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Cabela's Inc. Reports Strong Third Quarter 2012 Results

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 71,438 248,654 214,086
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 SUBSIDIARIES COMPONENTS 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 Ended Nine Months Ended

September 29, 2012

 

October 1, 2011

September 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 Ended

September 29, 2012

October 1, 2011

September 29, 2012

October 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 SUBSIDIARIES KEY 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
September 29, 2012   October 1, 2011

Increase (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 Ended
September 29, 2012 October 1, 2011

Increase (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 SUBSIDIARIES RECONCILIATION 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 Ended

September 29, 2012

  October 1, 2011
GAAP Basis As Reported GAAP Basis As Reported   Amounts Added Back  

Non-GAAP As 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 Ended

September 29, 2012

  October 1, 2011
GAAP Basis As Reported GAAP Basis As Reported   Amounts Added Back   Non-GAAP As 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.





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