Cabela's 2006 Annual Report Download - page 44

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Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $87.3 million, or 16.4%, to $620.4 million in fiscal
2005 from $533.1 million in fiscal 2004. Selling, general and administrative expenses were 34.5% of revenue in
fiscal 2005, compared to 34.3% in fiscal 2004. The most significant factors contributing to the increase in selling,
general and administrative expenses included:
•Other selling, general and administrative expenses attributed to shared services comprised $22.6 million
of the total increase in selling, general and administrative expense and increased primarily as a result of
the addition of new employees, which increased salary and wages, related taxes, insurance and benefits,
and 401(k) matching expense by $10.6 million. The additional new employees were hired primarily
in the distribution department, relating to expansion of retail distribution and increases in the direct
business. In addition, we hired additional personnel in management information systems, finance, legal
and human resources to support our growing infrastructure. Bonuses increased by $4.5 million due in
part to our improved performance, but also due to the elimination of extended vesting on executive bonus
compensation whereby deferred bonuses of $1.7 million were fully expensed in 2005 rather than expensed
over a two-year period in accordance with the previous plan. Depreciation expense increased $2.8 million
as the Wheeling distribution center was in service for a full year in 2005 compared to a partial year in
2004. In addition, there were system related projects put in service for the distribution centers tracking
of inventory and for various corporate projects. Furniture and fixtures were put in service for various
corporate expansion projects. Supplies expense increased $2.0 million related to increased supplies in
the distribution area and additional new employees. Repairs and maintenance costs increased by $1.7
million due to increased infrastructure and software maintenance costs. Property taxes increased by
$1.7 million due to a credit for an estimated rebate on a state tax program recorded in fiscal 2004.
•Direct selling, general and administrative expenses comprised $8.6 million of the total increase in selling,
general and administrative expense. Catalog production costs increased by $7.8 million, or 5.3%. Catalog
costs increased to $154.2 million, or 14.8% of Direct revenue in fiscal 2005, from $146.4 million, or 15.0%
of Direct revenue in fiscal 2004. This decrease in catalog costs as a percent of our Direct revenue was
primarily due to the strong Direct revenue increase and the focus on achieving the optimal circulation
program. Salary and related benefits increased by $5.0 million due in part to additional employees in
our promotional area and due to an increase in health insurance of $1.5 million. The increase in health
insurance was partly due to an increase in standard insurance rates charged to some of our smaller
subsidiaries as the number of their employees increased. Advertising increased by $2.7 million as a result
of Internet advertising fees. Our credit card discount fees increased by $1.9 million. As a percentage of
revenue these fees increased 0.1% as interchange rates have increased. Repairs and maintenance costs
increased by $0.6 million related to a software and equipment maintenance agreement for our customer
relations department. These increases in selling, general and administrative expenses were partially
offset by an increase in the marketing fee allocated to our Direct segment from our Financial Services
segment of $9.7 million, or 0.9% of Direct revenue.
•Retail selling, general and administrative expenses comprised $33.1 million of the total increase in
selling, general and administrative expense primarily due to having more stores and to increased new
store development and pre-opening costs. We break these costs into three categories. The first category is
pre-opening and new store development costs, which are all costs that we incur prior to a store’s opening.
The second category is the selling, general and administrative costs of new stores after they have opened,
but before they are included in the comparable store base. The final category is the selling, general and
administrative expenses that are incurred by the stores in our comparable store base. In fiscal 2005, our
new store development and pre-opening costs increased by $7.6 million related to our retail expansion
efforts. We also had four new stores that accounted for an increase of $35.8 million in selling, general
and administrative expenses. The increases in selling, general and administrative expenses related to
new stores were partially offset by a reduction of $5.9 million in the selling, general and administrative
expenses of stores in our comparable store base, compared to those same stores in the prior year, and by
an increase in the marketing fee allocated to our Retail segment from our Financial Services segment of
$4.3 million, or 0.7% of Retail revenue.