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Cabela's Inc. Reports Record First Quarter Fiscal 2010 Results.

-First Quarter Earnings Per Share of $0.12

-First Quarter Total Revenue Increased 5.1%, Adjusted For Divestitures

-First Quarter Direct Revenue Increased 2.1%, Adjusted For Divestitures

-First Quarter Comparable Store Sales Declined 1.7%

-First Quarter Operating Margins Expanded 50 Basis Points

-Inventory Reduced 22% to $446 Million

SIDNEY, Neb. -- Cabela's Incorporated (NYSE:CAB) today reported record first quarter fiscal 2010 financial results.

For the quarter, adjusted for divestitures, total revenue increased 5.1% to $559.6 million; retail store revenue decreased 1.5% to $271.3 million; direct revenue increased 2.1% to $222.7 million; and comparable store sales decreased 1.7%. The divestiture of Van Dyke's taxidermy business and Wild Wings in late 2009 accounted for $7.1 million of revenue in the first quarter of 2009. A detailed reconciliation is provided at the end of this release. Financial services revenue increased 77% to $60.0 million primarily due to higher interest and fee income of $9.0 million and a lower provision for loan losses of $8.0 million.

"We are encouraged with our revenue growth for the quarter, and in particular, revenue growth in our direct segment, which increased for the first time in six quarters due to growth in Internet sales," said Tommy Millner, Cabela's Chief Executive Officer. "As we anniversary the period of strong sales of firearms and ammunition, we have been pleased that sales declines in these two categories have been less than expected. Additionally, we are pleased with the sales increases we are seeing in other areas of our business, such as fishing and marine, camping, footwear, optics and gifts and furnishings."

"We are very pleased with the operating results we achieved during the quarter and our continued progress on our areas of strategic focus," Millner said. "As we have previously discussed, our strategic initiatives are to improve retail profitability, increase returns on invested capital, improve inventory turns and increase Cabela's brand loyalty through the operations of World's Foremost Bank. Internet sales were a special standout during the quarter. As the Internet continues to be the growing, preferred shopping channel for our direct customers, it is encouraging to see us capitalize on this trend. Additionally, ongoing improvements in catalog productivity as well as improved operating efficiencies in our retail stores contributed to expense reductions in the quarter."

Merchandise gross margins were lower than last year, but improved sequentially throughout the quarter; a trend that has continued into the second quarter. The Company continued to tightly manage inventory levels and realized a 22% reduction in inventory levels compared to the first quarter of 2009.

For the quarter, consolidated operating income increased 29.3% to $15.9 million compared to $12.3 million in the first quarter of 2009. Operating margins increased 50 basis points to 2.8% compared to 2.3% in the first quarter of 2009. Increases in operating profit were due to the strong performance of World's Foremost Bank, improved catalog productivity in the direct segment and lower labor costs in retail stores. For the quarter, net income increased 57.8% to $8.1 million, or $0.12 per diluted share compared, to $5.1 million, or $0.08 per diluted share, in the first quarter of 2009.

During the quarter, World's Foremost Bank received from the Federal Deposit Insurance Corporation ("FDIC") a preliminary report related to a compliance examination conducted in the second quarter of 2009. This examination report expressed concerns that World's Foremost Bank improperly assessed various overlimit fees, penalty interest rates and late fees over the past six years, and also used an improper collection practice. The Company is currently in discussions with the FDIC to resolve these matters. In the event that the Company is unable to resolve any of the issues raised in the preliminary examination report, the Company estimates that its maximum financial liability is $12 million after-tax and has reserved that full amount as a special charge in its first quarter 2010 financial statements. The Company eliminated or modified all of the practices of concern to the FDIC during the second half of 2009. The first quarter 2010 results include the impact of this $12 million after-tax special charge.

For the quarter, excluding the $12 million after-tax special charge, net income increased 122% to $20.0 million, or $0.29 per diluted share. This compares to net income of $9.0 million, or $0.13 per diluted share, in the first quarter of 2009, which excludes $3.9 million of special charges related to impairments and the valuation of interest only strips. A detailed reconciliation is provided at the end of this release.

For the quarter, managed financial services revenue as a percent of managed credit card loans improved 380 basis points due primarily to increased interest and fee income, lower provision for loan losses and lower interest expense. For the quarter, charge-offs were 4.96% compared to 4.72% in the first quarter of 2009. This is the lowest quarterly increase in net charge-offs in the past two years and the lowest absolute charge off rate in the past three quarters. As a result of continued favorable charge-off trends and a more favorable outlook for charge-offs for the remainder of the year, provision for loan losses for the quarter was $15.1 million.

As of April 3, 2010, inventories totaled $446 million, a decrease of 22% compared to inventories of $574 million as of March 28, 2009. Total debt as of April 3, 2010, was $351 million compared to $475 million as of March 28, 2009, a decrease of $124 million or 26%.

"We are pleased with our continued progress controlling costs, driving operational excellence, strengthening our balance sheet and increasing Cabela's brand loyalty through the operations of World's Foremost Bank," Millner said. "Given our strong first quarter results, we expect earnings per share for 2010 to meet or exceed current expectations, even after absorbing the special charge taken in the first quarter. Additionally, given continued favorable trends related to charge-offs, we now expect average net charge-offs at World's Foremost Bank to be between 5.25 and 5.75% for 2010 as compared to our previous guidance of 5.75 to 6.25%."

Conference Call Information

A conference call to discuss first quarter fiscal 2010 operating results is scheduled for today (Tuesday, May 4, 2010) 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 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 $12 million after-tax being its maximum financial liability for the FDIC matter, earnings per share for 2010 to meet or exceed current expectations, and average net charge-offs at World's Foremost Bank to be between 5.25 and 5.75% for 2010. 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 state 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 agreements; 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 and 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; political or financial instability in countries where the goods the Company sells are manufactured; 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; increased government regulation, including regulations relating to firearms and ammunition; inadequate protection of the Company's intellectual property; material security breaches of computer systems; 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, liquidity, interest rate, operational, legal and compliance risks; increasing competition for credit card products and reward programs; the Company's ability to increase credit card receivables while managing fraud, delinquencies and charge-offs; the Company's ability to securitize its credit card receivables at acceptable rates or access the deposits market at acceptable rates; decreased interchange fees as a result of credit card industry regulation and/or litigation; the impact of legislation, regulation and supervisory regulatory actions (including with respect to the compliance examination conducted by the Federal Deposit Insurance Corporation in the second quarter of 2009) in the financial services industry, including the Credit Card Accountability Responsibility and Disclosure Act of 2009, new and proposed regulations affecting securitizations 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 January 2, 2010), 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.
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CABELA'S INCORPORATED AND SUBSIDIARIES ADJUSTED REVENUE FOR FISCAL 2009 (Unaudited)

Direct revenue and total revenue for fiscal 2009 was adjusted for the dispositions of Wild Wings and Van Dyke's taxidermy business for comparability of the reported periods as presented below:
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CABELA'S INCORPORATED AND SUBSIDIARIES FINANCIAL SERVICES REVENUE AS REPORTED ON A GAAP BASIS (Unaudited)

The following table summarizes the results of the Company's Financial Services segment on a generally accepted accounting principles ("GAAP") basis. The Company did not retrospectively adopt the provisions of Accounting Standards Codification ("ASC") Topics 810 and 860; therefore, the components of Financial Services revenue will not be comparable to 2009 prior period amounts as a result of the consolidation of the Cabela's Master Credit Card Trust and related entities (collectively referred to as the "Trust"). Financial Services revenue is comprised of interest and fee income, interchange income, customer rewards costs, other non-interest income, interest expense, and provision for loan losses from our credit card operations. In fiscal 2010, the securitization income component was no longer recorded and separately reported; rather the remaining components will now reflect the financial performance of the entire managed portfolio which includes the Trust. The results of operations of the Financial Services business now look similar to the historical managed presentation for financial performance of the total managed portfolio of credit card loans, excluding income derived from the changes in the valuation of our interest only strip, cash reserve accounts, and cash accounts associated with the securitized loans.
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CABELA'S INCORPORATED AND SUBSIDIARIES FINANCIAL SERVICES REVENUE PRESENTED ON A MANAGED BASIS (Unaudited)

As a result of the adoption of ASC Topics 810 and 860, a managed presentation which is comparable between the periods has been presented to evaluate the changes in Financial Services revenue. The managed presentation shown below presents the financial performance of the total managed portfolio of credit card loans for the periods presented. The managed presentation for fiscal 2010 is the same as the GAAP presentation; however, the 2009 presentation is non-GAAP.

For the three months ended March 28, 2009, interest and fee income, interchange income, customer rewards costs, and other non-interest income on both the owned and securitized portfolio are reflected in the respective line items. Interest paid to outside investors on the securitized credit card loans is included in interest expense. Credit losses on the entire managed portfolio are reflected in the provision for loan losses. This managed presentation includes income or expense derived from the valuation of the interest-only strip, cash reserve accounts, and cash accounts associated with our securitized loans that would generally be reversed or not reported in a managed presentation in the other component.
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CABELA'S INCORPORATED AND SUBSIDIARIES KEY STATISTICS OF FINANCIAL SERVICES BUSINESS (Unaudited)

Key statistics reflecting the performance of our Financial Services business are shown in the following chart:
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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"), the Company has disclosed non-GAAP measures of operating results that exclude certain items. Financial services revenue; total revenue; selling, distribution, and administrative expenses; operating income; other non-operating income; provision for income taxes; net income; and earnings per diluted share are presented below both as reported (on a GAAP basis) and excluding (i) the effect of the $18 million charge recorded in the first quarter of fiscal 2010 relating to matters arising out of the Federal Deposit Insurance Corporation's compliance examination of World's Foremost Bank, (ii) the impact of valuations of our interest-only strips, cash reserve accounts, and cash accounts associated with our securitized loans recorded in fiscal 2009, and (iii) the impairment and restructuring charges recorded in fiscal 2009. The valuations of our interest-only strips, cash reserve accounts, and cash accounts associated with our securitized loans was not a reported amount beginning in 2010 with the adoption of ASC Topics 810 and 860. The impairment and restructuring charges include asset write-downs and severance and related costs. In light of their nature and magnitude, the Company believes 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 presented in the earnings release.

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 total revenue, 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 total revenue, operating income, net income, earnings per share, or any other measure calculated in accordance with GAAP. The following tables reconcile these financial measures to the related GAAP financial measures for the periods presented.
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