Cabela's Inc. Reports Strong Third Quarter 2012 Results

Cabela's Inc. Reports Strong Third Quarter 2012 Results

- Third Quarter EPS Increased 28% to $.60 Compared to $0.47 a Year Ago

- Third Quarter Comp Store Sales Up 3.9%


- Merchandise Gross Margin Up 130 Basis Points to a New Third Quarter Record 37.2%

- New Next-Generation Stores Significantly Outperforming Legacy Store Base

- After-Tax Return on Invested Capital Up 150 Basis Points

SIDNEY, Neb.--(BUSINESS WIRE)-- Cabela's Incorporated (NYS: 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 SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except Earnings Per Share)
(Unaudited)

Three Months Ended

Nine Months Ended

September 29,
2012

October 1,
2011

September 29,
2012

October 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 SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands Except Par Values)
(Unaudited)

ASSETS

September 29,
2012

December 31,
2011

October 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 SUBSIDIARIES
SEGMENT INFORMATION
(Dollars in Thousands)
(Unaudited)

Three Months Ended

Nine Months Ended

September 29,
2012

October 1,
2011

September 29,
2012

October 1,
2011

Revenue:

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