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Cabela's Inc. Reports Strong Second Quarter Fiscal 2009 Results Exceeding External Estimates
Second Quarter Comparable Store Sales Increased 6.1%Second Quarter Earnings Increased 27% to $0.14 Per Diluted ShareSecond Quarter Operating Margin Increased 63 Basis Points
SIDNEY, Neb., Jul 30, 2009 (BUSINESS WIRE) -- Cabela's Incorporated (NYSE:CAB) today reported strong second quarter fiscal 2009 financial results which exceeded external estimates.

For the quarter, retail store revenue increased 10.2% to $301.6 million led by a 6.1% increase in comparable store sales; direct revenue decreased 3.6% to $199.5 million as the Company reduced direct marketing costs 10.1% resulting in increased revenue per catalog page; and financial services revenue increased 15.4% to $44.1 million. Total revenue for the second quarter of 2009 increased 4.4% to $549.2 million compared to $526.0 million for the second quarter of 2008.

Net income for the second quarter of 2009 was $9.1 million, or $0.14 per diluted share, compared to $7.3 million, or $0.11 per diluted share, in the second quarter of 2008.

"We are very pleased to post another solid quarter," said Tommy Millner, Cabela's Chief Executive Officer. "Our 6.1% increase in comparable store sales, driven by strength in hunting equipment, represents our third consecutive quarter of positive gains. We continue to gain momentum in the hunting equipment category, as we take market share from our competitors and leverage our multi-channel model to provide our customers with a great value proposition."

Merchandise gross margin improved 62 basis points in the quarter. These improvements were realized across virtually all of the Company's product categories as a result of lower promotional costs, reduced transportation costs and reduced discounts and markdowns, all of which more than offset the mix shift to lower margin hard goods.

Additionally, the Company continues to reduce costs and improve operating efficiencies. Operating margin in the Company's retail segment increased 310 basis points as the Company reduced labor expense in its retail stores and increased productivity of its marketing materials. In the Company's direct segment, operating margin improved 360 basis points due to higher gross margin and increased revenue per catalog page.

"Our efforts to improve merchandise margins and operating efficiencies led to higher operating margin in both our direct and retail segments," Millner said. "Improved inventory levels led to reduced costs and fewer discounts and markdowns which helped increase merchandise margins, while our employees' hard work and extra efforts in controlling costs and improving operating efficiencies in all areas of our business helped improve operating margins."

Included in the quarter are two non-cash items that impacted the Company's reported financial results. The first is a non-cash charge related to the write down of excess real estate, and the second is a non-cash increase in the valuation of the Company's retained interest in securitized assets.

"As I shared with you last quarter, part of our strategy is to control costs, generate cash and improve return on invested capital," Millner said. "As a part of this strategy we performed a thorough review of all the land we own for future store locations to determine the future potential of these sites. We have completed this review and have made the decision not to build a store in Greenwood, Indiana. As a result of this decision, we recorded a pre-tax non-cash impairment charge of $11.7 million related to the write-down of excess land. This charge reduced earnings by $0.11 per diluted share in the quarter. "

Additionally, the Company's wholly-owned subsidiary, World's Foremost Bank, recently completed a competitive pricing analysis of its credit card portfolio and has made the decision to re-price the portfolio based on this analysis and changing market conditions. These pricing changes are expected to take effect in the third quarter. As a result, the valuation of the Company's interest-only strip associated with its securitized credit card receivables increased by $8.5 million in the quarter, which increased earnings by $0.08 per diluted share in the quarter.

The Company ended the quarter with total debt outstanding of $490 million as compared to $634 million at the end of the second quarter of 2008. In addition, the Company continued to tightly manage inventory as inventory decreased $44 million to $587 million as compared to $631 million at the end of the second quarter of 2008.

Due to ongoing efforts to control costs and tightly manage the balance sheet, cash flow used in operations improved significantly for the year to date period. For the six months ending June 27, 2009, cash flows used in operations were $47 million as compared to $143 million in the same period a year ago. Capital expenditures during the quarter were $10.0 million. The Company continues to expect capital expenditures for the year to be $40-50 million.

"As we look ahead into the third quarter, we are even more encouraged by the favorable trends in our retail and direct segments and our ability to tightly manage costs," Millner said. "For the full year, we now expect total revenue growth and comparable store sales to increase at a low single digit percentage rate as compared to our previous forecast for total revenue growth and comparable store sales to be approximately flat. We continue to expect direct revenue to decline at a low to mid-single digit rate and net charge-offs at World's Foremost Bank to be between 5.1% and 5.5% for the full year. While we continue to expect full year earnings per diluted share to be roughly equal with 2008, should the momentum we realized in the first half of the year continue into the second half, earnings per diluted share could exceed 2008 levels."

Conference Call Information

A conference call to discuss second quarter fiscal 2009 operating results is scheduled for today (Thursday, July 30) 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 A replay of the call will be archived on

About Cabela's Incorporated

Cabela's Incorporated, headquartered in Sidney, Nebraska, is the world's largest direct marketer, and a leading specialty retailer, of hunting, fishing, camping and related outdoor merchandise. Since the Company's founding in 1961, Cabela's(R) 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(R). 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(R) 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 capital expenditures being $40-50 million for 2009; total revenue growth and comparable store sales increasing at a low single digit percentage rate for 2009, direct revenue declining at a low to mid-single digit rate for 2009, net charge-offs at World's Foremost Bank being between 5.1% and 5.5% for 2009; and earnings per share for 2009 being roughly equal with or exceeding 2008 levels. 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 level of discretionary consumer spending; the strength of the economy, including increases in unemployment levels and bankruptcy filings; changes in the capital and credit markets or the availability of capital and credit; the Company's ability to comply with the financial covenants in its credit arrangements; counterparty risk on the Company's unsecured revolving credit facility; changes in consumer preferences and demographic trends; the Company's ability to successfully execute its multi-channel strategy; the ability to negotiate favorable purchase, lease and/or economic development arrangements for new retail store locations; expansion into new markets; market saturation due to new retail store openings; the rate of growth of general and administrative expenses associated with building a strengthened corporate infrastructure to support the Company's growth initiatives; increasing competition in the outdoor segment of the sporting goods industry; the cost of the Company's products; trade restrictions; political or financial instability in countries where the goods the Company sells are manufactured; adverse fluctuations in foreign currencies; increases in postage rates or paper and printing costs; supply and delivery shortages or interruptions caused by system changes or other factors; adverse or unseasonal weather conditions; fluctuations in operating results; the cost of fuel increasing; road construction around the Company's retail stores; labor shortages or increased labor costs; increased government regulation, including regulations relating to firearms and ammunition; inadequate protection of the Company's intellectual property; the Company's ability to protect its brand and reputation; changes in accounting rules applicable to securitization transactions, including related increases in required regulatory capital; the Company's ability to manage credit and liquidity risks; any downgrade of the ratings on the outstanding notes issued by the Company's financial services business' securitization trust; the ability of the Company's financial services business to securitize credit card receivables at acceptable rates or access the deposits market; decreased interchange fees received by the Company's financial services business as a result of credit card industry litigation; the impact of legislation, regulation and supervisory regulatory actions in the financial services industry including the Credit Card Accountability Responsibility and Disclosure Act of 2009 and the proposed financial regulatory reform; other factors that the Company may not have currently identified or quantified; 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 27, 2008), which filings are available at the Company's website at and the SEC's website at 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.

(Dollars in Thousands Except Earnings Per Share)
Three Months Ended Six Months Ended
June 27, June 28, June 27, June 28,
2009 2008 2009 2008
Merchandise sales $ 501,145 $ 480,640 $ 1,002,023 $ 971,551
Financial services revenue 44,129 38,253 78,023 78,961
Other revenue 3,962 7,059 8,730 10,979
Total revenue 549,236 525,952 1,088,776 1,061,491
Total cost of revenue (exclusive of depreciation and amortization) 326,060 316,386 652,374 630,188
Selling, distribution, and administrative expenses 192,536 194,714 391,758 395,365
Impairment and restructuring charges 11,692 - 13,370 -
Operating income 18,948 14,852 31,274 35,938
Interest expense, net (6,054 ) (7,748 ) (11,888 ) (14,889 )
Other non-operating income, net 1,654 1,755 3,700 3,614
Income before provision for income taxes 14,548 8,859 23,086 24,663
Provision for income taxes 5,425 1,580 8,835 7,428
Net income $ 9,123 $ 7,279 $ 14,251 $ 17,235
Basic net income per share $ 0.14 $ 0.11 $ 0.21 $ 0.26
Diluted net income per share $ 0.14 $ 0.11 $ 0.21 $ 0.26
Basic weighted average shares outstanding 67,030,452 66,203,423 66,804,333 66,068,902
Diluted weighted average shares outstanding 67,570,398 66,852,745 67,030,985 66,761,415
(Dollars in Thousands Except Par Values)
ASSETS June 27, December 27, June 28,
2009 2008 2008
Cash and cash equivalents $ 480,756 $ 410,104 $ 88,125

Accounts receivable, net of allowance for doubtful accounts of $1,802, $556 and $1,782

34,364 45,788 49,652
Credit card loans, net of allowances of $1,193, $1,507 and $1,254 138,896 167,226 184,024
Inventories 586,613 517,657 630,830
Prepaid expenses and other current assets 145,468 133,439 141,232
Income taxes receivable - - 1,753
Total current assets 1,386,097 1,274,214 1,095,616
Property and equipment, net 864,501 881,080 916,558
Land held for sale or development 37,550 39,318 33,312
Retained interests in securitized loans, including asset-backed securities 121,465 61,605 38,390
Economic development bonds 115,650 112,585 101,316
Other assets 25,411 27,264 32,356
Total assets $ 2,550,674 $ 2,396,066 $ 2,217,548
Accounts payable, including unpresented checks of $30,560, $28,217 and $14,234 $ 163,143 $ 189,766 $ 169,483
Gift instruments, and credit card and loyalty rewards programs 164,857 184,834 170,280
Accrued expenses 99,270 123,296 93,134
Time deposits 184,711 178,817 83,979
Current maturities of long-term debt 222 695 26,701
Income taxes payable 2,600 11,689 -
Deferred income taxes 10,627 11,707 13,157
Total current liabilities 625,430 700,804 556,734
Long-term debt, less current maturities 490,130 379,336 606,810
Long-term time deposits 398,662 307,382 117,603
Deferred income taxes 40,935 38,707 26,667
Other long-term liabilities 60,136 56,132 57,243
Preferred stock, $0.01 par value; Authorized -- 10,000,000 shares; Issued - none - - -
Common stock, $0.01 par value:

Class A Voting, Authorized - 245,000,000 shares; Issued - 67,063,457, 66,833,984, and 66,463,389 shares

671 668 665
Class B Non-voting, Authorized - 245,000,000 shares; Issued - none - - -
Additional paid-in capital 277,980 271,958 266,755
Retained earnings 661,927 647,676 588,507
Accumulated other comprehensive loss (5,197 ) (6,597 ) (3,436 )
Total stockholders' equity 935,381 913,705 852,491
Total liabilities and stockholders' equity $ 2,550,674 $ 2,396,066 $ 2,217,548
Three Months Ended Six Months Ended
June 27, June 28, June 27, June 28,
2009 2008 2009 2008
(Dollars in Thousands)


Retail $301,633 $273,624 $ 577,159 $ 527,999
Direct 199,512 207,016 424,864 443,552
Financial Services 44,129 38,253 78,023 78,961
Other 3,962 7,059 8,730 10,979
Total revenue $549,236 $525,952 $1,088,776 $1,061,491

Operating Income (Loss):

Retail $ 33,965 $ 22,406 $ 52,019 $ 49,345
Direct 32,587 26,379 62,003 59,855
Financial Services 12,020 11,190 23,989 21,967
Other (59,624) (45,123) (106,737) (95,229)
Total operating income $ 18,948 $ 14,852 $ 31,274 $ 35,938

As a Percentage of Total Revenue:

Retail revenue 55.0 % 52.0 % 53.0 % 49.8 %
Direct revenue 36.3 39.4 39.0 41.8
Financial Services revenue 8.0 7.3 7.2 7.4
Other revenue 0.7 1.3 0.8 1.0
Total revenue 100.0 % 100.0 % 100.0 % 100.0 %

As a Percentage of Segment Revenue:

Retail operating income 11.3 % 8.2 % 9.0 % 9.3 %
Direct operating income 16.3 12.7 14.6 13.5
Financial Services operating income 27.2 29.3 30.7 27.8
Total operating income (1) 3.4 2.8 2.9 3.4

(1) The percentage of total operating income is a percentage of total consolidated revenue.


Financial Services Information:

The following table summarizes the results of the Company's financial services segment on a

generally accepted accounting principles ("GAAP") basis. For credit card loans securitized and

sold, the loans are removed from the Company's consolidated balance sheet and the net earnings

on these securitized assets after paying outside investors are reflected as a component of

securitization income on a GAAP basis. Net interest income on a GAAP basis includes interest and

fee income, interest expense and provision for loan losses for the credit card loans receivable

the Company owns. Non-interest income on a GAAP basis includes servicing income, gains on sales

of loans and income recognized on retained interests, as well as interchange income.

Three Months Ended Six Months Ended

June 27,

June 28,

June 27,

June 28,

(In Thousands)
Interest and fee income, net of provision for loan losses $ 9,523 $ 8,743 $ 20,512 $ 19,123
Interest expense (6,497 ) (2,660 ) (12,670 ) (6,162 )
Net interest income, net of provision for loan losses 3,026 6,083 7,842 12,961
Non-interest income:
Securitization income 54,569 45,652 93,603 89,350
Other non-interest income 15,897 16,053 30,930 32,641
Total non-interest income 70,466 61,705 124,533 121,991
Less: Customer rewards costs (29,363 ) (29,535 ) (54,352 ) (55,991 )
Financial Services revenue $ 44,129 $ 38,253 $ 78,023 $ 78,961


"Managed" credit card loans represent credit card loans receivable owned by the Company plus securitized

credit card loans. Since the financial performance of the managed portfolio has a significant impact on

the earnings received from servicing the portfolio, the Company believes the following table on a

"managed" basis is important information to analyze revenue in the financial services segment. The

following non-GAAP presentation reflects the financial performance of the credit card loans receivable

owned by the Company plus those that have been sold and includes the effect of recording the retained

interest at fair value. Interest income, interchange income (net of customer rewards) and fee income on

both the owned and securitized portfolio are recorded in their respective line items. Interest paid to

outside investors on the securitized credit card loans is included with other interest costs and

included in interest expense. Credit losses on the entire managed portfolio are included in provision

for loan losses. Although the Company's consolidated financial statements are not presented in this

manner, management reviews the performance of the managed portfolio in order to evaluate the

effectiveness of the Company's origination and collection activities, which ultimately affects the

income received for servicing the portfolio.

Three Months Ended Six Months Ended

June 27,

June 28,

June 27,

June 28,

(Dollars in Thousands)
Interest income $ 55,734 $ 46,544 $ 112,623 $ 98,353
Interchange income, net of customer rewards costs 21,913 19,996 42,157 37,823
Other fee income 13,842 7,991 25,825 15,468
Interest expense (25,073 ) (19,596 ) (48,995 ) (41,306 )
Provision for loan losses (30,417 ) (14,419 ) (57,532 ) (26,821 )
Other 8,130 (2,263 ) 3,945 (4,556 )
Managed Financial Services revenue $ 44,129 $ 38,253 $ 78,023 $ 78,961

Managed Financial Services Revenue as a Percentage of Average Managed Credit Card Loans:

Interest income 9.9 % 9.2 % 10.0 % 9.9 %

Interchange income, net of customer rewards costs

3.9 4.0 3.8 3.8
Other fee income 2.5 1.6 2.3 1.6
Interest expense (4.5 ) (3.9 ) (4.4 ) (4.2 )
Provision for loan losses (5.4 ) (2.9 ) (5.1 ) (2.7 )
Other 1.4 (0.4 ) 0.4 (0.5 )
Managed Financial Services revenue 7.8 % 7.6 % 7.0 % 7.9 %

SOURCE: Cabela's Incorporated

Cabela's Incorporated
Chris Gay, 308-255-2905
Joe Arterburn, 308-255-1204

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