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 September 26,
2009
 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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).   Yes o No o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
 
 Large
      accelerated filer o
              Accelerated
      filer xNon-accelerated
      filer o (Do
      not check if a smaller reporting company)
              Smaller
      reporting company o
 
 Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).   Yes o No x
 
 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:  67,217,040 shares as of October 22,
2009.
 
  1
  
 CABELA’S INCORPORATED
 
 FORM
10-Q
 QUARTERLY
PERIOD ENDED SEPTEMBER 26, 2009
 TABLE
OF CONTENTS
 
 PagePART
      I – FINANCIAL INFORMATIONItem
      1.
              Financial
      Statements
              3Condensed
      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
              26Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              57Item
      4.
              Controls
      and Procedures
              59Item
      4T.
              Controls
      and Procedures
              59PART
      II – OTHER INFORMATIONItem
      1.
              Legal
      Proceedings
              60Item
      1A.
              Risk
      Factors
              60Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              61Item
      3.
              Defaults
      Upon Senior Securities
              61Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              61Item
      5.
              Other
      Information
              61Item
      6.
              Exhibits
              61SIGNATURES
              62INDEX
      TO EXHIBITS
              63
 
 
  2
 TABLE OF CONTENTS
  PART I - FINANCIAL INFORMATION
 Item
1. Financial
Statements
 CABELA’S INCORPORATED AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF INCOME(Dollars
      in Thousands Except Earnings Per Share)(Unaudited)Three Months Ended
              
              
              Nine Months EndedSeptember
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,2009
              
              
              2008
              
              
              2009
              
              
              2008Revenue:Merchandise
      sales
              
              $
              574,182
              
              
              $
              569,202
              
              
              $
              1,576,205
              
              
              $
              1,540,753Financial
      services revenue
              
              
              48,186
              
              
              
              41,896
              
              
              
              126,209
              
              
              
              120,857Other
      revenue
              
              
              1,928
              
              
              
              702
              
              
              
              10,658
              
              
              
              11,681Total
      revenue
              
              
              624,296
              
              
              
              611,800
              
              
              
              1,713,072
              
              
              
              1,673,291Total
      cost of revenue (exclusive of depreciation and
    amortization)
              
              
              386,034
              
              
              
              376,057
              
              
              
              1,038,408
              
              
              
              1,006,245Selling,
      distribution, and administrative expenses
              
              
              205,728
              
              
              
              214,898
              
              
              
              597,486
              
              
              
              610,263Impairment
      and restructuring charges
              
              
              613
              
              
              
              -
              
              
              
              13,983
              
              
              
              -Operating
      income
              
              
              31,921
              
              
              
              20,845
              
              
              
              63,195
              
              
              
              56,783Interest
      expense, net
              
              
              (5,579
              )
              
              
              (7,510
              )
              
              
              (17,467
              )
              
              
              (22,399
              )Other
      non-operating income, net
              
              
              2,577
              
              
              
              1,616
              
              
              
              6,277
              
              
              
              5,230Income
      before provision for income taxes
              
              
              28,919
              
              
              
              14,951
              
              
              
              52,005
              
              
              
              39,614Provision
      for income taxes
              
              
              10,153
              
              
              
              5,229
              
              
              
              18,988
              
              
              
              12,657Net
      income
              
              $
              18,766
              
              
              $
              9,722
              
              
              $
              33,017
              
              
              $
              26,957Basic
      net income per share
              
              $
              0.28
              
              
              $
              0.15
              
              
              $
              0.49
              
              
              $
              0.41Diluted
      net income per share
              
              $
              0.28
              
              
              $
              0.15
              
              
              $
              0.49
              
              
              $
              0.40Basic
      weighted average shares outstanding
              
              
              67,160,952
              
              
              
              66,648,175
              
              
              
              66,923,206
              
              
              
              66,261,993Diluted
      weighted average shares outstanding
              
              
              67,957,020
              
              
              
              67,051,493
              
              
              
              67,251,037
              
              
              
              67,105,399Refer
      to notes to unaudited condensed consolidated financial
      statements.
 
  3
 TABLE OF CONTENTS
  
 CABELA’S INCORPORATED AND SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEETS(Dollars
      in Thousands Except Par Values)(Unaudited)ASSETS
              
              September
      26,
              
              
              December
      27,
              
              
              September
      27,2009
              
              
              2008
              
              
              2008CURRENTCash
      and cash equivalents
              
              $
              418,083
              
              
              $
              410,104
              
              
              $
              207,282Accounts
      receivable, net of allowance for doubtful accounts of $3,505, $556 and
      $1,738
              
              
              20,973
              
              
              
              45,788
              
              
              
              31,269Credit
      card loans, net of allowances of $1,202, $1,507 and $1,373
              
              
              153,347
              
              
              
              167,226
              
              
              
              134,891Inventories
              
              
              572,194
              
              
              
              517,657
              
              
              
              649,155Prepaid
      expenses and other current assets
              
              
              159,631
              
              
              
              133,439
              
              
              
              153,590Income
      taxes receivable
              
              
              8,217
              
              
              
              -
              
              
              
              2,786Total
      current assets
              
              
              1,332,445
              
              
              
              1,274,214
              
              
              
              1,178,973Property
      and equipment, net
              
              
              848,600
              
              
              
              881,080
              
              
              
              905,961Land
      held for sale or development
              
              
              37,863
              
              
              
              39,318
              
              
              
              36,539Retained
      interests in securitized loans, including asset-backed
      securities
              
              
              145,888
              
              
              
              61,605
              
              
              
              43,170Economic
      development bonds
              
              
              119,974
              
              
              
              112,585
              
              
              
              101,583Other
      assets
              
              
              26,088
              
              
              
              27,264
              
              
              
              32,260Total
      assets
              
              $
              2,510,858
              
              
              $
              2,396,066
              
              
              $
              2,298,486LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENTAccounts
      payable, including unpresented checks of $33,941, $28,217 and
      $20,753
              
              $
              203,561
              
              
              $
              189,766
              
              
              $
              210,208Gift
      instruments, and credit card and loyalty rewards programs
              
              
              160,772
              
              
              
              184,834
              
              
              
              168,194Accrued
      expenses
              
              
              112,908
              
              
              
              123,296
              
              
              
              104,229Time
      deposits
              
              
              155,119
              
              
              
              178,817
              
              
              
              122,261Current
      maturities of long-term debt
              
              
              12,048
              
              
              
              695
              
              
              
              26,579Income
      taxes payable
              
              
              -
              
              
              
              11,689
              
              
              
              -Deferred
      income taxes
              
              
              32,268
              
              
              
              11,707
              
              
              
              13,496Total
      current liabilities
              
              
              676,676
              
              
              
              700,804
              
              
              
              644,967Long-term
      debt, less current maturities
              
              
              373,991
              
              
              
              379,336
              
              
              
              560,908Long-term
      time deposits
              
              
              388,125
              
              
              
              307,382
              
              
              
              142,928Deferred
      income taxes
              
              
              43,475
              
              
              
              38,707
              
              
              
              26,993Other
      long-term liabilities
              
              
              62,268
              
              
              
              56,132
              
              
              
              56,648COMMITMENTS
      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 –  67,209,700,
                66,833,984,
      and 66,669,314 shares
              
              
              672
              
              
              
              668
              
              
              
              667Class
      B Non-voting,  Authorized  –  245,000,000
      shares;  Issued –  none
              
              
              -
              
              
              
              -
              
              
              
              -Additional
      paid-in capital
              
              
              282,051
              
              
              
              271,958
              
              
              
              269,804Retained
      earnings
              
              
              680,693
              
              
              
              647,676
              
              
              
              598,229Accumulated
      other comprehensive  income (loss)
              
              
              2,907
              
              
              
              (6,597
              )
              
              
              (2,658
              )Total
      stockholders’ equity
              
              
              966,323
              
              
              
              913,705
              
              
              
              866,042Total
      liabilities and stockholders’ equity
              
              $
              2,510,858
              
              
              $
              2,396,066
              
              
              $
              2,298,486Refer
      to notes to unaudited condensed consolidated financial
      statements.
 
  4
 TABLE OF CONTENTS
  
 CABELA’S INCORPORATED AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS(In
      Thousands)(Unaudited)Nine Months EndedSeptember
      26,
              
              
              September
      27,CASH
      FLOWS FROM OPERATING ACTIVITIES:
              
              2009
              
              
              2008Net
      income
              
              $
              33,017
              
              
              $
              26,957Adjustments
      to reconcile net income to net cash flows from operating
      activities:Depreciation
      and amortization
              
              
              52,948
              
              
              
              48,186Impairment
      and restructuring charges
              
              
              13,377
              
              
              
              -Stock
      based compensation
              
              
              6,707
              
              
              
              5,253Deferred
      income taxes
              
              
              (1,136
              )
              
              
              (5,195
              )Other,
      net
              
              
              3,721
              
              
              
              (2,019
              )Change
      in operating assets and liabilities:Accounts
      receivable
              
              
              22,833
              
              
              
              13,181Credit
      card loans held for sale, net
              
              
              65,039
              
              
              
              (116,612
              )Securitization
      of credit card loans, net
              
              
              (52,688
              )
              
              
              170,069Retained
      interests in securitized loans (including asset-backed trading
      securities)
              
              
              (10,770
              )
              
              
              2,607Inventories
              
              
              (62,010
              )
              
              
              (40,995
              )Prepaid
      expenses and other current assets
              
              
              (27,165
              )
              
              
              (33,303
              )Land
      held for sale or development
              
              
              (440
              )
              
              
              1,478Accounts
      payable and accrued expenses
              
              
              3,594
              
              
              
              (70,962
              )Gift
      instruments, and credit card and loyalty rewards programs
              
              
              (24,062
              )
              
              
              (16,063
              )Other
      long-term liabilities
              
              
              576
              
              
              
              22,565Income
      taxes receivable
              
              
              602
              
              
              
              (38,036
              )Net
      cash derived from (used in) operating activities
              
              
              24,143
              
              
              
              (32,889
              )CASH
      FLOWS FROM INVESTING ACTIVITIES:Property
      and equipment additions
              
              
              (38,043
              )
              
              
              (104,087
              )Proceeds
      from dispositions of property and equipment
              
              
              11,913
              
              
              
              -Proceeds
      from retirements and maturities of economic development
    bonds
              
              
              1,904
              
              
              
              5,893Purchases
      of asset-backed available for sale securities classified with retained
      interests in securitized loans
              
              
              (76,924
              )
              
              
              -Change
      in credit card loans receivable, net
              
              
              897
              
              
              
              2,668Other
      investing changes, net
              
              
              8,154
              
              
              
              3,193Net
      cash used in investing activities
              
              
              (92,099
              )
              
              
              (92,333
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Change
      in unpresented checks net of bank balance
              
              
              5,723
              
              
              
              9,413Change
      in time deposits, net
              
              
              58,356
              
              
              
              104,598Changes
      in short-term borrowings of financial services subsidiary
              
              
              -
              
              
              
              (100,000
              )Borrowings
      on revolving credit facilities and inventory financing
              
              
              558,547
              
              
              
              634,331Repayments
      on revolving credit facilities and inventory financing
              
              
              (549,981
              )
              
              
              (489,706
              )Issuances
      of long-term debt
              
              
              -
              
              
              
              61,200Payments
      on long-term debt
              
              
              (214
              )
              
              
              (26,526
              )Exercise
      of employee stock options and employee stock purchase plan issuances,
      net
              
              
              3,351
              
              
              
              7,623Other
      financing changes, net
              
              
              153
              
              
              
              389Net
      cash provided by financing activities
              
              
              75,935
              
              
              
              201,322Net
      change in cash and cash equivalents
              
              
              7,979
              
              
              
              76,100Cash
      and cash equivalents, at beginning of period
              
              
              410,104
              
              
              
              131,182Cash
      and cash equivalents, at end of period
              
              $
              418,083
              
              
              $
              207,282Refer
      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
27, 2008, 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 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 27, 2008.
 
 We have
evaluated subsequent events through October 28, 2009, the filing date of this
Form 10-Q.  We have determined that there were no subsequent events to
recognize or disclose in the condensed consolidated financial statements
presented herein.
 
 Reporting Periods
-Unless otherwise stated, the fiscal periods referred to in the notes to
these condensed consolidated financial statements are the 13 weeks ended
September 26, 2009 (the “three months ended September 2009”), the 13 weeks ended
September 27, 2008 (the “three months ended September 2008”), the 39 weeks ended
September 26, 2009 (the “nine months ended September 2009”), the 39 weeks ended
September 27, 2008 (the “nine months ended September 2008”), and the 52 weeks
ended December 27, 2008 (the “year ended 2008”).
 
 
 2. CREDIT
CARD LOANS AND SECURITIZATION
 
 The
Company’s wholly-owned bank subsidiary, World’s Foremost Bank (“WFB”), has
established the Cabela’s Master Credit Card Trust and related entities
(collectively referred to as the “Trust”) for the purpose of routinely selling
and securitizing credit card loans and issuing beneficial interest to
investors.  The Trust issues variable funding facilities and long-term
notes each of which has an undivided interest in the assets of the Trust.
Variable rate notes are priced at a benchmark rate plus a
spread.  Fixed rate notes are priced on a swap rate plus a
spread.  At September 26, 2009, the Trust had five term series
outstanding totaling $1,950,000 and two variable funding facilities with
$671,880 in available capacity and $252,941 outstanding.  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 in other non-interest income in Financial
Services revenue.  The Trust is not a subsidiary of WFB or Cabela’s and is
therefore excluded from the condensed consolidated financial statements in
accordance with generally accepted accounting principles (“GAAP”).  These
securitizations qualify as sales under GAAP and accordingly are not treated as
debt on the condensed consolidated financial statements.  Accordingly, the
credit card loans receivable equal to the investor interest is also excluded
from the condensed consolidated financial statements.
 
 As
contractually required, WFB establishes certain cash accounts to be used as
collateral for the benefit of investors. The balances in the cash accounts with
the trustee were $8,000 and $6,090 at December 27, 2008, and September 27, 2008,
respectively. There were no amounts in the cash accounts at September 26, 2009,
and none were required.  In addition, WFB owns asset-backed securities
from some of its securitizations, which are subordinated to other notes
issued.
  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)
 
 WFB’s
retained interests in credit card asset securitizations include a transferor’s
interest, asset-backed securities, accrued interest receivable on securitized
credit card receivables, cash accounts, servicing rights, the interest-only
strip, cash reserve accounts, and other retained interests. The transferor’s
interest is represented by security certificates and is reported in credit card
loans held for sale. WFB’s transferor’s interest ranks pari passu with investors’
interests in the securitization trusts. The remaining retained interests are
subordinate to certain investors’ interests and, as such, may not be realized by
WFB if needed to absorb deficiencies in cash flows that are allocated to the
investors of the trusts.
 
 On April
14, 2009, the Trust sold $500,000 of asset-backed notes, Series
2009-I.  This securitization transaction included the issuance of
$425,000 of Class A notes, which accrue interest at a floating rate equal to the
one-month London Inter-Bank Offered Rate plus 2.00% per year.  The
Class A notes are eligible collateral under the Term Asset-Backed Securities
Loan Facility (“TALF”) established by the Federal Reserve Bank of New York. This
securitization transaction also included the issuance of three subordinated
classes of notes in the aggregate principal amount of $75,000.  WFB
retained each of the subordinated classes of notes as asset-backed available for
sale securities which are recorded in the condensed consolidated balance sheet
under the caption “retained interests in securitized loans, including
asset-backed securities.”  Each class of notes issued in the
securitization transaction has an expected life of approximately three years,
with a contractual maturity of approximately six years.  This
securitization transaction refinanced asset-backed notes issued by the Trust
that matured in 2009.
 
 On April
4, 2009, WFB purchased triple-A rated notes with a par value of $2,100 at a
discount in the secondary markets from previously issued series of the
Trust.  These notes are classified as asset-backed available for sale
securities.  On June 5, 2009, WFB renewed and increased a $213,904
variable funding facility to a $260,115 variable funding facility that will
mature in June 2010.  In addition, on September 15, 2009, WFB renewed
and increased a $376,355 variable funding facility to a $411,765 variable
funding facility that will mature in September 2010.
 
 WFB’s
retained interest, including asset-backed securities, and related
receivables are comprised of the following at:
 
 September
      26,
              
              
              December
      27,
              
              
              September
      27,2009
              
              
              2008
              
              
              2008Asset-backed
      trading securities
              
              $
              37,941
              
              
              $
              31,584
              
              
              $
              15,087Asset-backed
      available for sale securities(amortized cost of
      $76,963)
              
              
              81,512
              
              
              
              -
              
              
              
              -Interest-only
      strip, cash reserve accounts, and cash accounts
              
              
              26,435
              
              
              
              30,021
              
              
              
              28,083Transferor’s
      interest
              
              
              146,796
              
              
              
              143,411
              
              
              
              122,047Other
      assets - accrued interest receivable and amounts duefrom the
      Trust
              
              
              40,425
              
              
              
              32,379
              
              
              
              28,505Total
              
              $
              333,109
              
              
              $
              237,395
              
              
              $
              193,722
 
 WFB’s
retained interests are subject to credit, payment, and interest rate risks on
the transferred credit card receivables. To protect investors, the
securitization structures include certain features that could result in
earlier-than-expected repayment of the securities, which could cause WFB to
sustain a loss of one or more of its retained interests and could prompt the
need for WFB to seek alternative sources of funding. The primary investor
protection feature relates to the availability and adequacy of cash flows in the
securitized pool of receivables to meet contractual requirements, the
insufficiency of which triggers early repayment of the securities. WFB refers to
this as the “early amortization” feature. Investors are allocated cash flows
derived from activities related to the accounts comprising the securitized pool
of receivables, the amounts of which reflect finance charges collected, certain
fee assessments collected, allocations of interchange, and recoveries on charged
off accounts. From these cash flows, investors are reimbursed for charge-offs
occurring within the securitized pool of receivables and receive a contractual
rate of return and WFB is paid a servicing fee as servicer. Any cash flows
remaining in excess of these requirements are paid to WFB and recorded as excess
spread, included in securitization income. An excess spread of less than 0% for
a contractually specified period, generally a three-month average, would trigger
an early amortization event. Once the excess spread falls below 0%, the
receivables that would have been subsequently purchased by the Trust from WFB
will instead continue to be recognized on the consolidated balance sheet
since the cash flows generated in the Trust would be used to repay principal to
investors. Such an event could result in WFB incurring losses related to its
retained interests, including amounts due from the Trust, investments in
asset-backed securities, interest-only strip receivables, cash reserve account,
cash accounts and accrued interest receivable. The investors have no
recourse to WFB’s other assets for failure of debtors to pay other than for
breaches of certain customary representations, warranties, and covenants. 
These representations, warranties, covenants, and the related indemnities, do
not protect the Trust or the outside investors against credit-related losses on
the loans.
  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)
 
 Another
feature, which is applicable to the notes issued from the Trust, is one in which
excess cash flows generated by the transferred loan receivables are held at the
Trust for the benefit of the investors, rather than paid to WFB. This reserve
account funding is triggered when the three-month average excess spread rate of
the Trust decreases to below 4.50% or 5.50% (depending on the series) with
increasing funding requirements as excess spread levels decline below preset
levels. Similar to early amortization, this feature also is designed to protect
the investors’ interests from loss.
 
 Credit
card loans performed within established guidelines and no events which could
trigger an “early amortization” occurred during the nine months ended September
2009 and 2008, and the year ended 2008.
 
 In 2008,
the Trust entered into a $229,850 notional swap agreement in connection with the
Series 2008-I securitization in order to manage interest rate exposure. The
exposure is related to changes in cash flows from funding credit card loans,
which include a high percentage of accounts that do not incur monthly finance
charges based on floating rate obligations. The Series 2008-I swap effectively
converts the interest rate on the investor notes from a floating rate based on a
spread over a benchmark to a fixed rate of 4.32%. Since the Trust is not
consolidated with WFB, the fair value of the swap is not reflected on the
financial statements of WFB. Cabela’s entered into an interest rate swap
agreement with similar terms with the counterparty where the notional amount of
Cabela’s swap is zero unless the notional amount of WFB’s swap falls below a
required amount, effectively making Cabela’s a guarantor of WFB’s
swap.  WFB pays a fee to Cabela’s for the credit enhancement provided
by this swap.
 
 The table
below presents quantitative information about delinquencies, net charge-offs,
and components of managed credit card loans, including securitized
loans:
 
 September
      26,
              
              
              December
      27,
              
              
              September
      27,2009
              
              
              2008
              
              
              2008Credit
      card loans held for sale (including gross transferor’s interestof
      $146,796, $143,411, and $122,047)
              
              $
              144,950
              
              
              $
              157,301
              
              
              $
              124,802Credit
      card loans receivable, net of allowances of $1,202, $1,507 and
      $1,373
              
              
              8,397
              
              
              
              9,925
              
              
              
              10,089Total
              
              $
              153,347
              
              
              $
              167,226
              
              
              $
              134,891Composition
      of credit card loans at period end:Loans
      serviced
              
              $
              2,363,328
              
              
              $
              2,347,223
              
              
              $
              2,175,232Loans
      securitized and sold to outside investors
              
              
              (2,087,900
              )
              
              
              (2,142,688
              )
              
              
              (2,020,069
              )Securitized
      loans with securities owned by WFB at par which are classified as
      asset-backed securities in retainedinterests
      on securitized loans
              
              
              (115,041
              )
              
              
              (31,584
              )
              
              
              (15,087
              )160,387
              
              
              
              172,951
              
              
              
              140,076Less
      adjustments to valuations and allowances
              
              
              (7,040
              )
              
              
              (5,725
              )
              
              
              (5,185
              )Total
      (including gross transferor’s interest of  $146,796, $143,411,
      and $122,047)
              
              $
              153,347
              
              
              $
              167,226
              
              
              $
              134,891Delinquent
      loans including finance charges and fees atperiod
    end:Managed
      credit card loans:30-89
      days
              
              $
              31,957
              
              
              $
              28,712
              
              
              $
              21,83190
      days or more and still accruing
              
              
              13,362
              
              
              
              11,145
              
              
              
              7,872Securitized
      credit card loans including transferor’s interest:30-89
      days
              
              
              31,552
              
              
              
              28,148
              
              
              
              21,33690
      days or more and still accruing
              
              
              13,208
              
              
              
              10,761
              
              
              
              7,598
 
  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)
 
 Three Months Ended
              
              
              Nine Months EndedSeptember
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,2009
              
              
              2008
              
              
              2009
              
              
              2008Total
      net charge-offs including finance charges and fees for theperiods
      ended:Managed
      credit card loans
              
              $
              29,383
              
              
              $
              15,682
              
              
              $
              85,215
              
              
              $
              41,938Securitized
      credit card loans including transferor’s interest
              
              
              28,764
              
              
              
              15,357
              
              
              
              83,346
              
              
              
              41,024Annual
      average credit card loans including finance charges and
    fees:Managed
      credit card loans
              
              
              2,340,079
              
              
              
              2,153,089
              
              
              
              2,274,715
              
              
              
              2,043,142Securitized
      credit card loans including transferor’s interest
              
              
              2,313,537
              
              
              
              2,120,536
              
              
              
              2,245,639
              
              
              
              2,008,609Total
      net charge-offs as a percentage of annual average loans:Managed
      credit card loans
              
              
              5.02
              %
              
              
              2.91
              %
              
              
              4.99
              %
              
              
              2.74
              %Securitized
      credit card loans including transferor’s interest
              
              
              4.97
              %
              
              
              2.90
              %
              
              
              4.95
              %
              
              
              2.72
              %
 
 
 3. SECURITIES
  Economic development bonds and
asset-backed available for salesecurities consisted of
the following for the periods ended:
 
 Gross
              
              
              GrossAmortized
              
              
              Unrealized
              
              
              Unrealized
              
              
              FairCost
              
              
              Gains
              
              
              Losses
              
              
              ValueAt September 26, 2009:Available
      for sale securities:Economic
      development bonds
              
              $
              119,583
              
              
              $
              3,023
              
              
              $
              (2,632
              )
              
              $
              119,974Asset-backed
      securities
              
              
              76,963
              
              
              
              4,549
              
              
              
              -
              
              
              
              81,512$
              196,546
              
              
              $
              7,572
              
              
              $
              (2,632
              )
              
              $
              201,486At December 27, 2008:Available
      for sale securities:Economic
      development bonds
              
              $
              122,501
              
              
              $
              35
              
              
              $
              (9,951
              )
              
              $
              112,585At September 27, 2008:Available
      for sale securities:Economic
      development bonds
              
              $
              102,111
              
              
              $
              729
              
              
              $
              (4,860
              )
              
              $
              97,980Held
      to maturity securities:Economic
      development bonds
              
              $
              3,603
              
              
              $
              -
              
              
              $
              -
              
              
              $
              3,603
 
  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)
 
 The carrying value and fair value of
economic development bonds and asset-backed available for sale securities by
contractual maturity at September 26, 2009, were as follows:
 
 Available-for-SaleAmortized
              
              
              FairCost
              
              
              ValueFor
      the three months ended January 2, 2010
              
              $
              1,099
              
              
              $
              1,172For
      the fiscal years ended:2010
              
              
              2,258
              
              
              
              2,3842011
              
              
              3,413
              
              
              
              3,7092012
              
              
              77,868
              
              
              
              82,2812013
              
              
              3,100
              
              
              
              3,195Thereafter
              
              
              108,808
              
              
              
              108,745$
              196,546
              
              
              $
              201,486
 
 At the
end of September 2009 and 2008, none of the securities with a fair value below
carrying value were deemed to have an other than temporary
impairment.  At the end of December 2008, the fair value of certain
economic development bonds were determined to be below carrying value, with the
decline in fair value deemed to be other than temporary. These fair value
adjustments totaling $1,280 reduced the carrying value of the economic
development bond portfolio at the end of December 2008.
 
 
 4. SHORT-TERM
BORROWINGS OF FINANCIAL SERVICES SUBSIDIARY
 
 WFB had a
$25,000 variable funding facility credit agreement that was secured by a
participation interest in the transferor’s interest of the Trust.  On
May 28, 2009, this credit agreement was terminated.  During the nine
months ended September 2009, there were no borrowings under the credit
agreement.
 
 WFB has
unsecured federal funds purchase agreements with two financial
institutions.  The maximum amount that can be borrowed is $85,000.
There were no amounts outstanding at September 26, 2009, December 27, 2008, or
September 27, 2008.  During the nine months ended September 2009 and
2008, the average balance outstanding was $203 and $34,428 with a weighted
average rate of 0.21% and 2.90%, respectively.
  
 5. LONG-TERM
DEBT AND CAPITAL LEASES
 
 Long-term
debt, including revolving credit facilities and capital leases, consisted of the
following at the periods ended:
 
 September
      26,
              
              
              December
      27,
              
              
              September
      27,2009
              
              
              2008
              
              
              2008Unsecured
      revolving credit facility of $430,000 expiring June 30, 2012, with
      interest at 1.43% at September 26, 2009
              
              $
              28,617
              
              
              $
              20,000
              
              
              $
              198,712Unsecured
      notes payable due 2016 with interest at 5.99%
              
              
              215,000
              
              
              
              215,000
              
              
              
              215,000Unsecured
      senior notes payable due 2017 with interest at 6.08%
              
              
              60,000
              
              
              
              60,000
              
              
              
              60,000Unsecured
      senior notes due 2012-2018 with interest at 7.20%
              
              
              57,000
              
              
              
              57,000
              
              
              
              57,000Unsecured
      revolving credit facility of $15,000 CAD expiring June 30, 2010, with
      interest at 1.74% at September 26, 2009
              
              
              11,818
              
              
              
              6,465
              
              
              
              8,831Unsecured
      senior notes repaid in 2008
              
              
              -
              
              
              
              -
              
              
              
              25,000Capital
      lease obligations payable through 2036
              
              
              13,604
              
              
              
              13,665
              
              
              
              13,623Other
      long-term debt
              
              
              -
              
              
              
              7,901
              
              
              
              9,321Total
      debt
              
              
              386,039
              
              
              
              380,031
              
              
              
              587,487Less
      current portion of debt
              
              
              (12,048
              )
              
              
              (695
              )
              
              
              (26,579
              )Long-term
      debt, less current maturities
              
              $
              373,991
              
              
              $
              379,336
              
              
              $
              560,908
 
  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)
 
 We have a
credit agreement providing a $430,000 unsecured revolving credit facility
through June 2012.  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.
 
 During
the nine months ending September 2009 and 2008, the average principal balance
outstanding on the revolving credit facility was $109,234 and $187,270,
respectively, and the weighted average interest rate was 1.71% and 3.81%,
respectively.  Letters of credit and standby letters of credit
totaling $19,973 and $26,709 were outstanding at September 26, 2009, and
September 27, 2008, respectively. The average outstanding amount of total
letters of credit during the nine months ended September 2009 and 2008 was
$12,431 and $39,922, respectively.
 
 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 $671, $5,162, and $4,008 at September 26, 2009, December 27, 2008,
and September 27, 2008, respectively.
 
 At
September 26, 2009, we were in compliance with all financial covenants under our
credit agreements and unsecured notes.
 
 
 6. IMPAIRMENT
AND RESTRUCTURING CHARGES
 
 We
evaluated the recoverability of certain property and equipment and recognized
write-downs related to these assets totaling $613 and $1,685 during the three
and nine months ended September 2009.  We also finalized plans on
certain future retail store sites during the second quarter of 2009 and
consequently evaluated the recoverability of related properties and improvements
resulting in the recognition of write-downs related to these
assets.  In accordance with the provisions of Financial Accounting
Standards Board (“FASB”), Accounting Standards
Codification (“ASC”) Topic 360, Property, Plant, and
Equipment, certain land held for sale and properties and improvements
with a net carrying amount of $31,692 were written down to a fair value of
$20,000, resulting in an impairment charge of $11,692 recognized in earnings for
the nine months ended September 2009.  Economic trends could change
undiscounted cash flows in future periods which could trigger possible future
write downs.
 
 In our
ongoing effort to control costs, we implemented a voluntary retirement plan in
February 2009.  Retirement costs in addition to other severance and
related benefits totaling $606 were incurred under this plan during the three
months ended March 2009.
 
 Impairment
and restructuring charges were classified as follows for the periods
presented:
 
 Three Months Ended
              
              
              Nine Months EndedSeptember
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,2009
              
              
              2008
              
              
              2009
              
              
              2008Impariment
      losses on:Land
      held for sale
              
              $
              -
              
              
              $
              -
              
              
              $
              10,160
              
              
              $
              -Property
      and equipment
              
              
              613
              
              
              
              -
              
              
              
              3,217
              
              
              
              -Restructuring
      charges:Severance
      and related benefits
              
              
              -
              
              
              
              -
              
              
              
              606
              
              
              
              -$
              613
              
              
              $
              -
              
              
              $
              13,983
              
              
              $
              -
 
  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)
 
 7. INTEREST
EXPENSE, NET
 
 Interest
expense, net of interest income, consisted of the following for the periods
presented.
 
 Three Months Ended
              
              
              Nine Months EndedSeptember
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,2009
              
              
              2008
              
              
              2009
              
              
              2008Interest
      expense
              
              $
              (5,611
              )
              
              $
              (7,980
              )
              
              $
              (17,786
              )
              
              $
              (23,978
              )Capitalized
      interest
              
              
              28
              
              
              
              458
              
              
              
              222
              
              
              
              1,537Interest
      income
              
              
              4
              
              
              
              12
              
              
              
              97
              
              
              
              42$
              (5,579
              )
              
              $
              (7,510
              )
              
              $
              (17,467
              )
              
              $
              (22,399
              )
 
 
 8. INCOME
TAXES
 
 In August
2009 we completed a restructure of our international operations to more
effectively streamline our supply chain.  As a result of the
restructuring, we realized a reduction of income taxes of $636 during the three
months ended September 26, 2009.
 
 Effective
April 1, 2008, we completed a legal entity restructuring by merging certain
subsidiaries resulting in the major selling channels (catalog, Internet, and
retail) residing in a single legal entity.  State net operating losses
were partially utilized in 2008 pursuant to this restructuring.  Prior
to the restructuring, state net operating losses were being carried forward, and
an offsetting valuation allowance was recorded.
 
 A reconciliation of the statutory
federal tax rate to the effective income tax rate is as follows for the periods
presented.
 
 Three Months Ended
              
              
              Nine Months EndedSeptember
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,2009
              
              
              2008
              
              
              2009
              
              
              2008Statutory
      federal rate
              
              
              35.0
              %
              
              
              35.0
              %
              
              
              35.0
              %
              
              
              35.0
              %State
      income taxes, net of federal tax benefit
              
              
              1.8
              
              
              
              1.6
              
              
              
              1.8
              
              
              
              1.6International
      tax restructure
              
              
              (2.4
              )
              
              
              -
              
              
              
              (1.3
              )
              
              
              -State
      net operating losses valuation allowance release
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (2.3
              )Change
      in state deferred tax rates
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1.0
              )Change
      in tax liabilities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (0.8
              )Other
      nondeductible items
              
              
              0.1
              
              
              
              -
              
              
              
              0.1
              
              
              
              -Change
      in unrecognized tax benefits
              
              
              1.1
              
              
              
              -
              
              
              
              1.3
              
              
              
              -Other,
      net
              
              
              (0.5
              )
              
              
              (1.6
              )
              
              
              (0.4
              )
              
              
              (0.5
              )35.1
              %
              
              
              35.0
              %
              
              
              36.5
              %
              
              
              32.0
              %
 
 
  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)
 
 
 9. COMMITMENTS
AND CONTINGENCIES
 
 We lease various
buildings, computer equipment, 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 $2,961 and $6,880 for
the three and nine months ended September 2009, respectively, and $2,336 and
$6,432 for the three and nine months ended September 2008, respectively. The
following is a schedule of future minimum rental payments under operating leases
at September 26, 2009:
 
 
 For
      the three months ended January 2, 2010
              
              $
              1,873For
      the fiscal years ended:2010
              
              
              5,6432011
              
              
              5,0132012
              
              
              4,3652013
              
              
              4,262Thereafter
              
              
              70,961$
              92,117
 
 We have
entered into certain lease agreements for retail store locations.  We
expect to receive tenant allowances under these leases approximating $10,024 in
2009 and 2010.   We received tenant allowances under these leases
totaling $3,403 during the three and nine months ended September
2009.  We received $21,977 in tenant allowances during the nine months
ended September 2008.  Certain leases require us
to pay contingent rental amounts based on a percentage of sales, in addition to
real estates taxes, insurance, maintenance, and other operating expenses
associated with the leased premises. These leases have terms which include
renewal options ranging from 10 to 70 years.
 
 We have
entered into real estate purchase, construction, and/or economic development
agreements for various new retail store site locations.  At September
26, 2009, we had total cash commitments of approximately $53,000 for the
remainder of 2009 and 2010 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. This commitment
does not include amounts associated with retail store locations where we have
not completed 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.  At September 26, 2009,
December 27, 2008, and September 27, 2008, the total amount of grant funding
subject to specific contractual remedies was $11,589, $11,322, and $5,309,
respectively.
 
 In April 2007, we began an
open account document instructions program providing for Company-issued letters
of credit.  Obligations to pay participating vendors totaled
$32,818, $35,622, and $45,378 at September 26, 2009, December 27, 2008, and
September 27, 2008, respectively.
 
  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)
 
 WFB
enters into financial instruments with off balance sheet risk in the normal
course of business through the origination of unsecured credit card loans.
Unsecured credit card accounts are commitments to extend credit and totaled
$12,896,000, $12,886,000, and $12,668,000 at September 26, 2009, December 27,
2008, and September 27, 2008, respectively. These commitments are in addition to
any current outstanding balances of a cardholder. Unsecured credit card loans
involve, to varying degrees, elements of credit risk in excess of the amount
recognized in the condensed consolidated balance sheets. The principal amounts
of these instruments reflect WFB’s maximum related exposure. WFB has not
experienced and does not anticipate that all customers will exercise the entire
available line of credit at any given point in time. WFB has the right to reduce
or cancel the available lines of credit at any time.
 
 Litigation and
Claims– We are party to various proceedings, lawsuits, disputes, and
claims arising in the ordinary course of 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 applicable period.  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.
 
 
 10.           STOCK
AWARD PLANS
 
 We
recognized share-based compensation expense of $2,422 and $6,707 for the three
and nine months ended September 2009, respectively, and $2,122 and $5,194 for
the three and nine months ended September 2008,
respectively.  Compensation expense related to our share-based payment
awards is recognized in selling, distribution, and administrative expenses in
the condensed consolidated statements of income. At September 26, 2009, the
total unrecognized deferred share-based compensation balance for all equity
awards issued, net of expected forfeitures, was approximately $9,448, net of
tax, which is expected to be amortized over a weighted average period of 2.0
years.
 
 Employee Stock
Options– On May 12, 2009, shareholders of the Company approved an
amendment to Cabela’s Incorporated 2004 Stock Plan (the “2004 Plan”) to increase
the number of shares authorized for issuance by 3,750,000
shares.  During the nine months ended September 2009, there were
785,780 options granted to employees at a weighted average exercise price of
$8.13 per share and 10,000 options granted to non-employee directors at an
exercise price of $11.49 per share.  These options have an eight-year
term and vest over three years for employees and one year for non-employee
directors.  At September 26, 2009, there were 6,250,662 shares subject
to options and 3,983,172 additional shares available for grant under the 2004
Plan.
 
 At
September 26, 2009, under our 1997 Stock Option Plan (the “1997 Plan”), there
were 605,183 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.
 
 On
March 13, 2009, there were 111,720 options granted to our President and Chief
Executive Officer at an exercise price of $8.68 per share.  These
options are subject to the same terms and conditions of the 2004
Plan.  These options have an eight-year term and vest over three
years.
  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)
 
 
 During
the nine months ended September 2009, there were 197,349 options
exercised.  The aggregate intrinsic value of awards exercised during
the nine months ended September 2009 was $1,816 compared to $2,400 during the
nine months ended September 2008.  Based on our closing stock price of
$13.05 at September 26, 2009, the total number of in-the-money awards
exercisable at September 26, 2009, was 484,797.
 
 Nonvested Stock
and Stock Unit Awards -During the
nine months ended September 2009, we issued 785,780 units of nonvested
stockunder the 2004
Plan to employees at a weighted average fair value of $8.19 per unit and
138,249 units to our President and Chief Executive Officer at a fair value of
$10.25 per unit.  These nonvested stock units vest evenly over three
years on the grant date anniversary based on the passage of time. The nonvested
stock units granted to our President and Chief Executive Officer are subject to
the same terms and conditions of the 2004 Plan.
 
 Employee Stock
Purchase Plan– The maximum number of shares of common stock available
for issuance under our Employee Stock Purchase Plan is
1,835,000.  During the nine months ended September 2009, there were
178,367 shares issued.  At September 26, 2009, there were 1,020,289shares
authorized and available for issuance.  We began issuing new
shares in October 2008 instead of market purchases and plan to continue issuing
new shares in the future.
 
 
 11. STOCKHOLDERS’
EQUITY AND DIVIDEND RESTRICTIONS
 
 The most
significant restrictions on the payment of dividends are contained within the
covenants under our revolving credit and unsecured senior notes purchase
agreements. Also, Nebraska banking laws govern the amount of dividends that WFB
can pay to Cabela’s. At September 26, 2009, we had unrestricted retained
earnings of $106,238 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.
 
 Other
Comprehensive Income (Loss)– The components of accumulated other
comprehensive income (loss), net of related taxes, were as follows at the
periods ended:
 
 September
      26,
              
              
              December
      27,
              
              
              September
      27,2009
              
              
              2008
              
              
              2008Accumulated
      net unrealized holding gains (losses) on economic development
      bonds
              
              $
              247
              
              
              $
              (6,231
              )
              
              $
              (2,623
              )Accumulated
      net unrealized holding gains on asset-backed securities
              
              
              2,948
              
              
              
              -
              
              
              
              -Accumulated
      net unrealized holding gains on derivatives
              
              
              116
              
              
              
              33
              
              
              
              68Cumulative
      foreign currency translation adjustments
              
              
              (404
              )
              
              
              (399
              )
              
              
              (103
              )Total
      accumulated other comprehensive income (loss)
              
              $
              2,907
              
              
              $
              (6,597
              )
              
              $
              (2,658
              )
 
 
  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)
 
 12. COMPREHENSIVE
INCOME
 
 The
components of comprehensive income and related tax effects were as follows for
the periods presented.
 
 Three Months Ended
              
              
              Nine Months EndedSeptember
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,2009
              
              
              2008
              
              
              2009
              
              
              2008Net
      income
              
              $
              18,766
              
              
              $
              9,722
              
              
              $
              33,017
              
              
              $
              26,957Changes
      in net unrealized holding gains (losses) on economic development bonds,
      net of taxes of $2,271, $519, $3,829 and $(1,075)
              
              
              3,867
              
              
              
              903
              
              
              
              6,478
              
              
              
              (1,817
              )Changes
      in net unrealized holding gains on asset-backed available for sale
      securities, net of taxes of $2,242 and $1,601 for the 2009
      periods
              
              
              4,128
              
              
              
              -
              
              
              
              2,948
              
              
              
              -Changes
      in net unrealized holding gains on  derivatives designated as
      cash flow hedges, net of taxes of $4, $1, $49 and $82
              
              
              6
              
              
              
              2
              
              
              
              83
              
              
              
              140Less
      adjustment for reclassification of derivatives included in net income, net
      of taxes of $(15) and $(85) for the 2008 periods
              
              
              -
              
              
              
              (26
              )
              
              
              -
              
              
              
              (148
              )Foreign
      currency translation adjustment
              
              
              103
              
              
              
              (101
              )
              
              
              (5
              )
              
              
              (110
              )Comprehensive
      income
              
              $
              26,870
              
              
              $
              10,500
              
              
              $
              42,521
              
              
              $
              25,022
 
 
 13. EARNINGS
PER SHARE
 
 The
following table reconciles the number of shares utilized in the earnings per
share calculations for the periods presented.
 
 Three Months Ended
              
              
              Nine Months EndedSeptember
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,2009
              
              
              2008
              
              
              2009
              
              
              2008Weighted average number of
      shares:Common
      shares – basic
              
              
              67,160,952
              
              
              
              66,648,175
              
              
              
              66,923,206
              
              
              
              66,261,993Effect
      of incremental dilutive securities:Stock
      options, nonvested stock units, and employee stock purchase plan
      shares
              
              
              796,068
              
              
              
              403,318
              
              
              
              327,831
              
              
              
              843,406Common
      shares – diluted
              
              
              67,957,020
              
              
              
              67,051,493
              
              
              
              67,251,037
              
              
              
              67,105,399Stock
      options outstanding and nonvested stock units issued considered
      anti-dilutive
              
              
              3,816,359
              
              
              
              4,511,987
              
              
              
              4,234,698
              
              
              
              4,511,987
 
  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)
 
 
 14. SUPPLEMENTAL
CASH FLOW INFORMATION
 
 The
following table sets forth non-cash financing and investing activities and other
cash flow information for the periods presented.
 
 Nine Months EndedSeptember
      26,
              
              
              September
      27,2009
              
              
              2008Non-cash financing and investing
      activities:Accrued
      property and equipment additions (1)
              
              $
              6,904
              
              
              $
              7,220Other cash flow
information:Interest
      paid
              
              $
              40,890
              
              
              $
              32,690Capitalized
      interest
              
              
              (222
              )
              
              
              (1,537
              )Interest
      paid, net of capitalized interest
              
              $
              40,668
              
              
              $
              31,153Income
      taxes, net
              
              $
              17,281
              
              
              $
              53,505
  
 (1)
              Accrued
      property and equipment additions are recognized in the condensed
      consolidated statements of cash flows in the period they are
      paid.
 
 
 15.   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).  The Financial Services segment issues co-branded credit
cards.  For the Retail segment, operating costs consist primarily of
labor, advertising, depreciation, and occupancy costs of retail
stores.  For the Direct segment, operating costs consist primarily of
catalog costs, e-commerce advertising costs, and order processing
costs.  For the Financial Services segment, operating costs consist
primarily of advertising and promotion, marketing fees, third party services for
processing credit card transactions, salaries, and other general and
administrative costs.
 
 Revenues
included in Corporate Overhead and Other are primarily made up of land sales,
amounts received from 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 segment eliminations.  Unallocated
shared-service costs include receiving, distribution, and storage costs of
inventory, merchandising, and quality assurance costs, as well as corporate
headquarters occupancy costs.  In September 2009, we disposed of our
taxidermy business, and we expect to dispose of the net assets of our
wildlife/Americana art prints and art-related products business in the fourth
quarter of 2009.  The related pre-tax gain and loss were recorded in the
three and nine months ended September 2009.
 
 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.  At September 26, 2009, goodwill
totaling $3,217 was included in the Retail segment. At September 27, 2008,
goodwill totaling $4,474 was 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 to interests, receivables, fixtures, and other
assets.  Cash and cash equivalents of WFB were $414,376 and $202,405
at the end of September 2009 and 2008, respectively.  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 are recognized in each respective
segment.  Intercompany revenue between segments is eliminated in
consolidation.
  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)
 
 
 Financial
information by segment is presented in the following table for the three and
nine months ended September 2009 and 2008:
 
 CorporateFinancial
              
              
              OverheadThree Months Ended September 26,
      2009:
              
              Retail
              
              
              Direct
              
              
              Services
              
              
              and
      Other
              
              
              TotalRevenue
      from external customers
              
              $
              347,988
              
              
              $
              223,803
              
              
              $
              48,304
              
              
              $
              4,201
              
              
              $
              624,296Revenue
      (loss) from internal customers
              
              
              -
              
              
              
              2,391
              
              
              
              (118
              )
              
              
              (2,273
              )
              
              
              -Total
      revenue
              
              $
              347,988
              
              
              $
              226,194
              
              
              $
              48,186
              
              
              $
              1,928
              
              
              $
              624,296Operating
      income (loss)
              
              $
              40,451
              
              
              $
              34,243
              
              
              $
              12,547
              
              
              $
              (55,320
              )
              
              $
              31,921As
      a percentage of revenue
              
              
              11.6
              %
              
              
              15.1
              %
              
              
              26.0
              %
              
              
              N/A
              
              
              
              5.1
              %Depreciation
      and amortization
              
              $
              10,588
              
              
              $
              1,365
              
              
              $
              304
              
              
              $
              5,835
              
              
              $
              18,092Assets
              
              
              903,014
              
              
              
              696,686
              
              
              
              830,772
              
              
              
              80,386
              
              
              
              2,510,858
 
 CorporateFinancial
              
              
              OverheadThree Months Ended September 27,
      2008:
              
              Retail
              
              
              Direct
              
              
              Services
              
              
              and
      Other
              
              
              TotalRevenue
      from external customers
              
              $
              326,942
              
              
              $
              240,754
              
              
              $
              42,013
              
              
              $
              2,091
              
              
              $
              611,800Revenue
      (loss) from internal customers
              
              
              1,032
              
              
              
              474
              
              
              
              (117
              )
              
              
              (1,389
              )
              
              
              -Total
      revenue
              
              $
              327,974
              
              
              $
              241,228
              
              
              $
              41,896
              
              
              $
              702
              
              
              $
              611,800Operating
      income (loss)
              
              $
              30,084
              
              
              $
              33,513
              
              
              $
              11,961
              
              
              $
              (54,713
              )
              
              $
              20,845As
      a percentage of revenue
              
              
              9.2
              %
              
              
              13.9
              %
              
              
              28.5
              %
              
              
              N/A
              
              
              
              3.4
              %Depreciation
      and amortization
              
              $
              7,676
              
              
              $
              1,078
              
              
              $
              200
              
              
              $
              5,164
              
              
              $
              14,118Assets
              
              
              1,024,049
              
              
              
              580,917
              
              
              
              471,508
              
              
              
              222,012
              
              
              
              2,298,486
 
 CorporateFinancial
              
              
              OverheadNine Months Ended September 26,
      2009:
              
              Retail
              
              
              Direct
              
              
              Services
              
              
              and
      Other
              
              
              TotalRevenue
      from external customers
              
              $
              925,147
              
              
              $
              648,079
              
              
              $
              126,558
              
              
              $
              13,288
              
              
              $
              1,713,072Revenue
      (loss) from internal customers
              
              
              -
              
              
              
              2,979
              
              
              
              (349
              )
              
              
              (2,630
              )
              
              
              -Total
      revenue
              
              $
              925,147
              
              
              $
              651,058
              
              
              $
              126,209
              
              
              $
              10,658
              
              
              $
              1,713,072Operating
      income (loss)
              
              $
              92,470
              
              
              $
              96,246
              
              
              $
              36,536
              
              
              $
              (162,057
              )
              
              $
              63,195As
      a percentage of revenue
              
              
              10.0
              %
              
              
              14.8
              %
              
              
              28.9
              %
              
              
              N/A
              
              
              
              3.7
              %Depreciation
      and amortization
              
              $
              31,549
              
              
              $
              3,773
              
              
              $
              906
              
              
              $
              16,720
              
              
              $
              52,948Assets
              
              
              903,014
              
              
              
              696,686
              
              
              
              830,772
              
              
              
              80,386
              
              
              
              2,510,858
 
  18
 TABLE OF CONTENTS
  CABELA’S
INCORPORATED AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars
in Thousands Except Share and Per Share Amounts)
 (Unaudited)
 
 
 CorporateFinancial
              
              
              OverheadNine Months Ended September 27,
      2008:
              
              Retail
              
              
              Direct
              
              
              Services
              
              
              and
      Other
              
              
              TotalRevenue
      from external customers
              
              $
              854,011
              
              
              $
              683,403
              
              
              $
              121,192
              
              
              $
              14,685
              
              
              $
              1,673,291Revenue
      (loss) from internal customers
              
              
              1,962
              
              
              
              1,377
              
              
              
              (335
              )
              
              
              (3,004
              )
              
              
              -Total
      revenue
              
              $
              855,973
              
              
              $
              684,780
              
              
              $
              120,857
              
              
              $
              11,681
              
              
              $
              1,673,291Operating
      income (loss)
              
              $
              79,429
              
              
              $
              93,368
              
              
              $
              33,928
              
              
              $
              (149,942
              )
              
              $
              56,783As
      a percentage of revenue
              
              
              9.3
              %
              
              
              13.6
              %
              
              
              28.1
              %
              
              
              N/A
              
              
              
              3.4
              %Depreciation
      and amortization
              
              $
              28,125
              
              
              $
              3,022
              
              
              $
              786
              
              
              $
              16,253
              
              
              $
              48,186Assets
              
              
              1,024,049
              
              
              
              580,917
              
              
              
              471,508
              
              
              
              222,012
              
              
              
              2,298,486
 
 The
components and amounts of total revenue for the Financial Services business
segment were as follows for the periods presented.
 
 Three Months Ended
              
              
              Nine Months EndedSeptember
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,2009
              
              
              2008
              
              
              2009
              
              
              2008Interest
      and fee income, net of provision for loan losses
              
              $
              16,722
              
              
              $
              10,509
              
              
              $
              37,234
              
              
              $
              29,632Interest
      expense
              
              
              (6,254
              )
              
              
              (2,831
              )
              
              
              (18,924
              )
              
              
              (8,993
              )Net
      interest income, net of provision for loan losses
              
              
              10,468
              
              
              
              7,678
              
              
              
              18,310
              
              
              
              20,639Non-interest
      income:Securitization
      income
              
              
              51,026
              
              
              
              47,573
              
              
              
              144,629
              
              
              
              136,923Other
      non-interest income
              
              
              17,217
              
              
              
              17,273
              
              
              
              48,147
              
              
              
              49,914Total
      non-interest income
              
              
              68,243
              
              
              
              64,846
              
              
              
              192,776
              
              
              
              186,837Less:
      Customer rewards costs
              
              
              (30,525
              )
              
              
              (30,628
              )
              
              
              (84,877
              )
              
              
              (86,619
              )Financial
      Services total revenue
              
              $
              48,186
              
              
              $
              41,896
              
              
              $
              126,209
              
              
              $
              120,857
 
 The
following chart sets forth the percentage of revenue contributed by each of the
five product categories for our Retail and Direct businesses and in total for
the periods presented:
 
 Retail
              
              
              Direct
              
              
              TotalThree Months Ended:
              
              September
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,2009
              
              
              2008
              
              
              2009
              
              
              2008
              
              
              2009
              
              
              2008Product CategoryHunting
      Equipment
              
              
              46.4
              %
              
              
              42.2
              %
              
              
              40.5
              %
              
              
              34.5
              %
              
              
              44.2
              %
              
              
              39.1
              %Clothing
      and Footwear
              
              
              20.7
              
              
              
              23.2
              
              
              
              29.3
              
              
              
              32.7
              
              
              
              23.9
              
              
              
              27.0Fishing
      and Marine
              
              
              15.5
              
              
              
              15.9
              
              
              
              11.2
              
              
              
              12.0
              
              
              
              13.9
              
              
              
              14.4Camping
              
              
              9.6
              
              
              
              10.1
              
              
              
              12.6
              
              
              
              14.6
              
              
              
              10.7
              
              
              
              11.9Gifts
      and Furnishings
              
              
              7.8
              
              
              
              8.6
              
              
              
              6.4
              
              
              
              6.2
              
              
              
              7.3
              
              
              
              7.6Total
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
 
  19
 TABLE OF CONTENTS
  CABELA’S
INCORPORATED AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars
in Thousands Except Share and Per Share Amounts)
 (Unaudited)
 
 
 Retail
              
              
              Direct
              
              
              TotalNine Months Ended:
              
              September
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,2009
              
              
              2008
              
              
              2009
              
              
              2008
              
              
              2009
              
              
              2008Product CategoryHunting
      Equipment
              
              
              45.1
              %
              
              
              37.8
              %
              
              
              37.3
              %
              
              
              28.1
              %
              
              
              42.1
              %
              
              
              33.7
              %Clothing
      and Footwear
              
              
              19.3
              
              
              
              22.4
              
              
              
              28.3
              
              
              
              33.4
              
              
              
              22.8
              
              
              
              27.0Fishing
      and Marine
              
              
              18.6
              
              
              
              20.9
              
              
              
              15.4
              
              
              
              16.9
              
              
              
              17.3
              
              
              
              19.2Camping
              
              
              8.8
              
              
              
              9.7
              
              
              
              12.0
              
              
              
              14.2
              
              
              
              10.0
              
              
              
              11.6Gifts
      and Furnishings
              
              
              8.2
              
              
              
              9.2
              
              
              
              7.0
              
              
              
              7.4
              
              
              
              7.8
              
              
              
              8.5Total
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
 
 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 3% of consolidated net merchandise sales in each
reported period. No single customer accounted for 10% or more of consolidated
net sales. No single product or service accounted for a significant percentage
of our consolidated revenue.
  
 16. FAIR
VALUE MEASUREMENTS
 
 As
defined by ASC Topic 820, Fair
Value Measurements and Disclosures, 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 inputs other
      than quoted market prices.·
              Level
      3 – Unobservable inputs corroborated by little, if any, 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 primarily unobservable from objective sources. In determining the
appropriate hierarchy levels, we performed an analysis of the assets and
liabilities that are subject to ASC 820 and determined that at September 26,
2009, all applicable financial instruments carried on our condensed consolidated
balance sheets are classified as Level 3. The following table summarizes the
valuation of our recurring financial instruments at the periods
ended:
 
 
 Fair Value atAssets - Level 3
              
              September 26, 2009
              
              
              December 27, 2008
              
              
              September 27, 2008Retained
      interests in securitized loans, including asset-backed
      securities
              
              $
              145,888
              
              
              $
              61,605
              
              
              $
              43,170Economic
      development bonds
              
              
              119,974
              
              
              
              112,585
              
              
              
              101,583$
              265,862
              
              
              $
              174,190
              
              
              $
              144,753
 
  20
 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 changes in fair value of our assets measured at fair value on a
recurring basis using significant unobservable inputs (Level 3), as defined in
ASC 820, for
the periods presented:
 
 Three Months Ended
              
              
              Nine Months EndedRetained Interests in Securitized
      Loans:
              
              September 26, 2009
              
              
              September 27, 2008
              
              
              September 26, 2009
              
              
              September 27, 2008Balance,
      beginning of period
              
              $
              121,465
              
              
              $
              38,390
              
              
              $
              61,605
              
              
              $
              51,777Total
      gains or (losses):Included
      in earnings - realized
              
              
              236
              
              
              
              (3,108
              )
              
              
              4,447
              
              
              
              (12,440
              )Included
      in other comprehensive income - unrealized
              
              
              6,370
              
              
              
              -
              
              
              
              4,549
              
              
              
              -Purchases,
      issuances, and settlements, net
              
              
              17,817
              
              
              
              7,888
              
              
              
              75,287
              
              
              
              3,833Balance,
      end of period
              
              $
              145,888
              
              
              $
              43,170
              
              
              $
              145,888
              
              
              $
              43,170Three Months Ended
              
              
              Nine Months EndedEconomic Development Bonds:
              
              September 26, 2009
              
              
              September 27, 2008
              
              
              September 26, 2009
              
              
              September 27, 2008Balance,
      beginning of period
              
              $
              115,650
              
              
              $
              101,316
              
              
              $
              112,585
              
              
              $
              98,035Total
      gains or (losses):Included
      in earnings - realized
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Included
      in other comprehensive income - unrealized
              
              
              6,138
              
              
              
              1,422
              
              
              
              10,307
              
              
              
              (2,892
              )Purchases,
      issuances, and settlements, net
              
              
              (1,814
              )
              
              
              (1,155
              )
              
              
              (2,918
              )
              
              
              6,440Balance,
      end of period
              
              $
              119,974
              
              
              $
              101,583
              
              
              $
              119,974
              
              
              $
              101,583
 
 Included
in retained interests in asset securitizations are interest-only strips, cash
reserve accounts, and cash accounts. For interest-only strips and cash reserve
accounts WFB estimates 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. For cash accounts,
WFB estimates related fair values based on the present value of future expected
cash flows using discount rates commensurate with 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 and cash reserve accounts do not include interchange
income since interchange income is earned only when a charge is made to a
customer’s account.
 
 WFB also owns asset-backed
securities from five of its securitizations. Asset-backed trading securities
fluctuate daily based on the short-term operational needs of
WFB.  Advances and pay downs on the trading securities are at par
value. Therefore, the par value of the asset-backed trading securities
approximates fair value.For asset-backed available for sale
securities, WFB estimates fair values using discounted cash flow projection
estimates based upon contractual principal and interest cash flows. The discount
rate utilized is based upon management’s evaluation of current market rates;
indicative pricing for such instruments; the rates from the last date WFB
considered the market for these instruments to be active and orderly, adjusted
for changes in credit spreads in accordance with ASC Section 820-10-35, Fair
Value Measurements and Disclosures: Overall: Subsequent MeasurementandASC Section
820-10-65, Fair
Value Measurements and Disclosures: Overall: Transition and Open Effective Date
Information; and the discount rates used to value other retained
interests in securitized loans.  At the end of September 2009, the
weighted average discount rate used to value the triple-A rated notes was 1.35%,
the A rated notes was 6.12%, the triple-B rated notes was 7.62%, and the
double-B rated notes was 12.00%. Declines in the fair value of asset-backed
available for sale securities below amortized cost that are deemed to be other
than temporary are reflected in current earnings.
  21
 TABLE OF CONTENTS
  CABELA’S
INCORPORATED AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars
in Thousands Except Share and Per Share Amounts)
 (Unaudited)
 
 Fair
values of economic development bonds (“bonds”) are estimated using discounted
cash flow projection estimates based on available market interest rates and the
estimated amounts and timing of expected future payments to be received from
municipalities under tax 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.
 
 Certain
assets are measured at fair value on a non-recurring basis using significant
unobservable inputs (Level 3) as defined by and in accordance with the
provisions of ASC 820.  As such, certain land held for sale and
property and equipment with a total net carrying amount of $31,692 was written
down to its fair value of $20,000 at June 27, 2009.  This write-down
resulted in a total impairment charge of $11,692 ($10,160 relating to land held
for sale and $1,532 relating to property and equipment) recognized in earnings
for the nine months ended September 2009.
 
 The
carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable, gift instruments (including credit card and loyalty rewards programs),
accrued expenses, and income taxes payable included in the condensed
consolidated balance sheets approximate fair value given the short-term nature
of these financial instruments.  The estimated fair value of credit
card loans is 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. To determine fair value, time deposits are pooled in
homogeneous groups, and the future cash flows of those groups are discounted
using current market rates offered for similar products for purposes of
estimating fair value.  The estimated fair value of long-term debt is
based on the amount of future cash flows associated with each type of debt
discounted using current borrowing rates for similar types of debt of comparable
maturity.
 
 The
following table provides the estimated fair values of financial instruments not
carried at fair value at the periods ended:
 
 September 26, 2009
              
              
              December 27, 2008Carrying Value
              
              
              Estimated Fair Value
              
              
              Carrying Value
              
              
              Estimated Fair ValueFinancial
      AssetsCredit
      card loans, net
              
              $
              153,347
              
              
              $
              157,450
              
              
              $
              167,226
              
              
              $
              168,429Financial
      LiabilitiesTime
      deposits
              
              
              543,244
              
              
              
              568,905
              
              
              
              486,199
              
              
              
              508,190Long-term
      debt
              
              
              386,039
              
              
              
              379,928
              
              
              
              380,031
              
              
              
              373,304
 
 
 17. ACCOUNTING
PRONOUNCEMENTS
 
 Effective
December 30, 2007, we adopted the provisions of ASC Topic 820,Fair
Value Measurements and Disclosures.  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 this statement apply to all financial
instruments that are being measured and reported on a fair value
basis.  The partial adoption of ASC 820 did not have any impact on our
financial position or results of operations.  Effective December 28,
2008, we adopted the remaining provisions of ASC 820 that were delayed by the
issuance of ASC Section 820-10-55, Fair
Value Measurements and Disclosures: Overall: Implementation Guidance and
Illustrations.  The adoption of the remaining provisions of ASC
820, relating to nonfinancial assets and liabilities, did not have a material
impact on our financial position or results of operations.
  22
 TABLE OF CONTENTS
  CABELA’S
INCORPORATED AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars
in Thousands Except Share and Per Share Amounts)
 (Unaudited)
 
 
 In
December 2007, the FASB issued ASC Topic 805, Business Combinations, which
replaced FAS No. 141.  ASC 805 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.  We adopted the provisions of ASC 805 effective December 28,
2008, which applies prospectively to all business combinations entered into on
or after such date.  The adoption of this statement had no effect on
our financial position or results of operations.  Any future
acquisitions will be impacted by application of this statement.
 
 In
December 2007, the FASB issued ASC Section 810-10-65, Consolidation: Overall: Transition
and Effective Date Information.  This standard amends ARB No.
51 to establish accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a
subsidiary.  We adopted the provisions of ASC 810-10-65 effective
December 28, 2008.  The adoption of this statement did not have a
material effect on our financial position or results of operations.
 
 In
February 2008, the FASB updated ASC Topic 860, Transfers and
Servicing.The objective of this update is to provide
implementation guidance on accounting for a transfer of a financial asset and
repurchase financing.  The update presumes that an initial transfer of
a financial asset and a repurchase financing are considered part of the same
arrangement (linked transaction) under ASC 860.  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 ASC
860.  We adopted the provisions the update to ASC 860 effective
December 28, 2008.   The adoption of this statement did not have
a material effect on our financial position or results of
operations.
 
 In March
2008, the FASB updated ASC Topic 815, Derivatives and
Hedging.This update changesthe existing disclosure
requirements in ASC 815.ASC
815 now requires enhanced disclosures about an entity’s derivative and hedging
activities.  We adopted the updates to ASC 815 effective December 28,
2008.  The adoption of this statement did not have a material effect
on our financial position or results of operations.
 
 In April
2009, the FASB issued the following:
 
 ·
              Update to ASC
      Section 820-10-65,Fair Value Measurements and
      Disclosures: Overall: Transition and Open Effective Date
      Information,·
              Update to ASC
      Section 320-10-65,Investments – Debt and Equity
      Securities: Overall: Transition and Open Effective Date
      Information·
              Update to ASC
      Section 825-10-65,Financial Instruments:
      Overall: Transition and Open Effective Date
    Information
 
 ASC
820-10-65 indicates that when determining the fair value of an asset or
liability that is not a Level 1 fair value measurement, an entity should assess
whether the volume and level of activity for the asset or liability have
significantly decreased when compared with normal market conditions. If the
entity concludes that there has been a significant decrease in the volume and
level of activity, a quoted price (e.g., observed transaction) may not be
determinative of fair value and may require a significant
adjustment.  ASC Section 320-10-65 modifies the requirements for
recognizing other-than-temporarily impaired debt securities and changes the
existing impairment model for such securities.  These statements also
modify the presentation of other-than-temporary impairment losses and increase
the frequency of and expand already required disclosures about
other-than-temporary impairment for debt and equity securities.  ASC
Section 825-10-65 requires publicly traded companies to disclose the fair value
of financial instruments within the scope of ASC 825 in interim financial
statements, adding to the current requirement to make those disclosures in
annual financial statements. This staff position also requires that companies
disclose the method or methods and significant assumptions used to estimate the
fair value of financial instruments and a discussion of changes, if any, in the
method or methods and significant assumptions during the period.  We
adopted the provisions these staff positions effective for the second quarter
ended June 27, 2009.  The adoption of these staff positions did not
have a material effect on our financial position or results of
operations.
  23
 TABLE OF CONTENTS
  CABELA’S
INCORPORATED AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars
in Thousands Except Share and Per Share Amounts)
 (Unaudited)
 
 
 In May
2009, the FASB issued ASC Topic 855, Subsequent Events. This
statement requires management to evaluate subsequent events through the date the
financial statements are either issued, or available to be issued. Companies
will be required to disclose the date through which subsequent events have been
evaluated.  We adopted the provisions of ASC 855 effective March 29,
2009.  The adoption of this statement did not have a material effect
on our financial position or results of operations.
 
 In June
2009, the FASB updated ASC Topic 810, Consolidations,and ASC Topic
860, Transfers and
Servicing, which significantly change the accounting for transfers of
financial assets and the criteria for determining whether to consolidate a
variable interest entity (“VIE”).  The update to ASC 860 eliminates
the qualifying special purpose entity (“QSPE”) concept, establishes conditions
for reporting a transfer of a portion of a financial asset as a sale, clarifies
the financial-asset derecognition criteria, revises how interests retained by
the transferor in a sale of financial assets initially are measured, and removes
the guaranteed mortgage securitization recharacterization
provisions.  ASC Topic 810 requires reporting entities to evaluate
former QSPEs for consolidation, changes the approach to determining a VIE’s
primary beneficiary from a mainly quantitative assessment to an exclusively
qualitative assessment designed to identify a controlling financial interest,
and increases the frequency of required reassessments to determine whether a
company is the primary beneficiary of a VIE. These updates require additional
year-end and interim disclosures for public and nonpublic companies that are
similar to the disclosures required by FSP FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities, which we adopted and included those disclosures in
fiscal year 2008.  The statements are effective for us at the
beginning of our fiscal year 2010, and for subsequent interim and annual
reporting periods. We have evaluated the provisions of these two statements and
believe that their application will result in the consolidation of the Trust and related
entities.  Consequently, we believe there will be amaterial
impact on our total assets, total liabilities, retained earnings and other
comprehensive income, and the components of our Financial Services
revenue.  As a result of the new accounting standards, the
securitization transactions will be accounted for as secured borrowings, credit
card loans and debt issued from the Trust will be presented as assets and
liabilities of the Company, various other interests currently reflected on the
condensed consolidated balance sheet will be reclassified primarily to credit
card loans, other assets and accrued expenses, and changes in cash flows will be
reflected in financing and investing rather than operating.  If the
Trust was consolidated using the carrying amounts of Trust assets and
liabilities at September 26, 2009, total assets and liabilities would increase
approximately $2.0 billion and $2.1 billion, respectively, and retained earnings
and other comprehensive income would decrease approximately $100 million, after
tax.
 
 We have
evaluated the impact that the adoption of these accounting standards will have
on our compliance with the financial covenants in our credit agreements and
unsecured notes and do not believe that these standards, if they were effective
as of September 26, 2009, would have, after providing permitted notices to our
lenders, caused us to be in breach of any financial covenants in our credit
agreements and unsecured notes.  We can offer no assurances that the
impact from the provisions of these standards will not cause us to breach
financial covenants in our credit agreements and unsecured notes in the
future.  On September 15, 2009, the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, the Office of Thrift
Supervision, and the Federal Reserve (collectively, the “federal agencies”)
issued a Notice of Proposed Rulemaking, Risk-Based Capital Guidelines;
Capital Adequacy Guidelines; Capital Maintenance; Regulatory Capital; Impact of
Modifications to Generally Accepted Accounting Principles; Consolidation of
Asset-Backed Commercial Paper Programs; and Other Related Issues relating
to proposed changes to risk based capital as a result of ASC Topic 810 and
860.  With the consolidation of the assets and liabilities of the
Trust on WFB’s balance sheet, under both the existing and proposed regulatory
capital requirements, WFB’s required capital would be increased.  The
effect of changes to regulatory capital requirements resulting from the proposed
rules issued by the federal agencies, if adopted in their current form, will
cause us to reallocate capital from our Retail and Direct businesses to meet the
capital needs of our Financial Services business, or require us to raise
additional debt or equity capital, which in turn could significantly alter our
growth initiatives.  Also, if WFB fails to satisfy the requirements
for the well-capitalized classification under the regulatory framework for
prompt corrective action, WFB’s ability to issue certificates of deposit could
be affected.  We expect to have sufficient access to capital at the
end of December 2009 to provide the necessary capital contribution to WFB so WFB
can meet the regulatory capital requirements for the well-capitalized
classification for the first quarter of 2010.  We expect to amend our
existing credit agreement so we can contribute sufficient capital to
WFB.
  24
 TABLE OF CONTENTS
  CABELA’S
INCORPORATED AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars
in Thousands Except Share and Per Share Amounts)
 (Unaudited)
 
 
 In June
2009, the FASB issued FAS No.168, TheFASBAccountingStandardsCodification and the Hierarchy of
Generally Accepted Accounting Principles — a replacement of FASB Statement No.
162.  This codification is the source of authoritative GAAP
recognized by the FASB to be applied by nongovernmental entities.  Rules
and interpretive releases of the SEC under authority of federal securities laws
are also sources of authoritative GAAP for SEC registrants.  We adopted the
provisions of FAS No. 168 effective June 28, 2009.  The adoption of
this statement did not have an effect on our financial position or results of
operations.
 
  25
 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
      level of discretionary consumer spending;·
              the
      state of the economy, including increases in unemployment levels and
      bankruptcy filings;·
              changes
      in the capital and credit markets or the availability of capital and
      credit;·
              our
      ability to comply with the financial covenants in our credit
      agreements;·
              counterparty
      risk on our unsecured revolving credit facility;·
              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, including regulations relating to firearms and
      ammunition;·
              inadequate
      protection of our intellectual property;·
              our
      ability to protect our brand and reputation;·
              changes
      in accounting rules applicable to securitization transactions, including
      related increases in required regulatory capital;·
              our
      ability to manage credit and liquidity risks;·
              any
      downgrade of the ratings on the outstanding notes issued by our Financial
      Services business’ securitization trust;·
              our
      ability to securitize our credit card receivables at acceptable rates or
      access the deposits market;·
              decreased
      interchange fees received by our Financial Services business as a result
      of credit card industry regulation and/or litigation;·
              impact
      of legislation, regulation, and supervisory regulatory actions in the
      financial services industry including the Credit Card Accountability
      Responsibility and Disclosure Act of 2009 (the “CARD Act”) and the
      proposed financial regulatory reform;·
              other
      factors that we may not have currently identified or
      quantified;·
              other
      risks, relevant factors, and uncertainties identified in our filings with
      the SEC (including the information set forth in the “Risk Factors” section
      of our Annual Report on Form 10-K for the fiscal year ended December 27,
      2008, in Part II, Item 1A, of our Quarterly Report on Form 10-Q for
      the fiscal quarter ended June 27, 2009, and in Part II, Item 1A, of this
      report), which filings are available at the SEC’s website atwww.sec.gov.
 
  26
 TABLE OF CONTENTS
  
 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 Annual
Report on Form 10-K for the fiscal year ended December 27, 2008, as filed with
the SEC, and our unaudited interim condensed consolidated financial statements
and the notes thereto appearing elsewhere in this report.
 
 
 Critical
Accounting Policies and Use of Estimates
 
 Our
critical accounting policies and use of estimates utilized in the preparation of
the condensed consolidated financial statements as of September 26, 2009, remain
unchanged from December 27, 2008.
 
 
 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 30 stores, 29 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 also 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.
  27
 TABLE OF CONTENTS
  Financial Overview
 
 Three Months EndedSeptember 26, 2009
              
              
              September 27, 2008
              
              
              Increase (Decrease)
              
              
              %
                Change(Dollars
      in Thousands)Revenue:Retail
              
              $
              347,988
              
              
              $
              327,974
              
              
              $
              20,014
              
              
              
              6.1
              %Direct
              
              
              226,194
              
              
              
              241,228
              
              
              
              (15,034
              )
              
              
              (6.2
              )Total
      merchandise sales
              
              
              574,182
              
              
              
              569,202
              
              
              
              4,980
              
              
              
              0.9Financial
      Services
              
              
              48,186
              
              
              
              41,896
              
              
              
              6,290
              
              
              
              15.0Other
      revenue
              
              
              1,928
              
              
              
              702
              
              
              
              1,226
              
              
              
              174.6Total
      revenue
              
              $
              624,296
              
              
              $
              611,800
              
              
              $
              12,496
              
              
              
              2.0Operating
      income
              
              $
              31,921
              
              
              $
              20,845
              
              
              $
              11,076
              
              
              
              53.1Net
      income per diluted share
              
              $
              0.28
              
              
              $
              0.15
              
              
              $
              0.13
              
              
              
              86.7
 
 Nine Months EndedSeptember 26,
                2009
              
              
              September 27,
                2008
              
              
              Increase
                (Decrease)
              
              
              %
                Change(Dollars
      in Thousands)Revenue:Retail
              
              $
              925,147
              
              
              $
              855,973
              
              
              $
              69,174
              
              
              
              8.1
              %Direct
              
              
              651,058
              
              
              
              684,780
              
              
              
              (33,722
              )
              
              
              (4.9
              )Total
      merchandise sales
              
              
              1,576,205
              
              
              
              1,540,753
              
              
              
              35,452
              
              
              
              2.3Financial
      Services
              
              
              126,209
              
              
              
              120,857
              
              
              
              5,352
              
              
              
              4.4Other
      revenue
              
              
              10,658
              
              
              
              11,681
              
              
              
              (1,023
              )
              
              
              (8.8
              )Total
      revenue
              
              $
              1,713,072
              
              
              $
              1,673,291
              
              
              $
              39,781
              
              
              
              2.4Operating
      income
              
              $
              63,195
              
              
              $
              56,783
              
              
              $
              6,412
              
              
              
              11.3Net
      income per diluted share
              
              $
              0.49
              
              
              $
              0.40
              
              
              $
              0.09
              
              
              
              22.5
 
 Revenue
in our merchandising businessesincreased
$5 million, or 0.9%, for the three months ended September 2009 compared to the
three months ended September 2008, and $35 million, or 2.3%, for the nine months
ended September 2009 compared to the nine months ended September
2008.  The net increases in total merchandise sales comparing the
respective periods were due to 1) increases in comparable store sales led by
increases in the hunting equipment category for the three and nine month 2009
periods compared to the 2008 periods, 2) the opening of our Billings, Montana,
retail store in May 2009, as well as the opening of new stores in August 2008
and May 2008, and 3) increases in Internet sales.  Partially
offsetting these increases were decreases in catalog mail order
sales.  Financial Services revenue increased $6 million, or 15.0%, for
the three months ended September 2009 compared to the three months ended
September 2008 primarily due to increases in securitization income and net
interest income.  For the nine months ended September 2009 compared to
the nine months ended September 2008, Financial Services revenue increased $5
million, or 4.4%, primarily due to an increase in securitization income
partially offset by a decrease in net interest income.
 
 
  28
 TABLE OF CONTENTS
  Our
operating income for the three months ended September 2009 increased $11
million, or 53.1%, compared to the three months ended September
2008.  The increase in total operating income was primarily due to
increases in revenue from our Retail business and Financial Services segments, a
decrease in catalog and Internet related marketing costs due to a managed
reduction in catalog page count, and improved efficiencies in compensation and
advertising in our Retail business.  These improvements were partially
offset by lower revenue from our Direct business segment, lower merchandise
gross margin, and an asset impairment charge.  Operating income for
the nine months ended September 2009 increased $6 million, or 11.3%, compared to
the nine months ended September 2008.  The increases in total
operating income and total operating income as a percentage of total revenue
were primarily due to increases in revenue from our Retail business and
Financial Services segments, a decrease in catalog and Internet related
marketing costs due to a managed reduction in catalog page count, and improved
efficiencies in compensation and advertising in our Retail
business.  These improvements were partially offset by lower revenue
from our Direct business segment, asset impairment charges and retirement and
severance benefits, and lower merchandise gross margin.  We finalized
plans on certain future retail store sites during the second quarter of 2009 and
consequently evaluated the recoverability of related properties and improvements
resulting in the recognition of write-downs related to these assets totaling $12
million.  For the first nine months of 2009, we recorded asset
impairment charges of $13 million and severance and related benefits of $1
million.  Economic trends could change undiscounted cash flows in
future periods which could trigger possible future write downs.
 
 Our
primary focus is on managing our business efficiently to enhance near-term and
long-term results for our shareholders.  Our focus for 2009 is to
continue to make progress 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,
      a more streamlined flow of merchandise to our retail stores, and reduced
      operating expenses;·
              manage
      the merchandise gross margins of our sales channels
      effectively;·
              improve
      inventory management by actively managing quantities and product
      deliveries through enhanced leveraging of existing technologies, and by
      reducing unproductive inventory; and·
              reduce
      catalog costs with a nominal impact on
revenue.
 
 Retail Store Efficiencies– One primary
objective is to enhance our retail store efficiencies and improve our operating
results.  We are working on this objective by enhancing and optimizing
our retail store merchandising processes, management information systems, and
distribution and logistics capabilities.  We continue to improve our
visual merchandising within the stores and to flex more merchandise at our
stores by adding more seasonal product assortments.  Also, we continue
to streamline the flow of merchandise to our stores increasing productivity and
reducing labor costs as a percentage of revenue.  To enhance our
customer service at our retail stores, we are continuing to focus on customer
service through training and mentoring programs.
 
 For the
three and nine months ended September 2009 compared to the respective 2008
periods, operating income for our Retail business segment increased $10 million
and $13 million, respectively.
 
 Leverage
Our Multi-Channel Model–We offer our
customers integrated opportunities to access and use our retail store, catalog,
and Internet channels.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, thereby helping to increase foot traffic in our
stores.  Conversely, our expanding retail stores introduce customers
to our Internet and catalog channels.  We are capitalizing on our
multi-channel model by building on the strengths of each channel, primarily
through improvements in our merchandise planning system.  This system,
along with our replenishment system, allows us to identify the correct product
mix in each of our retail stores, and also help maintain the proper inventory
levels to satisfy customer demand in both our Retail and Direct business
channels.
  29
 TABLE OF CONTENTS
  Next Generation Stores – To
enhance our returns on capital we have developed a next generation store format
which incorporates the following objectives:
 
 ·
              develop
      a store modelthat is adaptable
      to more markets, faster to start-up,and more efficient
      to operate to reduce our investment, improve productivity through
      higher merchandise density, and increase sales per square foot; and·
              provide
      shopper-friendly layouts with regionalized product mixes, concept shops,
      and new product displays/fixtures featuring an improved
    look.
 
 We
incorporated these next generation store concepts into our two most recent
retail stores - Billings, Montana, which opened in May 2009, and Rapid City,
South Dakota, which opened in August 2008.
 
 Direct Business– We are
working on the following key growth objectives to expand our catalog and
Internet channels:
 
 ·
              natural
      growth by offering industry-leading selection, service, value, and
      quality;·
              acquisition,
      retention, and reactivation of customers through our multi-channel
      platform;·
              category
      expansion to capitalize on the general outdoor
  enthusiast;·
              develop
      and execute strategies to broaden our exposure to different growing
      networks, e-commerce platforms, and international e-commerce
      growth;·
              an
      enhanced focus on the Canadian market by building on our Canada
      acquisition; and·
              targeted
      marketing designed to increase sales of certain on-line market
      sectors.
 
 Our
Direct revenue decreased $15 million and $34 million, respectively, during the
three and nine months ended September 2009 compared to the three and nine months
ended September 2008 primarily due to a decrease in catalog mail order sales
resulting from planned decreases in catalog pages and, to a lesser extent, a
decrease in catalog circulation, customers buying more ammunition, firearms, and
related products from our retail locations, and customers buying smaller
quantities of higher margin soft goods.  The managed decreases in
catalog pages and circulation resulted in a decrease of $6 million and $13
million, respectively, in catalog-related costs comparing the three and nine
months ended September 2009 to the three and nine months ended September
2008.
 
 Our Credit Card Business
–We continue
working toward increasing our Financial Services revenue by attracting new
cardholders through low cost marketing efforts with our Retail and Direct
businesses.  By continuing our conservative underwriting and account
management standards and practices, we are controlling costs in our Financial
Services segment through active management of our credit card delinquencies and
charge-offs.
 
 Worldwide Credit Markets and
Macroeconomic Environment – Since April 2009, the credit markets have
become more active and we were successful in completing a Term Asset-Backed
Securities Loan Facility (“TALF”) securitization as well as renewing two
variable funding conduits.  Although we believe there have been
significant improvements in the credit markets, we remain cautious and will
continue to closely monitor our debt covenant compliance provisions and our
access to the credit markets.  Our Financial Services business will
continue to monitor developments in the securitization and certificates of
deposit markets to ensure adequate access to liquidity.
 
  30
 TABLE OF CONTENTS
  Developments in Legislation and
Regulation -On May 22, 2009, the Credit Card Accountability
Responsibility and Disclosure Act of 2009 was signed into
law.  Certain provisions of the CARD Act became effective on August
20, 2009.  Other provisions become effective in February 2010 and
August 2010.  On July 15, 2009, the Federal Reserve issued interim
final rules for the August 20, 2009, CARD Act provisions.  The Federal
Reserve issued proposed rules on September 29, 2009, for the provisions
effective February 22, 2010.  In addition, legislation was introduced
on September 24, 2009, by the House Financial Services Committee to accelerate
the effective date to December 1, 2009, for the remaining provisions of the CARD
Act, which are currently scheduled for February 2010 and August
2010.  Among other things, the CARD Act:
 
 ·
              requires
      creditors to provide written notice to consumers 45 days before increasing
      an annual percentage rate on a credit card account or making a significant
      change to the terms of a credit card account.  Creditors must
      also inform consumers of their right to cancel the credit card account
      before the increase or change goes into effect in the same notice. If a
      consumer cancels the account, the creditor is generally prohibited from
      applying the increase or change to the account.·
              requires
      creditors to mail or deliver periodic statements for credit card accounts
      at least 21 days before payment is due.·
              restricts
      annual percentage rate increases on outstanding balances except under
      limited circumstances;·
              restricts
      interest rate increases during the first year an account is opened except
      under limited circumstances;·
              requires
      creditors that increase annual percentage rates to review accounts at
      least every six months to determine whether the annual percentage rate
      should be reduced;·
              requires
      creditors to obtain the credit card account holders opt-in in order to
      assess an over-limit fee and places restrictions on fees charged for
      over-limit transactions;·
              restricts
      fees that may be charged for making a payment;·
              requires
      creditors to allocate payments in excess of the required minimum payment
      to balances with the highest annual percentage rate before balances with a
      lower rate;·
              requires
      fees to be “reasonable” and “proportionate” to the account holder’s
      violation of the cardholder agreement;·
              requires
      payment due dates to be the same day each month;·
              requires
      posting of all agreements on the Internet;·
              restricts
      issuance of a credit card to a consumer under the age of 21;
      and·
              requires
      expanded statement disclosures, such as minimum payment
      warning.
 
 The CARD
Act also requires the Federal Reserve to conduct various studies, including
studies regarding interchange fees, credit limit reductions, financial literacy,
marketing, and credit card terms and conditions. Future legislation or
regulations may be issued as a result of these studies.  In addition
to the CARD Act, the Federal Reserve also issued an amendment to Regulation Z at
the end of 2008.  This amendment will require additional enhanced
disclosures to consumers on cardholder agreements, statements, and applications
effective July 2010.
 
 WFB is
evaluating the effects of the CARD Act on its existing practices, cardholder
agreements, annual percentage rates, and revenue. The full impact of the CARD
Act on WFB is unknown at this time as the rules for several of the provisions
have not been promulgated by the Federal Reserve, service providers need to
implement operational changes, and the full impact on consumer behavior and the
actions of our competitors is unknown. Compliance with the CARD Act provisions
could result in reduced interest income and other fee income.  WFB
issued a change in terms effective July 2009 to lessen the effects of the CARD
Act.
  31
 TABLE OF CONTENTS
  On June
17, 2009, the Treasury Department released its white paper for reform of the
financial system that, among its many proposed changes, promotes heightened
supervision and regulation of financial firms, establishes supervision and
regulation for financial markets, protects consumers from financial abuse, and
eliminates the ability for a credit card bank such as WFB to be owned by a
nonbanking entity. The reform proposes to strengthen capital and other
regulatory standards for all banks and bank holding companies. The reform also
proposes to strengthen the supervision and regulation of securitization markets
by requiring originators to retain 5% of the credit risk of securitized
exposures, increasing reporting by asset-backed securities issuers, aligning
compensation of securitization participants with the long-term performance of
underlying loans, increasing the regulation of rating agencies, and reducing the
use of ratings in the regulations and supervisory practices.  Due to
the complexity and controversial nature of the proposed reform, modifications
are likely and the final legislation may differ significantly from this
proposal.  If the currently proposed reforms were adopted, Cabela’s
would no longer be allowed to own WFB, unless we were willing and able to become
a bank holding company under the Bank Holding Company Act of 1956, as amended
(“BHCA”).  The adoption of the proposal to eliminate the credit card
bank exemption from the BHCA could force us to divest our Financial Services
business.  Any such forced divestiture would materially adversely
affect our business and results of operation.
 
 Impact of New Accounting
Pronouncements – We believe implementing the updates to ASC Topic 810,
Consolidations,and ASC
Topic 860, Transfers and
Servicing, effective the beginning of fiscal year 2010, will require the
consolidation of WFB’s securitization trusts.  Consequently,
we believe there will be amaterial impact on our total assets, total
liabilities, retained earnings and other comprehensive income, and components of
our Financial Services revenue.  We have evaluated the impact that the
adoption of these accounting standards will have on our compliance with the
financial covenants in our credit agreements and unsecured notes and do not
believe that these standards, if they were effective as of September 26, 2009,
would have, after providing permitted notices to our lenders, caused us to be in
breach of any financial covenants in our credit agreements and unsecured
notes.  We can offer no assurances that the impact from the provisions
of these standards will not cause us to breach financial covenants in our credit
agreements and unsecured notes in the future.
 
 On
September 15, 2009, the Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the Office of Thrift Supervision, and the Federal
Reserve (collectively, the “federal agencies”) issued a Notice of Proposed
Rulemaking, Risk-Based Capital
Guidelines; Capital Adequacy Guidelines; Capital
Maintenance;  Regulatory Capital; Impact of Modifications to Generally
Accepted Accounting Principles; Consolidation of Asset-Backed Commercial Paper
Programs; and Other Related Issues relating to proposed changes to risk
based capital as a result of ASC Topic 810 and 860.  With the
consolidation of the assets and liabilities of the Trust on WFB’s balance sheet,
under both the existing and proposed regulatory capital requirements, WFB’s
required capital would be increased.  The effect of changes to
regulatory capital requirements resulting from the proposed rules issued by the
federal agencies, if adopted in their current form, will cause us to reallocate
capital from our Retail and Direct businesses to meet the capital needs of our
Financial Services business, or require us to raise additional debt or equity
capital, which in turn could significantly alter our growth
initiatives.  Also, if WFB fails to satisfy the requirements for the
well-capitalized classification under the regulatory framework for prompt
corrective action, WFB’s ability to issue certificates of deposit could be
affected.  We expect to have sufficient access to capital at the end
of December 2009 to provide the necessary capital contribution to WFB so WFB can
meet the regulatory capital requirements for the well-capitalized classification
for the first quarter of 2010.  We expect to amend our existing credit
agreement so we can contribute sufficient capital to WFB.
 
  32
 TABLE OF CONTENTS
  
 Operations
Review
 
 The three
months ended September 2009 and September 2008 each consisted of 13 weeks, and
the nine months ended September 2009 and September 2008 each consisted of 39
weeks.  Our operating results expressed as a percentage of revenue
were as follows for the periods presented.
 
 Three Months Ended
              
              
              Nine Months EndedSeptember 26, 2009
              
              
              September 27, 2008
              
              
              September 26, 2009
              
              
              September 27, 2008Revenue
              
              
              100.00
              %
              
              
              100.00
              %
              
              
              100.00
              %
              
              
              100.00
              %Cost
      of revenue
              
              
              61.84
              
              
              
              61.47
              
              
              
              60.62
              
              
              
              60.14Gross
      profit (exclusive of depreciation and amortization)
              
              
              38.16
              
              
              
              38.53
              
              
              
              39.38
              
              
              
              39.86Selling,
      distribution, and administrative expenses
              
              
              32.95
              
              
              
              35.12
              
              
              
              34.88
              
              
              
              36.47Impairment
      and restructuring charges
              
              
              0.10
              
              
              
              -
              
              
              
              0.82
              
              
              
              -Operating
      income
              
              
              5.11
              
              
              
              3.41
              
              
              
              3.69
              
              
              
              3.39Other
      income (expense):Interest
      expense, net
              
              
              (0.89
              )
              
              
              (1.23
              )
              
              
              (1.02
              )
              
              
              (1.33
              )Other
      income, net
              
              
              0.41
              
              
              
              0.26
              
              
              
              0.37
              
              
              
              0.31Total
      other income (expense), net
              
              
              (0.48
              )
              
              
              (0.97
              )
              
              
              (0.65
              )
              
              
              (1.02
              )Income
      before provision for income taxes
              
              
              4.63
              
              
              
              2.44
              
              
              
              3.04
              
              
              
              2.37Provision
      for income taxes
              
              
              1.63
              
              
              
              0.85
              
              
              
              1.11
              
              
              
              0.76Net
      income
              
              
              3.00
              %
              
              
              1.59
              %
              
              
              1.93
              %
              
              
              1.61
              %
 
 
  33
 TABLE OF CONTENTS
  
 Results
of Operations – Three Months Ended September 2009 Compared to September
2008
 
 Revenues
 
 Three Months EndedSeptember 26, 2009
              
              
              %
              
              
              September 27, 2008
              
              
              %
              
              
              Increase (Decrease)
              
              
              %
                Change(Dollars
      in Thousands)Retail
              
              $
              347,988
              
              
              
              55.7
              %
              
              $
              327,974
              
              
              
              53.6
              %
              
              $
              20,014
              
              
              
              6.1
              %Direct
              
              
              226,194
              
              
              
              36.2
              
              
              
              241,228
              
              
              
              39.4
              
              
              
              (15,034
              )
              
              
              (6.2
              )Financial
      Services
              
              
              48,186
              
              
              
              7.7
              
              
              
              41,896
              
              
              
              6.9
              
              
              
              6,290
              
              
              
              15.0Other
              
              
              1,928
              
              
              
              0.4
              
              
              
              702
              
              
              
              0.1
              
              
              
              1,226
              
              
              
              174.6$
              624,296
              
              
              
              100.0
              %
              
              $
              611,800
              
              
              
              100.0
              %
              
              $
              12,496
              
              
              
              2.0
 
 Retail
revenue includes sales realized and services performed at our retail stores,
sales from orders placed through our retail store Internet kiosks, and sales
from customers utilizing our in-store pick-up program.  Direct revenue
includes catalog and Internet sales from orders placed over the phone, by mail,
and through our website where the merchandise is shipped to non-retail store
locations.  Financial Services revenue is comprised of securitization
income, interest income, other fees, and interchange, net of reward program
costs, interest expense, and credit losses from our credit card
operations.  Other revenue sources include amounts received from our
outfitter services, real estate rental income, and fees earned through our
travel business and other complementary business services.
 
 Product Sales
Mix – The following chart sets forth the percentage of revenue
contributed by each of the five product categories for our Retail and Direct
businesses and in total for the three months ended September 2009 and
2008.
 
 Retail
              
              
              Direct
              
              
              TotalThree Months Ended:
              
              September
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,2009
              
              
              2008
              
              
              2009
              
              
              2008
              
              
              2009
              
              
              2008Product CategoryHunting
      Equipment
              
              
              46.4
              %
              
              
              42.2
              %
              
              
              40.5
              %
              
              
              34.5
              %
              
              
              44.2
              %
              
              
              39.1
              %Clothing
      and Footwear
              
              
              20.7
              
              
              
              23.2
              
              
              
              29.3
              
              
              
              32.7
              
              
              
              23.9
              
              
              
              27.0Fishing
      and Marine
              
              
              15.5
              
              
              
              15.9
              
              
              
              11.2
              
              
              
              12.0
              
              
              
              13.9
              
              
              
              14.4Camping
              
              
              9.6
              
              
              
              10.1
              
              
              
              12.6
              
              
              
              14.6
              
              
              
              10.7
              
              
              
              11.9Gifts
      and Furnishings
              
              
              7.8
              
              
              
              8.6
              
              
              
              6.4
              
              
              
              6.2
              
              
              
              7.3
              
              
              
              7.6Total
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
 
 Retail
Revenue–Retail revenue increased $20 million, or 6.1%, for the three months
ended September 2009 primarily due to increases in comparable store sales led by
increases in sales in the hunting equipment category and from the opening of our
Billings, Montana, retail store in May 2009, and the opening of a new store in
August 2008.
 
 Three Months EndedSeptember 26, 2009
              
              
              September 27, 2008
              
              
              Increase (Decrease)
              
              
              % Change(Dollars
      in Thousands)Comparable
      stores sales
              
              $
              320,977
              
              
              $
              310,270
              
              
              $
              10,707
              
              
              
              3.5
              %
 
 Comparable
store sales increased $11 million, or 3.5%, for the three months ended September
2009 principally because of the strength in hunting-related categories and the
success of our Retail operations focus.
  34
 TABLE OF CONTENTS
  Direct
Revenue – Direct
revenue decreased $15 million, or 6.2%, primarily due to a decrease in catalog
mail order sales resulting from a planned reduction in catalog page count,
customers buying more ammunition, firearms, and related products from our retail
locations, and customers buying smaller quantities of higher margin soft
goods.  Decreases in Direct revenue were partially mitigated by
managed reductions in catalog-related costs totaling $6 million comparing the
three months ended September 2009 to the three months ended September
2008.  As a percentage of Direct revenue, catalog-related costs
decreased 150 basis points to 13.6% for the three months ended September 2009
compared to 15.1% for the three months ended September 2008.
 
 Internet
sales increased for the three months ended September 2009 compared to the three
months ended September 2008.  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 14.9%
to 34.2 million visits for the three months ended September 2009 compared to
29.8 million visits for the three months ended September 2008.  The
hunting equipment product category was the largest dollar volume contributor to
our Direct revenue for the three months ended September 2009.
 
 Financial
Services Revenue–Key statistics reflecting the performance of our Financial Services
business are shown in the following chart:
 
 Three Months EndedSeptember 26, 2009
              
              
              September 27, 2008
              
              
              Increase (Decrease)
              
              
              % Change(Dollars
      in Thousands Except Average Balance per Account )Average
      balance of managed credit card loans
              
              $
              2,340,079
              
              
              $
              2,153,089
              
              
              $
              186,990
              
              
              
              8.7
              %Average
      number of active credit card accounts
              
              
              1,242,638
              
              
              
              1,143,525
              
              
              
              99,113
              
              
              
              8.7Average
      balance per active credit card account
              
              $
              1,883
              
              
              $
              1,883
              
              
              $
              -
              
              
              
              -Net
      charge-offs on managed loans
              
              $
              29,383
              
              
              $
              15,682
              
              
              $
              13,701
              
              
              
              87.4Net
      charge-offs as a percentage of average managed credit card
      loans
              
              
              5.02
              %
              
              
              2.91
              %
              
              
              2.11
              %
 
 The
average balance of managed credit card loans increased to $2.3 billion, or 8.7%,
for the three months ended September 2009 compared to the average balance for
the three months ended September 2008 due to an increase in the number of
accounts.  The average number of accounts increased to 1.2 million, or
8.7%, compared to the average number of accounts for the three months ended
September 2008 due to our marketing efforts.  Net charge-offs as a
percentage of average managed credit card loans increased to 5.02% for the three
months ended September 2009, up 211 basis points compared to the three months
ended September 2008, principally because of the current challenging
macroeconomic environment.  These changes impacted our Financial
Services revenue, which increased $6 million, or 15.0%, for the three months
ended September 2009 compared to the three months ended September
2008.
  35
 TABLE OF CONTENTS
  The
components of Financial Services revenue on a GAAP basis are as
follows:
 
 Three Months EndedSeptember 26, 2009
              
              
              September 27, 2008(In
      Thousands)Interest
      and fee income, net of provision for loan losses
              
              $
              16,722
              
              
              $
              10,509Interest
      expense
              
              
              (6,254
              )
              
              
              (2,831
              )Net
      interest income, net of provision for loan losses
              
              
              10,468
              
              
              
              7,678Non-interest
      income:Securitization
      income (including gains (losses) on sales of credit card loans of $(814)
      and $3,108)
              
              
              51,026
              
              
              
              47,573Other
      non-interest income
              
              
              17,217
              
              
              
              17,273Total
      non-interest income
              
              
              68,243
              
              
              
              64,846Less:
      Customer rewards costs
              
              
              (30,525
              )
              
              
              (30,628
              )Financial
      Services revenue
              
              $
              48,186
              
              
              $
              41,896
 
 Financial
Services revenue increased 15.0% for the three months ended September 2009
compared to the three months ended September 2008.  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, net of provision for loan
losses.  Interest and fee income increased $6 million primarily due to
changes in interest rates charged to cardholders, changes to fees charged, and
increases in late fees.  In addition, net interest income,
securitization income, and other non-interest income are affected by changes in
the transferor’s interest included in our credit card loans
receivable.  Interest expense increased $3 million primarily due to
increases in certificates of deposit compared to the three months ended
September 2008.   Non-interest income includes securitization
income, gains on sales of loans, and income recognized on our retained
interests, as well as interchange income.  Securitization income increased
$3 million for the three months ended September 2009 compared to the three
months ended September 2008, primarily due to increases in securitized credit
card loans and excess spread.
 
 Managed
credit card loans of the Financial Services business segment include both credit
card loans receivable we own and securitized credit card loans in a separate
trust that is not consolidated in our financial statements.  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.  This non-GAAP presentation includes
income derived from the valuation of our interest-only strip associated with our
securitized loans that would generally be reversed or not reported in a managed
presentation.
  36
 TABLE OF CONTENTS
  The
following table sets forth the revenue components of our Financial Services
segment managed portfolio on a non-GAAP basis for the periods
ended:
 
 Three Months EndedSeptember 26, 2009
              
              September 27,
                2008(Dollars
      in Thousands)Interest
      income
              
              $
              66,313
              
              
              $
              49,709Interchange
      income, net of customer rewards costs
              
              
              22,874
              
              
              
              19,854Other
      fee income
              
              
              13,118
              
              
              
              10,667Interest
      expense
              
              
              (24,285
              )
              
              
              (21,569
              )Provision
      for loan losses
              
              
              (29,683
              )
              
              
              (16,632
              )Other
              
              
              (151
              )
              
              
              (133
              )Managed
      Financial Services revenue
              
              $
              48,186
              
              
              $
              41,896Managed Financial Services Revenue as a Percentage
      of Average Managed Credit Card Loans:Interest
      income
              
              
              11.3
              %
              
              
              9.2
              %Interchange
      income, net of customer rewards costs
              
              
              3.9
              
              
              
              3.7Other
      fee income
              
              
              2.3
              
              
              
              2.0Interest
      expense
              
              
              (4.2
              )
              
              
              (4.0
              )Provision
      for loan losses
              
              
              (5.1
              )
              
              
              (3.1
              )Other
              
              
              -
              
              
              
              -Managed
      Financial Services revenue
              
              
              8.2
              %
              
              
              7.8
              %
  Managed
Financial Services revenue increased $6 million, or 15.0%, for the three months
ended September 2009 compared to the three months ended September 2008 primarily
due to increases in interest income partially offset by an increase of $13
million in the provision for loan losses from increases in managed credit card
loans and in net charge-offs due to the current challenging macroeconomic
environment.  The increase in interest income of $17 million was due
to an increase in managed credit card loans and changes to interest rates
charged.  Interest expense increased $3 million from increases in
securitized credit card loans and borrowings, increases in certificates of
deposit, higher spreads, and fees paid to investors on securitizations. The
increase in interchange income of $3 million was due to the rollout of the new
Visa signature product.  Other fee income increased $2 million due to
growth in the number of credit card loans, changes to fees charged, and
increases in late fees.
 
 Other
Revenue
 
 Other
revenue was $2 million for the three months ended September 2009 compared to $1
million for the three months ended September 2008.There were no real estate
sales for the three months ended September 2009 or the three months ended
September 2008.
  37
 TABLE OF CONTENTS
  
 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:
 
 ·
              shifts
      in customer preferences;·
              retail
      store, distribution, and warehousing costs which we exclude from our cost
      of revenue;·
              Financial
      Services revenue 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 we include 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 as follows:
 
 Three Months EndedSeptember 26, 2009
              
              September 27, 2008
              
              Increase
                (Decrease)
              
              %
                Change(Dollars
      in Thousands)Merchandise
      sales
              
              $
              574,182
              
              
              $
              569,202
              
              
              $
              4,980
              
              
              
              0.9
              %Merchandise
      gross margin
              
              
              188,442
              
              
              
              192,283
              
              
              
              (3,841
              )
              
              
              (2.0
              )Merchandise
      gross margin as a percentage of merchandise revenue
              
              
              32.8
              %
              
              
              33.8
              %
              
              
              (1.0
              )%
 
 
 Merchandise Gross
Margin–
The gross margin of our merchandising business decreased $4 million, or 2.0%, to
$188 million for the three months ended September 2009.  Our
merchandise gross margin as a percentage of revenue of our merchandising
business decreased to 32.8% for the three months ended September 2009 from 33.8%
for the three months ended September 2008.  Merchandise gross margin
and merchandise gross margin as a percentage of revenue decreased for the three
months ended September 2009 compared to the three months ended September 2008
due to the ongoing mix shift to lower margin hard-good categories and
management’s efforts to reduce slow moving inventory.  Contributing to
these decreases to our merchandise gross margin and merchandise gross margin as
a percentage of revenue were the continuing strong sales of lower margin
ammunition, firearms, and related products.  Reduced shipping expenses
partially offset the decreases to our merchandise gross margin and merchandise
gross margin as a percentage of revenue.
 
 Selling,
Distribution, and Administrative Expenses
 
  Three Months EndedSeptember 26, 2009
              
              September 27, 2008
              
              Increase (Decrease)
              
              
              % Change(Dollars
      in Thousands)Selling,
      distribution, and administrative expenses
              
              $
              205,728
              
              
              $
              214,898
              
              
              $
              (9,170
              )
              
              
              (4.3
              )%SD&A
      expenses as a percentage of  total revenue
              
              
              33.0
              %
              
              
              35.1
              %Retail
      store pre-opening costs
              
              $
              1,057
              
              
              $
              2,612
              
              
              
              (1,555
              )
              
              
              (59.5
              )
 
 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.
  38
 TABLE OF CONTENTS
  
 Selling,
distribution, and administrative expenses decreased $9 million, or 4.3%, for the
three months ended September 2009 compared to the three months ended September
2008.  The most significant factors contributing to the changes in
selling, distribution, and administrative expenses for the three months ended
September 2009 compared to the three months ended September 2008
included:
 
 ·
              managed
      reductions in catalog-related costs resulting in a decrease in catalog and
      Internet marketing costs of $6 million,·
              improved
      efficiencies in advertising in our Retail business resulting in a decrease
      of $5 million in advertising and promotional costs,·
              a
      decrease of $4 million in employee compensation and benefits due to
      enhanced efficiencies in our Retail business,·
              an
      increase in depreciation expense of $4 million, and·
              an
      increase of $1 million primarily related to reserves for losses on certain
      business claims.
 
 Significant
selling, distribution, and administrative expense increases and decreases
related to specific business segments included the following:
 
 Retail
Business Segment:
 ·
              Additional
      operating costs of $2 million for new stores that were not open in the
      comparable period of 2008, including $1 million in employee compensation
      and benefit costs.·
              A
      decrease in comparable store employee compensation and benefits of $3
      million realized from our focus to enhance our retail store
      efficiencies.·
              New
      store pre-opening costs of $1 million, a decrease of $2 million compared
      to the three months ended September 2008.·
              An
      increase in marketing fees of $3 million received from the Financial
      Services segment.
 
 Direct
Business Segment:
 ·
              A
      net decrease in catalog and Internet related marketing costs of $6 million
      compared to the comparable period of 2008 primarily due to a managed
      reduction in catalog page count and lower circulation.·
              A
      decrease in employee compensation and benefits of
    $1million.·
              An
      increase in marketing fees of $3 million received from the Financial
      Services segment.
 
 Financial
Services:
 ·
              An
      increase of $6 million in the marketing fee paid by the Financial Services
      segment to the Retail segment ($3 million) and the Direct business segment
      ($3 million).
 
 Corporate
Overhead, Distribution Centers, and Other:
 ·
              A
      decrease of $1 million in employee compensation and
    benefits.·
              An
      increase in depreciation expense of $1
million.
 
 Impairment
and Restructuring Charges
 
 We
recorded a $0.6 million pre-tax charge to earnings (Corporate Overhead and Other
segment) in the third quarter of 2009 related to asset impairment charges on
property and equipment.  No impairment and restructuring charges were
recorded during the three months ended September 2008.
 
  39
 TABLE OF CONTENTS
  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 EndedSeptember 26, 2009
              
              
              September 27, 2008
              
              
              Increase (Decrease)
              
              
              %
                Change(Dollars
      in Thousands)Total
      operating income
              
              $
              31,921
              
              
              $
              20,845
              
              
              $
              11,076
              
              
              
              53.1
              %Total
      operating income as a percentage of total revenue
              
              
              5.1
              %
              
              
              3.4
              %Operating
      income by business segment:Retail
              
              $
              40,451
              
              
              $
              30,084
              
              
              
              10,367
              
              
              
              34.5Direct
              
              
              34,243
              
              
              
              33,513
              
              
              
              730
              
              
              
              2.2Financial
      Services
              
              
              12,547
              
              
              
              11,961
              
              
              
              586
              
              
              
              4.9Operating
      income as a percentage of segment revenue:Retail
              
              
              11.6
              %
              
              
              9.2
              %Direct
              
              
              15.1
              
              
              
              13.9Financial
      Services
              
              
              26.0
              
              
              
              28.5
 
 Operating
income increased $11 million, or 53.1%, for the three months ended September
2009 compared to the three months ended September 2008.  Operating
income as a percentage of revenue also increased to 5.1% for the three months
ended September 2009 from 3.4% for the three months ended September
2008.  The increases in total operating income and total operating
income as a percentage of total revenue were primarily due to increases in
revenue from our Retail business and Financial Services segments, a decrease in
catalog and Internet related marketing costs due to a managed reduction in
catalog page count, and improved efficiencies in compensation and advertising in
our Retail business.  These improvements were partially offset by
lower revenue from our Direct business segment and lower merchandise gross
margin.
 
 Under a
contractual arrangement, the Financial Services segment incurs a marketing fee
paid to the Retail and Direct business segments.  The marketing fee is
determined based on the terms of the contractual arrangement that were
consistently applied to both periods presented.  The 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 $6 million
for the three months ended September 2009 compared to the three months ended
September 2008 – a $3 million increase to the Retail segment and a $3 million
increase to the Direct business segment.
 
 Interest
Expense, Net
 
 Interest
expense, net of interest income, decreased $2 million to $6 million for the
three months ended September 2009 compared to the three months ended September
2008.  The net decrease in interest expense was primarily due to a
lower average balance of debt outstanding from managed debt reduction and lower
weighted average interest rates comparing the three months ended September 2009
to the three months ended September 2008.  During the three months
ended September 2009, capitalized interest on qualifying fixed assets was
minimal compared to $0.5 million for the three months ended September
2008.
 
  40
 TABLE OF CONTENTS
  Other
Non-Operating Income, Net
 
 Other
non-operating income was $3 million for the three months ended September 2009
compared to $2 million for the three months ended September
2008.  Other non-operating income primarily represents interest earned
on our economic development bonds.  In September 2009, we disposed of
our taxidermy business and we expect to dispose of the net assets of our
wildlife/Americana art prints and art-related products business in the fourth
quarter of 2009.  The related pre-tax gain and loss were recorded in
the three months ended September 2009.
  Provision
for Income Taxes
 
 Our
effective tax rate was 35.1% for the three months ended September 2009 compared
to 35.0% for the three months ended September 2008.  The effective tax
rate for the three months ended September 2009 was impacted primarily by our
international restructuring completed in August 2009.  Refer to Note 8
herein of our condensed consolidated financial statements for additional
information.  We expect our effective income tax rate to approximate
36% for fiscal year 2009.
 
 
 Results
of Operations – Nine Months Ended September 2009 Compared to September
2008
 
 Revenues
  Nine Months EndedSeptember 26, 2009
              
              
              %
              
              
              September 27, 2008
              
              
              %
              
              
              Increase (Decrease)
              
              
              %
                Change(Dollars
      in Thousands)Retail
              
              $
              925,147
              
              
              
              54.0
              %
              
              $
              855,973
              
              
              
              51.2
              %
              
              $
              69,174
              
              
              
              8.1
              %Direct
              
              
              651,058
              
              
              
              38.0
              
              
              
              684,780
              
              
              
              40.9
              
              
              
              (33,722
              )
              
              
              (4.9
              )Financial
      Services
              
              
              126,209
              
              
              
              7.4
              
              
              
              120,857
              
              
              
              7.2
              
              
              
              5,352
              
              
              
              4.4Other
              
              
              10,658
              
              
              
              0.6
              
              
              
              11,681
              
              
              
              0.7
              
              
              
              (1,023
              )
              
              
              (8.8
              )$
              1,713,072
              
              
              
              100.0
              %
              
              $
              1,673,291
              
              
              
              100.0
              %
              
              $
              39,781
              
              
              
              2.4
 
 Product Sales
Mix – The following chart sets forth the percentage of revenue
contributed by each of the five product categories for our Retail and Direct
businesses and in total for the nine months ended September 2009 and
2008.
 
 Retail
              
              
              Direct
              
              
              TotalNine Months Ended:
              
              September
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,
              
              
              September
      26,
              
              
              September
      27,2009
              
              
              2008
              
              
              2009
              
              
              2008
              
              
              2009
              
              
              2008Product CategoryHunting
      Equipment
              
              
              45.1
              %
              
              
              37.8
              %
              
              
              37.3
              %
              
              
              28.1
              %
              
              
              42.1
              %
              
              
              33.7
              %Clothing
      and Footwear
              
              
              19.3
              
              
              
              22.4
              
              
              
              28.3
              
              
              
              33.4
              
              
              
              22.8
              
              
              
              27.0Fishing
      and Marine
              
              
              18.6
              
              
              
              20.9
              
              
              
              15.4
              
              
              
              16.9
              
              
              
              17.3
              
              
              
              19.2Camping
              
              
              8.8
              
              
              
              9.7
              
              
              
              12.0
              
              
              
              14.2
              
              
              
              10.0
              
              
              
              11.6Gifts
      and Furnishings
              
              
              8.2
              
              
              
              9.2
              
              
              
              7.0
              
              
              
              7.4
              
              
              
              7.8
              
              
              
              8.5Total
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
 
  41
 TABLE OF CONTENTS
  Retail
Revenue–Retail revenue increased $69 million for the nine months ended
September 2009 primarily due to increases in comparable store sales led by
increases in sales in the hunting equipment category and from the opening of our
Billings, Montana, retail store in May 2009, and the opening of new stores in
May 2008 and August 2008.
 
 Nine Months EndedSeptember 26, 2009
              
              
              September 27, 2008
              
              
              Increase (Decrease)
              
              
              %
                Change(Dollars
      in Thousands)Comparable
      stores sales
              
              $
              829,833
              
              
              $
              785,708
              
              
              $
              44,125
              
              
              
              5.6
              %
 
 Comparable
store sales increased $44 million, or 5.6%, for the nine months ended September
2009 principally because of the strength in hunting-related categories and the
success of our Retail operations focus.
 
 Direct
Revenue – Direct
revenue decreased $34 million, or 4.9%, primarily due to a decrease in catalog
mail order sales resulting from a planned reduction in catalog pages circulated
and to a lesser extent a decrease in catalog circulation, customers buying more
ammunition, firearms, and related products from our retail locations, and
customers buying smaller quantities of higher margin soft
goods.  Decreases in Direct revenue were partially mitigated by
managed reductions in catalog-related costs of $13 million comparing the nine
months ended September 2009 to the nine months ended September
2008.  As a percentage of Direct revenue, catalog-related costs
decreased 120 basis points to 13.5% for the nine months ended September 2009
compared to 14.7% for the nine months ended September 2008.
 
 Internet
sales increased for the nine months ended September 2009 compared to the nine
months ended September 2008.  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 20.1%
to 104.6 million visits for the nine months ended September 2009 compared to
87.1 million visits for the nine months ended September 2008.  The
hunting equipment product category was the largest dollar volume contributor to
our Direct revenue for the nine months ended September 2009.
 
 Financial
Services Revenue–Key statistics reflecting the performance of our Financial Services
business are shown in the following chart:
 
 Nine Months EndedSeptember 26, 2009
              
              
              September 27, 2008
              
              
              Increase (Decrease)
              
              
              %
                Change(Dollars
      in Thousands Except Average Balance per Account )Average
      balance of managed credit card loans
              
              $
              2,274,715
              
              
              $
              2,043,142
              
              
              $
              231,573
              
              
              
              11.3
              %Average
      number of active credit card accounts
              
              
              1,224,567
              
              
              
              1,116,180
              
              
              
              108,387
              
              
              
              9.7Average
      balance per active credit card account
              
              $
              1,858
              
              
              $
              1,830
              
              
              $
              28
              
              
              
              1.5Net
      charge-offs on managed loans
              
              $
              85,215
              
              
              $
              41,938
              
              
              $
              43,277
              
              
              
              103.2Net
      charge-offs as a percentage of average managed credit card
      loans
              
              
              4.99
              %
              
              
              2.74
              %
              
              
              2.25
              %
 
  42
 TABLE OF CONTENTS
  
 The
average balance of managed credit card loans increased to $2.3 billion, or
11.3%, for the nine months ended September 2009 compared to the average balance
for the nine months ended September 2008 due to the increase in the number of
accounts and the average balance per account.  The average number of
accounts increased to 1.2 million, or 9.7%, compared to the average number of
accounts for the nine months ended September 2008 due to our marketing
efforts.  Net charge-offs as a percentage of average managed credit
card loans increased to 4.99% for the nine months ended September 2009, up 225
basis points compared to the nine months ended September 2008, principally
because of the current challenging macroeconomic environment.  These
changes impacted our Financial Services revenue, which increased $5 million, or
4.4%, for the nine months ended September 2009 compared to the nine months ended
September 2008.
 
 The
components of Financial Services revenue on a GAAP basis are as
follows:
 
 Nine Months EndedSeptember 26, 2009
              
              
              September 27, 2008(In
      Thousands)Interest
      and fee income, net of provision for loan losses
              
              $
              37,234
              
              
              $
              29,632Interest
      expense
              
              
              (18,924
              )
              
              
              (8,993
              )Net
      interest income, net of provision for loan losses
              
              
              18,310
              
              
              
              20,639Non-interest
      income:Securitization
      income (including gains (losses) on sales of credit card loans of $(641)
      and $12,440)
              
              
              144,629
              
              
              
              136,923Other
      non-interest income
              
              
              48,147
              
              
              
              49,914Total
      non-interest income
              
              
              192,776
              
              
              
              186,837Less:
      Customer rewards costs
              
              
              (84,877
              )
              
              
              (86,619
              )Financial
      Services revenue
              
              $
              126,209
              
              
              $
              120,857
 
 Financial
Services revenue increased 4.4% for the nine months ended September 2009
compared to the nine months ended September 2008.  Net interest income
includes operating results on the credit card loans receivable we own. Interest
and fee income increased $8 million primarily due to changes in interest rates
charged to cardholders, changes to fees charged, and increases in late
fees.  In addition, net interest income, securitization income, and
other non-interest income are affected by changes in the transferor’s interest
included in our credit card loans receivable.  Interest expense
increased $10 million primarily due to increases in certificates of deposit
compared to the nine months ended September 2008.  Securitization
income increased $8 million for the nine months ended September 2009 compared to
the nine months ended September 2008, primarily due to increases in securitized
credit card loans and excess spread.  Other non-interest income
decreased $2 million from an increase in the valuation adjustments as a result
of increased charge-offs for credit card loans in the transferor’s interest
portion of the securitized loans.  Customer rewards costs decreased $2
million for the nine months ended September 2009 compared to the nine months
ended September 2008 due to decreases in credit card purchases and to changes in
customer rewards marketing programs utilized comparing the respective
periods.
 
  43
 TABLE OF CONTENTS
  The
following table sets forth the revenue components of our Financial Services
segment managed portfolio on a non-GAAP basis for the periods
ended:
 
 Nine Months EndedSeptember 26, 2009
              
              September 27,
                2008(Dollars
      in Thousands)Interest
      income
              
              $
              178,936
              
              
              $
              148,062Interchange
      income, net of customer rewards costs
              
              
              65,031
              
              
              
              57,677Other
      fee income
              
              
              38,943
              
              
              
              26,135Interest
      expense
              
              
              (73,280
              )
              
              
              (62,875
              )Provision
      for loan losses
              
              
              (87,215
              )
              
              
              (43,453
              )Other
              
              
              3,794
              
              
              
              (4,689
              )Managed
      Financial Services revenue
              
              $
              126,209
              
              
              $
              120,857Managed Financial Services Revenue as a Percentage
      of Average Managed Credit Card Loans:Interest
      income
              
              
              10.5
              %
              
              
              9.7
              %Interchange
      income, net of customer rewards costs
              
              
              3.8
              
              
              
              3.8Other
      fee income
              
              
              2.3
              
              
              
              1.7Interest
      expense
              
              
              (4.3
              )
              
              
              (4.1
              )Provision
      for loan losses
              
              
              (5.1
              )
              
              
              (2.9
              )Other
              
              
              0.2
              
              
              
              (0.3
              )Managed
      Financial Services revenue
              
              
              7.4
              %
              
              
              7.9
              %
  Managed
Financial Services revenue increased $5 million for the nine months ended
September 2009 compared to the nine months ended September 2008 primarily due to
increases in interest income and other fee income, partially offset by an
increase of $44 million in the provision for loan losses from increases in
managed credit card loans and in net charge-offs due to the current challenging
macroeconomic environment.  The increase in interest income of $31
million was due to an increase in managed credit card loans and changes to
interest rates charged.  Interest expense increased $10 million from
increases in securitized credit card loans and borrowings, increases in
certificates of deposit, higher spreads, and fees paid to investors
on securitizations. The increase in interchange income of $7 million was
due to the rollout of the new Visa signature product.  Other fee
income increased $13 million due to growth in the number of credit card loans,
changes to fees charged, and increases in late fees.  Other income
increased $8 million due to an increase in the valuation of our interest-only
strip associated with our securitized loans.
 
 Other
Revenue
 
 Other revenue was $11
million for the nine months ended September 2009 compared to $12 million for the
nine months ended September 2008.Real estate revenue totaled $2 million
for the nine months ended September 2009 compared to $6 million for the nine
months ended September 2008.  Pre-tax gains on the sale of real estate
totaled $1.1 million for the nine months ended September 2009 compared to $2.1
million for the nine months ended September 2008.
  44
 TABLE OF CONTENTS
  Gross
Profit
 
 Nine Months EndedSeptember 26, 2009
              
              September 27, 2008
              
              Increase
                (Decrease)
              
              %
                Change(Dollars
      in Thousands)Merchandise
      sales
              
              $
              1,576,205
              
              
              $
              1,540,753
              
              
              $
              35,452
              
              
              
              2.3
              %Merchandise
      gross margin
              
              
              538,757
              
              
              
              535,028
              
              
              
              3,729
              
              
              
              0.7Merchandise
      gross margin as a percentage of merchandise revenue
              
              
              34.2
              %
              
              
              34.7
              %
              
              
              (0.5
              )%
 
 Merchandise Gross
Margin–The
gross margin of our merchandising business increased $4 million, or 0.7%, to
$539 million for the nine months ended September 2009 compared to the nine
months ended September 2008.  Our merchandise gross margin as a
percentage of revenue of our merchandising business decreased to 34.2% for the
nine months ended September 2009 from 34.7% for the nine months ended September
2008. The increase in merchandise gross margin for the nine months ended
September 2009 compared to the nine months ended September 2008 is primarily
attributable to a net increase in merchandise sales, lower promotional costs,
and reduced shipping expenses.  The decrease in the merchandise gross
margin as a percentage of revenue for the nine months ended September 2009
compared to the nine months ended September 2008 is primarily attributable to a
current shift in customer preference toward lower margin ammunition, firearms,
and related products, management’s efforts to reduce slow moving inventory,and the impact from
higher 2009 merchandise sales compared to 2008.
 
 Selling,
Distribution, and Administrative Expenses
  Nine Months EndedSeptember 26, 2009
              
              September 27, 2008
              
              Increase (Decrease)
              
              
              % Change(Dollars
      in Thousands)Selling,
      distribution, and administrative expenses
              
              $
              597,486
              
              
              $
              610,263
              
              
              $
              (12,777
              )
              
              
              (2.1
              )%SD&A
      expenses as a percentage of total revenue
              
              
              34.9
              %
              
              
              36.5
              %Retail
      store pre-opening costs
              
              $
              3,142
              
              
              $
              6,991
              
              
              
              (3,849
              )
              
              
              (55.1
              )
 
 Selling,
distribution, and administrative expenses decreased $13 million, or 2.1%, for
the nine months ended September 2009 compared to the nine months ended September
2008.  The most significant factors contributing to the changes in
selling, distribution, and administrative expenses during the nine months ended
September 2009 compared to the nine months ended September 2008
included:
 
 ·
              managed
      reductions in catalog-related costs resulting in a decrease in catalog and
      Internet marketing costs of $13 million,·
              a
      decrease of $5 million in employee compensation and benefits due to
      enhanced efficiencies in our Retail business,·
              improved
      efficiencies in advertising in our Retail business resulting in a decrease
      of $5 million in advertising and promotional costs,·
              an
      increase in depreciation expense of $4 million,·
              an
      increase in new store opening related reimbursements and capitalized costs
      of $4 million, and·
              an
      increase of $2 million in professional
fees.
  45
 TABLE OF CONTENTS
  
 Significant
selling, distribution, and administrative expense increases and decreases
related to specific business segments included the following:
 
 Retail
Business Segment:
 ·
              Additional
      operating costs for new stores that were not open in the comparable period
      of 2008 of $9 million, including $4 million in employee compensation and
      benefit costs.·
              A
      decrease in comparable store employee compensation and benefits of $6
      million realized from our focus to enhance our retail store
      efficiencies.·
              New
      store pre-opening costs of $3 million, a decrease of $4 million compared
      to the nine months ended September 2008.·
              Depreciation
      on new stores not open in the comparable period of 2008 of $3
      million.
 
 Direct
Business Segment:
 ·
              A
      net decrease in catalog and Internet related marketing costs of $13
      million compared to the comparable period of 2008 primarily due to a
      managed reduction in catalog page count and lower
    circulation.·
              A
      decrease in marketing fees of $2 million received from the Financial
      Services segment.·
              A
      decrease of $2 million in employee compensation and
    benefits.
 
 Financial
Services:
 ·
              A
      decrease of $2 million in the marketing fee paid by the Financial Services
      segment to the Direct business segment ($2 million) and the Retail segment
      (no change).·
              An
      increase in advertising and promotional costs of $1 million due to a
      reduction of incentives received, which was partially offset by fewer new
      accounts added in the last nine months.·
              An
      increase in professional fees of $2 million due to higher amortization of
      fees related to recently completed securitizations and to increases in
      Federal Deposit Insurance Corporation (“FDIC”) assessments and consulting
      fees.·
              An
      increase in postage costs of $1 million due to customer notice mailings
      completed in the second quarter of 2009.·
              An
      increase in compensation and benefits of $1
  million.
 
 Corporate
Overhead, Distribution Centers, and Other:
 ·
              A
      decrease of $2 million in employee compensation and
    benefits.·
              A
      decrease of $1 million in costs for professional
  services.
 
 Impairment
and Restructuring Charges
 
 We
recorded a $12 million pre-tax charge to earnings in the second quarter of 2009
related to asset impairment charges on certain land held for sale and related
property and equipment.  We finalized plans on certain future retail
store sites during the second quarter of 2009 and consequently evaluated the
recoverability of related properties and improvements resulting in the
recognition of these impairment charges.  In addition, during the nine
months ended September 2009 we evaluated the recoverability of certain property
and equipment and recognized write-downs of $1 million related to these
assets.
 
 In our
ongoing effort to control costs, we also implemented a voluntary retirement plan
in February 2009.  Retirement costs and other severance and related
benefits totaling $0.6 million from this plan were incurred in the nine months
ended September 2009.  All impairment and restructuring charges were
recorded to the Corporate Overhead and Other segment for the nine months ended
September 2009.  No impairment and restructuring charges were recorded
during the nine months ended September 2008.
 
 
  46
 TABLE OF CONTENTS
  Operating
Income
 
 Nine Months EndedSeptember 26, 2009
              
              
              September 27, 2008
              
              
              Increase (Decrease)
              
              
              %
                Change(Dollars
      in Thousands)Total
      operating income
              
              $
              63,195
              
              
              $
              56,783
              
              
              $
              6,412
              
              
              
              11.3
              %Total
      operating income as a percentage of total revenue
              
              
              3.7
              %
              
              
              3.4
              %Operating
      income by business segment:Retail
              
              $
              92,470
              
              
              $
              79,429
              
              
              
              13,041
              
              
              
              16.4Direct
              
              
              96,246
              
              
              
              93,368
              
              
              
              2,878
              
              
              
              3.1Financial
      Services
              
              
              36,536
              
              
              
              33,928
              
              
              
              2,608
              
              
              
              7.7Operating
      income as a percentage of segment revenue:Retail
              
              
              10.0
              %
              
              
              9.3
              %Direct
              
              
              14.8
              
              
              
              13.6Financial
      Services
              
              
              28.9
              
              
              
              28.1
 
 Operating
income increased $6 million, or 11.3%, for the nine months ended September 2009
compared to the nine months ended September 2008.  Operating income as
a percentage of revenue also increased to 3.7% for the nine months ended
September 2009 from 3.4% for the nine months ended September
2008.  Operating income comparisons between periods are impacted by
the challenging retail and macroeconomic environment.  The increases
in total operating income and total operating income as a percentage of total
revenue were primarily due to increases in revenue from our Retail business and
Financial Services segments, a decrease in catalog and Internet related
marketing costs due to a managed reduction in catalog page count, and improved
efficiencies in compensation and advertising in our Retail
business.  These improvements were partially offset by lower revenue
from our Direct business segment, asset impairment charges and retirement and
severance benefits recorded during the nine months ended September 2009, and
lower merchandise gross margin.
 
 The
marketing fee paid by the Financial Services segment to the Retail and Direct
business segments decreased $2 million for the nine months ended September 2009
compared to the nine months ended September 2008 – a $2 million decrease to the
Direct business segment and no change to the Retail segment.  This
marketing fee was calculated based on the terms of the contractual arrangement
and was consistently applied to both periods presented.  It 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.
 
 Interest
Expense, Net
 
 Interest
expense, net of interest income, decreased $5 million to $17 million for the
nine months ended September 2009 compared to the nine months ended September
2008.  The net decrease in interest expense was primarily due to a
lower average balance of debt outstanding from managed debt reduction and lower
weighted average interest rates comparing the nine months ended September 2009
to the nine months ended September 2008.  During the nine months ended
September 2009, we capitalized interest totaling $0.2 million on qualifying
fixed assets compared to $1.5 million for the nine months ended September
2008.
 
 Other
Non-Operating Income, Net
 
 Other
non-operating income was $6 million and $5 million for the nine months ended
September 2009 and 2008, respectively.  Other non-operating income
primarily represents interest earned on our economic development
bonds.   In September 2009, we disposed of our taxidermy
business, and we expect to dispose of the net assets of our wildlife/Americana
art prints and art-related products business in the fourth quarter of
2009.  The related pre-tax gain and loss were recorded in the three
and nine months ended September 2009.
  47
 TABLE OF CONTENTS
  
 Provision
for Income Taxes
 
 Our
effective tax rate was 36.5% for the nine months ended September 2009 compared
to 32.0% for the nine months ended September 2008.  The effective tax
rate for the nine months ended September 2009 was higher than that of the
comparable period in 2008 because of the corporate restructure completed
effective April 1, 2008, and the release of valuation allowances relating to
state net operating losses realized in 2008, as well as the recognition of
amounts related to tax contingencies in the first quarter of
2009.  Our provision for income taxes and effective tax rate for the
nine months ended September 2009 was reduced by our international restructuring
completed in August 2009.  Refer to Note 8 herein of our condensed
consolidated financial statements for additional information.  We
expect our effective income tax rate to approximate 36% for fiscal year
2009.
 
 
 
 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.  Our transferor’s interest totaled $147
million at the end of September 2009.  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) account delinquency, 2) they originated from
sources other than Cabela’s CLUB Visa credit cards, or 3) for various other
reasons.  Loans ineligible for securitization totaled $9 million, $11
million, and $11 million at September 26, 2009, December 27, 2008, and September
27, 2008, 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 credit cardholders were 787 at the end of the third quarter of 2009 compared
to 786 at the end of 2008. 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:
 
 September
      26,
              
              
              December
      27,
              
              
              September
      27,Number of days
    delinquent
              
              2009
              
              
              2008
              
              
              2008Greater
      than 30 days
              
              
              1.90
              %
              
              
              1.68
              %
              
              
              1.35
              %Greater
      than 60 days
              
              
              1.12
              
              
              
              0.97
              
              
              
              0.76Greater
      than 90 days
              
              
              0.56
              
              
              
              0.47
              
              
              
              0.36
 
  48
 TABLE OF CONTENTS
  
 Charge-offs
 
 Charge-offs
consist of the uncollectible principal, interest, and fees on a customer’s
account.  Recoveries are the amounts collected on previously
charged-off accounts.  Most bankcard issuers charge-off accounts at
180 days.  We charge off credit card loans on a daily basis after an
account becomes at a minimum 130 days contractually delinquent to allow us to
manage the collection process more efficiently.  Accounts relating to
cardholder bankruptcies, cardholder deaths, and fraudulent transactions are
charged off earlier.  Our charge-off activity for the managed
portfolio is summarized below for the periods presented.
 
 Three Months Ended
              
              Nine Months EndedSeptember 26, 2009
              
              September 27, 2008
              
              September 26, 2009
              
              September 27, 2008(Dollars
      in Thousands)Charge-offs
              
              $
              31,962
              
              
              $
              18,051
              
              
              $
              92,809
              
              
              $
              49,319Recoveries
              
              
              (2,579
              )
              
              
              (2,369
              )
              
              
              (7,594
              )
              
              
              (7,381
              )Net
      charge-offs
              
              $
              29,383
              
              
              $
              15,682
              
              
              $
              85,215
              
              
              $
              41,938Net
      charge-offs as a percentage of average managed credit card
      loans
              
              
              5.02
              %
              
              
              2.91
              %
              
              
              4.99
              %
              
              
              2.74
              %
 
 For the
nine months ended September 2009, net charge-offs as a percentage of average
managed credit card loans increased to 4.99%, up 204 basis points compared to
2.95% for fiscal year 2008 and up 225 basis points compared to  the
nine months ended September 2008, principally because of the challenging
macroeconomic environment. We believe our charge-off levels remain below
industry averages.
 
 
 
 Liquidity
and Capital Resources
 
 Overview
 
 We
believe that we will have sufficient capital available from cash on hand, our
revolving credit facility, and other borrowing sources to fund our foreseeable
cash requirements and near-term growth plans.  At September 26, 2009,
December 27, 2008, and September 27, 2008, cash on a consolidated basis totaled
$418 million, $410 million, and $207 million, respectively, of which $414
million, $402 million, and $202 million, respectively, was cash at our Financial
Services business segment which will be utilized to meet this segment’s
liquidity requirements.  We will continue to evaluate additional
funding sources to determine the most cost effective source of funds for our
Financial Services business segment.  These potential sources include,
among others, certificates of deposit and securitizations.
 
 Retail and Direct Business
Segments – 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 when developing new
retail stores, collecting principal and interest payments on our economic
development bonds, and from the retirement of economic development
bonds.
  49
 TABLE OF CONTENTS
  
 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.
 
 Our
unsecured $430 million revolving credit facility and unsecured senior notes
contain certain financial covenants, including the maintenance of minimum debt
coverage, a fixed-charge coverage ratio, a cash flow leverage ratio, and a
minimum tangible net worth standard.  In the event that we failed to
comply with these covenants and the failure to comply would go beyond 30 days, a
default would trigger and all principal and outstanding interest would
immediately be due and payable.  At September 26, 2009, we were in
compliance with all financial covenants under our credit agreements and
unsecured notes.  We anticipate that we will continue to be in
compliance with all financial covenants under our credit agreements and
unsecured notes through the next 12 months.
 
 In
addition, recent and unprecedented distress in the worldwide credit markets has
had an adverse impact on the availability of credit. Although our
$430 million unsecured revolving credit facility does not expire until June
2012, continued market deterioration could jeopardize the counterparty
obligations of one or more of the banks participating in our facility, which
could have an adverse effect on our business if we are not able to replace such
credit facility or find other sources of liquidity on acceptable
terms.  We currently expect all participating banks to provide funding
as needed pursuant to the terms of our credit facility.
 
 Financial Services Business Segment
(World’s Foremost Bank or “WFB”)– The primary cash requirements of WFB
relate to the financing of credit card loans.  These cash requirements
will increase if our credit card originations increase or if our cardholders’
balances or spending increase. WFB sources operating funds in the ordinary
course of business through various financing activities, which includes funding
obtained from securitization transactions, borrowing under its federal funds
purchase agreements, obtaining brokered and non-brokered certificates of
deposit, and generating cash from operations.  On April 14, 2009, a
securitization transaction for $500 million was completed under the TALF program
established by the Federal Reserve Bank of New York.  This
securitization transaction refinanced asset-backed notes that matured in
2009.  On June 5, 2009, the Trust renewed and increased a $214 million
variable funding facility to a $260 million variable funding facility that will
mature on June 4, 2010.  On September 15, 2009, the Trust renewed and
increased a $376 million variable funding facility to a $412 million variable
funding facility that will mature on September 14, 2010.  We expect
these additional liquidity sources, cash on hand, and cash from the certificates
of deposit market to provide adequate liquidity to WFB through October
2010.  The certificates of deposit funding program of WFB has been
suspended due to the availability of the TALF program currently replacing it as
a source of liquidity.
 
 The
Federal Reserve and Treasury Department announced on August 17, 2009, their
approval of an extension to the TALF loan program through March 31,
2010. They had previously authorized TALF loans through December 31, 2009.
The Federal Reserve will continue to monitor financial conditions and will
consider in the future whether a further extension of the TALF program is
warranted to help promote financial stability and economic growth. The
securities eligible for collateralizing TALF loans include newly issued,
triple-A-rated asset-backed securities backed by loans to consumers and
businesses. On October 5, 2009, the Federal Reserve Board also announced changes
to the procedures for evaluating asset-backed securities for the TALF program.
Beginning with the November 2009 subscription, collateral for TALF loans is
required to receive two triple-A ratings from TALF-eligible organizations and a
formal risk assessment of the proposed collateral by the Federal Reserve Bank of
New York.  We do not believe that WFB will be negatively impacted by
these recently announced changes.
  50
 TABLE OF CONTENTS
  
 In
addition, our existing credit agreement limits the amount of capital we can
contribute to WFB to $25 million in any fiscal year or $75 million in the
aggregate.  In December 2008, we made a $25 million capital
contribution to WFB through a convertible participating preferred stock
investment.  WFB is prohibited by regulations from lending money to
Cabela’s or other affiliates. WFB 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.  If
there are any disruptions in the credit markets, our Financial Services
business, like many other financial institutions, may increase its funding from
certificates of deposit which may result in increased competition in the
deposits market with less funds available or at unattractive
rates.  Our ability to issue certificates of deposit is reliant on our
current regulatory capital levels.  WFB is classified as a “well
capitalized” bank, the highest category under the regulatory framework for
prompt corrective action.  If WFB were to be classified as an
“adequately capitalized” bank, which is the next level category down from well
capitalized, we would be required to obtain a waiver from the FDIC in order to
continue to issue certificates of deposits.  In addition to the
non-brokered certificates of deposit market to fund growth and maturing
securitizations, we have access to the brokered certificates of deposit market
through multiple financial institutions for liquidity and funding
purposes.
 
 While we
intend to finance our growth initiatives and operations with existing cash, cash
flow from operations, and borrowings under our existing revolving credit
facility, we may require additional financing to support our growth initiatives
and operations.  The ability of our Financial Services business to
engage in securitization transactions on favorable terms or at all could be
adversely affected by further disruptions in the capital markets or other
events, which could materially affect our business and cause our Financial
Services business to lose an important source of capital.  As a result
of the changes in accounting rules under ASC Topic 810 and 860, there is some
uncertainty over existing FDIC guidance regarding standards for legal isolation
of the transferred assets. If FDIC rule 12 C.F.R. Section 360.6 “Treatment by the Federal Deposit
Insurance Corporation as Conservator or Receiver of Financial Assets Transferred
by an Insured Depository Institution in Connection With a Securitization or
Participation” on legal isolation is not modified our securitizations
will no longer have the benefit of the current rule as they will not meet all of
the conditions for sale accounting treatment under GAAP.   With
the uncertainty, many rating agencies are reluctant to provide any new ratings
until further guidance from the FDIC is provided.  The current rule as
written may limit future securitizations and may change the ratings on existing
securitizations which may significantly affect the credit markets.
 
 We
believe implementing the updates to ASC Topic 810, Consolidations,and ASC Topic
860, Transfers and
Servicing, effective the beginning of fiscal year 2010, will result in
the consolidation of WFB’s securitization trusts.  Consequently,
we believe there will be amaterial impact on our total assets, total
liabilities, retained earnings and other comprehensive income, and components of
our Financial Services revenue.  We have evaluated the impact that the
adoption of these accounting standards will have on our compliance with the
financial covenants in our credit agreements and unsecured notes and do not
believe that these standards, if they were effective as of September 26, 2009,
would have, after providing permitted notices to our lenders, caused us to be in
breach of any financial covenants in our credit agreements and unsecured
notes.  We can offer no assurances that the impact from the provisions
of these standards will not cause us to breach financial covenants in our credit
agreements and unsecured notes in the future.
 
 On
September 15, 2009, the federal agencies issued a Notice of Proposed Rulemaking,
Risk-Based Capital Guidelines;
Capital Adequacy Guidelines; Capital Maintenance; Regulatory Capital; Impact of
Modifications to Generally Accepted Accounting Principles; Consolidation of
Asset-Backed Commercial Paper Programs; and Other Related Issues relating
to proposed changes to risk based capital as a result of ASC Topic 810 and
860.  With the consolidation of the assets and liabilities of the
Trust on WFB’s balance sheet, under both the existing and proposed regulatory
capital requirements, WFB’s required capital would be increased.  The
effect of changes to regulatory capital requirements resulting from the proposed
rules issued by the federal agencies, if adopted in their current form, will
cause us to reallocate capital from our Retail and Direct businesses to meet the
capital needs of our Financial Services business, or require us to raise
additional debt or equity capital, which in turn could significantly alter our
growth initiatives.  Also, if WFB fails to satisfy the requirements
for the well-capitalized classification under the regulatory framework for
prompt corrective action, WFB’s ability to issue certificates of deposit could
be affected.  We expect to have sufficient access to capital at the
end of December 2009 to provide the necessary capital contribution to WFB so WFB
can meet the regulatory capital requirements for the well-capitalized
classification for the first quarter of 2010.  We expect to amend our
existing credit agreement so we can contribute sufficient capital to
WFB.
 
  51
 TABLE OF CONTENTS
  Operating,
Investing, and Financing Activities
 
 The
following table presents changes in our cash and cash equivalents for the
periods presented:
 
 Nine Months EndedSeptember 26, 2009
              
              
              September 27, 2008(In
      Thousands)Net
      cash derived from (used in) operating activities
              
              $
              24,143
              
              
              $
              (32,889
              )Net
      cash used in investing activities
              
              
              (92,099
              )
              
              
              (92,333
              )Net
      cash provided by financing activities
              
              
              75,935
              
              
              
              201,322
 
 2009
versus 2008
 
 Operating Activities– Cash
derived from operating activities increased $57 million for the nine months
ended September 2009 compared to the nine months ended September
2008.  This net increase in cash from operations comparing the
respective periods was primarily due to a net increase in accounts payable and
accrued expenses of $75 million where these balances increased $4 million for
the nine months ended September 2009, compared to a reduction of $71 million for
the nine months ended September 2008.  In addition, current and
deferred income taxes increased by a net of $43 million comparing the nine
months ended September 2009 to the nine months ended September
2008.  These increases in cash derived from operating activities were
partially offset by WFB’s credit card loan activity and inventory
levels.  WFB received cash on a net basis for credit card originations
(net of cash received from collections, proceeds from new securitizations, and
changes in retained interests) of $2 million for the nine months ended September
2009 compared to $56 million of net cash received for the nine months ended
September 2008.  In addition, inventory increased $55 million for the
nine months ended September 2009, to a balance of $572 million, compared to an
increase of $41 million for the nine months ended September 2008, to a balance
of $649 million.
 
 Investing Activities –Cash
used in investing activities was unchanged for the nine months ended September
2009 compared to the nine months ended September 2008.  For the nine
months ended September 2009, cash paid for property and equipment additions
totaled $38 million compared to $104 million for the nine months ended September
2008.  We opened our Billings, Montana, retail store in May 2009 and
two retail stores in 2008.  At September 26, 2009, we estimated total
capital expenditures, including the purchase of economic development bonds, to
approximate $53
million relating to the development, construction, and completion of
retail stores for the remainder of fiscal 2009 and fiscal 2010.  We
expect to fund these estimated capital expenditures with funds from
operations.
 
 In
addition, WFB retained asset-backed securities totaling $75 million on April 14,
2009, from the $500 million Series 2009-I issuance of asset-backed notes and
purchased triple-A rated notes for $2 million in the secondary markets from
previously issued series of the Trust.  WFB classified these notes as
asset-backed available for sale securities which are recorded in the condensed
consolidated balance sheet under the caption “retained interests in securitized
loans, including asset-backed securities.”  For the nine months ended
September 2009 we realized $12 million in proceeds from the disposition of
certain premises and equipment.
 
 Financing Activities –Cash
provided by financing activities decreased $125 million for the nine months
ended September 2009 compared to the nine months ended September
2008.  This net decrease from financing activities was due to the
lesser amount of borrowings, net of repayments, of our Retail and Direct
business segments and WFB operations which was $8 million for the nine months
ended September 2009 compared to $79 million for the nine months ended September
2008.  In addition, net borrowings of time deposits, which WFB
utilizes to fund its credit card operations, decreased $46 million in comparing
the respective periods,  from a $58 million net increase in time
deposits for the nine months ended September 2009 compared to a net increase of
$105 million for the nine months ended September 2008.
 
  52
 TABLE OF CONTENTS
  The
following table highlights the borrowing activities of our merchandising
business and WFB for the periods presented:
 
 Nine Months EndedSeptember 26, 2009
              
              
              September 27, 2008(In
      Thousands)Borrowings
      on (repayment of) lines of credit and short-term debt, net
              
              $
              8,566
              
              
              $
              144,625Borrowing
      on (repayment of) variable funding facility – WFB
              
              
              -
              
              
              
              (100,000
              )Issuances
      of long-term debt, net of repayments
              
              
              (214
              )
              
              
              34,674Total
              
              $
              8,352
              
              
              $
              79,299
 
 The
following table summarizes our availability under revolving credit facilities,
excluding the facilities of WFB, at the end of September:
 
 Nine Months EndedSeptember 26, 2009
              
              
              September 27, 2008(In
      Thousands)Amounts
      available for borrowing under credit facilities (1)
              
              $
              443,742
              
              
              $
              445,000Principal
      amounts outstanding
              
              
              (40,435
              )
              
              
              (207,543
              )Outstanding
      letters of credit and standby letters of credit
              
              
              (19,973
              )
              
              
              (26,709
              )Remaining
      borrowing capacity
              
              $
              383,334
              
              
              $
              210,748
 
 (1)
              Consists
      of our revolving credit facility of $430 million and $15 million CAD from
      the credit facility of our Canada
operations.
 
 In
addition, WFB has total borrowing availability of $85 million under its
agreements to borrow federal funds.  At the end of September 2009, the
entire $85 million of borrowing capacity was available to WFB.
 
 Our
unsecured $430 million credit agreement requires us to comply with certain
financial and other customary covenants, including 1) a fixed charge coverage
ratio (as defined) of no less than 1.50 to 1.00 as of the last day of any
quarter; 2) a cash flow leverage ratio (as defined) of no more than 3.00 to 1.00
as of the last day of any quarter; and 3) a minimum tangible net worth standard
(as defined).  In addition, our unsecured senior notes contain various
covenants and restrictions such as the maintenance of minimum debt coverage, net
worth, and financial ratios. The significant financial ratios and net worth
requirements in the long-term debt agreements are 1) a limitation of funded debt
to be less than 60% of consolidated total capitalization; 2) cash flow fixed
charge coverage ratio, as defined, of no less than 2.00 to 1.00 as of the last
day of any quarter; and 3) a minimum consolidated adjusted net worth (as
defined).  Also, the debt agreements contain cross default provisions
to other outstanding credit facilities. In the event that we failed to comply
with these covenants and the failure to comply would go beyond 30 days, a
default would trigger and all principal and outstanding interest would
immediately be due and payable.  At September 26, 2009, we were in
compliance with all financial covenants under our credit agreements and
unsecured notes.  We anticipate that we will continue to be in
compliance with all financial covenants under our credit agreements and
unsecured notes through the next 12 months.
  53
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 Economic
Development Bonds and Grants
 
 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 repayment 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.  At September 26, 2009, December 27, 2008, and
September 27, 2008, economic development bonds totaled $120 million, $113
million, and $102 million, respectively.
 
 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 approximately five to ten
years. If we fail to maintain the commitments during the applicable period, the
funds we received may have to be repaid or other adverse consequences may arise,
which could affect our cash flows and profitability.  At September 26,
2009, December 27, 2008, and September 27, 2008, the total amount of grant
funding subject to specific contractual remedies was $12 million, $11 million,
and $5 million, respectively.
 
 
 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 commercial paper conduit
programs 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.
 
  54
 TABLE OF CONTENTS
  The total
amounts and maturities for our credit card securitizations are as
follows:
 
 Series
              
              Type
              
              Total Available
                Capacity
              
              
              Third Party Investor Available
      Capacity
              
              
              Third Party Investor
      Outstanding
              
              Interest Rate
              
              ExpectedMaturity(Dollars
      in Thousands)Series
      2005-I
              
              Term
              
              $
              140,000
              
              
              $
              140,000
              
              
              $
              140,000
              
              Fixed
              
              October
      2010Series
      2005-I
              
              Term
              
              
              110,000
              
              
              
              109,500
              
              
              
              109,500
              
              Floating
              
              October
      2010Series
      2006-III
              
              Term
              
              
              250,000
              
              
              
              250,000
              
              
              
              250,000
              
              Fixed
              
              October
      2011Series
      2006-III
              
              Term
              
              
              250,000
              
              
              
              250,000
              
              
              
              250,000
              
              Floating
              
              October
      2011Series
      2008-I
              
              Term
              
              
              461,500
              
              
              
              461,500
              
              
              
              461,500
              
              Fixed
      (1)
              
              December
      2010Series
      2008-I
              
              Term
              
              
              38,500
              
              
              
              38,500
              
              
              
              38,500
              
              Floating
              
              December
      2010Series
      2008-IV
              
              Term
              
              
              122,500
              
              
              
              122,500
              
              
              
              122,500
              
              Fixed
              
              September
      2011Series
      2008-IV
              
              Term
              
              
              77,500
              
              
              
              75,900
              
              
              
              75,900
              
              Floating
              
              September
      2011Series
      2009-I
              
              Term
              
              
              75,000
              
              
              
              -
              
              
              
              -
              
              Fixed
              
              March
      2012Series
      2009-I
              
              Term
              
              
              425,000
              
              
              
              425,000
              
              
              
              425,000
              
              Floating
              
              March
      2012Total
      term
              
              
              
              
              1,950,000
              
              
              
              1,872,900
              
              
              
              1,872,900Series
      2006-I
              
              Variable
      Funding
              
              
              411,765
              
              
              
              350,000
              
              
              
              215,000
              
              Floating
              
              September
      2010Series
      2008-III
              
              Variable
      Funding
              
              
              260,115
              
              
              
              225,000
              
              
              
              -
              
              Floating
              
              June
      2010Total
      variable
              
              
              
              
              671,880
              
              
              
              575,000
              
              
              
              215,000Total
      available
              
              
              
              $
              2,621,880
              
              
              $
              2,447,900
              
              
              $
              2,087,900
  
 (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 WFB. 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 the
business of WFB. Unfavorable conditions in the asset-backed securities markets
generally, including the unavailability of commercial bank liquidity support or
credit enhancements, could have a similar effect. During 2008, WFB completed
securitizations totaling $1.2 billion and renewed a $376 million variable
funding facility.  On April 14, 2009, a securitization transaction for
$500 million was completed under the TALF program established by the Federal
Reserve Bank of New York.  This securitization transaction refinanced
asset-backed notes that matured in 2009.  On June 5, 2009, the Trust
renewed and increased a $214 million variable funding facility to a $260 million
variable funding facility that will mature on June 4, 2010.  On
September 15, 2009, the Trust renewed and increased a $376 million variable
funding facility to a $412 million variable funding facility that will mature on
September 14, 2010.  We expect these additional liquidity sources,
cash on hand, and cash from the certificates of deposit market to provide
adequate liquidity to WFB through October 2010.
 
 If we
were to experience further deterioration of WFB’s securitized credit card loans,
including increased delinquencies and credit losses, lower payment rates, or a
decrease in excess spreads below certain thresholds, the following could result:
1) a downgrade or withdrawal of the ratings on the outstanding securities issued
in WFB’s securitization transactions, 2) early amortization of these securities,
or 3) higher required credit enhancement levels.  On February 19,
2009, Moody’s Investors Service announced that it had downgraded the ratings on
21 classes of asset-backed notes issued by the Trust.  The downgrade
did not impact our ability to securitize loans under the TALF program or renew
variable funding facilities.  Furthermore, we do not believe that this
downgrade will have a significant impact on the ability of our Financial
Services business to complete other securitization transactions on acceptable
terms or to access financing.
 
  55
 TABLE OF CONTENTS
  Certificates
of Deposit
 
 WFB
utilizes brokered and non-brokered certificates of deposit to partially finance
its operating activities.  WFB issues certificates of deposit in a
minimum amount of one hundred thousand dollars in various
maturities.  At September 26, 2009, WFB had $543 million of
certificates of deposit outstanding with maturities ranging from October 2009 to
April 2016 and with a weighted average effective annual fixed rate of 4.30%.
This outstanding balance compares to $486 million and $265 million at December
27, 2008, and September 27, 2008, respectively, with weighted average effective
annual fixed rates of 4.64% and 4.69%, respectively.
 
 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.
 
 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.
 
 Credit Card
Limits- WFB
bears off-balance sheet risk in the normal course of its business. One form of
this risk is through WFB’s commitment to extend credit to cardholders up to the
maximum amount of their credit limits. The aggregate of such potential funding
requirements totaled $13 billion above existing balances at the end of September
2009. These funding obligations are not included on our consolidated balance
sheet.  While WFB has not experienced, and does not anticipate that it
will experience, a significant draw down of unfunded credit lines by its
cardholders, such an event would create a cash need at WFB which likely could
not be met by our available cash and funding sources. WFB has the right to
reduce or cancel these available lines of credit at any time.
 
 Securitizations- All of WFB’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.
 
 
 
  56
 TABLE OF CONTENTS
  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 LIBOR. At the end of 2008, the variable
rate credit card loans were indexed to the prime rate. To mitigate our interest
rate risk, beginning January 2009, the variable rate credit loans were indexed
to one month LIBOR and the credit card portfolio was segmented into risk-based
pricing tiers each with a different interest margin. Securitization notes are
indexed to LIBOR-based rates of interest and are periodically repriced.
Certificates of deposit are priced at the current prevailing market rate at the
time of issuance. We manage and mitigate our interest rate sensitivity through
several techniques, but primarily by indexing the customer rates to the same
index as our cost of funds. Additional techniques we use include managing the
maturity, repricing, and distribution of assets and liabilities by issuing
fixed rate securitization notes and entering into interest rate
swaps.
 
 The table
below shows the mix of our credit card account balances at the periods
ended:
 
 September
      26,
              
              
              December
      27,
              
              
              September
      27,2009
              
              
              2008
              
              
              2008As a percentage of total balances
      outstanding:Balances
      carrying an interest rate based upon various interest rate
      indices
              
              
              67.8
              %
              
              
              66.1
              %
              
              
              65.4
              %Balances
      carrying an interest rate of 9.99%
              
              
              2.0
              
              
              
              1.9
              
              
              
              2.2Balances
      carrying an interest rate of 0.00%
              
              
              0.7
              
              
              
              1.3
              
              
              
              0.4Balances
      not carrying interest because their previous month's balance was paid in
      full
              
              
              29.5
              
              
              
              30.7
              
              
              
              32.0100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
 
 Charges
on the credit cards issued by our Financial Services segment were priced at a
margin over various defined lending rates, subject to certain interest rate
floors.  No interest is charged if the account is paid in full within
24 days of the billing cycle, which represented 29.5% of total balances
outstanding at September 26, 2009.  Some of the zero percentage
promotion expenses are passed through to the merchandise vendors for each
specific promotion offered.
 
 Management
has performed several interest rate risk analyses to measure the effects of the
timing of the repricing of our interest sensitive assets and liabilities. Based
on these analyses, we believe that an immediate increase of 50 basis points, or
0.5%, in market rates for which our assets and liabilities are indexed would
cause a pre-tax decrease to earnings of $2 million for our Financial Services
segment over the next twelve months.
  57
 TABLE OF CONTENTS
  
 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 utilize our unsecured revolving credit
agreement of $15 million CAD to fund such operations.
 
  58
 TABLE OF CONTENTS
  
 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 at September 26, 2009.
 
 Changes in Internal Control
Over Financial Reporting
 
 There
were no changes in our internal control over financial reporting that occurred
during the quarter ended September 26, 2009, that materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
 
 
 Item 4T. Controls and
Procedures
 
 Not
applicable.
  59
 TABLE OF CONTENTS
  .
 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
applicable period.  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 27, 2008, and in Part II, Item 1A, of our Quarterly Report on Form 10-Q
for the fiscal quarter ended June 27, 2009, except that the risk factor titled
“Recently adopted amendments to accounting standards will require us to
consolidate previous and future securitization transactions, which will have a
significant impact on our consolidated financial statements, and could cause us
to reallocate capital from our Retail and Direct businesses to meet the capital
needs of our Financial Services business” shall be deleted in its entirety and
the following new risk factor shall be added.
 
 Recently
adopted amendments to accounting standards will require us to consolidate
previous and future securitization transactions, which will have a significant
impact on our consolidated financial statements, and could cause us to
reallocate capital from our Retail and Direct businesses to meet the capital
needs of our Financial Services business.
 
 In June
2009, the Financial Accounting Standards Board updated Accounting Standards
Codification (“ASC”) Topic 810, Consolidations,and ASC Topic
860, Transfers and
Servicing, which significantly change the accounting for transfers of
financial assets and the criteria for determining whether to consolidate a
variable interest entity (“VIE”). The update to ASC Topic 860 eliminates the
qualifying special purpose entity (“QSPE”) concept, establishes conditions for
reporting a transfer of a portion of a financial asset as a sale, clarifies the
financial-asset derecognition criteria, revises how interests retained by the
transferor in a sale of financial assets initially are measured, and removes the
guaranteed mortgage securitization recharacterization provisions.  The
update to ASC Topic 810 requires reporting entities to evaluate former QSPEs for
consolidation, changes the approach to determining a VIE’s primary beneficiary
from a mainly quantitative assessment to an exclusively qualitative assessment
designed to identify a controlling financial interest, and increases the
frequency of required reassessments to determine whether a company is the
primary beneficiary of a VIE.  We have evaluated the provisions of
these two statements and believe that their application will result in the
consolidation of the Cabela’s Master Credit Card Trust and related entities
(collectively referred to as the “Trust”).  For example, if the Trust
was consolidated using the carrying amounts of Trust assets and liabilities as
of September 26, 2009, total assets would increase approximately $2.0 billion,
total liabilities would increase approximately $2.1 billion, and approximately
$100 million, after tax, would be recorded as a decrease to retained earnings
and other comprehensive income.  These standards will be effective for
us at the beginning of our 2010 fiscal year.
 
 We have
evaluated the impact that the adoption of these standards will have on our
compliance with the financial covenants in our credit agreements and unsecured
notes and do not believe that these standards, if they were effective as of
September 26, 2009, would have, after providing permitted notices to our
lenders, caused us to be in breach of any financial covenants in our credit
agreements and unsecured notes.  We can offer no assurances that the
impact from the provisions of these standards will not cause us to breach
financial covenants in our credit agreements and unsecured notes in the
future.
 
  60
 TABLE OF CONTENTS
  
 With the
consolidation of the assets and liabilities of the Trust on WFB’s balance sheet,
under existing regulatory capital requirements and proposed rules of the
applicable federal agencies, WFB’s required capital would be
increased.  If the proposed rules issued by the federal agencies are
adopted in their current form, the effect of changes to regulatory capital
requirements will cause us to reallocate capital from our Retail and Direct
businesses to meet the capital needs of our Financial Services business, or
require us to raise additional debt or equity capital, which in turn could
significantly alter our growth initiatives.
 
 In
addition, our existing credit agreement limits the amount of capital we can
contribute to WFB to $25 million in any fiscal year or $75 million in the
aggregate.  In December 2008, we made a $25 million capital
contribution to WFB through a convertible participating preferred stock
investment.  Accordingly, under our existing credit agreement, we may
only contribute an additional $50 million to WFB in the aggregate.  We
anticipate that we will need to obtain an amendment to our existing credit
agreement to be able to meet the capital needs of our Financial Services
business when the assets and liabilities of the Trust are consolidated on WFB’s
balance sheet.  If we are unable to obtain an amendment of our
existing credit agreement on favorable terms, it could have an adverse effect on
our cash flows and profitability.  If we cannot obtain an amendment of
our existing credit agreement to allow for additional contributions to WFB, we
may be forced to divest WFB or WFB may be forced to raise additional capital
from sources other than us to meet its regulatory capital
requirements.  Any such forced divestiture may materially adversely
affect our business and results of operation.  If WFB is forced to
raise additional capital from outside sources, our ownership of WFB would be
diluted.
  In addition,
the applicability of a Federal Deposit Insurance Corporation (“FDIC”) final rule
requires that the transfer of the receivables in securitization transactions
receive sale accounting treatment to achieve legal isolation of the receivables
from our bank subsidiary, a core aspect of securitization.  It is unclear
whether, or to what extent, this rule will be modified by the FDIC to reflect
the changed standards under ASC Topic 810 and 860 and to reflect the expectation
that transferors to securitization vehicles will no longer be able to achieve
sale accounting treatment on a consolidated basis.  Unless these issues are
resolved, changes to the accounting treatment for securitizations may result in
an inability to achieve legal isolation of the transferred receivables and may
prevent future issuances of notes from the Trust.
 
 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.
 
 
 Item 6.  
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 Act32.1
              Certifications Pursuant to 18 U.S.C. Section
      1350
 
  61
 TABLE OF CONTENTS
  
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 
 CABELA’S
      INCORPORATEDDated:  October
      28, 2009
              By:
              /s/
      Thomas L. MillnerThomas
      L. MillnerPresident
      and Chief Executive OfficerDated:  October
      28, 2009
              By:
              /s/
      Ralph W. CastnerRalph
      W. CastnerVice
      President and Chief Financial
Officer
 
  62
 TABLE OF CONTENTS
  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 Act32.1
                Certifications Pursuant to 18 U.S.C. Section
      1350
 63