-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Od0Kf+73qgDRUKNMwA8U4HFXe+gcO6IO9c8Y3aEK9zN74mSbXNF0NBYtnLci0UvF pfs3c2KfO2pidTcT44950w== 0000950144-98-012810.txt : 19981118 0000950144-98-012810.hdr.sgml : 19981118 ACCESSION NUMBER: 0000950144-98-012810 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELLETT BROTHERS INC CENTRAL INDEX KEY: 0000902055 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISC DURABLE GOODS [5090] IRS NUMBER: 570957069 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21632 FILM NUMBER: 98750132 BUSINESS ADDRESS: STREET 1: 267 COLUMBIA AVE CITY: CHAPIN STATE: SC ZIP: 29036 BUSINESS PHONE: 8033453751 MAIL ADDRESS: STREET 1: P O BOX 128 CITY: CHAPIN STATE: SC ZIP: 29036 10-Q 1 ELLETT BROTHERS FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number: 0-21632 ELLETT BROTHERS, INC. (Exact name of Registrant as specified in its charter) South Carolina 57-0957069 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 267 Columbia Avenue, Chapin, South Carolina 29036 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (803) 345-3751 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of September 30, 1998, 4,945,018 shares of no par value common stock of the registrant were outstanding. Page 1 of 14 pages 2 Form 10-Q Page 2 ELLETT BROTHERS, INC. AND SUBSIDIARIES SEPTEMBER 30, 1998 INDEX Page ---- Part I. Financial Information Item 1. Financial Statements Condensed consolidated balance sheets as of September 30, 1998 and December 31, 1997 3 Condensed consolidated statements of income for the three months and nine months ended September 30, 1998 and 1997 4 Condensed consolidated statements of cash flows for the nine months ended September 30, 1998 and 1997 5 Notes to condensed consolidated financial statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 12 Page ---- Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 13 3 Form 10-Q Page 3 PART I. FINANCIAL INFORMATION Item I. Financial Statements ELLETT BROTHERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, Dec. 31, 1998 1997 -------- -------- ASSETS (unaudited) (see note) Current assets: Cash and cash equivalents $ 114 $ 395 Accounts receivable, less allowance for doubtful accounts of $831 and $769 at September 30, 1998 and December 31, 1997, respectively 24,411 19,201 Other accounts receivable 980 1,820 Inventories 36,129 31,535 Prepaid expenses 1,872 1,488 Deferred income tax asset 538 534 -------- -------- Total current assets 64,044 54,973 -------- -------- Property, plant and equipment, at cost, less accumulated depreciation 7,222 6,703 Other assets: Intangible assets, at cost, less accumulated amortization 1,745 1,936 Other assets 2 2 Total other assets 1,747 1,938 -------- -------- $ 73,013 $ 63,614 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable, trade $ 9,237 $ 4,424 Accrued expenses 1,498 1,884 Current portion of long-term debt 554 525 -------- -------- Total current liabilities 11,289 6,833 -------- -------- Revolving credit facility 31,265 26,788 Long-term debt 5,947 6,399 Non-current deferred income tax liability 211 258 Shareholders' equity: Preferred stock, no par value (5,000 shares authorized, no shares issued or outstanding) Common stock, no par value (20,000 shares authorized, 4,945 and 5,121 shares issued and outstanding as of September 30, 1998 and December 31, 1997, respectively) 12,119 12,833 Unearned compensation (92) (177) Unrealized gain on IRB reserve 57 21 Subscription receivable (418) (452) Retained earnings 12,635 11,111 -------- -------- Total shareholders' equity 24,301 23,336 -------- -------- $ 73,013 $ 63,614 ======== ========
The accompanying notes are an integral part of these condensed consolidated financial statements. Note: The balance sheet at December 31, 1997 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See Note 5 on page 7 entitled Comprehensive Income. 4 Form 10-Q Page 4 ELLETT BROTHERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (in thousands, except per share data)
Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ---------------------------- 1998 1997 1998 1997 --------- --------- --------- --------- Sales $ 39,625 $ 41,326 $ 105,513 $ 112,798 Cost of goods sold 32,398 34,484 86,633 96,936 --------- --------- --------- --------- Gross profit 7,227 6,842 18,880 15,862 Selling, general and administrative expenses 5,206 5,421 14,554 16,372 --------- --------- --------- --------- Income (loss) from operations 2,021 1,421 4,326 (510) Other income (expenses): Interest income 111 115 366 365 Interest expense (724) (945) (1,866) (2,535) Other income (expense) (6) (13) 36 (6) --------- --------- --------- --------- Income (loss) before income taxes 1,402 578 2,862 (2,686) Income tax expense (benefit) 518 113 1,027 (917) --------- --------- --------- --------- Net income (loss) $ 884 $ 465 $ 1,835 $ (1,769) ========= ========= ========= ========= Basic and diluted earnings (loss) per common share $ 0.17 $ 0.09 $ 0.36 $ (0.34) ========= ========= ========= ========= Weighted average shares outstanding 5,062 5,131 5,100 5,154 ========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Form 10-Q Page 5 ELLETT BROTHERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)
Nine Months Ended September 30, ---------------------------- 1998 1997 --------- --------- Cash flows from operating activities: Net income (loss) $ 1,835 $ (1,769) Adjustments to reconcile net income to net cash used in operating activities: Non-cash charges to income (loss) 833 1,028 Changes in assets and liabilities: Accounts receivable (4,433) (9,279) Inventories (4,594) 4,985 Prepaid expenses (384) 2,209 Accounts payable, trade 4,813 591 Accrued expenses (386) (186) --------- --------- Net cash used in operating activities (2,316) (2,421) --------- --------- Net cash used in investing activities (1,064) (905) --------- --------- Cash flows from financing activities: Gross borrowings on revolving credit facility 107,038 110,329 Gross repayments on revolving credit facility (102,561) (106,055) Principal payments on capital lease obligations (8) (39) Principal payments on long-term debt (379) (342) Exercise of stock options by certain executive officers 0 24 Subscription receivable 34 0 Common stock repurchase (714) (219) Dividends to shareholders (311) (309) --------- --------- Net cash provided by financing activities 3,099 3,389 --------- --------- Net (decrease) increase in cash and cash equivalents (281) 63 Cash and cash equivalents: Beginning of period 395 139 --------- --------- End of period $ 114 $ 202 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Form 10-Q Page 6 ELLETT BROTHERS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1998 (in thousands, except per share data) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements, which include the accounts of Ellett Brothers, Inc. and subsidiaries (the "Company"), have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 1998 are not necessarily indicative of the results that may be expected for the full year ending December 31, 1998. For further information, refer to the financial statements and footnotes thereto included in Ellett Brothers, Inc.'s annual report on Form 10-K for the year ended December 31, 1997. 2. INVENTORIES Inventories consisted of the following: September 30, December 31, 1998 1997 ------- ------- Finished goods $35,202 $30,406 Raw materials 737 885 Work in process 190 244 ------- ------- $36,129 $31,535 ======= ======= 3. COMMON AND PREFERRED STOCK In January 1997, the Company issued 112 shares of common stock to two executives of the Company for $475. The market value of these shares on the measurement date was $559. The shares carry restrictions over their transferability which will be lifted over a two year period ending in January 1999. The difference between the market value and the price at which the shares were sold to the executives is reflected as unearned compensation and is being amortized over a two year period. In connection with the issuance of these shares, the Company received promissory notes totaling $452 and $23 in cash from the executives. Balances due under the promissory notes, which bear interest at 5.6%, payable semi-annually, become due on a pro-rata basis as the shares are sold by the executives. In June of 1998, the Company reacquired 34 shares from one of the former officers and recorded it using the cost method of accounting for treasury stock. The proceeds of this was used to reduce the promissory note. The balances on the notes at September 30, 1998 and December 31, 1997 were $418 and $452, respectively, which are shown as an offset to equity. The Company reacquired 142 shares in September of 1998, and 46 and 10 shares in June and December of 1997, respectively, and recorded it using the cost method of accounting for treasury stock. In addition, the Company reacquired 449 shares in October of 1998. Additionally, the Board of Directors of the Company is authorized to issue, at its discretion, up to 5,000 shares of preferred stock in one or more series with the number of shares, designation, relative rights and preferences, and limitations to be determined by resolution of the Board of Directors. However, no share of stock of any class shall be subject to preemptive rights or have cumulative voting provisions. 4. EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No. 128 is designed to improve the earnings per share information provided in financial statements by simplifying the prior computational guidelines, revising the disclosure requirements, and increasing comparability of earnings per share data on an international basis. This pronouncement, which became 7 Form 10-Q Page 7 effective for periods ended after December 15, 1997, required the restatement of earnings per share data for all periods presented in the form of basic earnings per share and diluted earnings per share. The Company had no options outstanding or other dilutive securities during the year ended December 31, 1997 or the nine month period ended September 30, 1998. The earnings per share calculations reported by the Company equal basic and diluted earnings per share calculated under the provisions of SFAS No. 128. Basic and diluted earnings per share for the quarters and nine months ended September 30, 1998 and 1997, and the year ended December 31, 1997 is earnings divided by the weighted average shares outstanding. 5. COMPREHENSIVE INCOME On January 1, 1998 the Company adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income." As required by the SFAS No. 130, prior year information has been modified to conform with the new presentation. Comprehensive income includes net income and all other changes to the Company's equity, with the exception of transactions with shareholders ("other comprehensive income"). The Company's only components of other comprehensive income relate to unrealized gains and losses on available for sale securities. The Company's comprehensive income for the nine month periods ended September 30, 1998 was $1,858 and a net loss of $1,769 for 1997. Information concerning the Company's other comprehensive income for the nine month periods ended September 30, 1998 and 1997 is as follows: 1998 1997 ---- ---- Net unrealized gains on available for sale securities $ 36 $-- Income tax expense relating to unrealized gains on available for sale securities (13) -- ---- ---- Other comprehensive income $ 23 $-- ==== ==== 6. Closing of Subsidiary Operation In June 1997, Executive Management and the Board of Directors concluded that ongoing operation of the Safesport Manufacturing Company subsidiary was not in the best interest of the Company, and began liquidation of this subsidiary. An after tax reserve of $2,725, or $0.53 per share, was established as of June 30, 1997 for the purpose of this liquidation. The reserve was reviewed as of September 30, 1997 and adjusted to reflect the liquidation efforts through that point. The reserves were adjusted to the values noted below, resulting in $208 of net income in the three months ended September 30, 1997. The reserve was composed of the following components as of June 30, 1997 and as of September 30, 1997. June 30, 1997 September 30, 1997 ------------- ------------------ Inventory Reserve $ 3,548 $ 1,246 Accounts Receivable Reserve 207 580 Accrued Expenses 255 10 Current Tax Benefit (1,285) (688) ------- ------- Total Reserve $ 2,725 $ 1,148 ======= ======= The results (unaudited) for the three and nine months ended September 30, 1997, without the impact of the Safesport subsidiary, would have been: Three Months Nine Months ------------ ----------- Sales $ 36,946 $104,909 Gross Margin 6,341 18,062 Operating Income 1,275 3,886 Net Income 457 1,502 Earnings Per Share $ 0.09 $ 0.29 8 Form 10-Q Page 8 7. New Accounting Pronouncement During 1997, the Financial Accounting Standards Board issued the new Statement of Financial Accounting Standards (SFAS), No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 establishes guidelines in reporting information about operating segments in annual financial statements and requires selected information about operating segments. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. This standard will be effective for the Company's 1998 fiscal year. This pronouncement is not expected to have a material impact on the Company's financial statements. 9 Form 10-Q Page 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis provide information that management believes is relevant to an assessment and understanding of the operations and financial condition of Ellett Brothers, Inc. and its subsidiaries (the "Company"). This discussion and analysis should be read in conjunction with the financial statements and related notes presented in the Company's annual report on Form 10-K for the year ended December 31, 1997, and the condensed consolidated financial statements and related notes included in this Form 10-Q. Sales for the three months ended September 30, 1998 were $39.6 million. This compares to $36.9 million last year, excluding the sales from Safesport Manufacturing Company which was liquidated in 1997, for an increase of 7.3%. For the nine months ended September 30, 1998, sales were $105.5 million, as compared to $104.9 million for the same period in 1997, excluding Safesport from the 1997 results, for an increase of 0.6%. Sales reported for the three and nine months ended September 30, 1997 were $41.3 million and $112.8 million, respectively, which included amounts from Safesport. Total sales in the distribution business increased 8.6% in the three months ended September 30, 1998, as compared to the same period in 1997. Marine accessory products continued to achieve record sales and had a 17.7% increase, as compared to 1997. Our camping, archery and outdoor accessories sales experienced a 15.9% increase over 1997. Our hunting and shooting sports sales had a 2.8% increase compared to 1997. Sales from the subsidiaries, excluding Safesport from prior years numbers, decreased 7.1% for the three months ended September 30, 1998, as compared to last year. While we benefited from a shipment we had expected to occur in the second quarter falling in the third quarter, sales were negatively impacted by the delay of an expected order which we believe will be in the fourth quarter. Gross profit was $7.2 million (18.2% of sales) for the three months ended September 30, 1998. This compares to $6.3 million (17.2% of sales), excluding Safesport, for the same period in 1997, an increase of $900,000. Gross profit for the nine months ended September 30, 1998 was $18.9 million (17.9% of sales), as compared to $18.1 million (17.2% of sales), excluding Safesport, for the same period in 1997, an increase of $800,000. Gross profits reported for the three and nine months ended September 30, 1997 were $6.8 million (16.6% of sales) and $15.9 million (14.1% of sales), respectively, which included amounts from Safesport. Gross margins in our distribution business for the three months ended September 30, 1998 were up 114 basis points over the same period in 1997. For the nine months ended September 30, 1998, they were up 53 basis points, as compared to the same period in 1997. Our subsidiaries, excluding Safesport for the three months and nine months ended September 30, 1998 and 1997, had a gross margin increase of 301 basis points and 733 basis points, respectively, as compared to the same periods in 1997. We have continued to work to improve manufacturing efficiencies in the subsidiaries, which have resulted in improved margins. Selling, general and administrative (SG&A) expenses for the three months ended September 30, 1998 were $5.2 million (13.1% of sales), as compared to $5.1 million (13.7% of sales), excluding Safesport, for the same period in 1997, an increase of $100,000 or 2.0%. Selling, general and administrative expenses for the nine months ended September 30, 1998 were $14.6 million (13.8% of sales), as compared to $14.2 million (13.5% of sales), excluding Safesport, for the same period in 1997, an increase of $400,000, or 2.8%. SG&A expenses reported for the three and nine months ended September 30, 1997 were $5.4 million (13.1% of sales) and $16.4 million (14.5% of sales), respectively, which included amounts from Safesport. Interest expense was $724,000 (1.8% of sales) for the three months ended September 30, 1998, as compared to $945,000 (2.3% of sales) for the same period in 1997, a decrease of $221,000, or 23.4%. Interest expense for the nine months ended September 30, 1998 was $1.9 million (1.8% of sales), as compared to $2.5 million (2.3% of sales) for the same period in 1997, a decrease of $669,000, or 26.4%. Reduced borrowings, along with lower interest rates, resulted in lower interest expense. Income tax expense for the three months ended September 30, 1998 was $518,000, as compared to $113,000 for the same period in 1997. Income tax expense was $1,027,000 for the nine months ended September 30, 1998, as compared to a tax benefit of $917,000 for the same period in 1997. The effective tax rates for the three months and nine months ended September 30, 1998 were 36.9% and 35.9%, respectively. Net income for the third quarter was $884,000, or $0.17 per share, as compared to $458,000, or $0.09 per share, for the same period in 1997, excluding the impact of Safesport from the 1997 amounts. Net income and earnings per share reported for the third quarter of 1997, including Safesport's results, were $465,000 and $0.09 per share, respectively. 10 Form 10-Q Page 10 Excluding the impact of Safesport from the 1997 amounts, for the nine months ended September 30, 1998, net income was $1,835,000, or $0.36 per share, as compared to net income of $1,502,000, or $0.29 per share, for the same period in 1997, an increase of 22.2%. The net loss and loss per share reported for the nine months ended September 30, 1997, including Safesport's impact, were $1,769,000 and $0.34 per share, respectively. SEASONALITY AND QUARTERLY INFORMATION Historically, the Company's business has been seasonal. The sales of hunting and shooting sports products, as well as camping, archery and outdoor accessories, usually increase in the third quarter of each year, and peak early in the fourth quarter. Sales of marine accessories usually increase in the first quarter of each year, then peak midway through the second quarter and continue at similar levels through the first half of the third quarter. Operations of the subsidiaries are very seasonal, producing significantly higher sales and gross profit during the third and fourth quarters, with losses generated in the first and second quarters. The Company's quarterly operating results may also be affected by a wide variety of factors, such as legislative and regulatory changes, competitive pressures, and general economic conditions. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity are results of operations and borrowings under its revolving credit facility. Pursuant to its operating strategy, the Company maintains very minimal cash balances and is substantially dependent on, among other things, the availability of adequate working capital financing to support inventories and accounts receivable. During the nine months ended September 30, 1998, net cash used in operating activities was $2.3 million as compared to $2.4 million for the same period in 1997. The net cash used in operating activities in 1998 above the cash generated from operations and higher payables was used for inventories and higher receivables at the end of the quarter. The net cash used in investing activities in 1998 of $1.0 million was primarily due to the purchase of computer software. During the nine months ended September 30, 1998, the Company obtained the additional cash needed to fund operations by increasing borrowings under its revolving credit facility by $4.5 million. The Company also paid dividends of $310,000 in the nine months ended September 30, 1998. Working capital requirements for the Company's traditional distribution business have historically been somewhat seasonal in nature. Accounts receivable have generally increased in the first quarter primarily because of the customary industry practice during the first quarter of each year whereby the Company has offered to its customers extended payment terms for purchases of certain products, thereby extending the payment due dates for a portion of its sales into the third and fourth quarters of the year. Accounts receivable have generally increased further early in the third quarter as additional 60 to 90 day extended terms have been offered to stimulate sales in advance of the Company's highest volume quarters. Accounts receivable usually decrease in the fourth quarter as payments are received on prior quarters' sales and a larger percentage of current sales are made with shorter payment terms. Inventory generally builds during the first two quarters and peaks in the third quarter to support the higher sales volumes of the third and fourth quarters. In the fourth quarter, the higher sales volumes have traditionally served to reduce inventory to its lowest point at year-end. Working capital requirements are also seasonal for the subsidiaries. Inventories increase during the first half of the year to accommodate the sales expected in the third and fourth quarters. Accounts receivable decline to their lowest point in the second quarter just before the sales increase in the second half of the year. Principal maturities on the Company's industrial revenue refunding bonds began in 1995. Remaining payments for 1998 will be $137,500, and maturities for 1999 and 2000 will be $567,000 and $617,000, respectively. The annual interest charges on the Company's industrial revenue bonds, at a fixed rate of 7.5%, will be $145,000 for the remainder of 1998, and $568,000 and $525,000 for 1999 and 2000, respectively. Management believes that cash generated from operations and available under the Company's revolving credit facility, will be sufficient to finance its operations, expected working capital needs, capital expenditures, debt service requirements, and business acquisitions for the remainder of 1998 and the foreseeable future. YEAR 2000 ISSUE During the period ended September 30, 1998, the Company continued the efforts to upgrade its computer equipment and information systems. These upgrades are expected to be operational in the first half of 1999. The total cost of the computer upgrades, including 1996, 1997, and 1998 expenditures, is expected to be approximately $3.8 million, of which approximately $1.1 million is planned for 1998. The Company has received documentation from the vendor 11 Form 10-Q Page 11 stating that these systems are Year-2000 compliant. The Company has a Year-2000 plan in place which involves an audit and test of all internal systems for compliance as well as a survey of all suppliers for compliance. Non-compliant internal systems will be upgraded, replaced, or taken out of service. Suppliers will be assessed as to their compliance, with the idea of putting contingency plans in place to deal with any non-compliant suppliers. With respect to the audit and testing of the internal systems for compliance, as well as the suppliers' compliance, the Company has spent approximately $2,300 on the Year-2000 project through the nine months ended September 30, 1998. Estimated costs for the remainder of 1998 are $15,000. For 1999, the Company is estimating the costs associated with the Year-2000 project to be $25,000. A further assessment of the costs will be made after all the information is received from the suppliers and the testing of the internal systems is complete. Advisory Note Regarding Forward-Looking Statements Certain of the statements contained in Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations) that are not historical facts are forward-looking statements subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. The Company cautions readers of this report on Form 10-Q that such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Although the Company's management believes that their expectations of future performance are based on reasonable assumptions within the bounds of their knowledge of their business and operations, there can be no assurance that actual results will not differ materially from their expectations. Factors which could cause actual results to differ from expectations include, among other things, reductions in, or lack of growth of, firearm sales; potential negative effects of existing and future gun control legislation on consumer demand for firearms; the potential negative impact on gross margins from shifts in the Company's product mix toward lower margin products; seasonal fluctuations in the Company's business; competition from national, regional and local distributors and various manufacturers who sell products directly to the Company's customer base; competition from sporting goods mass merchandisers or "superstores" which sell in competition with the Company's primary customer base; exposure to product liability lawsuits; the challenges and uncertainties in the implementation of the Company's expansion and development strategies; the Company's dependence on key personnel; and other factors described in this report and in other reports filed by the Company with the Securities and Exchange Commission. Item 3. Quantitative and Qualitative Disclosures About Market Risk Pursuant to Securities and Exchange Commission Release 33-7386 (January 31, 1997), the disclosure requirement contemplated by Item 305 of Regulation S-K in response to this Item 3 is not currently mandated for the Company. 12 Form 10-Q Page 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the three months ended September 30, 1998. 13 Page 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized. Ellett Brothers, Inc. Date: November 13, 1998 By: /s/ Joseph F. Murray, Jr. ----------------------------------------------- Joseph F. Murray, Jr. President, Chief Executive Officer and Director By: /s/ George E. Loney ----------------------------------------------- George E. Loney Chief Financial Officer (principal financial and accounting officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ELLETT BROTHERS, INC. FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 114 0 26,222 831 36,129 64,044 14,459 7,237 73,013 11,289 5,947 0 0 11,701 12,600 73,013 105,513 105,513 86,633 86,633 14,554 0 (1,866) 2,862 1,027 1,835 0 0 0 1,835 0.36 0.36
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