Cabela’s Inc. Reports Third Quarter Fiscal 2008 Results and Updates Fiscal 2008 Outlook

SIDNEY, Neb.--(BUSINESS WIRE)--Cabela’s Incorporated (NYSE: CAB), the World’s Foremost Outfitter® of hunting, fishing and outdoor gear, today reported financial results for its third fiscal quarter ended September 27, 2008.

Total revenue for the third quarter of 2008 increased 11.9% to $611.8 million compared to $546.8 million for the third quarter of 2007. Net income for the third quarter of 2008 was $9.7 million, or $0.15 per diluted share, compared to $13.2 million, or $0.20 per diluted share, for the third quarter of 2007.

In the third quarter of 2008, retail store revenue increased 27.5% to $328.0 million with a same store sales decrease of 9.0%; direct revenue was $241.2 million; and financial services revenue was $41.9 million.

Total revenue for the nine months ended September 27, 2008, increased 14.6% to $1.67 billion compared to $1.46 billion for the same period last year. Net income for the nine months ended September 27, 2008, was $27.0 million, or $0.40 per diluted share, compared to $31.6 million, or $0.47 per diluted share, for the nine months ended September 29, 2007.

“The challenging macro-environment, general consumer concerns about the economy and the unprecedented events in the financial markets impacted sales trends in our business during the quarter,” said Dennis Highby, Cabela’s President and Chief Executive Officer. “We continue to monitor our business carefully and remain focused on managing factors within our control, including executing on our profit-improvement initiatives, implementing additional cost reductions and aggressively managing inventory levels. To that end, we have experienced significant improvements in inventory levels and cash generated from operations. Additionally, despite the difficult environment we continue to gain market share, grow our direct customer file and add Cabela’s CLUB Visa cardholders. The significant progress we have made in these areas positions us extremely well for future market share growth.”

“During the third quarter, we opened our first next generation store and are very pleased with the initial results,” Highby said. “At approximately 80,000 square feet, our next generation store in Rapid City, South Dakota, is designed to be smaller, more flexible and efficient, and less capital intensive than our more traditional stores. We will closely monitor the performance of this new prototype and expect to roll out similar-sized stores in the years ahead.”

“We head into the fourth quarter fully cognizant of the current environment and its potential impact on the upcoming holiday selling season,” Highby said. “Therefore, we believe it is prudent to adopt a more conservative outlook and now expect high single-digit percentage revenue growth for fiscal 2008. Additionally, we expect a low to mid-teen percentage decline in earnings per share for fiscal 2008 as compared to fiscal 2007. This compares to our previous guidance of mid-teen percentage revenue growth and mid-single-digit percentage earnings per share growth for fiscal 2008. Importantly, Cabela’s leadership position in the market, its powerful brand, multi-channel operating model, strong cash flows and high level of customer service will serve us well, not only during these difficult times but for many years to come.”

Conference Call Information

A conference call to discuss third quarter fiscal 2008 operating results is scheduled for today (Thursday, October 30, 2008) at 4:30 p.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 expected high single-digit percentage revenue growth for fiscal 2008, expected low to mid-teen percentage decline in earnings per share for fiscal 2008, and expected store openings. 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 strength of the economy; the level of discretionary consumer spending; changes in consumer preferences and demographic trends; changes in the credit markets or the availability of credit; 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 our 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; 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; any downgrade of the ratings on the outstanding notes issues by the Company’s financial services business’ securitization trust; decreased interchange fees received by the Company’s financial services business as a result of credit card industry litigation; 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 29, 2007, and in Part II, Item 1A, of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2008), 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 27, 2008				September 29, 2007				September 27, 2008				September 29, 2007
REVENUE:
Merchandise sales		$	569,202			$	499,182			$	1,540,753			$	1,325,245
Financial services revenue			41,896				44,749				120,857				121,497
Other revenue			702				2,878				11,681				13,357
Total revenue			611,800				546,809				1,673,291				1,460,099
COST OF REVENUE (exclusive of depreciation and amortization)			376,057				322,584				1,006,245				860,713
SELLING, DISTRIBUTION, AND ADMINISTRATIVE EXPENSES			214,898				199,879				610,263				542,397
OPERATING INCOME			20,845				24,346				56,783				56,989
INTEREST (EXPENSE) INCOME, NET			(7,510	)			(4,178	)			(22,399	)			(11,985	)
OTHER NON-OPERATING INCOME, NET			1,616				1,004				5,230				5,353
INCOME BEFORE PROVISION FOR INCOME TAXES			14,951				21,172				39,614				50,357
PROVISION FOR INCOME TAXES			5,229				7,940				12,657				18,719
NET INCOME		$	9,722			$	13,232			$	26,957			$	31,638
EARNINGS PER COMMON SHARE:
Basic		$	0.15			$	0.20			$	0.41			$	0.48
Diluted		$	0.15			$	0.20			$	0.40			$	0.47
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic			66,648,175				65,825,895				66,261,993				65,701,443
Diluted			67,051,493				67,031,102				67,105,399				67,317,482

CABELA'S INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) (Unaudited)
ASSETS		September 27, 2008			December 29, 2007			September 29, 2007
CURRENT
Cash and cash equivalents		$	207,282		$	131,182		$	103,114
Accounts receivable			31,269			46,857			30,657
Credit card loans			134,891			191,893			172,299
Inventories			649,155			608,159			669,544
Prepaid expenses and other current assets			153,590			116,297			131,587
Income taxes receivable			2,786			--			11,113
Total current assets			1,178,973			1,094,388			1,118,314
Property and equipment, net			905,961			904,052			862,554
Land held for sale or development			36,539			34,802			34,186
Retained interests in securitized loans			43,170			51,777			46,378
Economic development bonds			101,583			98,035			80,687
Other assets			32,260			29,776			22,655
TOTAL ASSETS		$	2,298,486		$	2,212,830		$	2,164,774
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT
Accounts payable and unpresented checks		$	210,208		$	281,391		$	351,653
Gift certificates and credit card and loyalty rewards programs			168,194			184,257			141,030
Accrued expenses			104,229			139,510			111,413
Time deposits			122,261			49,219			25,044
Short-term borrowings of financial services subsidiary			--			100,000			50,000
Current maturities of long-term debt			26,579			26,785			26,760
Income taxes payable and deferred income taxes			13,496			49,942			21,774
Total current liabilities			644,967			831,104			727,674
LONG-TERM LIABILITIES			787,477			553,167			666,707
STOCKHOLDERS’ EQUITY			866,042			828,559			770,393
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	2,298,486		$	2,212,830		$	2,164,774

CABELA'S INCORPORATED AND SUBSIDIARIES SEGMENT INFORMATION (Dollars in Thousands) (Unaudited)
		Three Months Ended								Nine Months Ended
		September 27, 2008				September 29, 2007				September 27, 2008				September 29, 2007
Revenue:
Retail		$	327,974			$	257,282			$	855,973			$	641,599
Direct			241,228				241,900				684,780				683,646
Financial Services			41,896				44,749				120,857				121,497
Other			702				2,878				11,681				13,357
Total revenue		$	611,800			$	546,809			$	1,673,291			$	1,460,099
Operating Income (Loss):
Retail		$	30,084			$	26,940			$	79,429			$	66,403
Direct			33,513				40,897				93,368				107,356
Financial Services			11,961				9,569				33,928				26,961
Other			(54,713	)			(53,060	)			(149,942	)			(143,731	)
Total operating income		$	20,845			$	24,346			$	56,783			$	56,989
As a Percentage of Total Revenue:
Retail revenue			53.6	%			47.1	%			51.2	%			44.0	%
Direct revenue			39.4				44.2				40.9				46.8
Financial Services revenue			6.9				8.2				7.2				8.3
Other revenue			0.1				0.5				0.7				0.9
Total revenue			100.0	%			100.0	%			100.0	%			100.0	%
As a Percentage of Segment Revenue:
Retail operating income			9.2	%			10.5	%			9.3	%			10.4	%
Direct operating income			13.9				16.9				13.6				15.7
Financial Services operating income			28.5				21.4				28.1				22.2
Total operating income (1)			3.4	%			4.5	%			3.4	%			3.9	%

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

ABELA'S INCORPORATED AND SUBSIDIARIES

FINANCIAL SERVICES REVENUE AS REPORTED ON A GAAP BASIS

(Dollars in Thousands)

(Unaudited)

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 on the entire managed portfolio.

Financial Services Revenue as Reported on a GAAP Basis:
		Three Months Ended								Nine Months Ended
		September 27, 2008				September 29, 2007				September 27, 2008				September 29, 2007
Interest and fee income, net of provision for loan losses		$	10,509			$	9,139			$	29,632			$	20,233
Interest expense			(2,831	)			(1,807	)			(8,993	)			(4,252	)
Net interest income, net of provision for loan losses			7,678				7,332				20,639				15,981
Non-interest income:
Securitization income			47,573				50,679				136,923				144,315
Other non-interest income			17,273				13,592				49,914				36,072
Total non-interest income			64,846				64,271				186,837				180,387
Less: Customer rewards costs			(30,628	)			(26,854	)			(86,619	)			(74,871	)
Financial Services revenue		$	41,896			$	44,749			$	120,857			$	121,497

CABELA'S INCORPORATED AND SUBSIDIARIES

MANAGED FINANCIAL SERVICES REVENUE PRESENTED ON A NON-GAAP BASIS

(Dollars in Thousands)

(Unaudited)

"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.

Managed Financial Services Revenue Presented on a Non-GAAP Basis:
		Three Months Ended								Nine Months Ended
		September 27, 2008				September 29, 2007				September 27, 2008				September 29, 2007
Interest income		$	49,709			$	48,465			$	148,062			$	136,010
Interchange income, net of customer rewards costs			19,854				16,940				57,677				46,690
Other fee income			10,667				7,425				26,135				19,502
Interest expense			(21,569	)			(21,776	)			(62,875	)			(60,187	)
Provision for loan losses			(16,632	)			(8,931	)			(43,453	)			(23,374	)
Other			(133	)			2,626				(4,689	)			2,856
Managed Financial Services revenue		$	41,896			$	44,749			$	120,857			$	121,497
Managed Financial Services Revenue as a Percentage of Average Managed Credit Card Loans:
Interest income			9.2	%			11.2	%			9.7	%			11.1	%
Interchange income, net of customer rewards costs			3.7				3.9				3.8				3.8
Other fee income			2.0				1.7				1.7				1.6
Interest expense			(4.0	)			(5.0	)			(4.1	)			(4.9	)
Provision for loan losses			(3.1	)			(2.1	)			(2.9	)			(1.9	)
Other			--				0.6				(0.3	)			0.2
Managed Financial Services revenue			7.8	%			10.3	%			7.9	%			9.9	%
Average managed credit card loans			2,153,089				1,730,886				2,043,142				1,633,446