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Press release from Business Wire

Cabela's Inc. Reports Strong Third Quarter 2012 Results

<p class='bwalignc'> - Third Quarter EPS Increased 28% to $.60 Compared to $0.47 a Year Ago </p> <p class='bwalignc'> - Third Quarter Comp Store Sales Up 3.9% </p> <p class='bwalignc'> - Merchandise Gross Margin Up 130 Basis Points to a New Third Quarter Record 37.2% </p> <p class='bwalignc'> - New Next-Generation Stores Significantly Outperforming Legacy Store Base </p> <p class='bwalignc'> - After-Tax Return on Invested Capital Up 150 Basis Points </p>

Thursday, October 25, 2012

Cabela's Inc. Reports Strong Third Quarter 2012 Results08:00 EDT Thursday, October 25, 2012 SIDNEY, Neb. (Business Wire) -- Cabela's Incorporated (NYSE:CAB) today reported strong financial results for third quarter fiscal 2012. For the quarter, total revenue increased 9.2% to $741.2 million; Retail store revenue increased 15.8% to $456.0 million; Direct revenue decreased 6.7% to $196.8 million; and Financial Services revenue increased 20.3% to $85.9 million. For the quarter, comparable store sales increased 3.9%. Net income increased to $42.8 million compared to $33.3 million and earnings per diluted share were $0.60 compared to $0.47, each compared to the year ago quarter. "The highlight of the quarter was the excellent performance of our new next-generation stores, which bodes well for our future," said Tommy Millner, Cabela's Chief Executive Officer. "The eight next-generation stores open for the full quarter outperformed our existing legacy store base in sales and profit per square foot by a wide margin. Additionally, same store sales from our next-generation stores exceeded the performance of our existing stores by several hundred basis points." "Recently, we opened two next-generation stores in Charleston, West Virginia, and Rogers, Arkansas, and our first, even smaller, Outpost store in Union Gap, Washington," Millner said. "These stores generated the same great customer enthusiasm we experienced in our previous store openings and are performing at the same high level as our other next-generation stores. Of our 40 stores open today, eleven are either next-generation or Outpost stores, and all future stores will be in one of these formats." "As a result of the strong performance of our new stores, we are accelerating square footage growth as we move into 2014," Millner said. "We now expect to open eight domestic next-generation stores in 2014. Of these eight stores, three have been previously announced, four new locations were approved at or prior to the October Board of Directors meeting and one is expected to be approved shortly." Merchandise gross margin increased 130 basis points to 37.2%. This is the sixth consecutive quarter of merchandise margin improvement. 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 and ammunition, which had a 60 basis point negative impact on merchandise gross margin. "The one area that did not meet our expectations was revenue in our Direct segment," Millner said. "The entire decline in Direct revenue for the quarter was attributable to weaker demand for clothing and footwear, and a 300 basis point reduction in Direct revenue from the absence of shipping income due to our CLUB Visa free shipping offer. In September, we responded with increased levels of advertising, which we will continue through the holiday season. As a result, Direct revenue has improved in the first few weeks of the fourth quarter." The Cabela's CLUB Visa program also posted very strong results in the quarter. For the quarter, net charge-offs as a percentage of average credit card loans decreased 52 basis points to 1.71% compared to 2.23% 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 20.3% in the quarter to $85.9 million. "Our strong results led to another quarter of improvement in return on invested capital, a vital measurement," Millner said. "Return on invested capital improved 150 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." "We are optimistic about our prospects for the remainder of 2012 and 2013," Millner said. "The 28% increase in earnings per share and 25% increase in operating profit both exceeded our internal budget. At the end of the second quarter, we said externally that we expected earnings per share for 2012 to be 1-3% ahead of then current expectations of $2.60, or a range of $2.63 to $2.68. We now feel strongly that full year 2012 earnings per share will be at the high end of this range. While our 2013 budget is not yet finalized, we expect 2013 earnings per share to grow at least at a low double-digit rate." Conference Call Information A conference call to discuss third quarter fiscal 2012 operating results is scheduled for today (Thursday, October 25, 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 opening eight domestic next-generation stores in 2014, increasing return on capital going forward, full year 2012 earnings per share being at the high end of its previous guidance of $2.63-$2.68, and 2013 earnings per share growing at least at a low double-digit rate. 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 or adverse 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, and Form 10-Q for the fiscal quarter ended June 30, 2012), 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 EndedNine Months EndedSeptember 29,2012October 1,2011September 29,2012October 1,2011 Revenue: Merchandise sales $ 652,313 $ 604,288 $ 1,730,252 $ 1,601,807 Financial Services revenue 85,932 71,438 248,654 214,086 Other revenue 2,933   2,884   13,030   11,528   Total revenue 741,178   678,610   1,991,936   1,827,421     Cost of revenue: Merchandise costs (exclusive of depreciation and amortization) 409,929 387,520 1,100,431 1,037,963 Cost of other revenue —   5   634   8   Total cost of revenue (exclusive of depreciation and amortization) 409,929 387,525 1,101,065 1,037,971 Selling, distribution, and administrative expenses 264,136 234,108 719,354 663,322 Impairment and restructuring charges —   3,488   —   4,443     Operating income 67,113 53,489 171,517 121,685   Interest expense, net (5,227 ) (6,177 ) (16,175 ) (18,322 ) Other non-operating income, net 1,288   1,699   4,139   5,656     Income before provision for income taxes 63,174 49,011 159,481 109,019 Provision for income taxes 20,389   15,704   54,000   36,227     Net income $ 42,785   $ 33,307   $ 105,481   $ 72,792     Earnings per basic share $ 0.61   $ 0.48   $ 1.51   $ 1.05   Earnings per diluted share $ 0.60   $ 0.47   $ 1.47   $ 1.02     Basic weighted average shares outstanding 69,894,538   69,554,229   69,794,416   69,203,978   Diluted weighted average shares outstanding 71,555,862   71,013,861   71,624,451   71,394,912       CABELA'S INCORPORATED AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Dollars in Thousands Except Par Values)(Unaudited)           ASSETSSeptember 29,2012December 31,2011October 1,2011 CURRENT Cash and cash equivalents $ 265,675 $ 304,679 $ 81,063   Restricted cash of the Trust 16,709 18,296 523,138 Accounts receivable, net 20,773 47,127 26,542 Credit card loans (includes restricted credit card loans of the Trust of $3,193,162, $3,142,151, and $2,779,854), net of allowance for loan losses of $65,750, $73,350, and $75,300 3,151,647 3,094,163 2,726,779 Inventories 721,701 494,828 652,863 Prepaid expenses and other current assets 143,930 146,479 147,455 Income taxes receivable and deferred income taxes 52,261   5,709   18,011   Total current assets 4,372,696 4,111,281 4,175,851 Property and equipment, net 971,401 866,899 840,369 Land held for sale or development 39,437 38,393 39,314 Economic development bonds 92,744 86,563 113,630 Deferred income taxes — — 7,637 Other assets 29,091   30,635   25,671   Total assets $ 5,505,369   $ 5,133,771   $ 5,202,472     LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT Accounts payable, including unpresented checks of $18,819, $19,124, and $21,876 $ 366,992 $ 266,793 $ 246,168 Gift instruments, and credit card and loyalty rewards programs 218,068 227,414 192,000 Accrued expenses 129,869 143,695 114,785 Time deposits 310,617 88,401 146,756 Current maturities of secured variable funding obligations of the Trust — 460,000 282,000 Current maturities of secured long-term obligations of the Trust — 425,000 925,000 Current maturities of long-term debt 8,398 8,387 106,236 Income taxes payable and deferred income taxes —   —   931   Total current liabilities 1,033,944 1,619,690 2,013,876 Long-term time deposits 763,938 893,912 888,131 Secured long-term obligations of the Trust, less current maturities 1,827,500 977,500 722,500 Long-term debt, less current maturities 443,199 336,535 338,744 Deferred income taxes 33,712 26,367 — Other long-term liabilities 99,593 98,451 109,403   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 - 70,545,524, 69,641,818, and 69,572,089 shares; Outstanding - 70,019,501, 68,840,883, and 69,572,089 shares 705 696 696 Additional paid-in capital 344,541 334,925 333,389 Retained earnings 968,395 862,914 793,086 Accumulated other comprehensive income (loss) 8,917 2,731 2,647 Treasury stock, at cost – 526,023 and 800,935 shares (19,075 ) (19,950 ) —   Total stockholders' equity 1,303,483   1,181,316   1,129,818   Total liabilities and stockholders' equity $ 5,505,369   $ 5,133,771   $ 5,202,472       CABELA'S INCORPORATED AND SUBSIDIARIESSEGMENT INFORMATION(Dollars in Thousands)(Unaudited)             Three Months EndedNine Months EndedSeptember 29,2012October 1,2011September 29, 2012October 1,2011Revenue: Retail $ 455,965 $ 393,837 $ 1,185,989 $ 1,024,835 Direct 196,818 210,854 545,466 577,903 Financial Services 85,932 71,438 248,654 214,086 Other 2,463   2,481   11,827   10,597   Total revenue $ 741,178   $ 678,610   $ 1,991,936   $ 1,827,421     Operating Income (Loss): Retail $ 85,438 $ 66,269 $ 200,889 $ 154,585 Direct 30,220 37,054 93,559 104,108 Financial Services 23,230 14,884 73,508 43,122 Other (71,775 ) (64,718 ) (196,439 ) (180,130 ) Total operating income $ 67,113   $ 53,489   $ 171,517   $ 121,685     As a Percentage of Total Revenue: Retail revenue 61.5 % 58.0 % 59.5 % 56.1 % Direct revenue 26.6 31.1 27.4 31.6 Financial Services revenue 11.6 10.5 12.5 11.7 Other revenue 0.3   0.4   0.6   0.6   Total revenue 100.0 % 100.0 % 100.0 % 100.0 %   As a Percentage of Segment Revenue: Retail operating income 18.7 % 16.8 % 16.9 % 15.1 % Direct operating income 15.4 17.6 17.2 18.0 Financial Services operating income 27.0 20.8 29.6 20.1 Total operating income as a percentage of total revenue 9.1 7.9 8.6 6.7         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 EndedNine Months EndedSeptember 29, 2012   October 1, 2011September 29, 2012   October 1, 2011   Interest and fee income $ 76,944 $ 70,130 $ 222,137 $ 204,130 Interest expense (13,799 ) (19,648 ) (40,379 ) (55,508 ) Provision for loan losses (10,387 ) (11,133 ) (29,231 ) (27,616 ) Net interest income, net of provision for loan losses 52,758   39,349   152,527   121,006   Non-interest income: Interchange income 77,022 67,474 220,388 192,377 Other non-interest income 3,055   3,481   11,075   9,784   Total non-interest income 80,077 70,955 231,463 202,161 Less: Customer rewards costs (46,903 ) (38,866 ) (135,336 ) (109,081 ) Financial Services revenue $ 85,932   $ 71,438   $ 248,654   $ 214,086       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 Ended   Nine Months EndedSeptember 29, 2012October 1, 2011September 29, 2012October 1, 2011   Interest and fee income 9.8 % 10.1 % 9.8 % 10.1 % Interest expense (1.8 ) (2.8 ) (1.8 ) (2.7 ) Provision for loan losses (1.3 ) (1.6 ) (1.3 ) (1.4 ) Interchange income 9.8 9.7 9.7 9.5 Other non-interest income 0.4 0.5 0.5 0.5 Customer rewards costs (6.0 ) (5.6 ) (5.9 ) (5.4 ) Financial Services revenue 10.9 % 10.3 % 11.0 % 10.6 %         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 EndedSeptember 29, 2012   October 1, 2011Increase(Decrease)% Change   Average balance of credit card loans (1) $ 3,129,897 $ 2,772,434 $ 357,463 12.9 % Average number of active credit card accounts 1,539,150 1,412,676 126,474 9.0   Average balance per active credit card account (1) $ 2,034 $ 1,963 $ 71 3.6   Net charge-offs on credit card loans (1) $ 13,376 $ 15,439 $ (2,063 ) (13.4 ) Net charge-offs as a percentage of average credit card loans (1) 1.71 % 2.23 % (0.52 )% (1) Includes accrued interest and fees   Nine Months EndedSeptember 29, 2012October 1, 2011Increase(Decrease)% Change   Average balance of credit card loans (1) $ 3,033,243 $ 2,687,167 $ 346,076 12.9 % Average number of active credit card accounts 1,504,545 1,390,768 113,777 8.2   Average balance per active credit card account (1) $ 2,016 $ 1,932 $ 84 4.3   Net charge-offs on credit card loans (1) $ 42,170 $ 49,026 $ (6,856 ) (14.0 ) Net charge-offs as a percentage of average credit card loans (1)     1.85 %   2.43 %   (0.58 )%     (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 the impairment and restructuring charges recorded in the three and nine months ended October 1, 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 nine months ended September 29, 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 EndedSeptember 29,2012   October 1, 2011GAAP BasisAs ReportedGAAP BasisAs Reported   AmountsAdded Back   Non-GAAPAs Adjusted(Dollars in Thousands Except Earnings Per Share)   Total revenue $ 741,178 $ 678,610 $ — $ 678,610   Total cost of revenue (exclusive of depreciation and amortization) 409,929 387,525 — 387,525 Selling, distribution, and administrative expenses 264,136 234,108 — 234,108 Impairment and restructuring charges (1) —   3,488   (3,488 ) —     Operating income 67,113 53,489 3,488 56,977   Interest expense, net (5,227 ) (6,177 ) — (6,177 ) Other non-operating income 1,288   1,699   —   1,699   Income before provision for income taxes 63,174 49,011 3,488 52,499 Provision for income taxes (2) 20,389   15,704   1,149   16,853     Net income $ 42,785   $ 33,307   $ 2,339   $ 35,646     Earnings per basic share $ 0.61   $ 0.48   $ 0.03   $ 0.51     Earnings per diluted share $ 0.60   $ 0.47   $ 0.03   $ 0.50       Nine Months EndedSeptember 29,2012   October 1, 2011GAAP BasisAs ReportedGAAP BasisAs Reported   AmountsAdded Back   Non-GAAPAs Adjusted(Dollars in Thousands Except Earnings Per Share)   Total revenue $ 1,991,936 $ 1,827,421 $ — $ 1,827,421   Total cost of revenue (exclusive of depreciation and amortization) 1,101,065 1,037,971 — 1,037,971 Selling, distribution, and administrative expenses 719,354 663,322 — 663,322 Impairment and restructuring charges (1) —   4,443   (4,443 ) —     Operating income 171,517 121,685 4,443 126,128   Interest expense, net (16,175 ) (18,322 ) — (18,322 ) Other non-operating income 4,139   5,656   —   5,656   Income before provision for income taxes 159,481 109,019 4,443 113,462 Provision for income taxes (2) 54,000   36,227   1,476   37,703     Net income $ 105,481   $ 72,792   $ 2,967   $ 75,759     Earnings per basic share $ 1.51   $ 1.05   $ 0.04   $ 1.09     Earnings per diluted share $ 1.47   $ 1.02   $ 0.04   $ 1.06     (1) Reflects (i) impairment losses recognized in the three and nine months ended October 1, 2011, to reflect the fair value on certain assets and (ii) restructuring charges for severance and related benefits recognized in the three and nine months ended October 1, 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