| • FORM 10-Q • SECTION 302 CERTIFICATION OF CEO • SECTION 302 CERTIFICATION OF CFO • SECTION 906 CERTIFICATIONS OF CEO & CFO • XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT • XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT • XBRL INSTANCE DOCUMENT • XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT • XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT • XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One)
OR
Commission File Number: 1-32227 CABELA'S INCORPORATED (Exact name of registrant as specified in its charter)
(308) 254-5505 (Registrant's telephone number, including area code) Not applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes x No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x Number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common stock, $0.01 par value: 70,356,375 shares as of April 23, 2012 1 CABELA'S INCORPORATED FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012 TABLE OF CONTENTS
2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements
Refer to notes to unaudited condensed consolidated financial statements. 3
Refer to notes to unaudited condensed consolidated financial statements. 4
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7 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) 1. MANAGEMENT REPRESENTATIONS Principles of Consolidation – The condensed consolidated financial statements included herein are unaudited and have been prepared by management of Cabela's Incorporated and its wholly-owned subsidiaries (“Cabela's,” “Company,” “we,” “our,” or “us”) pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The Company's condensed consolidated balance sheet as of December 31, 2011, was derived from the Company's audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and reflect all adjustments which are, in the opinion of management, necessary to summarize fairly our financial position and results of operations, comprehensive income, and cash flows for the periods presented. All of these adjustments are of a normal recurring nature. All intercompany accounts and transactions have been eliminated in consolidation. Management of Cabela's wholly-owned bank subsidiary, World's Foremost Bank ("WFB," "the Financial Services segment," or "Cabela's CLUB Visa program"), evaluated and concluded that WFB is the primary beneficiary of the Cabela's Master Credit Card Trust and related entities (collectively referred to as the “Trust”) and accordingly, consolidated the Trust effective January 3, 2010, and for all subsequent reporting periods through March 31, 2012. As the servicer and the holder of retained interests in the Trust, WFB has the powers to direct the activities that most significantly impact the Trust's economic performance and the right to receive significant benefits or obligations to absorb significant losses of the Trust. Because of the seasonal nature of the Company's operations, results of operations of any single reporting period should not be considered as indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements for the fiscal year ended December 31, 2011. Evaluation of Subsequent Events – Management of the Company evaluated subsequent events through the filing date of this Form 10-Q and determined that there were no events to recognize or disclose in the condensed consolidated financial statements. Cash and Cash Equivalents – Cash and cash equivalents of the Financial Services segment were $96,504, $117,035, and $151,404 at March 31, 2012, December 31, 2011, and April 2, 2011, respectively. Due to regulatory restrictions on WFB, the Company is restricted from using cash held by WFB for non-banking operations. Reporting Periods – Unless otherwise stated, the fiscal periods referred to in the notes to these condensed consolidated financial statements are the 13 weeks ended March 31, 2012 (“three months ended March 31, 2012”), the 13 weeks ended April 2, 2011 (“three months ended April 2, 2011”), and the 52 weeks ended December 31, 2011 ("year ended 2011"). WFB follows a calendar fiscal period and, accordingly, the respective three month periods ended on March 31, 2012 and 2011, and the fiscal year ended on December 31, 2011. 8 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) 2. CABELA'S MASTER CREDIT CARD TRUST The Financial Services segment utilizes the Trust for the purpose of routinely selling and securitizing credit card loans and issuing beneficial interest to investors. The Trust issues variable funding facilities and long-term notes each of which has an undivided interest in the assets of the Trust. The Financial Services segment must retain a minimum 20 day average of 5% of the loans in the securitization trust which ranks pari passu with the investors' interests in the securitized trusts. In addition, the Financial Services segment owns notes issued by the Trust from some of the securitizations, which in some cases may be subordinated to other notes issued. The consolidated assets of the Trust are subject to credit, payment, and interest rate risks on the transferred credit card loans. The secured borrowings contain the legal isolation requirements which would protect the assets pledged as collateral for the securitization investors as well as protecting Cabela's and WFB from any liability from default on the notes. To protect investors, the securitization structures include certain features that could result in earlier-than-expected repayment of the securities, which could cause the Financial Services segment to sustain a loss of one or more of its retained interests and could prompt the need to seek alternative sources of funding. The primary investor protection feature relates to the availability and adequacy of cash flows in the securitized pool of loans to meet contractual requirements, the insufficiency of which triggers early repayment of the securities. The Financial Services segment refers to this as the “early amortization” feature. Investors are allocated cash flows derived from activities related to the accounts comprising the securitized pool of loans, the amounts of which reflect finance charges collected, certain fee assessments collected, allocations of interchange, and recoveries on charged-off accounts. These cash flows are considered to be restricted under the governing documents to pay interest to investors, servicing fees, and to absorb the investor's share of charge-offs occurring within the securitized pool of loans. Any cash flows remaining in excess of these requirements are reported to investors as excess spread. An excess spread of less than zero percent for a contractually specified period, generally a three-month average, would trigger an early amortization event. Such an event could result in the Financial Services segment incurring losses related to its retained interests. In addition, if the retained interest in the loans of the Financial Services segment falls below the 5% minimum 20 day average and the Financial Services segment fails to add new accounts to the securitized pool of loans, an early amortization event would be triggered. The investors have no recourse to the other assets of WFB for failure of debtors to pay other than for breaches of certain customary representations, warranties, and covenants. These representations, warranties, covenants, and the related indemnities do not protect the Trust or third party investors against credit-related losses on the loans. Another feature, which is applicable to the notes issued from the Trust, is one in which excess cash flows generated by the transferred loans are held at the Trust for the benefit of the investors. This cash reserve account funding is triggered when the three-month average excess spread rate of the Trust decreases to below 4.50% or 5.50% (depending on the series) with increasing funding requirements as excess spread levels decline below preset levels or as contractually required by the governing documents. Similar to early amortization, this feature also is designed to protect the investors' interests from loss thus making the cash restricted. Upon scheduled maturity or early amortization of a securitization, the Financial Services segment is required to remit principal payments received on the securitized pool of loans to the Trust which are restricted for the repayment of the investors' principal note. Credit card loans performed within established guidelines and no events which could trigger an “early amortization” occurred during the three months ended March 31, 2012, the year ended December 31, 2011, and the three months ended April 2, 2011. 9 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) The following table presents the components of the consolidated assets and liabilities of the Trust at the periods ended:
3. CREDIT CARD LOANS AND ALLOWANCE FOR LOAN LOSSES The Financial Services segment grants individual credit card loans to its customers and is diversified in its lending with borrowers throughout the United States. Credit card loans are reported at their principal amounts outstanding less the allowance for loan losses. As part of collection efforts, a credit card loan may be closed and placed on non-accrual or restructured in a fixed payment plan prior to charge-off. The fixed payment plans consist of a lower interest rate, reduced minimum payment, and elimination of fees. Loans on fixed payment plans include loans in which the customer has engaged a consumer credit counseling agency to assist them in managing their debt. Customers who miss two consecutive payments once placed on a payment plan or non-accrual will resume accruing interest at the rate they had accrued at before they were placed on a plan. Interest and fees are accrued in accordance with the terms of the applicable cardholder agreements on credit card loans until the date of charge-off unless placed on non-accrual. Payments received on non-accrual loans are applied to principal. The Financial Services segment does not record any liabilities for off-balance sheet risk of unfunded commitments through the origination of unsecured credit card loans. The direct credit card account origination costs associated with costs of successful credit card originations incurred in transactions with independent third parties, and certain other costs incurred in connection with credit card approvals, are deferred credit card origination costs included in credit card loans and are amortized on a straight-line basis over 12 months. Other account solicitation costs, including printing, list processing, telemarketing, and postage are expensed as solicitation occurs. The following table reflects the composition of the credit card loans at the periods ended:
10 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) Allowance for Loan Losses: The allowance for loan losses represents management's estimate of probable losses inherent in the credit card loan portfolio. The allowance for loan losses is established through a charge to the provision for loan losses and is regularly evaluated by management for adequacy. Loans on a payment plan or non-accrual are segmented from the rest of the credit card loan portfolio into a restructured credit card loan segment before establishing an allowance for loan losses as these loans have a higher probability of loss. Management estimates losses inherent in the credit card loans segment and restructured credit card loans segment based on a model which tracks historical loss experience on delinquent accounts, bankruptcies, death, and charge-offs, net of estimated recoveries. The Financial Services segment uses a migration analysis and historical bankruptcy and death rates to estimate the likelihood that a credit card loan will progress through the various stages of delinquency and to charge-off. This analysis estimates the gross amount of principal that will be charged off over the next 12 months, net of recoveries. This estimate is used to derive an estimated allowance for loan losses. In addition to these methods of measurement, management also considers other factors such as general economic and business conditions affecting key lending areas, credit concentration, changes in origination and portfolio management, and credit quality trends. Since the evaluation of the inherent loss with respect to these factors is subject to a high degree of uncertainty, the measurement of the overall allowance is subject to estimation risk, and the amount of actual losses can vary significantly from the estimated amounts. Credit card loans that have been modified through a fixed payment plan or placed on non-accrual are considered impaired and are collectively evaluated for impairment. The Financial Services segment charges off credit card loans and restructured credit card loans on a daily basis after an account becomes at a minimum 130 days contractually delinquent. Accounts relating to cardholder bankruptcies, cardholder deaths, and fraudulent transactions are charged off earlier. The Financial Services segment recognizes charged-off cardholder fees and accrued interest receivable in interest and fee income that is included in Financial Services revenue. The following table reflects the activity in the allowance for loan losses by segment for the periods presented:
Credit Quality Indicators, Delinquent, and Non-Accrual Loans: The Financial Services segment segregates the loan portfolio into loans that have been restructured and other credit card loans in order to facilitate the estimation of the losses inherent in the portfolio as of the reporting date. The Financial Services segment uses the scores of Fair Isaac Corporation (“FICO”), a widely-used tool for assessing an individual's credit rating, as the primary credit quality indicator. The FICO score is an indicator of quality, with the risk of loss increasing as an individual's FICO score decreases. The credit card loan segment was disaggregated into the following classes as reflected in the tables below based upon the loan's current related FICO score. The Financial Services segment considers a loan to be delinquent if the minimum payment is not received by the payment due date. The aging method is based on the number of completed billing cycles during which a customer has failed to make a required payment. 11 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) The table below provides information on non-accrual, past due, and restructured credit card loans by class by using the respective quarter FICO score at the periods ended:
12 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) 4. SECURITIES Available-for-sale securities consisted of the following at the periods ended:
The carrying value and fair value of securities by contractual maturity at March 31, 2012, were as follows:
At March 31, 2012, and April 2, 2011, none of the securities with a fair value below carrying value were deemed to have other than a temporary impairment. Interest earned on the securities totaled $1,378 and $1,859 in the three months ended March 31, 2012, and April 2, 2011, respectively. There were no realized gains or losses on these securities in the three months ended March 31, 2012, or April 2, 2011. 13 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) 5. BORROWINGS OF FINANCIAL SERVICES SEGMENT The obligations of the Trust are secured borrowings backed by restricted credit card loans. The following table presents, as of the periods presented, a summary of the secured fixed and variable rate long-term obligations of the Trust, the expected maturity dates, and the respective weighted average interest rates.
14 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) The Trust also issues variable funding facilities which are considered secured borrowings backed by restricted credit card loans. The Trust renewed one variable funding facility in the amount of $225,000 on March 23, 2012. At March 31, 2012, the Trust had three variable funding facilities with $875,000 in available capacity and $190,000 outstanding. The three variable funding facilities are scheduled to mature in March 2014, September 2014, and March 2015, respectively. Each of these variable funding facilities includes an option to renew. Variable rate note interest is priced at a benchmark rate, London Interbank Offered Rate, or commercial paper rate, plus a spread, which ranges from 0.50% to 0.85%. The variable rate notes provide for a fee ranging from 0.25% to 0.40% on the unused portion of the facilities. During the three months ended March 31, 2012, and April 2, 2011, the daily average balance outstanding on these notes was $357,802 and $97,000, with a weighted average interest rate of 0.79% and 0.86%, respectively. On March 7, 2012, the Trust sold $500,000 of asset-backed notes, Series 2012-I. This securitization transaction included the issuance of $425,000 of Class A notes and three subordinated classes of notes in the aggregate principal amount of $75,000. The Financial Services segment retained each of the subordinated classes of notes which were eliminated in the preparation of our condensed consolidated financial statements. Each class of notes issued in these securitization transactions has an expected life of approximately five years and a contractual maturity of approximately eight years. This securitization transaction was used to refinance asset-backed notes issued by the Trust that matured during the three months ended March 31, 2012. The Financial Services segment has unsecured federal funds purchase agreements with two financial institutions. The maximum amount that can be borrowed is $85,000. There were no amounts outstanding at March 31, 2012, December 31, 2011, or April 2, 2011. During the three months ended March 31, 2012, and April 2, 2011, the daily average balance outstanding was $1,386 and $82 with a weighted average rate of 0.75% and 0.75%, respectively. 6. LONG-TERM DEBT AND CAPITAL LEASES Long-term debt, including revolving credit facilities and capital leases, consisted of the following at the periods ended:
The Company has a credit agreement providing for a $415,000 revolving credit facility that expires on November 2, 2016. The unsecured $415,000 revolving credit facility permits the issuance of letters of credit up to $100,000 and swing line loans up to $20,000. This credit facility may be increased to $500,000 subject to certain terms and conditions. 15 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) During the three months ended March 31, 2012, and April 2, 2011, the daily average principal balance outstanding on the lines of credit was $1,276 and $27,116, respectively, and the weighted average interest rate was 1.62% and 1.36%, respectively. Letters of credit and standby letters of credit totaling $15,944 and $15,576, respectively, were outstanding at March 31, 2012, and April 2, 2011. The daily average outstanding amount of total letters of credit during the three months ended March 31, 2012, and April 2, 2011, was $9,473 and $9,430, respectively. The Company also has a credit agreement for its operations in Canada providing for a $15,000 Canadian ("CAD") unsecured revolving credit facility through June 30, 2013. The credit facility permits the issuance of up to $5,000 CAD in letters of credit, which reduce the overall credit limit available under the credit facility. At March 31, 2012, the Company was in compliance with all financial covenants under the credit agreements and unsecured notes. At March 31, 2012, the Company was in compliance with the financial covenant requirements of its $415,000 credit agreement with a fixed charge coverage ratio of 8.03 to 1 (minimum requirement is 2.00 to 1), a leverage ratio of 1.15 to 1 (requirement is no more than 3.00 to 1), and a consolidated net worth that was $336,166 in excess of the minimum. We anticipate that we will continue to be in compliance with all financial covenants under our credit agreements and unsecured notes through at least the next 12 months. The Company also has financing agreements that allow certain boat and all-terrain vehicle merchandise vendors to give the Company extended payment terms. The vendors are responsible for all interest payments, with certain exceptions, for the financing period and the financing company holds a security interest in the specific inventory held by the Company. Cabela’s revolving credit facility limits this security interest to $100,000. The extended payment terms to the vendor do not exceed one year. The outstanding liability, included in accounts payable, was $590, $524, and $1,165 at March 31, 2012, December 31, 2011, and April 2, 2011, respectively. 7. INCOME TAXES A reconciliation of the statutory federal income tax rate to the effective income tax rate was as follows for the periods presented.
The balance of unrecognized tax benefits totaled $38,528, $37,608, and $45,007 at March 31, 2012, December 31, 2011, and April 2, 2011, respectively. The changes comparing the respective periods were due primarily to our assessments of uncertain tax positions related to prior period tax positions. In 2011, the Company paid $38,418 as a deposit for federal taxes related to prior period uncertain tax positions. The deposit is classified as a current asset netted within income taxes receivable and deferred income taxes in the condensed consolidated balance sheet. 16 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) 8. COMMITMENTS AND CONTINGENCIES The Company leases various buildings, computer and other equipment, and storage space under operating leases which expire on various dates through July 2037. Rent expense on these leases as well as other month to month rentals was $2,542 in the three months ended March 31, 2012, compared to $2,334 in the three months ended April 2, 2011. The following is a schedule of future minimum rental payments under operating leases at March 31, 2012:
The Company has lease agreements for certain retail store locations. Certain leases include tenant allowances that will be amortized over the life of the lease. In the three months ended March 31, 2012, and April 2, 2011, no tenant allowances were received and the Company does not expect to receive any tenant allowances under these leases in the remainder of 2012. Certain leases require the Company to pay contingent rental amounts based on a percentage of sales, in addition to real estates taxes, insurance, maintenance, and other operating expenses associated with the leased premises. These leases have terms which include renewal options ranging from 10 to 70 years. The Company has entered into real estate purchase, construction, and/or economic development agreements for various new retail store site locations. At March 31, 2012, the Company had total estimated cash commitments of approximately $141,800 outstanding for projected expenditures connected with the development, construction, and completion of new retail stores. This does not include any amounts for contractual obligations associated with retail store locations where the Company is in the process of certain negotiations. Under various grant programs, state or local governments provide funding for certain costs associated with developing and opening a new retail store. The Company generally receives grant funding in exchange for commitments, such as assurance of agreed employment and wage levels at the retail store or that the retail store will remain open, made by the Company to the state or local government providing the funding. The commitments typically phase out over approximately five to 10 years. If the Company failed to maintain the commitments during the applicable period, the funds received may have to be repaid or other adverse consequences may arise, which could affect the Company's cash flows and profitability. At March 31, 2012, December 31, 2011, and April 2, 2011, the total amount of grant funding subject to a specific contractual remedy was $9,868, $9,930, and $12,565, respectively. The Company operates an open account document instructions program, which provides for Cabela's-issued letters of credit. The Company had obligations to pay participating vendors $47,377, $40,074, and $66,860, at March 31, 2012, December 31, 2011, and April 2, 2011, respectively. 17 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) The Financial Services segment enters into financial instruments with off-balance sheet risk in the normal course of business through the origination of unsecured credit card loans. Unsecured credit card accounts are commitments to extend credit and totaled $20,514,000, $20,235,000, and $16,107,000 at March 31, 2012, December 31, 2011, and April 2, 2011, respectively. These commitments are in addition to any current outstanding balances of a cardholder. Unsecured credit card loans involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The principal amounts of these instruments reflect the Financial Services segment's maximum related exposure. The Financial Services segment has not experienced and does not anticipate that all customers will exercise the entire available line of credit at any given point in time. The Financial Services segment has the right to reduce or cancel the available lines of credit at any time. Litigation and Claims – The Company is party to various legal proceedings arising in the ordinary course of business. These actions include commercial, intellectual property, employment, regulatory, and product liability claims. Some of these actions involve complex factual and legal issues and are subject to uncertainties. The activities of WFB are subject to complex federal and state laws and regulations. WFB's regulators are authorized to impose penalties for violations of these laws and regulations and, in some cases, to order WFB to pay restitution. The Company cannot predict with assurance the outcome of the actions brought against it. Accordingly, adverse developments, settlements, or resolutions may occur and have a material effect on the Company's results of operations for the period in which such development, settlement, or resolution occurs. However, the Company does not believe that the outcome of any current legal proceeding would have a material effect on its results of operations, cash flows, or financial position taken as a whole. On January 6, 2011, the Company received a Commissioner's charge from the Chair of the U.S. Equal Employment Opportunity Commission ("EEOC") alleging that the Company has discriminated against non-Whites on the basis of their race and national origin in recruitment and hiring. The Company is disputing these allegations, and the EEOC currently is in the early stages of its investigation. At the present time, the Company is unable to form a judgment regarding a favorable or unfavorable outcome regarding this matter or the potential range of loss in the event of an unfavorable outcome. 9. STOCK BASED COMPENSATION PLANS AND EMPLOYEE BENEFIT PLANS Stock-Based Compensation. The Company recognized total share-based compensation expense of $3,255 and $3,092 in the three months ended March 31, 2012, and April 2, 2011, respectively. Compensation expense related to the Company's share-based payment awards is recognized in selling, distribution, and administrative expenses in the condensed consolidated statements of income. At March 31, 2012, the total unrecognized deferred share-based compensation balance for all equity awards issued, net of expected forfeitures, was $19,310, net of tax, which is expected to be amortized over a weighted average period of 3.0 years. Option Awards. During the three months ended March 31, 2012, there were 229,540 non-qualified stock options granted to employees under the Cabela's Incorporated 2004 Stock Plan ("2004 Plan") at an exercise price of $35.17 per share. These options have an eight-year term and vest over four years. In addition, during the three months ended March 31, 2012, the Company issued 64,000 premium-priced non-qualified stock options to its President and Chief Executive Officer under the 2004 Plan at an exercise price of $40.45. The premium-priced non-qualified stock options vest in three equal annual installments beginning on March 2, 2017, and expire on March 2, 2020. At March 31, 2012, there were 4,391,710 awards outstanding and 1,941,661 additional shares authorized and available for grant under the 2004 Plan. At March 31, 2012, the Company also had 63,173 shares (all incentive stock options) subject to options under the 1997 Stock Option Plan ("1997 Plan") with no shares available for grant. Options issued expire on the fifth or the tenth anniversary of the date of the grant under the 1997 Plan. 18 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) During the three months ended March 31, 2012, there were 1,698,110 options exercised. To the extent available, the Company issued its treasury shares for the exercise of stock options before issuing new shares. The aggregate intrinsic value of awards exercised was $36,349 and $19,334 during the three months ended March 31, 2012, and April 2, 2011, respectively. Based on the Company's closing stock price of $38.15 at March 31, 2012, the total number of in-the-money awards exercisable as of March 31, 2012, was 2,810,826. Nonvested Stock and Stock Unit Awards. During the three months ended March 31, 2012, the Company issued 398,690 units of nonvested stock under the 2004 Plan to employees at a fair value of $35.17 per unit. These nonvested stock units vest evenly over four years on the grant date anniversary based on the passage of time. On March 2, 2012, the Company also issued 64,000 units of performance-based restricted stock units under the 2004 Plan to certain executives at a fair value of $35.17 per unit. These performance-based restricted stock units will begin vesting in four equal installments on March 2, 2013, if the performance criteria is achieved. To the extent available, the Company issued its treasury shares for the vesting of these stock awards before issuing new shares. Restricted Stock Awards. On July 7, 2008, 111,324 shares of restricted stock were issued to two executives under the 2004 Plan. The stock price on the date of grant was $10.48 per share resulting in a fair value of $1,167 of deferred compensation, which is being amortized to compensation expense over a five-year period. Compensation expense related to these restricted stock awards totaled $58 in both the three months ended March 31, 2012, and April 2, 2011, and is included in total share-based compensation expense. The restricted stock vested one-third on July 7, 2011, and will vest one-third on July 7, 2012, and one-third on July 7, 2013. Inducement Awards. On March 13, 2009, the Company granted non-qualified stock options and nonvested stock units to Cabela's President and Chief Executive Officer pursuant to an employment inducement award exemption under the New York Stock Exchange. We granted 111,720 nonqualified stock options at an exercise price of $8.68 per share. These options are subject to the same terms and conditions of the 2004 Plan, have an eight-year term, and have fully vested as of March 13, 2012. We also issued 138,249 units of nonvested stock at a fair value of $10.25 per unit. These nonvested stock units were subject to the same terms and conditions of the 2004 Plan and were fully vested as of March 13, 2012. At March 31, 2012, there were no units of nonvested stock remaining to vest. Employee Stock Purchase Plan. The maximum number of shares of common stock available for issuance under the Company's Employee Stock Purchase Plan is 1,835,000. During three months ended March 31, 2012, there were 22,035 shares issued. At March 31, 2012, there were 722,801 shares authorized and available for issuance.
Retained Earnings - The most significant restrictions on the payment of dividends are contained within the covenants under the Company's revolving credit and unsecured senior notes purchase agreements. Also, Nebraska banking laws govern the amount of dividends that WFB can pay to Cabela's. At March 31, 2012, the Company had unrestricted retained earnings of $155,209 available for dividends. However, the Company has never declared or paid any cash dividends on its common stock, and does not anticipate paying any cash dividends in the foreseeable future. Treasury Stock - On August 23, 2011, the Company's Board of Directors authorized a share repurchase program that provides for share repurchases on an ongoing basis to offset dilution resulting from equity awards under the Company's current or future equity compensation plans. As a result, the Company announced on February 16, 2012, that it intends to repurchase up to 800,000 shares of its common stock in open market transactions through February 2013. These shares can be repurchased from time to time in open market transactions or privately negotiated transactions at the Company's discretion, subject to market conditions, customary blackout periods, and other factors. The Company did not repurchase any shares of its common stock during the three months ended March 31, 2012. The Company reissued 800,935 shares of its treasury stock during the three months ended March 31, 2012. At March 31, 2012, there were no shares of treasury stock outstanding. 19 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) 11. EARNINGS PER SHARE The following table reconciles the number of shares utilized in the earnings per share calculations for the periods presented.
12. SUPPLEMENTAL CASH FLOW INFORMATION The following table sets forth non-cash financing and investing activities and other cash flow information for the periods presented.
13. SEGMENT REPORTING The Company has three reportable segments: Retail, Direct, and Financial Services. The Retail segment sells products and services through the Company's retail stores. The Direct segment sells products through our e-commerce websites (Cabelas.com and Cabelas.ca) and direct mail catalogs. The Financial Services segment issues co-branded credit cards. For the Retail segment, operating costs consist primarily of labor, advertising, depreciation, and occupancy costs of retail stores. For the Direct segment, operating costs consist primarily of direct marketing costs (catalog and e-commerce advertising costs) and order processing costs. For the Financial Services segment, operating costs consist primarily of advertising and promotion, license fees, third party services for processing credit card transactions, salaries, and other general and administrative costs. 20 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) Revenues included in Corporate Overhead and Other are primarily made up of amounts received from outfitter services, real estate rental income, land sales, and fees earned through the Company's travel business and other complementary business services. Corporate Overhead and Other expenses include unallocated shared-service costs, operations of various ancillary subsidiaries such as real estate development and travel, and segment eliminations. Unallocated shared-service costs include receiving, distribution, and storage costs of inventory, merchandising, and quality assurance costs, as well as corporate headquarters occupancy costs. Segment assets are those directly used in or clearly allocable to an operating segment’s operations. For the Retail segment, assets include inventory in the retail stores, land, buildings, fixtures, and leasehold improvements. For the Direct segment, assets primarily include deferred catalog costs and fixed assets. Goodwill totaling $3,516, $3,450, and $3,642, at March 31, 2012, December 31, 2011, and April 2, 2011, respectively, was included in the Retail segment. The change in the carrying value of goodwill between periods is due to foreign currency adjustments. Assets for the Financial Services segment include cash, credit card loans, restricted cash, receivables, fixtures, and other assets. Cash and cash equivalents of the Financial Services segment were $96,504, $117,035, and $151,404 at March 31, 2012, December 31, 2011, and April 2, 2011, respectively. Assets for the Corporate Overhead and Other segment include corporate headquarters and facilities, merchandise distribution inventory, shared technology infrastructure and related information technology systems, corporate cash and cash equivalents, economic development bonds, prepaid expenses, deferred income taxes, and other corporate long-lived assets. Depreciation, amortization, and property and equipment expenditures are recognized in each respective segment. Intercompany revenue between segments was eliminated in consolidation. Prior to January 1, 2012, under an Intercompany Agreement, the Financial Services segment had incurred a marketing fee that was paid to the Retail and Direct segments. Effective January 1, 2012, this Intercompany Agreement was amended with the marketing fee component eliminated and replaced with a fixed license fee equal to 70 basis points on all originated charge volume of Cabela's CLUB Visa credit card portfolio. In addition, among other changes, the agreement requires the Financial Services segment to reimburse the Retail and Direct segments for certain operating costs. Reported operating income by segment, and the components of operating income for each segment, were not materially impacted for the three months ended March 31, 2012, compared to the three months ended April 2, 2011, by this new fixed license fee agreement. The Company does not expect that reported operating income by segment, or the components of operating income for each segment, will be materially impacted for full year 2012 compared to prior years by this new agreement. 21 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) Financial information by segment is presented in the following tables for the periods presented:
22 CABELA'S INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands Except Share and Per Share Amounts) (Unaudited) The components and amounts of total revenue for the Financial Services segment were as follows for the periods presented.
The following table sets forth the percentage of the Company's merchandise revenue contributed by major product categories for our Retail and Direct segments and in total for the three months ended March 31, 2012, and April 2, 2011.
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