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Press release from Business Wire

Cabela's Inc. Reports Strong Second Quarter 2012 Results

<p class='bwalignc'> 2nd Qtr. EPS Up 52% to $0.47 </p> <p class='bwalignc'> 2nd Qtr. Comp Store Sales Up 4.7% </p> <p class='bwalignc'> Merchandise Gross Margin Up 70 Basis Points </p> <p class='bwalignc'> Best Direct Channel Revenue Performance in Eight Quarters </p> <p class='bwalignc'> Retail Operating Margin Up 230 Basis Points to 18.5% </p> <p class='bwalignc'> After-Tax Return on Invested Capital Up 190 Basis Points </p>

Thursday, July 26, 2012

Cabela's Inc. Reports Strong Second Quarter 2012 Results08:01 EDT Thursday, July 26, 2012 SIDNEY, Neb. (Business Wire) -- Cabela's Incorporated (NYSE:CAB) today reported strong financial results for second quarter fiscal 2012. For the quarter, total revenue increased 11.6% to $627.3 million; Retail store revenue increased 16.9% to $384.7 million; Direct revenue decreased 0.7% to $158.5 million; and Financial Services revenue increased 12.8% to $79.3 million. For the quarter, comparable store sales increased 4.7%. Net income increased to $33.9 million compared to $21.7 million and earnings per diluted share were $0.47 compared to $0.31, each compared to the year ago quarter. "This strong performance is Company-wide and shows that our strategic initiatives have generated major improvements in our business," said Tommy Millner, Cabela's Chief Executive Officer. "Every key line of our income statement benefited. Retail and Direct channel revenue, merchandise margin, operating margin, expenses as a percentage of revenue, inventory turns, earnings per share and return on capital all improved." "Retail revenue growth was particularly encouraging," Millner said. "Comparable store sales accelerated in the quarter and increased 4.7%. It's great that our smaller next-generation stores continue to generate higher revenue and profit per square foot than our legacy stores. Additionally, each of our three new stores opened this year exceeded our expectations in the quarter, which reinforces our decision to accelerate retail store expansion." "Our Direct channel experienced its best revenue performance in eight quarters," Millner said. "Direct revenue improved significantly from the first quarter, declining just 0.7% due to stronger growth in Internet sales and reduced declines in call center sales." Merchandise margin increased 70 basis points to 37.4%, the highest level in more than five years. Ongoing focus on Cabela's branded products, improved in-season and pre-season planning, and greater vendor collaboration contributed to the strong performance. These positives more than overcame strong sales of firearms, ammunition and powersports, which had a negative affect on merchandise margin. "Operating expense management remains a key focus," Millner said. "Our disciplined approach to managing operating expenses led to our third consecutive quarter of operating expenses growing at a slower rate than revenue. We are confident in our ability to continue to tightly manage operating expenses as we accelerate growth." The Company realized significant increases in Retail segment contribution margin. For the quarter, Retail segment operating margin increased 230 basis points to 18.5%, a new second quarter record. This represents the 13th consecutive quarterly increase in Retail segment contribution margin. "These strong results led to another quarter of improvement in return on invested capital," Millner said. "Return on invested capital improved 190 basis points. Key operational improvements and the strong performance of our new stores give us confidence in our ability to increase return on capital going forward." The Cabela's CLUB Visa program also posted very strong results in the quarter. For the quarter, net charge-offs decreased 48 basis points to 1.86% compared to 2.34% in the prior year quarter. This is the lowest level of net charge-offs in five years. Primarily due to higher interest and fee income and reduced interest expense, Financial Services revenue increased 12.8% in the quarter to $79.3 million. "We are optimistic about our prospects for the remainder of 2012 and 2013," Millner said. "Our strategies are working well and our next-generation stores are achieving superior results. Accordingly, we believe that our full year 2012 earnings per share should exceed current estimates by 1-3%." Conference Call Information A conference call to discuss second quarter fiscal 2012 operating results is scheduled for today (Thursday, July 26, 2012) at 11:00 a.m. Eastern Time. A webcast of the call will take place simultaneously and can be accessed by visiting the Investor Relations section of Cabela's website at www.cabelas.com. A replay of the call will be archived on www.cabelas.com. About Cabela's Incorporated Cabela's Incorporated, headquartered in Sidney, Nebraska, is a leading specialty retailer, and the world's largest direct marketer, of hunting, fishing, camping and related outdoor merchandise. Since the Company's founding in 1961, Cabela's® has grown to become one of the most well-known outdoor recreation brands in the world, and has long been recognized as the World's Foremost Outfitter®. Through Cabela's growing number of retail stores and its well-established direct business, it offers a wide and distinctive selection of high-quality outdoor products at competitive prices while providing superior customer service. Cabela's also issues the Cabela's CLUB® Visa credit card, which serves as its primary customer loyalty rewards program. Cabela's stock is traded on the New York Stock Exchange under the symbol “CAB”. Caution Concerning Forward-Looking Statements Statements in this press release that are not historical or current fact are "forward-looking statements" that are based on the Company's beliefs, assumptions and expectations of future events, taking into account the information currently available to the Company. Such forward-looking statements include, but are not limited to, the Company's statements regarding its ability to tightly manage operating expenses as it accelerates growth, its ability to increase return on capital going forward, and full year 2012 earnings per share exceeding current estimates by 1-3%. Forward-looking statements involve risks and uncertainties that may cause the Company's actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition that the Company expresses or implies in any forward-looking statements. These risks and uncertainties include, but are not limited to: the state of the economy and the level of discretionary consumer spending, including changes in consumer preferences and demographic trends; adverse changes in the capital and credit markets or the availability of capital and credit; the Company's ability to successfully execute its multi-channel strategy; increasing competition in the outdoor sporting goods industry and for credit card products and reward programs; the cost of the Company's products, including increases in fuel prices; the availability of the Company's products due to political or financial instability in countries where the goods the Company sells are manufactured; supply and delivery shortages or interruptions, and other interruptions or disruptions to the Company's systems, processes, or controls, caused by system changes or other factors; increased government regulations, including regulations relating to firearms and ammunition; the Company's ability to protect its brand, intellectual property, and reputation; the outcome of litigation, administrative, and/or regulatory matters (including a Commissioner's charge the Company received from the Chair of the U. S. Equal Employment Opportunity Commission in January 2011); the Company's ability to manage credit, liquidity, interest rate, operational, legal, and compliance risks; the Company's ability to increase credit card receivables while managing credit quality; the Company's ability to securitize its credit card receivables at acceptable rates or access the deposits market at acceptable rates; the impact of legislation, regulation, and supervisory regulatory actions in the financial services industry, including the Dodd-Frank Wall Street Reform and Consumer Protection Act; and other risks, relevant factors and uncertainties identified in the Company's filings with the SEC (including the information set forth in the "Risk Factors" section of the Company's Form 10-K for the fiscal year ended December 31, 2011), which filings are available at the Company's website at www.cabelas.com and the SEC's website at www.sec.gov. Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. The Company's forward-looking statements speak only as of the date they are made. Other than as required by law, the Company undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.   CABELA'S INCORPORATED AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME(Dollars in Thousands Except Earnings Per Share)(Unaudited)           Three Months EndedSix Months EndedJune 30, 2012July 2, 2011June 30, 2012July 2, 2011 Revenue: Merchandise sales $ 542,662 $ 488,409 $ 1,077,939 $ 997,519 Financial Services revenue 79,267 70,277 162,722 142,648 Other revenue 5,325   3,414   10,097   8,644   Total revenue 627,254   562,100   1,250,758   1,148,811     Cost of revenue: Merchandise costs  (exclusive of depreciation and amortization) 339,782 309,233 690,502 650,443 Cost of other revenue 595   3   634   3   Total cost of revenue  (exclusive of depreciation and amortization) 340,377 309,236 691,136 650,446 Selling, distribution, and administrative expenses 229,049 214,600 455,218 429,214 Impairment and restructuring charges —   955   —   955     Operating income 57,828 37,309 104,404 68,196   Interest expense, net (6,444 ) (6,123 ) (10,948 ) (12,145 ) Other non-operating income, net 1,450   1,993   2,851   3,957     Income before provision for income taxes 52,834 33,179 96,307 60,008 Provision for income taxes 18,964   11,479   33,611   20,523     Net income $ 33,870   $ 21,700   $ 62,696   $ 39,485     Earnings per basic share $ 0.48   $ 0.31   $ 0.90   $ 0.57   Earnings per diluted share $ 0.47   $ 0.31   $ 0.87   $ 0.55     Basic weighted average shares outstanding 70,034,486   69,279,823   69,744,356   69,028,853   Diluted weighted average shares outstanding 71,542,102   71,084,998   71,995,918   71,407,558       CABELA'S INCORPORATED AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Dollars in Thousands Except Par Values)(Unaudited)           ASSETSJune 30, 2012December 31, 2011July 2, 2011 CURRENT Cash and cash equivalents $ 347,389 $ 304,679 $ 385,327 Restricted cash of the Trust 15,826 18,296 18,524 Held-to-maturity investment securities — — 197,999 Accounts receivable, net 24,400 47,127 25,164 Credit card loans (includes restricted credit card loans of the Trust of $3,038,415,  $3,142,151, and $2,685,110), net of allowance for loan losses of $67,050, $73,350,  and $77,800 2,994,459 3,094,163 2,627,191 Inventories 577,120 494,828 599,851 Prepaid expenses and other current assets 134,999 146,479 133,440 Income taxes receivable and deferred income taxes 31,142   5,709   30,719   Total current assets 4,125,335 4,111,281 4,018,215 Property and equipment, net 928,442 866,899 827,800 Land held for sale or development 36,666 38,393 42,615 Economic development bonds 88,335 86,563 102,846 Deferred income taxes — — 11,141 Other assets 28,919   30,635   25,152   Total assets $ 5,207,697   $ 5,133,771   $ 5,027,769     LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT Accounts payable, including unpresented checks of $23,287, $19,124, and $8,358 $ 273,662 $ 266,793 $ 198,285 Gift instruments, and credit card and loyalty rewards programs 221,449 227,414 196,824 Accrued expenses 109,699 143,695 96,100 Time deposits 261,340 88,401 158,929 Current maturities of secured variable funding obligations of the Trust — 460,000 — Current maturities of secured long-term obligations of the Trust — 425,000 1,123,400 Current maturities of long-term debt 8,394   8,387   123,390   Total current liabilities 874,544 1,619,690 1,896,928 Long-term time deposits 796,704 893,912 868,693 Secured long-term obligations of the Trust, less current maturities 1,827,500 977,500 722,500 Long-term debt, less current maturities 331,725 336,535 345,316 Deferred income taxes 31,084 26,367 — Other long-term liabilities 98,473 98,451 107,352   STOCKHOLDERS' EQUITY Preferred stock, $0.01 par value; Authorized - 10,000,000 shares; Issued - none — — — Common Stock, $0.01 par value; Authorized - 245,000,000 shares; Issued - 70,542,289, 69,641,818, and 69,415,712 shares; Outstanding - 69,742,289, 68,840,883, and 69,415,712 shares 705 696 694 Additional paid-in capital 346,007 334,925 328,169 Retained earnings 925,610 862,914 759,779 Accumulated other comprehensive income (loss) 4,322 2,731 (1,662 ) Treasury stock, at cost (28,977 ) (19,950 ) —   Total stockholders' equity 1,247,667   1,181,316   1,086,980   Total liabilities and stockholders' equity $ 5,207,697   $ 5,133,771   $ 5,027,769       CABELA'S INCORPORATED AND SUBSIDIARIESSEGMENT INFORMATION(Dollars in Thousands)(Unaudited)               Three Months EndedSix Months EndedJune 30, 2012July 2, 2011June 30, 2012July 2, 2011Revenue: Retail $ 384,693 $ 329,162 $ 730,024 $ 630,998 Direct 158,453 159,598 348,648 367,049 Financial Services 79,267 70,277 162,722 142,648 Other 4,841   3,063   9,364   8,116   Total revenue $ 627,254   $ 562,100   $ 1,250,758   $ 1,148,811     Operating Income (Loss): Retail $ 71,224 $ 53,428 $ 115,451 $ 88,316 Direct 29,165 31,072 63,339 67,054 Financial Services 21,276 14,271 50,278 28,238 Other (63,837 ) (61,462 ) (124,664 ) (115,412 ) Total operating income $ 57,828   $ 37,309   $ 104,404   $ 68,196     As a Percentage of Total Revenue: Retail revenue 61.3 % 58.6 % 58.4 % 54.9 % Direct revenue 25.3 28.4 27.9 32.0 Financial Services revenue 12.6 12.5 13.0 12.4 Other revenue 0.8   0.5   0.7   0.7   Total revenue 100.0 % 100.0 % 100.0 % 100.0 %   As a Percentage of Segment Revenue: Retail operating income 18.5 % 16.2 % 15.8 % 14.0 % Direct operating income 18.4 19.5 18.2 18.3 Financial Services operating income 26.8 20.3 30.9 19.8 Total operating income as a percentage of total revenue 9.2 6.6 8.3 5.9   .       CABELA'S INCORPORATED AND SUBSIDIARIESCOMPONENTS OF FINANCIAL SERVICES SEGMENT REVENUE(Dollars in Thousands)(Unaudited)     Financial Services revenue consists of activity from the Company's credit card operations and is comprised of interest and fee income, interchange income, other non-interest income, interest expense, provision for loan losses, and customer rewards costs. The following table details the components and amounts of Financial Services revenue for the periods presented below   Three Months EndedSix Months EndedJune 30, 2012   July 2, 2011June 30, 2012   July 2, 2011   Interest and fee income $ 72,085 $ 65,598 $ 145,193 $ 134,000 Interest expense (12,689 ) (18,567 ) (26,580 ) (35,860 ) Provision for loan losses (12,198 ) (8,809 ) (18,844 ) (16,483 ) Net interest income, net of provision for loan losses 47,198   38,222   99,769   81,657   Non-interest income: Interchange income 74,939 66,230 143,366 124,903 Other non-interest income 3,981   3,256   8,020   6,303   Total non-interest income 78,920 69,486 151,386 131,206 Less: Customer rewards costs (46,851 ) (37,431 ) (88,433 ) (70,215 ) Financial Services revenue $ 79,267   $ 70,277   $ 162,722   $ 142,648     The following table sets forth the components of Financial Services revenue as a percentage of average total credit card loans, including any accrued interest and fees, for the periods presented below.     Three Months EndedSix Months EndedJune 30, 2012July 2, 2011June 30, 2012July 2, 2011   Interest and fee income 9.6 % 9.9 % 9.8 % 10.1 % Interest expense (1.6 ) (2.8 ) (1.8 ) (2.7 ) Provision for loan losses (1.6 ) (1.3 ) (1.2 ) (1.2 ) Interchange income 10.0 9.9 9.6 9.4 Other non-interest income 0.4 0.5 0.6 0.5 Customer rewards costs (6.4 ) (5.6 ) (6.0 ) (5.3 ) Financial Services revenue 10.4 % 10.6 % 11.0 % 10.8 %   CABELA'S INCORPORATED AND SUBSIDIARIESKEY STATISTICS OF FINANCIAL SERVICES BUSINESS(Dollars in Thousands Except Average Balance per Account )(Unaudited)     Key statistics reflecting the performance of the Cabela's CLUB Visa Program are shown in the following charts:     Three Months Ended     June 30, 2012   July 2, 2011Increase(Decrease)%Change   Average balance of credit card loans (1) $ 3,001,213 $ 2,657,501 $ 343,712 12.9 % Average number of active credit card accounts 1,492,033 1,382,428 109,605 7.9   Average balance per active credit card account (1) $ 2,011 $ 1,922 $ 89 4.6   Net charge-offs on credit card loans (1) $ 13,948 $ 15,552 $ (1,604 ) (10.3 ) Net charge-offs as a percentage of average credit card loans (1)     1.86 %   2.34 %   (0.48 )%     (1) Includes accrued interest and fees     Six Months Ended     June 30, 2012   July 2, 2011Increase(Decrease)%Change   Average balance of credit card loans (1) $ 2,984,384 $ 2,643,827 $ 340,557 12.9 % Average number of active credit card accounts 1,487,242 1,379,814 107,428 7.8   Average balance per active credit card account (1) $ 2,007 $ 1,916 $ 91 4.7   Net charge-offs on credit card loans (1) $ 28,794 $ 33,587 $ (4,793 ) (14.3 ) Net charge-offs as a percentage of average credit card loans (1)     1.93 %   2.54 %   (0.61 )%     (1) Includes accrued interest and fees CABELA'S INCORPORATED AND SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURES(Unaudited)   To supplement the Company's condensed consolidated statements of income presented in accordance with generally accepted accounting principles ("GAAP"), management of the Company has disclosed non-GAAP measures of operating results that exclude certain items. Operating income, provision for income taxes, net income, and earnings per basic and diluted share are presented below both as reported (on a GAAP basis) and excluding (i) the impairment and restructuring charges recorded in the three and six months ended July 2, 2011. The impairment and restructuring charges include asset write-downs and severance and related costs. There were no impairment and restructuring charges reflected in the three and six months ended June 30, 2012. In light of the nature and magnitude, we believe these items should be presented separately to enhance a reader's overall understanding of the Company's ongoing operations. These non-GAAP financial measures should be considered in conjunction with the GAAP financial measures.   Management believes these non-GAAP financial results provide useful supplemental information to investors regarding the underlying business trends and performance of the Company's ongoing operations and are useful for period-over-period comparisons of such operations. In addition, management evaluates results using non-GAAP adjusted operating income, adjusted net income, and adjusted earnings per diluted share. These non-GAAP measures should not be considered in isolation or as a substitute for operating income, net income, earnings per diluted share, or any other measure calculated in accordance with GAAP. The following table reconciles these financial measures to the related GAAP financial measures for the periods presented.     Three Months EndedJune 30, 2012   July 2, 2011GAAP BasisAs ReportedGAAP BasisAs Reported   AmountsAdded Back   Non-GAAPAs Adjusted(Dollars in Thousands Except Earnings Per Share)   Total revenue $ 627,254 $ 562,100 $ — $ 562,100   Total cost of revenue (exclusive of depreciation and amortization) 340,377 309,236 — 309,236 Selling, distribution, and administrative expenses 229,049 214,600 — 214,600 Impairment and restructuring charges (1) —   955   (955 ) —     Operating income 57,828 37,309 955 38,264   Interest expense, net (6,444 ) (6,123 ) — (6,123 ) Other non-operating income 1,450   1,993   —   1,993   Income before provision for income taxes 52,834 33,179 955 34,134 Provision for income taxes (2) 18,964   11,479   327   11,806     Net income $ 33,870   $ 21,700   $ 628   $ 22,328     Earnings per basic share $ 0.48   $ 0.31   $ 0.01   $ 0.32     Earnings per diluted share $ 0.47   $ 0.31   $ 0.01   $ 0.32       Six Months EndedJune 30, 2012   July 2, 2011GAAP BasisAs ReportedGAAP BasisAs Reported   AmountsAdded Back   Non-GAAPAs Adjusted(Dollars in Thousands Except Earnings Per Share)   Total revenue $ 1,250,758 $ 1,148,811 $ — $ 1,148,811   Total cost of revenue (exclusive of depreciation and amortization) 691,136 650,446 — 650,446 Selling, distribution, and administrative expenses 455,218 429,214 — 429,214 Impairment and restructuring charges (1) —   955   (955 ) —     Operating income 104,404 68,196 955 69,151   Interest expense, net (10,948 ) (12,145 ) — (12,145 ) Other non-operating income 2,851   3,957   —   3,957   Income before provision for income taxes 96,307 60,008 955 60,963 Provision for income taxes (2) 33,611   20,523   327   20,850     Net income $ 62,696   $ 39,485   $ 628   $ 40,113     Earnings per basic share $ 0.90   $ 0.57   $ 0.01   $ 0.58     Earnings per diluted share $ 0.87   $ 0.55   $ 0.01   $ 0.56   (1) Reflects (i) impairment losses recognized in the three and six months ended July 2, 2011, to reflect the fair value on certain assets and (ii) restructuring charges for severance and related benefits recognized in the three and six months ended July 2, 2011. (2) The provision for income taxes for the non-GAAP measurements for the respective periods were based on the effective tax rate calculated under GAAP for those respective periods on a year-to-date basis. Investor Contact:Cabela's IncorporatedChris Gay, 308-255-2905orMedia Contact:Cabela's IncorporatedJoe Arterburn, 308-255-1204