis as the shares are sold by the executives. The
shares carry restrictions over their transferability which have been lifted over
a two-year period ended January 1999. The market value of the common stock at
the date of the transaction was $559. 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 June
of 1998, the Company reacquired 34 shares from one of the former executives and
recorded it using the cost method of accounting.
During 1998, the Company awarded 20 shares to an executive officer when the
market value of these shares was $93. Compensation expense was recognized at the
time of the award and shareholders' equity reflects the stock subscribed. During
1996, the Company awarded 58 shares of restricted common stock to two executives
of the Company. The restrictions are scheduled to be released pro-rata over a
three to four year period, based on certain criteria. The stock awards were
valued at the market price per share at the time of each award, and unearned
compensation was recorded in equity. Compensation expense is recognized as the
awards vest over the three to four year period.
<PAGE> 7
Form 10-Q
Page 7
The Company reacquired 46 and 10 shares of its common stock in June and December
of 1997, respectively; and reacquired 142, 448, and 200 shares of its common
stock in September, October, and December of 1998, respectively. The Company
recorded these acquisitions using the cost method of accounting.
The Company is authorized to issue 20,000 shares of no-par-value common 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.
4. EARNINGS PER COMMON 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 ending after December 15, 1997, requires the restatement of earnings per
share data for all periods presented in the form of basic earnings per share and
diluted earnings per share. Although the Company had options outstanding during
portions of the three years ended December 31, 1998, they have an antidilutive
effect on earnings per share for each year. As such, the earnings per share
calculations previously 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 quarter ended March 31, 1999 and for the year ended
December 31, 1998 is earnings divided by the weighted average shares
outstanding.
5. COMPREHENSIVE INCOME
On January 1, 1998 the Company adopted SFAS 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 total comprehensive income for the three month periods ended March
31, 1999 and 1998 was $679 and $464, respectively. Information concerning the
Company's other comprehensive income for the three month periods ended March 31,
1999 and 1998 is as follows:
1999 1998
---- ----
Net unrealized gains on available for sale securities $ - $ 21
Income tax expense relating to unrealized gains
on available for sale securities - (8)
------- -------
Other comprehensive income $ - $ 13
======= ======
6. BUSINESS SEGMENT INFORMATION
In June 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS No. 131") was issued effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 requires the Company to report
information about its operating segments. In 1998, Ellett Brothers adopted SFAS
No. 131. The adoption of SFAS No. 131 did not affect results of operations or
financial position.
The Company's reportable segments are business units that offer different
products and have separate management teams and infrastructures. The business
units have been aggregated into two reportable segments. These segments are:
Hunting, Shooting, Camping, Archery & Outdoor Products ("HS&A") and Marine
Products. The "Other" segment includes the Company's subsidiaries.
<PAGE> 8
Form 10-Q
Page 8
The accounting policies of the segments are the same as those described in the
Company's annual report on Form 10-K for the year ended December 31, 1998. The
Company evaluates performance based upon operating income of the business units.
The following table presents information about reported segments for the
quarters ended March 31, 1999 and 1998 (in millions):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
1999 HS&A Marine Other Total
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 32.0 $ 6.5 $ .4 $ 38.9
Operating income (loss) 1.3 .4 (.2) 1.5
Identifiable segment assets 46.6 10.7 2.0 59.3
Capital expenditures .5 .0 .0 .5
Depreciation .2 .0 .0 .2
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
1998 HS&A Marine Other Total
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 28.1 $ 5.5 $ .4 $ 34.0
Operating income (loss) 1.0 .3 (.2) 1.1
Identifiable segment assets 42.8 9.3 2.0 54.1
Capital expenditures .2 .0 .0 .2
Depreciation .1 .0 .0 .1
- ---------------------------------------------------------------------------------------
</TABLE>
A reconciliation of total segment operating income to total consolidated income
before taxes for the quarter ended March 31 (in millions) is as follows:
- ------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------
Operating income $ 1.5 $ 1.1
Interest income and other income, net .1 .1
Interest expense (.5) (.5)
- ------------------------------------------------------------------------------
Income before taxes $ 1.1 $ .7
- ------------------------------------------------------------------------------
A reconciliation of identifiable segment assets to total assets for the quarter
ended March 31 (in millions) is as follows:
- ------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------
Identifiable segment assets $ 59.3 $ 54.1
Other corporate assets 11.4 10.7
- ------------------------------------------------------------------------------
Total assets $ 70.7 $ 64.8
- ------------------------------------------------------------------------------
<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 provides 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, 1998, and the consolidated
financial statements and related notes included in this Form 10-Q.
Sales for the three months ended March 31, 1999 were $38.9 million, as compared
to $34.0 million for the same period in 1998, an increase of $4.9 million, or
14.4%. Included in these amounts were sales from the subsidiaries of $414,000
and $421,000 for the three months ended March 31, 1999 and 1998, respectively.
During the first quarter of 1999, sales for the distribution business increased
$4.9 million, or 14.6%. Sales in the hunting and shooting sports product group
had an increase of $2.7 million, or 12.9%. Marine accessories showed continued
growth with an increase of $1.1 million, or 20.5%, while camping, archery and
outdoor accessories sales increased by $1.1 million, or 15.4%.
Gross profit was $6.7 million (17.3% of sales) for the three months ended March
31, 1999, as compared to $5.9 million (17.3% of sales) for the same period in
1998, an increase of $842,000, or 14.2%. In the distribution business, gross
margin as a percentage of sales was essentially flat. Gross margin as a
percentage of sales for the hunting and shooting sports products increased 5
basis points, while marine accessories increased 7 basis points and camping,
archery and outdoor accessories decreased 60 basis points.
Selling and general and administrative expenses for the three months ended March
31, 1999 were $5.3 million (13.6% of sales), as compared to $4.8 million (14.1%
of sales) for the same period in 1998, an increase of $497,000, or 10.4%. The
increase in the first quarter of 1999 over 1998 was primarily in the variable
expenses as a result of the increase in sales in 1999 over 1998.
Interest expense was $517,000 (1.3% of sales) for the three months ended March
31, 1999, as compared to $526,000 (1.5% of sales) for the same period in 1998, a
decrease of $9,000, or 1.7%.
Income tax expense was $392,000 for the three months ended March 31, 1999, as
compared to $254,000 for the same period in 1998, an increase of $138,000, or
54.3%. The effective tax rate for the three months ended March 31, 1999 was
36.6%, as compared to 36.0% for the same period in 1998.
Net income for the three months ended March 31, 1999 was $679,000 ($0.16 per
basic and diluted share) as compared to $451,000 ($0.09 per basic and diluted
share) for the three months ended March 31, 1998.
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 have been 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 have been results of operations and
borrowings under its revolving credit facility. Pursuant to its operating
strategy, the Company maintains 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 provided by operating activities was $2.6 million for the three months
ended March 31, 1999 as compared to net cash provided by operating activities of
$4.8 million for the same period in 1998. The decrease in cash provided by
operating activities was primarily due to a larger increase in inventories in
the first quarter of 1999 versus the first quarter of 1998.
<PAGE> 10
Form 10-Q
Page 10
Net cash used in investing activities was $553,000 for the three months ended
March 31, 1999 as compared to $245,000 for the same period in 1998. The net cash
used was primarily for computer equipment and information systems upgrades.
Net cash used in financing activities was $2.0 million for the three months
ended March 31, 1999 as compared to $4.8 million for the same period in 1998.
During the quarter ended March 31, 1999, the Company used cash collections in
excess of the current borrowings to reduce its revolving credit facility by $1.7
million as well as to make principal payments on long-term debt and to pay
dividends.
Working capital requirements for the Company's 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 to offer 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.
Working capital requirements have been seasonal for the subsidiaries.
Inventories have generally increased during the first half of the year to
accommodate the sales 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 bonds for the remainder
of 1999 will be $429,167, and maturities for 2000 and 2001 will be $616,667 and
$666,667, respectively. The annual interest charges on the Company's industrial
revenue bonds, at a fixed rate of 7.5%, will be $422,188 for the remainder of
1999, and $525,000 and $478,750 for 2000 and 2001, 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 1999 and for the foreseeable future.
YEAR 2000
The Company is devoting resources throughout its business operations to minimize
the risk of potential disruption from the Year 2000 ("Y2K") problem. This
problem is a result of computer programs having been written using two digits
(rather than four) to define the applicable year. Any information technology
("IT") systems that have time-sensitive software may recognize a date using "00"
as the year 1900 rather than the year 2000, which could result in
miscalculations and system failures. The problem also extends to many "Non-IT"
systems; that is, operating and control systems that rely on embedded chip
systems. In addition, like every other business enterprise, the Company is at
risk from Y2K failures on the part of its major business counterparts, including
suppliers and customers, as well as potential failures in public and private
infrastructure services. System failures resulting from the Y2K problem could
adversely affect operations and financial results of the Company. Y2K failures
on the part of our major vendors would limit our available inventory for resale.
Failures at our customer level would result in lower revenue. Public
infrastructure failures could adversely affect power and communications.
In late 1996, the Company determined that its operating system would not be Y2K
compliant and made a decision to purchase new operating software (purchasing,
distribution, and financial) to run its business. In connection with this
decision, new hardware was purchased that moved the Company from a mainframe to
a client/server environment. System modifications and testing have been ongoing
with installation of the new system anticipated to begin in the second quarter
of 1999 with completion in the third quarter of 1999.
In the second half of 1998, the Company put together a project team headed up by
an executive of the Company with the assistance of the department heads. A plan
was put together to assess all internal Non-IT systems as well as key suppliers
and customers.
<PAGE> 11
Form 10-Q
Page 11
An inventory was taken of all internal Non-IT systems. From this inventory, 39%
of the systems were identified as critical to business operations. Of the
critical systems, 87% have been identified as Y2K compliant or unaffected by
computer dates. Of the remaining ones, 7% will be addressed by the new operating
system and the other 6% are still being investigated.
All critical vendors have been surveyed as well as all major customers as to
their Y2K readiness. The Company is currently evaluating the responses to
determine what action is necessary, if any.
The Company will be developing contingency plans as a precautionary measure for
all systems that are not expected to be Y2K compliant. This planning will begin
in the second quarter of 1999 and will be completed by the third quarter of
1999.
The cost of the system upgrades, which includes hardware and software, since
inception through completion, is expected to be approximately $3.8 million. As
of March 31, 1999, the Company had spent $3.4 million. This amount was funded
out of working capital and the Company's revolving credit line. Amounts incurred
to-date and expected to be incurred in the future do not include amounts for
internal manpower or additional amounts determined as a result of the
contingency programs to be developed, if any.
Based upon its efforts to-date, the Company believes that the vast majority of
both its IT and its Non-IT systems, including all critical and important
systems, will remain up and running after January 1, 2000. Accordingly, the
Company does not currently anticipate that internal systems failures will result
in any material adverse effect to its operations or financial condition.
The nature and focus of the Company's efforts to address the Y2K problem may be
revised periodically as interim goals are achieved or new issues are identified.
In addition, it is important to note that the description of the Company's
efforts necessarily involves estimates and projections with respect to
activities required in the future. These estimates and projections are subject
to change as work continues, and such changes may be substantial.
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; the
Company's ability to detect and correct the potential Year 2000 sensitive
problem; and other factors described in this report and in other reports filed
by the Company with the Securities and Exchange Commission.
<PAGE> 12
Form 10-Q
Page 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk for a change in interest rates relates
solely to its debt under its revolving credit facility ($24.7 million at March
31, 1999 and $26.5 million at December 31, 1998). The Company does not currently
use derivative financial instruments.
Approximately $6.3 million of the Company's debt at March 31, 1999 and $6.4
million at December 31, 1998 was subject to fixed interest rates and principal
payments. This debt is comprised of the Company's long-term debt under its
industrial revenue refunding bonds which carry an interest rate of 7.5%.
The Company is exposed to changes in interest rates primarily as a result of its
debt in a revolving credit facility ("Facility") used to maintain liquidity and
fund the Company's business operations. Pursuant to the Company's operating
strategies, it maintains minimal cash balances and is substantially dependent
on, among other things, the availability of adequate working capital financing
to support inventories and accounts receivables. The Facility provides the
Company with a revolving line of credit and letters of credit. The maximum
amount that can be outstanding at anytime is $40.0 million. The term of the
Facility expires on September 30, 2001. Borrowings under the Facility bear
interest at a rate equal to, at the Company's option, prime rate plus 0.375% or
2.25% above the 30 or 90 day LIBOR rate. Combinations of these rates can be used
for the various loans that comprise the total outstanding balance under the
Facility. The interest rates of the Facility are subject to change based on
changes in the Company's leverage ratio and net income. At March 31, 1999, the
interest rate was 7.21%. The definitive extent of the Company's interest rate
risk under the Facility is not quantifiable or predictable because of the
variability of future interest rates and business financing requirements.
The Company's long-term debt has a fair value, based upon current interest
rates, of approximately $31.0 million at March 31, 1999 and $33.9 million at
December 31, 1998. Fair value will vary as interest rates change. The following
table presents the aggregate maturities and historical cost amounts of the fixed
debt principal and interest rates by maturity dates at March 31, 1999:
Maturity Date Fixed Rate Debt Interest Rate
------------------------------------------------------------------
1999 $ 429,000 7.5%
2000 617,000 7.5%
2001 667,000 7.5%
2002 716,000 7.5%
2003 767,000 7.5%
Thereafter 3,069,000 7.5%
------------------------------------------------------------------
$ 6,265,000 7.5%
<PAGE> 13
Form 10-Q
Page 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(b) Amended and Restated Bylaws
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 March 31, 1999.
<PAGE> 14
Form 10-Q
Page 14
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: May 14, 1999
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)
<PAGE> 1
Exhibit 3(b) to
1999 First Quarter Report on Form 10-Q
AMENDED AND RESTATED BYLAWS OF
ELLETT BROTHERS, INC.
ARTICLE I
OFFICES AND REGISTERED AGENT
Section 1.01. Principal Office. The Corporation shall maintain its
Principal Office in the City of Chapin, State of South Carolina, or such other
place as designed from time to time by the Board of Directors for the principal
executive offices of the Corporation.
Section 1.02. Registered Office. The Corporation shall maintain a
Registered Office as required by the South Carolina Business Corporation Act of
1988, as amended from time to time (the "Act"), at a location in the State of
South Carolina designated by the Board of Directors from time to time. In the
absence of a contrary designation by the Board of Directors, the Registered
Office of the Corporation shall be located at its Principal Office.
Section 1.03. Other Offices. The Corporation may have such other
offices within and without the State of South Carolina as the business of the
Corporation may require from time to time. The authority to establish or close
such other offices may be delegated by the Board of Directors to one or more of
the Corporation's Officers.
Section 1.04. Registered Agent. The Corporation shall maintain a
Registered Agent as required by the Act who shall have a business office at the
Corporation's Registered Office. The Registered Agent shall be designated by the
Board of Directors from time to time to serve at its pleasure. In the absence of
such designation the Registered Agent shall be the Corporation's Secretary.
Section 1.05. Filings. In the absence of directions from the Board of
Directors to the contrary, the Secretary of the Corporation shall cause the
Corporation to maintain currently all filings in respect of the Registered
Office and Registered Agent with all governmental officials as required by the
Act or otherwise by law.
ARTICLE II
SHAREHOLDERS
Section 2.01. Annual Meetings. An annual meeting of the Corporation's
shareholders shall be held once each calendar year for the purpose of electing
Directors and for the transaction of such other business as may properly come
before the meeting. The annual meeting shall be held at the time and place
designated by the Chairman of the Board or the Board of Directors from time to
time. In the absence of or in the event of any conflict between any such
designation, the annual meeting shall be held at the Corporation's Principal
Office at the hour of ten o'clock in the morning on the second Tuesday of the
sixth month following the Corporation's fiscal year-end; but if that day shall
be a holiday
Bylaws of Ellett Brothers, Inc.
Page 1
<PAGE> 2
under federal or South Carolina law, then such annual meeting shall be held on
the next succeeding business day.
Section 2.02. Special Meetings. Special meetings of the Corporation's
shareholders may be called for any one or more lawful purposes by the
Corporation's President, the Chairman of the Board, a majority of the Directors,
or the holders of record of ten percent of the Corporation's outstanding shares
of stock entitled to vote at such meeting. Special meetings of the shareholders
shall be held at a time and location designated by the Chairman of the Board or
by a majority of the Directors as reflected in the notice of the meeting
provided for hereinafter; provided, however, that if the Chairman of the Board
or a majority of Directors do not designate a time and location, such meetings
shall be held at the Corporation's Principal Office at the hour of ten o'clock
in the morning on the date designated in the notice of the meeting provided for
below. In the event that the Chairman of the Board and a majority of Directors
timely designate different times or locations, then the designations of the
majority of the Directors shall control.
Section 2.03. Notice of Meetings, Waiver or Notice. Written or printed
notice of all meetings of shareholders shall be delivered not less than ten nor
more than sixty days before the meeting date, either personally, by mail, or by
any other method permitted under the Act, to all shareholders of record entitled
to vote at such meeting. If mailed, the notice shall be deemed to be delivered
when deposited with postage thereon prepaid in the United States mail, addressed
to the shareholder at the shareholder's address as it appears on the
Corporation's records, or if a shareholder shall have filed with the Secretary
of the Corporation a written request that notices to such shareholder be mailed
to some other address, then directed to such shareholder at that other address.
Such notice shall state the date, time, and place of the meeting and, in the
case of a special meeting, the purpose or purposes for which such meeting was
called. At the written request, delivered personally or by registered or
certified mail, of the person or persons calling a special meeting of
shareholders, the President or Secretary of the Corporation shall fix the date
and time of the meeting and provide notice thereof to the shareholders as
required above; provided, however, such date shall in no event be fixed less
than ten or more than sixty days from the date the request was received. If the
notice of the meeting is not given within fifteen days after the request is made
to the President or Secretary, the person or persons calling the meeting may fix
the date and time of the meeting and give or cause to be given the notice
thereof required above. Notice of a meeting of shareholders need not be given to
any shareholder who attends such meeting or who, in person or by proxy, signs a
waiver of notice either before or after the meeting. To be effective such waiver
shall contain statements or recitals sufficient to identify beyond reasonable
doubt the meeting to which it applies. Such statements or recitals may, but need
not necessarily, include reference to the date and purpose of the meeting and
the business transacted thereat. Statement or recital of the proper date of a
meeting shall be conclusive identification of the meeting to which a waiver of
notice applies unless the waiver contains additional statements or recitals
creating a patent ambiguity as to its proper application.
Section 2.04. Quorum. Except as may otherwise be required by the Act or
the Corporation's Articles of Incorporation, at any meeting of shareholders the
presence, in person or by proxy, of the holders of a majority of the outstanding
shares entitled to vote thereat shall constitute a quorum for the transaction of
any business properly before the meeting. Shares entitled to vote as a separate
voting group on a matter may take action at a meeting on such matter only if a
quorum of the shares in the separate voting group are present in person or by
proxy at the meeting. Except as may otherwise be required by law or the
Corporation's Articles of Incorporation, at any meeting of shareholders the
presence, in person or by proxy, of the holders of a majority of the outstanding
shares in a separate
Bylaws of Ellett Brothers, Inc.
Page 2
<PAGE> 3
voting group entitled to vote thereat as separate voting group, if any, shall
constitute a quorum of such separate voting group for purposes of such matter.
In the absence of a quorum a meeting may be adjourned from time to time, in
accordance with the provisions concerning adjournments contained elsewhere in
these Bylaws, by the holders of a majority of the shares represented at the
meeting in person or in proxy. At such adjourned meeting a quorum of
Shareholders may transact such business as might have been properly transacted
at the original meeting.
Section 2.05. Transaction of Business. Business transacted at an annual
meeting of shareholders may include all such business as may properly come
before the meeting. Business transacted at a special meeting of shareholders
shall be limited to the purposes stated in the notice of the meeting.
Section 2.06. Shareholders of Record. For the purpose of determining
shareholders entitled to vote at any meeting of shareholders, or entitled to
receive dividends or other distributions, or in connection with any other proper
purpose requiring a determination of shareholders, the Board of Directors shall
by resolution fix a record date for such determination. The date shall be not
more than fifty and not less than ten days prior to the date on which the
activity requiring the determination is to occur. The shareholders of record
appearing in the stock transfer books of the Corporation at the close of
business on the record date so fixed shall constitute the shareholders of right
in respect of the activity in question. In the absence of action by the Board of
Directors to fix a record date, the record date shall be ten days prior to the
date on which the activity requiring a determination of shareholders is to
occur. A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting
to a date not later than one hundred twenty days after the date fixed for the
original meeting; provided, however, that the Board of Directors may in its
discretion fix a new record date for any adjourned meeting.
Section 2.07. Voting. Except as may otherwise be required by the Act or
the Corporation's Articles of Incorporation, and subject to the provisions
concerning shareholders of record contained elsewhere in these Bylaws, a person
(or his proxy) present at a meeting of shareholders shall be entitled to one
vote for each share of voting stock as to which such person is the shareholder
of record. In elections of Directors, those candidates receiving the greater
number of votes cast (although not necessarily a majority of votes cast) at the
meeting shall be elected. Any other corporate action shall be authorized by a
majority of the votes cast at the meeting unless otherwise provided by the Act,
the Corporation's Articles of Incorporation, or these Bylaws.
Section 2.08. Voting Inspectors. For each meeting of Shareholders an
odd number of persons (which may be only one person) shall be appointed to serve
as voting inspectors, either by the Board of Directors prior to the meeting or
by the presiding official at the meeting. The voting inspectors may include one
or more representatives of the Corporation's Transfer Agent, if any. The voting
inspectors shall by majority decision (if more than one inspector) resolve all
disputes which may arise concerning the qualification of voters, the validity of
proxies, the existence of a quorum, the voting power of shares, and the
acceptance, rejection, and tabulation of votes. Each voting inspector shall take
an oath (which may be in writing) to execute his duties impartially and to the
best of his ability. Such oath shall be administered to each voting inspector
before a voting inspector enters upon the discharge of his duties. The
Corporation is entitled to reject a vote, consent, waiver, or proxy appointment
if the voting inspector(s), acting in good faith, has reasonable basis for doubt
about the validity of the signature on it or about the signatory's authority to
sign for the shareholder. Neither the Corporation nor the voting inspector(s)
who accepts or rejects a vote, consent, waiver, or proxy
Bylaws of Ellett Brothers, Inc.
Page 3
<PAGE> 4
appointment in good faith and in accordance with the standards of this section
shall be liable in damages to any shareholder for the consequences of the
acceptance or rejection. Corporate action based on the acceptance or rejection
of a vote, consent, waiver, or proxy appointment under this Section 2.08 is
valid unless a court of competent jurisdiction determines otherwise.
Section 2.09. Adjournments. A majority of the voting shares held by
shareholders of record present in person or by proxy at a meeting of
shareholders may (whether or not constituting a quorum) adjourn a meeting from
time to time to a date, time, and place fixed by notice as provided for above
or, if such date is less than thirty days from the date of adjournment, to a
date, time, and place fixed by the majority vote and announced at the original
meeting prior to adjournment.
Section 2.10. Action Without Meeting. Holders of record of voting
shares may take action without meeting by written consent as to such matters and
in accordance with such requirements and procedures as may be permitted by the
Act.
Section 2.11. Proxies. At all meetings of shareholders, a shareholder
may vote in person or by proxy. Such proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting. A proxy must be filed (a)
in writing executed by the shareholder or by his duly authorized attorney in
fact, or (b) by a telegram or cablegram appearing to have been transmitted by
the shareholder; provided, however that the Board of Directors may also
establish procedures by which shareholders can file proxies with the Secretary
by telecopier facsimile transmission. No proxy shall be valid after eleven
months from the date of its execution unless it qualifies as an irrevocable
proxy under the Act.
Section 2.12. Voting of Shares by Certain Holders. Shares standing in
the name of another corporation may be voted, either in person or by proxy, by
the officer, agent, or proxy as the bylaws of that corporation may prescribe, or
in the absence of such provision, as the board of directors of that corporation
may determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by such
trustee either in person or by proxy, but no trustee shall be entitled to vote
shares held by such trustee without a transfer of the shares into such trustee's
name as trustee.
Shares standing in the name of a receiver may be voted, either in
person or by proxy, by the receiver, and shares held by or under the control of
a receiver may be voted, either in person or by proxy, by the receiver without
the transfer thereof into such receiver's name if authority to do so is
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote, either in person or by proxy,
the shares so transferred.
Section 2.13. Action. Approval of actions by shareholders shall be in
accordance with the requirements of the Act, except to the extent otherwise
provided by the Articles of Incorporation.
Bylaws of Ellett Brothers, Inc.
Page 4
<PAGE> 5
Section 2.14. Inspection Rights. The shareholders shall have only such
rights to inspect records of this Corporation to the extent, and according to
the procedures and limitations, prescribed by the Act.
Section 2.15. Conduct of Meetings. The Chairman of the Board of
Directors shall preside at each meeting of shareholders. In the absence of the
Chairman, the meeting shall be chaired by an officer of the Corporation in
accordance with the following order: Chief Executive Officer, President and Vice
President. In the absence of all such officers, the meeting shall be chaired by
an officer of the Corporation chosen by the vote of a majority in interest of
the shareholders present in person or represented by proxy and entitled to vote
thereat. The Secretary or in his or her absence an Assistant Secretary or in the
absence of the Secretary and all Assistant Secretaries a person whom the
chairman of the meeting shall appoint shall act as secretary of the meeting and
keep a record of the proceedings thereof.
The Board of Directors of the Corporation shall be entitled to make
such rules or regulations for the conduct of meetings of shareholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to shareholders of
record of the Corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comment by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless, and to the extent, determined by the Board of Directors or
the chairman of the meeting, meetings of shareholders shall not be required to
be held in accordance with rules of parliamentary procedure
ARTICLE III
DIRECTORS
Section 3.01. Authority. The Board of Directors shall have ultimate
authority over the conduct and management of the business and affairs of the
Corporation.
Section 3.02. Number. The Corporation shall have an authorized range of
no fewer than two and no more than seven Directors. The number of Directors
within such authorized range: (a) initially shall be established at two
Directors; and (b) thereafter shall be established from time to time without
amendment to these Bylaws by resolution of the Board of Directors or as
otherwise provided by law. The authorized range and established number of
Directors may be increased or decreased from time to time by resolution of the
Board of Directors; provided, however, that after election of Directors at the
first annual meeting of the shareholders, the established number of Directors
may be increased or decreased from time to time by resolution of the Board of
Directors only by a number of Directors that is thirty percent (30%) or less of
the number of Directors last elected by the shareholders, and only the
shareholders may increase or decrease by more than thirty percent (30%) the
established number
Bylaws of Ellett Brothers, Inc.
Page 5
<PAGE> 6
of Directors last elected by the shareholders. No decrease in the authorized
range or established number of Directors shall have the effect of shortening the
term of any incumbent Director.
Section 3.03. Tenure. Each Director shall hold office from the date of
his election and qualification until his successor shall have been duly elected
and qualified, or until his earlier removal, resignation, death, or incapacity.
An election of all Directors by the shareholders shall be held at each annual
meeting of the Corporation's shareholders. A Director need not be a shareholder.
In case of any increase in the number of Directors, the additional directorships
so created may be filled in the first instance in the same manner as a vacancy
in the Board of Directors.
Section 3.04. Removal. Any Director may be removed from office, with or
without cause, by a vote of the holders of a majority of the shares of the
Corporation's voting stock. Any Director may be removed from office with cause
by a majority vote of the Board of Directors at a meeting at which only the
removal and replacement of the Director or Directors in question shall be
considered.
Section 3.05. Vacancies. The Board of Directors may by majority vote of
the Directors then in office, regardless of whether such Directors constitute a
quorum, elect a new Director to fill a vacancy on the Board of Directors;
provided, however, that no person may be elected to fill a vacancy created by
his removal from office pursuant to these Bylaws.
Section 3.06. Annual and Regular Meetings. An annual meeting of the
Board of Directors shall be called and held for the purpose of annual
organization, changes in the established number of Directors, if any,
appointment of Officers and committees, and transaction of any other business.
If such meeting is held promptly after and at the place specified for the annual
meeting of shareholders, no notice of the annual meeting of the Board of
Directors need be given. Otherwise, such annual meeting of the Board of
Directors shall be held at such time (at any time prior to and not more than
thirty days after the annual meeting of shareholders) and place as may be
specified in the notice of the meeting. The Board of Directors may by resolution
provide for the holding of additional regular meetings without notice other than
such resolution; provided, however, the resolution shall fix the dates, times,
and places (which may be anywhere within or without the State of the
Corporation's Principal Office) for these regular meetings. Except as otherwise
provided by law, any business may be transacted at any annual or regular meeting
of the Board of Directors.
Section 3.07. Special Meetings; Notice of Special Meeting. Special
meetings of the Board of Directors may be called for any lawful purpose or
purposes by any Director or the President of the Corporation. The person calling
a special meeting shall give, or cause to be given, to each Director at his
business address, notice of the date, time and place of the meeting by any
normal means of communication not less than seventy-two hours nor more than
sixty days prior thereto. The notices may, but need not, describe the purpose of
the meeting. If mailed, the notice shall be deemed to be delivered when
deposited in the United States mail addressed to the Director's business
address, with postage thereon prepaid. If notice is given by telegram, the
notice shall be deemed delivered when the telegram is delivered to the telegraph
company and the transmission fee therefor is paid. If notice is given by
telecopier facsimile transmission, the notice shall be deemed delivered when the
facsimile of the notice is transmitted to a telecopier facsimile receipt number
designated by the receiving Director, if any, so long as such director transmits
to the sender an acknowledgment of receipt. Any time or place fixed for a
special meeting must permit participation in the meeting by means of
telecommunications as authorized below.
Bylaws of Ellett Brothers, Inc.
Page 6
<PAGE> 7
Section 3.08. Waiver of Notice of Special Meetings. Notice of a special
meeting need not be given to any Director who signs a waiver of notice either
before or after the meeting. To be effective the waiver shall contain recitals
sufficient to identify beyond reasonable doubt the meeting to which it applies.
The recitals may, but need not necessarily, include reference to the date and
purpose of the meeting and the business transacted thereat. Recital of the
proper date of a meeting shall be conclusive identification of the meeting to
which a waiver of notice applies unless the waiver contains additional recitals
creating a patent ambiguity as to its proper application. The attendance of a
Director at a special Directors meeting shall constitute a waiver of notice of
that meeting, except where the Director attends the meeting for the sole and
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Section 3.9. Participation by Telecommunications. Any Director may
participate in, and be regarded as present at, any meeting of the Board of
Directors by means of conference telephone or any other means of communication
by which all persons participating in the meeting can hear each other at the
same time.
Section 3.10. Quorum. A majority of Directors in office shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
Section 3.11. Action. The Board of Directors shall take action pursuant
to resolutions adopted by the affirmative vote of a majority of the Directors
participating in a meeting at which a quorum is present, or the affirmative vote
of a greater number of Directors where required by the Corporation's Articles of
Incorporation or otherwise by law.
Section 3.12. Action Without Meeting. Any action permitted by the Act
and required or permitted to be taken by the Board of Directors at an annual,
regular, or special meeting may be taken without a meeting if a consent in
writing, setting forth the action taken, shall be signed by all of the Directors
in accordance with the procedures authorized by the Act.
Section 3.13. Presumption of Assent. A Director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting, or unless he
shall file his written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward his
dissent by registered mail to the Secretary of the Corporation immediately after
the adjournment of the meeting. The right to dissent shall not apply to a
Director who voted in favor of such action.
Section 3.14. Executive Committee. The Board of Directors shall by
resolution, adopted in accordance with the Act, designate and delegate authority
to an Executive Committee with any or all such authority as may be permitted by
the Act. The Executive Committee shall be a standing committee appointed
annually. The Executive Committee shall be composed of two or more members, who
shall serve at the pleasure of the Board of Directors. All voting members of the
Executive Committee must be Directors of the Corporation appointed by the Board
of Directors in accordance with Section 33-8-240 of the Act. The Chairman of the
Executive Committee shall be elected by the Board of Directors from the
Directors appointed to the Executive Committee. The Chairman of the Executive
Committee shall have such duties and authority as set forth in these Bylaws. The
Chairman
Bylaws of Ellett Brothers, Inc.
Page 7
<PAGE> 8
of the Board shall be a member of the Executive Committee. The duties,
constitution, and procedures of the Executive Committee shall be prescribed by
the Board of Directors. In the absence, incapacity, inability, or refusal of the
President to act, the Executive Committee shall designate an Officer or Director
temporarily or indefinitely to assume the authority and perform the duties of
the President, which designee shall serve in such capacity at the pleasure of
the Executive Committee.
Section 3.15. Other Committees. The Board of Directors may from time to
time by resolution, adopted in accordance with the Act, designate and delegate
authority to an Audit Committee, a Compensation Committee, and other committees,
with any or all such authority as may be permitted by the Act. Any such
committee may be designated as a standing committee appointed annually or as a
special committee for specific circumstances or transactions with a limited
duration. Each committee shall be composed of two or more members, who shall
serve at the pleasure of the Board of Directors. All voting committee members
must be Directors of the Corporation appointed by the Board of Directors in
accordance with Section 33-8-240 of the Act. The Chairman of the Board shall be
given notice of all committee meetings and may in his discretion attend meetings
of any committee to which he is not appointed as a member. The duties,
constitution, and procedures of any committee shall be prescribed by the Board
of Directors. The Board of Directors shall designate one member of each
committee as its chairman. In the event the Corporation is listed on the NASDAQ
National Merit System, and so long as the Board of Directors determines in its
discretion to maintain such listing, the Board of Directors shall designate,
delegate such authority to, and appoint, as a standing committee, an Audit
Committee which satisfies the applicable NASDAQ/NMS criteria.
Section 3.16. Committee Meetings. A majority of each committee's voting
members shall constitute a quorum for the transaction of business by the
committee, and each committee shall take action pursuant to resolutions adopted
by a majority of the committee's voting members participating in a meeting at
which a quorum of the committee is present. Each committee may also take action
without a meeting if a consent in writing, setting forth the action taken, shall
be signed by all of the committee's voting members in accordance with the
procedures authorized by the Act. Special meetings of any committee may be
called at any time by any Director who is a member of the committee or by any
person entitled to call a special meeting of the full Board of Directors. Except
as otherwise provided in this section, the conduct of all meetings of any
committee, including notice thereof, and the taking of any action by such
committee, shall be governed by Sections 3.06 through 3.13 of this Article.
Section 3.17. Compensation. The Board of Directors may by resolution
authorize payment to all Directors of a uniform fixed sum for attendance at each
meeting or a stated salary (which need not be uniform) as a Director, or a
combination thereof, in such amounts as the Board may determine from time to
time. The Board of Directors may, in its discretion, authorize payments of
greater amounts or different forms to the Chairman of the Board or particular
Directors or committee members than are paid to other Directors. No such payment
shall preclude any Director from serving the Corporation in any other capacity
and receiving compensation therefore. The Board of Directors may also by
resolution authorize the payment or reimbursement of all expenses of each
Director related to the Director's attendance at meetings or other service to
the Corporation.
Section 3.18. Notification of Nominations. Nominations for the election
of Directors may be made by the Board of Directors or by any shareholder
entitled to vote for the election of directors. Any shareholder entitled to vote
for the election of directors at a meeting may nominate persons for election as
Directors only if written notice of such shareholder's intent to make such
nomination is
Bylaws of Ellett Brothers, Inc.
Page 8
<PAGE> 9
given, either by personal delivery or by United States mail, postage prepaid, to
the Secretary of the Corporation not later than (i) with respect to an election
to be held at an annual meeting of shareholders, 120 days in advance of such
meeting, and (ii) with respect to any election to be held at a special meeting
of shareholders for the election of directors, the close of business on the
seventh day following the date on which notice of such meeting is first given to
shareholders. Each such notice shall set forth: (a) the name and address of the
shareholder who intends to make the nomination and of the person or persons to
be nominated, (b) a representation that such shareholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice, (c) a description of all arrangements or understandings
between such shareholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or nominations
are to be made by such shareholder, (d) such other information regarding each
nominee proposed by such shareholder as would have been required to be included
in a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had each nominee been nominated, or intended to be
nominated, by the Board of Directors, and (e) the consent of each nominee to
serve as a Director of the Corporation if elected. The chairman of a shareholder
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
Section 3.19. Order of Business. Unless otherwise determined by the
Chairman of the Board, the order of business at the annual meeting, and so far
as practicable at all other meetings of the Board of Directors, shall be as
follows:
1. Determination of a quorum
2. Reading and disposal of all unapproved minutes
3. Reports of Officers and committees, if applicable
4. Change in established number of Directors, if applicable
5. Appointment of Officers and committees, if applicable
6. Unfinished business, if applicable
7. New business
8. Adjournment
Unless, and to the extent, determined by the Board of Directors or the
chairman of the meeting, or unless required by a specific rule to the contrary
in these Bylaws, the Articles of Incorporation, or the Act, meetings of the
Board of Directors shall not be required to be held in accordance with rules of
parliamentary procedure.
ARTICLE IV
OFFICERS
Section 4.01. In General. The Officers of the Corporation shall consist
of a Chairman of the Board, a Chairman of the Executive Committee, a President,
one or more Vice Presidents, a Secretary, and a Treasurer, and such additional
vice presidents, assistant secretaries, assistant treasurers and other officers
and agents as the Board of Directors deems advisable from time to time. All
Officers shall be appointed by the Board of Directors to serve at the pleasure
of the Board. Except as may otherwise be provided by Act or in the Articles of
Incorporation, any Officer may be removed by the Board of Directors at any time,
with or without cause. Any vacancy, however occurring, in any office
Bylaws of Ellett Brothers, Inc.
Page 9
<PAGE> 10
may be filled by the Board of Directors for the unexpired term. One person may
hold two or more offices. Each Officer shall exercise the authority and perform
the duties as may be set forth in these Bylaws and any additional authority and
duties as the Board of Directors shall determine from time to time.
Section 4.02. Chairman of the Board. The Board of Directors shall elect
from the Directors a Chairman of the Board to serve at the pleasure of the Board
of Directors. The Chairman of the Board shall whenever possible preside at all
meetings of shareholders and all meetings of the Board of Directors. Except as
otherwise provided herein and as may be specifically limited by resolution of
the Board of Directors or Executive Committee, the Chairman of the Board may
execute on the Corporation's behalf any and all contracts, agreements, notes,
bonds, deeds, mortgages, certificates, instruments, and other documents. The
Chairman of the Board shall exercise such additional authority and duties as set
forth in these Bylaws and as the Board of Directors shall determine from time to
time.
Section 4.03. Chairman of the Executive Committee. The Board of
Directors shall elect from the Directors (who are appointed to the Executive
Committee) a Chairman of the Executive Committee to serve at the pleasure of the
Board of Directors. The Chairman of the Executive Committee shall preside at all
meetings of the Executive Committee. In the absence of the Chairman of the
Board, the Chairman of the Executive Committee shall preside at all meetings of
the shareholders and all meetings of the Board of Directors. Except as otherwise
provided herein and as may be specifically limited by resolution of the Board of
Directors or Executive Committee, the Chairman of the Executive Committee may
execute on the Corporation's behalf any and all contracts, agreements, notes,
bonds, deeds, mortgages, certificates, instruments, and other documents. The
Chairman of the Executive Committee shall exercise such additional authority and
duties as set forth in these Bylaws and as the Board of Directors shall
determine from time to time.
Section 4.04. President. The President shall, subject to the authority
of the Board of Directors and Executive Committee, manage the business and
affairs of the Corporation. The President shall see that the resolutions of the
Board of Directors and committees thereof are put into effect. Except as
otherwise provided herein, the President may execute on the Corporation's behalf
such contracts, agreements, notes, bonds, deeds, mortgages, certificates,
instruments, and other documents as may be authorized by specific or general
resolution of the Board of Directors. The President shall also perform such
other duties and may exercise such other powers as are incident to the office of
president and as are from time to time assigned to him by the Act, these Bylaws,
the Board of Directors, the Chairman of the Board, or the Chairman of the
Executive Committee.
Section 4.05. Vice Presidents. Except as otherwise determined by the
Board of Directors, each Vice President shall serve under the direction of the
President. Except as otherwise provided herein, each Vice President shall
perform such duties and may exercise such powers as are incident to the office
of vice president and as are from time to time assigned to him by the Act, these
Bylaws, the Board of Directors, the Chairman of the Board, the Chairman of the
Executive Committee, or the President.
Section 4.06. Secretary. Except as otherwise provided by these Bylaws
or determined by the Board of Directors, the Secretary shall serve under the
direction of the President. The Secretary shall whenever possible attend all
meetings of the shareholders and the Board of Directors, and whenever the
Secretary cannot attend such meetings, such duty shall be delegated by the
presiding officer for such
Bylaws of Ellett Brothers, Inc.
Page 10
<PAGE> 11
meeting to a duly authorized assistant secretary. The Secretary shall record or
cause to be recorded under his general supervision the proceedings of all such
meetings and any other actions taken by the shareholders or the Board of
Directors (or by any committee of the Board in place of the Board) in a book or
books (or similar collection) to be kept for such purpose. The Secretary shall
give, or cause to be given, all notices in connection with such meetings. The
Secretary shall be the custodian of the Corporate seal and affix the seal to any
document requiring it, and to attest thereto by signature. The Secretary may
delegate his authority to affix the Corporation's seal and attest thereto by
signature to any Assistant Secretary. The Board of Directors may give general
authority to any other officer or specified agent to affix the Corporation's
seal and to attest thereto by signature. Unless otherwise required by law, the
affixing of the Corporation's seal shall not be required to bind the Corporation
under any documents duly executed by the Corporation and the use of the seal
shall be precatory in the discretion of the Corporation's duly authorized
signing officers. The Secretary shall properly keep and file, or cause to be
properly kept and filed under his supervision, all books, reports, statements,
notices, waivers, proxies, tabulations, minutes, certificates, documents,
records, lists, and instruments required by the Act or these Bylaws to be kept
or filed, as the case may be. The Secretary may when requested, and shall when
required, authenticate any records of the Corporation. Except to the extent
otherwise required by the Act, the Secretary may maintain, or cause to be
maintained, such items within or without the State of South Carolina at any
reasonable place. In the event the Board of Directors designates and engages a
Transfer Agent, as permitted by these Bylaws, such duties of keeping such
shareholder records and the like accepted by such Transfer Agent shall be deemed
delegated from the Secretary to such Transfer Agent, but such Transfer Agent
shall be subject to supervision of the Secretary. The Secretary shall perform
such other duties and may exercise such other powers as are incident to the
office of secretary and as are from time to time assigned to him by the Act,
these Bylaws, the Board of Directors, the Chairman of the Board, or the
President.
Section 4.07. Treasurer. Except as otherwise provided by these Bylaws
or determined by the Board of Directors, the Treasurer shall serve under the
direction of the President. The Treasurer shall, under the direction of the
President, keep safe custody of the Corporation's funds and securities, maintain
and give complete and accurate books, records, and statements of account, give
and receive receipts for moneys, and make deposits of the Corporation's funds,
or cause the same to be done under his supervision. The Treasurer shall upon
request report to the Board of Directors on the financial condition of the
Corporation. The Treasurer may be required by the Board of Directors at any time
and from time to time to give such bond as the Board may determine. The
Treasurer shall perform such other duties and may exercise such other powers as
are incident to the office of treasurer and as are from time to time assigned to
him by the Act, these Bylaws, the Board of Directors, the Chairman of the Board,
or the President.
Section 4.08. Assistant Officers. Except as otherwise provided by these
Bylaws or determined by the Board of Directors, the Assistant Secretaries and
Assistant Treasurers, if any, shall serve under the immediate direction of the
Secretary and the Treasurer, respectively, and under the ultimate direction of
the President. The Assistant Officers shall assume the authority and perform the
duties of their respective immediate superior officer as may be necessary at the
direction of such immediately superior officer, or in the absence, incapacity,
inability, or refusal of such immediate superior officer to act. The seniority
of Assistant Officers shall be determined from their dates of appointment unless
the Board of Directors shall otherwise specify.
Bylaws of Ellett Brothers, Inc.
Page 11
<PAGE> 12
Section 4.09. Salaries. The salaries and other compensation of the
officers shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving a salary or other compensation by
reason of the fact that he is also a Director of the Corporation.
ARTICLE V
INDEMNIFICATION
Section 5.01. Scope. Every person who was or is a party to, or is
threatened to be made a party to, or is otherwise involved in, any action, suit,
or proceeding, whether civil, criminal, administrative, or investigative, by
reason of the fact that he or a person of whom he is the legal representative is
or was a Director or Officer of the Corporation or is or was serving at the
request of the Corporation or for its benefit as a director or officer of
another corporation, or as its representative in a partnership, joint venture,
trust, or other enterprise, shall be indemnified and held harmless to the
fullest extent legally permissible under and pursuant to the Act (and regardless
of whether such proceeding is by or in the right of the Corporation), against
all expenses, liabilities, and losses (including without limitation attorneys'
fees, judgments, fines, and amounts paid or to be paid in settlement) suffered,
or reasonably incurred by him in connection therewith. Such right of
indemnification shall be a contract right that may be enforced in any manner
desired by such person. Such right of indemnification shall not be exclusive of
any other right which such Directors, Officers, or representatives may have or
hereafter acquire and, without limiting the generality of such statement, they
shall be entitled to their respective rights of indemnification under any bylaw,
agreement, vote of Shareholders, insurance, provision of law, or otherwise, as
well as their rights under this Article V. The Corporation may contract in
advance to provide indemnification.
Section 5.02. Advances and Reimbursements. The determination that
indemnification under this Article V is permissible and the evaluation as to the
reasonableness of expenses in a specific case shall be made, in the case of a
Director, as provided by the Act, and in the case of an Officer or other person
indemnified under Section 5.03, if any, as provided in Section 5.03 of this
Article; provided, however, that if a majority of the Directors of the
Corporation has changed after the date of the alleged conduct giving rise to a
claim for indemnification, such determination and evaluation shall, at the
option of the person claiming indemnification, be made by special legal counsel
agreed upon by the Board of Directors and such person. Unless a determination
has been made that indemnification is not permissible, and upon receipt of such
written affirmation as required by the Act from the person to be indemnified,
the Corporation shall make advances and reimbursements for expenses incurred by
a Director or Officer or other person indemnified under Section 5.03, if any, in
a proceeding upon receipt of an undertaking from him to repay the same if it is
ultimately determined that he is not entitled to indemnification. Such
undertaking shall be an unlimited, unsecured general obligation of the Director
or Officer and shall be accepted without reference to his ability to make
repayment. The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that a Director or Officer acted in such a manner as
to make him ineligible for indemnification.
Section 5.03. Indemnification of Other Persons. The Corporation may, to
a lesser extent or to the same extent that the Corporation is required to
provide indemnification to its Directors and Officers, provide indemnification
and make advances and reimbursements for expenses to (a) its
Bylaws of Ellett Brothers, Inc.
Page 12
<PAGE> 13
employees, agents, and advisors, (b) the directors, officers, employees, agents,
and advisors of its subsidiaries and predecessor entities, and (c) any person
serving any other legal entity in any capacity at the request of the
Corporation; and, if authorized by general or specific action of the Board of
Directors, may contract in advance to do so. The determination that
indemnification under this Section is permissible, the authorization of such
indemnification, and the advance or reimbursement, if any, and the evaluation as
to the reasonableness of expenses in a specific case, shall be made as
authorized from time to time by general or specific action of the Board of
Directors, which action may be taken before or after a claim for indemnification
is made, or as otherwise provided by the Act. No person's rights under Sections
5.01 or 5.02 of this Article shall be limited by the provisions of this Section
5.03.
Section 5.04. Indemnification Plan. The Board of Directors may from
time to time adopt an Indemnification Plan implementing the rights granted in
Section 5.01. This Indemnification Plan shall set forth in detail any other
mechanics for exercise of the indemnification rights granted in this Article V,
and shall be binding upon all parties except to the extent it is proven to be
inconsistent with these Bylaws or the Act. The absence of the adoption of such
plan, however, shall not vitiate the effectiveness of the rights conferred by
this Article V.
Section 5.05. Insurance. The Board of Directors may cause the
Corporation to purchase and maintain insurance on behalf of any person who is or
was a Director or Officer of the Corporation, or is or was serving at the
request of the Corporation as a Director or Officer of another corporation, or
as its representative in a partnership, joint venture, trust, or other
enterprise, or any other person indemnified or described as the subject of
potential indemnification in this Article V, against any liability asserted
against such person and incurred in any such capacity or arising out of such
status, whether or not the Corporation would have the power to indemnify such
person.
Section 5.06. Miscellaneous. Every reference in this Article V to
persons who are or may be entitled to indemnification shall include all persons
who formerly occupied any of the positions referred to and their respective
heirs, executors, and administrators. Special legal counsel selected to make
determinations under this Article V may be counsel for the Corporation.
Indemnification pursuant to this Article V shall not be exclusive of any other
right of indemnification to which any person may be entitled, including
indemnification pursuant to valid contract, indemnification by legal entities
other than the Corporation and indemnification under policies of insurance
purchased and maintained by the Corporation or others. However, no person shall
be entitled to indemnification by the Corporation to the extent prohibited by
the Act or to the extent he is indemnified by another, including an insurer;
provided, however, that the Corporation may make advances and reimbursements,
subject to appropriate repayment obligations, under Section 5.02 if the
effectiveness of such other indemnification will be delayed. The provisions of
this Article shall not be deemed to prohibit the Corporation from entering into
contracts otherwise permitted by law with any individuals or legal entities,
including those named above, for the purpose of conducting the business of the
Corporation. Indemnification of any person under this Article V shall be
implemented only in accordance with procedures and requirements mandated by the
Act and by plans, if any, adopted pursuant to Section 5.04. If any provision of
this Article V or its application to any person or circumstance is held invalid
by a court of competent jurisdiction, the invalidity shall not affect other
provisions or applications of this Article V, and to this end the provisions of
this Article V are severable.
Bylaws of Ellett Brothers, Inc.
Page 13
<PAGE> 14
ARTICLE VI
TRANSACTIONS
Section 6.01. Contracts. The Board of Directors may authorize any
Officer or Officers, or agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances.
Section 6.02. Loans. The Board of Directors may authorize any Officer
or Officers, or agent or agents, to contract any indebtedness and grant evidence
of indebtedness and collateral therefor in the name of an on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
Section 6.03. Checks, Drafts, etc. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by the Officer or Officers, or agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 6.04. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
Section 6.05. Voting of Shares in Other Corporations Owned By The
Corporation. Subject always to the specific directions of the Board of
Directors, any share or shares of stock issued by any other corporation and
owned or controlled by the Corporation may be voted at any shareholders' meeting
of the other corporation by the Chairman of the Board, the Chairman of the
Executive Committee, or the President of the Corporation if any of them is
present, or in their absence by any Vice-President of the Corporation who may be
present. Whenever, in the judgment of the Chairman of the Board, the Chairman of
the Executive Committee, or the President, or in their absence, of any
Vice-President, it is desirable for the Corporation to execute a proxy or give a
shareholders' consent in respect to any share or shares of stock issued by any
other corporation and owned or controlled by the Corporation, the proxy or
consent shall be executed in the name of the Corporation by the Chairman of the
Board, the Chairman of the Executive Committee, the President, or one of the
Vice-Presidents of the Corporation without necessity of any authorization by the
Board of Directors. Any person or persons designated in the manner above stated
as the proxy or proxies of the Corporation shall have full right, power and
authority to vote such share or shares of stock issued by the other corporation.
Bylaws of Ellett Brothers, Inc.
Page 14
<PAGE> 15
ARTICLE VII
STOCK
Section 7.01. Certificates for Shares. Certificates representing shares
of capital stock of the Corporation shall state upon the face thereof the name
of the person to whom issued, the number of shares, the fact that the
Corporation is organized under the laws of the State of South Carolina, and such
other matters as the Board of Directors may approve or as may be required by the
Act. Each certificate shall be signed by (a) any one of the Chairman of the
Board, the Chairman of the Executive Committee, the President, or a Vice
President, and (b) by any one of the Secretary or an Assistant Secretary. Where
a certificate is countersigned by (i) a Transfer Agent other than the
Corporation or its employee, or (ii) a registrar other than the Corporation or
its employee, any other signature on the certificate may be a facsimile. In case
any Officer whose facsimile signature has been placed upon a certificate shall
have ceased to be such Officer before such certificate is issued it may be
issued by the Corporation with the same effect as if he were such Officer at the
date of issue. All certificates for shares shall be consecutively numbered.
Certificates for shares of different classes, and different series within a
class, to the extent authorized, if any, shall bear appropriate designations to
identify the class or series as required by the Act.
Section 7.02. Stock Transfer Books. The name and address of the person
to whom the shares represented thereby are issued, with the number of shares and
date of issuance, shall be entered on the stock transfer books of the
Corporation. Such stock transfer books shall be maintained by the Secretary or
Transfer Agent as a record of the Corporation's shareholders, in a form that
permits preparation of a list of the names and addresses of all shareholders, in
alphabetical order by class of shares showing the number and class of shares
held by each shareholder.
Section 7.03. Transfer of Shares. Subject to the provisions of the Act
and to any transfer restrictions binding on the Corporation, transfer of shares
of the Corporation shall be made only on the stock transfer books of the
Corporation by the holder of record thereof or by his agent, attorney-in-fact or
other legal representative, who shall furnish proper evidence of authority to
transfer, upon surrender for cancellation of the certificate for such shares.
Unless the Board of Directors in its discretion has by resolution established
procedures, if any, by which a beneficial owner of shares held by a nominee may
be recognized by the Corporation as the owner thereof, the person in whose name
shares stand on the stock transfer books of the Corporation shall be deemed by
the Corporation to be the owner thereof for all purposes. The Corporation's
stock transfer books maintained by the Secretary or the Transfer Agent shall be
conclusive in all such regards absent a determination by the Board of Directors
of manifest error. All certificates surrendered to the Corporation for transfer
shall be canceled.
Section 7.04. New or Replacement Certificates. No new stock certificate
shall be issued until the former certificate for a like number of shares shall
have been surrendered and canceled, except that in case of a lost, destroyed, or
mutilated certificate a substitute certificate may be issued therefor upon: (a)
the making of an affidavit by the holder of record of the shares represented by
such certificate setting forth the facts concerning the loss, theft, or
mutilation thereof; (b) delivery of such bond and/or indemnity to the
Corporation as the Secretary or Board of Directors may prescribe or as may be
required by law; and (c) satisfaction of such other reasonable requirements
(which may include without limitation advertisement of the same) as the
Secretary or Board of Directors may prescribe. To the extent permitted by
applicable law (including Section 36-8-405 of the South Carolina Uniform
Bylaws of Ellett Brothers, Inc.
Page 15
<PAGE> 16
Commercial Code), a new certificate may be issued without requiring any bond
when, in the judgment of the Board of Directors, it is not imprudent to do so;
and without limiting the generality of the foregoing, the Secretary or the Board
of Directors may in their discretion waive (except as prohibited by law) any
bond requirement otherwise applicable where the aggregate fair market value of
the shares represented by such lost, stolen, or mutilated certificate is less
than five hundred dollars based upon indicia deemed reasonable by the waiving
party.
Section 7.05. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its stock transfer books
as the owner of shares to receive dividends or other distributions, and to vote
as such owner, and to hold liable for calls and assessments, if any, a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on the part
of any other person, whether or not the Corporation shall have express or other
notice thereof, except as otherwise provided by the Act or by procedures, if
any, established by resolution of the Board of Directors in its discretion by
which a beneficial owner of shares held by a nominee may be recognized as the
owner thereof. Such procedures, if any, shall also set forth the extent of such
recognition.
Section 7.06 Transfer Agent. The Board of Directors may, in its
discretion, appoint an independent institutional Transfer Agent to serve as
transfer agent and registrar for the Corporation's stock at the pleasure of the
Board. Such Transfer Agent shall assist the Corporation's Secretary and voting
inspectors in performance of their duties respecting shares of the Corporation's
stock. Such Transfer Agent shall maintain the Corporation's stock transfer books
and stock certificates in accordance with the Act, these Bylaws, instructions of
the Board of Directors, and customary procedures consistently applied. Such
Transfer Agent shall perform such other duties and shall be entitled to exercise
such other powers, as may be assigned to the Transfer Agent from time to time by
the Secretary or the Board of Directors.
Section 7.07 Transfer Restrictions. The Secretary shall have full power
and authority to place or cause to be placed on any and all stock certificates
restrictive legends to the extent reasonably believed necessary or appropriate
to ensure the Corporation's compliance with federal or any state's securities
laws, and to issue to any Transfer Agent stop transfer orders to effect
compliance with such legends.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Fiscal Year. The fiscal year of the Corporation shall be
established, and may be altered, by resolution of the Board of Directors from
time to time as the Board deems advisable.
Section 8.02. Dividends. The Board of Directors may from time to time
at any regular or special meeting (or by any other manner of action permitted by
these Bylaws and the Act) declare, and the Corporation may pay, dividends or
other distributions on its outstanding shares of stock in the manner and upon
the terms and conditions as the Board of Directors deems advisable and as may be
permitted by the Articles of Incorporation, the Act, and any other lawful
restrictions imposed upon the
Bylaws of Ellett Brothers, Inc.
Page 16
<PAGE> 17
Corporation. Such dividends or other distributions, when declared and permitted,
may be paid in cash, stock, property, or any other permitted means lawfully
declared by the Board of Directors.
Section 8.03. Seal. The seal of the Corporation shall be circular in
form and shall have inscribed thereon the name of the Corporation, the year of
its organization, and the words "Corporate Seal, State of South Carolina."
Section 8.04. Forms of Records. When consistent with good business
practices, any records of the Corporation may be maintained in other than
written form if such other form is capable of reasonable preservation and
conversion into written form within a reasonable time.
Section 8.05. Amendments. Any or all of these Bylaws may be altered,
amended, or repealed and new Bylaws may be adopted by the Board of Directors,
subject to the following: (a) the right of the shareholders to alter, adopt,
amend, or repeal Bylaws as provided in the Act; and (b) action of the
shareholders in adopting, amending, or repealing a particular Bylaw wherein the
Board of Directors is expressly prohibited by such shareholder action from
amending or repealing the particular Bylaw acted upon by the shareholders. The
shareholders may amend or repeal any or all of these Bylaws even though these
Bylaws may also be amended or repealed by the Board of Directors. Any notice of
a meeting of shareholders at which Bylaws are to be adopted, amended, or
repealed shall state that the purpose, or one of the purposes, of the meeting is
to consider the adoption, amendment, or repeal of Bylaws and contain or be
accompanied by a copy or summary of the proposal.
Section 8.06. Severability. If any provision of these Bylaws or the
application thereof to any person or circumstances shall be held invalid or
unenforceable to any extent by a court of competent jurisdiction, such provision
shall be complied with or enforced to the greatest extent permitted by law as
determined by such court, and the remainder of these Bylaws and the application
of such provision to other persons or circumstances shall not be affected
thereby and shall continue to be complied with and enforced to the greatest
extent permitted by law.
Section 8.07 Usage. In construing these Bylaws, feminine or neuter
pronouns shall be substituted for masculine forms and vice versa, and plural
terms shall be substituted for singular forms and vice versa, in any place in
which the context so requires. The section and paragraph headings contained in
these Bylaws are for reference purposes only and shall not affect in any way the
meaning or interpretation of these Bylaws. Terms such as "hereof", "hereunder",
"hereto", and words of similar import shall refer to these Bylaws in the
entirety and all references to "Articles", "Paragraphs", "Sections", and similar
cross references shall refer to specified portions of these Bylaws, unless the
context clearly requires otherwise. Terms used herein which are not otherwise
defined shall have the meanings ascribed to them in the Act. All references to
statutory provisions shall be deemed to include corresponding sections of
succeeding law.
The foregoing are certified to be the true and complete Amended and
Restated Bylaws of the Corporation as adopted by the incorporator and the
initial Board of Directors as of June 30, 1992 and amended and restated by the
Board of Directors effective April 5, 1999.
/s/ E. Wayne Gibson
----------------------------------------
Secretary
(Corporate Seal)
Bylaws of Ellett Brothers, Inc.
Page 17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ELLETT BROTHERS, INC. FOR THE THREE MONTHS ENDED MARCH
31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 232
<SECURITIES> 0
<RECEIVABLES> 23,061
<ALLOWANCES> (680)
<INVENTORY> 36,928
<CURRENT-ASSETS> 61,160
<PP&E> 15,531
<DEPRECIATION> 7,629
<TOTAL-ASSETS> 70,713
<CURRENT-LIABILITIES> 16,564
<BONDS> 5,699
0
0
<COMMON> 9,652
<OTHER-SE> 13,804
<TOTAL-LIABILITY-AND-EQUITY> 70,713
<SALES> 38,946
<TOTAL-REVENUES> 38,946
<CGS> 32,198
<TOTAL-COSTS> 32,198
<OTHER-EXPENSES> 5,292
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (517)
<INCOME-PRETAX> 1,072
<INCOME-TAX> 392
<INCOME-CONTINUING> 679
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 679
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
