<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(Mark One)
     [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
           EXCHANGE ACT OF 1934

                   For the Fiscal Year Ended December 31, 2000
                                       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 Number)


     267 COLUMBIA AVENUE, CHAPIN, SOUTH CAROLINA          29036
     (Address of principal executive offices)             (Zip Code)

       Registrant's telephone number, including area code: (803) 345-3751

           Securities registered pursuant to section 12(b) of the Act:
                                      NONE

           Securities registered pursuant to section 12(g) of the Act:

                           COMMON STOCK (NO PAR VALUE)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of February 28, 2001 there were 4,082,968 shares of common stock of the
Registrant outstanding, and the aggregate market value of the shares of common
stock held by nonaffiliated shareholders (based upon the closing price for the
stock on the NASDAQ SmallCap Market on February 28, 2001 was $9,186,678).



                                  Page 1 of 34
<PAGE>   2


ADVISORY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain of the statements contained in PART I, Item 1 (Business) and in PART II,
Item 7 (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 Annual Report on Form 10-K
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 lawsuits; the Company's ability to
obtain liability insurance coverage for firearms related claims; 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.

PART I

ITEM 1.    BUSINESS

                                   BACKGROUND

GENERAL

Ellett Brothers, Inc. and subsidiaries (the "Company") is a nationwide marketer
and supplier of natural outdoor sporting goods products. The Company markets and
distributes a broad line of products and accessories for hunting and shooting
sports, marine, camping, archery, and other related outdoor activities. The
Company's product line, which contains over 60,000 stock-keeping units (SKU's),
includes firearms, ammunition, marine electronics, small marine engine
replacement parts, electric trolling motors, binoculars, cutlery, archery
equipment, leather goods, flashlights, tents, lanterns, sportsmen's gifts,
camping accessories, decorative boxes, licensed nostalgia items, and a variety
of other natural outdoor sporting goods products. During fiscal years 2000,
1999, and 1998, revenues from sales of firearms and ammunition comprised
approximately 46.9%, 52.6%, and 50.7%, respectively, of the Company's revenues.
The Company features such recognized brand names as Remington, Ruger,
Winchester, Daisy, Rocky Shoes and Boots, LaCrosse, Motorguide, Coleman,
Rubbermaid, Leupold, Easton, Simmons, Federal, and Eureka. The Company's mailing
address is 267 Columbia Avenue, Chapin, South Carolina, 29036, and its telephone
number is (803) 345-3751.

In late 1988, the Company began broadening its product line from primarily
hunting and shooting goods to include marine accessories. The Company's marine
accessories business has proven to be a natural extension of Ellett Brothers'
("Ellett") traditional sporting goods business with sales increasing from $2.6
million in 1989 to $26.3 million in 2000. In 1994, Ellett formed a new sales
group to specifically target archery retailers. The archery group has shown
continued growth since its inception, reaching $9.7 million in sales in 2000.

During 1995, Ellett implemented its acquisition strategy of acquiring assets of
entities with products that complement Ellett's existing product lines as well
as opening the possibility of new markets or channels of distribution. As a
result, substantially all of the assets of Evans Sports, Inc. ("Evans") and
Vintage Editions, Inc. ("Vintage") were acquired in April and September 1995,
respectively. Evans is a manufacturer of outdoor sporting accessories and wooden
nostalgia boxes. Vintage is a manufacturer of specialty licensed nostalgia
products. While their products are similar in nature, they are very distinct in
quality and marketing approaches. The Company expects to continue to seek
expansion of the wood products of both companies to provide additional sales to
both current and new customers. All of the assets of Evans and Vintage were
transferred at the time of each respective purchase to wholly-owned subsidiaries
that were incorporated in the State of South Carolina.

On October 8, 1999, the Company purchased the assets of Archery Center
International, Inc. ("ACI") of Monroe, Michigan. ACI is a distributor of archery
products. The Company expects to grow their archery products business by
offering additional product lines to existing customers. At the time of
purchase, all of the assets were transferred to a wholly-owned subsidiary that
was incorporated in the State of South Carolina.


                                  Page 2 of 34
<PAGE>   3

                             DESCRIPTION OF BUSINESS


MARKETING

The Company currently sells to more than 19,000 active customer accounts
(defined as customers who have made a purchase from the Company within the last
twelve months), the majority of which are independent natural outdoor sporting
goods retailers (as opposed to mass merchandisers). The Company's largest
customer was responsible for approximately 3.3% of 2000 sales, and sales to the
Company's ten largest customers represented approximately 6.9% of 2000 sales.
Distribution channels targeted by the Company include specialty pro shop
retailers of archery products, industry organization groups and larger sporting
goods stores.

Ellett's customer base in its traditional distribution business is organized
into individual business units. Each sales associate, after ten weeks of
intensive training, is promoted to manager of an individual business unit
serving a designated customer base. Each business unit manager participates in
the development of an annual profit plan, receives monthly profit and loss
statements, and is accountable for the performance of the business unit.
Business unit managers continually update each customer's file with product,
sales and other customer-specific information to tailor the Company's services
to better suit the customer's needs. Customers regularly contact their personal
business unit managers to obtain current information regarding compatible
products and accessories, product warranties, and product availability.

The Company believes this organizational structure is unique in its industry
because the business unit managers are incentivized to develop strong one-on-one
relationships with their customers and to enhance their sales, marketing, and
management skills. The Company believes this enhances the overall productivity
of each business unit.

Ellett's commitment to ongoing training and professional development of its
business unit managers is a key feature of the organization. Ellett trains each
business unit manager to be a constant source of product information for that
business unit's customers. Management believes this approach is unique to
Ellett. Each business unit manager receives 500 hours of training in the
manager's first year and approximately 200 hours of training each year
thereafter. Prior to any customer contact, each business unit manager must
successfully complete an intensive 10 week training, testing, and analysis
process, which addresses product knowledge and a broad range of selling and
management skills. Every business unit manager begins each day with a training
meeting designed to build on earlier training and provide updates on Company
direction, product promotions, and new marketing opportunities. In addition,
periodic career enhancement classes provide in-depth training on a wide range of
topics.

Because of Ellett's business unit approach and state-of-the-art
telecommunications technology, Ellett does not need an outside sales force in
our traditional distribution business. Ellett's business unit approach, combined
with our teleservicing capabilities, enables us to communicate frequently with
our entire customer base, providing timely updates on market developments, new
products, promotions, and order status. In 2000, Ellett averaged approximately
4,200 outbound customer contacts and 3,800 inbound customer contacts daily, with
a collective total of 370 hours of telephone time daily. Ellett believes that it
is capable of contacting its entire customer base in two days rather than the
weeks typically required by a traditional field sales force.

Evans and Vintage rely on an inside marketing staff as well as independent sales
representatives. The products of the subsidiaries are also cross-marketed to
traditional Ellett customers by Ellett's business unit managers to help generate
additional sales for the subsidiaries.

A key part of Ellett's marketing strategy is the production of complete annual
product catalogs, as well as frequent promotional mini-catalogs. Annual catalogs
are produced for each of our major product groups, including hunting and
shooting sports products, archery products, marine accessories, Evans' products,
and Vintage's products. The hunting and shooting, archery, and marine catalogs
are produced in two separate formats. The Ellett version is designed to be used
at a retail sales counter by store employees as a reference tool and sales
guide. Ellett also sells catalogs to its customer base with the retail store's
name on the front cover, which the retailers generally give to their best
customers. Management believes that through this process our catalogs are found
in the hands of the most active consumers in the marketplace. In 2000, we
distributed over 96,000 copies of our annual catalogs.

In 2000, Ellett's distribution business produced 40 different mini-catalogs
(periodic promotional flyers) for our hunting and shooting sports products,
archery products, and marine accessory products with 43% of our sales being from
items featured in these mini-catalogs. These promotional, business-to-business
mail order vehicles are designed to focus our customers and business unit
managers on a narrow range of products, including special values, new products,
and upcoming seasonal items for a short period of time.


                                  Page 3 of 34
<PAGE>   4

DISTRIBUTION

Ellett's ability to ship orders in a timely fashion is an important element in
maintaining successful customer relationships. Our distribution centers pride
themselves on generally having customer orders ready for shipment within six
business hours of the receipt of an order, resulting in virtually no backlog of
orders. Consequently, Ellett serves as a "just-in-time" inventory supplier to
many of our distribution business customers. Our electronic inventory management
system enables us to manage over 60,000 stock keeping units, minimizing
out-of-stock situations and provides what we believe to be one of the highest
fulfillment rates in our industry.

The Company utilizes United Parcel Service for delivery services to the majority
of its customers, while a few customers pick up merchandise. The use of UPS has
allowed the Company to avoid the substantial fixed costs associated with
regional warehouse locations and a fleet of trucks. Following the 1997 UPS
strike, management reviewed this relationship and determined that the benefits
exceed the risks of any future strike.

PURCHASING AND SUPPLIERS

The Company currently purchases products from approximately 1,000 manufacturers
and other suppliers. The Company's four largest suppliers accounted for
approximately 30.7%, 28.2%, and 27.7%, of the Company's purchases during 2000,
1999, and 1998, respectively. Management believes that the Company's size,
reputation, prompt payment history, and overall knowledge of independent
sporting goods retailers have contributed to strong relationships with its
suppliers. The majority of the suppliers provide advertising allowances to the
Company to assist in the promotion and sale of their products, via the catalogs
and mini-catalogs, while many are actively involved in on-site promotion efforts
at Ellett.

Ellett's purchasing associates play a key role in merchandising. They are
responsible for the initial buying decisions, including selection and pricing,
and coordination of supplier promotional efforts. All distribution products are
evaluated on a 2 to 3 week cycle and must perform to guidelines established by
the Company. Raw materials for the manufacturing and assembly operations are
evaluated as each major purchase cycle is encountered. Purchasing associates are
regularly involved in reviewing new products or current product performance for
the addition or discontinuance of items.

COMPETITION

The industry in which Ellett competes is extremely competitive. The principal
methods of competition within the natural outdoor sporting goods distribution
industry include purchasing convenience, customer service, inventory selection,
price, and rapid customer order turnaround. Ellett believes that it
differentiates itself by its strategies of servicing each customer through that
customer's own personal business unit manager, providing customers with ongoing
product and market information, after-the-sale follow-up, carrying one of the
most extensive selections of inventory in its various product categories, and
having customer orders generally ready for shipment within six business hours of
the order being received by a business unit manager.

Ellett's customer base for its distribution business consists almost exclusively
of independent sporting goods retailers located across the United States. Ellett
competes with other national distributors, various regional and local
distributors and various manufacturers who sell certain products directly to
these retailers. Ellett has identified approximately 60 distributors, of whom
approximately six are national in scope, competing in the hunting and shooting
sports, camping and archery products and outdoor accessories markets, and has
identified approximately 50 other distributors competing in the marine
accessories markets. Certain of these competitors may have substantially greater
financial resources, larger sales and support staffs and greater purchasing
power than Ellett. Ellett's ability to compete successfully depends on factors
both within and outside its control, including its ability, if necessary, to
support reductions in selling prices through reductions in operating expenses,
the timing and success of product introductions, access to high demand products,
successful inventory management, suitable product quality, reliability and
price, and general economic conditions. Ellett also indirectly competes with
sporting goods mass merchandisers or "superstores," to which Ellett generally
does not sell, but which generally sell in competition with Ellett's primary
customer base of independent sporting goods retailers.

Although our distribution business shares customers with our subsidiaries,
competition in the markets of the subsidiaries differs from Ellett's traditional
distribution business. Management believes Evans and Vintage hold the majority
of the market for nostalgic and licensed decorative boxes, with a few smaller
companies competing for market share. Evans' customer base is dominated by mass
merchandisers and Vintage's sales are predominately through specialty catalogs
and gift shops. The main competitive factor for Evans and Vintage is being able
to produce a product timely and at a price level commensurate to the quality of
the item. ACI is a distribution business similar to our archery group. It
competes with other archery distributors as well as national distributors,
various regional and local distributors. ACI will enable the Company to offer a
broader product line and provide an additional distribution point.


                                  Page 4 of 34
<PAGE>   5

GOVERNMENT REGULATION AND LICENSES

In recent years, an increasing amount and variety of legislation aimed at
eliminating or limiting the production, sale, possession, ownership and use of
certain kinds of firearms has been introduced in the United States Congress and
in various state legislatures, and the Company expects that such legislation
will continue to be introduced in the future. In addition, certain states and
other local governments have already adopted, or are currently considering the
adoption of, laws aimed at the control of firearm possession and ownership by
the public. There can be no assurance that existing and future gun control
legislation will not have a substantial negative impact on consumer demand for
firearms and result in a material adverse effect on the Company's financial
condition, results of operations, and cash flows.

The Company is also subject to a variety of federal, state and local laws and
regulations relating to, among other things, advertising, the sale and handling
of firearms, the offering and extension of credit and workplace and product
safety, including various regulations concerning the storage of gunpowder.
Certain governmental licenses and permits are also necessary in connection with
the Company's operations. In particular, as with any seller of firearms, the
Company is required to maintain a federal firearms license that imposes various
restrictions and conditions on the Company's operations, including a requirement
that the Company resell firearms and ammunition only to federally licensed
firearms dealers. In addition, all exports of firearms and ammunition require
federal government licenses in advance of shipment. In the event that the
Company should be determined to be in violation of any applicable regulations,
licenses or permits, the Company could become subject to cease and desist
orders, injunctions, civil fines and other penalties. Any such penalties could
have a material adverse effect on the Company's business, financial condition,
results of operations, and cash flows.

ASSOCIATES

The Company views all of its personnel as associates of the Company, rather than
merely as employees. As of February 28, 2001, the Company employed approximately
411 associates, none of whom was a member of an industry trade union or
collective bargaining unit. Part-time workers (primarily clerical and
distribution) are also utilized over the course of the year as needed to assist
the Company during periods of peak sales.

COMPANY TRADENAMES AND TRADEMARKS

The Company utilizes several trade names, trademarks and service marks in the
course of its business, including, among others, the Ellett Brothers(R), Ellett
Brothers As Big As All Outdoors(R), As Big As All Outdoors(R), and Coverz(R)
trademarks. Although the Company's operations are not dependent upon any single
trade name or trademark, other than the Ellett Brothers trademark, the Company
considers its various trademarks and trade names to be valuable to its business.

SUBSEQUENT EVENTS

On March 7, 2001, the Board of Directors of the Company approved a cash-out
merger between the Company and certain corporations owned by members of the
Company's management (the "Acquirers"). The merger will result in a payment of
$3.20 per share for all shares of the Company not already owned by the
Acquirers. This price represents a 16.4% increase over the $2.75 original price
per share offered by the Acquirers on November 6, 2000. The transaction is
subject to approval of the Company's shareholders.

On March 23, 2001, the common stock of the Company was delisted for trading on
the NASDAQ SmallCap Market as a consequence of failure to maintain a minimum of
two active market markers as required by NASDAQ Marketplace Rule 431(c)(1).
Trading of the common stock of the Company is currently conducted in the
over-the-counter market.

ITEM 2.    PROPERTIES

The Company's operations are carried out at five separate locations. The
following table sets forth certain information regarding each of these
facilities:

                                                  Approximate
                                               Aggregate Usable
                                                  Square Feet         Status
                                              -------------------------------
             Chapin, South Carolina                 190,000            Owned
             Newberry, South Carolina               140,000            Owned
             Houston, Missouri                       62,000           Leased
             Taylorsville, North Carolina            30,000           Leased
             Monroe, Michigan                        22,000           Leased

The Company's headquarters is housed in the 190,000 square foot, two-story
office and warehouse facility located on 12 acres of land owned by the Company.
The second floor of this facility, approximately 40,000 square feet, encompasses
the Company's teleservicing sales and administrative departments, including a
complete media workshop. Both of the South Carolina facilities serve as
collateral under the Company's industrial revenue refunding bonds. See Note 10
to the Financial Statements in Item 8, Part II which is incorporated herein by
reference. The Newberry facility, located on 16.4 acres of land owned by the
Company, includes 34,000 square feet of warehouse space added in February 1996.
The Company believes the facilities are adequate to meet its business needs.


                                  Page 5 of 34
<PAGE>   6

ITEM 3.    LEGAL PROCEEDINGS

See Note 16 to the Financial Statements in Item 8, Part II which is incorporated
herein by reference.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of shareholders of the Company during the
fourth quarter of fiscal year 2000.

PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

During 2000, the common stock of the Company was traded on the NASDAQ SmallCap
Market System under the symbol ELET. On March 23, 2001, the common stock of the
Company was delisted for trading on the NASDAQ SmallCap Market as a consequence
of failure to maintain a minimum of two active market makers as required by
NASDAQ Marketplace Rule 431(c)(1). Trading of the common stock of the Company is
currently conducted in the over-the-counter market. As of March 6, 2001, the
Company had a total of approximately 65 shareholders of record. Certain of these
shareholders of record hold shares in nominee name for other beneficial owners.

The following table sets forth the quarterly high and low sale prices per share
for the common stock as reported on the NASDAQ SmallCap Market and dividends on
common stock.

Quarter Ended:                 High                  Low               Dividend
-------------                  ----                  ---               --------
March 31, 1999                $ 5.500              $ 4.250              $ 0.04
June 30, 1999                   8.000                3.375                0.04
September 30, 1999              8.375                4.000                0.04
December 31, 1999               6.875                4.750                0.04
March 31, 2000                  7.250                4.813                0.04
June 30, 2000                   6.000                2.875                0.04
September 30, 2000              4.000                2.250                0.04
December 31, 2000               3.000                1.500                0.04

The Company did not sell any equity securities during the fiscal year ended
December 31, 2000 which were not registered under the Securities Act of 1933.

ITEM 6.    SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
(in thousands except per share and other data)                2000           1999          1998          1997(3)         1996
--------------------------------------------------------- -------------- ------------- -------------- -------------- --------------
<S>                                                          <C>            <C>           <C>            <C>            <C>
Sales                                                        $157,324       $168,056      $147,130       $152,500       $147,666
Income (loss) before income taxes                                (367)         5,612         4,750         (1,353)         2,673
Net income (loss)                                                (329)         3,575         3,012           (815)         1,687
Basic and diluted earnings (loss) per share                     (0.08)          0.83          0.61          (0.16)          0.33
Dividends paid per share(1)                                      0.16           0.16          0.08           0.08           0.08
Weighted average number of
     shares outstanding                                         4,281          4,313         4,955          5,148          5,135
Working capital                                                58,395         50,894        46,538         48,140         55,029
Total assets                                                   77,922         72,926        64,769         63,614         73,688
Long-term debt obligations                                     43,801         35,596        32,297         33,187         38,472
Shareholders' equity                                           24,477         26,093        22,932         23,336         24,637
Other data:
Number of business units at year end                              120            126           127            139            145
Number of customers served during year(2)                      19,500         20,065        20,677         23,800         25,890
</TABLE>

(1)      Includes quarterly dividends at $0.04 per share paid in March, June,
         September and December 2000 and 1999, $0.02 per share paid in March,
         June, September and December 1998, 1997, and 1996.

(2)      Due to the potential for errors in elimination of mutual customers
         between subsidiaries, the numbers for 2000, 1999, 1998, 1997, and 1996
         are approximations. Management believes that any differences are
         insignificant.

(3)      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. The liquidation was substantially
         concluded by December 31, 1997 with a net after tax loss of $2,276
         ($0.44 per share).



                                  Page 6 of 34
<PAGE>   7

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

2000 COMPARED TO 1999

Sales for the year ended December 31, 2000 were $157.3 million as compared to
$168.1 million in 1999, a decrease of $10.8 million or 6.4%. Total sales in our
distribution business were down 11.8% in 2000 as compared to 1999. Sales of our
hunting and shooting sports products experienced a 15.9% decline in 2000, as
compared to 1999. The marine accessory products decreased 1.8% and sales of our
camping, archery and outdoor accessories decreased by 4.4% as compared to 1999.
The distribution business experienced a soft market throughout the year,
especially in the fourth quarter of the year which is normally the Company's
strongest selling season. The general economy and the consumers' lack of
spending contributed to this soft market and sales decline. In addition, sales
earlier in the year were detrimentally effected by winter weather conditions as
well as other operational delays associated with the installation of a new
computer system. Our marine business was also impacted negatively by the drought
in many parts of the country along with the high cost of fuel throughout the
year. In 1999, sales were driven by a thriving economy along with the Year 2000
effect.

Sales from our subsidiaries in 2000, including ACI, were $13.6 million, as
compared to $7.0 million, an increase of $6.6 million. Excluding ACI, which was
purchased in October 1999, sales were down 12.1% in 2000 compared to 1999. Much
of this decrease was attributable to the general economic conditions.

Gross profit for the year ended December 31, 2000 was $28.7 million (18.2% of
sales) as compared to $30.5 million (18.2% of sales) in 1999.

Selling, general and administrative expenses in 2000 were $26.0 million (16.5%
of sales) as compared to $22.7 million (13.5% of sales), an increase of 14.5%.
Excluding ACI, expenses were up 10.1%. In 2000, expenses excluding ACI increased
as a result of the implementation and costs associated with the start up of the
new computer system, which was placed in service in 2000, higher depreciation
and maintenance costs of the new system, legal expenses incurred in connection
with the industry lawsuits, and one-time consulting projects.

Interest expense for the year ended December 31, 2000 was $3.5 million (2.2% of
sales) as compared to $2.7 million (1.6% of sales) in 1999. The increase was
related to higher interest rates along with higher borrowings.

Income tax benefit in 2000 was $38,000 as compared to income tax expense of $2.0
million in 1999. The effective tax rate was 10.3% in 2000 as compared to 36.3%
in 1999.

Net loss for 2000 was $329,000, or $0.08 per basic and diluted share, as
compared to net income of $3.6 million, or $0.83 per basic and diluted share, in
1999.

1999 COMPARED TO 1998

Sales for the year ended December 31, 1999 were $168.1 million as compared to
$147.1 million in 1998, an increase of $21.0 million or 14.2%. Total sales in
our distribution business were up 14.2% in 1999 as compared to 1998. Sales of
our hunting and shooting sports products led the way with an increase of 16.1%
in 1999, as compared to 1998. The marine accessory products increased 12.1%, and
sales of our camping, archery and outdoor accessories increased by 11.1%, as
compared to 1998.

Sales from our subsidiaries in 1999, which includes our acquisition of ACI, were
$7.0 million, as compared to $6.1 million, an increase of $900,000 or 14.3%.
Excluding ACI, sales were down 4.5% in 1999 compared to 1998, mainly due to a
cancellation of a large sale to a major account.

Gross profit for the year ended December 31, 1999 was $30.5 million (18.2% of
sales) as compared to $26.4 million (18.0% of sales) in 1998. This increase was
primarily achieved in our distribution business with hunting and shooting sports
products accounting for the largest part of the increase.

Selling, general and administrative expenses in 1999 were $22.7 million (13.5%
of sales) as compared to $19.7 million (13.4% of sales), an increase of 15.1%.
Excluding ACI, expenses were up 13.3%. This increase was primarily due to
one-time expenses associated with the Year 2000 remediation work, increased
costs associated with our associates' health insurance program, and freight
costs.

Interest expense for the year ended December 31, 1999 was $2.7 million (1.6% of
sales) as compared to $2.5 million (1.7% of sales) in 1998. The increase was
mainly related to the ACI transaction along with higher borrowings.

Income tax expense in 1999 was $2.0 million as compared to $1.7 million in 1998.
The effective tax rate was 36.3% in 1999 as compared to 36.6% in 1998.

Net income for 1999 was $3.6 million, or $0.83 per basic and diluted share, as
compared to $3.0 million, or $0.61 per basic and diluted share, in 1998.


                                  Page 7 of 34
<PAGE>   8

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 acquired during 1995 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 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 cash flows from 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 used by operating activities was $6.0 million during the year ended
December 31, 2000, as compared to $2.7 million provided by operating activities
in 1999. In 2000, the Company incurred a net loss as compared to net income in
1999. In addition, the Company experienced increases in inventories and
decreases in trade payables. Both of these contributed to the decrease in cash
provided by operations in 2000. In 1999, cash provided by operating activities
was primarily the result of net income earned for the year.

Net cash used in investing activities was $1.1 million during the year ended
December 31, 2000, as compared to $5.2 million in 1999. The decrease in net cash
used in investing activities was mainly due to less purchases of property and
equipment and no acquisitions in 2000. In 1999, the increase in net cash used in
investing activities was due to the purchase of computer equipment and the new
software information system. In addition, $2.3 million was utilized in the
purchase of the assets of ACI.

Net cash provided by financing activities was $6.9 million during the year ended
December 31, 2000 as compared to $2.6 million in 1999. In 2000, the net cash
provided was from increased net borrowings of $8.9 million used primarily to
fund operating activities along with the dividend payments of $687,000, long
term debt reduction of $617,000, and the repurchase of stock of $649,000. In
1999, the net cash provided was from increased net borrowings of $3.9 million
used primarily for the ACI acquisition offset by dividends of $683,000.

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 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 generally have 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 refunding bonds for
2001, 2002, and 2003 will be $917,000, $967,000, and $1,017,000, respectively.
The annual interest charges, at the fixed rate of 7.5%, will be $479,000,
$410,000, and $356,000 for 2001, 2002, and 2003, respectively (see Note 10 to
the Financial Statements in Item 8, Part II which is incorporated herein by
reference).

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 during 2001 and for the foreseeable
future.

The Company was in violation of three covenants at December 31, 2000 with
respect to its revolving credit facility. The bank has waived these violations
for the fiscal year ended December 31, 2000. The Company was also in violation
of a covenant with respect to the Industrial Revenue Refunding Bonds at December
31, 2000, which was also waived for the fiscal year ended December 31, 2000 (see
Notes 9 and 10 to the financial statements).

ITEM 7A.   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 ($39.2 million at
December 31, 2000). The Company does not currently use derivative financial
instruments.

Approximately $5.2 million of the Company's debt at December 31, 2000 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%.



                                  Page 8 of 34
<PAGE>   9

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 up to February 4, 2001 is $45.0
million and $40.0 million thereafter. The term of the Facility expires on
January 31, 2002. Borrowings under the Facility bear interest at a rate equal
to, at the Company's option, prime rate plus 0.375% or 2.00% 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 December 31, 2000, the interest rate was 8.82%
(see Note 9 to the Financial Statements in Item 8, Part II which is incorporated
herein by reference). 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 $45.0 million at December 31, 2000 ($37.0 million at
December 31, 1999). 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 December 31, 2000:

        Maturity Date               Fixed Rate Debt            Interest Rate
     ---------------------------------------------------------------------------
             2001                     $    917,000                  7.5%
             2002                          967,000                  7.5%
             2003                        1,017,000                  7.5%
             2004                        1,067,000                  7.5%
             2005                        1,117,000                  7.5%
          Thereafter                       147,000                  7.5%
     ---------------------------------------------------------------------------
                                      $  5,232,000                  7.5%


                                  Page 9 of 34
<PAGE>   10

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

(A) FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (in thousands)                                                    December 31,
---------------------------------------------------------------------------------------------------------------------
Assets                                                                                   2000               1999
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                 <C>
Current assets:
     Cash and cash equivalents                                                     $      216          $     346
     Accounts receivable, less allowance for doubtful accounts of $613
         and $634 at December 31, 2000 and 1999, respectively                          21,361             21,777
     Other accounts receivable                                                          1,278              1,109
     Inventories                                                                       41,855             36,061
     Prepaid expenses                                                                   1,662              1,154
     Deferred income tax asset                                                            898                834
---------------------------------------------------------------------------------------------------------------------
              Total current assets                                                     67,270             61,281
---------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, at cost, less
     accumulated depreciation                                                           8,716              9,352
Other assets:
     Intangible assets, at cost, less accumulated amortization                          1,935              2,292
     Other assets                                                                           1                  1
---------------------------------------------------------------------------------------------------------------------
              Total other assets                                                        1,936              2,293
---------------------------------------------------------------------------------------------------------------------
                                                                                   $   77,922          $  72,926
=====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
---------------------------------------------------------------------------------------------------------------------
Current liabilities:
     Accounts payable, trade                                                       $    6,470          $   7,891
     Accrued expenses                                                                   1,738              1,780
     Income tax payable                                                                     -                 99
     Current portion of long-term debt                                                    917                617
---------------------------------------------------------------------------------------------------------------------
              Total current liabilities                                                 9,125             10,387
---------------------------------------------------------------------------------------------------------------------
Revolving credit facility                                                              39,236             30,327
Long-term debt                                                                          4,315              5,269
Deferred income tax liability and other                                                   769                850
Commitments and contingencies (see Notes 11 and 16)
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, 4,083
         and 4,317 shares issued and outstanding as of December 31,
         2000 and 1999, respectively)                                                   9,278              9,652
     Common stock subscribed                                                               42                317
     Unearned compensation                                                                  -                (12)
     Subscription receivable                                                             (465)              (465)
     Retained earnings                                                                 15,592             16,608
     Accumulated other comprehensive income (loss)                                         30                 (7)
---------------------------------------------------------------------------------------------------------------------
              Total shareholders' equity                                               24,477             26,093
---------------------------------------------------------------------------------------------------------------------
                                                                                   $   77,922          $  72,926
=====================================================================================================================
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.


                                 Page 10 of 34
<PAGE>   11

CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                                 For the year ended December 31,
-----------------------------------------------------------------------------------------------------------------------
                                                                            2000              1999               1998
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                <C>                <C>
Sales                                                              $     157,324      $    168,056       $    147,130
Cost of goods sold                                                       128,651           137,529            120,685
-----------------------------------------------------------------------------------------------------------------------
              Gross profit                                                28,673            30,527             26,445
Selling, general and administrative expenses                              25,957            22,673             19,706
-----------------------------------------------------------------------------------------------------------------------
              Income from operations                                       2,716             7,854              6,739
-----------------------------------------------------------------------------------------------------------------------
Other income (expenses):
     Interest income                                                         440               445                481
     Interest expense                                                     (3,486)           (2,674)            (2,497)
     Other income (expense), net                                             (37)              (13)                27
-----------------------------------------------------------------------------------------------------------------------
              Total other expense, net                                    (3,083)           (2,242)            (1,989)
-----------------------------------------------------------------------------------------------------------------------
              Income (loss) before income taxes                             (367)            5,612              4,750
Income tax expense (benefit)                                                 (38)            2,037              1,738
-----------------------------------------------------------------------------------------------------------------------
Net income (loss)                                                  $        (329)     $      3,575       $      3,012
=======================================================================================================================
Basic and diluted earnings (loss) per common share                 $       (0.08)     $       0.83       $       0.61
=======================================================================================================================
Weighted average shares outstanding                                        4,281             4,313              4,955
=======================================================================================================================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.


                                 Page 11 of 34
<PAGE>   12

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands, except per share
data)

<TABLE>
<CAPTION>
                                                                                                              Accumulated
                                          Common Stock                                                           Other
                                 Common    Subscribed     Unearned   Subscription  Retained  Comprehensive  Comprehensive
                                  Stock                 Compensation  Receivable   Earnings  Income (Loss)  Income (Loss)    Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>         <C>           <C>          <C>         <C>        <C>              <C>         <C>
Shareholders' equity at
     12/31/97                   $ 12,833    $             $  (177)     $  (452)    $ 11,111                    $    21     $ 23,336
Comprehensive income:
     Net income                        -           -            -            -        3,012   $   3,012              -        3,012
     Change in unrealized gain
     on available for sale
     securities                        -           -            -            -            -          21             21           21
                                                                                              ---------
     Comprehensive income                                                                     $   3,033
                                                                                              =========
Dividends paid, $0.08 per share        -           -            -            -         (407)                         -         (407)
Repurchase of 824 shares of
     common stock                 (3,274)          -            -           64            -                          -       (3,210)
Award of 20 shares of common
     stock to an executive
     officer                           -          93            -            -            -                          -           93
Interest on subscription               -           -            -          (35)           -                          -          (35)
receivable
Amortization of unearned
     compensation                      -           -          122            -            -                          -          122
---------------------------------------------------------------------------------------------              -------------------------
Shareholders' equity at
     12/31/98                      9,559          93          (55)        (423)      13,716                         42       22,932
Comprehensive income:
     Net income                        -           -            -            -        3,575   $   3,575              -        3,575
     Change in unrealized gain
     on  available for sale
     securities                        -           -            -            -            -         (49)           (49)         (49)
                                                                                              ---------
     Comprehensive income                                                                     $   3,526
                                                                                              =========
Dividends paid, $0.16 per share        -           -            -            -         (683)                         -         (683)
Issuance of 20 shares of common
     stock to an executive
     officer                          93         (93)           -            -            -                          -            -
Award of 40 shares of common
     stock to an executive
     officer                           -         275            -            -            -                          -          275
Award of 10 shares of common
     stock to an executive
     officer                           -          42            -          (42)           -                          -            -
Amortization of unearned
     compensation                      -           -           43            -            -                          -           43
---------------------------------------------------------------------------------------------              -------------------------
Shareholders' equity at
     12/31/99                      9,652         317          (12)        (465)      16,608                         (7)      26,093
Comprehensive loss:
     Net loss                          -           -            -            -         (329)   $   (329)             -         (329)
     Change in unrealized loss
     on available for sale
     securities                        -           -            -            -            -          37             37           37
                                                                                              ---------
     Comprehensive loss                                                                       $    (292)
                                                                                              =========
Dividends paid, $0.16 per share        -           -            -            -         (687)                         -         (687)
Repurchase of 274 shares of
     common stock                   (649)          -            -            -            -                          -         (649)
Issuance of 40 shares of common
     stock to an executive
     officer                         275       (275)            -            -            -                          -            -
Amortization of unearned
     compensation                      -           -           12            -            -                          -           12
---------------------------------------------------------------------------------------------              -------------------------
Shareholders' equity at
     12/31/00                   $  9,278    $     42      $     -      $  (465)    $ 15,592                    $    30      $24,477
---------------------------------------------------------------------------------------------              -------------------------
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.



                                 Page 12 of 34
<PAGE>   13

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)                                           For the year ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                                           2000             1999             1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>               <C>              <C>
Cash flows from operating activities:
     Net income (loss)                                                                $     (329)       $    3,575       $   3,012
     Adjustments to reconcile net income (loss) to net cash provided by (used
         in) operating activities:
              Depreciation and amortization                                                2,072             1,054             983
              Deferred income taxes                                                          (95)             (434)            421
              Provision for loss on accounts receivable                                    1,107               576             374
              Amortization of unearned compensation                                           12                43             122
              Stock award to executive officer                                                 -               275              93
              Gain on sale of property and equipment                                           -               (15)              -
              Changes in operating assets and liabilities (net of impact of acquisition):
                  Receivables                                                               (860)           (1,680)         (1,135)
                  Inventories                                                             (5,794)           (2,195)           (605)
                  Prepaid expenses                                                          (508)             (193)            540
                  Accounts payable, trade                                                 (1,421)              742           2,725
                  Accrued expenses                                                           (42)              541            (645)
                  Income tax payable                                                         (99)               99               -
                  Other                                                                      (50)              331             (25)
------------------------------------------------------------------------------------------------------------------------------------
                      Net cash provided by (used in) operating activities                 (6,007)            2,719           5,860
------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
     Purchases of property and equipment                                                  (1,070)           (2,561)         (1,596)
     Purchase of intangibles and other assets                                                 (9)             (471)              -
     Proceeds from sale of property and equipment                                              -               140               3
     Purchase of assets in business acquisition                                                -            (2,281)              -
------------------------------------------------------------------------------------------------------------------------------------
                      Net cash used in investing activities                               (1,079)           (5,173)         (1,593)
------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
     Gross borrowings on revolving credit facility                                       170,277           174,158         150,304
     Gross repayments on revolving credit facility                                      (161,368)         (170,292)       (150,606)
     Principal payments on long-term debt                                                   (617)             (566)           (517)
     Principal payments on capital lease obligations                                           -                 -              (8)
     Increase in subscription receivable                                                       -                 -              35
     Repurchase of common stock                                                             (649)                -          (3,210)
     Dividends to shareholders                                                              (687)             (683)           (407)
------------------------------------------------------------------------------------------------------------------------------------
                      Net cash provided by (used in) financing activities                  6,956             2,617          (4,479)
------------------------------------------------------------------------------------------------------------------------------------
                      Net increase (decrease) in cash and cash equivalents                  (130)              163            (212)
Cash and cash equivalents:
     Beginning of year                                                                $      346         $     183        $    395
------------------------------------------------------------------------------------------------------------------------------------
     End of year                                                                      $      216         $     346        $    183
====================================================================================================================================
Cash payments for interest                                                            $    3,395         $   2,656        $  2,491
====================================================================================================================================
Cash payments for income taxes                                                        $      533         $   2,372        $  1,080
====================================================================================================================================
</TABLE>

Supplemental disclosure of non-cash investing and financing activities:

o        The change in net unrealized gain (loss) on investment securities
         available for sale was $37 and ($49) for the years ended December 31,
         2000 and 1999, respectively.

o        During 2000 and 1999, the Company issued $275 and $93, respectively, of
         common stock to an executive officer from common stock subscribed.

o        During 1999, the Company agreed to issue $42 of common stock to an
         executive officer in exchange for a subscription receivable.

o        During 1998, the Company repurchased 16 shares of common stock from an
         executive officer in exchange for the forgiveness of a $64 subscription
         receivable.

The accompanying notes are an integral part of these consolidated financial
statements.


                                 Page 13 of 34
<PAGE>   14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share data)

1.     BASIS OF PRESENTATION

Ellett Brothers, Inc. (the Company) is principally a supplier of goods and
customer services to independent retailers who serve the natural outdoor
sporting goods market, primarily in the United States. The Company's products
are diversified among a wide variety of outdoor sporting goods equipment
including a wide selection of styles and brand names. In addition, the Company
operates three wholly-owned subsidiaries. One subsidiary, Evans Sports, Inc., is
a manufacturer of outdoor sporting accessories and wooden nostalgia boxes.
Another subsidiary, Vintage Editions, Inc., manufactures specialty licensed
nostalgic products, and the other subsidiary, Archery Center International,
Inc., distributes archery products.

2.     SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.

Use of estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Cash and cash equivalents

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Revenue recognition

The Company recognizes revenue from product sales at the time of shipment. For
the years ended December 31, 2000, 1999 and 1998, the Company recorded shipping
and handling costs of $4,904, $4,432 and $3,824, respectively, in selling,
general and administrative expenses.

Inventories

Inventories, consisting principally of purchased goods held for resale, are
stated at the lower of cost or market, with cost determined under the first-in,
first-out (FIFO) method.

Credit risk

The Company performs ongoing evaluations of its customers and generally does not
require collateral. An allowance for doubtful accounts is provided in an amount
equal to the estimated collection losses.

Advertising costs

The Company has elected to expense all advertising costs as incurred or the
first time advertising takes place, with the exception of direct response
advertising, which is capitalized and amortized over the period of its expected
future benefit. At December 31, 2000 and 1999, the Company did not have any
significant amounts capitalized as direct response advertising. The Company
incurred total advertising expenditures of $733, $536, and $587 during the years
ended December 31, 2000, 1999, and 1998, respectively.

Property, plant and equipment

Property, plant and equipment are depreciated or amortized using the
straight-line method over the estimated useful lives of the respective assets
which range as follows:

             Description                                            Years
             ----------------------------------------------------------------
             Buildings and improvements                             25 - 39
             Furniture, fixtures and equipment                       3 - 10

Expenditures for repairs and maintenance are charged to expense as incurred. The
costs of major renewals and betterments are capitalized and depreciated over
their estimated useful lives. The cost and related accumulated depreciation of
property, plant and equipment are removed from the accounts upon disposition and
any resulting gain or loss is reflected in the results of operations.

The Company reviews long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Accordingly, when indicators of impairment are present, the Company
evaluates the carrying value of property, plant and equipment, and intangibles,
in relation to operating performance.



                                 Page 14 of 34
<PAGE>   15

Intangible assets

Intangible assets principally represent the amount by which costs of acquired
net assets exceeded their related fair value ("goodwill") and costs of acquired
non-compete agreements. The non-compete agreements are being amortized over the
original terms of the agreements. Intangible assets are amortized using the
following methods and estimated useful lives:

        Description                      Method                      Years
        --------------------------------------------------------------------
        Deferred financing costs         Effective interest            20
        Licenses and trademarks          Straight-line                5 - 20
        Goodwill                         Straight-line               10 - 15
        Non-compete agreements           Straight-line                5 - 10

Fair values of financial instruments

The Company owns certain debt securities held on deposit with the trustee for
payment of interest and principal on the IRB bond (see Note 10). Market values
of bond issues outstanding are based on quotes received from securities dealers
or the present value of principal and interest payments at the current market
rates. The revolving credit facility is carried at current value which
approximates the fair market value.

Income taxes

Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized.

Stock based compensation

The Company continues to account for stock-based compensation using the
intrinsic value method prescribed in APB Opinion No. 25, "Accounting for Stock
Issued to Employees." Compensation costs for stock options, if any, are measured
as the excess of the quoted market price of the Company's stock at the date of
the grant over the amount an associate must pay to acquire the stock.

Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation", established accounting and disclosure requirements
using a fair value-based method of accounting for stock-based employee
compensation plans. The Company has elected to continue its current method of
accounting as described above, and has adopted the disclosure requirements of
SFAS No. 123.

Earnings per common share

Although the Company had options outstanding during portions of the three years
ended December 31, 2000, they have an antidilutive effect on earnings per share
for each year. As such, basic and diluted earnings (loss) per share for the
years ended December 31, 2000, 1999, and 1998 computed as net income (loss)
divided by the weighted average shares outstanding as of year end.

Investment securities

The Company accounts for investment securities in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." All
investments held at December 31, 2000 and 1999 are considered securities
available for sale and reported at fair value, with unrealized gains and losses
reported as a separate component of shareholders' equity.

The classification of securities is generally determined at the date of
purchase. Gains and losses on sales of investment securities, computed based on
the specific identification method, are included in other income (expense) at
the time of sale.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which was
amended by SFAS No. 138. SFAS No. 133, as amended, establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. SFAS No. 133
is effective for financial statements for all fiscal quarters of all fiscal
years beginning after June 15, 2000. The Company has adopted SFAS No. 133;
however, no derivative instruments were held at adoption, and as a result, there
was no impact on the Company's consolidated financial position, results of
operations, or cash flows. Management does not expect SFAS 133 to have a
material impact due to the Company's limited use of derivative instruments.

3.     COMPREHENSIVE INCOME

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 component of other comprehensive
income relates to unrealized gains and losses on available for sale securities.



                                 Page 15 of 34
<PAGE>   16

4.     ACQUISITION

In October of 1999, the Company purchased the assets of Archery Center
International, Inc. (ACI) located in Monroe, Michigan. ACI is a leading
distributor in the archery industry. The Company paid $2,281 in cash for these
assets. The purchase price exceeded the book value of ACI's assets by $420. The
purchase price was allocated as follows:

                           Inventory                             $1,726
                           Prepaid expenses                          13
                           Property, plant and equipment            122
                           Goodwill                                 420
                                                               --------
                                                                 $2,281

The assets of ACI were placed into a separate, wholly-owned subsidiary, and the
acquisition was accounted for using the purchase method of accounting, with the
excess of the purchase price over the estimated fair value of the assets
acquired being recorded as goodwill. The goodwill arising from this transaction
is being amortized on a straight-line basis over a period of 15 years.

In addition to the purchase agreement, the Company entered into a non-compete
agreement with the former owner of ACI. The Company has agreed to pay the former
owner specified sums of money over each of the next five years in accordance
with the agreement. The Company has recorded the non-compete agreement and the
deferred compensation liability at the present value of future cash flows with
the non-compete amortized on a straight-line basis and the liability amortized
using the effective interest method over a period of five years. The
consolidated balance sheets include the non-compete agreement (net of
amortization) of $263 and $333 and the deferred compensation liability of $325
and $355 at December 31, 2000 and 1999, respectively. The non-compete agreement
has been recorded in intangible assets and has an accumulated amortization
balance of $87 and $17 at December 31, 2000 and 1999, respectively. The deferred
compensation liability has a non-current portion of $255 and $305 and a current
portion of $70 and $50 which have been included in accrued expenses at December
31, 2000 and 1999, respectively.

The results of operations for ACI are included in the consolidated statements of
operations only from the time of the acquisition. If ACI had been acquired at
the beginning of 1998, the Company would have reported sales of $176,852 and
$155,522, and net income of $3,617 and $3,060 for each of the years ended
December 31, 1999 and 1998, respectively.

5.     INVENTORIES

       Inventories consisted of the following at December 31:

                                                   2000              1999
                  ------------------------------------------------------------
                  Finished goods              $  40,848         $  34,686
                  Raw materials                     700             1,048
                  Work in progress                  307               327
                  ------------------------------------------------------------
                                              $  41,855         $  36,061
                  ------------------------------------------------------------

6.     PROPERTY, PLANT AND EQUIPMENT

       Property, plant and equipment consisted of the following at December 31:

                                                           2000         1999
                  -------------------------------------------------------------
                  Land                                 $    201      $     201
                  Buildings and improvements              6,587          6,554
                  Furniture, fixtures and equipment      11,734         10,697
                  -------------------------------------------------------------
                                                         18,522         17,452
                  Less accumulated depreciation          (9,806)        (8,100)
                  -------------------------------------------------------------
                                                       $  8,716      $   9,352
                  -------------------------------------------------------------

7.     INTANGIBLE ASSETS

       Intangible assets consisted of the following at December 31:

                                                        2000               1999
                  --------------------------------------------------------------
                  Deferred financing costs          $    336          $     336
                  Licenses                               253                244
                  Goodwill                             1,028              1,028
                  Non-compete agreements               2,050              2,050
                  --------------------------------------------------------------
                                                       3,667              3,658
                  Less accumulated amortization       (1,732)            (1,366)
                  --------------------------------------------------------------
                                                    $  1,935          $   2,292
                  --------------------------------------------------------------


                                 Page 16 of 34
<PAGE>   17

8.     INVESTMENT SECURITIES

       The cost and estimated market value of investment securities at
December 31, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                Gross       Gross        Gross      Estimated
                                              Amortized  Unrealized   Unrealized     Market
Year                                            Cost        Gains       Losses        Value
----------------------------------------------------------------------------------------------
<S>                                          <C>           <C>          <C>        <C>
2000   Available for Sale: Bond Reserve      $   1,122     $     39     $   (9)    $   1,152
1999   Available for Sale: Bond Reserve      $   1,121     $     11     $  (18)    $   1,114
</TABLE>

Investment securities consist primarily of government backed bonds.

9.     REVOLVING CREDIT FACILITY

In 1994, the Company entered into a revolving credit facility (the "Agreement")
with an affiliate of First Union National Bank of North Carolina, N.A. The
Agreement is collateralized by substantially all of the Company's assets other
than real estate. The initial term of the Agreement was for three years ending
in June 1997. The Agreement was amended in September 1997 to extend the term to
September 30, 2001. A subsequent amendment on March 27, 2001 has extended the
term to January 31, 2002. On June 16, 2000, the Agreement was amended to
increase the maximum amount of the borrowings to $45 million for a 120 day
period, which was subsequently extended to February 4, 2001 and at which time
the maximum availability reverted back to $40 million. Effective August 1, 1999
borrowings under the Agreement bear interest at a rate equal to, at the
Company's option, prime rate plus .375% or 1.75% above the 30 or 90 day LIBOR
rate. Combinations of these rates can be used for the various loans which
comprise the total facility outstanding balance. The interest rates of the
facility are subject to change based on changes in the Company's leverage ratio
and net income. At December 31, 2000, the interest rate was 8.82%.

The Agreement provides the Company with a revolving line of credit and letters
of credit. The revolving line of credit provides loans of up to 70% of the
eligible inventories and up to 85% of eligible receivables. The maximum amount,
subject to the amendment, that can be outstanding at any time under the
Agreement is $40 million. At December 31, 2000 the Company had $4.0 million
available under the Agreement.

The Agreement contains various covenants which, among other things, limit
capital expenditures and limit cash dividends. The Agreement also requires the
Company to meet various minimum financial covenants. As of December 31, 2000,
the Company was in violation of certain covenants. The bank has waived these
violations for the fiscal year ended December 31, 2000.

10.    LONG-TERM DEBT

       Long-term debt consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                                                                   2000            1999
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>          <C>
Industrial Revenue Refunding Bonds, Series 1988 ("IRB") collateralized
    by real estate. The fixed interest of 7.5% due to bond holders semi-annually
    is required to be deposited with the Trustee monthly in an amount equal to
    one-sixth of the next interest payment. The Company also pays one-twelfth
    of the next principal payment (by way of annual maturity or annual mandatory
    sinking fund redemption) to the Trustee monthly in addition to the interest. The
    bonds are due September, 2008.                                                            $   6,384    $      7,000

Industrial revenue refunding bond reserve on deposit with the Trustee                            (1,152)         (1,114)
------------------------------------------------------------------------------------------------------------------------

                                                                                                  5,232           5,886
Less, current portion                                                                              (917)           (617)
------------------------------------------------------------------------------------------------------------------------
                                                                                              $   4,315    $      5,269
------------------------------------------------------------------------------------------------------------------------
</TABLE>

Under the terms of the IRB, the Company is required to maintain a reserve fund
with a fair market value in the amount of $1,050 on deposit with the Trustee.
The Company may, depending upon market value fluctuations of the bonds held in
the reserve fund, be required to make payments to bring the fund up to the
$1,050. If for any reason, the reserve fund is in excess of the required amount,
such excess may be used to reduce required sinking fund payments. Reserve fund
balances may also be used toward the redemption of the outstanding IRB
obligations. In September 1997, the agreement was amended to reduce the interest
rate from 10.65% to 7.5%, and to eliminate the ability for early redemption.

The fair market value of the IRB at December 31, 2000 and 1999 was approximately
$5,959 and $6,735, respectively.



                                 Page 17 of 34
<PAGE>   18

Principal maturities and sinking fund requirements for long-term debt at
December 31, 2000 are as follows:

                  For year ending December 31,
                  2001                                          $    917
                  2002                                               967
                  2003                                             1,017
                  2004                                             1,067
                  2005                                             1,117
                  Thereafter                                         147
                  ------------------------------------------------------
                                                                $  5,232

Under the bond agreement, as amended, annual cash dividends are limited to 60%
of annual net income (adjusted for non-cash charges), a required minimum fixed
charge ratio of 1.25:1 (adjusted for non-cash charges), a required minimum
current ratio of 1.17:1, and a required minimum shareholders' equity level (as
defined) of $6,000 at December 31, 1996 and thereafter. At December 31, 2000,
the Company was in violation of the cash dividend restriction. On April 6, 2001,
this violation was waived for the fiscal year ended December 31, 2000.

11.    OPERATING LEASES

The Company entered into three significant leases for computer equipment in
conjunction with the first phase of an information system upgrade. The Company
incurred $296, $229, and $279 in rental expenses related to these leases in
2000, 1999, and 1998, respectively.

The Company's subsidiaries lease their manufacturing and office space under
non-cancelable operating leases. These leases expire through 2010. The Company
has the right to cancel two of these leases with a 90 day notice beginning in
1998 for one lease and in 2000 for the other.

Rent expense under these subsidiaries' leases approximated $224, $149, and $125
in the years ended December 31, 2000, 1999, and 1998, respectively. The
following is a summary of the future rental payments as of December 31, 2000:

                  For the year ending December 31,
                  ---------------------------------------------------------
                  2001                                             $  706
                  2002                                                600
                  2003                                                436
                  2004                                                404
                  2005                                                332
                  Thereafter                                          878
                  ---------------------------------------------------------
                                                                  $ 3,356

12.    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 carried restrictions over their transferability which were lifted over a
two-year period ending 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 for treasury stock.

During 1998, the Company awarded 20 shares to an executive officer when the
market value of these shares was $93. During 1999, the Company awarded 40 shares
to an executive officer when the market value of these shares was $275.
Compensation expense was recognized at the time of these awards and
shareholders' equity reflects the stock subscribed in 1999. In 1999, the Company
also issued to an executive officer an option to purchase up to 10 shares of the
Company's common stock at 85% of the market price of the stock at the grant
date. The Company recognized compensation expense of $7 related to this
discount.

The Company reacquired 824 and 274 shares of its common stock in 1998 and 2000,
respectively. The Company recorded these acquisitions using the cost method of
accounting for treasury stock.

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.



                                 Page 18 of 34
<PAGE>   19

13.    STOCK COMPENSATION PLANS

The Company has two stock option plans that provide for the granting of up to
500 options to associates. The options granted are normally at an exercise price
equal to the fair value of the shares at the date of the grant. During 1998,
under the stock option program (the "Plan"), one executive was granted an option
to acquire 50 shares of common stock at $10 per share, and 50 shares of stock at
$15 per share. The options expire five years from the date granted. In 1999,
under the Plan, one executive was granted and exercised an option to acquire 10
shares of common stock at an exercise price of $4.25 per share.

A summary of the status of the Plan as of December 31, 2000 and 1999 and changes
during the years then ended is presented below:

<TABLE>
<CAPTION>
                                                                 2000                                  1999
                                                   ---------------------------------     ---------------------------------
                                                                 Weighted Average                      Weighted Average
                                                     Shares       Exercise Price           Shares       Exercise Price
                                                   ---------------------------------     ---------------------------------
<S>                                                     <C>            <C>                    <C>            <C>
               Outstanding at beginning of year         100            $ 12.50                100            $ 12.50
               Granted                                    -                 -                  10               4.25
               Exercised                                  -                 -                 (10)              4.25
                                                   ---------------------------------     ---------------------------------
               Outstanding at end of year               100            $ 12.50                100            $ 12.50
                                                   ---------------------------------     ---------------------------------
               Options exercisable                      100            $ 12.50                100            $ 12.50
                                                   ---------------------------------     ---------------------------------
</TABLE>

The following table summarizes information about the Plan's stock options at
December 31, 2000:

<TABLE>
<CAPTION>
                                                Options Outstanding                                  Options Exercisable
                            ------------------------------------------------------------- ------------------------------------------
                                   Number         Weighted Average                         Number Exercisable
                               Outstanding at        Remaining        Weighted Average        and Vested at      Weighted Average
 Range of Exercise Prices         12/31/00        Contractual Life     Exercise Price           12/31/00          Exercise Price
--------------------------- ------------------------------------------------------------- ------------------------------------------
<S>                                 <C>                 <C>               <C>                      <C>                <C>
        $10 - $15                   100                 2.50              $ 12.50                  100                $ 12.50
</TABLE>

Had compensation cost been recognized based on the fair value of the options at
the grant dates for awards under the Plan consistent with the method of SFAS No.
123, the Company's net income would have been decreased to the pro forma amount
of $2,976 and earnings per share would have been $0.60 for the year ended
December 31, 1998. Since all options granted in 1998 were fully vested at
December 31, 1998, there would be no impact on 2000 and 1999 earnings.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants. The weighted average fair value of options granted
during the year ended December 31, 1998 was approximately $0.37.

                                                                1998
                                                                ----
                     Dividend yield                             2.08%
                     Expected volatility                       36.72%
                     Risk-free interest rate                    5.40%
                     Expected lives, in years                       5

At December 31, 2000 the Company had 400 shares reserved for future grants of
stock options.


14.    INCOME TAXES

       Income tax expense (benefit) consisted of the following:

                                             For the year ended December 31,
                  ----------------------------------------------------------
                                       2000            1999             1998
                  ----------------------------------------------------------
                  Current:
                       Federal     $     87          $2,350         $  1,273
                       State            (30)            121               44
                  ----------------------------------------------------------
                                         57           2,471            1,317
                  ----------------------------------------------------------
                  Deferred:
                       Federal          (51)           (396)             342
                       State            (44)            (38)              79
                  ----------------------------------------------------------
                                        (95)           (434)             421
                  ----------------------------------------------------------
                                   $    (38)         $2,037         $  1,738
                  ==========================================================

                                 Page 19 of 34
<PAGE>   20

Components of the net deferred income tax liability (asset) were as follows:

                                                        As of December 31,
--------------------------------------------------------------------------
                                     2000                             1999
--------------------------------------------------------------------------
Depreciation and amortization    $    501                         $    545
Bad debt expense                     (224)                            (230)
Inventory capitalization             (622)                            (416)
Net operating loss                   (173)                               -
Other                                 134                             (188)
---------------------------------------------------------------------------
Total                            $   (384)                        $   (289)
===========================================================================

       Income tax expense varied from statutory federal income taxes as follows:

<TABLE>
<CAPTION>
                                                         For the year ended December 31,
----------------------------------------------------------------------------------------
                                                   2000            1999             1998
----------------------------------------------------------------------------------------
<S>                                            <C>               <C>            <C>
Income taxes at 34% statutory federal rate     $   (125)         $1,908         $  1,615
State income taxes, net of federal tax benefit      (10)             10               81
Other                                                97             119               42
----------------------------------------------------------------------------------------
Income tax expense (benefit)                   $    (38)         $2,037         $  1,738
========================================================================================
</TABLE>

The Company had federal and state operating losses of $358 and $1,370,
respectively, at December 31, 2000. These carryforwards will expire in 2002
through 2020, if not utilized.

15.    EMPLOYEE BENEFIT PLAN

The Company has a 401(k) defined contribution plan (the "Plan") covering
substantially all full-time associates who meet certain age and length of
service requirements. Participants are eligible to contribute up to 20% of their
annual compensation, not to exceed legal limits, and the Company, at its
discretion, makes matching contributions to the Plan. Participants vest
immediately in their contributions and after three years in the Company's
contributions. The Company incurred expenses related to the Plan of $115, $131,
and $84 for the years ended December 31, 2000, 1999, and 1998, respectively.

16.    CONTINGENCIES

The Company is a party to litigation in connection with the distribution of its
inventory. Over the past thirty months, thirty cities and/or counties, states,
and one advocacy group have filed lawsuits against the firearms industry as a
whole. These lawsuits list numerous manufacturers and distributors as defendants
in the claims. To date, three of the thirty-one suits have been dismissed, as
the judges have found the complaints "without standing" under the laws of their
respective states. The Company was named in five of these remaining twenty-eight
suits. The Company and all distributors were dismissed from one of these
lawsuits (the Hamilton-Cargill lawsuit) in the first quarter of 1999. For the
remaining defendants, this case is under appeal. Pending the appeal, there are
three remaining industry-wide cases in which the Company is named. Although the
outcome cannot be predicted, it is the opinion of management that the Company
has meritorious defenses and the disposition of these matters will not have a
material adverse effect on the consolidated financial position, results of
operations or liquidity of the Company.

In recent years, an increasing amount and variety of legislation aimed at
eliminating or limiting the production, sale, possession, ownership and use of
certain kinds of firearms has been introduced in the United States Congress and
in various state legislatures, and the Company expects that such legislation
will continue to be introduced in the future. In addition, certain states and
other local governments have already adopted, or are currently considering the
adoption of, laws aimed at the control of firearm possession and ownership by
the public. There can be no assurance that existing and future gun control
legislation will not have a substantial negative impact on consumer demand for
firearms and result in a material adverse effect on the Company's financial
condition, results of operations, and cash flows.

The Company is also subject to a variety of federal, state and local laws and
regulations relating to, among other things, advertising, the sale and handling
of firearms, the offering and extension of credit and workplace and product
safety, including various regulations concerning the storage of gunpowder.
Certain governmental licenses and permits are also necessary in connection with
the Company's operations. In particular, as with any seller of firearms, the
Company is required to maintain a federal firearms license that imposes various
restrictions and conditions on the Company's operations, including a requirement
that the Company resell firearms and ammunition only to federally licensed
firearms dealers. In addition, all exports of firearms and ammunition require
federal government licenses in advance of shipment. In the event that the
Company should be determined to be in violation of any applicable regulations,
licenses or permits, the Company could become subject to cease and desist
orders, injunctions, civil fines and other penalties. Any such penalties could
have a material adverse effect on the Company's business, financial condition,
results of operations, and cash flows.


                                 Page 20 of 34
<PAGE>   21

17.    QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table of supplementary financial information presents selected
unaudited quarterly results of the Company's operations over the last eight
quarters:

<TABLE>
<CAPTION>
                                                      1999                                            2000
-------------------------------------------------------------------------------- ------------------------------------------------
                                   First       Second      Third       Fourth      First       Second       Third       Fourth
                                  Quarter     Quarter     Quarter      Quarter    Quarter     Quarter      Quarter     Quarter
-------------------------------------------------------------------------------- ------------------------------------------------
<S>                              <C>          <C>         <C>         <C>         <C>         <C>         <C>          <C>
Sales                            $ 38,946     $ 38,319    $ 45,931    $ 44,860    $ 36,667    $ 36,062    $ 44,509     $  40,086
Gross profit                        6,748        6,850       8,428       8,501       6,787       6,489       7,673         7,724
Selling, general, and
   administrative expense           5,293        5,271       5,817       6,292       5,980       6,252       6,765         6,960
Income from
    operations                      1,455        1,579       2,611       2,209         807         237         908           764
Net income (loss)                     678          687       1,302         908         157        (356)         29          (159)
Basic and diluted earnings
    (loss) per common share      $   0.16     $   0.16    $   0.30    $   0.21    $   0.04    $  (0.08)   $   0.01     $   (0.04)

</TABLE>

18.    Business Segment Information

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 subsidiary operations of
Vintage Editions and Evans Sports. ACI, which was purchased in the fourth
quarter of 1999, is included in HS&A.

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based upon operating income of the business units.

The following table presents information about reported segments for the years
ended December 31 (in millions):

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                           2000                                   HS&A            MARINE            OTHER             TOTAL
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>              <C>              <C>                <C>
Sales                                                            $ 125.9          $   26.3         $    5.1           $ 157.3
Operating income (loss)                                              1.6               1.3              (.2)              2.7
Identifiable segment assets                                         54.7               5.8              2.7              63.2
Capital expenditures                                                 1.1                .0               .0               1.1
Depreciation                                                         1.4                .2               .1               1.7
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                           1999                                   HS&A            MARINE            OTHER             TOTAL
----------------------------------------------------------------------------------------------------------------------------------
Sales                                                            $ 135.5          $   26.8         $    5.8           $ 168.1
Operating income                                                     5.6               2.1               .2               7.9
Identifiable segment assets                                         48.8               6.8              2.2              57.8
Capital expenditures                                                 2.4                .1               .1               2.6
Depreciation                                                          .5                .1               .1                .7
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
                           1998                                   HS&A            MARINE            OTHER             TOTAL
----------------------------------------------------------------------------------------------------------------------------------
Sales                                                            $ 117.1          $   23.9         $    6.1           $ 147.1
Operating income                                                     4.4               1.7               .6               6.7
Identifiable segment assets                                         43.8               6.5              2.0              52.3
Capital expenditures                                                 1.6                .0               .0               1.6
Depreciation                                                          .5                .1               .1                .7
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

A reconciliation of total segment operating income to total consolidated income
(loss) before taxes for the years ended December 31 (in millions) is as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                     2000                   1999                    1998
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                   <C>                    <C>
Operating income                                                    $   2.7               $   7.9                $   6.7
Interest income and other income (expense), net                          .4                    .4                     .5
Interest expense                                                       (3.5)                 (2.7)                  (2.5)
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before taxes                                          $   (.4)              $   5.6                $   4.7
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>



                                 Page 21 of 34
<PAGE>   22

A reconciliation of identifiable segment assets to total assets for the year
ended December 31 (in millions) is as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                     2000                   1999                    1998
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                     <C>                    <C>
Identifiable segment assets                                       $  63.2                 $  57.8                $  52.3
Other corporate assets                                               14.7                    15.1                   12.5
----------------------------------------------------------------------------------------------------------------------------------
      Total assets                                                $  77.9                 $  72.9                $  64.8
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

19.    MERGER PROPOSAL

The Company announced on November 6, 2000 that it had received an offer from a
group of controlling shareholders to acquire the Company through a cash merger
at $2.75 per share. The shareholder group currently owns approximately 62.2% of
the outstanding shares of the Company.

The offer to acquire the Company came during a regularly scheduled meeting of
the Company's Board of Directors. The Board appointed a special committee of
outside directors to consider the offer.

On March 7, 2001, the Board of Directors of the Company approved a cash-out
merger between the Company and certain corporations owned by members of the
Company's management (the "Acquirers"). The merger will result in a payment of
$3.20 per share for all shares of the Company not already owned by the
Acquirers. This price represents a 16.4% increase over the $2.75 original price
per share offered by the Acquirers on November 6, 2000. The transaction is
subject to approval of the Company's shareholders.



                                 Page 22 of 34
<PAGE>   23

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
Ellett Brothers, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Ellett
Brothers, Inc. and subsidiaries at December 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the index appearing under item
14(a)(2) on page 31, presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.



PricewaterhouseCoopers LLP

Charlotte, North Carolina
February 21, 2001, except as to the
first and third paragraphs of Note 9,
as to which the date is March 27, 2001;
the third paragraph of Note 19, as to
which the date is March 27, 2001; and the
last paragraph of Note 10, as to which the
date is April 6, 2001




                                 Page 23 of 34
<PAGE>   24

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE
None.

ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The directors and executive officers of the Company consist of the persons named
in the table below, each of whom holds the position reflected as being held by
him in the table. Each director has been elected to serve until the next Annual
Meeting of shareholders of the Company or until his successor is elected and
qualified. The executive officers of the Company were elected by, and serve at
the discretion of, the Board of Directors. Additional information with respect
to those persons who serve as directors and executive officers is set forth
below:

Name                    Age     Position
----                    ---     --------
Joseph F. Murray, Jr.   51      President; Chief Executive Officer; Director
P. Douglas McMillan     57      Executive Vice President
George E. Loney         55      Chief Financial Officer
Robert D. Gorham, Jr.   69      Chairman of the Board of Directors
E. Wayne Gibson         48      Chairman of the Executive Committee; Secretary;
                                  Director
William H. Batchelor    69      Director
Charles V. Ricks        67      Director
William H. Stanley      75      Director

JOSEPH F. MURRAY, JR. has served as President and Chief Executive Officer of the
Company since he was hired in April 1991. Prior to joining the Company, he
served for one and a half years as Vice President of Sales and Marketing for
Simmons Outdoor Corporation, a major sports optical company specializing in
firearm scopes, binoculars, and telescopes. Mr. Murray has over twenty-five
years of experience in the telemarketing and sporting goods distribution
business, having served prior to 1989 as President and Chief Executive Officer
for the last three of his fifteen years with Southern Gun and Tackle
Distributors, which at that time was one of the nation's largest sporting goods
distributors. He has served in several industry organizations and is past
President of the National Association of Sporting Goods Wholesalers. Mr. Murray
attended the University of Bridgeport in Connecticut. Mr. Murray has been a
director of the Company since June 1993.

P. DOUGLAS MCMILLAN joined Ellett Brothers as Executive Vice President on July
1, 1998 and brings years of varied experience in financial and operational
positions, including his most recent experience in the distribution industry.
Prior to joining the Company, he served six years as President and Chief
Executive Officer of Allison-Erwin Company, a marketing and wholesale
distribution company. Prior to working for Allison-Erwin, Mr. McMillan held
positions with Blue Bell, Inc., Monsanto Company, Hartmarx, Beatrice Foods
Company, and The Tuscarora Corporation. He has over thirty years of increasingly
responsible and diverse experience in both public and private companies. Mr.
McMillan is a graduate of the University of North Carolina at Chapel Hill.

GEORGE E. LONEY joined Ellett Brothers as Chief Financial Officer on April 1,
1998. For the previous seven years, he was Senior Vice President of Finance,
Chief Financial Officer and Treasurer for Merchants Inc., a retailer and
wholesale distributor in the tire and automotive service industry. Prior to
that, Mr. Loney was Executive Vice President and Chief Financial Officer for
Dart Drug Stores, Inc. His background includes experience in information systems
and warehouse distribution. Mr. Loney is a member of the American Institute of
Certified Public Accountants and is a graduate of the University of Dayton with
a degree in accounting.

ROBERT D. GORHAM, JR. is a private investor and, since 1965, has been the
controlling shareholder and a director of The Tuscarora Corporation, a private
holding company based in Rocky Mount, North Carolina. Mr. Gorham received his
masters degree in business administration from Harvard University. Mr. Gorham
has been a director and has served as Chairman of the Board of Directors of the
Company since The Tuscarora Corporation acquired it in 1985.

E. WAYNE GIBSON has served as President and a director of The Tuscarora
Corporation since 1982 and as President and sole shareholder of EWG Investments,
Inc. since 1982. He has served The Tuscarora Corporation in numerous full time
positions since 1976, including Chief Financial Officer and Executive Vice
President. Mr. Gibson received his masters degree in business administration
from the University of North Carolina at Chapel Hill. Mr. Gibson has been a
director and has served as Chairman of the Executive Committee and Secretary of
the Company since The Tuscarora Corporation acquired it in 1985.



                                 Page 24 of 34
<PAGE>   25

WILLIAM H. BATCHELOR served as City Manager of the City of Rocky Mount, North
Carolina for seventeen years, prior to his retirement on December 31, 1994. He
also held that office for ten years prior to 1970. He has served as a director
of The Tuscarora Corporation for over twenty-five years and served as its
Executive Vice President from 1970 to 1976. Following his retirement as City
Manager, he returned to this executive officer position with Tuscarora. From
1986 until 1998, he served as Chairman of the Board of New Southern of Rocky
Mount, Inc., a peanut and cotton seed processing company. Mr. Batchelor is a
graduate of North Carolina State University. Mr. Batchelor has been a director
of the Company since The Tuscarora Corporation acquired it in 1985.

CHARLES V. RICKS is a financial and tax advisor and business consultant to a
number of closely held businesses. He also spends a significant amount of his
time managing his own business interests, most of which are involved in the
retail automobile industry.

WILLIAM H. STANLEY is past President, Chairman, and Chief Executive Officer of
Peoples Bank & Trust Co. of Rocky Mount, North Carolina. He served in various
capacities for Peoples Bank from 1950 to 1985. Since his retirement from Peoples
Bank he has served as a director of Boddie-Noell Restaurant Properties, Inc., a
director of Rocky Mount Mills, and Chairman of the Nash County Social Services
Board. Mr. Stanley has been a director of the Company since 1995.

ITEM 11.   EXECUTIVE COMPENSATION

The following table sets forth the total compensation, including bonuses, earned
by the Chief Executive Officer and by each of the executive officers of the
Company whose annual compensation from the Company during 2000 exceeded
$100,000.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                             Long Term
                                                                            Compensation
                                                                               Awards
                                                                    ---------------------------
                                                                    Restricted       Securities              All
                                                                       Stock         Underlying             Other
Name and Principal Position         Annual Compensation              Awards(1)         Options          Compensation(2)
-----------------------------------------------------------------------------------------------------------------------
                               Year        Salary       Bonus
                               --------------------------------
<S>                            <C>      <C>           <C>            <C>               <C>                    <C>
Joseph F. Murray, Jr.          2000     $  326,443    $       -              -               -                6,900
President and                  1999        305,154      188,598              -               -                5,096
   Chief Executive Officer     1998        301,154      149,531              -               -                7,572


P. Douglas McMillan            2000        296,200            -              -               -               48,406
Executive Vice President       1999        250,231       28,800      $ 275,000               -               33,626
                               1998        119,308        8,000         92,500         100,000               20,428

George E. Loney                2000        148,077            -              -               -                4,971
Chief Financial Officer        1999        139,115       15,716              -          10,000                2,677
                               1998        124,096       18,491              -               -               16,508

E. Wayne Gibson                2000        150,000            -              -               -                3,225
Chairman of the Executive      1999        150,000            -              -               -                2,655
   Committee and Secretary     1998        150,576            -              -               -                4,240
</TABLE>

(1)      During 1999 the Company granted a restricted stock award to P. Douglas
         McMillan for 40,000 shares, and in 1998 for 20,000 shares. The awards
         were valued at market price per share on the dates of the grant. The
         awards vested upon grant.

(2)      Amounts included under the heading "All Other Compensation" for 2000
         include (i) $2,496, $2,267, $1,696, and $1,725 in premiums for life
         insurance provided by the Company for the benefit of Messrs. Murray,
         McMillan, Loney, and Gibson, respectively, and (ii) $3,400, $3,400, and
         $3,275 in Company contributions to the Company's 401(k) plan for the
         accounts of Messrs. Murray, McMillan, and Loney, respectively, and
         (iii) $1,500 each for Messrs. Murray and Gibson in directors' meeting
         fees, and (iv) $42,739 in relocation expenses for Mr. McMillan.



                                 Page 25 of 34
<PAGE>   26

COMPENSATION OF DIRECTORS

Each director of the Company is paid a fee of $500 for attending each meeting of
the Board of Directors and of committees of the Board of Directors. All
directors of the Company are reimbursed by the Company for all out-of-pocket
expenses reasonably incurred by them in the discharge of their duties as
directors, including out-of-pocket expenses incurred in attending meetings of
the Board of Directors and committees of the Board of Directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2000, matters of executive compensation were decided by the Compensation
Committee of the Board of Directors. The Compensation Committee is composed of
E. Wayne Gibson, Chairman, and Robert D. Gorham, Jr. Each of these individuals
is also an executive officer of the Company and, beginning in 1994, each of Mr.
Gorham and Mr. Gibson began receiving an annual salary of $75,000. On July 1,
1997, Mr. Gibson's annual salary was increased to $150,000. These salaries were
approved by a vote of the disinterested directors of the full Board of
Directors. See "Compensation Committee Report on Executive Compensation" on page
27 and "Certain Relationships and Related Transactions" on page 30.

The Board of Directors of the Company had a total of three meetings during 2000.
No director attended fewer than 75% of the total of such Board meetings and the
meetings of the committees upon which he served during the period for which he
was a director.

Among its standing committees the Company has an Audit Committee, a Compensation
Committee and an Executive Committee.

The Audit Committee consists of William H. Stanley and Charles V. Ricks. This
Committee recommends to the Board of Directors the engagement of the independent
auditors for the Company, determines the scope of the auditing of the books and
accounts of the Company, reviews the reports submitted by the auditors, examines
procedures employed in connection with the Company's internal control structure
and makes recommendations to the Board of Directors as may be appropriate. This
Committee met one time during 2000.

The Compensation Committee consists of E. Wayne Gibson and Robert D. Gorham, Jr.
This Committee sets the salaries and other compensation of all officers and
directors of the Company, except the salaries of the Chairman of the Board and
the Chairman of the Executive Committee, and all other employees whose salaries
are at a monthly rate at or above a level as determined from time to time by the
Board of Directors. This Committee met two times during 2000.

One of the duties of the Executive Committee is the annual recommendation to the
Board of Directors of the size and composition of the Board of Directors. The
Executive Committee will consider nominees for the Board of Directors
recommended by shareholders. Recommendations by shareholders should be forwarded
to the Secretary of the Company and should identify the nominee by name and
provide pertinent information concerning his or her background and experience. A
shareholder recommendation must be received at least one hundred and twenty days
prior to the date of the Annual Meeting of shareholders. The Executive
Committee, consisting of Joseph F. Murray, E. Wayne Gibson and Robert D. Gorham,
Jr., met three times in 2000.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Company's executive compensation program is designed to attract, motivate
and fairly reward people with the capabilities required for the Company to
achieve its objectives. It is the Company's belief that a program which fulfills
the financial and emotional needs of its executives is an important means of
retaining them.

The Compensation Committee seeks to align executives' performance objectives
with the interests of shareholders, and to structure compensation plans to reach
a balance between achievement of short-term business plans and long-term
strategic goals. Compensation for executive officers, therefore, is designed to
be directly linked to the Company's performance. This is accomplished through
annual bonus programs, substantially dependent upon the Company's financial
performance, combined with stock options which provide additional value to
certain executives as the value of the Common Stock grows. Each of these
components has an integral role in the total executive compensation program.

Each of the members of the Compensation Committee is also an executive officer
of the Company. Robert D. Gorham, Jr., Chairman of the Board of Directors, and
E. Wayne Gibson, Chairman of the Executive Committee and Secretary, received
$75,000 and $150,000, respectively, in compensation from the Company for his
services as an officer during 2000. These amounts were determined by the
remaining members of the Board of Directors without a recommendation from the
Compensation Committee and with Mr. Gorham and Mr. Gibson abstaining from voting
in each case. The consideration by the full Board of Directors of the
Committee's recommendations regarding Joseph F. Murray's compensation as
President and Chief Executive Officer are made without the presence or
participation of Mr. Murray.

In general, compensation for each of the Company's associates, including the
executive officers, is based on the associate's responsibilities and performance
over a period of time. The Company's executive compensation program has four
principal components: base salary, annual variable incentive compensation, stock
options, and other compensation. The Committee believes these components combine
to provide a fair and competitive package, while helping the Company to achieve
its objectives, both short- and long-term.



                                 Page 26 of 34
<PAGE>   27

Base Salary: The salary of each executive is regularly reviewed against
comparable positions in other companies in the Company's industry. Each
executive's base salary is then determined based on that information as well as
the individual's performance over time. The Company believes that a position is
ultimately only worth a certain amount in base salary, and that additional
compensation should be determined by incentives.

Annual Variable Incentive Compensation: The Company believes that, for
executives with the most influence on profitability, a meaningful portion of
compensation should be "at risk," providing a direct link between pay and the
Company's results for the year. The Company has a bonus program that rewards its
executives, department managers, and certain other associates based both on the
Company's financial performance during each year and the personal performance of
the associate. Such incentives are paid in two ways. First is a bonus based upon
successfully meeting certain criteria established jointly by the Company and the
associate. Second is an annual bonus based upon the Company's financial
performance.

The annual bonus for all associates, other than Mr. Murray, is determined by the
Compensation Committee following discussions with Mr. Murray, who makes a
recommendation on each associate's bonus. The annual bonuses for Mr. Murray and
Mr. Loney are determined by the Committee based upon a percentage of adjusted
income before taxes for the Company. Mr. McMillan's annual bonus is primarily
through a restricted stock award which is only earned if the Company attains
pre-determined levels of income before taxes.

Stock Options and Restricted Stock: The Company's long-term incentive
compensation for executive officers is designed to focus management's attention
on the Company's future. Such long-term compensation is provided through grants
of restricted stock and stock options. The number of stock options granted is
based upon the executive's salary, performance and responsibilities.

Other Compensation: Each executive officer also receives additional compensation
through standard benefit plans available to all associates including, but not
limited to, matching contributions pursuant to a 401(k) plan, paid vacation, and
group health, life, and disability insurance. The Compensation Committee
believes each of these benefits is an integral part of the overall compensation
program that helps to ensure that executive officers of the Company receive
competitive compensation.

Compensation Committee members are:

             E. Wayne Gibson - Chairman of the Compensation Committee,
                               Chairman of the Executive Committee and Secretary
       Robert D. Gorham, Jr. - Chairman of the Board of Directors


                                 Page 27 of 34
<PAGE>   28

PERFORMANCE GRAPH

The graph below compares cumulative total shareholder return of the Common Stock
for the period from December 31, 1995 to December 31, 2000, with The NASDAQ
Stock Market (US) Index and with a Peer Group* of companies for the same period.
Total shareholder return represents stock price changes and assumes the
reinvestment of dividends. The graph assumes the investment of $100 on December
31, 1995.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

                                         12/31/95       12/31/96        12/31/97        12/31/98        12/31/99        12/31/00
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>           <C>             <C>             <C>             <C>             <C>

ELLETT BROTHERS INC.                        100.00         63.33           71.17           60.58           92.41           42.36
------------------------------------------------------------------------------------------------------------------------------------

THE NASDAQ STOCK MARKET (US)                100.00        124.27          152.00          214.39          378.12          237.66
------------------------------------------------------------------------------------------------------------------------------------

PEER GROUP                                  100.00         63.81           77.23           87.54           62.30           13.10
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*The Peer Group is composed of companies that compete with the Company,
companies that supply products distributed by the Company, and companies that
otherwise operate in the outdoor sporting goods industry. The returns of each
company have been weighted according to their respective stock market
capitalization for purposes of arriving at a Peer Group average. The members of
the Peer Group are as follows: Coast Distribution Systems, Inc., Sport Supply
Group, Inc., and Sportsman's Guide, Inc.



                                 Page 28 of 34
<PAGE>   29

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Common Stock of the Company as of
February 28, 2001. Information is presented for (i) shareholders owning more
than five percent of the outstanding Common Stock, (ii) each director, (iii)
each executive officer named in the Summary Compensation Table, and (iv) all
directors and executive officers, as a group. Except as otherwise specified,
each of the shareholders named in the table has indicated to the Company that
such shareholder has sole voting and investment power with respect to all shares
of Common Stock beneficially owned by that shareholder.

<TABLE>
<CAPTION>
Name                                               Number of Shares(1)       Percent(1)
-------------------------------------------------------------------------------------------
<S>                                                    <C>                     <C>
E. Wayne Gibson(2)
     Chairman of the Executive Committee,
     Secretary and Director                            2,620,900(3)            64.2%
Robert D. Gorham, Jr.(2)
     Chairman of the Board                             2,070,900(4)            50.7%
The Tuscarora Corporation(2)                           1,945,000               47.6%
EWG Investments, Inc.(2)                                 550,000               13.5%
Gilder, Gagnon, Howe & Co., L.L.C. (2)                   583,750               14.3%
Dimensional Fund Advisors Inc. (2)                       313,200                7.7%
Joseph F. Murray, Jr.
     President, Chief Executive Officer
     and Director                                        145,918                3.6%
P. Douglas McMillan
     Executive Vice President                            160,000(5)             3.9%
George E. Loney
     Chief Financial Officer                              15,000(6)              .4
William H. Batchelor
     Director                                              5,000(7)              .1
William H. Stanley
     Director                                              3,700                 .1
Charles V. Ricks
     Director                                                 -0-              -0-
All directors and executive officers as a group
     (8 persons)                                       2,950,518               72.3%
</TABLE>

----------------------------------------
* Amount represents less than 1.0%

(1)  Beneficial ownership is determined in accordance with the rules and
     regulations of the Securities and Exchange Commission and generally
     includes voting or investment power with respect to securities. Shares of
     Common Stock issuable upon the exercise of options currently exercisable or
     convertible, or exercisable or convertible within 60 days, are deemed
     outstanding for computing the percentage ownership of the person holding
     such options, but are not deemed outstanding for computing the percentage
     ownership of any other person. Percentage ownership is based on 4,082,968
     shares on the Record Date.

(2)  The address of E. Wayne Gibson, Robert D. Gorham, Jr., The Tuscarora
     Corporation, and EWG Investments, Inc. is Post Office Box 912, Rocky Mount,
     North Carolina 27802. The address of Dimension Fund Advisors Inc. is 1299
     Ocean Avenue, 11th Floor, Santa Monica, California 90401. The address of
     Gilder, Gagnon, Howe & Co., L.L.C. is 1775 Broadway, 26th Floor, New York,
     New York 10019.

(3)  Shares reflected as beneficially owned include all shares reflected in the
     table as beneficially owned by The Tuscarora Corporation and EWG
     Investments, Inc., 40,000 shares owned by Tuscarora Marketing Group, Inc.
     and 81,600 shares owned by Tuscarora Foundation, Inc., a charitable
     foundation of which Mr. Gibson is a director and an executive officer. Mr.
     Gibson is the sole shareholder and President of EWG Investments, Inc;
     President, a director and a principal shareholder of The Tuscarora
     Corporation, and President and a director of Tuscarora Marketing Group,
     Inc.

(4)  Shares reflected as beneficially owned include all shares reflected in the
     table as beneficially owned by The Tuscarora Corporation, 40,000 shares
     owned by Tuscarora Marketing Group, Inc. and 85,900 shares owned by
     Tuscarora Foundation, Inc., a charitable foundation of which Mr. Gorham is
     a director. Mr. Gorham is the majority shareholder and a director of The
     Tuscarora Corporation, and the sole shareholder and a director of Tuscarora
     Marketing Group, Inc.

(5)  Shares reflected as beneficially owned include 50,000 shares issuable
     pursuant to a currently exercisable stock option at $10 per share, 50,000
     shares issuable pursuant to a currently exercisable stock option at $15 per
     share, and 40,000 shares issuable pursuant to a restricted stock grant.

(6)  Shares reflected as beneficially owned are issuable pursuant to the
     exercise of a stock option.

(7)  Excludes shares owned by The Tuscarora Corporation and Tuscarora Marketing
     Group, Inc. Mr. Batchelor is a director of both of such corporations.

                                 Page 29 of 34
<PAGE>   30

Section 16(a) of the 1934 Act requires the directors and officers of the Company
to file reports of holdings and acquisitions in Common Stock with the Securities
and Exchange Commission ("SEC"). Based on Company records and other information,
the Company believes that all SEC filing requirements applicable to its
directors and officers were complied with in respect to the Company's 2000
fiscal year.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As of the date of this report, The Tuscarora Corporation, Tuscarora Marketing
Group, Inc., EWG Investments, Inc., and Tuscarora Foundation, Inc. own an
aggregate of approximately 64.2% of the outstanding Common Stock. Robert D.
Gorham, Jr., E. Wayne Gibson and William H. Batchelor are all directors of the
Company and are the three directors of The Tuscarora Corporation. Mr. Gorham is
the majority shareholder of The Tuscarora Corporation and Mr. Gibson is a
principal shareholder and the President of The Tuscarora Corporation and the
sole shareholder and President of EWG Investments, Inc. Mr. Gorham and Mr.
Gibson are both directors of Tuscarora Foundation, Inc. See "Security Ownership
of Certain Beneficial Owners and Management."

The Tuscarora Corporation and the Company provide each other with certain
support services at cost. Payments by the Company as well as amounts received
from The Tuscarora Corporation relating to such services have not been material.
Pursuant to a policy adopted by the Board of Directors with respect to
transactions with affiliates, the Company expects that any arrangement or
agreement with The Tuscarora Corporation relating to such support services will
be on terms no less favorable to the Company than available in transactions of
such nature with unrelated third parties.

PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this Form 10-K:

1.  Financial Statements: See Item 8 of this report on Form 10-K.

2.  Financial Statement Schedules:

Schedule II - Valuation and Qualifying Accounts - Page 32

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions, or are inapplicable, or the required information is
disclosed elsewhere, and therefore, have been omitted.

3. Exhibits: The Exhibits listed on the accompanying Index to Exhibits on pages
34 and 35 are filed as part of this report.

(b)  On March 9, 2001, a report on Form 8-K was filed announcing the approval of
     a cash-out merger between the Company and certain corporations owned by
     members of the Company's management (the "Acquirers"). The merger will
     result in a payment of $3.20 per share for all shares of the Company not
     already owned by the Acquirers. This price represents a 16.4% increase over
     the $2.75 original price per share offered by the Acquirers on November 6,
     2000. The transaction is subject to approval of the Company's shareholders.
     In an unrelated matter, the Company announced the pending delisting from
     the NASDAQ SmallCap Market for failure to maintain a minimum of two active
     market makers for its stock in compliance with NASDAQ Marketplace Rule
     431(c)(1).

     On March 22, 2001, a report on Form 8-K was filed relating to the
     announcement of the delisting from the NASDAQ SmallCap Market effective
     March 23, 2001.


                                 Page 30 of 34
<PAGE>   31

                              ELLETT BROTHERS, INC.

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                     Balance at      Charged to       Charged to                      Balance at
                                                     Beginning          Cost/           Other                             End
                         Description                 of Period        Expenses         Accounts       Deductions       of Period
                         -----------                 ---------        --------         --------       ----------       ---------
<S>                                                    <C>             <C>              <C>             <C>             <C>

  2000
             Allowance for Doubtful Accounts           $  634          $1,107           $  783 (B)      $1,911 (A)      $  613
                                                       ======          ======           ======          ======          ======

             Allowance for Obsolete Inventory          $  535 (C)      $   11 (D)       $    -          $    5          $  541
                                                       ======          ======           ======          ======          ======


  1999
             Allowance for Doubtful Accounts           $  605          $  576           $  614 (B)      $1,161 (A)      $  634
                                                       ======          ======           ======          ======          ======

             Allowance for Obsolete Inventory          $  569 (C)      $   -(D)         $    -          $   34          $  535
                                                       ======          =====            ======          ======          ======


  1998
             Allowance for Doubtful Accounts           $  769          $  374           $  750 (B)      $1,288 (A)      $  605
                                                       ======          ======           ======          ======          ======

             Allowance for Obsolete Inventory          $  697 (C)      $   -(D)         $    -          $  128          $  569
                                                       ======          =====            ======          ======          ======
</TABLE>

------------------------

The information above is provided in support of the financial statements as
further described in Note 2 to the financial statements.

(A)  Represents actual write-off of uncollectable accounts.

(B)  Recoveries.

(C)  The Company maintains a general reserve for excess or obsolete inventory
     and for lower of cost or market adjustments. As part of the Company's
     inventory management, slow moving items are identified and prices are
     reduced until the items are liquidated. These sales are part of sales and
     cost of sales.

(D)  Reflected as cost of sales. See Note C above.


                                 Page 31 of 34
<PAGE>   32

                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

ELLETT BROTHERS, INC.
(Registrant)


Date: April 12, 2001                  By:   /s/ Joseph F. Murray, Jr.
                                          -------------------------------------
                                          Joseph F. Murray, Jr.
                                          President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.


<TABLE>
<CAPTION>
            Signature                                    Title                         Date
            ---------                                    -----                         ----
<S>                                             <C>                                <C>

/s/ Robert D. Gorham, Jr.                       Chairman of the Board              April 12, 2001
--------------------------------
Robert D. Gorham, Jr.


/s/ Joseph F. Murray, Jr.                      Director, President and             April 12, 2001
--------------------------------               Chief Executive Officer
Joseph F. Murray, Jr.


/s/ George E. Loney                            Chief Financial Officer             April 12, 2001
--------------------------------
George E. Loney


/s/ E. Wayne Gibson                      Director, Chairman of the Executive       April 12, 2001
--------------------------------               Committee and Secretary
E. Wayne Gibson


/s/ William H. Batchelor                               Director                    April 12, 2001
--------------------------------
William H. Batchelor


/s/ Charles V. Ricks                                   Director                    April 12, 2001
--------------------------------
Charles V. Ricks


/s/ William H. Stanley                                 Director                    April 12, 2001
--------------------------------
William H. Stanley
</TABLE>



                                 Page 32 of 34
<PAGE>   33

                                INDEX TO EXHIBITS

Exhibit
Number                                 Description
-------                                -----------

3(a)     Articles of Incorporation of the Corporation. Incorporated by reference
         to Exhibit 3(a) filed as part of the Corporation's Registration
         Statement on Form S-1 (File No. 33-61490).

3(b)     Bylaws of the Corporation. Incorporated by reference to Exhibit 3(b)
         filed as part of the Corporation's Registration Statement on Form S-1
         (File No. 33-61490).

3(c)     Amendment dated April 5, 1999 to the Bylaws of the Corporation filed as
         Exhibit 3(b).

4(a)     Specimen Stock Certificate for the Common Stock of the Corporation.
         Incorporated by reference to Exhibit 4(a) filed as part of the
         Corporation's Registration Statement on Form S-1 (File No. 33-61490).

4(b)     Loan Agreement between Lexington County, South Carolina and Ellett
         Brothers Limited Partnership dated as of November 1, 1988. Incorporated
         by reference to Exhibit 4(c) filed as part of the Corporation's
         Registration Statement on Form S-1 (File No. 33-61490).

4(c)     Promissory Note of Ellett Brothers Limited Partnership to Lexington
         County, South Carolina dated December 1, 1988. Incorporated by
         reference to Exhibit 4(d) filed as part of the Corporation's
         Registration Statement on Form S-1 (File No. 33-61490).

4(d)     Trust Indenture between Lexington County, South Carolina and Ellett
         Brothers Limited Partnership dated as of November 1, 1988. Incorporated
         by reference to Exhibit 4(e) filed as part of the Corporation's
         Registration Statement on Form S-1 (File No. 33-61490).

4(e)     Mortgage and Security Agreement between Ellett Brothers Limited
         Partnership and Citizens and Southern Trust Company (South Carolina),
         National Association, dated as of November 1, 1988. Incorporated by
         reference to Exhibit 4(f) filed as part of the Corporation's
         Registration Statement on Form S-1 (File No. 33-61490).

4(f)     Form of Amendment dated June 3, 1992 between Ellett Brothers Limited
         Partnership, NationsBank, Allstate Municipal Income Opportunities Trust
         and Allstate Municipal Income Trust II relating to the Loan Agreement
         filed as Exhibit 4(b). Incorporated by reference to Exhibit 4(i) filed
         as part of the Corporation's Annual Report on Form 10-K for the year
         ended December 31, 1993.

4(g)     Form of Letter Agreement dated July 29, 1992 among Allstate Municipal
         Income Opportunities Trust, Allstate Municipal Income Trust II, Ellett
         Brothers Limited Partnership, NationsBank and Lexington County relating
         to the Loan Agreement filed as Exhibit 4(b). Incorporated by reference
         to Exhibit 4(j) filed as part of the Corporation's Annual Report on
         Form 10-K for the year ended December 31, 1993.

4(h)     Letter dated February 23, 1993 of Allstate Municipal Income
         Opportunities Trust and Allstate Municipal Income Trust II to Ellett
         Brothers Limited Partnership relating to the Loan Agreement filed as
         Exhibit 4(b). Incorporated by reference to Exhibit 4(k) filed as part
         of the Corporation's Registration Statement on Form S-1 (File No.
         33-61490).

4(i)     Form of Assignment and Assumption Agreement dated June 9, 1993 between
         Ellett Brothers Limited Partnership and Ellett Brothers, Inc. relating
         to the Loan Agreement filed as Exhibit 4 (b). Incorporated by reference
         to Exhibit 4(l) filed as part of the Corporation's Annual Report on
         Form 10-K for the year ended December 31, 1993.

4(j)     First Amendatory Loan Agreement between Lexington County, South
         Carolina, the Corporation and The Bank of New York dated as of
         September 12, 1997. Incorporated by reference to Exhibit 4(j) filed as
         part of the Corporation's Annual Report on Form 10-K for the year ended
         December 31, 1997.

4(k)     First Supplemental Trust Indenture between Lexington County, South
         Carolina, the Corporation and The Bank of New York dated as of
         September 12, 1997. Incorporated by reference to Exhibit 4(k) filed as
         part of the Corporation's Annual Report on Form 10-K for the year ended
         December 31, 1997.

4(l)     Mortgage Modification Agreement between the corporation and The Bank of
         New York dated as of September 12, 1997. Incorporated by reference to
         Exhibit 4(l) filed as part of the Corporation's Annual Report on Form
         10-K for the year ended December 31, 1997.

4(m)     Modification of Note between the Corporation and The Bank of New York
         dated as of September 12, 1997. Incorporated by reference to Exhibit
         4(m) filed as part of the Corporation's Annual Report on Form 10-K for
         the year ended December 31, 1997.



                                 Page 33 of 34
<PAGE>   34

                                INDEX TO EXHIBITS
                                   (CONTINUED)

Exhibit
Number                                 Description
-------                                -----------

10(a)    Financing and Security Agreement dated June 10, 1994 between First
         Union Commercial Corporation and the Corporation. Incorporated by
         reference to Exhibit 10(d) filed as part of the Corporation's quarterly
         report on Form 10-Q for the quarter ended June 30, 1994.

10(b)    Amendment dated April 21, 1995 to the Financing and Security Agreement
         filed as exhibit 10(a). Incorporated by reference to Exhibit 10(e)
         filed as part of the Corporation's Annual Report on Form 10-K for the
         year ended December 31, 1995.

10(c)    Amendment dated December 23, 1996 to the Financing and Security
         Agreement filed as Exhibit 10(a). Incorporated by reference to exhibit
         10(f) filed as part of the Corporation's Annual Report on Form 10-K for
         the year ended December 31, 1996.

10(d)    Amendment dated March 31, 1997 to the Financing and Security Agreement
         filed as Exhibit 10(a). Incorporated by reference to Exhibit 10(d)
         filed as part of the Corporation's Annual Report on Form 10-K for the
         year ended December 31, 1997.

10(e)    Amendment dated September 26, 1997 to the Financing and Security
         Agreement filed as Exhibit 10(a). Incorporated by reference to Exhibit
         10(e) filed as part of the Corporation's Annual Report on Form 10-K for
         the year ended December 31, 1997.

10(f)    Amendment dated December 30, 1997 to the Financing and Security
         Agreement filed as Exhibit 10(a). Incorporated by reference to Exhibit
         10(f) filed as part of the Corporation's Annual Report on Form 10-K for
         the year ended December 31, 1997.

10(g)    Amendment dated December 31, 1998 to the Financing and Security
         Agreement filed as Exhibit 10(a). Incorporated by reference to Exhibit
         10(g) filed as part of the Corporation's Annual Report on Form 10-K for
         the year ended December 31, 1998.

10(h)    Amendment dated July 30, 1999 to the Financing and Security Agreement
         filed as Exhibit 10(a).

10(i)    Amendment dated October 8, 1999 to the Financing and Security Agreement
         filed as Exhibit 10(a).

10(j)    Amendment dated June 21, 2000 to the Financing and Security Agreement
         filed as Exhibit 10(a).

10(k)    Amendment dated October 12, 2000 to the Financing and Security
         Agreement filed as Exhibit 10(a).

10(l)    Amendment dated December 8, 2000 to the Financing and Security
         Agreement filed as Exhibit 10(a).

21       Subsidiaries of the Registrant. Incorporated by reference to Exhibit 21
         filed as part of the Corporation's Annual Report on Form 10-K for the
         year ended December 31, 1997.



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