**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form 10-Q**


(Mark
      One)




x
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





For
      the
      quarterly period ended October 1, 2005





or





o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





Commission
      File Number: **1-32227**





**CABELA’S
      INCORPORATED**


(Exact
      name of registrant as specified in its charter)


**Delaware**
            
            **20-0486586**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                Number)**One
                Cabela Drive, Sidney, Nebraska**
            
            **69160**(Address
                of principal executive offices)
            
            (Zip
                Code)





**(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 is an accelerated filer (as defined in
      Rule 12b-2 of the Exchange Act). Yes o No x





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





Indicate
      the
      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: 64,984,650 shares, including 8,073,205 shares of
      non-voting common stock, as of November 1, 2005.








CABELA’S
      INCORPORATED


FORM
      10-Q


QUARTERLY
      PERIOD ENDED OCTOBER 1, 2005


TABLE
      OF
      CONTENTS








PART
                I -FINANCIAL INFORMATION
            PageItem
                1. Financial Statements
            3Consolidated
                Balance Sheets
            3Consolidated
                Statements of Income
            4Consolidated
                Statements of Cash Flows
            5Notes
                to Consolidated Financial Statements
            6Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            20Item
                3. Quantitative and Qualitative Disclosures about Market
                Risk
            38Item
                4. Controls and Procedures
            40PART
                II - OTHER INFORMATION
            40Item
                1. Legal Proceedings
            40Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            40Item
                3. Defaults Upon Senior Securities
            40Item
                4. Submission of Matters to a Vote of Security Holders
            40Item
                5. Other Information
            40Item
                6. Exhibits
            41SIGNATURES
            42INDEX
                TO EXHIBITS
            43





2
 Table
          of Contents


**PART
      I - FINANCIAL INFORMATION**





**Item
      1.**  **Financial
      Statements.**





**CABELA'S
                INCORPORATED AND
                SUBSIDIARIES**
              **CONSOLIDATED
                BALANCE SHEETS**
              **(Dollar
                Amounts in Thousands Except Share and Per Share
                Amounts)**
              **(Unaudited)****ASSETS**
            
            **October
                1,**
              **2005**
            
            **January
                1,**
              **2005**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            57,173
            
            $
            248,184Accounts
                receivable, net of allowance for doubtful accounts of $1,118 at October
                1,
                2005, and $1,483at
                January 1, 2005
            
            
            28,395
            
            
            33,524Credit
                card loans receivable held for sale (Note 3)
            
            
            70,028
            
            
            64,019Credit
                card loans receivable, net of allowance of $120 and $65 at October
                1, 2005
                and January 1, 2005(Note
                3)
            
            
            9,753
            
            
            5,209Inventories
            
            
            474,049
            
            
            313,002Prepaid
                expenses and deferred catalog costs
            
            
            55,378
            
            
            31,294Deferred
                income taxes
            
            
            -
            
            
            2,240Other
                current assets
            
            
            39,469
            
            
            31,015Total
                current assets
            
            
            734,245
            
            
            728,487PROPERTY
                AND EQUIPMENT, NET
            
            
            425,467
            
            
            294,141OTHER
                ASSETS:Intangible
                assets, net
            
            
            3,829
            
            
            4,555Land
                held for sale or development
            
            
            8,583
            
            
            18,153Retained
                interests in securitized receivables (Note 3)
            
            
            32,906
            
            
            28,723Marketable
                securities
            
            
            143,812
            
            
            145,587Investment
                in equity method investee
            
            
            364
            
            
            830Other
            
            
            12,594
            
            
            7,755Total
                other assets
            
            
            202,088
            
            
            205,603Total
                assets
            
            $
            1,361,800
            
            $
            1,228,231**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**CURRENT
                LIABILITIES:Accounts
                payable
            
            $
            141,314
            
            $
            100,826Unpresented
                checks net of bank balance
            
            
            16,494
            
            
            34,653Accrued
                expenses and other liabilities
            
            
            46,030
            
            
            50,264Gift
                certificates and credit card reward points
            
            
            96,255
            
            
            97,242Accrued
                employee compensation and benefits
            
            
            42,477
            
            
            54,925Time
                deposits
            
            
            39,402
            
            
            48,953Current
                maturities of long-term debt
            
            
            28,931
            
            
            28,327Income
                taxes payable
            
            
            15,293
            
            
            38,551Deferred
                Income taxes
            
            
            5,219
            
            
            -Total
                current liabilities
            
            
            431,415
            
            
            453,741LONG-TERM
                LIABILITIES:Long-term
                debt, less current maturities
            
            
            91,469
            
            
            119,825Revolving
                credit borrowings
            
            
            156,439
            
            
            -Long-term
                time deposits
            
            
            40,405
            
            
            51,706Deferred
                compensation
            
            
            10,324
            
            
            8,614Deferred
                grant income
            
            
            13,241
            
            
            11,366Deferred
                income taxes
            
            
            22,169
            
            
            16,625Total
                long-term liabilities
            
            
            334,047
            
            
            208,136COMMITMENTS
                AND CONTINGENCIES (Note 10)STOCKHOLDERS’
                EQUITY:Common
                stock, $0.01 par value:Class
                A Voting, 245,000,000 shares authorized; 56,632,534 and 56,494,975
                shares
                issued
              and
                outstanding at October 1, 2005 and January 1, 2005,
                respectively
            
            
            567
            
            
            566Class
                B Non-voting, 245,000,000 shares authorized; 8,073,205 and 8,073,205
                shares issued
              and
                outstanding at October 1, 2005 and January 1, 2005,
                respectively
            
            
            80
            
            
            80Preferred
                stock, 10,000,000 shares authorized, no shares issued or
                outstanding
            
            
            -
            
            
            -Additional
                paid-in capital
            
            
            238,870
            
            
            236,198Retained
                earnings
            
            
            356,852
            
            
            326,794Accumulated
                other comprehensive income or (loss)
            
            
            (31
            )
            
            2,716Total
                stockholders’ equity
            
            
            596,338
            
            
            566,354Total
                liabilities and stockholders’ equity
            
            $
            1,361,800
            
            $
            1,228,231See
                notes to unaudited consolidated financial
                statements.







3
 Table
          of Contents







**CABELA'S
                INCORPORATED AND
                SUBSIDIARIES**
              **CONSOLIDATED
                STATEMENTS OF INCOME**
              **(Dollar
                Amounts in Thousands Except Per Share and Share
                Amounts)**
              **(Unaudited)****Three
                months ended**
            
            **Nine
                months ended****October
                1,**
              **2005**
            
            **October
                2,**
              **2004**
            
            **October
                1,**
              **2005**
            
            **October
                2,**
              **2004**REVENUES:Merchandise
                sales
            
            $
            393,209
            
            $
            361,439
            
            $
            1,012,186
            
            $
            920,124Financial
                services revenue
            
            
            32,532
            
            
            22,276
            
            
            85,866
            
            
            53,709Other
                revenue
            
            
            4,012
            
            
            95
            
            
            26,162
            
            
            3,033Total
                revenues
            
            
            429,753
            
            
            383,810
            
            
            1,124,214
            
            
            976,866COST
                OF REVENUE:Cost
                of merchandise sales
            
            
            253,623
            
            
            227,346
            
            
            655,840
            
            
            585,142Cost
                of other revenue
            
            
            1,371
            
            
            43
            
            
            21,227
            
            
            3,208Total
                cost of revenue (exclusive of depreciation and
                amortization)
            
            
            254,994
            
            
            227,389
            
            
            677,067
            
            
            588,350Gross
                profit
            
            
            174,759
            
            
            156,421
            
            
            447,147
            
            
            388,516SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES
            
            
            148,499
            
            
            130,926
            
            
            401,042
            
            
            347,086OPERATING
                INCOME
            
            
            26,260
            
            
            25,495
            
            
            46,105
            
            
            41,430OTHER
                INCOME (EXPENSE):Interest
                income
            
            
            94
            
            
            132
            
            
            544
            
            
            269Interest
                expense
            
            
            (3,432
            )
            
            (2,055
            )
            
            (7,937
            )
            
            (6,100
            )Other
                income, net
            
            
            2,350
            
            
            1,897
            
            
            7,962
            
            
            5,227(988
            )
            
            (26
            )
            
            569
            
            
            (604
            )INCOME
                BEFORE PROVISION FOR INCOME TAXES
            
            
            25,272
            
            
            25,469
            
            
            46,674
            
            
            40,826INCOME
                TAX EXPENSE
            
            
            8,997
            
            
            8,966
            
            
            16,616
            
            
            14,290NET
                INCOME
            
            $
            16,275
            
            $
            16,503
            
            $
            30,058
            
            $
            26,536EARNINGS
                PER SHARE:Basic
            
            $
            0.25
            
            $
            0.26
            
            $
            0.46
            
            $
            0.44Diluted
            
            $
            0.25
            
            $
            0.25
            
            $
            0.45
            
            $
            0.43WEIGHTED
                AVERAGE SHARES OUTSTANDING:Basic
            
            
            64,691,228
            
            
            64,252,912
            
            
            64,642,692
            
            
            60,241,891Diluted
            
            
            66,342,727
            
            
            66,409,915
            
            
            66,301,862
            
            
            62,190,157See
                notes to unaudited consolidated financial
                statements.







4
 Table
          of Contents




**CABELA’S
                INCORPORATED AND SUBSIDIARIES**
              **CONSOLIDATED
                STATEMENTS OF CASH
                FLOWS**
              **(Dollar
                Amounts in Thousands)**
              **(Unaudited)****Nine
                Months Ended****October
                1,**
            
            **October
                2,****2005**
            
            **2004**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            30,058
            
            $
            26,536Adjustments
                to reconcile net income to net cash flows from operating
                activities:Depreciation
            
            
            24,173
            
            
            21,009Amortization
            
            
            802
            
            
            988Stock
                based compensation
            
            
            705
            
            
            1,045Equity
                in undistributed net earnings of equity method investee
            
            
            (118
            )
            
            (232
            )Deferred
                income taxes
            
            
            14,544
            
            
            (923
            )Other
            
            
            1,292
            
            
            1,386Change
                in operating assets and liabilities:Accounts
                receivable
            
            
            3,598
            
            
            4,202Origination
                of credit card loans held for sale, net of collections
            
            
            (6,009
            )
            
            (61,522
            )Inventories
            
            
            (161,047
            )
            
            (101,602
            )Prepaid
                expenses
            
            
            (24,084
            )
            
            (19,570
            )Other
                current assets
            
            
            (7,661
            )
            
            2,330Land
                held for sale or development
            
            
            9,570
            
            
            (9,972
            )Accounts
                payable
            
            
            14,749
            
            
            25,780Accrued
                expenses and other liabilities
            
            
            (4,273
            )
            
            (6,360
            )Gift
                certificates and credit card reward points
            
            
            (987
            )
            
            (2,737
            )Accrued
                compensation and benefits
            
            
            (12,448
            )
            
            (18,945
            )Income
                taxes payable
            
            
            (23,106
            )
            
            (2,736
            )Deferred
                grant income
            
            
            (365
            )
            
            (36
            )Deferred
                compensation
            
            
            1,710
            
            
            1,640Net
                cash flows from operating activities
            
            
            (138,897
            )
            
            (139,719
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Capital
                expenditures
            
            
            (133,113
            )
            
            (27,432
            )Purchases
                of marketable securities
            
            
            (59,664
            )
            
            (52,082
            )Retirements
                of marketable securities
            
            
            60,593
            
            
            -Maturities
                of marketable securities
            
            
            2,104
            
            
            1,464Change
                in credit card loans receivable
            
            
            (4,753
            )
            
            -Change
                in retained interests
            
            
            (4,183
            )
            
            (2,196
            )Other
            
            
            (4,590
            )
            
            326Net
                cash flows from investing activities
            
            
            (143,606
            )
            
            (79,920
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Advances
                on line of credit
            
            
            398,514
            
            
            53,106Payments
                on line of credit
            
            
            (242,075
            )
            
            (53,106
            )Proceeds
                from issuance of long-term debt
            
            
            -
            
            
            98Payments
                on long-term debt
            
            
            (27,752
            )
            
            (2,431
            )Change
                in unpresented checks net of bank balance
            
            
            (18,159
            )
            
            (22,043
            )Change
                in time deposits, net
            
            
            (20,852
            )
            
            8,895Net
                decrease in employee savings plan
            
            
            -
            
            
            (1,083
            )Issuance
                of common stock for initial public offering, net of transaction costs
                of
                $3,277
            
            
            -
            
            
            114,286Issuance
                of common stock pursuant to employee benefit plans
            
            
            1,816
            
            
            9,590Repurchase
                of common stock
            
            
            -
            
            
            (1,273
            )Net
                cash flows from financing activities
            
            
            91,492
            
            
            106,039NET
                DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (191,011
            )
            
            (113,600
            )CASH
                AND CASH EQUIVALENTS, Beginning of Year
            
            
            248,184
            
            
            192,581CASH
                AND CASH EQUIVALENTS, End of Period
            
            $
            57,173
            
            $
            78,981See
                notes to unaudited consolidated financial
                statements.







5
 Table
          of Contents





**CABELA’S
      INCORPORATED AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Dollar
      Amounts in Thousands Except Share and Per Share Amounts)**


**(Unaudited)**








**1.**  **MANAGEMENT
      REPRESENTATIONS**





The
      consolidated financial statements included herein are unaudited and have been
      prepared by Cabela’s Incorporated and its wholly-owned subsidiaries (the
“Company”) 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 consolidated
      balance sheet of the Company as of January 1, 2005, was derived from the
      Company’s audited consolidated balance sheet as of that date. All other
      consolidated financial statements contained herein are unaudited and reflect
      all
      adjustments which are, in the opinion of management, necessary to summarize
      fairly the financial position of the Company and the results of the Company’s
      operations and cash flows for the periods presented. All of these adjustments
      are of a normal recurring nature. All significant intercompany balances and
      transactions have been eliminated in consolidation. 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 consolidated financial statements should be read in conjunction
      with
      the Company’s audited consolidated financial statements for the fiscal year
      ended 2004.





**2.**  **STOCK-BASED
      COMPENSATION**





The
      Company follows Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* and
      related interpretations. The Company has adopted the disclosure-only provisions
      of SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      as
      amended by SFAS No. 148, *Accounting
      for Stock-Based Compensation - Transition and Disclosure* .
      Under
      SFAS No. 123, the fair value of stock option awards to employees is calculated
      through the use of option pricing models, even though such models were developed
      to estimate the fair value of freely tradable, fully transferable options
      without vesting restrictions, which differ from the Company’s stock option
      awards. These models also require subjective assumptions, including future
      stock
      price volatility and expected time to exercise, which affect the calculated
      values. The Company’s calculations are based on a single option valuation
      approach and forfeitures are recognized as they occur. Stock-based compensation
      costs are reflected in net income where the options granted under those plans
      had an exercise price that is less than the fair value of the underlying common
      stock on the date of grant.





For
      purposes of pro forma disclosures, the estimated fair value of the options
      granted is amortized to expense over the options’ vesting period. On April 14,
      2005, 678,000 options were granted that vested immediately. The Company’s pro
      forma net income and earnings per share for the three months and nine months
      ended October 1, 2005 and October 2, 2004 were as follows:







6
 Table
          of Contents







**Three
                Months Ended**
            
            **Nine
                Months Ended****October
                1,**
              **2005**
            
            **October
                2,**
              **2004**
            
            **October
                1,**
              **2005**
            
            **October
                2,**
              **2004**Net
                income - as reported
            
            $
            16,275
            
            $
            16,503
            
            $
            30,058
            
            $
            26,536Add:
                Stock based employee compensation
              recognized,
                net of tax
            
            
            152
            
            
            406
            
            
            455
            
            
            677Deduct:
                Total stock-based employee compensation
              expense
                determined under fair value based method
              for
                all awards, net of tax
            
            
            (687
            )
            
            (1,688
            )
            
            (6,115
            )
            
            (3,008
            )Net
                income - pro forma
            
            $
            15,740
            
            $
            15,221
            
            $
            24,398
            
            $
            24,205Earnings
                per share:Basic
                - as reported
            
            $
            0.25
            
            $
            0.26
            
            $
            0.46
            
            $
            0.44Basic
                - proforma
            
            $
            0.24
            
            $
            0.24
            
            $
            0.38
            
            $
            0.40Diluted
                - as reported
            
            $
            0.25
            
            $
            0.25
            
            $
            0.45
            
            $
            0.43Diluted
                - proforma
            
            $
            0.23
            
            $
            0.22
            
            $
            0.36
            
            $
            0.38





The
      fair
      value of options granted on and subsequent to May 1, 2004 was estimated on
      the
      date of the grant using the Black-Scholes option pricing model with the
      following weighted-average assumptions: the expected stock price volatility
      was
      50%, the risk free interest at grant date ranged from 3.57% to 3.99% and the
      expected term was 4.5 years. Prior to the May 1, 2004 option grants, the Company
      used a binomial model and did not include a volatility factor.





**3.**  **SALE
      OF CREDIT CARD LOANS**





The
      Company’s wholly-owned bank subsidiary, World’s Foremost Bank (“WFB”), sells a
      substantial portion of its credit card loans. WFB has established a master
      trust
      (the “Trust”) for the purpose of routinely selling and securitizing credit card
      loans. WFB retains the servicing and certain other interests, including
      interest-only strips, cash reserve accounts and Class B certificates. During
      the
      three months and nine months ended October 1, 2005 and October 2, 2004, WFB
      recognized gains on sale of $5,223, $2,726, $12,934 and $5,629,  respectively,
      which are reflected as a component of credit card securitization
      income.





***Retained
      Interests -*** Retained
      interests in securitized receivables, which are carried at fair value, consisted
      of the following at October 1, 2005 and January 1, 2005:





**October
                1,**
              **2005**
            
            **January
                1,**
              **2005**Cash
                reserve account
            
            $
            15,406
            
            $
            16,158Interest-only
                strip
            
            
            14,230
            
            
            10,003Class
                B certificates
            
            
            3,270
            
            
            2,562$
            32,906
            
            $
            28,723







7
 Table
          of Contents


Credit
      card loans held for sale and credit card loans receivable consisted of the
      following at October 1, 2005 and January 1, 2005:





**October
                  1,**
                **2005**
              
              **January
                  1,**
                **2005**Composition
                  of credit card loans held for sale and credit card loans
                  receivable:Loans
                  serviced
              
              $
              1,153,036
              
              $
              1,083,120Loans
                  securitized
              
              
              (1,068,000
              )
              
              (1,010,000
              )Securitized
                  receivables with certificates owned by WFB
              
              
              (3,270
              )
              
              (2,562
              )81,766
              
              
              70,558Less
                  adjustment to market value and allowance for loan losses
              
              
              (1,985
              )
              
              (1,330
              )$
              79,781
              
              $
              69,228Delinquent
                  loans in the managed credit card loan portfolio
                at
                  October 1, 2005 and January 1, 2005:30-89
                  days
              
              $
              5,841
              
              $
              5,59190
                  days or more and still accruing
              
              $
              1,696
              
              $
              2,098






**Three
                  Months Ended**
              
              **Nine
                  Months Ended****October
                  1,**
                **2005**
              
              **October
                  2,**
                **2004**
              
              **October
                  1,**
                **2005**
              
              **October
                  2,**
                **2004**Total
                  net charge-offs on the managed credit card loan portfolio for the
                  three
                  months and nine months ended October 1, 2005 and October 2,
                  2004
              
              $
              5,040
              
              $
              4,994
              
              $
              16,198
              
              $
              14,579Quarterly
                  average credit card loans:
                Managed
                  credit card loans
              
              $
              1,128,336
              
              $
              908,623
              
              $
              1,058,134
              
              $
              863,354Securitized
                  credit card loans including seller's interest
              
              $
              1,107,110
              
              $
              897,767
              
              $
              1,039,060
              
              $
              853,275Total
                  net charge-offs as an annualized percentage of average managed
                  loans
              
              
              1.79
              %
              
              2.20
              %
              
              2.04
              %
              
              2.25
              %





**4.**  **DEBT**





On
      July
      15, 2005, the Company amended and restated its credit agreement with several
      banks. The amended and restated credit agreement provides for a $325 million
      unsecured revolving credit facility and expires on June 30, 2010. In addition,
      the credit agreement was amended to eliminate certain limitations with regard
      to
      the temporary pay down of revolving loans. Due to the elimination of these
      limitations, loans made pursuant to the credit agreement are now classified
      as
      long-term debt. During the term of the facility, the Company is required to
      pay
      a


8
 Table
          of Contents




facility
      fee, which ranges from 0.100% to 0.250%. The Company may elect to take advances
      at interest rates calculated at U.S. Bank National Association’s prime rate (or,
      if greater, the average rate on the federal funds rate in effect for the day
      plus one-half of one percent) or the Eurodollar rate of interest plus a margin,
      which adjusts, based upon certain financial ratios achieved by the Company
      and
      ranges from 0.650% to 1.350%. The credit agreement permits the issuance of
      up to
      $150 million in letters of credit and standby letters of credit, the nominal
      amount of which are applied against the overall credit limit available under
      the
      revolver. The credit facility may be increased to $450 million upon the request
      of the Company and the consent of the banks party to the credit agreement.
      There
      was $156,439 outstanding on the line of credit, and $60,193 outstanding on
      letters of credit and standby letters of credit, at October 1, 2005. The
      weighted average interest rate on the line of credit was 4.54% during the three
      months ended October 1, 2005. The agreement requires that the Company comply
      with several financial and other covenants, including requirements that it
      maintain the following financial ratios as set forth in the credit
      agreement:





·
            A
                fixed charge coverage ratio of no less than 1.50 to 1.00 as of the
                last
                day of any fiscal quarter. The fixed charge coverage ratio is defined
                as
                (a) EBITR minus the sum of any cash dividends, tax expenses paid
                in cash,
                in each case for the twelve month period ending on the last day of
                the
                fiscal quarter, and to the extent not included, or previously included,
                in
                the calculation of EBITR, any cash payments with respect to contingent
                obligations to (b) the sum of interest expense, all required principal
                payments with respect to coverage indebtedness and operating lease
                obligations, in each case for the twelve month period ending on the
                last
                day of the fiscal quarter. Our credit agreement defines EBITR as
                net
                income before deductions for income taxes, interest expense and operating
                lease obligations;·
            A
                cash flow leverage ratio of no more than 3.00 to 1.00 as of the last
                day
                of any fiscal quarter for the twelve month period ending on that
                day. The
                cash flow leverage ratio is defined as adjusted coverage indebtedness
                (average indebtedness of the Company on a consolidated basis for
                the
                preceding four fiscal quarters determined in accordance with GAAP
                excluding: (a) liabilities of WFB, (b) long term deferred compensation,
                (c) long term deferred taxes, (d) any current liabilities (other
                than
                coverage indebtedness), and (e) deferred grant income) to EBITDA. 
                Our credit agreement defines EBITDA as net income before deductions
                for
                income taxes, interest expense, depreciation and amortization, all
                as
                determined on a consolidated basis in accordance with GAAP;
                and·
            A
                minimum tangible net worth of no less than $350,000 plus 50% of positive
                consolidated net income on a cumulative 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 the Company fails to comply with these covenants,
      a default is triggered. In the event of default, all outstanding letters of
      credit and all principal and outstanding interest would immediately become
      due
      and payable.





The
      Company was in compliance with all covenants as of the end of the periods
      presented.





On
      October 7, 2004, WFB entered into an unsecured Federal Funds Sales Agreement
      with a financial institution. All federal funds transactions are on a daily
      origination and return basis. Daily interest charges are determined based on
      mutual agreement by the parties. The maximum amount of funds which can be
      borrowed is $25,000. The interest rate for the line of credit is based on the
      current federal funds rate. There were no amounts outstanding as of October
      1,
      2005.





On
      October 8, 2004, WFB entered into an unsecured Federal Funds Line of Credit
      agreement with a financial institution. All federal funds transactions are
      on a
      daily origination and return basis. The maximum amount of funds which can be
      borrowed is $40,000.  The
      interest rate for the line of credit is based on the current federal funds
      rate . There
      were no amounts outstanding as of October 1, 2005.





**5.**  **DERIVATIVES**





The
      Company is exposed to market risks including changes in currency exchange rates
      and interest rates. The Company may enter into various derivative transactions
      pursuant to established Company policies to manage volatility associated with
      these exposures.





***Foreign
      Currency Management*** - The
      Company may enter into forward exchange or option contracts for transactions
      denominated in a currency other than the applicable functional currency in
      order
      to reduce exposures related to changes in foreign currency exchange rates.
      This
      primarily relates to hedging against anticipated inventory
      purchases.


9
 Table
          of Contents


Hedges
      of
      anticipated inventory purchases are designated as cash flow hedges. The gains
      and losses associated with these hedges are deferred in accumulated other
      comprehensive income/(loss) until the anticipated transaction is consummated
      and
      are recognized in the income statement in the same period during which the
      hedged transactions affect earnings. Gains and losses on foreign currency
      derivatives for which the Company has not elected hedge accounting are recorded
      immediately in earnings.





For
      the
      three months and nine months ended October 1, 2005 and October 2, 2004, there
      was ineffectiveness associated with the Company’s foreign currency derivatives
      designated as cash flow hedges. The Company discontinued two contracts in the
      three months ended October 1, 2005, for which a loss of $56 was recorded in
      earnings. For the nine months ended October 1, 2005, there were three contracts
      discontinued for which a net loss of $55 was recorded in earnings.





Generally,
      the Company hedges a portion of its anticipated inventory purchases for periods
      up to twelve months. As of October 1, 2005, the Company has hedged certain
      portions of its anticipated inventory purchases through May 2006.





The
      fair
      value of foreign currency derivative assets or liabilities is recognized within
      other current assets or other current liabilities. As of October 1, 2005 and
      January 1, 2005, the fair value of foreign currency derivative assets was $0
      and
      $235, respectively, and the fair value of foreign currency derivative
      liabilities was $38 and $0, respectively.





As
      of
      October 1, 2005 and January 1, 2005, the net deferred loss recognized in
      accumulated other comprehensive income/(loss) was $(176) and $(205), net of
      tax,
      respectively. The Company anticipates a loss of $25, net of tax, will be
      transferred out of accumulated other comprehensive income and recognized within
      earnings over the next twelve months. Gains or (losses) of $61, $(3), $55 and
      $(180), net of tax, were transferred from accumulated other comprehensive income
      into cost of revenues for the three months and nine months ended October 1,
      2005
      and October 2, 2004, respectively.





***Interest
      Rate Management*** -
      On
      February 4, 2003, in connection with the Series 2003-1 term securitization,
      the
      securitization Trust entered into a $300,000 notional swap agreement in order
      to
      manage interest rate exposure. The exposure is related to changes in cash flows
      from funding credit card loans, which include a high percentage of accounts
      with
      floating rate obligations that do not incur monthly finance charges. The swap
      converts the interest rate on the investor bonds from a floating rate basis
      with
      a spread over a benchmark note to a fixed rate of 3.699%. Since the Trust is
      not
      consolidated, the fair value of the swap is not reflected on the financial
      statements. Additionally, the Company entered into a swap with similar terms
      with the counter-party whereby the notional amount is zero unless the notional
      amount of the Trust’s swap falls below $300,000. The Company has not elected to
      designate this derivative as a hedge and, therefore, the derivative is marked
      to
      market through the statement of income. As of October 1, 2005, market value
      was
      determined to be zero. WFB pays Cabela’s a fee for the credit enhancement
      provided by this swap, which was $153, $154, $455 and $457, for the three months
      and nine months ended October 1, 2005 and October 2, 2004, respectively.





**6.**  **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. Diluted
      earnings per share is computed by dividing net income by the sum of the weighted
      average number of shares outstanding plus all additional common shares that
      would have been outstanding if potentially dilutive common share equivalents
      had
      been issued. Options exercised prior to vesting have not been considered in
      the
      basic EPS calculation, but are considered in the computation of diluted EPS.
      There were 6,000 options outstanding that were considered anti-dilutive for
      the
      three months and nine months ended October 1, 2005. The following table
      reconciles the number of shares utilized in the earnings per share calculations:


10
 Table
          of Contents





**Three
                  Months Ended**
              
              **Nine
                  Months Ended****October
                  1,**
                **2005**
              
              **October
                  2,**
                **2004**
              
              **October
                  1,**
                **2005**
              
              **October
                  2,**
                **2004**Weighted
                  average number of shares:Common
                  shares - basic
              
              
              64,691,228
              
              
              64,252,912
              
              
              64,642,692
              
              
              60,241,891Effect
                  of dilutive securities:Stock
                  options
              
              
              1,651,499
              
              
              2,157,003
              
              
              1,659,170
              
              
              1,948,266Common
                  shares - diluted
              
              
              66,342,727
              
              
              66,409,915
              
              
              66,301,862
              
              
              62,190,157





**7.**  **STOCKHOLDERS’
      EQUITY**





In
      March
      2004, the Company adopted the Cabela’s Incorporated 2004 Stock Plan. The 2004
      Stock Plan provides for the grant of non-qualified stock options, incentive
      stock options, stock appreciation rights, restricted stock, restricted stock
      units and other stock-based awards to employees, directors and consultants.
      Subject to adjustment in the event of a stock split, consolidation or stock
      dividend, a maximum of 2,752,500 shares of common stock may be subject to awards
      under the 2004 Stock Plan. During any three-year period, no one person will
      be
      able to receive more than 734,000 options and/or stock appreciation rights.
      For
      awards subject to performance requirements no one person will be able to receive
      more than 734,000 shares during any performance period of 36 months, with
      proportionate adjustment for shorter or longer periods not to exceed five years.
      The options will have a term of no greater than ten years from the grant date
      and will become exercisable in accordance with the vesting schedule determined
      at the time the awards are granted. If incentive stock options are granted
      to a
“ten percent holder,” then the options will have a term of no greater than five
      years from the grant date. A “ten percent holder” is defined as a person who
      owns stock possessing more than 10% of the total combined voting power of all
      classes of capital stock of the Company. As of October 1, 2005, there were
      1,993,016 shares of common stock subject to outstanding options under this
      plan
      and 753,979 shares of common stock available for future awards.





In
      March
      2004, the Company adopted an Employee Stock Purchase Plan, under which shares
      of
      common stock are available to be purchased by the Company’s employees. The
      maximum number of shares of common stock available for issuance under the plan
      is 1,835,000, subject to adjustment in the event of a stock split,
      consolidation, or stock dividends of the Company’s common stock. Employees who
      own more than 5% of the combined voting power of all classes of the Company’s
      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. As of October 1, 2005, 98,164 shares had been
      issued under the Stock Purchase Plan and 1,736,836 were available for
      issuance.





The
      authorized capital stock of the Company consists of 245,000,000 shares of Class
      A voting common stock, par value $0.01 per share; 245,000,000 shares of Class
      B
      non-voting common stock, par value $0.01 per share; and 10,000,000 shares of
      preferred stock, par value $0.01 per share. As of October 1, 2005, there were
      56,871,080 shares of Class A voting common stock outstanding, including 238,546
      shares of unvested early exercised options, and 8,073,205 shares of Class B
      non-voting common stock outstanding.


11
 Table
          of Contents


**8. COMPREHENSIVE
      INCOME**




**Three
                Months Ended**
            
            **Nine
                Months Ended****October
                1,**
              **2005**
            
            **October
                2,**
              **2004**
            
            **October
                1,**
              **2005**
            
            **October
                2,**
              **2004**Net
                income
            
            $
            16,275
            
            $
            16,503
            
            $
            30,058
            
            $
            26,536Change
                in net unrealized holding gain or (loss) on marketable securities,
                net of
                tax of $(1,350) and $303 for the three month periods and $(1,409)
                and
                $1,274 for the nine month periods ended October 1, 2005 and October
                2,
                2004, respectively.
            
            
            (2,441
            )
            
            551
            
            
            (2,550
            )
            
            2,316Less:
                adjustment for net realized gain or (loss) on marketable securities,
                net
                of tax of $6 and $53 for the three month periods and $(12) and $91
                for the
                nine month periods ended October 1, 2005 and October 2, 2004,
                respectively.
            
            
            11
            
            
            97
            
            
            (21
            )
            
            165Change
                in net unrealized holding gain or (loss) on derivatives, net of tax
                of
                $(7) and $(12) for the three month periods and $(127) and $(80) for
                the
                nine month periods ended October 1, 2005 and October 2, 2004,
                respectively.
            
            
            (13
            )
            
            (22
            )
            
            (231
            )
            
            (144
            )Less:
                adjustment for reclassification of derivative included in net income,
                net
                of tax of $34 and $(1) for the three month periods and $31and $(98)
                for
                the nine month periods ended October 1, 2005 and October 2, 2004,
                respectively.
            
            
            61
            
            
            (3
            )
            
            55
            
            
            (180
            )Comprehensive
                income
            
            $
            13,893
            
            $
            17,126
            
            $
            27,311
            
            $
            28,693





**9.**  **RELATED
      PARTY TRANSACTIONS**





A
      prior
      member of the Company’s board of directors is an attorney with a firm that the
      Company utilizes in the course of its legal needs throughout the year. All
      activity is at arms-length rates and reviewed and approved by a Vice President
      prior to payment. Fees paid to this board member’s firm totaled $126 through
      March 2, 2004, when this director resigned from the board effective
      March 2, 2004.





A
      prior
      member of the Company’s board of directors, who is now an emeritus director, is
      an attorney with a firm that the Company utilizes in the course of its legal
      needs throughout the year. All activity is at arms-length rates and reviewed
      and
      approved by a Vice President prior to payment. Fees paid to this individual’s
      firm totaled $17, $0, $23 and $40 in the three months and nine months ended
      October 1, 2005 and October 2, 2004, respectively.





The
      Company buys certain gift inventory from an affiliate of the Company’s Board
      Chairman, which is sold through various distribution channels. All activity
      is
      at arms-length rates. Invoices received from the Board Chairman’s affiliate were
      $11 and $37 in the three months and nine months ended October 1, 2005,
      respectively.


12
 Table
          of Contents


The
      Company entered into an employee and office space lease agreement with the
      Company’s Board Chairman, dated January 1, 2004, pursuant to which he leased the
      services of certain Company employees and associated office space from the
      Company. This agreement terminated on December 31, 2004. The Company entered
      into a new employee lease agreement with an affiliate of the Company’s Board
      Chairman dated January 1, 2005, pursuant to which such affiliate leases the
      services of certain Company employees. In the three months and nine months
      ended
      October 1, 2005 and October 2, 2004, total reimbursements for these expenses
      were $73, $54, $226 and $165, respectively.





**10.**  **CONTINGENCIES**





***Litigation*** - The
      Company is engaged in various legal actions arising in the ordinary course
      of
      business. After taking into consideration legal counsel’s evaluation of such
      actions, management is of the opinion that the ultimate outcome of these actions
      will not have a material adverse effect on the Company’s financial position,
      results of operations or liquidity.





***Self-Insurance*** - The
      Company is self-insured for health claims up to $300 per individual. A liability
      of $3,963 and $4,168 has been estimated and recorded at October 1, 2005 and
      January 1, 2005, respectively, for those claims incurred prior to the end of
      the
      respective periods but not yet reported.





The
      Company is also self-insured for workers’ compensation claims up to $500 per
      individual. A liability of $2,264 and $1,913 has been estimated and recorded
      at
      October 1, 2005 and January 1, 2005, respectively.





The
      Company’s liabilities for health and workers’ compensation claims incurred but
      not reported are based upon internally developed calculations. These estimates
      are regularly evaluated for adequacy based on the most current information
      available, including historical claim payments, expected trends and industry
      factors.


13
 Table
          of Contents


**11.**  **SEGMENT
      REPORTING**





The
      Company has three reportable segments, Direct, Retail and Financial Services.
      The Direct segment sells products through direct-mail 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 corporate overhead and shared services. The Company’s executive
      management, being its chief operating decision makers, assesses the performance
      of each operating segment based on an operating income measure, which is net
      revenue less merchandise acquisition costs and certain directly identifiable
      and
      allocable operating costs as described below. For the Direct segment, these
      operating costs primarily consist of catalog costs, e-commerce advertising
      costs
      and order processing costs. For the Retail segment, these operating costs
      primarily consist of labor, advertising, depreciation and occupancy costs of
      our
      destination retail stores. For the Financial Services segment, operating costs
      primarily consist of advertising and promotion, third party services for
      processing credit card transactions, salaries and wages and other general and
      administrative costs. Corporate and other expenses consist of unallocated
      shared-service costs, eliminations, general and administrative expenses and
      various small companies such as travel and lodging which are not aggregated
      with
      the other segments. Unallocated shared-service costs include receiving,
      distribution and storage costs of our inventory, merchandising and quality
      assurance costs, as well as corporate headquarters occupancy costs. General
      and
      administrative expenses include costs associated with general corporate
      management and shared departmental services such as management information
      systems, finance, human resources and legal.





Segment
      assets are those directly used in or clearly allocable to an operating segment’s
      operations. For the Direct segment, these assets primarily include prepaid
      catalog costs, fixed assets and goodwill. Goodwill makes up $970 of assets
      in
      the Direct Segment. For the Retail segment, these assets primarily include
      inventory in the stores, land, buildings, fixtures and leasehold improvements.
      For the Financial Services segment, these assets primarily include cash, credit
      card loans, buildings and fixtures. Corporate and other assets include corporate
      headquarters, merchandise distribution inventory, and shared technology
      infrastructure as well as corporate cash and cash equivalents, prepaid expenses
      and $364 of investment in an equity method investee. Segment depreciation and
      amortization and capital expenditures are correspondingly allocated to each
      segment. Corporate and other depreciation and amortization and capital
      expenditures are 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 systems, deferred income taxes and other corporate long-lived
      assets. The accounting policies of the segments, where applicable, are the
      same
      as those described in the summary of significant accounting policies in our
      annual financial statements. Intercompany revenues between the segments have
      been eliminated in the consolidations.







14
 Table
          of Contents







**Three
                Months Ended October 1, 2005**
            
            **Direct**
            
            **Retail**
            
            **Financial**
              **Services**
            
            **Corporate**
              **Overhead**
              **and
                Other**
            
            **Total****(Dollars
                in thousands)**Revenue
                from external
            
            $
            219,656
            
            $
            172,583
            
            $
            32,685
            
            $
            4,829
            
            $
            429,753Revenue
                from internal
            
            
            585
            
            
            385
            
            
            (153
            )
            
            (817
            )
            
            -Total
                revenue
            
            
            220,241
            
            
            172,968
            
            
            32,532
            
            
            4,012
            
            
            429,753Operating
                income (loss)
            
            
            28,956
            
            
            17,062
            
            
            17,672
            
            
            (37,430
            )
            
            26,260As
                a % of revenue
            
            
            13.1
            %
            
            9.9
            %
            
            54.3
            %
            
            N/A
            
            
            6.1
            %Depreciation
                and amortization
            
            
            1,499
            
            
            3,238
            
            
            245
            
            
            3,807
            
            
            8,789Assets
            
            
            323,393
            
            
            459,362
            
            
            217,170
            
            
            361,875
            
            
            1,361,800







**Three
                Months Ended October 2, 2004**
            
            **Direct**
            
            **Retail**
            
            **Financial****Services**
            
            **Corporate**
              **Overhead**
              **and
                Other**
            
            **Total****(Dollars
                in thousands)**Revenue
                from external
            
            $
            220,600
            
            $
            140,054
            
            $
            22,430
            
            $
            726
            
            $
            383,810Revenue
                from internal
            
            
            375
            
            
            410
            
            
            (154
            )
            
            (631
            )
            
            -Total
                revenue
            
            
            220,975
            
            
            140,464
            
            
            22,276
            
            
            95
            
            
            383,810Operating
                income (loss)
            
            
            32,609
            
            
            22,256
            
            
            10,787
            
            
            (40,157
            )
            
            25,495As
                a % of revenue
            
            
            14.8
            %
            
            15.8
            %
            
            48.4
            %
            
            N/A
            
            
            6.6
            %Depreciation
                and amortization
            
            
            1,379
            
            
            2,495
            
            
            335
            
            
            3,329
            
            
            7,538Assets
            
            
            248,802
            
            
            275,253
            
            
            190,128
            
            
            393,195
            
            
            1,107,378







15
 Table
          of Contents







**Nine
                Months Ended October 1, 2005**
            
            **Direct**
            
            **Retail**
            
            **Financial**
              **Services**
            
            **Corporate**
              **Overhead**
              **and
                Other**
            
            **Total****(Dollars
                in thousands)**Revenue
                from external
            
            $
            631,606
            
            $
            378,188
            
            $
            86,321
            
            $
            28,099
            
            $
            1,124,214Revenue
                from internal
            
            
            1,248
            
            
            1,144
            
            
            (455
            )
            
            (1,937
            )
            
            -Total
                revenue
            
            
            632,854
            
            
            379,332
            
            
            85,866
            
            
            26,162
            
            
            1,124,214Operating
                income (loss)
            
            
            80,728
            
            
            27,208
            
            
            46,356
            
            
            (108,187
            )
            
            46,105As
                a % of revenue
            
            
            12.8
            %
            
            7.2
            %
            
            54.0
            %
            
            N/A
            
            
            4.1
            %Depreciation
                and amortization
            
            
            4,297
            
            
            8,564
            
            
            861
            
            
            11,252
            
            
            24,974Assets
            
            
            323,393
            
            
            459,362
            
            
            217,170
            
            
            361,875
            
            
            1,361,800







**Nine
                Months Ended October 2, 2004**
            
            **Direct**
            
            **Retail**
            
            **Financial****Services**
            
            **Corporate
                Overhead****and Other**
            
            **Total****(Dollars
                in thousands)**Revenue
                from external
            
            $
            591,650
            
            $
            326,286
            
            $
            54,166
            
            $
            4,764
            
            $
            976,866Revenue
                from internal
            
            
            1,018
            
            
            1,170
            
            
            (457
            )
            
            (1,731
            )
            
            -Total
                revenue
            
            
            592,668
            
            
            327,456
            
            
            53,709
            
            
            3,033
            
            
            976,866Operating
                income (loss)
            
            
            81,146
            
            
            41,174
            
            
            21,386
            
            
            (102,276
            )
            
            41,430As
                a % of revenue
            
            
            13.7
            %
            
            12.6
            %
            
            39.8
            %
            
            N/A
            
            
            4.2
            %Depreciation
                and amortization
            
            
            4,024
            
            
            7,570
            
            
            1,027
            
            
            9,376
            
            
            21,997Assets
            
            
            248,802
            
            
            275,253
            
            
            190,128
            
            
            393,195
            
            
            1,107,378







16
 Table
          of Contents


The
      components and amounts of net revenues for our Financial Services segment for
      the three and nine month periods ended October 1, 2005 and October 2, 2004
      were
      as follows:




**Three
                Months Ended**
            
            **Nine
                Months Ended****October
                1,**
              **2005**
            
            **October
                2,**
              **2004**
            
            **October
                1,**
              **2005**
            
            **October
                2,**
              **2004**Interest
                and fee income
            
            $
            4,639
            
            $
            3,778
            
            $
            13,189
            
            $
            8,789Interest
                expense
            
            
            (726
            )
            
            (735
            )
            
            (2,339
            )
            
            (2,261
            )Net
                interest income
            
            
            3,913
            
            
            3,043
            
            
            10,850
            
            
            6,528Non-interest
                income:Securitization
                income
            
            
            35,576
            
            
            25,277
            
            
            94,495
            
            
            65,648Other
                non-interest income
            
            
            8,069
            
            
            6,484
            
            
            22,640
            
            
            17,752Total
                non-interest income
            
            
            43,645
            
            
            31,761
            
            
            117,135
            
            
            83,400Less:
                Customer reward costs
            
            
            (15,026
            )
            
            (12,528
            )
            
            (42,119
            )
            
            (36,219
            )Financial
                services revenue
            
            $
            32,532
            
            $
            22,276
            
            $
            85,866
            
            $
            53,709





The
      Company’s products are principally marketed to individuals within the United
      States. Net sales realized from other geographic markets, primarily Canada,
      have
      collectively been less than 2% of consolidated net sales in each reported
      period. No single customer accounted for ten percent or more of consolidated
      net
      sales. No single product or service accounts for a significant percentage of
      the
      Company’s consolidated revenue.





**12.**  **SUPPLEMENTAL
      CASH FLOW INFORMATION**




The
        following table sets forth non-cash financing and investing activities and
        other
        cash flow information.




**Nine
                Months Ended****October
                1,**
              **2005**
            
            **October
                2,**
              **2004**Non-cash
                financing and investing activities:Unpaid
                purchases of property and equipment included in accounts payable
                (1)
            
            $
            25,739
            
            $
            -Capital
                lease obligation
            
            $
            -
            
            $
            8,728Other
                cash flow information:Interest
                paid, net of amounts capitalized
            
            $
            11,753
            
            $
            10,090Income
                taxes
            
            $
            25,211
            
            $
            17,890





(1)
            Amounts
                reported as unpaid purchases are recorded as purchases of property
                and
                equipment in the statement of cash flows in the period they are
                paid.





17
 Table
          of Contents


**13.**  **RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS**





At
      the
      March 17-18, 2004 EITF meeting the Task Force reached a consensus on Issue
      No.
      03-1, *The
      Meaning of Other-Than-Temporary Impairment and Its Application to Certain
      Investments.* Issue
      03-1 provides guidance for determining when an investment is
      other-than-temporarily impaired that is incremental to the consideration in
      this
      Issue- specifically, whether an investor has the ability and intent to hold
      an
      investment until recovery. In addition, Issue 03-1 contains disclosure
      requirements that provide useful information about impairments that have not
      been recognized as other-than-temporary for investments within the scope of
      this
      Issue. The guidance for evaluating whether an investment is
      other-than-temporarily impaired should be applied in other-than-temporary
      impairment evaluations made in reporting periods beginning after June 15, 2004.
      The disclosures are effective in annual financial statements for fiscal years
      ending after December 15, 2003, for investments accounted for under SFAS No.
      115 *Accounting
      for Certain Investments in Debt and Equity Securities* and SFAS
      No. 124 *Accounting
      for Certain Investments Held by Not-for-Profit Organizations* .
      For all
      other investments within the scope of this Issue, the disclosures are effective
      in annual financial statements for fiscal years ending after June 15, 2004.
      The
      additional disclosure for cost method investments are effective for fiscal
      years
      ending after June 15, 2004. Comparative information for periods prior to initial
      application is not required. The adoption of this Issue did not have a material
      impact on the Company’s financial position, results of operations or cash flows.
      In September 2004, the FASB issued Staff Position 03-1-1 which deferred the
      effective date for the measurement and recognition guidance contained in
      paragraphs 10-20 of Issue 03-1. This delay does not suspend the requirement
      to
      recognize other-than-temporary impairments as required by existing authoritative
      literature. The delay of the effective date for paragraphs 10-20 of Issue 03-1
      will be superseded concurrent with the final issuance of FSB EITF Issue 03-1a.





On
      December 16, 2004, the FASB issued Statement No. 153, *Exchanges
      of Non-monetary Assets* ,
      an
      amendment of APB Opinion No. 29. This statement was a result of an effort by
      the
      FASB and the IASB to improve financial reporting by eliminating certain narrow
      differences between their existing accounting standards. One such difference
      was
      the exception from fair value measurement in APB Opinion No. 29, Accounting
      for
      Non-monetary Transactions, for non-monetary exchanges of similar productive
      assets. Statement 153 replaces this exception with a general exception from
      fair
      value measurement for exchanges of non-monetary assets that do not have
      commercial substance. A non-monetary exchange has commercial substance if the
      future cash flows of the entity are expected to change significantly as a result
      of the exchange. This statement shall be applied prospectively and is effective
      for non-monetary asset exchanges occurring in fiscal periods beginning after
      June 15, 2005. Earlier application is permitted for non-monetary asset exchanges
      occurring in fiscal periods beginning after the date of issuance of this
      Statement. The adoption of FASB No. 153 does not have a significant impact
      on
      the Company’s financial position, results of operations or cash
      flows.





On
      December 16, 2004, the FASB issued Statement No. 123 (revised 2004), *Share-Based
      Payment* (“Statement No. 123(R)”). Statement No. 123(R) requires all entities to
      recognize compensation expense in an amount equal to the fair value of the
      share-based payments (e.g., stock options and restricted stock) granted to
      employees or by incurring liabilities to an employee or other supplier (a)
      in
      amounts based, at least in part, on the price of the entity’s shares or other
      equity instruments or (b) that require or may require settlement by issuing
      the
      entity’s equity shares or other equity instruments. This Statement is a revision
      of FASB Statement No. 123, Accounting for Stock-Based Compensation. This
      Statement supersedes APB Opinion No. 25, Accounting for Stock Issued to
      Employees, and its related implementation guidance. This Statement was to be
      effective for public entities that do not file as small business issuers as
      of
      the beginning of the first interim or annual reporting period that begins after
      June 15, 2005. On April 14, 2005, the SEC announced the amendment of Rule
      4-01(a) of Regulation S-X that amends the compliance dates for FASB’s Statement
      No. 123(R). The SEC’s new rule allows companies to implement Statement No.
      123(R) at the beginning of their next fiscal year, instead of the next reporting
      period, that begins after June 15, 2005. The Company will evaluate the impact
      of
      this timing change on its financial statements for 2006.





On
      February 7, 2005, the SEC staff issued a letter clarifying the SEC’s position on
      application of accounting principles generally accepted in the United States
      for
      certain lease accounting rules. The letter addressed the SEC’s view of proper
      accounting for the amortization of leasehold improvements, rent holidays and
      escalations, and landlord or tenant incentives. The Company has evaluated the
      SEC’s clarification of lease accounting and the Company believes that it has
      accounted for its limited number of lease agreements
      appropriately.


18
 Table
          of Contents


On
      March
      29, 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”). SAB 107
      provides interpretations expressing the views of the SEC staff regarding the
      interaction between Statement No. 123(R) and certain SEC rules and regulations,
      and provides the staff’s views regarding the valuation of share-based payment
      arrangements for public companies. SAB 107 does not modify any of the
      conclusions or requirements of Statement No. 123(R).





On
      May
      30, 2005, the FASB issued Statement 154, *Change
      in Accounting Principle* (“Statement 154”), which changes the requirements for the accounting and
      reporting of a change in accounting principle. Statement 154 applies to all
      voluntary changes in accounting principle as well as to changes required by
      an
      accounting pronouncement that does not include specific transition provisions.
      Statement 154 eliminates the requirement in APB Opinion No. 20, *Accounting
      Changes* ,
      to
      include the cumulative effect of changes in accounting principle in the income
      statement in the period of changes. Instead, to enhance the comparability of
      prior period financial statements, Statement 154 requires that changes in
      accounting principle to be retrospectively applied. Under retrospective
      application, the new accounting principle is applied as of the beginning of
      the
      first period presented as if that principle had always been used. The cumulative
      effect of the change is reflected in the carrying value of assets and
      liabilities as of the first period presented and the offsetting adjustments
      are
      recorded to opening retained earnings. Each period presented is adjusted to
      reflect the period-specific effects of applying the changes. Statement 154
      is
      effective for accounting changes and corrections of errors made in fiscal years
      beginning after December 15, 2005. Early adoption is permitted for accounting
      changes and corrections of errors made in fiscal years beginning after the
      date
      the Statement was issued. The Statement does not change the transition
      provisions of any existing accounting pronouncements, including those that
      are
      in a transition phase as of the effective date of the Statement.





On
      July
      14, 2005, the FASB published an exposure draft entitled *Accounting
      for Uncertain Tax Positions -* an
      interpretation of FASB Statement No. 109 (“the proposed interpretation”). The
      proposed interpretation is intended to reduce the significant diversity in
      practice associated with recognition and measurement of income taxes by
      establishing consistent criteria for evaluating uncertain tax positions. The
      proposed interpretation establishes a probable recognition threshold. To
      recognize a benefit from a tax position, a company must conclude that the
      position is probable of being sustained upon audit based solely on the technical
      merits of the position. Once the probable recognition threshold is met, the
      best
      estimate of the amount that would be sustained on audit should be recognized.
      In
      the period in which it becomes more likely than not that a tax position would
      no
      longer be sustained upon an audit by a taxing authority, the benefit should
      be
      derecognized by recording an income tax liability or reducing a deferred tax
      asset. A liability arising from the difference between the position taken in
      the
      tax return and the amount booked in the financial statements pursuant to the
      proposed interpretation should be classified as a current liability if expected
      to be paid within one year. However, if the liability arises from a taxable
      temporary difference, it would be classified as a deferred tax liability.
      Companies should follow the disclosure requirements of Statement 5 for both
      loss
      and gain contingencies related to uncertain tax positions. The proposed
      interpretation would be effective as of the end of the first fiscal year ending
      after December 15, 2005. The transition adjustment resulting from the
      application of this interpretation would be recorded as a cumulative-effect
      change in the income statement as of the end of the period of
      adoption.





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”, “Accounting for Servicing of Financial Assets, an amendment of FASB
      Statement No. 140” and “Accounting for Certain Hybrid Financial Instruments, an
      amendment of FASB Statements No. 133 and 144”. The Company is currently
      evaluating the impact of the proposed changes.


19
 Table
          of Contents


**Item
      2.** **Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.**





This
      report on Form 10-Q contains “forward-looking statements” that are based on our
      beliefs, assumptions and expectations of future events, taking into account
      the
      information currently available to us. All statements other than statements
      of
      current or historical fact contained in this report are forward-looking
      statements within the meaning of the Private Securities Litigation Reform Act.
      The words “believe,” “may,” “should,” “anticipate,” “estimate,” “expect,”
“intend,” “objective,” “seek,” “plan,” “will,” and similar statements are
      intended to identify forward-looking statements. Forward-looking statements
      involve risks and uncertainties that may cause our actual results, performance
      or financial condition to differ materially from the expectations of future
      results, performance or financial condition we express or imply in any
      forward-looking statements. These risks and uncertainties include, but are
      not
      limited to: the ability to negotiate favorable purchase, lease and/or economic
      development arrangements, expansion into new markets; market saturation due
      to
      new destination retail store openings; the rate of growth of general and
      administrative expenses associated with building a strengthened corporate
      infrastructure to support our growth initiatives; increasing competition in
      the
      outdoor segment of the sporting goods industry; the cost of our products; supply
      and delivery shortages or interruptions; adverse weather conditions, unseasonal
      weather conditions which impact the demand for our products; fluctuations in
      operating results; adverse economic conditions causing a decline in
      discretionary consumer spending; the cost of fuel increasing or remaining at
      current levels; delays in road construction and/or traffic planning around
      our
      new destination retail stores; road construction around our existing destination
      retail stores; labor shortages or increased labor costs; changes in consumer
      preferences and demographic trends; increased government regulation; inadequate
      protection of our intellectual property; decreased interchange fees received
      by
      our financial services business as a result of the current interchange
      litigation against VISA; other factors that we may not have currently identified
      or quantified; and other risks, relevant factors and uncertainties identified
      in
      our filings with the SEC (including the information set forth in the “Factors
      Affecting Future Results” section of our Form 10-K for the fiscal year ended
      January 1, 2005 (our “2004 Form 10-K”)), which filings are available at 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. Our forward-looking statements speak only as of the date of this
      report. Other than as required by law, we undertake no obligation to update
      or
      revise forward-looking statements, whether as a result of new information,
      future events or otherwise.





The
      following discussion and analysis of financial condition, results of operations,
      liquidity and capital resources should be read in conjunction with our audited
      consolidated financial statements and notes thereto included in our 2004 Form
      10-K, as filed with the SEC, and our unaudited interim consolidated financial
      statements and the notes thereto appearing elsewhere in this Form
      10-Q.





**Overview**





We
      are
      the nation's largest direct marketer, and a leading specialty retailer, of
      hunting, fishing, camping and related outdoor merchandise. Since our founding
      in
      1961, Cabela’s â has
      grown to become one of the most well-known outdoor recreation brands in the
      United States. Through our well-established direct business and our growing
      number of destination retail stores, we believe we offer the widest and most
      distinctive selection of high quality outdoor products at competitive prices
      while providing superior customer service. Our multi-channel retail model -
      catalog, Internet and destination retail stores - strategically positions us
      to
      meet our customers’ ever-growing needs. Our extensive product offering consists
      of approximately 245,000 stock keeping units, or SKUs, and 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 co-branded credit card provides revenue from credit and
      interchange fees and offers us the opportunity to enhance our merchandising
      business revenue by reinforcing our brand and increasing customer loyalty.
      To
      best reflect our operations, we organize the financial reporting of our business
      into the following three segments:





·
            Direct,
                which consists of our catalogs and website;·
            Retail,
                which consists of our destination retail stores; and·
            Financial
                Services, which consists of our credit card business, which is managed
                and
                administered by our wholly-owned bank subsidiary, World's Foremost
                Bank
                (“WFB”).





20
 Table
          of Contents


In
      the
      discussion below, where we refer to our "merchandising business" we are
      referring to our Direct and Retail segments, collectively. Where we refer to
      the
      "bank," we are referring to our Financial Services segment.





We
      also
      operate various other small businesses, which are not included within these
      segments but which we believe are an extension of our overall business strategy
      and enable us to offer additional products and services to our customers that
      further develop and leverage our brand and expertise. These businesses are
      aggregated under the category "Other" in this discussion and include a travel
      agency specializing in big-game hunting, wing shooting, fishing and trekking
      trips and a developer of real estate adjacent to some of our destination retail
      stores. Corporate and other expenses, consisting of unallocated shared-service
      costs and general and administrative expenses, also are included in the "Other"
      category. Unallocated shared-service costs include receiving, distribution
      and
      storage costs, merchandising, quality assurance costs and corporate occupancy
      costs. General and administrative expenses include costs associated with general
      corporate management and shared departmental services such as management
      information systems, finance, human resources and legal.





**Revenue**





Revenue
      consists of sales of our products and services. Direct revenue includes sales
      from orders placed over the phone, by mail and through our website and includes
      customer shipping charges. Retail revenue includes all sales made at our
      destination retail stores and is driven by sales at new stores and changes
      in
      comparable store sales. A store is included in our comparable store sales base
      on the first day of the month following the fifteen month anniversary of its
      opening or expansion by greater than 25% of total square footage. Financial
      Services revenue includes securitization income, interest income and interchange
      and other fees net of reward program costs, interest expense and credit losses
      from our credit card operations.





**Cost
      of Revenue**





Cost
      of
      revenue for our merchandising business includes cost of merchandise, shipping
      costs, inventory shrink and other miscellaneous costs. However, it does not
      include occupancy costs, depreciation, direct labor or warehousing costs, which
      are included in selling, general and administrative expenses. Our Financial
      Services segment does not have costs classified as cost of revenue.





**Gross
      Profit**





We
      define
      gross profit as the difference between revenue and cost of revenue. As we
      discuss below, we believe that operating income presents a more meaningful
      measure of our consolidated operating performance than gross profit because
      of
      the following factors:





·
            our
                Financial Services segment does not have costs classified as cost
                of
                revenue which results in a disproportionate gross profit contribution
                for
                this segment;·
            we
                do not include occupancy costs, depreciation, direct labor or warehousing
                costs in cost of revenue, which affects comparability to other retailers
                who may account differently for some or all of these costs;
                and·
            we
                have historically attempted to price our customer shipping charges
                to
                generally match our shipping expenses, which reduces gross profit
                as a
                percentage of Direct revenue.





**Selling,
      General and Administrative Expenses**





Selling,
      general and administrative expenses include directly identifiable operating
      costs and other expenses, as well as depreciation and amortization. For our
      Direct segment, these operating costs primarily consist of catalog development,
      production and circulation costs, Internet advertising costs and order
      processing costs. For our Retail segment, these costs primarily consist of
      payroll, store occupancy, utilities and advertising costs. For our Financial
      Services segment, these costs primarily consist of advertising costs, third
      party data processing costs associated with servicing accounts, payroll and
      other administrative fees. Our Other expenses include shared-service costs,
      general


21
 Table
          of Contents


and
      administrative expenses and the costs of operating our various other small
      businesses described above which are not included in any of our segments.
      Shared-service costs include costs for services shared by two or more of our
      business segments (principally our Direct and Retail segments) and include
      receiving, distribution and storage costs, merchandising, quality assurance
      costs and corporate occupancy costs. General and administrative expenses include
      costs associated with general corporate management and shared departmental
      services such as management information systems, finance, human resources and
      legal.





**Operating
      Income**





Operating
      income is defined as revenue less cost of revenue and selling, general and
      administrative expenses. Given the variety of segments we report and the
      different cost classifications inherent in each of their respective businesses,
      it is difficult to compare our consolidated results on the basis of gross
      profit. Consequently, we believe that operating income is the best metric to
      compare the performance and profitability of our segments to each other and
      to
      judge our consolidated performance because it includes all applicable revenue
      and cost items.





**Retail
      Expansion Opportunities**





Significant
      amounts of cash will be needed in order to open new destination retail stores
      and implement our retail growth strategy. Depending upon the location and a
      variety of other factors, including store size and the amount of public
      improvements necessary, and based upon our prior experience, opening a single
      large-format destination retail store will require expenditures in the range
      of
      $40 to $80 million. This includes the cost of real estate, site work, public
      improvements such as utilities and roads, buildings, equipment, fixtures
      (including taxidermy) and inventory.





Historically,
      we have been able to negotiate economic development arrangements relating to
      the
      construction of a number of our new destination retail stores. We attempt to
      design our destination retail stores to provide exciting tourist and
      entertainment shopping experiences for the entire family. We believe these
      factors increase the revenue for the state and local municipality where the
      destination retail store is located, making us a compelling partner for
      community development and expansion. Where appropriate, we intend to continue
      to
      utilize economic development arrangements with state and local governments
      to
      offset some of the construction costs and improve the return on investment
      on
      new stores. We also will seek to improve our Retail segment’s operating
      performance through investments in new systems, such as our recent investments
      in space planning software, which we believe will help us analyze and expand
      our
      product margins, retail associate scheduling analysis software, which we believe
      will help increase our labor efficiencies as we expand into new markets, and
      an
      interactive on-line training platform for retail associates, which we believe
      will improve our sales associates’ selling skills and knowledge. We have
      implemented and utilized our space planning software for our recent new store
      openings and plan to implement it in our existing stores during
      2006.





At
      the
      end of the third fiscal quarter we operated thirteen destination retail stores.
      On October 14, 2005, we opened our fourteenth destination retail store in
      Rogers, Minnesota. We also opened destination retail stores in Fort Worth and
      Buda, Texas in the second fiscal quarter of 2005, and Lehi, Utah in the third
      fiscal quarter of 2005. These four large-format destination retail stores have
      added 781,000 square feet, or 59%, to our retail square footage in 2005.





**Critical
      Accounting Policies**





Our
      consolidated financial statements have been prepared in accordance with
      accounting principles generally accepted in the United States of America. The
      preparation of these financial statements requires us to make estimates and
      judgments that affect the reported amounts of assets, liabilities, revenues
      and
      expenses and related disclosures of contingent assets and liabilities. The
      estimates and assumptions are evaluated on a periodic basis and are based on
      historical experience and various other factors that are believed to be
      reasonable under the circumstances. Actual results may differ significantly
      from
      these estimates.





22
 Table
          of Contents


Our
      critical accounting policies and use of estimates are discussed in our 2004
      Form
      10-K, as filed with the SEC, and should be read in conjunction with the annual
      financial statements and notes included in our 2004 Form 10-K.





**Results
      of Operations**




Our
      third
      fiscal quarter ends on the Saturday closest to September 30. The three months
      ended October 1, 2005 and October 2, 2004 each consisted of 13 weeks, and the
      nine months then ended each had 39 weeks. Our operating results for the three
      months and nine months ended October 1, 2005 and October 2, 2004, expressed
      as a
      percentage of revenue, were as follows:





**Three
                Months Ended**
            
            **Nine
                Months Ended****October
                1,**
              **2005**
            
            **October
                2,**
              **2004**
            
            **October
                1,**
              **2005**
            
            **October
                2,**
              **2004**Revenue
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of revenue
            
            
            59.3
            %
            
            59.2
            %
            
            60.2
            %
            
            60.2
            %Gross
                profit
            
            
            40.7
            %
            
            40.8
            %
            
            39.8
            %
            
            39.8
            %Selling,
                general and administrative expenses
            
            
            34.6
            %
            
            34.2
            %
            
            35.7
            %
            
            35.6
            %Operating
                income
            
            
            6.1
            %
            
            6.6
            %
            
            4.1
            %
            
            4.2
            %Interest
                income
            
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %Interest
                expense
            
            
            (0.8
            )%
            
            (0.5
            )%
            
            (0.7
            )%
            
            (0.6
            )%Other
                income (net)
            
            
            0.5
            %
            
            0.5
            %
            
            0.7
            %
            
            0.6
            %Total
                other income/(expense)
            
            
            (0.3
            )%
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %Income
                before provision for income taxes
            
            
            5.8
            %
            
            6.6
            %
            
            4.1
            %
            
            4.2
            %Income
                tax expense
            
            
            2.0
            %
            
            2.3
            %
            
            1.4
            %
            
            1.5
            %Net
                income
            
            
            3.8
            %
            
            4.3
            %
            
            2.7
            %
            
            2.7
            %





**Segment
      Information**





The
      following table sets forth the revenue and operating income of each of our
      segments for the three months and nine months ended October 1, 2005 and October
      2, 2004.


23
 Table
          of Contents





**Three
                Months Ended**
            
            **Nine
                Months Ended****October
                1,**
              **2005**
            
            **October
                2,**
              **2004**
            
            **October
                1,**
              **2005**
            
            **October
                2,**
              **2004****(Dollars
                in thousands)**Direct
                revenue
            
            $
            220,241
            
            $
            220,975
            
            $
            632,854
            
            $
            592,668Retail
                revenue
            
            
            172,968
            
            
            140,464
            
            
            379,332
            
            
            327,456Financial
                services revenue
            
            
            32,532
            
            
            22,276
            
            
            85,866
            
            
            53,709Other
                revenue
            
            
            4,012
            
            
            95
            
            
            26,162
            
            
            3,033Total
                revenue
            
            $
            429,753
            
            $
            383,810
            
            $
            1,124,214
            
            $
            976,866Direct
                operating income
            
            $
            28,956
            
            $
            32,609
            
            $
            80,728
            
            $
            81,146Retail
                operating income
            
            
            17,062
            
            
            22,256
            
            
            27,208
            
            
            41,174Financial
                services operating income
            
            
            17,672
            
            
            10,787
            
            
            46,356
            
            
            21,386Other
                operating income (loss)
            
            
            (37,430
            )
            
            (40,157
            )
            
            (108,187
            )
            
            (102,276
            )Total
                operating income
            
            $
            26,260
            
            $
            25,495
            
            $
            46,105
            
            $
            41,430*As
                a Percentage of Total Revenue:*Direct
                revenue
            
            
            51.2
            %
            
            57.6
            %
            
            56.3
            %
            
            60.7
            %Retail
                revenue
            
            
            40.2
            %
            
            36.6
            %
            
            33.8
            %
            
            33.5
            %Financial
                services revenue
            
            
            7.6
            %
            
            5.8
            %
            
            7.6
            %
            
            5.5
            %Other
                revenue
            
            
            1.0
            %
            
            0.0
            %
            
            2.3
            %
            
            0.3
            %Total
                revenue
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %*As
                a Percentage of Segment Revenue:*Direct
                operating income
            
            
            13.1
            %
            
            14.8
            %
            
            12.8
            %
            
            13.7
            %Retail
                operating income
            
            
            9.9
            %
            
            15.8
            %
            
            7.2
            %
            
            12.6
            %Financial
                services operating income
            
            
            54.3
            %
            
            48.4
            %
            
            54.0
            %
            
            39.8
            %Total
                operating income (1)
            
            
            6.1
            %
            
            6.6
            %
            
            4.1
            %
            
            4.2
            %





(1)
            The
                percentage set forth is a percentage of consolidated revenue rather
                than
                revenue by segment as it is based upon our consolidated operating
                income.
                A separate line item is not included for Other operating income as
                this
                amount is reflected in the total operating income amount, which reflects
                our consolidated operating results.





For
      credit card loans securitized and sold, the loans are removed from our balance
      sheet and the net earnings on these securitized assets after paying outside
      investors are reflected as a component of our securitization income on a GAAP
      basis. The following table summarizes the results of our Financial Services
      segment for the three months and nine months ended October 1, 2005 and October
      2, 2004 on a GAAP basis with interest and fee income, interest expense and
      provision for loan losses for the credit card loans receivable we own reported
      in net interest income. Non-interest income on a GAAP basis includes servicing
      income, gains on sales of loans and income recognized on retained interests
      for
      the entire securitized portfolio, as well as, interchange income on the entire
      managed portfolio.


24
 Table
          of Contents




**Financial
                        Services Revenue as reported**
                      **in
                        the Financial Statements:**
                    
                    **Three
                        Months Ended**
                    
                    **Nine
                        Months Ended****October
                        1,**
                      **2005**
                    
                    **October
                        2,**
                      **2004**
                    
                    **October
                        1,**
                      **2005**
                    
                    **October
                        2,**
                      **2004****(Dollars
                        in thousands)**Interest
                        and fee income
                    
                    $
                    4,639
                    
                    $
                    3,778
                    
                    $
                    13,189
                    
                    $
                    8,789Interest
                        expense
                    
                    
                    (726
                    )
                    
                    (735
                    )
                    
                    (2,339
                    )
                    
                    (2,261
                    )Net
                        interest income
                    
                    
                    3,913
                    
                    
                    3,043
                    
                    
                    10,850
                    
                    
                    6,528Non-interest
                        income:Securitization
                        income (1)
                    
                    
                    35,576
                    
                    
                    25,277
                    
                    
                    94,495
                    
                    
                    65,648Other
                        non-interest income
                    
                    
                    8,069
                    
                    
                    6,484
                    
                    
                    22,640
                    
                    
                    17,752Total
                        non-interest income
                    
                    
                    43,645
                    
                    
                    31,761
                    
                    
                    117,135
                    
                    
                    83,400Less:
                        Customer rewards costs
                    
                    
                    (15,026
                    )
                    
                    (12,528
                    )
                    
                    (42,119
                    )
                    
                    (36,219
                    )Financial
                        Services revenue
                    
                    $
                    32,532
                    
                    $
                    22,276
                    
                    $
                    85,866
                    
                    $
                    53,709





(1)
            For
                the three months and nine months ended October 1, 2005 and October
                2,
                2004, we recognized gains on sale of credit card loans of $5.2 million,
                $2.7 million, $12.9 million and $5.6 million, respectively, which
                are
                reflected as a component of securitization
                income.





Our
      “managed” credit card loans represent credit card loans we own plus securitized
      credit card loans. Since the financial performance of the managed portfolio
      has
      a significant impact on the earnings we will receive from servicing the
      portfolio, we believe the following table on a “managed” basis is important
      information to analyze our revenue in the Financial Services segment. This
      non-GAAP presentation reflects the financial performance of the credit card
      loans receivable we own plus those that have been sold for the three months
      and
      nine months ended October 1, 2005 and October 2, 2004 and includes the effect
      of
      recording the retained interests at fair value. Interest, interchange (net
      of
      customer rewards) and fee income on both the owned and securitized portfolio
      are
      recorded in their respective line items. Interest paid to outside investors
      on
      the securitized credit card loans is included with other interest costs and
      included in interest expense. Credit losses on the entire managed portfolio
      are
      included in provision for loan losses. Although our financial statements are
      not
      presented in this manner, management reviews the performance of its managed
      portfolio in order to evaluate the effectiveness of its origination and
      collection activities, which ultimately affects the income we will receive
      for
      servicing the portfolio. The securitization of credit card loans primarily
      converts interest income, interchange income, credit card fees, credit losses
      and other income and expense related to the securitized loans into
      securitization income.


25
 Table
          of Contents





**Managed
                  Financial Services Revenue:**
              
              **Three
                  Months Ended**
              
              **Nine
                  Months Ended****October
                  1,**
                **2005**
              
              **October
                  2,**
                **2004**
              
              **October
                  1,**
                **2005**
              
              **October
                  2,**
                **2004****(Dollars
                  in thousands)**Interest
                  income
              
              $
              26,931
              
              $
              18,536
              
              $
              73,476
              
              $
              50,807Interchange
                  income, net of customer reward costs
              
              
              15,375
              
              
              10,562
              
              
              39,937
              
              
              27,540Other
                  fee income
              
              
              5,555
              
              
              4,535
              
              
              14,797
              
              
              11,737Interest
                  expense
              
              
              (10,771
              )
              
              (6,883
              )
              
              (28,792
              )
              
              (18,950
              )Provision
                  for loan losses
              
              
              (5,574
              )
              
              (5,344
              )
              
              (17,047
              )
              
              (15,279
              )Other
              
              
              1,016
              
              
              870
              
              
              3,495
              
              
              (2,146
              )Managed
                  Financial Services revenue
              
              $
              32,532
              
              $
              22,276
              
              $
              85,866
              
              $
              53,709***As
                  a Percentage of Managed Credit Card Loans*****Managed
                  Financial Services Revenue:**Interest
                  income
              
              
              9.5
              %
              
              8.2
              %
              
              9.3
              %
              
              7.8
              %Interchange
                  income, net of customer reward costs
              
              
              5.5
              %
              
              4.6
              %
              
              5.0
              %
              
              4.3
              %Other
                  fee income
              
              
              1.9
              %
              
              2.0
              %
              
              1.8
              %
              
              1.8
              %Interest
                  expense
              
              
              (3.8
              )%
              
              (3.0
              )%
              
              (3.6
              )%
              
              (2.9
              )%Provision
                  for loan losses
              
              
              (2.0
              )%
              
              (2.4
              )%
              
              (2.1
              )%
              
              (2.4
              )%Other
              
              
              0.4
              %
              
              0.4
              %
              
              0.4
              %
              
              (0.3
              )%Managed
                  Financial Services revenue
              
              
              11.5
              %
              
              9.8
              %
              
              10.8
              %
              
              8.3
              %Average
                  reported credit card loans
              
              $
              104,035
              
              $
              80,933
              
              $
              104,681
              
              $
              76,766Average
                  managed credit card loans
              
              $
              1,128,336
              
              $
              908,623
              
              $
              1,058,134
              
              $
              863,354







**Three
      Months Ended October 1, 2005 Compared to Three Months Ended October 2, 2004**





**Revenue**





Revenue
      increased by $46.0 million, or 12.0%, to $429.8 million in the three months
      ended October 1, 2005 from $383.8 million in the three months ended October
      2,
      2004 as we experienced revenue growth in our Retail and Financial Services
      segments. We sold land during the three months ended October 1, 2005, which
      was
      the primary contributor to an increase of $4.0 million in Other segment revenue.





*Direct
      Revenue* .
      Direct
      revenue decreased by $0.8 million, or 0.3%, to $220.2 million in the three
      months ended October 1, 2005 from $221.0 million in the three months ended
      October 2, 2004. We believe our new stores in Texas and Utah had an impact
      on
      our Direct business around those stores. In addition, external factors such
      as
      the recent hurricanes in the gulf coast region and higher fuel prices have
      affected consumer spending. Internet visits increased 43.0% in the three months
      ended October 1, 2005 compared to the three months ended October 2, 2004 as
      our
      customers are becoming more comfortable with using this medium for placing
      their
      orders. The number of customer packages shipped decreased by 0.3% in the three
      months ended October 1, 2005. The product categories that contributed the
      largest dollar volume increases to our Direct revenue in the three months ended
      October 1, 2005 as compared to the three months ended October 2, 2004, included
      camping, fishing and women’s and children’s clothing.





*Retail
      Revenue* .
      Retail
      revenue increased by $32.5 million, or 23.1%, to $173.0 million in the three
      months ended October 1, 2005 from $140.5 million in the three months ended
      October 2, 2004 due to an increase in new


26
 Table
          of Contents


store
      sales of $44.8 million. New store sales were partially offset by a decrease
      in
      comparable store sales of $10.7 million, or 8.7%, compared to the three months
      ended October 2, 2004. Sales at our Hamburg, Pennsylvania store continued to
      be
      down in comparison to the strong sales performance of this store in the third
      quarter of last year, but did improve by 200 basis points over second quarter
      2005 results. We believe our destination retail store revenues were negatively
      impacted by the increases in fuel prices. Our Hamburg store has also been
      impacted by a highway construction project and increased competition in the
      area. The product categories that contributed the largest dollar volume
      increases to our Retail revenue growth in the three months ended October 1,
      2005
      as compared to the three months ended October 2, 2004, included hunting
      equipment, camping gear and marine products.





*Financial
      Services Revenue* .
      Financial Services revenue increased by $10.2 million, or 46.0%, to $32.5
      million in the three months ended October 1, 2005 from $22.3 million in the
      three months ended October 2, 2004 primarily due to an increase in
      securitization income of $10.3 million and an increase in other non-interest
      income of $1.6 million. Interest income, which is included in securitization
      income, increased 45.3% due to growth in cardholder balances, changes in the
      prime rate and changes to the terms of our cardholder agreements, which
      increased the amount we charge our cardholders for interest. Interchange income
      is also included in securitization income and is primarily driven by our
      customers’ Cabela’s Club® VISA credit card net purchases. VISA net purchases
      increased by 23.3% over the three months ended October 2, 2004. Changes in
      the
      VISA interchange rates accounted for an increase in interchange income of $1.9
      million for the three months ended October 1, 2005 compared to the three months
      ended October 2, 2004. Customer reward costs, which are netted against Financial
      Services revenue, generally increase at the same rate as VISA net purchases.
      However, in the three months ended October 1, 2005, customer reward costs
      increased only $2.5 million, or 19.9%, over the three months ended October
      2,
      2004. The decrease in the growth rate of customer reward costs as compared
      to
      VISA net purchases was caused by the instant credit program implemented in
      our
      destination retail stores in the second fiscal quarter of 2005. Instant credit
      allows customers to find out within minutes if they are approved for credit.
      Changes in our customer rewards program implemented in connection with instant
      credit have reduced the customer rewards costs related to the acquisition of
      new
      accounts. Compared to the three months ended October 2, 2004, the number of
      average active accounts grew by 17.3% to 726,507 and the average balance per
      active account grew by 5.8% to approximately $1,553.





**Gross
      Profit**





Gross
      profit increased by $18.3 million, or 11.7%, to $174.7 million in the three
      months ended October 1, 2005 from $156.4 million in the three months ended
      October 2, 2004. Gross profit decreased 0.1% as a percentage of revenue to
      40.7%
      in the three months ended October 1, 2005 from 40.8% in the three months ended
      October 2, 2004. Gross profit as a percentage of revenue declined due to a
      decrease in merchandising gross profit as a percentage of revenue, which was
      offset by an increase in Financial Services revenue, which did not have any
      corresponding increase in cost of revenue.





*Merchandising
      Business.* The
      gross profit of our merchandising business increased by $5.5 million, or 4.1%,
      to $139.6 million in the three months ended October 1, 2005 from $134.1 million
      in the three months ended October 2, 2004. Gross profit decreased by 1.6% as
      a
      percentage of merchandise revenue to 35.5% in the three months ended October
      1,
      2005 from 37.1% in the three months ended October 2, 2004. The decrease was
      primarily attributable to discounts related to a promotional gift card program
      that began in August during the third quarter of 2005 compared to September
      in
      the comparable quarter of 2004. The promotional gift card program reduced gross
      margin by $5.7 million, or 1.4% of merchandise revenue, compared to the prior
      quarter. In the third fiscal quarter of 2004, we experienced a delay in the
      printing and shipping of the promotional gift cards, and the gross margin impact
      was primarily shifted to the fourth fiscal quarter of 2004. Our merchandise
      margins were also impacted by new store openings. We attribute this to the
      spreading of vendor support payments between three grand openings in the third
      quarter of 2005 as compared to one grand opening in the third quarter of 2004.  Shipping
      margin - the shipping income we collect less the cost we pay to ship merchandise
      to our customers - decreased for the Direct business, impacting our total
      merchandise gross profit margin by $0.5 million, or 0.1% of merchandise revenue.  Inbound
      freight expenses - the cost we pay to have goods shipped to our distribution
      centers and retail stores - increased $1.1 million, or 0.3% of merchandise
      revenue, decreasing our merchandise gross profit margin. **





27
 Table
          of Contents


**Selling,
      General and Administrative Expenses**





Selling,
      general and administrative expenses increased by $17.6 million, or
      13.4% *,* to
      $148.5 million in the three months ended October 1, 2005 from $130.9 million
      in
      the three months ended October 2, 2004. Selling, general and administrative
      expenses were 34.6% of revenue in the three months ended October 1, 2005
      compared to 34.2% in the three months ended October 2, 2004. The most
      significant factors contributing to the increase in selling, general and
      administrative expenses included:





·
            Selling,
                general and administrative expenses attributed to shared services
                decreased by $0.1 million over the prior period primarily as a result
                of
                decreases in bonus expense and health insurance costs. Our bonus
                expense
                is tied to financial performance expectations and decreased by $0.7
                million. We experienced decreased health claims activity, which decreased
                our incurred but not paid self-insured health insurance estimate
                by $0.7
                million compared to the three months ended October 2, 2004. These
                decreases were offset by an increase in salary and wages of $1.3
                million
                as we added new employees, primarily at our distribution center in
                Wheeling, West Virginia.·
            *Direct*selling,
                general and administrative expenses comprised $2.4 million of the
                total
                increase in selling, general and administrative expense and increased
                primarily as a result of an increase in catalog production costs
                of $2.0
                million, or 6.3%. Catalog costs increased to $34.2 million in the
                three
                months ended October 1, 2005 from $32.2 million in the three months
                ended
                October 2, 2004. As a percentage of Direct revenue, catalog costs
                increased to 15.6% in the three months ended October 1, 2005 from
                14.6% of
                Direct revenue in the three months ended October 2, 2004. This increase
                in
                catalog costs as a percent of our Direct revenue is due to the lower
                than
                expected sales performance of our catalogs in the third fiscal quarter
                of
                2005. The sales performance of our catalogs was impacted in part
                due to
                catalogs mailed to hurricane affected areas in the gulf coast region.
                Salary and wages and related expenses increased $0.6 million. During
                the
                current period, we increased the number of employees in our promotions
                and
                brand management group as well as one of our smaller Direct subsidiaries.
                The increases were partially offset by a decrease in employees in
                our call
                centers as we continue to reduce our ordering costs as customers
                become
                more comfortable with ordering on the Internet.·
            *Retail*selling,
                general and administrative expenses comprised $11.9 million of the
                total
                increase in selling, general and administrative expense. We incurred
                new
                store operating costs of $10.2 million related to our Wheeling, West
                Virginia store, our two Texas stores and our Lehi, Utah store, which
                were
                not open in, or not open for the full comparable quarter of, 2004.
                We
                increased our retail expansion and pre-opening costs by $2.2 million
                during the three months ended October 1, 2005, as we opened our Lehi,
                Utah
                store and were in the process of building our Rogers, Minnesota store,
                which opened in October of 2005. We increased our corporate retail
                overhead costs by $0.9 million as we continue to build our infrastructure
                to support our retail growth strategy. Total selling, general and
                administrative expenses in our comparable store base increased by
                0.4% as
                a percentage of comparable store sales.·
            *Financial
                Services*selling,
                general and administrative expenses comprised $3.4 million of the
                total
                increase in selling, general and administrative expense. This was
                primarily due to increased advertising and promotional costs of $1.6
                million due to increases in VISA assessments and new account acquisition
                costs, including TV advertising and account retention tools. Salary
                and
                wages, including related benefits, increased by $1.0 million with
                the
                growth of the bank. Third party services increased by $0.5 million
                as the
                number of credit card accounts and credit card transactions increased.
                Professional services increased by $0.3 million primarily related
                to
                consulting services for industry data research. Total Financial Services
                selling, general and administrative costs as a percentage of Financial
                Services revenue decreased from 51.6% of revenue to 45.7% of revenue.





**Operating
      Income**





Operating
      income increased by $0.8 million, or 3.0%, to $26.3 million in the three months
      ended October 1, 2005 from $25.5 million in the three months ended October
      2,
      2004. Operating income as a percentage of revenue decreased to 6.1% in the
      three
      months ended October 1, 2005 from 6.6% in the three months ended October 2,
      2004
      due to the factors discussed above.


28
 Table
          of Contents





**Interest
      Expense**





Interest
      expense increased by $1.3 million to $3.4 million in the three months ended
      October 1, 2005 from $2.1 million in the three months ended October 2, 2004.
      The
      increase in interest was primarily due to an increase in borrowing on our
      revolving line of credit.





**Income
      Taxes**





Our
      effective tax rate was 35.6% in the three months ended October 1, 2005 as
      compared to 35.2% in the three months ended October 2, 2004. We expect to
      experience an increase in our effective tax rate as we open stores in new states
      and incur additional state income taxes.





**Nine
      Months Ended October 1, 2005 Compared to Nine Months Ended October 2,
      2004**





**Revenue**





Revenue
      increased by $147.3 million, or 15.1%, to $1.124 billion in the nine months
      ended October 1, 2005 from $976.9 million in the nine months ended October
      2,
      2004 as we experienced revenue growth in each of our three segments. We sold
      a
      significant amount of land during the nine months ended October 1, 2005, which
      was the primary contributor to an increase of $23.1 million in Other segment
      revenue.





*Direct
      Revenue* .
      Direct
      revenue increased by $40.2 million, or 6.8%, to $632.9 million in the nine
      months ended October 1, 2005 from $592.7 million in the nine months ended
      October 2, 2004 primarily due to growth in sales through our website and strong
      performance from our catalogs in the first half of the year. Internet visits
      increased 29.1% in the nine months ended October 1, 2005 compared to the nine
      months ended October 2, 2004. The number of customer packages shipped increased
      by 11.1% in the nine months ended October 1, 2005. We had a stronger than
      anticipated response to a promotion in the first quarter of fiscal 2005, and
      we
      believe that the increase in fuel prices drove more of our customers to order
      through our Direct channel in the first half of the year. However, sales
      declined in the third quarter of 2005 compared to the third quarter of 2004.
      We
      believe this was due to the impact of our new Retail stores on our Direct sales
      in the surrounding areas and to the economic conditions that prevailed after
      the
      recent hurricanes that affected the gulf coast region. The product categories
      that contributed the largest dollar volume increases to our Direct revenue
      growth in the nine months ended October 1, 2005 as compared to the nine months
      ended October 2, 2004, included camping, hunting equipment and
      fishing.





*Retail
      Revenue* .
      Retail
      revenue increased by $51.8 million, or 15.8%, to $379.3 million in the nine
      months ended October 1, 2005 from $327.5 million in the nine months ended
      October 2, 2004 due to new store sales of $77.0 million. New store sales were
      partially offset by a decrease in comparable store sales of $22.1 million,
      or
      7.2%, compared to the nine months ended October 2, 2004. We believe that the
      increase in fuel prices has negatively impacted our Retail revenues.  The
      product categories that contributed the largest dollar volume increases to
      our
      Retail revenue growth in the nine months ended October 1, 2005 as compared
      to
      the nine months ended October 2, 2004, included hunting equipment, camping
      and
      marine.





*Financial
      Services Revenue* .
      Financial Services revenue increased by $32.2 million, or 59.9%, to $85.9
      million in the nine months ended October 1, 2005 from $53.7 million in the
      nine
      months ended October 2, 2004 primarily due to an increase in securitization
      income of $28.8 million and an increase in net interest income of $4.3 million.
      Interest income, which is included in securitization income, increased 44.6%
      due
      to growth in cardholder balances, changes in the prime rate and changes to
      the
      terms of our cardholder agreements. Interchange income is included in
      securitization income and is primarily driven by our customers’ Cabela’s Club®
VISA credit card net purchases. VISA net purchases increased by 22.0 % over the
      nine months ended October 2, 2004. VISA increased the interchange rates during
      the nine months ended October 1, 2005, which accounted for an increase in
      interchange income of $4.3 million compared to the nine months ended October
      2,
      2004. Customer reward costs, which are netted against Financial Services
      revenue, generally increase at the same rate as VISA net purchases. However,
      in
      the nine months ended October 1, 2005, customer reward costs increased only
      $5.9
      million, or 16.3%, over the nine months ended October 2, 2004. The decrease
      in
      the growth rate of customer reward costs as compared to VISA net purchases
      was
      caused by changes in some of our promotional event campaigns, the implementation
      of instant credit


29
 Table
          of Contents


and
      a
      cost sharing program implemented with our retail stores, whereby our retail
      stores cover a larger portion of the customer reward costs for special events.
      The instant credit program was implemented in our destination retail stores
      in
      the second fiscal quarter of 2005. It allows customers to find out within
      minutes if they are approved for credit. Changes in our customer rewards program
      implemented in connection with instant credit have reduced the customer rewards
      costs related to the acquisition of new accounts. The increase in securitization
      income was also due to a $3.1 million loss from a term securitization
      transaction that was included in the results for the nine months ended October
      2, 2004. We did not have any new term securitization transactions in the nine
      months ended October 1, 2005. Compared to the nine months ended October 2,
      2004,
      the number of average active accounts grew by 17.0% to 704,329 and the average
      balance per active account grew by 4.8% to approximately $1,502.





**Gross
      Profit**





Gross
      profit increased by $58.6 million, or 15.1%, to $447.1 million in the nine
      months ended October 1, 2005 from $388.5 million in the nine months ended
      October 2, 2004. Gross profit was flat as a percentage of revenue at 39.8%
      for
      both nine month periods. Gross profit margin increased primarily as a result
      of
      an increase in Financial Services revenue, which did not have any corresponding
      increase in cost of revenue. The increase from Financial Services revenue was
      offset by a year to date decrease in merchandising gross profit margin.





*Merchandising
      Business.* The
      gross profit of our merchandising business increased by $21.3 million, or 6.4%,
      to $356.3 million in the nine months ended October 1, 2005 from $335.0 million
      in the nine months ended October 2, 2004. Gross profit decreased by 1.2% as
      a
      percentage of merchandise revenue to 35.2% in the nine months ended October
      1,
      2005 from 36.4% in the nine months ended October 2, 2004. The decrease was
      attributable to a promotional gift card program in the third fiscal quarter,
      discounted sales of seasonal merchandise at our retail  stores
      in
      the first fiscal quarter, new store opening differences, increased shipping
      expenses in our Direct business and increased inbound freight expenses due
      to
      increases in fuel prices. Our promotional gift card program reduced gross margin
      by $5.7 million, or 0.6% of merchandise revenue. In the third fiscal quarter
      of
      2004, we experienced a delay in the printing and shipping of the promotional
      gift cards, and the gross margin impact was primarily shifted to the fourth
      fiscal quarter of 2004. Our merchandise margins are also impacted by new store
      openings. We attribute this to the spreading of vendor support payments between
      three store grand openings in the first nine months of 2005, compared to one
      store grand opening in the first nine months of 2004. Shipping margin - shipping
      income we collect from our customers less the cost we pay to ship merchandise
      to
      our customers - decreased for the Direct business, impacting our total
      merchandise gross profit margin by $3.1 million, or 0.3% of merchandise revenue.
      Inbound freight expenses - the cost we pay to have goods shipped to our
      distribution centers and retail stores - increased $7.8 million, or 0.8% of
      merchandise revenue, decreasing our merchandise gross profit margin. ** **





**Selling,
      General and Administrative Expenses**





Selling,
      general and administrative expenses increased by $53.9 million, or
      15.5% *,* to
      $401.0 million in the nine months ended October 1, 2005 from $347.1 million
      in
      the nine months ended October 2, 2004. Selling, general and administrative
      expenses were up slightly as a percentage of revenue at 35.7% in the nine months
      ended October 1, 2005 compared to 35.6% in the nine months ended October 2,
      2004. The most significant factors contributing to the increase in selling,
      general and administrative expenses included:





·
            Selling,
                general and administrative expenses attributed to shared services
                increased by $11.0 million over the prior period primarily as a result
                of
                increases in salary and wages and related benefits of $8.1 million.
                We
                added new employees at our distribution center in Wheeling, West
                Virginia
                that opened in the third quarter of 2004. Depreciation increased
                by $1.9
                million in the nine months ended October 1, 2005 compared to the
                nine
                months ended October 2, 2004 primarily due to furniture and equipment
                additions in our corporate offices along with additional investments
                in
                our distribution centers.







30
 Table
          of Contents





·
            *Direct*selling,
                general and administrative expenses comprised $11.8 million of the
                total
                increase in selling, general and administrative expense and increased
                primarily as a result of an increase in catalog production costs
                of $4.9
                million, or 5.7%. Catalog costs increased to $91.3 million in the
                nine
                months ended October 1, 2005 from $86.4 million in the nine months
                ended
                October 2, 2004. However, as a percentage of Direct revenue, catalog
                costs
                improved to 14.4% of Direct revenue in the nine months ended October
                1,
                2005 from 14.6% of Direct revenue in the nine months ended October
                2,
                2004. This improvement in catalog costs as a percent of our Direct
                revenue
                was primarily due to the strong sales performance of our catalogs
                in the
                first half of the year. Salary and wages, including related benefits,
                increased $3.7 million as the number of employees in some of our
                smaller
                subsidiaries and in our promotions and brand management group increased.
                Advertising increased by $2.0 million, primarily related to Internet
                advertising commissions. Credit card discount fees increased by $1.1
                million due to the increase in Internet credit card sales transactions,
                which carry a higher credit card discount rate. Insurance and benefits
                increased by $1.1 million for the Direct segment primarily due to
                an
                increase in standard insurance rates charged to some of our smaller
                subsidiaries as the number of their employees increased.·
            *Retail*selling,
                general and administrative expenses comprised $23.9 million of the
                total
                increase in selling, general and administrative expense. We incurred
                new
                store operating costs of $17.5 million related to stores not open
                in, or
                not open for the full comparable period of, 2004. We increased our
                retail
                expansion costs by $5.6 million during the nine months ended October
                1,
                2005, as we opened two new stores in Texas, one new store in Lehi,
                Utah
                and prepared for the opening of our Rogers, Minnesota store in October
                2005. We increased our corporate retail overhead costs by $1.4 million
                as
                we continue to build our infrastructure to support our retail growth
                strategy. Total comparable store selling general and administrative
                costs
                as a percentage of related revenue were flat.·
            *Financial
                Services*selling,
                general and administrative expenses comprised $7.2 million of the
                total
                increase in selling, general and administrative expense. Salary and
                wages,
                including related benefits, increased by $2.7 million with the growth
                of
                the bank. Advertising costs increased by $1.7 million due to increases
                in
                VISA assessments and new account acquisition costs, including TV
                advertising and account retention tools. Costs of bad debt expense
                increased by $1.2 million, primarily due to an increase in counterfeit
                fraud. Our bad debts relating to fraud are less than industry standards.
                Third party services increased by $1.0 million as the number of credit
                card accounts and credit card transactions increased. Total Financial
                Services selling, general and administrative expenses as a percentage
                of
                Financial Services revenue decreased from 60.2% in the nine months
                ended
                October 2, 2004 to 46.0% in the nine months ended October 1, 2005.





**Operating
      Income**





Operating
      income increased by $4.7 million, or 11.3%, to $46.1 million in the nine months
      ended October 1, 2005 from $41.4 million in the nine months ended October 2,
      2004. Operating income as a percentage of revenue decreased to 4.1% in the
      nine
      months ended October 1, 2005 from 4.2% in the nine months ended October 2,
      2004
      due to the factors discussed above.





**Interest
      Expense**





Interest
      expense increased to $7.9 million in the nine months ended October 1, 2005
      from
      $6.1 million in the nine months ended October 2, 2004. The increase in interest
      is primarily due to an increase in borrowing on our revolving line of credit
      and
      an increase in interest recorded from a capital lease that was signed in the
      third quarter of 2004.





**Income
      Taxes**





Our
      effective tax rate was 35.6% in the nine months ended October 1, 2005 as
      compared to 35.0% in the nine months ended October 2, 2004. We expect to
      experience an increase in our effective tax rate as we open stores in new states
      and incur additional state income taxes.





31
 Table
          of Contents


**Bank
      Asset Quality**





We
      securitize a majority of our credit card loans. On a quarterly basis, we
      transfer eligible credit card loans into a securitization trust. This does
      not
      have any income statement impact until we issue a term debt instrument from
      our
      securitization trust. We are required to own at least a minimum twenty day
      average of 5% of the interests in the securitization trust. Therefore, these
      retained loans have the same characteristics as those loans sold to outside
      investors. Certain accounts are ineligible for securitization because they
      are
      delinquent at the time of addition, originated from sources other than Cabela’s
      Club credit cards and various other requirements. The total amount of ineligible
      receivables we owned were $10.8 million and $6.1 million as of October 1, 2005
      and January 1, 2005, respectively. Of the $10.8 million in ineligible
      receivables outstanding at October 1, 2005, $10.0 million were originated from
      sources other than Cabela’s Club credit cards.





The
      quality of our managed credit card loan portfolio at any time reflects, among
      other factors, the creditworthiness of the individual cardholders, general
      economic conditions, the success of our account management and collection
      activities, and the life cycle stage of the portfolio. Our financial results
      are
      sensitive to changes in delinquencies and net charge-offs of this portfolio.
      During periods of economic weakness, delinquencies and net charge-offs are
      more
      likely to increase. We have sought to manage this sensitivity by selecting
      a
      customer base that has historically shown itself to be very creditworthy based
      on charge-off levels, credit bureau scores, such as Fair Isaac & Company
      (FICO) scores, and behavior scores.





**Delinquencies**





We
      consider the entire balance of an account, including any accrued interest and
      fees, delinquent if the minimum payment is not received by the payment due
      date.
      Our aging methodology is based on the number of completed billing cycles during
      which a customer has failed to make a required payment. Delinquencies not only
      have the potential to reduce earnings by increasing the unrealized loss
      recognized to reduce the loans to market value and reducing securitization
      income, but they also result in additional operating costs dedicated to
      resolving the delinquencies. The following chart shows the percentage of our
      managed accounts that have been delinquent as of the ends of the periods
      presented.





**October
                1,**
              **2005**
            
            **January
                1,**
              **2005**
            
            **October
                2,**
              **2004**Number
                of days delinquentGreater
                than 30 days
            
            
            0.65%
            
            
            0.71%
            
            
            0.79%Greater
                than 60 days
            
            
            0.36%
            
            
            0.41%
            
            
            0.43%Greater
                than 90 days
            
            
            0.15%
            
            
            0.19%
            
            
            0.18%





**Charge-offs**





Gross
      charge-offs reflect the uncollectible principal, interest and fees on a
      customer's account. Recoveries reflect the amounts collected on previously
      charged-off accounts. We believe that most bankcard issuers charge off accounts
      at 180 days. We charge off accounts on the 24th day of the month after an
      account becomes 115 days contractually delinquent, except in the case of
      cardholder bankruptcies and cardholder deaths. Cardholder bankruptcies are
      charged off 30 days after notification, and delinquencies caused by cardholder
      deaths are charged off on the 24th day of the month after an account is 60
      days
      contractually delinquent. As a result, our charge-off rates are not directly
      comparable to other participants in the bankcard industry. On October 17, 2005,
      the Bankruptcy Reform Act was enacted, which makes it more difficult to file
      bankruptcy and have certain debts forgiven. We experienced an increase in the
      number of cardholders filing for bankruptcy before the October 17th deadline.
      This was included in our provision for bad debts in the third quarter of 2005,
      and we expect to have a small negative impact in the fourth fiscal quarter
      followed by a slight improvement in charge-offs as it becomes more difficult
      to
      file for bankruptcy. Our charge-off activity for the managed portfolio for
      the
      three months and nine months ended October 1, 2005 and October 2, 2004 is
      summarized below:


32
 Table
          of Contents





**Three
                Months Ended**
            
            **Nine
                Months Ended****October
                1,**
              **2005**
            
            **October
                2,**
              **2004**
            
            **October
                1,**
              **2005**
            
            **October
                2,**
              **2004****(Dollars
                in thousands)**Gross
                charge-offs
            
            $
            5,997
            
            $
            5,843
            
            $
            19,318
            
            $
            17,096Less:
                Recoveries
            
            
            (957
            )
            
            (849
            )
            
            (3,120
            )
            
            (2,517
            )Net
                charge-offs
            
            
            5,040
            
            
            4,994
            
            
            16,198
            
            
            14,579Net
                charge-offs as a percentage of average managed loans
            
            
            1.79
            %
            
            2.20
            %
            
            2.04
            %
            
            2.25
            %





**Liquidity
      and Capital Resources**


**Overview**





Our
      merchandising business and our Financial Services segment have significantly
      different liquidity and capital needs. The primary cash requirements of our
      merchandising business relate to purchase of inventory, capital for new
      destination retail stores, purchases of economic development bonds related
      to
      the development of new destination retail stores, investments in our management
      information systems and other infrastructure, and other general working capital
      needs. We historically have met these requirements by generating cash from
      our
      merchandising business operations, borrowing under revolving credit facilities,
      issuing debt and equity securities, obtaining economic development grants from
      state and local governments in connection with developing our destination retail
      stores and collecting principal and interest payments on our economic
      development bonds. The cash flow we generate from our merchandising business
      is
      seasonal, with our peak cash requirements for inventory occurring between August
      and November. While we have consistently generated overall positive annual
      cash
      flow from our operating activities, other sources of liquidity are generally
      required by our merchandising business during these peak cash use periods.
      These
      sources historically have included borrowings under our revolving credit
      facility and access to debt markets, such as the private placement of long-term
      debt securities we completed in September 2002. While we generally have been
      able to manage our cash needs during peak periods, if any disruption occurred
      to
      our funding sources, or if we underestimated our cash needs, we would be unable
      to purchase inventory and otherwise conduct our merchandising business to its
      maximum effectiveness which would result in reduced revenues and profits.





The
      primary cash requirements of our Financial Services segment relate to the
      generation of credit card loans and the purchase of rewards used in the customer
      loyalty rewards program from our merchandising business. The bank obtains funds
      for these purposes through various financing activities, which include engaging
      in securitization transactions, borrowing under federal funds agreements,
      selling certificates of deposit and generating cash from operations. Our bank’s
      charter is limited to issuing credit cards and selling brokered certificates
      of
      deposit of $100,000 or more, and it does not accept demand deposits or make
      non-credit card loans. Consequently, our bank cannot lend money to Cabela’s
      Incorporated or our other affiliates. The bank is subject to capital
      requirements imposed by Nebraska banking law and the VISA membership rules,
      and
      its ability to pay dividends is limited by Nebraska and federal banking law.





We
      have
      focused on generating cash from our existing assets such as the sale of land
      around our destination retail stores and the monetization of our economic
      development bonds. On August 3, 2005, the local government in Kansas City
      retired $56.9 million in bonds and accrued interest we owned related to our
      Kansas City store, and we expect the remaining $3.5 million of bonds we own
      related to that store to be repaid over the next nine months.  In
      addition, on September 2, 2005, the local government in Prairie Du Chien,
      Wisconsin retired $4.3 million in bonds and accrued interest we owned related
      to
      our Prairie Du Chien store and distribution center. We also completed an
      amendment and restatement of our revolving credit facility in July 2005, which
      increased available funds for working capital borrowings.  See “—Credit
      Facilities
      and Other Indebtedness.”


33
 Table
          of Contents


We
      believe that we will have sufficient capital available from current cash on
      hand, operations, our revolving credit facility, other borrowing sources and
      the
      continuing monetization of our economic development bonds to fund our existing
      operations and growth plan for the next fifteen to eighteen months.





**Operating,
      Investing and Financing Activities**





Cash
      used
      by operating activities was $138.9 million in the nine months ended October
      1,
      2005 as compared with $139.7 million in the nine months ended October 2, 2004.
      The $0.8 million decrease in cash used by operating activities was due to an
      increase in cash provided by proceeds from securitized credit cards of $55.5
      million, an increase in land sales net of land purchases of $19.5 million and
      an
      increase in deferred income taxes of $15.5 million. The increases in cash
      provided from operations were offset by increases in cash used from operations
      from the growth in our inventory of $59.4 million, the growth in cash paid
      for
      income taxes of $20.4 million and an increase in cash used for accounts payable
      of $11.0 million. We had a term securitization transaction in the first nine
      months of 2004 that caused the difference in cash provided by proceeds from
      credit card loans. We increased cash used for inventory by $59.4 million
      primarily as a result of buying inventory for the 59% increase in Retail square
      footage, which includes the additional inventory for the October opening of
      our
      Rogers, Minnesota store, and buying inventory to support the increase in Direct
      sales. The increase in cash paid for income taxes was due to increased quarterly
      installment payments on income taxes. The increase in cash used for accounts
      payable was primarily due to an increase in the amount of letters of credit
      and
      other terms we utilized for inventory purchases.





Cash
      used
      in investing activities was $143.6 million in the nine months ended October
      1,
      2005 as compared with $79.9 million in the nine months ended October 2, 2004.
      The $63.7 million increase in cash used for investing activities was due to
      a
      $105.7 million increase in capital expenditures, an increase in purchases of
      marketable securities of $7.6 million and an increase in notes receivable of
      $4.9 million, all of which were related to building our four new destination
      retail stores. Use of cash for our credit card loans receivable increased by
      $4.8 million as we increased the growth of our co-branded accounts. These
      increases in uses of cash were partially offset by the proceeds from retirement
      of economic development bonds of $60.6 million.





Cash
      provided by financing activities was $91.5 million in the nine months ended
      October 1, 2005 as compared with $106.0 million in the nine months ended October
      2, 2004. The $14.5 million decrease in cash provided by financing activities
      was
      due to an increase of $29.7 million in the maturities of time deposits paid
      by
      our bank. The first installment on our private placement notes issued in
      September 2002 was paid increasing payments on long-term debt by $25.3 million.
      The remaining amount was the difference in cash received from our initial public
      offering in the nine months ended October 2, 2004 of $114.3 million compared
      to
      the cash borrowed and paid on our revolving line of credit of $156.4 million
      in
      the nine months ended October 1, 2005.





As
      of
      October 1, 2005, we had material cash commitments in the amount of $24.0 million
      for fiscal 2005 and $254.5 million for fiscal 2006 and 2007 for estimated
      capital expenditures and the purchase of future economic development bonds
      in
      connection with the construction and development of new destination retail
      stores. In addition, we are obligated to fund the remaining $26.0 million of
      economic development bonds and construction costs related to the expansion
      of
      our distribution center in Wheeling, West Virginia throughout fiscal 2005 and
      2006.





We
      have
      announced plans for retail site locations in Reno, Nevada, East Hartford,
      Connecticut, Richfield, Wisconsin and LaVista, Nebraska for which material
      commitments were not signed as of October 1, 2005. These locations are still
      being negotiated and will be subject to customary conditions to closing. We
      expect the total cost of each of these destination retail stores, including
      the
      cost of economic development bonds, to fall in the estimated range of $40 to
      $80
      million each. We expect to incur costs for two of these locations in 2006 and
      two in 2007.





We
      expect
      to incur total capital expenditures, including the purchase of economic
      development bonds related to our retail stores, in the range of $225 million
      to
      $275 million in fiscal 2005. This number could increase depending on the timing
      of land acquisitions for our future stores.





34
 Table
          of Contents


**Grants
      and Economic Development Bonds**





*Grants.* Under
      various grant programs, state or local governments provide funding for certain
      costs associated with developing and opening a new destination retail store.
      We
      generally have received grant funding in exchange for commitments, such as
      assurance of agreed employment and wage levels at our destination retail stores
      or that the destination retail store will remain open, made by us to the state
      or local government providing the funding. The commitments typically phase
      out
      over approximately five to ten years. If we fail to maintain the commitments
      during the applicable period, the funds we received may have to be repaid or
      other adverse consequences may arise, which could affect our cash flows and
      profitability. As of October 1, 2005 and January 1, 2005, the total amount
      of
      grant funding subject to a specific contractual remedy was $17.4 million and
      $17.7 million, respectively. Portions of seven of our destination retail stores,
      such as wildlife displays and museums, are subject to forfeiture provisions.
      In
      addition, there are 30.3 acres of undeveloped property subject to forfeiture
      provisions. We expect to forfeit 15.3 acres of this undeveloped property in
      the
      fourth fiscal quarter of 2005 as a result of not developing or selling this
      property during the agreed upon period. The 15.3 acres expected to be forfeited
      has no basis and therefore the forfeiture will not create an income statement
      impact.





*Economic
      Development Bonds.* Through
      economic development bonds, the state or local government sells bonds to provide
      funding for land acquisition, readying the site, building infrastructure and
      related eligible expenses associated with the construction and equipping of
      our
      destination retail stores. We typically have been the sole purchaser of these
      bonds. The bond proceeds that are received by the governmental entity are then
      used to fund portions of the cost of constructing and equipping new destination
      retail stores and related infrastructure development. While purchasing these
      bonds involves an initial cash outlay by us, some or all of these costs can
      be
      recaptured through the repayments of the bonds. The payments of principal and
      interest on the bonds are typically tied to sales, property or lodging taxes
      generated from the store and, in some cases, from businesses in the surrounding
      area, over periods which range between 10 and 30 years. In addition, some of
      the
      bonds that we have purchased may be repurchased for par value by the
      governmental entity prior to the maturity date of the bonds. However, the
      governmental entity from which we purchase the bonds is not otherwise liable
      for
      repayment of principal and interest on the bonds to the extent that the
      associated taxes are insufficient to pay the bonds. In one location, the bonds
      will become subordinated to other bonds associated with the development if
      we
      fail to continue to operate the store over a prescribed period. After purchasing
      the bonds, we typically carry them on our balance sheet as “available for sale”
marketable securities and value them based upon management’s projections of the
      amount of tax revenue that will be generated to support principal and interest
      payments on the bonds. We have limited experience in valuing these bonds and,
      because of the unique features of each project, there is no independent market
      data for valuation of these types of bonds. If sufficient tax revenue is not
      generated by the subject properties, we will not receive scheduled payments
      and
      will be unable to realize the full value of the bonds carried on our balance
      sheet. As of October 1, 2005 and January 1, 2005, we carried $142.9 million
      and
      $144.6 million, respectively, of economic development bond receivables on our
      balance sheet.





The
      negotiation of these economic development arrangements has been important to
      our
      destination retail store expansion in the past, and we believe it will continue
      to be an important factor in our ability to execute our destination retail
      store
      expansion strategy because these arrangements will allow us to avoid or
      recapture a portion of the costs involved with opening a new store. If similar
      packages are unavailable in the future or the terms are not as favorable to
      us,
      our return on investment in new stores would be adversely affected and we may
      choose to significantly alter our destination retail store expansion
      strategy.





**Securitization
      of Credit Card Loans**





We
      have
      been, and will continue to be, particularly reliant on funding from
      securitization transactions for our Financial Services segment. A failure to
      renew existing facilities or to add additional capacity on favorable terms
      as it
      becomes necessary 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 insurance, could have a similar effect.





35
 Table
          of Contents


Furthermore,
      poor performance of our securitized credit card loans, including increased
      delinquencies and credit losses, lower payment rates or a decrease in excess
      spreads below certain thresholds, could result in a downgrade or withdrawal
      of
      the ratings on the outstanding securities issued in our securitization
      transactions, cause early amortization of these securities or result in higher
      required credit enhancement levels. This could jeopardize our ability to
      complete other term securitization transactions on acceptable terms, decrease
      our liquidity and force us to rely on other potentially more expensive funding
      sources, to the extent available, which would decrease our profitability. We
      are
      currently negotiating a new credit card securitization in an initial amount
      of
      $250.0 million that we expect to close in the fourth fiscal quarter of 2005.
      The
      total amount and maturities for our credit card securitizations as of October
      1,
      2005 were as follows:





**Series**
            
            **Type**
            
            **Initial
                Amount**
            
            **Certificate
                Rate**
            
            **Expected
                Final**(Dollars
                in thousands)Series
                2001-2
            
            
            Term
            
            
            $250,000
            
            
            Floating
            
            
            November
                2006Series
                2003-1
            
            
            Term
            
            
            $300,000
            
            
            Floating
                (2)
            
            
            January
                2008Series
                2003-2
            
            
            Variable
                Funding
            
            
            $300,000 (1)
            
            
            Floating
            
            
            June
                2006Series
                2004-I
            
            
            Term
            
            
            $ 
                75,000
            
            
            Fixed
            
            
            March
                2009Series
                2004-II
            
            
            Term
            
            
            $175,000
            
            
            Floating
            
            
            March
                2009





(1)
            We
                extended the Series 2003-2 facility to June 2006 and amended it to
                include
                an additional $50.0 million temporary increase for seasonal purposes
                from
                December 1 to February 28, if needed.(2)
            The
                trust entered into an agreement to convert the floating rate certificate
                into a fixed rate obligation.





**Certificates
      of Deposit**





We
      utilize certificates of deposit to partially finance the operating activities
      of
      our bank. Our bank issues certificates of deposit in a minimum amount of
      $100,000 in various maturities. As of October 1, 2005, we had $79.8 million
      of
      certificates of deposit outstanding with maturities ranging from July 2005
      to
      June 2015  and
      with
      a weighted average effective annual fixed rate of 3.73%. Certificate of deposit
      borrowings are subject to regulatory capital requirements.





**Credit
      Facilities and Other Indebtedness**





On
      July
      15, 2005, we amended and restated our credit agreement with several banks.
      The
      amended and restated credit agreement provides for a $325 million unsecured
      revolving credit facility and expires on June 30, 2010. In addition, the credit
      agreement was amended to eliminate certain limitations with regard to the
      temporary pay down of revolving loans. During the term of the facility, we
      are
      required to pay a facility fee, which ranges from 0.100% to 0.250%. We may
      elect
      to take advances at interest rates calculated at U.S. Bank National
      Association’s prime rate (or, if greater, the average rate on the federal funds
      rate in effect for the day plus one-half of one percent) or the Eurodollar
      rate
      of interest plus a margin, which adjusts, based upon certain financial ratios
      achieved and ranges from 0.650% to 1.350%. The credit agreement permits the
      issuance of up to $150 million in letters of credit and standby letters of
      credit, the nominal amount of which are applied against the overall credit
      limit
      available under the revolver. The credit facility may be increased to $450
      million upon our request and with the consent of the banks party to the credit
      agreement. The average outstanding amount of letters of credit during the nine
      months ended October 1, 2005 was $46.3 million. There was $156.4 million in
      outstanding principal borrowings under the credit facility as of October 1,
      2005. Our total remaining borrowing capacity under the credit facility as of
      October 1, 2005, after subtracting outstanding letters of credit of $53.8
      million, and standby letters of credit of $6.4 million, was $108.4 million.
      The
      credit agreement requires that we comply with several financial and other
      covenants, including requirements that we maintain the following financial
      ratios as set forth in the credit agreement:


36
 Table
          of Contents





·
            A
                fixed charge coverage ratio of no less than 1.50 to 1.00 as of the
                last
                day of any fiscal quarter. The fixed charge coverage ratio is defined
                as
                (a) EBITR minus the sum of any cash dividends, tax expenses paid
                in cash,
                in each case for the twelve month period ending on the last day of
                the
                fiscal quarter, and to the extent not included, or previously included,
                in
                the calculation of EBITR, any cash payments with respect to contingent
                obligations, to (b) the sum of interest expense, all required principal
                payments with respect to coverage indebtedness and operating lease
                obligations, in each case for the twelve month period ending on the
                last
                day of the fiscal quarter. Our credit agreement defines EBITR as
                net
                income before deductions for income taxes, interest expense and operating
                lease obligations; and·
            A
                cash flow leverage ratio of no more than 3.00 to 1.00 as of the last
                day
                of any fiscal quarter for the twelve month period ending on that
                day. The
                cash flow leverage ratio is defined as adjusted coverage indebtedness
                (average indebtedness of the Company on a consolidated basis for
                the
                preceding four fiscal quarters determined in accordance with GAAP
                excluding: (a) liabilities of WFB, (b) long term deferred compensation,
                (c) long term deferred taxes, (d) any current liabilities (other
                than
                coverage indebtedness), and (e) deferred grant income) to EBITDA. 
                Our credit agreement defines EBITDA as net income before deductions
                for
                income taxes, interest expense, depreciation and amortization, all
                as
                determined on a consolidated basis in accordance with GAAP;
                and·
            A
                minimum tangible net worth of no less than $350,000 plus 50% of positive
                consolidated net income on a cumulative 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 with these covenants, a default
      is triggered. In the event of default, all outstanding letters of credit and
      all
      principal and outstanding interest would immediately become due and
      payable.





In
      addition, our new credit agreement includes a limitation that we may not pay
      dividends to our stockholders in excess of 50% of our prior year's consolidated
      EBITDA and a provision that permits acceleration by the lenders in the event
      there is a "change in control." Our credit agreement defines "EBITDA" to mean
      our net income before deductions for income taxes, interest expense,
      depreciation and amortization. Based upon this EBITDA calculation for fiscal
      2004, dividends would not be permissible in fiscal 2005 in excess of $68.8
      million. Our credit agreement defines a "change in control" to mean any of
      the
      following circumstances: (a) we cease to own, directly or indirectly, 100%
      of
      the shares of each class of the voting stock or other equity interest of each
      other borrower that has or has had total assets in excess of $10.0 million;
      (b)
      the acquisition or ownership, directly or indirectly, beneficially or of record,
      by any person or group (within the meaning of the Securities Exchange Act of
      1934 and the rules of the Securities and Exchange Commission thereunder as
      in
      effect on July 15, 2005, of equity interests representing more than 25% of
      the
      aggregate ordinary voting power represented by our issued and outstanding equity
      interests (other than equity interests held by Richard N. Cabela or James W.
      Cabela or a group controlled by Richard N. Cabela or James W. Cabela); or (c)
      occupation of a majority of the seats (other than vacant seats) on our board
      of
      directors by persons who were neither (i) nominated by our board of directors
      nor (ii) appointed by directors so nominated. Our credit agreement provides
      that
      all loans or deposits from us or any of our subsidiaries to our bank cannot
      exceed $75.0 million in the aggregate at any time when loans are outstanding
      under the revolving credit facility.





Our
      bank
      entered into an unsecured uncommitted Federal Funds Sales Agreement with a
      bank
      on October 7, 2004. The maximum amount of funds which can be outstanding is
      $25.0 million of which no amounts were outstanding at October 1, 2005. On
      October 8, 2004, our bank entered into an unsecured uncommitted Federal Funds
      Line of Credit Agreement with another bank. The maximum amount of funds which
      can be outstanding is $40.0 million of which no amounts were outstanding at
      October 1, 2005.





In
      addition to our credit facilities, we have accessed the private placement debt
      markets. We currently have two such note issuances outstanding. In September
      2002, we issued $125.0 million in senior unsecured notes bearing interest at
      a
      fixed rate of 4.95%, repayable in five annual installments of $25.0 million
      beginning on September 5, 2005. The aggregate principal balance on these notes
      as of October 1, 2005 was $100.0 million. In January 1995, we issued $20.0
      million in senior unsecured notes bearing interest at fixed rates ranging
      between 8.79% and 9.19% per year. The notes amortize, with principal and
      interest payable in the amount of $0.3 million per month through January 1,
      2007, thereafter decreasing to $0.1 million per month through January 1, 2010.
      The aggregate principal balance of these notes as of October 1, 2005 was $6.1
      million. Both note issuances provide for prepayment penalties based on yield
      maintenance formulas.





37
 Table
          of Contents


These
      notes require that we comply with several financial and other covenants,
      including requirements that we maintain the following financial ratios as set
      forth in the note purchase agreement:





·
            a
                consolidated adjusted net worth in an amount not less than the sum
                of (i)
                $150 million plus (ii) 25% of positive consolidated net earnings
                on a
                cumulative basis for each fiscal year beginning with the fiscal year
                ended
                2002; and·
            a
                fixed charge coverage ratio (the ratio of consolidated cash flow
                to
                consolidated fixed charges for each period of four consecutive fiscal
                quarters) of no less than 2.00 to 1.00 as of the last day of any
                fiscal
                quarter.





In
      addition, we agreed to a limitation that our subsidiaries, excluding the bank,
      and we may not create, issue, assume, guarantee or otherwise assume funded
      debt
      in excess of 60% of consolidated total capitalization.





As
      of
      October 1, 2005, we were in compliance with all of the covenants under our
      credit agreement and unsecured notes. We may or may not engage in future
      long-term borrowing transactions to fund our operations or our growth plans.
      Whether or not we undertake such borrowings will depend on a variety of factors,
      including prevailing interest rates, our retail growth plans, our financial
      strength, alternative sources and costs of funding and our management's
      assessment of potential returns on investment that may be realized from the
      proceeds of such borrowings.





**Off-Balance
      Sheet Arrangements**





*Operating
      leases -* We
      lease
      various items of office equipment and buildings, all of which are recorded
      in
      our selling, general and administrative expenses.





*Credit
      Card Limits -* The
      bank
      bears off-balance sheet risk in the normal course of its business. One form
      of
      this risk is through the bank's commitment to extend credit to cardholders
      up to
      the maximum amount of their credit limits. The aggregate of such potential
      funding requirements totaled $7.1 billion and $6.0 billion as of October 1,
      2005
      and January 1, 2005, respectively, which amounts were in addition to existing
      balances cardholders had at such dates. These funding obligations are not
      included on our consolidated balance sheet. While the bank has not experienced,
      and does not anticipate that it will experience, a significant draw down of
      unfunded credit lines by customers, a significant draw down would create a
      cash
      need at the bank which likely could not be met by our available cash and funding
      sources. The bank has the right to reduce or cancel these available lines of
      credit at any time.





*Securitizations
      -* All
      of
      the bank's securitization transactions have been accounted for as sale
      transactions and the credit card loans relating to those pools of assets are
      not
      reflected on our consolidated balance sheet.





**Seasonality**





Our
      business is seasonal in nature and interim results may not be indicative of
      results for the full year. Due to holiday buying patterns, and hunting and
      fishing season openings across the country, merchandise sales are typically
      higher in the third and fourth quarters than in the first and second quarters.
      We anticipate our sales will continue to be seasonal in nature.








**Item
      3.**  **Quantitative
      and Qualitative Disclosures About Market Risk.**





We
      are
      exposed to interest rate risk through our bank's operations and, to a lesser
      extent, through our merchandising operations. We also are exposed to foreign
      currency risk through our merchandising operations.





38
 Table
          of Contents


**Financial
      Services Interest Rate Risk**





Interest
      rate risk refers to changes in earnings or the net present value of assets
      and
      off-balance sheet positions less liabilities (termed "economic value of equity")
      due to interest rate changes. To the extent that interest income collected
      on
      managed receivables and interest expense do not respond equally to changes
      in
      interest rates, or that rates do not change uniformly, securitization earnings
      and economic value of equity could be affected. Our net interest income on
      managed receivables is affected primarily by changes in short term interest
      rate
      indices such as LIBOR and prime rate. The variable rate card receivables are
      indexed to the prime rate. Securitization certificates and notes are indexed
      to
      LIBOR-based rates of interest and are periodically repriced. Certificates of
      deposit are priced at the current prevailing market rate at the time of
      issuance. We manage and mitigate our interest rate sensitivity through several
      techniques, but primarily by modifying the contract terms with our cardholders,
      including interest rates charged, in response to changing market conditions.
      Additional techniques we use include managing the maturity, repricing and
      distribution of assets and liabilities by issuing fixed rate securitization
      certificates and notes and by entering into interest rate swaps to hedge our
      fixed rate exposure from interest strips. The table below shows the mix of
      account balances at each interest rate at each period presented.





**October
                1,**
              **2005**
            
            **January
                1,**
              **2005**
            
            **October
                2,**
              **2004***As
                a percentage of total balances outstanding*Balances
                carrying interest rate based upon the national prime lending
                rate.
            
            
            61.5%
            
            
            57.2%
            
            
            59.8%Balances
                carrying an interest rate of 9.99%.
            
            
            2.4%
            
            
            3.1%
            
            
            2.7%Balances
                carrying an interest rate of 0.00%
            
            
            0.1%
            
            
            0.0%
            
            
            0.0%Balances
                not carrying interest because their previous month's balance was
                paid in
                full.
            
            
            36.0%
            
            
            39.6%
            
            
            37.5%





Charges
      on the credit cards issued by our Financial Services segment are priced at
      a
      margin over the defined national prime lending rate, subject to certain interest
      rate floors, except purchases of Cabela’s merchandise, certain other charges and
      balance transfer programs, which are financed at a fixed interest rate of 9.99%.
      No interest is charged if the account balance is paid in full within 20 days
      of
      the billing cycle.





Management
      performs a projected interest rate gap analysis over a rolling twelve-month
      period to measure the effects of the timing of the repricing of our interest
      sensitive assets and liabilities. Based on this analysis, we believe that if
      there is an immediate 100 basis point, or 1.0%, increase in the market rates
      for
      which our assets and liabilities are indexed during the next twelve months,
      our
      projected operating results would not be materially affected. Management has
      also performed a projected interest rate gap analysis, over the same rolling
      twelve-month period, to measure the effects of a change in spread between the
      prime interest rate and the LIBOR interest rate. Based on this analysis, we
      believe that an immediate 50 basis point, or 0.5%, decrease or increase in
      this
      spread would cause a decrease or increase of $3.5 million to $3.7 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 a variable interest rate
      with its base rate tied to prime rate and adjusted annually in November. We
      do
      not believe the interest rate changes will have a material impact on our
      operations.





The
      interest payable under our revolving credit facility is based on variable
      interest rates and therefore affected by changes in market interest rates.
      If
      interest rates on existing variable rate debt rose 1%, our results from
      operations and cash flows would not be materially affected.


39
 Table
          of Contents


**Foreign
      Currency Risk**





We
      purchase a significant amount of inventory from vendors outside of the U.S.
      in
      transactions that are primarily U.S. dollar transactions. A small percentage
      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.




**Item
      4.**  **Controls
      and Procedures** .





In
      response to recently enacted changes in the laws and regulations affecting
      public companies, including the provisions of the Sarbanes Oxley Act of 2002,
      we
      continue to devote significant resources and time to comply with these new
      requirements. In particular, we are currently undertaking a full analysis and
      documentation of the Company’s internal control over financial reporting. Our
      testing and analysis is continuing and will be completed in connection with
      our
      evaluation of our internal control over financial reporting as of the end of
      the
      current fiscal year. This additional testing may identify deficiencies in our
      internal control over financial reporting and we may conclude that the
      identified deficiencies rise to the level of significant deficiencies or
      material weaknesses in internal control over financial reporting.





Under
      the
      direction of our Chief Executive Officer and Chief Financial Officer, we
      evaluated our disclosure controls and procedures and internal control over
      financial reporting and concluded that (i) our disclosure controls and
      procedures were effective as of October 1, 2005, and (ii) no change in internal
      control over financial reporting occurred during the quarter ended October
      1,
      2005, that has materially affected, or is reasonably likely to materially
      affect, such internal control over financial reporting.








**PART
      II - OTHER INFORMATION**





**Item
      1****.**  **Legal
      Proceedings.**





We
      are
      party to certain lawsuits in the ordinary course of our business. The subject
      matter of these proceedings primarily includes commercial disputes, employment
      issues and product liability lawsuits. We do not believe that the ultimate
      dispositions of these proceedings, individually or in the aggregate, will have
      a
      material adverse effect on our consolidated financial position, results of
      operations or liquidity .




**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds.**





Not
      applicable.





**Item
      3.**  **Defaults
      Upon Senior Securities.**





Not
      applicable.





**Item
      4.**  **Submission
      of Matters to Vote of Security Holders.**





Not
      applicable.





**Item
      5.**  **Other
      Information.**





Not
      applicable.





40
 Table
          of Contents


**Item
      6.**  **Exhibits.**





(a)
            Exhibits.




Exhibit
                Number
              Description10
              First
                  Amendment Agreement to Note Purchase Agreements dated as of September
                  5,
                  2002, among Cabela’s Incorporated and various purchasers party
                  thereto31.1
              Certification
                  of CEO Pursuant to Rule 13a-14(a) under the Exchange
                  Act31.2
              Certification
                  of CFO Pursuant to Rule 13a-14(a) under the Exchange
                  Act32
              Certifications
                  Pursuant to 18 U.S.C. Section 1350





41
 Table
          of Contents








SIGNATURES





Pursuant
      to the requirements 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
                INCORPORATEDDated:
                November 4, 2005
            By:
            /s/
                Dennis HighbyDennis
                HighbyPresident
                and Chief Executive OfficerDated:
                November 4, 2005
            By:
            /s/
                Ralph W. CastnerRalph
                W. CastnerVice
                President and Chief Financial
                Officer





42
 Table
          of Contents


EXHIBIT
      INDEX





Exhibit
              Number
            Description10
            First
                Amendment Agreement to Note Purchase Agreements dated as of September
                5,
                2002, among Cabela’s Incorporated and various purchasers party
                thereto31.1
            Certification
                of CEO Pursuant to Rule 13a-14(a) under the Exchange
                Act31.2
            Certification
                of CFO Pursuant to Rule 13a-14(a) under the Exchange
                Act32
            Certifications
                Pursuant to 18 U.S.C. Section 1350





43