Cabela's 2005 Annual Report Download

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CABELA’S INC.
ANNUAL REPORT
NYSE: CAB
2005

Table of contents

  • Page 1
    C A B ELA 'S IN C. A N N UA L R EP O RT 2005 NYSE: CAB

  • Page 2
    ... superior customer service. Our multi-channel retail model (catalog, Internet and destination retail stores) strategically positions us to meet our customers' ever-growing needs. We also issue the Cabela's Club® VISA credit card, which serves as our primary customer loyalty rewards program. NYSE...

  • Page 3
    ... Per Share Total Cash and Cash Equivalents Inventories Total Debt Total Stockholders' Equity Number of Catalogs Mailed Number of Retail Stores (at end of period) Total Gross Square Footage Average Sales Per Square Foot Total Revenue ($ in Millions) Operating Income ($ in Millions) Net Income...

  • Page 4
    ... store sales in 2006. Financial services revenue grew 48.6% for the year as we continued to grow our Cabela's Club VISA credit card business. The Company's net income rose 11.7% to a record $72.6 million and earnings per share were $1.10 for the year. F inancial Highlights Total revenue for 2005...

  • Page 5
    ...retirement of these bonds, we ended the year with roughly the same amount of bonds in our portfolio as we added new bonds associated with our stores in Texas, Utah and Minnesota. We expect the recycling of economic development bonds to provide a source of cash in future years. Annual Report 2005 3

  • Page 6
    ... planning software to improve and reduce the associated time and expense of merchandising our retail stores. Thank you for your continued support. superior product selection and our devotion to customer service will allow us to continue to increase our market share and maximize shareholder value...

  • Page 7
    ...and other successes in 2005 is our continued commitment to our customers and, in turn, our customers' loyalty to the Cabela's brand. Our marketing research and customer surveys show Cabela's customers prefer to shop with us, perceive real value in the products and services we offer and are among the...

  • Page 8
    ...system for our retail stores. Many products we sell have seasonal demand curves that vary with the opening and closing of specific hunting or fishing seasons. This new system is designed to improve the foreWe also recently introduced space planning software to improve the merchandise presentation in...

  • Page 9
    ..., Cabela's retail stores are increasing our visibility and are successfully selling Cabela's products, and the Cabela's brand, to customers across the country. In 2005, our retail expansion efforts took on momentum, with new stores in Fort Worth and Buda, Texas; Lehi, Utah; and Rogers, Minnesota...

  • Page 10
    ...Dominance Cabela's remains the largest direct marketer in the industry following another successful year in 2005. We mailed more than 121 million catalogs with 80 different titles and our website, www.cabelas.com, was the most visited sport and fitness website in the industry. Catalog sales continue...

  • Page 11
    ...Customer Loyalty, Adding Value 2005 proved to be another great year for our financial services business. Through our wholly-owned subsidiary, World's Foremost Bank, and our Cabela's Club VISA program, we continue to offer our customers added value and a convenient way to shop. The Cabela's Club VISA...

  • Page 12
    ... Omaha World-Herald Company Michael Callahan Senior Vice President, Retail Operations and Marketing Michael R. McCarthy Director and Chairman McCarthy Group, Inc. Theodore M. Armstrong Retired Chief Financial Officer Angelica Corporation Patrick A. Snyder Senior Vice President of Merchandising...

  • Page 13
    ... approximately $787,862,086 as of July 2, 2005 (the last business day of the registrant's most recently completed second fiscal quarter) based upon the closing price of the registrant's Class A Common Stock on that date as reported on the New York Stock Exchange. For the purposes of this disclosure...

  • Page 14
    CABELA'S INCORPORATED FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005 TABLE OF CONTENTS Page PART I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Business ...Risk Factors ...Unresolved Staff Comments ...Properties ...Legal Proceedings ...Submission of Matters to a Vote of Security Holders...

  • Page 15
    ... includes hunting, fishing, marine and camping merchandise, casual and outdoor apparel and footwear, optics, vehicle accessories, gifts and home furnishings with an outdoor theme. Our direct business uses catalogs and the Internet to increase brand awareness and generate customer orders via the mail...

  • Page 16
    ..., an online measurement company. Our wholly-owned bank subsidiary, World's Foremost Bank, surpassed our expectations in profitability and growth as it continues to build brand loyalty with our Cabela's Club VISA card. We completed major enhancements to our website, www.cabelas.com, including...

  • Page 17
    ... of new catalog titles and the development and introduction of new products. We have taken advantage of web-based technologies such as targeted promotional e-mails, on-line shopping engines and Internet affiliate programs to increase sales. We also are improving our customer relationship management...

  • Page 18
    ... catalog product identification number for quick ordering), our website gives customers the ability to purchase gift certificates, research outdoor activities and choose from other services we provide. Our website also offers discontinued merchandise through a Bargain Cave link which is advertised...

  • Page 19
    ... for future retail expansion. We successfully opened four destination retail stores in 2005, increasing our total retail square footage by 780,780 feet or 59.3%. Our four destination retail stores opened in 2005 are located in Fort Worth, Texas, Buda, Texas, Lehi, Utah and Rogers, Minnesota. We...

  • Page 20
    ...products, gifts and home furnishings with an outdoor theme and furniture restoration related merchandise. Our merchandise assortment ranges from products at entry-level price points to premium-priced high-end items. We generally price our products consistently across our direct and retail businesses...

  • Page 21
    ... recreation market and we continue to look at category expansion to further serve our customers. We have developed strong vendor relationships over the past 44 years. These relationships generally provide us with greater access to technological innovations and new products. We source our merchandise...

  • Page 22
    ... manage our inventory levels. Marketing Our marketing strategy focuses on using our multi-channel retail model to build the strength and recognition of our brand by communicating our wide and distinctive offering of quality products to our customers and potential customers in a cost effective...

  • Page 23
    ... visits and purchases is due, in part, to the strength of our customer support and service operations. Financial Services Business Through our wholly-owned subsidiary, World's Foremost Bank, we issue and manage the Cabela's Club VISA card and related customer loyalty rewards program. We believe...

  • Page 24
    ... States Postal Service. We use common carriers and typically deliver inventory two to three times per week to our destination retail stores. Our primary returns processing facility is located in Oshkosh, Nebraska. In fiscal 2006, we plan to expand our Wheeling, West Virginia distribution center by...

  • Page 25
    ...concerning the payment of dividends from net profits or surplus, restrictions governing transactions between an insured depository institution and its affiliates, and general federal and Nebraska regulatory oversight to prevent unsafe or unsound practices. At the end of 2005, our bank subsidiary met...

  • Page 26
    ... background check of purchasers of hunting rifles and other firearms. We also are subject to a variety of state laws and regulations relating to, among other things, advertising, pricing, and product safety/restrictions. Some of these laws prohibit or limit the sale, in certain states and locations...

  • Page 27
    ... or in the future, is not part of this or any other report we file with or furnish to the SEC. ITEM 1A. RISK FACTORS Risk Factors Risks Related to Our Merchandising Business If we cannot successfully implement our destination retail store expansion strategy, our growth and profitability would be...

  • Page 28
    ... sales of the products marketed in the catalog; lower and less predictable response rates for catalogs sent to prospective customers; increases in U.S. Postal Service rates, paper costs and printing costs resulting in higher catalog production costs and lower profits for our direct business...

  • Page 29
    ... Sporting Goods and Big 5 Sporting Goods; retailers that currently compete with us through retail businesses that may enter the direct business; mass merchandisers, warehouse clubs, discount stores and department stores, such as Wal-Mart and Target; and casual outdoor apparel and footwear retailers...

  • Page 30
    ... those we currently purchase. Any delay or failure in offering products to our customers could have an adverse impact on our revenue and profitability. In addition, if the cost of fuel rises, the cost to deliver merchandise to the customers of our direct business and from our distribution centers to...

  • Page 31
    ... general business conditions; increases in interest rates; increases in inflation; wars, fears of war and terrorist attacks and organizing activities; increases in consumer debt levels and decreases in the availability of consumer credit; adverse or unseasonable weather conditions or events...

  • Page 32
    ... growth may suffer. Our success depends on hiring, training, managing and retaining quality managers, sales associates and employees in our destination retail stores and customer care centers. Our corporate headquarters, distribution centers, return center and some of our destination retail stores...

  • Page 33
    ... centers or return facility could cause us to lose merchandise and be unable to effectively deliver to our direct customers and destination retail stores. We currently rely on distribution centers in Sidney, Nebraska, Mitchell, South Dakota, Prairie du Chien, Wisconsin and Wheeling, West Virginia...

  • Page 34
    ...associated taxes are insufficient to pay the bonds. At the time we purchase these bonds, we make estimates of the discounted future cash flow streams they are expected to generate in the form of interest and principal payments. Because these cash flows are based primarily on future property or sales...

  • Page 35
    ... hunting and fishing; laws and regulations relating to the collecting and sharing of non-public customer information; and U.S. customs laws and regulations pertaining to proper item classification, quotas, payment of duties and tariffs, and maintenance of documentation and internal control programs...

  • Page 36
    ... our financial services business, which could limit growth of the business and decrease our profitability. Our financial services business requires a significant amount of cash to operate. These cash requirements will increase if our credit card originations increase or if our cardholders' balances...

  • Page 37
    ... profits from our financial services business could decline, for a variety of reasons, many of which are beyond our control, including credit risk related to the loans we make to cardholders and the charge-off levels of our credit card accounts; lack of growth of potential new customers generated...

  • Page 38
    ...cardholders' account balances, and pay interest on the certificates of deposit and borrowings we use to fund those loans. Changes in these two interest rates affect the value of the assets and liabilities of our financial services business. If the rate of interest we pay on borrowings increases more...

  • Page 39
    ... Direct, Financial Services and Other Direct Other (1) We own all of these properties except the Grand Island, Nebraska customer care center and Wheeling, West Virginia distribution center, which we lease. We own all of our destination retail stores. However, in connection with some of the economic...

  • Page 40
    ... any cash dividends on our common stock in the foreseeable future. In addition, our revolving credit facility and our senior notes restrict our ability to pay dividends to our stockholders based upon our prior year's consolidated EBITDA and our consolidated net worth, respectively. See "Management...

  • Page 41
    ...investing activities ...Net cash flows from financing activities ...Other Data: Number of catalogs mailed (000's) ...Number of destination retail stores (at end of period) ...Total gross square footage (at end of the period) ...Average sales per gross square foot (8) ...Comparable store sales growth...

  • Page 42
    ... on economic development bonds, gains on sales of marketable securities and equity in undistributed net earnings (losses) of equity method investees. (5) At fiscal year end 2005, 2004, 2003, 2002 and 2001, cash and cash equivalents at World's Foremost Bank were $80.6 million, $58.1 million, $77...

  • Page 43
    ... statements. Overview We are the world's largest direct marketer, and a leading specialty retailer, of hunting, fishing, camping and related outdoor merchandise. We serve people who enjoy the outdoor lifestyle through our well-established direct business and our growing number of destination retail...

  • Page 44
    ... the cost of real estate, site work, public improvements such as utilities and roads, buildings, equipment, fixtures (including taxidermy) and inventory. See "-Liquidity and Capital Resources-Retail Store Expansion." We currently intend to open five new largeformat destination retail stores in...

  • Page 45
    ...to support our new destination retail stores and in our management information systems department, which supports growth in our website customer base. We expect that we will make investments in our data systems, and we expect to hire additional employees in our shared services and corporate overhead...

  • Page 46
    ... our credit card loans in the securitization markets and manage those customer accounts at the bank. Increase in interchange income. We have experienced an increase in interchange fee income as VISA raised the interchange rate charged to merchants in 2004, and we participated in a new reward program...

  • Page 47
    ... on the circumstances and development plan for each location. Total gross profit on our land sales was $4.4 million, or 17.5% of land sales, in fiscal 2005 compared to $2.8 million, or 37.3% of land sales, in fiscal 2004. Number of weeks in our fiscal periods. Our fiscal year ends on the Saturday...

  • Page 48
    ...years 2005, 2004 and 2003. 2005 Fiscal Years 2004 (Dollars in thousands) 2003 Direct revenue ...Retail revenue ...Financial services revenue ...Other revenue ...Total revenue ...Direct operating income ...Retail operating income ...Financial services operating income ...Other operating income (loss...

  • Page 49
    ... reflects the financial performance of the credit card loans receivable we own plus those that have been sold for the fiscal years ended 2005, 2004 and 2003 and includes the effect of recording the retained interest at fair value. Interest income, interchange income (net of customer rewards) and fee...

  • Page 50
    ... the largest dollar volume increase to our fiscal 2005 Direct revenue growth included hunting equipment, footwear and camping. Retail Revenue. Retail revenue increased by $121.1 million, or 24.3%, to $620.2 million in fiscal 2005 from $499.1 million in fiscal 2004 due to increased new store sales of...

  • Page 51
    ... our two new stores in Texas, however the primary impact was the hurricanes' effect on gasoline prices. The product categories that contributed the largest dollar volume increase to our Retail revenue growth in fiscal 2005 included hunting equipment, camping and footwear. Financial Services Revenue...

  • Page 52
    ... increases in VISA assessments, new account acquisition costs and account retention tools. Third-party data processing services increased by $1.8 million, as the number of credit card accounts and transactions increased. Salary and related benefits increased $1.5 million with the growth of the bank...

  • Page 53
    ... customers who have purchased merchandise from us in the last twelve months, increased by 6.1% to approximately 4.2 million in fiscal 2004 over fiscal 2003. The product categories that contributed the largest dollar volume increase to our Direct revenue growth included work wear, home furnishings...

  • Page 54
    ... new employees were hired primarily in the distribution department, relating to the new distribution center in Wheeling, West Virginia. In addition to new employees, there was a $1.7 million compensation charge related to stock options granted at less than fair market value under our 2004 stock plan...

  • Page 55
    ...data processing services increased by $2.3 million, as the number of credit card transactions increased. Salary and wages along with bonus and other related wage costs increased $2.2 million with the growth of the bank. Advertising and promotion costs related to new account acquisitions increased by...

  • Page 56
    ... year end 2005, $12.6 million originated from sources other than Cabela's Club credit cards. The following table shows credit card loans available for sale along with those securitized as of fiscal year end 2005, 2004 and 2003: 2005 2004 2003 Loans >90 Days Loans >90 Days Loans >90 Days Outstanding...

  • Page 57
    ... million in fiscal 2005 from $889 million in fiscal 2004. We believe that as credit card accounts mature they are less likely to charge-off and less likely to be closed. The following table shows our managed loans outstanding at fiscal year end 2005 and 2004 by months since the account opened. 2005...

  • Page 58
    ...The primary cash requirements of our Financial Services segment relate to the generation of credit card loans and the purchase of points used in the customer loyalty rewards program from our merchandising business. The bank obtains funds for these purposes through various financing activities, which...

  • Page 59
    ... and timing of when it was paid. Gift certificates and credit card reward points increased by $7.2 million. These increases were partially offset by increases in uses of cash. Cash used for inventory increased by $33.4 million related to the stocking of four new destination retail stores. Cash used...

  • Page 60
    ... $23.1 million of future economic development bonds relating to expansion of our distribution center in Wheeling, West Virginia in fiscal 2006. Retail Store Expansion Significant amounts of cash will be needed in order to open new destination retail stores and implement our retail growth strategy...

  • Page 61
    ... payments and will be unable to realize the full value of the bonds carried on our balance sheet. See "-Critical Accounting Policies and Use of Estimates- Economic Development Bonds" and "Risk Factors-Risks Related to our Merchandising Business-The failure of properties to generate sufficient taxes...

  • Page 62
    ... servicing and administration fees. We use certain valuation assumptions related to the average lives of the loans sold and anticipated credit losses, as well as the appropriate market discount rate, in determining the estimated present value of the interest only strip. Changes in the average life...

  • Page 63
    ... could increase our financing costs and potentially limit our ability to grow our Financial Services business. Unfavorable conditions in the asset-backed securities markets generally, including the unavailability of commercial bank liquidity support or credit enhancements, such as financial guaranty...

  • Page 64
    ...basis for each fiscal year beginning with the fiscal year ended 2005 as of the last day of any fiscal quarter. Tangible net worth is equity less intangible assets. • • In addition, the credit agreement contains cross default provisions to other outstanding debt. In the event we fail to comply...

  • Page 65
    flow statement as advances and payments on lines of credit. The extended payment terms to the vendors do not exceed one year. The outstanding liability under the inventory financing agreements was $1.4 million at the end of fiscal 2005. Our bank entered into an unsecured uncommitted Federal Funds ...

  • Page 66
    ...destination retail stores and $23.1 million of economic development bond funding in connection with our Wheeling, West Virginia distribution center. (5) Our purchase obligations relate primarily to purchases of inventory, shipping and other goods and services in the ordinary course of business under...

  • Page 67
    ... items of office equipment and buildings, all of which are recorded in our selling, general and administrative expenses. Future obligations are shown in the contractual obligations table above. Credit Card Limits-The bank bears off-balance sheet risk in the normal course of its business. One form of...

  • Page 68
    ...the sale in the store. For direct sales, revenue is recognized when the merchandise is delivered to the customer, with the time of delivery being based on our estimate of shipping time from our distribution facility to the customer. We record a reserve for estimated product returns in each reporting...

  • Page 69
    ... and losses on the sale of securities are recorded on the trade date and determined using the specific identification method. At the time we purchase these bonds we make estimates of the discounted future cash flow streams they are expected to generate in the form of interest and principal payments...

  • Page 70
    ... and discounts under employee stock purchase plans granted to employees based on the estimated fair value of the equity instrument at the time of the grant. Currently we disclose the pro forma net income and earnings per share as if we applied the fair value recognition provisions of Statement 123...

  • Page 71
    ...until the first fiscal year ending after December 15, 2006. In August 2005, the FASB issued proposed statements of financial accounting standards: "Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140" and "Accounting for Servicing of Financial Assets, an amendment of...

  • Page 72
    ... or increase of $3.7 million to $3.9 million on the projected pre-tax income of our Financial Services segment over the next twelve months, which could have a material effect on our operating results. Merchandising Interest Rate Risk One of our economic development bond agreements is priced at...

  • Page 73
    ... of our international purchase transactions are in currencies other than the U.S. dollar. Any currency risks related to these transactions are immaterial to us. A decline in the relative value of the U.S. dollar to other foreign currencies could, however, lead to increased merchandise costs. 61

  • Page 74
    ... REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ...CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets ...Consolidated Statements of Income ...Consolidated Statements of Stockholders' Equity ...Consolidated Statements of Cash Flows ...Notes to Consolidated Financial Statements...

  • Page 75
    ... of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic...

  • Page 76
    ...: Accounts payable ...Unpresented checks net of bank balance ...Accrued expenses and other liabilities ...Gift certificates and credit card reward points (Note 1) ...Accrued employee compensation and benefits ...Time deposits (Note 6) ...Current maturities of long-term debt (Note 8) ...Income taxes...

  • Page 77
    CABELA'S INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollar Amounts in Thousands Except Per Share and Share Amounts) 2005 2004 2003 REVENUE: Merchandise sales ...Financial services revenue ...Other revenue ...Total revenue ...COST OF REVENUE: Cost of merchandise sales ...Cost ...

  • Page 78
    ... (Note 15) ...Employee stock purchase plan issuances ...Exercise of employee stock options ...Tax benefit of employee stock option exercises ...BALANCE, End of fiscal year 2004 ...Comprehensive income (Note 17): Net income ...Unrealized loss on marketable securities, net of taxes of $(1,428...

  • Page 79
    ... ...CASH FLOWS FROM FINANCING ACTIVITIES: Advances on lines of credit ...Payments on lines of credit ...Change in unpresented checks net of bank balance ...Proceeds from issuance of long-term debt ...Payments on long-term debt ...Change in time deposits, net ...Net decrease in employee savings plan...

  • Page 80
    ... The Company used $38,088 of the net proceeds to repay the outstanding balance on its open line of credit. The remaining amount was used for capital expenditures and the purchase of economic development bonds related to the construction and opening of new destination retail stores. Transaction costs...

  • Page 81
    ... of purchase of three months or less. Unpresented checks net of bank balance in a single bank account are classified as current liabilities. WFB had $80,569 and $58,147 of cash and cash equivalents in fiscal years 2005 and 2004, respectively. Due to regulatory restrictions the Company is restricted...

  • Page 82
    ... as a reduction of merchandise costs of goods sold when the merchandise is sold. The Company records an estimate of earned allowances based on the latest projected purchase volumes. Historical program results, current purchase volumes, and inventory projections are reviewed when establishing the...

  • Page 83
    ... of fiscal 2005 and 2004. Fair value was determined using a discounted cash flow methodology. There were no impairment adjustments for fiscal years 2005 and 2004. Marketable Securities-Economic development bonds ("bonds") issued by state and local municipalities that management has the positive...

  • Page 84
    ...for the fiscal years ended 2005, 2004 and 2003, respectively. In certain cases, the Company has agreed to guarantee any deficiency in tax proceeds that are used for debt service of the economic development bonds. In those situations, the Company records the obligation as debt on its balance sheet in...

  • Page 85
    ... associated with the grant are met. As of the fiscal years ended 2005 and 2004, the Company was in compliance with all material requirements. Credit Card Reward Program-Every Cabela's Club VISA cardholder receives Cabela's points based on the dollar amount transacted on WFB's credit card. Cabela...

  • Page 86
    ... For purposes of estimating fair value, time deposits are pooled in homogeneous groups and the future cash flows of those groups are discounted using current market rates offered for similar products. At fiscal year end 2005 and 2004, the carrying amounts of the Company's time deposits were $109,488...

  • Page 87
    ... to prior year financial statements and the notes to conform to the current year presentation. The Company has reclassified a portion of the retained interests related to its Financial Services business from investing activities to operating activities in the statement of cash flows. These changes...

  • Page 88
    ...errors made in fiscal years beginning after December 15, 2005. The Company does not believe the adoption of Statement 154 will have a material impact on its financial statements. On July 14, 2005, the FASB published an exposure draft entitled "Accounting for Uncertain Tax Positions-an interpretation...

  • Page 89
    ... basis. The Company is currently reviewing Statement 155 and has not yet determined the impact on its financial statements. 2. SALE OF CREDIT CARD LOANS WFB has established a trust for the purpose of routinely selling and securitizing credit card loans. WFB maintains responsibility for servicing the...

  • Page 90
    ...to market value and allowance for loan losses ...Total ...Delinquent loans in the managed credit card loan portfolio at fiscal year end: 30-89 days ...90 days or more and still accruing ...Total net charge-offs on the managed credit card loans portfolio for fiscal year ended ...Annual average credit...

  • Page 91
    CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Dollar Amounts in Thousands Except Share and Per Share Amounts) Sensitivity Analysis: At fiscal year ended 2005, key economic assumptions used by management and the sensitivity of the current fair value of...

  • Page 92
    CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Dollar Amounts in Thousands Except Share and Per Share Amounts) 3. PROPERTY AND EQUIPMENT Property and equipment included the following at each fiscal year end: Useful Life in Years Fiscal Years Ended 2005...

  • Page 93
    ... 850 515 283 283 276 441 $2,648 5. MARKETABLE SECURITIES Marketable securities consisted of the following at each fiscal year: Fiscal Year Ended 2005 Gross Gross Unrealized Unrealized Gains Losses Cost Fair Value Available-for-sale: Economic development bonds ...Held to maturity: Mortgage backed...

  • Page 94
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Dollar Amounts in Thousands Except Share and Per Share Amounts) The amortized cost and fair value of economic development bonds by contractual maturity at fiscal year end 2005 is as follows: Available for Sale Amortized Fair Cost Value Held to...

  • Page 95
    .... The Company's revolving credit facility limits this security interest to $25,000. The Company records this boat merchandise in inventory with an offsetting liability in accounts payable. The loans and payments are reflected in the financing lines of credit in the Company's cash flow statement. The...

  • Page 96
    ... facility in Wheeling, West Virginia. The lease term is 30 years with monthly installments of $42 and contains a bargain purchase option at the end of the lease term. The Company is accounting for this lease as a capital lease and has recorded the leased asset at the present value of the future...

  • Page 97
    ... 26,583 26,445 544 2,230 111,331 8,495 $119,826 $ 8,495 2005 Fiscal Year Ended 2004 2003 Interest income earned on economic development bonds ...Gains on sale of investments ...Equity in undistributed net earnings (losses) of equity method investees ...Other ...Total ... $10,549 - 108 6 $10,663...

  • Page 98
    ... FINANCIAL STATEMENTS-(Continued) (Dollar Amounts in Thousands Except Share and Per Share Amounts) A reconciliation of the statutory federal income tax rate to the effective income tax rate is a follows: 2005 2004 2003 Statutory federal rate ...State income taxes, net of federal tax benefit...

  • Page 99
    ... currency derivatives designated as cash flow hedges. The Company discontinued four foreign currency contracts in the twelve months ended December 31, 2005, for which a loss of $58 was recorded in earnings. Generally, the Company hedges a portion of its anticipated inventory purchases for periods...

  • Page 100
    ... or cancel these available lines of credit at any time. The Company has entered into real estate purchase, construction and/or economic development bond agreements for various Retail site locations. For agreements that have been signed as of the end of fiscal 2005, the total anticipated initial...

  • Page 101
    ...age or service requirements employees can receive their balance in a lump sum payment or in equal annual payments over a five, ten or twelve year period. The charge to interest expense under the fixed rate portion of the plan was approximately $633, $595 and $2,967 during the fiscal years ended 2005...

  • Page 102
    ...classes of our stock or stock of a subsidiary cannot participate in the plan. The right to purchase stock under this plan became effective upon the completion of the Company's initial public offering. At fiscal year end 2005, 129,721 shares had been issued under the Stock Purchase Plan and 1,705,279...

  • Page 103
    ... exercised. Information relating to stock options at fiscal years ended 2005, 2004 and 2003 is as follows: 2005 Weighted Average Exercise Price 2004 Weighted Average Exercise Price 2003 Weighted Average Exercise Price Number of Options Number of Options Number of Options Outstanding-beginning...

  • Page 104
    ... be accounted for in accordance with APB No. 25. The Company estimates that the pre-tax expense related to outstanding unvested options granted after March 23, 2004, as well as the anticipated impact of expense from the Company's employee stock purchase plan, will be approximately $2.3 million in...

  • Page 105
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Dollar Amounts in Thousands Except Share and Per Share Amounts) 16. EARNINGS PER SHARE Basic earnings per share ("EPS") is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period...

  • Page 106
    CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Dollar Amounts in Thousands Except Share and Per Share Amounts) common stock, which rates equally with the Company's Class A common stock in respect of dividends, are entitled to receive ratably dividends,...

  • Page 107
    ... is now deceased. Total fees paid for these services were $1,413 during 2003. The Company buys products from an affiliate of the Company's Board Chairman, which are sold through various distribution channels. All activity is at arms-length rates. Total products purchased in fiscal 2005 were $37. 95

  • Page 108
    ... catalogs and an e-commerce website (Cabelas.com); the Retail segment consists of destination retail stores in various sizes and formats; and the Financial Services segment issues co-branded credit cards. The reconciling amount or Other segment is primarily made up of land sales, employee discounts...

  • Page 109
    ...related to corporate headquarters, merchandise distribution and technology infrastructure. Unallocated assets include corporate cash and equivalents, inventory that could be shipped for sales to the Retail or Direct segment entities, the net book value of corporate facilities and related information...

  • Page 110
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Dollar Amounts in Thousands Except Share and Per Share Amounts) Financial Services Corporate Overhead and Other 2003 Direct Retail Total Revenue from external ...Revenue from internal ...Total revenue ...Operating income (loss) ...As a % of...

  • Page 111
    ... financial statements of Cabela's Incorporated and Subsidiaries (the "Company") as of December 31, 2005 and January 1, 2005, and for each of the three years in the period ended December 31, 2005, management's assessment of the effectiveness of the Company's internal control over financial reporting...

  • Page 112
    ...AND QUALIFYING ACCOUNTS Beginning of Year Balance Charged to Costs and Expenses Charged to Other Accounts Net ChargeOffs End of Year Balance YEAR ENDED DECEMBER 31, 2005: Allowance for doubtful accounts ...Allowance for credit card receivable loan losses ...YEAR ENDED JANUARY 1, 2005: Allowance for...

  • Page 113
    ... adequate internal control over financial reporting for the company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted...

  • Page 114
    ... opinion on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain...

  • Page 115
    ... have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2005 of the Company and our report dated February 28, 2006 expressed an unqualified opinion on those...

  • Page 116
    ...report: 1. Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Statements of Income-Years ended December 31, 2005, January 1, 2005, and January 3, 2004 Consolidated Balance Sheets-December 31, 2005 and January 1, 2005 Consolidated Statements of Cash Flows-Years...

  • Page 117
    ... 10 of our Quarterly Report of Form 10-Q, filed on November 4, 2005, File No. 001-32227) Note Agreements dated as of January 1, 1995, among Cabela's Incorporated and various purchasers party thereto (incorporated by reference from Exhibit 4.8 of our Registration Statement on Form S-1, filed on...

  • Page 118
    ... 23, 2003, among Cabela's Incorporated, James W. Cabela and an affiliated party, and Richard N. Cabela and his affiliates (incorporated by reference from Exhibit 10.4 of our Registration Statement on Form S-1, filed on March 23, 2004, Registration No. 333-113835) Stock Purchase Agreement dated as of...

  • Page 119
    ...10.17 10.18 2004 Employee Stock Purchase Plan (incorporated by reference from Exhibit 10.14 of our Registration Statement on Form S-1, filed on March 23, 2004, Registration No. 333-113835) * Second Amended and Restated Credit Agreement dated as of July 15, 2005, among Cabela's Incorporated, various...

  • Page 120
    ... 12, 2005, File No. 001-32227) Fifth Amendment of the Cabela's Incorporated 401(k) Savings Plan 99.3 99.4 99.5 99.6 * indicates management contract or compensatory plan or arrangement required to be filed as exhibits pursuant to Item 15(b) of this report. (c) Financial Statement Schedules. See...

  • Page 121
    ... 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CABELA'S INCORPORATED Dated: March 1, 2006 By: /s/ DENNIS HIGHBY Dennis Highby President and Chief Executive Officer Pursuant to...

  • Page 122
    ... caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals...

  • Page 123
    ... caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals...

  • Page 124
    ...Annual Report of Cabela's Incorporated (the "registrant") on Form 10-K for the year ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "report... The information contained in the report fairly presents, in all material respects, the financial condition ...

  • Page 125
    ...Manager of Investor Relations, at 308-255-2905 or via email at [email protected] or by visiting the company's website at www.cabelas.com. Legal Counsel Koley Jessen P.C., A Limited Liability Organization One Pacific Place 1125 South 103 Street, Suite 800 Omaha, NE 68124 Notice of Annual...

  • Page 126
    Retail Store in Fort Worth, Texas Cabela's Inc. One Cabela Drive Sidney, Nebraska 69160 Tel: 308-254-5505 www.cabelas.com NYSE: CAB