Cabela's Inc. Reports Record Fourth Quarter 2012 Results

Cabela's Inc. Reports Record Fourth Quarter 2012 Results

- EPS Increased 18% to $1.25 Compared to $1.06 a Year Ago, Excluding Certain Items

- Comparable Store Sales Up 12.0%


-Direct Revenue Increased 1.7%

- New Next-Generation Stores Significantly Outperform Legacy Store Base

- After-Tax Return on Invested Capital Increased 160 Basis Points to 15.9% for the Full Year

SIDNEY, Neb.--(BUSINESS WIRE)-- Cabela's Incorporated (NYS: CAB) today reported strong financial results for fourth quarter fiscal 2012.

For the quarter, adjusted for certain items, total revenue increased 15.2% to $1.133 billion; Retail store revenue increased 26.3% to $663.6 million; Direct revenue increased 1.7% to $385.5 million; and Financial Services revenue increased 7.2% to $83.2 million. For the quarter, comparable store sales increased 12.0%. During the quarter, the Company recognized a $12.5 million revenue reduction in its Financial Services business related to the previously disclosed Visa antitrust settlement. On a reported basis, total revenue increased 13.9% and Financial Services revenue decreased 8.9%. A detailed reconciliation and explanation regarding the Visa antitrust settlement is provided later in this release.

For the quarter, net income increased 19.7% to $89.8 million compared to $75.0 million in the year ago quarter, and earnings per diluted share were $1.25 compared to $1.06 in the year ago quarter, each adjusted for certain items. The Company reported GAAP net income of $68.0 million and earnings per diluted share of $0.95 as compared to GAAP net income of $69.8 million and earnings per diluted share of $0.99 in the year ago quarter. Fourth quarter 2012 GAAP results include impairment charges of $20.3 million primarily related to land held for sale and a $12.5 million revenue reduction related to the Visa antitrust settlement. Fourth quarter 2011 GAAP results include impairment charges of $7.8 million mostly related to the value of economic development bonds. See the supporting schedules to this earnings release labeled "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of the GAAP to non-GAAP financial measures.

For fiscal 2012, net income increased 29.5% to $195.3 million compared to $150.8 million last year, and earnings per diluted share were $2.72 compared to $2.12 a year ago, each excluding certain items. The Company reported GAAP net income of $173.5 million and earnings per diluted share of $2.42 as compared to GAAP net income of $142.6 million and earnings per diluted share of $2.00 a year ago. Fiscal 2012 GAAP results include impairment charges of $20.3 million primarily related to land held for sale and a $12.5 million revenue reduction related to the Visa antitrust settlement. Fiscal year 2011 results include impairment and restructuring charges of $12.2 million. See the supporting schedules to this earnings release labeled "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of the GAAP to non-GAAP financial measures.

"Every area of our Company performed at very high levels in the fourth quarter," said Tommy Millner, Cabela's Chief Executive Officer. "Sales and profit per square foot at our next-generation stores were 40% higher than our legacy stores. Comparable store sales, aided by a surge in firearms and ammunition, increased 12.0%, a new record, and our Direct business grew 1.7%, the first increase in 11 quarters. Assuming more normalized sales of firearms and ammunition, comparable store sales would have increased 5.0%. These strong results combined to improve ROIC by 160 basis points to 15.9% for the full year, the highest level we have seen in eight years."

"During the quarter, we made significant additional omni-channel investments in advertising," Millner said. "These investments helped accelerate comparable store sales and growth in Direct revenue. This acceleration has continued into the first quarter of 2013. Additionally, we are very encouraged with increases in new customers as it further expands our market share and has a positive long-term impact on our consumer franchise."

For the quarter, excluding firearms and ammunition, merchandise margin increased 60 basis points. Merchandise margin increased in each of the Company's 13 merchandise sub categories, including firearms and ammunition. Ongoing focus on Cabela's branded products, improved markdown management and greater vendor collaboration contributed to this improvement. Consolidated merchandise gross margin declined 20 basis points as a direct result of the mix effect from the firearm and ammunition surge.

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 21 basis points to 1.91% compared to 2.12% in the prior year quarter. During the quarter, growth in average active credit card accounts accelerated to 9.4% due to retail square footage growth and increases in new customers in all channels. Additionally, average active credit card balance increased 2.9%.

"During the quarter, we opened our first Outpost store in Union Gap, Washington," Millner said. "This store is running ahead of our expectations, and we are thrilled with how this store is performing. As a result, our Board of Directors has authorized us to open an additional ten Outpost stores over the next four years. These stores will be a more effective tool for us to reach smaller markets across North America and further grow our market share. Our strategy is to use our significant cash flows to fund retail store expansion, and we expect to be able to open all of our planned stores in 2013 and 2014 with no external financing."

As previously announced, the Company's Board of Directors has approved a share repurchase program designed primarily to offset shareholder dilution resulting from the granting of equity-based compensation awards. As a result, the Company intends to repurchase up to 750,000 shares of its common stock in open market transactions through February 2014.

"So far this year, our revenue and profit growth remains strong," Millner said. "This growth, along with the strong performance of our new stores, makes us comfortable with the external earnings estimates for 2013."

Conference Call Information

A conference call to discuss fourth quarter fiscal 2012 operating results is scheduled for today (Thursday, February 14, 2013) 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 an additional ten Outpost stores over the next four years, opening all planned stores in 2013 and 2014 with no external financing, repurchasing up to 750,000 shares of the Company's common stock through February 2014, and being comfortable with the external earnings estimates for 2013. 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 omni-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

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands Except Earnings Per Share)

(Unaudited)

Three Months Ended

Fiscal Year Ended

December 29,
2012

December 31,
2011

December 29,
2012

December 31,
2011

Revenue:

Merchandise sales

$

1,048,651

$

903,926

$

2,778,903

$

2,505,733

Financial Services revenue

70,745

77,660

319,399

291,746

Other revenue

1,350

2,159

14,380

13,687

Total revenue

1,120,746

983,745

3,112,682

2,811,166

Cost of revenue:

Merchandise costs

668,730

575,278

1,769,161

1,613,241

Cost of other revenue

3

637

8

Total cost of revenue
(exclusive of depreciation and amortization)

668,733

575,278

1,769,798

1,613,249

Selling, distribution, and administrative expenses

327,507

290,803

1,046,861

954,125

Impairment and restructuring charges

20,324

7,801

20,324

12,244

Operating income

104,182

109,863

275,699

231,548

Interest expense, net

(3,948

)

(6,105

)

(20,123

)

(24,427

)

Other non-operating income, net

1,999

1,690

6,138

7,346

Income before provision for income taxes

102,233

105,448

261,714

214,467

Provision for income taxes

34,201

35,620

88,201

71,847

Net income

$

68,032

$

69,828

$

173,513

$

142,620

Earnings per basic share

$

0.97

$

1.01

$

2.48

$

2.06

Earnings per diluted share

$

0.95

$

0.99

$

2.42

$

2.00

Basic weighted average shares outstanding

70,041,784

69,166,725

69,856,258

69,194,663

Diluted weighted average shares outstanding

71,700,567

70,718,826

71,709,873

71,274,242

CABELA'S INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands Except Par Values)

(Unaudited)

ASSETS

December 29,
2012

December 31,
2011

CURRENT

Cash and cash equivalents

$

288,750

$

304,679

Restricted cash of the Trust

17,292

18,296

Accounts receivable, net

46,081

47,127

Credit card loans (includes restricted credit card loans of the Trust of $3,523,133 and $3,142,151), net of allowance for loan losses of $65,600 and $73,350

3,497,472

3,094,163

Inventories

552,575

494,828

Prepaid expenses and other current assets

132,694

146,479

Income taxes receivable and deferred income taxes

54,164

5,709

Total current assets

4,589,028

4,111,281

Property and equipment, net

1,021,656

866,899

Land held for sale or development

23,448

38,393

Economic development bonds

85,041

86,563

Other assets

28,990

30,635

Total assets

$

5,748,163

$

5,133,771

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT

Accounts payable, including unpresented checks of $30,125 and $19,124

$

285,039

$

266,793

Gift instruments, and credit card and loyalty rewards programs

262,653

227,414

Accrued expenses

180,906

143,695

Time deposits

367,350

88,401

Current maturities of secured variable funding obligations of the Trust

325,000

460,000

Current maturities of secured long-term obligations of the Trust

425,000

Current maturities of long-term debt

8,402

8,387

Total current liabilities

1,429,350

1,619,690

Long-term time deposits

680,668

893,912

Secured long-term obligations of the Trust, less current maturities

1,827,500

977,500

Long-term debt, less current maturities

328,133

336,535

Deferred income taxes

10,571

26,367

Other long-term liabilities

95,962

98,451

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 - 70,545,558 and 69,641,818 shares

Outstanding - 70,053,144 and 68,840,883 shares

705

696

Additional paid-in capital

351,161

334,925

Retained earnings

1,036,427

862,914

Accumulated other comprehensive income

5,542

2,731

Treasury stock, at cost - 492,414 and 800,935 shares

(17,856

)

(19,950

)

Total stockholders' equity

1,375,979

1,181,316

Total liabilities and stockholders' equity

$

5,748,163

$

5,133,771

CABELA'S INCORPORATED AND SUBSIDIARIES

SEGMENT INFORMATION

(Dollars in Thousands)

(Unaudited)

Three Months Ended

Fiscal Year Ended

December 29,
2012

December 31,
2011

December 29,
2012

December 31,
2011

Revenue:

Retail

$

663,593

$

525,607

$

1,849,582

$

1,550,442

Direct

385,477

378,931

930,943

956,834

Financial Services

70,745

77,660

319,399

291,746

Other

931

1,547

12,758

12,144

Total revenue

$

1,120,746

$

983,745

$

3,112,682

$

2,811,166

Operating Income (Loss):

Retail

$

144,151

$

108,425

$

345,040

$

263,010

Direct

61,678

68,055

155,237

172,163

Financial Services

674

15,910

74,182

59,032

Other