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 March 29,
2008




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 a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.  (Check one):





Large
      accelerated filer x
            Accelerated
      filer o
            Non-accelerated
      filer o





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).  Yes o No x





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: 66,011,696 shares as of April 28, 2008.








1








CABELA’S INCORPORATED





FORM
10-Q


QUARTERLY
PERIOD ENDED MARCH 29, 2008


TABLE
OF CONTENTS








PagePART
      I – FINANCIAL INFORMATIONItem
      1.
            Financial
      StatementsCondensed
      Consolidated Statements of Income
            3Condensed
      Consolidated Balance Sheets
            4Condensed
      Consolidated Statements of Cash Flows
            5Notes
      to Condensed Consolidated Financial Statements
            6Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            19Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            35Item
      4.
            Controls
      and Procedures
            37Item
      4T.
            Controls
      and Procedures
            37PART
      II – OTHER INFORMATIONItem
      1.
            Legal
      Proceedings
            38Item
      1A.
            Risk
      Factors
            38Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            38Item
      3.
            Defaults
      Upon Senior Securities
            38Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            38Item
      5.
            Other
      Information
            38Item
      6.
            Exhibits
            39SIGNATURES
            40INDEX
      TO EXHIBITS
            41








2
 TABLE OF CONTENTS





PART I – FINANCIAL INFORMATION





Item
1.                      Financial
Statements





CABELA’S INCORPORATED AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)





Three Months EndedMarch
      29.
              2008
            
            
            March
      31,
              2007Revenue:Merchandise
    sales
            
            $
            490,911
            
            
            $
            422,639Financial services
      revenue
            
            
            40,708
            
            
            
            35,734Other revenue
            
            
            3,920
            
            
            
            3,718Total revenue
            
            
            535,539
            
            
            
            462,091Total
      cost of revenue (exclusive of depreciation and
    amortization)
            
            
            313,802
            
            
            
            278,032Selling,
      distribution, and administrative expenses
            
            
            200,651
            
            
            
            171,668Operating
      income
            
            
            21,086
            
            
            
            12,391Interest
      (expense) income, net
            
            
            (7,141
            )
            
            
            (3,398
            )Other
      non-operating income, net
            
            
            1,859
            
            
            
            2,196Income
      before provision for income taxes
            
            
            15,804
            
            
            
            11,189Provision
      for income taxes
            
            
            5,848
            
            
            
            4,047Net
      income
            
            $
            9,956
            
            
            $
            7,142Basic
      net income per share
            
            $
            0.15
            
            
            $
            0.11Diluted
      net income per share
            
            $
            0.15
            
            
            $
            0.11Basic
      weighted average shares outstanding
            
            
            65,934,381
            
            
            
            65,495,612Diluted
      weighted average shares outstanding
            
            
            66,575,573
            
            
            
            67,103,984





Refer to
notes to unaudited condensed consolidated financial statements.











3
 TABLE OF CONTENTS





CABELA’S INCORPORATED AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(Dollars
in Thousands Except Par Values)


(Unaudited)




ASSETS
            
            March
      29,
              2008
            
            
            December
      29,
              2007
            
            
            March
      31,
              2007CURRENTCash and cash
      equivalents
            
            $
            78,085
            
            
            $
            131,182
            
            
            $
            51,985Accounts receivable, net of
      allowance for doubtful accounts of $1,861, $1,851 and
              $1,701
            
            
            56,713
            
            
            
            46,857
            
            
            
            30,869Credit card loans, net of
      allowances of $1,210, $1,197 and $968
            
            
            175,254
            
            
            
            191,893
            
            
            
            130,056Inventories
            
            
            620,925
            
            
            
            608,159
            
            
            
            505,337Prepaid expenses and other
      current assets
            
            
            139,924
            
            
            
            116,297
            
            
            
            137,326Total current
      assets
            
            
            1,070,901
            
            
            
            1,094,388
            
            
            
            855,573Property
      and equipment, net
            
            
            900,280
            
            
            
            904,052
            
            
            
            637,111Land
      held for sale or development
            
            
            34,811
            
            
            
            34,802
            
            
            
            21,078Retained
      interests in securitized loans
            
            
            36,864
            
            
            
            51,777
            
            
            
            35,334Economic
      development bonds
            
            
            106,314
            
            
            
            98,035
            
            
            
            117,008Other
      assets
            
            
            30,685
            
            
            
            29,776
            
            
            
            18,678Total assets
            
            $
            2,179,855
            
            
            $
            2,212,830
            
            
            $
            1,684,782LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENTAccounts payable, including
      unpresented checks of $18,352, $11,340 and $18,502
            
            $
            190,328
            
            
            $
            281,391
            
            
            $
            239,668Gift certificates and credit
      card and loyalty rewards programs
            
            
            169,006
            
            
            
            184,257
            
            
            
            132,992Accrued
    expenses
            
            
            88,627
            
            
            
            139,510
            
            
            
            84,325Time deposits
            
            
            65,494
            
            
            
            49,219
            
            
            
            29,748Short-term borrowings of
      financial services subsidiary
            
            
            --
            
            
            
            100,000
            
            
            
            --Current maturities of
      long-term debt
            
            
            26,564
            
            
            
            26,785
            
            
            
            26,689Income taxes
      payable
            
            
            4,468
            
            
            
            34,341
            
            
            
            --Deferred income
      taxes
            
            
            15,568
            
            
            
            15,601
            
            
            
            15,508Total current
      liabilities
            
            
            560,055
            
            
            
            831,104
            
            
            
            528,930Long-term
      debt, less current maturities
            
            
            599,802
            
            
            
            376,600
            
            
            
            287,556Long-term
      time deposits
            
            
            118,071
            
            
            
            111,372
            
            
            
            71,094Deferred
      income taxes
            
            
            31,063
            
            
            
            31,113
            
            
            
            29,316Other
      long-term liabilities
            
            
            32,059
            
            
            
            34,082
            
            
            
            25,039COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      EQUITYPreferred stock, $0.01 par
      value; Authorized  -- 10,000,000 shares;  Issued –
      none
            
            
            --
            
            
            
            --
            
            
            
            --Common stock, $0.01 par
      value:Class A Voting,
      Authorized  –  245,000,000 shares;  Issued
      –  66,011,696,
              65,888,384 and 63,851,652
      shares
            
            
            660
            
            
            
            659
            
            
            
            639Class B Non-voting,
      Authorized  –  245,000,000 shares;  Issued
      –  none, none and
              1,820,437
shares
            
            
            --
            
            
            
            --
            
            
            
            18Additional paid-in
      capital
            
            
            260,047
            
            
            
            257,351
            
            
            
            251,571Retained
    earnings
            
            
            581,228
            
            
            
            571,272
            
            
            
            490,535Accumulated other
      comprehensive income (loss), net
            
            
            (3,130
            )
            
            
            (723
            )
            
            
            84Total stockholders’
      equity
            
            
            838,805
            
            
            
            828,559
            
            
            
            742,847Total liabilities and
      stockholders’ equity
            
            $
            2,179,855
            
            
            $
            2,212,830
            
            
            $
            1,684,782





Refer to
notes to unaudited condensed consolidated financial statements.  4
 TABLE OF CONTENTS


CABELA’S INCORPORATED AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(In
Thousands)


(Unaudited)




Three Months EndedCASH
      FLOWS FROM OPERATING ACTIVITIES:
            
            March
      29,
              2008
            
            
            March
      31,
              2007Net income
            
            $
            9,956
            
            
            $
            7,142Adjustments to reconcile net
      income to net cash flows from operating activities:Depreciation and
      amortization
            
            
            17,747
            
            
            
            13,253Stock based
      compensation
            
            
            1,420
            
            
            
            856Deferred income
      taxes
            
            
            (3,178
            )
            
            
            (3,455
            )Other, net
            
            
            (2,147
            )
            
            
            947Change in operating assets and
      liabilities:Accounts
      receivable
            
            
            (10,510
            )
            
            
            7,493Originations of credit card
      loans held for sale, net of collections
            
            
            15,908
            
            
            
            20,479Retained interests in
      securitized loans
            
            
            8,913
            
            
            
            3,699Inventories
            
            
            (12,766
            )
            
            
            (20,923
            )Prepaid expenses and other
      current assets
            
            
            (20,964
            )
            
            
            (29,448
            )Land held for sale or
      development
            
            
            (9
            )
            
            
            (131
            )Accounts payable and accrued
      expenses
            
            
            (132,738
            )
            
            
            (79,708
            )Gift certificates and credit
      card and loyalty rewards programs
            
            
            (15,251
            )
            
            
            (11,218
            )Other long-term
      liabilities
            
            
            2,467
            
            
            
            8,612Income taxes
      payable/receivable
            
            
            (29,888
            )
            
            
            (18,854
            )Net cash used in operating
      activities
            
            
            (171,040
            )
            
            
            (101,256
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Property
      and equipment additions
            
            
            (49,698
            )
            
            
            (37,640
            )Proceeds
      from maturities of economic development bonds
            
            
            128
            
            
            
            329Change
      in credit card loans receivable, net
            
            
            481
            
            
            
            1,580Change
      in cash reserves for retained interests
            
            
            6,000
            
            
            
            --Other
      investing changes, net
            
            
            (1,437
            )
            
            
            (366
            )Net cash used in investing
      activities
            
            
            (44,526
            )
            
            
            (36,097
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Change in unpresented checks
      net of bank balance
            
            
            7,012
            
            
            
            18,502Change in time deposits,
      net
            
            
            22,974
            
            
            
            (1,354
            )Changes in short-term
      borrowings of financial services subsidiary, net
            
            
            (100,000
            )
            
            
            (6,491
            )Borrowings on revolving credit
      facilities and inventory financing
            
            
            262,600
            
            
            
            33,175Repayments on revolving credit
      facilities and inventory financing
            
            
            (92,135
            )
            
            
            (30,822
            )Issuances of long-term
      debt
            
            
            61,200
            
            
            
            800Payments on long-term
      debt
            
            
            (548
            )
            
            
            (450
            )Exercise of employee stock
      options
            
            
            1,248
            
            
            
            2,329Other financing changes,
      net
            
            
            118
            
            
            
            746Net cash provided by financing
      activities
            
            
            162,469
            
            
            
            16,435Net
      change in cash and cash equivalents
            
            
            (53,097
            )
            
            
            (120,918
            )Cash
      and cash equivalents, at beginning of period
            
            
            131,182
            
            
            
            172,903Cash
      and cash equivalents, at end of period
            
            $
            78,085
            
            
            $
            51,985





Refer to
notes to unaudited condensed consolidated financial statements.








5
 TABLE OF CONTENTS





CABELA’S INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)







1.            MANAGEMENT
REPRESENTATIONS





The
condensed consolidated financial statements included herein are unaudited and
have been prepared by Cabela’s Incorporated and its wholly-owned subsidiaries
(“Cabela’s,” “Company,” “we,” “our,” or “us”) pursuant to the rules and
regulations of the United States Securities and Exchange Commission (“SEC”).
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations. Our condensed consolidated balance sheet as of December
29, 2007, was derived from the Company’s audited consolidated balance sheet as
of that date. All other condensed consolidated financial statements contained
herein are unaudited and reflect all adjustments which are, in the opinion of
management, necessary to summarize fairly our financial position and results of
operations and cash flows for the periods presented. All of these adjustments
are of a normal recurring nature. All material intercompany balances and
transactions have been eliminated in consolidation. Because of the seasonal
nature of our operations, results of operations of any single reporting period
should not be considered as indicative of results for a full year. These
condensed consolidated financial statements should be read in conjunction with
the Company’s audited consolidated financial statements for the fiscal year
ended December 29, 2007.





Reporting
Periods:





Unless
otherwise stated, the fiscal periods referred to in the notes to these condensed
consolidated financial statements are the 13 weeks ended March 29, 2008 (the
“three months ended March 2008”), the 13 weeks ended March 31, 2007 (the “three
months ended March 2007”), and the 52 weeks ended December 29, 2007 (“year ended
2007”).





Reclassification:





Effective
June 30, 2007, we reclassified an accrued interest receivable balance totaling
$5,672 associated with our economic development bonds from accounts receivable
to other current assets in the consolidated balance sheet as of March 31, 2007,
to conform to the presentations as of March 29, 2008, and December 29,
2007.  The corresponding line items in the condensed consolidated
statement of cash flows were also reclassified and there was no change in the
total of net cash derived from operating activities for the three months ended
March 31, 2007.  Total current assets were not affected by this
reclassification and there was no impact on cash flows or covenant
provisions.








2.
            CREDIT
      CARD LOANS AND SECURITIZATION





The
Company’s wholly-owned bank subsidiary, World’s Foremost Bank (“WFB”), has
established a trust for the purpose of routinely securitizing and selling credit
card loans. WFB maintains responsibility for servicing the securitized loans and
receives a servicing fee based on the average outstanding loans in the
trust.  Servicing fees are paid monthly and reflected as a component
of Financial Services revenue. The trust issues commercial paper, long-term
bonds, or long-term notes. Variable bonds and notes are priced at a benchmark
rate plus a spread.  Fixed rate notes are priced on a five-year swap
rate plus a spread.  WFB retains rights to future cash flows arising
after investors have received the return to which they are entitled and after
certain administrative costs of operating the trust. This portion of the
retained interests is known as interest-only strips and is subordinate to
investors’ interests. The value of the interest-only strips is subject to
credit, payment rate, and interest rate risks on the loans sold. The investors
have no recourse to the assets of WFB for failure of debtors to pay. However, as
contractually required, WFB establishes certain cash accounts, known as cash
reserve accounts, to be used as collateral for the benefit of
investors.





6
 TABLE OF CONTENTS





CABELA’S
INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)







Credit
card loans consisted of the following at or for the periods ended:





March
      29,
              2008
            
            
            December
      29,
              2007
            
            
            March
      31,
              2007Credit
      card loans held for sale (including transferor’s interest of
      $156,477,
              $166,700 and
      $112,394)
            
            $
            162,351
            
            
            $
            178,258
            
            
            $
            115,593Credit
      card loans receivable, net of allowances of $1,210, $1,197 and
      $968
            
            
            12,903
            
            
            
            13,635
            
            
            
            14,463Total
            
            $
            175,254
            
            
            $
            191,893
            
            
            $
            130,056Composition
      of credit card loans at year end:Loans serviced
            
            $
            1,942,892
            
            
            $
            2,058,235
            
            
            $
            1,530,641Loans securitized and sold to
      outside investors
            
            
            (1,758,000
            )
            
            
            (1,850,000
            )
            
            
            (1,396,000
            )Securitized loans with
      securities owned by WFB which are classified as
              retained
    interests
            
            
            (5,934
            )
            
            
            (12,650
            )
            
            
            (2,208
            )178,958
            
            
            
            195,585
            
            
            
            132,433Less adjustments to market
      value and allowance for loan losses
            
            
            (3,704
            )
            
            
            (3,692
            )
            
            
            (2,377
            )Total
      (including transferor’s interest of $156,477, $166,700 and
      $112,394)
            
            $
            175,254
            
            
            $
            191,893
            
            
            $
            130,056Transferor’s
      interest restricted for repayment of secured borrowing at the
              three, 12, and three months
      ended
            
            $
            --
            
            
            $
            133,333
            
            
            $
            --Delinquent
      loans in the managed credit card loan portfolio at the
              three, 12, and three months
      ended:30-89 days
            
            
            15,701
            
            
            
            14,319
            
            
            
            9,19590 days or more and still
      accruing
            
            
            6,003
            
            
            
            5,835
            
            
            
            3,475Total
      net charge-offs on the managed credit card loans portfolio for
      the
              three, 12, and three months
      ended
            
            
            12,390
            
            
            
            33,898
            
            
            
            7,333Annual
      average credit card loans:Managed credit card
      loans
            
            
            1,962,064
            
            
            
            1,690,543
            
            
            
            1,560,968Securitized credit card loans
      including transferor’s interest
            
            
            1,923,714
            
            
            
            1,656,078
            
            
            
            1,521,925Total
      net charge-offs as a percentage of annual average
              managed credit card
      loans
            
            
            2.53
            %
            
            
            2.01
            %
            
            
            1.88
            %





Retained
Interests:





Retained
interests in securitized loans consisted of the following at the periods
ended:





March
      29,
              2008
            
            
            December
      29,
              2007
            
            
            March
      31,
              2007Cash
      reserve account
            
            $
            6,028
            
            
            $
            11,965
            
            
            $
            9,886Interest-only
      strips
            
            
            24,902
            
            
            
            27,162
            
            
            
            23,240Class
      B securities
            
            
            5,934
            
            
            
            12,650
            
            
            
            2,208$
            36,864
            
            
            $
            51,777
            
            
            $
            35,334








7
 TABLE OF CONTENTS





CABELA’S
INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)










Certain
restrictions exist related to securitization transactions that protect
certificate and note holders against declining performance of the credit card
loans. In the event performance declines outside stated parameters and waivers
are not granted by certificate holders, note holders and/or credit enhancement
providers, a rapid amortization of the certificates and notes could potentially
occur. The credit card loans were performing within established guidelines
during the three months ended March 2008 and 2007.








3.           SHORT-TERM
BORROWINGS OF FINANCIAL SERVICES SUBSIDIARY





On June
21, 2007, WFB entered into a variable funding facility credit agreement that is
secured by a participation interest in the transferor’s interest of the Cabela’s
Master Credit Card Trust.  There was no amount outstanding at March
29, 2008, and at December 29, 2007, the principal amount of $100,000 was
outstanding.  The weighted average interest rate on the facility was
3.97% during the first quarter of 2008.  This credit agreement expires
on June 20, 2008.





WFB has
an unsecured federal funds purchase agreement with two financial
institutions.  The maximum amount that can be borrowed is $85,000.
There were no amounts outstanding at March 29, 2008, December 29, 2007, or March
31, 2007.  During the three months ended March 2008 and 2007, the
average balance outstanding was $37,695 and $959 with a weighted average rate of
3.58% and 5.71%, respectively.








4.
            LONG-TERM
      DEBT AND CAPITAL LEASES





Long-term
debt, including revolving credit facilities and capital leases, consisted of the
following at the periods ended:





March
      29,
              2008
            
            
            December
      29,
              2007
            
            
            March
      31,
              2007Unsecured
      revolving credit facility for $325,000 expiring June 30,
    2012
            
            $
            213,182
            
            
            $
            50,576
            
            
            $
            2,311Unsecured
      senior notes due 2008-2009 with interest at 4.95%
            
            
            50,000
            
            
            
            50,000
            
            
            
            75,000Unsecured
      notes payable due 2016 with interest at 5.99%
            
            
            215,000
            
            
            
            215,000
            
            
            
            215,000Senior
      unsecured notes payable due 2017 with interest at 6.08%
            
            
            60,000
            
            
            
            60,000
            
            
            
            --Unsecured
      senior notes due 2012-2018 with interest at 7.20%
            
            
            57,000
            
            
            
            --
            
            
            
            --Unsecured
      revolving credit facility for Canadian operations expiring
              June 30, 2010 with interest at
      4.94% at March 29, 2008
            
            
            7,189
            
            
            
            7,447
            
            
            
            --Capital
      lease obligations payable through 2036
            
            
            13,719
            
            
            
            13,939
            
            
            
            13,904Other
      long-term debt
            
            
            10,276
            
            
            
            6,423
            
            
            
            8,030Total debt
            
            
            626,366
            
            
            
            403,385
            
            
            
            314,245Less
      current portion of debt
            
            
            (26,564
            )
            
            
            (26,785
            )
            
            
            (26,689
            )Long-term debt, less current
      maturities
            
            $
            599,802
            
            
            $
            376,600
            
            
            $
            287,556








8
 TABLE OF CONTENTS





CABELA’S
INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)








As of
March 29, 2008, we had a credit agreement providing for a $325,000 unsecured
revolving credit facility that effective April 2, 2008, was increased to
$430,000.  Other than the increase in borrowing capacity, the terms of
the credit agreement remain unchanged.  The credit facility may be
increased to $450,000, and permits the issuance of up to $200,000 in letters of
credit and standby letters of credit, which reduce the overall credit limit
available under the credit facility.  The average principal balance
outstanding during the three months ended March 2008 and 2007 was $121,605 and
$3,016, respectively, and the weighted average interest rate for borrowings on
the line of credit was 4.38% and 6.32%.  Letters of credit and standby
letters of credit totaling $58,732, $59,596 and $68,793 were outstanding at
March 29, 2008, December 29, 2007, and March 31, 2007,
respectively.  The average outstanding amount of total letters of
credit during the three months ended March 2008 and 2007 was $44,025 and
$42,327, respectively.





On
January 16, 2008, we issued and sold $57,000 of 7.20% fixed-rate senior
unsecured notes to institutional buyers.  The notes have a final
maturity of 10 years (January 16, 2018) and an average life of seven
years.  Scheduled principal repayments of $8,143 are payable beginning
January 16, 2012, and annually thereafter.  Interest is payable
semi-annually.  We used the proceeds to pay down existing debt and for
general corporate purposes.





We have
financing agreements that allow certain boat and all-terrain vehicle merchandise
vendors to give us extended payment terms.   The vendors are
responsible for all interest payments, with certain exceptions, for the
financing period and the financing company holds a security interest in the
specific inventory held by Cabela’s.  We record this merchandise in
inventory.  Our revolving credit facility limits this security
interest to $50,000.  The extended payment terms to the vendor do not
exceed one year.  The outstanding liability, included in accounts
payable, was $16,045, $7,988 and $9,871 at March 29, 2008, December 29, 2007,
and March 31, 2007, respectively.





At March
29, 2008, we were in compliance with all financial covenants under our credit
agreements and unsecured notes.








5.
            INTEREST
      (EXPENSE) INCOME, NET





Interest
expense, net of interest income, consisted of the following for the periods
presented.





Three Months EndedMarch
      29,
              2008
            
            
            March
      31,
              2007Interest
      expense
            
            $
            (7,580
            )
            
            $
            (4,694
            )Capitalized
      interest
            
            
            416
            
            
            
            60Interest
      income
            
            
            23
            
            
            
            1,236$
            (7,141
            )
            
            $
            (3,398
            )










9
 TABLE OF CONTENTS





CABELA’S
INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)







6.
            COMMITMENTS
      AND CONTINGENCIES





We lease
various buildings, computer equipment, signs, and storage space under operating
leases, which expire on various dates through April 2033.  Rent
expense on these leases as well as other month to month rentals was $3,137 and
$2,754, respectively, for the three months ended March 2008 and 2007. The
following is a schedule of future minimum rental payments under operating leases
as of March 29, 2008:





For
      the nine months ending December 27, 2008
            
            $
            4,678For
      fiscal years:2009
            
            
            5,3182010
            
            
            5,0042011
            
            
            4,5862012
            
            
            4,167Thereafter
            
            
            78,102$
            101,855





We have
entered into certain lease agreements for retail store
locations.  Certain leases include tenant allowances that will be
amortized over the life of the lease. We expect to receive tenant allowances
approximating $16,020 in 2008.  During the three months ended March
29, 2008, we did not receive any tenant allowances.




We have
entered into real estate purchase, construction, and/or economic development
agreements for various new retail store site locations.  At March 29,
2008, we had total estimated cash commitments of approximately $110,000 for
projected retail store-related expenditures and the purchase of future economic
development bonds connected with the development, construction, and completion
of new retail stores for 2008 and 2009.  This does not include any
amounts for contractual obligations associated with retail store locations where
we are in the process of certain negotiations.





Under
various grant programs, state or local governments provide funding for certain
costs associated with developing and opening a new retail store. We generally
receive grant funding in exchange for commitments, such as assurance of agreed
employment and wage levels at the retail store or that the retail store will
remain open, made by us to the state or local government providing the funding.
The commitments typically phase out over five to 10 years.  If we fail
to maintain the commitments during the applicable period, the funds received may
have to be repaid or other adverse consequences may arise, which could affect
our cash flows and profitability. As of March 29, 2008, December 29, 2007, and
March 31, 2007, the total amount of grant funding subject to a specific
contractual remedy was $12,461, $13,049 and $13,903, respectively.





Under our
open account document instructions program, we had obligations to pay
participating vendors $7,311 and $6,399 as of March 29, 2008, and December 29,
2007, respectively.  This program began in April 2007.





WFB
enters into financial instruments with off balance sheet risk in the normal
course of business through the origination of unsecured credit card loans. These
financial instruments consist of commitments to extend credit, totaling
$12,032,000, $11,635,000 and $10,071,000, in addition to any outstanding
balances a cardholder has, at March 29, 2008, December 29, 2007, and March 31,
2007, respectively. These instruments involve, to varying degrees, elements of
credit risk in excess of the amount recognized in the consolidated balance
sheets. The principal amounts of these instruments reflect the maximum exposure
WFB has in the instruments. WFB has not experienced and does not anticipate that
all of the customers will exercise their entire available line of credit at any
given point in time. WFB has the right to reduce or cancel these available lines
of credit at any time.





10
 TABLE OF CONTENTS





CABELA’S
INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)






Litigation and
Claims– We are party to various proceedings, lawsuits, disputes, and
claims arising in the ordinary course of our business.  These actions
include commercial, intellectual property, employment, and product liability
claims.  Some of these actions involve complex factual and legal
issues and are subject to uncertainties.  We cannot predict with
assurance the outcome of the actions brought against us.  Accordingly,
adverse developments, settlements, or resolutions may occur and negatively
impact earnings in the quarter of such development, settlement, or
resolution.  However, we do not believe that the outcome of any
current action would have a material adverse effect on our results of
operations, cash flows, or financial position taken as a whole.






7. STOCK
OPTION PLANS





Employee Stock
Option Plans– The Cabela’s Incorporated 2004 Stock Plan (the “2004
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. Options
granted under the 2004 Plan 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.  As of March
29, 2008, there were 3,571,652 shares subject to options and 2,560,551 shares
authorized and available for grant under the 2004 Plan.





As of
March 29, 2008, under our 1997 Stock Option Plan (the “1997 Plan”), there were
1,586,125 shares subject to options with no shares available for
grant.  Options issued expire on the fifth or the tenth anniversary of
the date of the grant under the 1997 Plan.





During
the three months ended March 2008, there were 123,312 options
exercised.  The aggregate intrinsic value of awards exercised was $518
and $4,815 during the three months ended March 2008 and 2007,
respectively.  Based on our closing stock price of $14.11 as of March
29, 2008, the total number of in-the-money awards exercisable at March 29, 2008,
was 1,603,737.





We
recorded share-based compensation expense of $1,420 ($895 after-tax, or $0.01
per diluted share) and $856 ($535 after-tax, or $.01 per diluted share) for the
three months ended March 2008 and 2007, respectively.  Compensation
expense related to our share-based payment awards is recorded in selling,
distribution, and administrative expenses in the consolidated statements of
income.





As of
March 29, 2008, the total unrecognized deferred share-based compensation balance
for unvested shares issued, net of expected forfeitures, was approximately
$6,963, net of tax, which is expected to be amortized over a weighted average
period of 3.25 years.





Employee Stock
Purchase Plan– The maximum number of shares of common stock available
for issuance under our Employee Stock Purchase Plan (the “ESPP”) is
1,835,000.  During the three months ended March 2008, there were
50,113 shares issued under the ESPP.  As of March 29, 2008, there were
1,395,163 shares authorized and available for issuance.  We intend to
utilize market purchases, rather than new issuances, whenever
possible.








8.
            STOCKHOLDERS’
      EQUITY AND DIVIDEND RESTRICTIONS





The most
significant restrictions on the payment of dividends are the covenants contained
in our revolving credit agreement and unsecured senior notes purchase
agreements.  At March 29, 2008, we had unrestricted retained earnings
of $108,933 available for dividends.  However, we have never declared
or paid any cash dividends on our common stock and we do not anticipate paying
any cash dividends in the foreseeable future.  Nebraska banking laws
also govern the amount of dividends that WFB can pay to Cabela’s.





11
 TABLE OF CONTENTS





CABELA’S
INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)







Other
Comprehensive Income (Loss)– The components of accumulated other
comprehensive income (loss), net of related taxes, are as follows at the periods
ended:




March
      29,
              2008
            
            
            December
      29,
              2007
            
            
            March
      31,
              2007Accumulated
      net unrealized holding gains (losses) on economic
              development
    bonds
            
            $
            (3,254
            )
            
            $
            (806
            )
            
            $
            43Accumulated
      net unrealized holding gains on derivatives
            
            
            133
            
            
            
            76
            
            
            
            41Cumulative
      foreign currency translation adjustments
            
            
            (9
            )
            
            
            7
            
            
            
            --Total
      accumulated other comprehensive income (loss)
            
            $
            (3,130
            )
            
            $
            (723
            )
            
            $
            84








9.           COMPREHENSIVE
INCOME





The
components of comprehensive income and related tax effects were as follows for
the periods presented.





Three Months EndedMarch
      29,
                2008
              
              
              March
      31,
                2007Net
      income
              
              $
              9,956
              
              
              $
              7,142Changes
      in net unrealized holding losses on economic development
                bonds, net of taxes of $1,438 and
      $149
              
              
              (2,448
              )
              
              
              (248
              )Changes
      in net unrealized holding gains on derivatives designated as
                cash flow hedges, net of taxes of
      $66 and $14
              
              
              113
              
              
              
              24Less
      adjustment for reclassification of derivatives included
                in net income, net of taxes of
      $32 and $4
              
              
              (56
              )
              
              
              (6
              )57
              
              
              
              18Foreign
      currency translation adjustment
              
              
              (16
              )
              
              
              --Comprehensive
      income
              
              $
              7,549
              
              
              $
              6,912










12
 TABLE OF CONTENTS





CABELA’S
INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)







10.
            EARNINGS
      PER SHARE





The
following table reconciles the number of shares utilized in the earnings per
share calculations for the periods presented.





Three Months EndedMarch
      29,
              2008
            
            
            March
      31,
              2007Weighted average
      number of shares:Common
      shares – basic
            
            
            65,934,381
            
            
            
            65,495,612Effect of incremental dilutive
      securities:Stock options and employee
      stock purchase plan shares
            
            
            641,192
            
            
            
            1,608,372Common
      shares – diluted
            
            
            66,575,573
            
            
            
            67,103,984Options
      outstanding considered anti-dilutive
            
            
            3,102,626
            
            
            
            4,000








11.           SUPPLEMENTAL
CASH FLOW INFORMATION





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





March
      29,2008
            
            
            March
      31,2007Non-cash financing and
      investing activities:Accrued
      property and equipment additions (1)
            
            $
            24,112
            
            
            $
            32,118Capital
      lease obligations
            
            
            --
            
            
            
            201Other cash flow
      information:Interest
      paid
            
            $
            11,082
            
            
            $
            9,975Capitalized
      interest
            
            
            (416
            )
            
            
            (60
            )Interest
      paid, net of capitalized interest
            
            $
            10,666
            
            
            $
            9,915Income
      taxes, net
            
            $
            36,198
            
            
            $
            22,100





(1)
            Accrued property and equipment
      additions are recognized in the condensed consolidated statements of cash
      flows in the period they are
paid.








13
 TABLE OF CONTENTS





CABELA’S
INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)








12.           SEGMENT
REPORTING





We have
three reportable segments: Retail, Direct, and Financial
Services.  The Retail segment sells products and services through our
retail stores; the Direct segment sells products through direct mail catalogs
and e-commerce websites (Cabelas.com and complementary websites); and the
Financial Services segment issues co-branded credit cards.  Operating
costs for the Retail segment primarily consists of labor, advertising,
depreciation, and occupancy costs of retail stores.  For the Direct
segment, operating costs primarily consist of catalog costs, e-commerce
advertising costs, and order processing costs.  Operating costs for
the Financial Services segment primarily consists of advertising and promotion,
marketing fees, third party services for processing credit card transactions,
salaries, and other general and administrative costs.





Revenue
included in Corporate Overhead and Other is primarily made up of land sales,
amounts received from our outfitter services, real estate rental income, and
fees earned through our travel business and other complementary business
services.  Corporate Overhead and Other expenses include unallocated
shared-service costs, operations of various ancillary subsidiaries such as real
estate development and travel, and eliminations.  Unallocated
shared-service costs include receiving, distribution, and storage costs of
inventory, merchandising, and quality assurance costs, as well as corporate
headquarters occupancy costs.





Segment
assets are those directly used in or clearly allocable to an operating segment’s
operations.  For the Retail segment, assets include inventory in the
retail stores, land, buildings, fixtures, and leasehold
improvements.   For the Direct segment, assets include deferred
catalog costs and fixed assets.  Included in the assets of these two
segments is goodwill totaling $4,474 as of March 29, 2008, that has been
allocated $969 to the Direct segment and $3,505 to the Retail
segment.  For the Financial Services segment, assets include cash,
credit card loans, retained interest, buildings, and fixtures.  Assets
for the Corporate Overhead and Other segment include corporate headquarters and
facilities, merchandise distribution inventory, shared technology infrastructure
and related information systems, corporate cash and cash equivalents, economic
development bonds, prepaid expenses, deferred income taxes, and other 
corporate long-lived assets.  Depreciation, amortization, and property
and equipment expenditures of each segment are allocated to each respective
segment.  Intercompany revenue between segments has been eliminated in
consolidation.





Results
by business segment are presented in the following table for the three months
ended March 2008 and 2007:




Three Months Ended
              March 29, 2008:
            
            Retail
            
            
            Direct
            
            
            Financial
              Services
            
            
            Corporate
              Overhead
              and Other
            
            
            TotalRevenue
      from external
            
            $
            253,947
            
            
            $
            236,019
            
            
            $
            40,810
            
            
            $
            4,763
            
            
            $
            535,539Revenue
      (loss) from internal
            
            
            428
            
            
            
            517
            
            
            
            (102
            )
            
            
            (843
            )
            
            
            --Total revenue
            
            $
            254,375
            
            
            $
            236,536
            
            
            $
            40,708
            
            
            $
            3,920
            
            
            $
            535,539Operating
      income (loss)
            
            $
            26,939
            
            
            $
            33,476
            
            
            $
            10,777
            
            
            $
            (50,106
            )
            
            $
            21,086As a percentage of
      revenue
            
            
            10.6
            %
            
            
            14.2
            %
            
            
            26.5
            %
            
            
            N/A
            
            
            
            3.9
            %Depreciation
      and amortization
            
            $
            10,003
            
            
            $
            1,053
            
            
            $
            298
            
            
            $
            6,393
            
            
            $
            17,747Assets
            
            
            995,526
            
            
            
            508,260
            
            
            
            383,865
            
            
            
            292,204
            
            
            
            2,179,855





14
 TABLE OF CONTENTS





CABELA’S
INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)




Three Months Ended
              March 31, 2007:
            
            Retail
            
            
            Direct
            
            
            Financial
              Services
            
            
            Corporate
              Overhead
              and Other
            
            
            TotalRevenue
      from external
            
            $
            184,247
            
            
            $
            237,542
            
            
            $
            35,884
            
            
            $
            4,418
            
            
            $
            462,091Revenue
      (loss) from internal
            
            
            507
            
            
            
            343
            
            
            
            (150
            )
            
            
            (700
            )
            
            
            --Total revenue
            
            $
            184,754
            
            
            $
            237,885
            
            
            $
            35,734
            
            
            $
            3,718
            
            
            $
            462,091Operating
      income (loss)
            
            $
            17,355
            
            
            $
            32,493
            
            
            $
            8,559
            
            
            $
            (46,016
            )
            
            $
            12,391As a percentage of
      revenue
            
            
            9.4
            %
            
            
            13.7
            %
            
            
            24.0
            %
            
            
            N/A
            
            
            
            2.7
            %Depreciation
      and amortization
            
            $
            6,133
            
            
            $
            1,008
            
            
            $
            264
            
            
            $
            5,848
            
            
            $
            13,253Assets
            
            
            659,439
            
            
            
            498,590
            
            
            
            319,230
            
            
            
            207,523
            
            
            
            1,684,782





The
components and amounts of total revenue for the Financial Services business
segment were as follows for the periods presented.




Three Months EndedMarch
      29,
              2008
            
            
            March
      31,
              2007Interest
      and fee income, net of provision for loan losses
            
            $
            10,380
            
            
            $
            4,760Interest
      expense
            
            
            (3,502
            )
            
            
            (1,240
            )Net interest income, net of
      provision for loan losses
            
            
            6,878
            
            
            
            3,520Non-interest
      income:Securitization
      income
            
            
            43,698
            
            
            
            43,610Other non-interest
      income
            
            
            16,588
            
            
            
            11,172Total non-interest
      income
            
            
            60,286
            
            
            
            54,782Less: Customer rewards
      costs
            
            
            (26,456
            )
            
            
            (22,568
            )Financial
      Services total revenue
            
            $
            40,708
            
            
            $
            35,734







Our
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 merchandise sales in each
reported period. No single customer accounts for 10% or more of consolidated net
sales. No single product or service accounts for a significant percentage of our
consolidated revenue.







15
 TABLE OF CONTENTS





CABELA’S
INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)







13. FAIR
VALUE MEASUREMENTS





Effective
December 30, 2007, we adopted the provisions of Financial Accounting Standards
(“FAS”) No. 157, Fair Value
Measurements.  This statement defines fair value, establishes a
hierarchal disclosure framework for measuring fair value, and requires expanded
disclosures about fair value measurements.  The provisions of FAS 157
apply to all financial instruments that are being measured and reported on a
fair value basis.  In addition, in February 2008, the Financial
Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) FAS
157-2, Effective Date of FASB
Statement No. 157.  This FSP delays the effective date of FAS
157 to fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years for all nonfinancial assets and liabilities, except
those that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually).  The partial adoption of FAS
157 did not have any impact on our financial position or results of
operations.  We do not believe that the adoption of FAS 157, as it
relates to nonfinancial assets and liabilities, will have a material impact on
our financial position or results of operations.





As
defined by FAS 157, fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.  In determining fair value, we
use various methods including discounted cash flow projections based on
available market interest rates and management estimates of future cash
payments.   Financial instrument assets and liabilities measured
and reported at fair value are classified and disclosed in one of the following
categories:





·
            Level
      1 - Quoted market prices in active markets for identical assets or
      liabilities.·
            Level
      2 – Observable market based inputs or unobservable inputs that are
      corroborated by market data.·
            Level
      3 – Unobservable inputs that are not corroborated by market
      data.





Level 3
is comprised of financial instruments whose fair value is estimated based on
internally developed models or methodologies utilizing significant inputs that
are unobservable from objective sources.  In determining the
appropriate levels, we performed analysis of the assets and liabilities that are
subject to FAS 157 and determined that at March 29, 2008, all applicable
financial instruments carried on our consolidated balance sheets are classified
as Level 3.  The following table summarizes the valuation of our
recurring financial instruments at March 29, 2008.





Assets
            
            Fair
      Value
              Measurements
              Using Level 3
            
            
            Fair
      Value at
              March
      29,
              2008Credit
      card loans
            
            $
            162,351
            
            
            $
            162,351Retained
      interests in securitized loans
            
            
            36,864
            
            
            
            36,864Economic
      development bonds
            
            
            106,314
            
            
            
            106,314$
            305,529
            
            
            $
            305,529








16
 TABLE OF CONTENTS








CABELA’S
INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)







The table
below presents a reconciliation for the assets measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) during the three
months ended March 29, 2008.




Assets
            
            Credit
      Card
              Loans
            
            
            Retained
              Interests
      in
              Securitized
              Loans
            
            
            Economic
              Development
              BondsBalance,
      December 30, 2007
            
            $
            178,258
            
            
            $
            51,777
            
            
            $
            98,035Total
      gains or losses (realized/unrealized):Included in
      earnings
            
            
            --
            
            
            
            (2,197
            )
            
            
            --Included in other
      comprehensive income
            
            
            --
            
            
            
            --
            
            
            
            (3,886
            )Purchases,
      issuances, and settlements, net
            
            
            (15,907
            )
            
            
            (12,716
            )
            
            
            12,165Transfers
      in/out of Level 3
            
            
            --
            
            
            
            --
            
            
            
            --Balance,
      March 29, 2008
            
            $
            162,351
            
            
            $
            36,864
            
            
            $
            106,314





The
carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable, gift certificates (including credit card and loyalty rewards programs),
accrued expenses, short-term borrowings, and income taxes payable included in
the consolidated balance sheets approximate fair value given the short-term
nature of these financial instruments.  The estimated fair value and
disclosures for time deposits and long-term debt included in the consolidated
balance sheets are reported under the provisions of FAS 107 Disclosures About Fair Value of
Financial Instruments.





Fair
values of economic development bonds (“bonds”) are estimated using discounted
cash flow projections based on available market interest rates and management
estimates including the estimated amounts and timing of expected future tax
payments to be received by the municipalities under development
zones.  These fair values do not reflect any premium or discount that
could result from offering these bonds for sale or through early redemption, or
any related income tax impact.  Declines in the fair value of
held-to-maturity and available-for-sale economic development bonds below cost
that are deemed to be other than temporary are reflected in
earnings.





Credit
card loans classified as held for sale, which includes WFB’s transferor’s
interest in securitized credit card loans, are carried at the lower of cost or
market.  Net unrealized losses, if any, are recognized in income
through a valuation allowance.  WFB’s securitization transactions are
treated as sales and the securitized loans are not included in our consolidated
balance sheet.  Gains or losses are recognized at the time of sale,
and depend, in part, on the carrying amount assigned to the credit card loans
sold, which is allocated between the assets sold and retained
interest  based on their relative fair values at date of
transfer.





For
interest-only strips, we estimate related fair values based on the present value
of future expected cash flows using assumptions for credit losses, payment
rates, and discount rates commensurate with the risks involved.  WFB
retains the rights to remaining cash flows (including interchange fees) after
the other costs of the trust are paid.  However, future expected cash
flows for valuation of the interest-only strips do not include interchange
income since interchange income is earned only when a charge is made to a
customer’s account.  WFB is required to maintain a cash reserve
account under certain securitization programs.  The fair value of the
cash reserve accounts are estimated by discounting future cash flows using a
rate reflecting the risks commensurate with similar types of
instruments.  In addition, WFB owns Class B securities from one of the
securitizations.  For the Class B securities, fair value approximates
the book value of the underlying loans.










17
 TABLE OF CONTENTS





CABELA’S
INCORPORATED AND SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Dollars
in Thousands Except Share and Per Share Amounts)


(Unaudited)







14.
            ACCOUNTING
      PRONOUNCEMENTS





As of
December 30, 2007, FAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement No.
115, became effective for the Company.  This statement permits
entities to choose to measure many financial instruments and certain other items
at fair value.  As of March 29, 2008, we had not elected to adopt the
fair value option under FAS 159 on any of our financial instruments or other
items we held.





In
December 2007, the FASB issued FAS No. 141R, Business Combinations, which
replaces FAS No. 141.  FAS 141R establishes principles and
requirements for how the acquirer of a business recognizes and measures in its
financial statements the identifiable assets acquired and the liabilities
assumed.   This statement applies prospectively to all business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.  FAS 141R will be applicable to us beginning in
2009.





In
December 2007, the FASB issued FAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No.
51.  This statement amends ARB No. 51 to establish accounting
and reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary.  FAS 160 is effective for fiscal
years beginning on or after December 15, 2008, including interim
periods.  We do not believe that the adoption of this statement will
have a material effect on our financial position or results of
operations.





In
February 2008, the FASB issued FSP FAS 140-3, Accounting for Transfers of
Financial Assets and Repurchase Financing Transactions.The
objective of this FSP is to provide implementation guidance on accounting for a
transfer of a financial asset and repurchase financing.  The FSP
presumes that an initial transfer of a financial asset and a repurchase
financing are considered part of the same arrangement (linked transaction) under
FAS 140.  However, if certain criteria are met, the initial transfer
and repurchase financing shall not be evaluated as a linked transaction and
shall not be evaluated under FAS 140.  FSP FAS 140-3 is effective for
fiscal years beginning after November 15, 2008.  We are currently
evaluating the effect of FSP FAS 140-3 will have on our consolidated financial
statements.





In March
2008, the FASB issued FAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133.This statement changesthe existing disclosure
requirements in FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities.FAS
161 requires enhanced disclosures about an entity’s derivative and hedging
activities.  This statement is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged. Since the provisions of this statement are
disclosure related, we do not believe that the adoption of this statement will
have a material effect on our financial position or results of
operations.











18
 TABLE OF CONTENTS








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





This
report 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,” 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
      strength of the economy;·
            the
      level of discretionary consumer spending;·
            changes
      in consumer preferences and demographic trends;·
            our
      ability to successfully execute our multi-channel
  strategy;·
            the
      ability to negotiate favorable purchase, lease, and/or economic
      development arrangements for new retail store
locations;·
            expansion
      into new markets;·
            market
      saturation due to new retail store openings;·
            the
      rate of growth of general and administrative expenses associated with
      building a strengthened corporate infrastructure to support our growth
      initiatives;·
            increasing
      competition in the outdoor segment of the sporting goods
      industry;·
            the
      cost of our products;·
            trade
      restrictions;·
            political
      or financial instability in countries where the goods we sell are
      manufactured;·
            adverse
      fluctuations in foreign currencies;·
            increases
      in postage rates or paper and printing costs;·
            supply
      and delivery shortages or interruptions caused by system changes or other
      factors;·
            adverse
      or unseasonal weather conditions;·
            fluctuations
      in operating results;·
            the
      cost of fuel increasing;·
            road
      construction around our retail stores;·
            labor
      shortages or increased labor costs;·
            increased
      government regulation;·
            inadequate
      protection of our intellectual property;·
            our
      ability to protect our brand and reputation;·
            decreased
      interchange fees received by our Financial Services business as a result
      of credit card industry litigation;·
            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 Section 1A of Part II of
      this report and the “Risk Factors” section of our Annual Report on Form
      10-K for the fiscal year ended December 29, 2007 (our “2007 Form 10-K”)),
      which filings are available at the SEC’s website atwww.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 2007 Form
10-K, as filed with the SEC, and our unaudited interim condensed consolidated
financial statements and the notes thereto appearing elsewhere in this
report.





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Critical
Accounting Policies and Use of Estimates





Our
condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
which requires us to make estimates and judgments that affect amounts reported
in the condensed consolidated financial statements and accompanying notes.
Management has discussed the development, selection, and disclosure of critical
accounting policies and estimates with the Audit Committee of Cabela’s Board of
Directors.  While our estimates and assumptions are based on our
knowledge of current events and actions we may undertake in the future, actual
results may ultimately differ from our estimates and assumptions.  Our
estimation processes contain uncertainties because they require management to
make assumptions and apply judgment to make these estimates.  Should
actual results be different than our estimates, we could be exposed to gains or
losses from differences that are material.





Our
critical accounting policies and use of estimates utilized in the preparation of
the condensed consolidated financial statements as of March 29, 2008, remain
unchanged from December 29, 2007.





Cabela’s®





We are a
leading specialty retailer, and the world’s largest direct marketer, of hunting,
fishing, camping, and related outdoor merchandise.  We provide a
quality service to our customers who enjoy an outdoor lifestyle by supplying
outdoor products through our multi-channel retail business consisting of our
Retail and Direct business segments.  Our Retail business segment is
comprised of 27 stores, 26 located in the United States and one in
Canada.   Our Direct business segment is comprised of our catalog
mail order business and our highly acclaimed Internet website.





Our
Financial Services business segment plays an integral role in supporting our
merchandising business.  Our Financial Services business segment is
comprised of our credit card services, which reinforces our strong brand and
strengthens our customer loyalty through our credit card loyalty
programs.





Financial
Overview




Three Months EndedMarch
      29,
                    2008
                  
                  
                  March
      31,
                    2007
                  
                  
                  Increase
                    (Decrease)
                  
                  
                  %
                    Change(Dollars
      in Thousands)Revenue:Retail
                  
                  $
                  254,375
                  
                  
                  $
                  184,754
                  
                  
                  $
                  69,621
                  
                  
                  
                  37.7
                  %Direct
                  
                  
                  236,536
                  
                  
                  
                  237,885
                  
                  
                  
                  (1,349
                  )
                  
                  
                  (0.6
                  )Total merchandise
      sales
                  
                  
                  490,911
                  
                  
                  
                  422,639
                  
                  
                  
                  68,272
                  
                  
                  
                  16.2Financial
    Services
                  
                  
                  40,708
                  
                  
                  
                  35,734
                  
                  
                  
                  4,974
                  
                  
                  
                  13.9Other revenue
                  
                  
                  3,920
                  
                  
                  
                  3,718
                  
                  
                  
                  202
                  
                  
                  
                  5.4Total revenue
                  
                  $
                  535,539
                  
                  
                  $
                  462,091
                  
                  
                  $
                  73,448
                  
                  
                  
                  15.9Operating
      income
                  
                  $
                  21,086
                  
                  
                  $
                  12,391
                  
                  
                  $
                  8,695
                  
                  
                  
                  70.2Net
      income per diluted share
                  
                  $
                  0.15
                  
                  
                  $
                  0.11
                  
                  
                  $
                  0.04
                  
                  
                  
                  36.4




Revenues
for the first quarter of 2008 totaled $536 million, an increase of 15.9% over
the first quarter of 2007, principally from the opening of eight new stores –
one each in April 2007 and September 2007, and six in the fourth quarter of
2007.  Operating income totaled $21 million for the three months ended
March 2008, an increase of 70.2% over the first quarter of 2007.  Net
income per diluted share for the three months ended March 2008 was $0.15 versus
$0.11 for the three months ended March 2007.







20
 TABLE OF CONTENTS





Even
though our operating results for the first quarter of 2008 improved
significantly compared to the first quarter of 2007, we continue to be impacted
by a challenging retail and macroeconomic environment resulting in slowed retail
store and Direct sales.  Comparable store sales decreased $15 million,
or 8.4%, for the first quarter of 2008 compared to the first quarter of 2007.
Other significant items which directly impacted comparisons of our operating
results for the first quarter of 2008 to the first quarter of 2007
were:





·
            an
      increase of $33 million, or 22.5%, in our merchandise gross margin, with
      an increase to 36.1% in our merchandise gross margin as a percentage of
      revenue for the first quarter of 2008 compared to 34.2% for the first
      quarter of 2007, an increase of 190 basis points;·
            an
      increase in our operating income of $9 million, or 70.2%,  to
      $21 million for the three months ended March 2008 due to increases in our
      Retail and Direct merchandise gross margins and to labor efficiencies in
      these segments compared to the first quarter of 2007;·
            an
      increase in Financial Services revenue principally from growth in the
      number of average active credit card accounts and average managed credit
      card loans, partially offset by higher credit card loan charge-offs;
      and·
            new
      store pre-opening costs of $2 million in the first quarter of 2008 from
      the planned opening of two new stores (one to open May 2008 and the other
      store to open in August 2008), a decrease of $1 million compared to
      pre-opening costs in the first quarter of
2007.





As we
stated in our 2007 annual report, our primary focus for 2008 is on managing our
business efficiently to enhance near-term and long-term results for our
shareholders. We are focusing on improving our retail store operating
metrics.  We have slowed our new store opening schedule to two stores
in 2008 given the continued slowdown projected in discretionary consumer
spending for the remainder of 2008.  Our focus is on the following
initiatives:





·
            improve
      our advertising strategy by using more targeted campaigns throughout our
      multi-channel model to increase store traffic;·
            improve
      retail store sales and profitability through enhanced product assortment,
      streamlined flow of merchandise to our retail stores, and reduced
      operating expenses;·
            maintain
      merchandise gross margins in our sales channels;·
            improve
      inventory management by actively managing quantities and product
      deliveries through enhanced leveraging of existing technologies, and by
      reducing unproductive inventory; and·
            the
      successful opening of two new stores in
2008.




Retail Store Efficiencies– Our primary
objective is to enhance our retail store efficiencies and improve our operating
results.  We are working to achieve this objective by enhancing and
optimizing our retail store merchandising processes, management information
systems, and distribution and logistics capabilities.  To enhance our
customer service at our retail stores, we are focusing on customer service
through training and mentoring programs.





For the
three months ended March 2008 compared to 2007, despite a deteriorating consumer
spending environment,  operating income for our Retail business
segment increased $10 million, and operating income as a percentage of revenue
increased for our Retail segment to 10.6% from 9.4%. We plan to open our
Scarborough, Maine, store in May 2008 and our Rapid City, South Dakota, store in
August 2008.





Leverage
Our Multi-Channel Model–We are
offering customers integrated opportunities to access and use our retail store,
catalog, and Internet channels, including in the first quarter of 2008 the
completion of ourcustomer service enhancements roll-out.  Our
in-store pick-up program allows customers to order products through our catalogs
and Internet site, and have them delivered to the retail store of their choice
without incurring shipping costs, increasing foot traffic in our
stores.  Conversely, our expanding retail stores introduce customers
to our Internet and catalog channels.  Our multi-channel model employs
the same merchandising team, distribution centers, customer database, and
infrastructure, which we intend to further capitalize on by building on the
strengths of each channel, primarily through improvements in our merchandise
planning and replenishment systems.  These systems allow us to
identify the correct product mix in each of our retail stores, and also helps
maintain the proper inventory levels to satisfy customer demand in both our
Retail and Direct business channels.





21
 TABLE OF CONTENTS










Next Generation Stores – To
enhance our returns on capital we are developing a next generation store format
which incorporates the following objectives:





·
            a
      store development modelthat will be
      adaptable to more markets, faster to start-up,and more efficient
      to operate to reduce our investment and increase sales per square
      foot; and·
            to
      provide shopper-friendly layouts with regionalized product mixes, concept
      shops, and new product displays/fixtures featuring an improved
      look.





We plan
on incorporating many of these next generation store concepts into our Rapid
City, South Dakota, store scheduled to open in August 2008.




Internet Expansion – We are
working on the following key growth objectives to expand our Internet
channel:


·
            natural
      growth by offering industry-leading selection, service, value, and
      quality;·
            category
      expansion to capitalize on the general outdoor enthusiast;
    and·
            targeted
      marketing designed to increase sales overall and to transition customers
      from the catalog channel.





During
the first quarter of 2008, our Direct revenue decreased $1 million due in part
to catalog sales lower for the first quarter of 2008 compared to 2007
and some cannibalization relating to our new retail stores that opened in
late 2007.  For the three months ended March 2008 compared to March
2007, operating income for our Direct business segment increased $1 million, and
operating income as a percentage of revenue for our  Direct segment
increased to 14.2% from 13.7%.





Growth of Our Credit Card
Business –We are increasing our
Financial Services revenue by attracting new cardholders through low cost
marketing efforts with our Retail and Direct businesses.  We are
controlling costs in our Financial Services segment by actively managing default
rates, delinquencies, and charge-offs, by continuing our conservative
underwriting and account management standards and practices.





Operations
Review





The three
months ended March 29, 2008, and March 31, 2007, each consisted of 13 weeks. Our
operating results expressed as a percentage of revenue were as follows for the
three months ended:





March
      29,
              2008
            
            
            March
      31,
              2007Revenue
            
            
            100.00
            %
            
            
            100.00
            %Cost
      of revenue
            
            
            58.60
            
            
            
            60.17Gross profit (exclusive of
      depreciation and amortization)
            
            
            41.40
            
            
            
            39.83Selling,
      distribution, and administrative expenses
            
            
            37.46
            
            
            
            37.15Operating
      income
            
            
            3.94
            
            
            
            2.68Other
      income (expense):Interest (expense) income,
      net
            
            
            (1.33
            )
            
            
            (0.73
            )Other income,
    net
            
            
            0.34
            
            
            
            0.47Total
      other income (expense), net
            
            
            (0.99
            )
            
            
            (0.26
            )Income
      before provision for income taxes
            
            
            2.95
            
            
            
            2.42Provision
      for income taxes
            
            
            1.09
            
            
            
            0.87Net
      income
            
            
            1.86
            %
            
            
            1.55
            %








22
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Results
of Operations – Three Months Ended March 2008 Compared to March
2007





Revenues


Three Months EndedMarch
      29,
                    2008
                  
                  
                  %
                  
                  
                  March
      31,
                    2007
                  
                  
                  %
                  
                  
                  Increase
                    (Decrease)
                  
                  
                  %
                    Change(Dollars
      in Thousands)Retail
                  
                  $
                  254,375
                  
                  
                  
                  47.5
                  %
                  
                  $
                  184,754
                  
                  
                  
                  40.0
                  %
                  
                  $
                  69,621
                  
                  
                  
                  37.7
                  %Direct
                  
                  
                  236,536
                  
                  
                  
                  44.2
                  
                  
                  
                  237,885
                  
                  
                  
                  51.5
                  
                  
                  
                  (1,349
                  )
                  
                  
                  (0.6
                  )Financial
      Services
                  
                  
                  40,708
                  
                  
                  
                  7.6
                  
                  
                  
                  35,734
                  
                  
                  
                  7.7
                  
                  
                  
                  4,974
                  
                  
                  
                  13.9Other
                  
                  
                  3,920
                  
                  
                  
                  0.7
                  
                  
                  
                  3,718
                  
                  
                  
                  0.8
                  
                  
                  
                  202
                  
                  
                  
                  5.4$
                  535,539
                  
                  
                  
                  100.0
                  %
                  
                  $
                  462,091
                  
                  
                  
                  100.0
                  %
                  
                  $
                  73,448
                  
                  
                  
                  15.9
                  %





Retail
revenue includes sales and services at our retail stores.  Direct
revenue includes sales from orders placed over the phone, by mail, and through
our website and customer shipping charges.  Financial Services revenue
is comprised of securitization income, interest income, and interchange and
other fees, net of reward program costs, interest expense, and credit losses
from our credit card operations.  Other revenue consists principally
of sales of land surrounding our retail store developments and fees collected
from our other real estate, outfitter services, and travel
businesses.





For the
first quarter of 2008, our Retail and Direct sales continue to be impacted by a
challenging retail and macroeconomic environment.  Despite this
challenging environment, revenue increased in the three months ended March 2008
compared to March 2007 in two of our three primary business segments, but
declined slightly for our Direct segment.  Retail sales increased due
to the eight new store openings in 2007 that began in April
2007.  Financial Services revenue growth was driven by growth in the
number of average active credit card accounts and average managed credit card
loans.  Direct revenue decreased primarily due to a portion of catalog
mail order sales decreasing as these sales move to our new retail
stores.





Retail
Revenue–Retail revenue increased $85 million for the three months ended March
2008 primarily due to new store sales increasing compared to the first quarter
of 2007.  The product category that contributed the largest dollar
volume increase to our Retail revenue for the first quarter of 2008 was hunting
equipment.





Three Months EndedMarch
      29,
                  2008
                
                
                March
      31,
                  2007
                
                
                Increase
                  (Decrease)
                
                
                %
                  Change(Dollars
      in Thousands)Comparable
      stores sales
                
                $
                162,451
                
                
                $
                177,433
                
                
                $
                (14,982
                )
                
                
                (8.4
                )%





Comparable
store sales decreased $15 million, or 8.4%, for the three months ended March
2008 principally because of the challenging macroeconomic and retail industry
environment, a lowering of overall consumer confidence in the United States as
consumers continue to pull back discretionary spending, and competition in
certain markets, all which negatively impacted sales growth.





Direct
Revenue – Direct
revenue decreased $1 million, or 0.6%, due in part to lower catalog sales in the
first quarter of 2008 compared to 2007 and some cannibalization relating to our
new retail stores that opened in late 2007.  Internet site visits
increased as we continue to focus our efforts on utilizing Direct marketing
programs to increase traffic to our website.  Internet visits
increased 40.7%, to 30.2 million visits for the three months ended March 2008
compared to 21.5 million visits for the first quarter of 2007.  The
clothing and footwear product category is the largest dollar volume contributor
to our Direct revenue for the first quarter of 2008.





23
 TABLE OF CONTENTS





Financial
Services Revenue–Key statistics reflecting the performance of our Financial Services
business are shown in the following chart for the three months
ended:




March
      29,
                  2008
                
                
                March
      31,
                  2007
                
                
                Increase
                  (Decrease)
                
                
                %
                  Change(Dollars
      in Thousands Except Average Balance per Account )Average
      balance of managed credit card loans
                
                $
                1,962,064
                
                
                $
                1,560,968
                
                
                $
                401,096
                
                
                
                25.7
                %Number
      of average active credit card accounts
                
                
                1,093,946
                
                
                
                935,685
                
                
                
                158,261
                
                
                
                16.9Average
      balance per active credit card account
                
                $
                1,794
                
                
                $
                1,668
                
                
                $
                126
                
                
                
                7.6Net
      charge-offs
                
                
                12,390
                
                
                
                7,333
                
                
                
                5,057
                
                
                
                69.0Net
      charge-offs as a percentage of average
                  managed credit card
      loans
                
                
                2.53
                %
                
                
                1.88
                %
                
                
                0.65
                %







The
balance of average managed credit card loans increased to $1.96 billion, or
25.7%, because of the increase in the number of accounts and the average balance
per account.  The number of accounts increased to 1,093,946, or 16.9%,
due to our marketing efforts to add additional accounts.  Net
charge-offs as a percentage of average managed credit card loans increased to
2.53% for the first quarter of 2008, up 15 basis points compared to the rate of
2.38% for the fourth quarter of 2007, principally because of the challenging
economic environment.  The dollar level of net charge-offs for the
three months ended March 2008 are within our expectations and are anticipated to
approximate this annualized percentage for 2008.





The
components of Financial Services revenue on a generally accepted accounting
principles (“GAAP”) basis are as follows for the three months
ended:





March
      29,
              2008
            
            
            March
      31,
              2007(In
      Thousands)Interest
      and fee income, net of provision for loan losses
            
            $
            10,380
            
            
            $
            4,760Interest
      expense
            
            
            (3,502
            )
            
            
            (1,240
            )Net
      interest income, net of provision for loan losses
            
            
            6,878
            
            
            
            3,520Non-interest
      income:Securitization
      income (including gains on sales of credit card loans of $6,862 and
      $7,496)
            
            
            43,698
            
            
            
            43,610Other
      non-interest income
            
            
            16,588
            
            
            
            11,172Total non-interest
      income
            
            
            60,286
            
            
            
            54,782Less:
      Customer rewards costs
            
            
            (26,456
            )
            
            
            (22,568
            )Financial
      Services revenue
            
            $
            40,708
            
            
            $
            35,734





Financial
Services revenue increased $5 million, or 13.9%, for the first quarter of 2008
compared to 2007.  Credit card loans securitized and sold are removed
from our consolidated balance sheet, and the net earnings on these securitized
assets, after paying costs associated with outside investors, are reflected as a
component of our securitization income shown above on a GAAP
basis.  Net interest income includes operating results on the credit
card loans receivable we own. Non-interest income includes servicing income,
gains on sales of loans, and income recognized on our retained interests, as
well as interchange income on the entire managed portfolio.







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Managed
credit card loans of the Financial Services business segment include both credit
card loans receivable we own and securitized credit card loans.  The
process by which credit card loans are securitized converts interest income,
interchange income, credit card fees, credit losses, and other income and
expenses on the securitized loans into securitization income.  Because
the financial performance of the total managed portfolio has a significant
impact on earnings we receive from servicing the portfolio, management believes
that evaluating the components of our Financial Services revenue for both owned
loans and securitized loans, as presented below in the non-GAAP presentation, is
important to analyzing results.





Non-GAAP
Presentation – The “non-GAAP” presentation shown below presents the
financial performance of the total managed portfolio of credit card
loans.  Although our condensed consolidated financial statements are
not presented in this manner, we review the performance of the managed portfolio
as presented below.  Interest income, interchange income (net of
customer rewards), and fee income on both the owned and securitized portfolio
are reflected in the respective line items.  Interest paid to outside
investors on the securitized credit card loans is included in interest
expense.  Credit losses on the entire managed portfolio are reflected
in the provision for loan losses.





The
following table sets forth the revenue components of our Financial Services
segment managed portfolio on a non-GAAP basis for the three months
ended:





March
      29,
              2008
            
            
            March
      31,
              2007(Dollars
      in Thousands)Interest
      income
            
            $
            51,809
            
            
            $
            43,807Interchange
      income, net of customer rewards costs
            
            
            17,827
            
            
            
            13,465Other
      fee income
            
            
            7,477
            
            
            
            6,027Interest
      expense
            
            
            (21,710
            )
            
            
            (18,860
            )Provision
      for loan losses
            
            
            (12,402
            )
            
            
            (7,333
            )Other
            
            
            (2,293
            )
            
            
            (1,372
            )Managed
      Financial Services revenue
            
            $
            40,708
            
            
            $
            35,734




Managed Financial
      Services Revenue as a Percentage of Average Managed Credit Card
      Loans:Interest
      income
            
            
            10.6
            %
            
            
            11.2
            %Interchange
      income, net of customer
              rewards
      costs
            
            
            3.6
            
            
            
            3.5Other
      fee income
            
            
            1.5
            
            
            
            1.5Interest
      expense
            
            
            (4.4
            )
            
            
            (4.8
            )Provision
      for loan losses
            
            
            (2.5
            )
            
            
            (1.8
            )Other
            
            
            (0.5
            )
            
            
            (0.4
            )Managed
      Financial Services revenue
            
            
            8.3
            %
            
            
            9.2
            %





The
increase in interest income of $8 million in the first quarter of 2008 from the
first quarter of 2007 was due to an increase in managed credit card loans,
partially offset by decreases in interest rates.  The increase in
interchange income of $4 million in the 2008 first quarter from the 2007 first
quarter was driven by net credit card purchases, which increased
22.8%.  Other fee income increased $1 million due to increases in late
fees, overlimit fees, and payment assurance fees.  The increases in
interest income and interchange income were partially offset by an increase in
interest expense of $3 million from increases in securitized credit card loans
and borrowings, partially offset by decreases in interest rates.  Also
partially offsetting the increases in interest income and interchange income was
an increase in loan losses of $5 million from increases in managed credit card
loans and increases in net charge-offs.







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Other
Revenue





Other
revenue sources include sales of land held for sale, amounts received from our
outfitter services, real estate rental income, and fees earned through our
travel business and other complementary business services.  Other
revenue was flat at $4 million for both the three months ended March 2008 and
2007.  There were no real estate land sales for either three month
period ended March 2008 or 2007.





Gross
Profit





Gross
profit, or gross margin, is defined as total revenue less the costs of related
merchandise sold and shipping costs.  Comparisons of gross profit and
gross profit as a percentage of revenue for our operations, year over year, and
to the retail industry in general, are impacted by:





·
            retail
      store, distribution, and warehousing costs which we exclude from our cost
      of revenue;·
            Financial
      Services revenue that we include in revenue for which there are no costs
      of revenue;·
            real
      estate land sales we include in revenue for which costs vary by
      transaction;·
            outfitter
      services revenue that we included in revenue for which there are no costs
      of revenue; and·
            customer
      shipping charges in revenue which are slightly higher than shipping costs
      in costs of revenue because of our practice of pricing shipping charges to
      match costs.





Accordingly,
comparisons of gross margins on merchandising revenue presented below are the
best metrics for analysis of our gross profit for the three months
ended:





March
      29,
                  2008
                
                
                March
      31,
                  2007
                
                
                Increase
                  (Decrease)
                
                
                %
                  Change(Dollars
      in Thousands)Merchandise
      sales
                
                $
                490,911
                
                
                $
                422,639
                
                
                $
                68,272
                
                
                
                16.2
                %Merchandise
      gross margin
                
                
                177,109
                
                
                
                144,607
                
                
                
                32,502
                
                
                
                22.5Merchandise
      gross margin as a
                  percentage of merchandise
      revenue
                
                
                36.1
                %
                
                
                34.2
                %
                
                
                1.9
                %





Merchandise Gross
Margins–
Gross margins of our merchandising business increased $33 million, or 22.5%, to
$177 million for the three months ended March 2008.  Merchandise gross
margins as a percentage of revenue of our merchandising business increased to
36.1% for the three months ended March 2008 from 34.2% for the first quarter of
2007.  The increase in merchandise gross margins for the first quarter
of 2008 compared to the first quarter of 2007 were positively impacted by a
refinement in the estimate of our drop ship costs during the first quarter of
2007, a decrease in sales discounts and allowances for the first quarter of 2008
compared to the first quarter of 2007, and an increase in our shipping margin
for the three months ended March 2008 over March 2007.  This increase
was partially offset by a continuing increase in hard goods sales with lower
margins for the three months ended March 2008 compared to March
2007.










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Selling,
Distribution, and Administrative Expenses





Three Months EndedMarch
      29,
                  2008
                
                
                March
      31,
                  2007
                
                
                Increase
                  (Decrease)
                
                
                %
                  Change(Dollars
      in Thousands)Selling,
      distribution, and administrative
                  expenses
                
                $
                200,651
                
                
                $
                171,668
                
                
                $
                28,983
                
                
                
                16.9
                %S,D&A
      expenses as a percentage of  total
                  revenue
                
                
                37.5
                %
                
                
                37.2
                %Retail
      store pre-opening costs
                
                $
                1,928
                
                
                $
                2,809
                
                
                $
                (881
                )
                
                
                (31.4
                )%





Selling,
distribution, and administrative expenses include all operating expenses related
to our retail stores, Internet website, distribution centers, product
procurement, and overhead costs, including: advertising and marketing, catalog
costs, employee compensation and benefits, occupancy costs, information systems
processing, and depreciation and amortization.





Selling,
distribution, and administrative expenses on a consolidated basis increased $29
million, or 16.9%, for
the three months ended March 2008 over the three months ended March
2007.  The primary reason for the increase was the addition of eight
new stores in 2007 along with the addition of infrastructure necessary to
support this store expansion.  The most significant factors
contributing to the increase in selling, distribution, and administrative
expenses, and the infrastructure expansion required to support the revenue
growth in the first quarter of 2008 from our retail store expansion, included
increases in:





·
            employee
      compensation, benefits, training, and recruitment costs of $15
      million;·
            facility
      and information system depreciation of $5 million;·
            advertising
      costs of  $3 million; and·
            retail
      store-related operating costs of $6
million.





Significant
selling, distribution, and administrative expense increases and decreases
related to specific business segments included the following:





Retail
Business Segment:


·
            New
      store pre-opening costs of $2 million, a decrease of $1 million over the
      three months ended March 2007.·
            Operating
      costs for new stores that were not open in the comparable period of 2007
      of $22 million, including employee compensation and benefits costs of $13
      million.·
            A
      decrease in comparable store employee compensation and benefits of $1
      million resulting from staffing changes and declining sales in comparable
      stores.·
            Depreciation
      on new stores not open in the comparable period of 2007 of $4
      million.





Direct
Business Segment:


·
            An
      increase in employee compensation and benefits of $1 million principally
      for positions added to support our Direct and multi-channel
      growth.·
            A
      decrease in incidental information system costs of $1 million compared to
      the first quarter of 2007 specifically related to our
    website.





Financial
Services:


·
            An
      increase in advertising and promotional costs of $1 million due to
      increases in new account acquisition costs and account retention
      tools.·
            The
      marketing fee paid by the Financial Services segment to the Retail and
      Direct business segments increased $1.5 million in the first quarter of
      2008 compared to the first quarter of
2007.








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 TABLE OF CONTENTS





Corporate
Overhead, Distribution Centers, and Other:


·
            An
      increase in employee compensation and benefits of $3 million from the
      expansion and improvement of our infrastructure to support our
      growth.·
            Depreciation
      expense increase of $1 million on information system upgrades implemented
      in 2007.





Operating
Income





Operating
income is revenue less cost of revenue and selling, distribution, and
administrative expenses.  Operating income for our merchandise
business segments excludes costs associated with operating expenses of
distribution centers, procurement activities, and other corporate overhead
costs.





Three Months EndedMarch
      29,
              2008
            
            
            March
      31,
              2007
            
            
            Increase
              (Decrease)
            
            
            %
              Change(Dollars
      in Thousands)Total
      operating income
            
            $
            21,086
            
            
            $
            12,391
            
            
            $
            8,695
            
            
            
            70.2
            %Total
      operating income as a percentage of
              total revenue
            
            
            3.9
            %
            
            
            2.7
            %
            
            
            1.2
            %Operating
      income by business segment:Retail
            
            $
            26,939
            
            
            $
            17,355
            
            
            
            9,584
            
            
            
            55.2Direct
            
            
            33,476
            
            
            
            32,493
            
            
            
            983
            
            
            
            3.0Financial
    Services
            
            
            10,777
            
            
            
            8,559
            
            
            
            2,218
            
            
            
            25.9Operating
      income as a percentage of
              segment
revenue:Retail
            
            
            10.6
            %
            
            
            9.4
            %Direct
            
            
            14.2
            
            
            
            13.7Financial
    Services
            
            
            26.5
            
            
            
            24.0





Operating
income increased $9 million, or 70.2%, for the three months ended March 2007
compared to the first quarter of 2007. Operating income as a percentage of
revenue also increased to 3.9% for the first quarter of 2008 from 2.7% for the
first quarter of 2007.  Operating income comparisons between the three
months ended March 2008 and 2007 are impacted by 1) the addition of new retail
stores in 2007, 2) the profitability of our Financial Services business segment,
and 3) the reduction of operating expenses due to certain cost-cutting
initiatives.  The Financial Services segment incurs a marketing fee
paid to the Retail and Direct business segments.  This marketing fee
is included in selling, distribution, and administrative expenses as an expense
for the Financial Services segment and as a credit to expense for the Retail and
Direct business segments.   The marketing fee paid by the
Financial Services segment to these two business segments increased $1.5 million
in the first quarter of 2008 compared to the first quarter of 2007 – a $0.2
million increase to the Direct business segment and a $1.3 million increase to
the Retail segment.





Interest
(Expense) Income, Net




Interest
expense, net of interest income, increased $4 million to $7 million for the
three months ended March 2008 compared to the three months ended March
2007.  The net increase in interest expense was primarily due to
additional debt incurred for financing our retail store
expansion.  During the three months ended March 2008, we capitalized
interest totaling $0.4 million on qualifying fixed assets relating primarily to
retail store construction compared to $0.1 million for the three months ended
March 2007.





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Other
Non-Operating Income, Net





Other
income was $2 million for both the three months ended March 2008 and 2007. This
income is from the interest earned on our economic development
bonds.  Our investment in economic development bonds was $11 million
lower in March 2008 than March 2007 primarily due to the retirement of $43
million in Wheeling, West Virginia, bonds in April 2007.





Provision
for Income Taxes





Our
effective tax rate was 37.0% for the three months ended March 2008 compared to
36.2% for the three months ended March 2007.  The effective tax rate
was lower for the 2007 first quarter due to less state income taxes in the three
months ended March 2007 compared to March 2008.








Bank
Asset Quality





Overview





We
securitize a majority of our credit card loans. On a quarterly basis, we
transfer eligible credit card loans into a securitization trust.  We
are required to own at least a minimum twenty day average of 5% of the interests
in the securitization trust, which is our transferor’s interest that totaled
$156 million at the end of March 2008.  Accordingly, retained credit
card loans have the same characteristics as credit card loans sold to outside
investors.  Certain accounts are ineligible for securitization for
reasons such as:  1) they are delinquent, 2) they originated from
sources other than Cabela's CLUB Visa credit cards, or 3) various other
requirements.  Loans ineligible for securitization totaled $14
million, $15 million and $16 million, at March 29, 2008, December 29, 2007, and
March 31, 2007, respectively.





The
quality of our managed credit card loan portfolio at any time reflects, among
other factors:  1) the creditworthiness of cardholders, 2) general
economic conditions, 3) the success of our account management and collection
activities, and 4) the life-cycle stage of the portfolio.  During
periods of economic weakness, delinquencies and net charge-offs are more likely
to increase. We have mitigated periods of economic weakness by selecting a
customer base that is very creditworthy.  The median FICO scores of
our securitized loans were 785 in the first quarter of 2008 compared to 787 in
2007 and 785 in 2006. We believe that as our credit card accounts mature, they
are less likely to result in a charge-off and less likely to be
closed.





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 method is based on the number of completed billing cycles during which
a customer has failed to make a required payment. The following chart shows the
percentage of our managed credit card loans that have been delinquent at the
periods ended:





Number of days
      delinquent
            
            March
      29,
              2008
            
            
            December
      31,
              2007
            
            
            March
      31,
              2007Greater
      than 30 days
            
            
            1.11
            %
            
            
            0.97
            %
            
            
            0.82
            %Greater
      than 60 days
            
            
            0.64
            
            
            
            0.57
            
            
            
            0.49Greater
      than 90 days
            
            
            0.31
            
            
            
            0.28
            
            
            
            0.23








29
 TABLE OF CONTENTS








Charge-offs













Three Months EndedMarch
      29, 2008
            
            
            March
      31, 2007(Dollars
      in Thousands)Charge-offs
            
            $
            14,965
            
            
            $
            9,481Recoveries
            
            
            (2,575
            )
            
            
            (2,148
            )Net
      charge-offs
            
            $
            12,390
            
            
            $
            7,333Net
      charge-offs as a percentage of
              average managed credit card
      loans
            
            
            2.53
            %
            
            
            1.88
            %







Net
charge-offs as a percentage of average managed credit card loans increased to
2.53% for the first quarter of 2008, up 15 basis points compared to the rate of
2.38% for the fourth quarter of 2007, principally because of the challenging
economic environment.  The dollar level of net charge-offs for the
three months ended March 2008 are within our expectations and are anticipated to
approximate this annualized percentage for 2008.





Liquidity
and Capital Resources





Overview





Our
Retail and Direct business segments and our Financial Services business segment
have significantly differing liquidity and capital needs. The primary cash
requirements of our merchandising business relate to capital for new retail
stores, purchases of inventory, investments in our management information
systems and infrastructure, purchases of economic development bonds related to
the construction of new retail stores, and general working capital
needs.  We historically have met these requirements with cash
generated 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 retail stores, collecting principal and interest payments on our
economic development bonds, and from the retirement of economic development
bonds.





Retail and Direct Business
Segments – The cash flow we generate from our merchandising business is
seasonal, with our peak cash requirements for inventory occurring from April
through November.  While we have consistently generated overall
positive annual cash flow from our operating activities, other sources of
liquidity are required by our merchandising business during these peak cash use
periods.  These sources historically have included short-term
borrowings under our revolving credit facility and access to debt
markets.  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
could result in reduced revenue and profits.








30
 TABLE OF CONTENTS





Financial Services Business Segment
(the “bank”)– The primary cash requirements of our bank relate to the
financing of credit card loans.  The bank sources operating funds in
the ordinary course of business through various financing activities, which
includes funding obtained from securitization transactions, borrowing under its
credit agreement or federal funds purchase agreements, accepting certificates of
deposit, and generating cash from operations.  The bank is prohibited
by regulations from lending money to Cabela’s or 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 also limited by Nebraska
and Federal banking law.





We
believe that we will have sufficient capital available from cash on hand, our
revolving credit facility, and other borrowing sources to fund our cash
requirements and near-term growth plans.





Operating,
Investing, and Financing Activities





The
following table presents changes in our cash and cash equivalents for the three
months ended:





March
      29,
              2008
            
            
            March
      31,
              2007(In
      Thousands)Net
      cash used in operating activities
            
            $
            (171,040
            )
            
            $
            (101,256
            )Net
      cash used in investing activities
            
            
            (44,526
            )
            
            
            (36,097
            )Net
      cash provided by financing activities
            
            
            162,469
            
            
            
            16,435





2008
versus 2007





Operating Activities– Cash
used in operating activities increased $70 million for the three months ended
March 2008 compared to 2007. This net increase in the use of cash comparing the
respective quarters was primarily due to a net reduction in accounts payable of
$52 million, a net decrease of $18 million in accounts receivable, and a net
reduction in income taxes payable of $11 million.  The net decrease in
accounts payable was impacted by a $5 million decrease compared to 2007 due to a
decrease in the payable to the third party processor for the bank’s credit card
transactions.  These uses of cash for operating activities were
partially offset by a net increase of $8 million between comparable quarters
related to inventories, and by an $8 million net change in prepaid expenses and
other current assets.





We will
incur a total cash outlay of approximately $19 million over four years (through
2010) based on our election in our 2007 federal income tax return to change our
method of accounting for inventory from LIFO to FIFO for income tax purposes. At
the end of March 2008, we owed approximately $14 million, which liability is
included in our consolidated balance sheet.





Investing Activities –Cash
used in investing activities increased $8 million for the three months ended
March 2008 compared to 2007. This net increase was primarily due to expenditures
related to the development and construction of the new retail stores scheduled
to open in 2008 as well as the payment of remaining costs associated with
certain 2007 stores.  For the first quarter of 2008, cash paid for
property and equipment additions totaled $50 million compared to $38 million for
the three months ended March 2007.  We plan to open our Scarborough,
Maine, store in May 2008 and our Rapid City, South Dakota, store in August
2008.  Retail stores currently scheduled to open in 2009 are East
Rutherford, New Jersey, and Billings, Montana.  We will not open a
retail store on the previously announced site in Montreal, Canada.  At
March 29, 2008, we estimate remaining total capital expenditures, including the
purchase of economic development bonds, to approximate $110 million to be paid
in 2008 and 2009 relating to the development, construction, and completion of
retail stores.  Certain contractual aspects of our retail store
locations are in various stages of negotiations and are subject to customary
conditions to closing.





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Financing Activities –Cash
provided by financing activities increased $146 million for the three months
ended March 2008 compared to 2007. This net increase from financing activities
comparing periods was due to a net increase of $168 million in borrowings
primarily on lines of credit for working capital and inventory financing, a net
increase of $60 million in long-term debt, and a net increase of $24 million in
time deposits.  Partially offsetting these increases was a net
decrease in the bank’s short-term borrowings of $94 million primarily from the
repayment of a variable funding facility credit agreement. In addition,
unpresented checks net of bank balance decreased $11 million due to timing of
when checks cleared our bank.


.


The
following table highlights the borrowing activity of our merchandising business
and bank operations for the three months ended March:





2008
            
            
            2007(In
      Thousands)Borrowings
      on lines of credit and short-term debt, net of repayments
            
            $
            170,465
            
            
            $
            2,353Changes
      in short-term borrowings of financial services subsidiary,
    net
            
            
            (100,000
            )
            
            
            (6,491
            )Issuances
      of long-term debt, net of repayments
            
            
            60,652
            
            
            
            350Total
            
            $
            131,117
            
            
            $
            (3,788
            )





The
following table summarizes our availability under debt and credit facilities,
excluding the bank’s facilities, at the end of March:





2008
            
            
            2007(In
      Thousands)Amounts
      available for borrowing under credit facilities (1)
            
            $
            340,000
            
            
            $
            325,000Principal
      amounts outstanding
            
            
            (220,371
            )
            
            
            (2,311
            )Outstanding
      letters of credit and standby letters of credit
            
            
            (58,732
            )
            
            
            (68,793
            )Remaining
      borrowing capacity (1)
            
            $
            60,897
            
            
            $
            253,896








(1)
            Effective
      April 2, 2008, we increased our revolving credit facility by $105 million
      to $430 million, resulting in a total amount available for borrowing of
      $445 million, including the credit facility for our Canadian
      operations.





In
addition, the bank has total borrowing availability of $185 million under its
transferor’s interest credit agreement and agreements to borrow federal funds.
Our bank entered into a credit agreement in 2007 for a $100 million variable
funding facility secured by a participation interest in the bank’s transferor’s
interest of the Cabela’s Master Credit Card Trust.  In the first
quarter of 2008, the $100 million of debt was paid in full.   At
the end of March 2008, the full $185 million of borrowing capacity was
available.





On
January 16, 2008, we issued and sold $57 million of 7.20% senior unsecured notes
to institutional buyers.  The notes have a final maturity of 10 years
and an average life of seven years.  Scheduled principal repayments of
$8 million  are payable beginning January 16, 2012, and annually
thereafter.  Interest is payable semi-annually.  We used the
proceeds to pay down existing debt and for general corporate
purposes.





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Grants
and Economic Development Bonds





Grants– We generally have received
grant funding in exchange for commitments made by us to the state or local
government providing the funding.  The commitments, such as assurance
of agreed employment and wage levels at our retail stores or that the retail
store will remain open, typically phase out over five to 10 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 March 29, 2008, December
29, 2007, and March 31, 2007, the total amount of grant funding subject to a
specific contractual remedy was $12 million, $13 million and $14 million,
respectively.





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 retail stores. In the past, we have primarily been the sole
purchaser of these bonds. The bond proceeds that are received by the
governmental entity are then used to fund the construction and equipping of new
retail stores and related infrastructure development. While purchasing these
bonds involves an initial cash outlay by us in connection with a new store, 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 20 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.





After
purchasing the bonds, we typically record them on our consolidated balance sheet
classified as “available for sale” and value them based upon management’s
projections of the amount of tax revenue expected to be generated to support
principal and interest payments on the bonds.  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 consolidated
balance sheet.  Economic development bonds totaled $106 million, $98
million, and $117 million, respectively, as of March 29, 2008, December 29,
2007, and March 31, 2007.





Securitization
of Credit Card Loans





Our
Financial Services business historically has funded most of its growth in credit
card loans through an asset securitization program. We sell our credit card
loans in the ordinary course of business through a commercial paper conduit
program and longer-term fixed and floating rate securitization
transactions.   In a conduit securitization, our credit card
loans are converted into securities and sold to commercial paper issuers, which
pool the securities with those of other issuers. The amount securitized in a
conduit structure is allowed to fluctuate within the terms of the facility,
which may provide greater flexibility for liquidity needs.





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The total
amounts and maturities for our credit card securitizations as of March 29, 2008,
were as follows:





Series
              Type
              Initial
                Amount
              Interest
      Rate
              Expected
      Final
                Maturity(Dollars
      in Thousands)Series
      2004-I
              Term
              $  
      75,000
              Fixed
              March
      2009Series
      2004-II
              Term
              175,000
              Floating
              March
      2009Series
      2005-I
              Term
              140,000
              Fixed
              October
      2010Series
      2005-I
              Term
              110,000
              Floating
              October
      2010Series
      2006-III
              Term
              250,000
              Fixed
              October
      2011Series
      2006-III
              Term
              250,000
              Floating
              October
      2011Series
      2008-I
              Term
              461,500 (1)
              Fixed
              December
      2010Series
      2008-I
              Term
              38,500
              Floating
              December
      2010Series
      2006-I
              Variable
      Funding
              350,000
              Floating
              October
      2008


_____________________




(1)
            The
      trust entered into an interest rate swap agreement to convert the floating
      rate notes with a notional amount of $229.85 million into a fixed rate
      obligation.








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.




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 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.




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 one
hundred thousand dollars in various maturities.   As of March 29,
2008, we had $184 million of certificates of deposit outstanding with maturities
ranging from April 2008 to April 2016 and with a weighted average effective
annual fixed rate of 4.85%. This outstanding balance compares to $161 million
and $101 million at December 29, 2007, and March 31, 2007, respectively, with
weighted average effective annual fixed rates of 5.01% and 4.97%,
respectively.  Certificate of deposit borrowings are subject to
regulatory capital requirements.





Impact
of Inflation




We do not
believe that our operating results have been materially affected by inflation
during the preceding three years. We cannot assure, however, that our operating
results will not be adversely affected by inflation in the future.







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Off-Balance
Sheet Arrangements





Operating
Leases- We lease
various items of office equipment and buildings.  Rent expense for
these operating leases is recorded in selling, distribution, and administrative
expenses in the consolidated statements of income. Future obligations are shown
in the preceding contractual obligations table.





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 $12 billion above existing balances as of March 29,
2008. 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 its cardholders,
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 sales transactions and
the credit card loans relating to those pools of assets are not reflected in 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 buying patterns around the holidays and the
opening of hunting seasons, our merchandise revenue is traditionally higher in
the third and fourth quarters than in the first and second quarters, and we
typically earn a disproportionate share of our operating income in the fourth
quarter.  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.





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 credit card loans 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 credit card loans is affected primarily by changes in
short term interest rate indices such as London Inter-Bank Offered Rate
(“LIBOR”) and the prime rate.  The variable rate credit card loans are
indexed to the prime rate.  Securitization certificates and notes are
indexed to LIBOR-based rates of interest and are periodically
repriced.  Certificate of deposits 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.





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The table
below shows the mix of our credit card account balances at the periods
ended:





March
      29,
              2008
            
            
            December
      29,
              2007
            
            
            March
      31,
              2007As a
      percentage of total balances outstanding:Balances
      carrying interest rate based upon the national
              prime lending
    rate
            
            
            66.0
            %
            
            
            61.1
            %
            
            
            64.8
            %Balances
      carrying an interest rate of 9.99%
            
            
            2.6
            
            
            
            3.1
            
            
            
            3.0Balances
      carrying an interest rate of 0.00%
            
            
            0.4
            
            
            
            0.3
            
            
            
            --Balances
      not carrying interest because their previous
              month's balance was paid in
      full
            
            
            31.0
            
            
            
            35.5
            
            
            
            32.2100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %





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.  However, purchases of Cabela’s merchandise, certain
other charges, and balance transfer programs are financed at a fixed interest
rate of 9.99%. Together, the balances on these credit cards represent 68.6% of
total balances outstanding as of March 29, 2008, compared to 64.2% at the end of
2007.  No interest is charged if the account is paid in full within 20
days of the billing cycle, which represent 31.0% of total balances outstanding
as of March 29, 2008. Credit card balances with a zero percentage interest rate
have increased over prior years due to an increase in promotional merchandise
offers.





Management
has performed an interest rate gap analysis 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 had been 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 also has performed a projected
interest rate gap analysis for the same future twelve month period to measure
the effects of a change in the spread between the prime interest rate and the
LIBOR interest rate.  Based on this analysis, we believe that an
immediate spread decrease of 50 basis point, or 0.5%, would cause a pre-tax
decrease to income of $5 million, and an immediate spread increase of 50 basis
points would cause a pre-tax increase to income of $7 million on our Financial
Services segment over the next twelve months, which could have a material effect
on our operating results.





Merchandising
Business Interest Rate Risk





The
interest payable on our line of credit is based on variable interest rates and
therefore affected by changes in market interest rates. If interest rates on
existing variable rate debt increased 1.0%, our interest expense and results
from operations and cash flows would not be materially affected.





Foreign
Currency Risk





We
purchase a significant amount of inventory from vendors outside of the United
States 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.  For our retail store in Canada, we intend to fund all
transactions in Canadian dollars, and we will utilize our unsecured revolving
credit agreement of $15 million to fund such operations.





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Item
4.                      Controls
and Procedures





We
maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), designed
to ensure that information required to be disclosed in reports filed under the
Exchange Act is recorded, processed, summarized, and reported within specified
time periods. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.





In
connection with this quarterly report on Form 10-Q, our Chief Executive Officer
and Chief Financial Officer evaluated, with the participation of our management,
the effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report. Based on management’s evaluation, our Chief
Executive Officer and Chief Financial Officer each concluded that our disclosure
controls and procedures were effective as of March 29, 2008.




Changes in Internal Control
Over Financial Reporting





There
were no changes in our internal control over financial reporting that occurred
during the quarter ended March 29, 2008, that materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.








Item
4T.                    Controls
and Procedures





Not
applicable.





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PART
II – OTHER INFORMATION





Item
1.                 Legal
Proceedings.





We are
party to various proceedings, lawsuits, disputes, and claims arising in the
ordinary course of our business.  These actions include commercial,
intellectual property, employment, and product liability claims.  Some
of these actions involve complex factual and legal issues and are subject to
uncertainties.  We cannot predict with assurance the outcome of the
actions brought against us.  Accordingly, adverse developments,
settlements, or resolutions may occur and negatively impact earnings in the
quarter of such development, settlement, or resolution.  However, we
do not believe that the outcome of any current action would have a material
adverse effect on our results of operations, cash flows, or financial position
taken as a whole.





Item
1A.                   
Risk Factors.





There
have been no material changes from the risk factors disclosed in the “Risk
Factors” section of our Annual Report on Form 10-K for the fiscal year ended
December 29, 2007, except that the risk factor titled “Our historic sales tax
collection policy for our Direct business may subject us to liabilities for
unpaid sales taxes on past Direct business sales” shall be deleted in its
entirety and the following new risk factor shall be added.





Our
historic sales tax collection policy for our Direct business may subject us to
liabilities for unpaid sales taxes on past Direct business sales.





Many
states have attempted to require that out-of-state direct marketers, whose only
contacts with the state are solicitations and delivery to their residents of
products purchased through the mail or the Internet, collect sales taxes on the
sale of these products. In addition, a private litigant, purportedly on behalf
of various states, has initiated litigation against several out-of-state direct
marketers alleging that the failure to collect and remit sales tax violates
various state false claims laws. The U.S. Supreme Court has held that states,
absent congressional legislation, may not impose tax collection obligations on
out-of-state direct marketers unless the out-of-state direct marketer has nexus
with the state. Nexus generally is created by the physical presence of the
direct marketer, its agents, or its property within the state. Our sales tax
collection policy for our Direct business is to collect and remit sales tax in
states where our Direct business has established nexus. Prior to the opening of
a retail store, we historically sought a private letter ruling from the state in
which the store would be located as to whether our Direct business would have
nexus with that state as a result of the store opening. Some states have enacted
legislation that requires sales tax collection by direct marketers with no
physical presence in that state. In some instances, the legislation assumes
nexus exists because of the physical presence of an affiliated entity engaged in
the same line of business. During the first quarter of 2008, we received an
assessment for unpaid sales taxes on prior Direct business sales from a state
with such legislation.  In addition, a competitor has commenced an
action against us alleging that our failure to collect and remit sales tax in
certain states constitutes unfair competition.  It is also possible
that we may receive future assessments from other states for unpaid sales taxes
on prior Direct business sales.  We presently intend to vigorously
contest the assessment, the action, and any future sales tax assessments, but we
may not prevail. If we do not prevail with respect to any assessment, we could
be held liable for sales taxes on prior Direct business sales, which could be
substantial.





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 a Vote of Security Holders.





Not
applicable.





Item 5.  Other
Information.





Not
applicable.







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Item 6.  Exhibits.








(a)
            Exhibits.




Exhibit
              Number
            Description31.1
            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








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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:  May
      2, 2008
            By:
            /s/
      Dennis HighbyDennis
      HighbyPresident
      and Chief Executive OfficerDated:  May
      2, 2008
            By:
            /s/
      Ralph W. CastnerRalph
      W. CastnerVice
      President and Chief Financial
Officer











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EXHIBIT INDEX





Exhibit
              Number
            Description31.1
            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





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