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**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, DC 20549**

 

**FORM 10-Q**

 

**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OFTHE**

**SECURITIES EXCHANGE ACT OF 1934 FOR THE**

**QUARTERLY PERIOD ENDED MAY 2, 2009**

 

**Commission file number: 0-50659**

 

**GANDERMOUNTAIN COMPANY**

(Exact name of Registrant asSpecified in its Charter)

 

| **Minnesota**(State or Other  Jurisdiction of  Incorporation or Organization) | ** ** | **41-1990949**(I.R.S.  Employer  Identification No.) |
|-------------------------------------------------------------------------------|------------|------------------------------------------------------|

 

**180 EastFifth Street, Suite 1300Saint Paul, Minnesota 55101(651) 325-4300**

(Address, including zipcode, and telephone number, including area code,

of Registrant’s PrincipalExecutive Offices)

 

Indicate by check mark whetherthe registrant: (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes x  No o

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted and postedpursuant to Rule 405 of Regulation S-T during the preceding12 months (or for such shorter period that the registrant was required tosubmit and post such files). Yes o  No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 
| Large accelerated filer o      |   | Accelerated filer o              |
|-----------------------------------------------|--------|--------------------------------------------|
|                                          |   |                                       |
| Non-accelerated filer x             |   | Smaller reporting company o |
| (Do not check if a smaller reporting company) |   |                                       |

 

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

 

Indicatethe number of shares outstanding of each of the issuer’s classes of commonstock, as of the latest practical date: Common Stock, $.01 par value; 24,196,036 shares outstanding as of June 5,2009.

 

 

 

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**GANDERMOUNTAIN COMPANY**

**QUARTERLYPERIOD ENDED MAY 2, 2009**

**Index**

 
| ** **                          | ** **                                                                                  | **Page** |
|-------------------------------------|---------------------------------------------------------------------------------------------|----------|
|                                |                                                                                        |     |
| PART I.  FINANCIAL INFORMATION | 2                                                                                           |
|                                |                                                                                        |
| Item 1.                             | Unaudited Financial  Statements                                                             | 2        |
|                                | Consolidated  Statements of Operations                                                      | 2        |
|                                | Consolidated  Balance Sheets                                                                | 3        |
|                                | Consolidated  Statements of Cash Flows                                                      | 4        |
|                                | Notes to Unaudited Consolidated Financial Statements                                        | 5        |
| Item 2.                             | Management’s Discussion and Analysis  of Financial Condition and Results of Operations | 11       |
| Item 3.                             | Quantitative  and Qualitative Disclosures About Market Risk                                 | 21       |
| Item 4.                             | Controls and  Procedures                                                                    | 21       |
|                                |                                                                                        |     |
| PART II.  OTHER INFORMATION    | 22                                                                                          |
|                                |                                                                                        |
| Item 1.                             | Legal Proceedings                                                                           | 22       |
| Item 1A.                            | Risk Factors                                                                                | 22       |
| Item 2.                             | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 22       |
| Item 3.                             | Defaults  Upon Senior Securities                                                            | 22       |
| Item 4.                             | Submission  of Matters to a Vote of Security Holders                                        | 22       |
| Item 5.                             | Other Information                                                                           | 22       |
| Item 6.                             | Exhibits                                                                                    | 22       |
|                                |                                                                                        |     |
| SIGNATURES                          | 23                                                                                          |

 

*Our logosGander Mountain**®**, Gander Mtn.**®**,Gander Mountain Guide Series**®**, We LiveOutdoors**®**,**Overton’s**®**,Gladiator*,*®** and Dockmate*;*®** *and other trademarks,tradenames and service marks of Gander Mountain mentioned in this report areour property. This report also contains trademarks and service marks belongingto other entities.

 

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**SPECIALNOTE REGARDING FORWARD-LOOKING INFORMATION**

 

This Quarterly Report on Form 10-Q containsforward-looking statements regarding us, our business prospects and our resultsof operations that are subject to certain risks and uncertainties posed by manyfactors and events that could cause our actual business, prospects and resultsof operations to differ materially from those that may be anticipated by suchforward-looking statements. Factors that could cause or contribute to suchdifferences include, but are not limited to, those described in Item 1A—“RiskFactors” of our Annual Report on Form 10-K for fiscal year 2008. Readersare cautioned not to place undue reliance on these forward-looking statements,which speak only as of the date of this report. We undertake no obligation torevise any forward-looking statements in order to reflect events orcircumstances that may subsequently arise. Readers are urged to carefullyreview and consider the various disclosures made by us in this report and inour other reports filed with the Commission that advise interested parties ofthe risks and factors that may affect our business.

 

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**PART I.  FINANCIALINFORMATION**

 

**ITEM 1.****    ****UNAUDITED CONSOLIDATED FINANCIALSTATEMENTS**

** **

**Gander Mountain Company**

**ConsolidatedStatements of Operations - Unaudited**

**(In thousands, except per share data)**

 
| ** **                                   | ** ** | **13 Weeks Ended** | ** ** |
|----------------------------------------------|------------|--------------------|------------|
| ** **                                   | ** ** | **May 2,**    | ** ** | **May 3,** | ** ** |
|                                         | ** ** | **2009**           | ** ** | **2008** | ** ** |
| Sales                                        |       | $                  | 227,654    |   | $ | 207,662 |   |
| Cost of goods sold                           |       | 180,751            |       | 165,633 |   |
| Gross profit                                 |       | 46,903             |       | 42,029 |   |
| Operating expenses:                          |       |               |       |   |   |
| Selling, general and administrative expenses |       | 62,127             |       | 58,957 |   |
| Exit costs and related charges               |       | 285                |       | 776 |   |
| Pre-opening expenses                         |       | 299                |       | 1,627 |   |
| Loss from operations                         |       | (15,808            | )          | (19,331 | ) |
| Interest expense, net                        |       | 2,617              |       | 4,842 |   |
| Loss before income taxes                     |       | (18,425            | )          | (24,173 | ) |
| Income tax provision                         |       | 220                |       | 272 |   |
| Net loss                                     |       | $                  | (18,645    | ) | $ | (24,445 | ) |
|                                         |       |               |       |   |   |
| Basic and diluted loss per common share      |       | $                  | (0.77      | ) | $ | (1.02 | ) |
|                                         |       |               |       |   |   |
| Weighted average common shares outstanding   |       | 24,195             |       | 24,051 |   |

 

Seeaccompanying notes to unaudited consolidated financial statements.

 

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**Gander Mountain Company**

**ConsolidatedBalance Sheets**

**(In thousands)**

 
| ** **                                                                                              | ** ** | **May 2,** | ** ** | **January 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|-----------------|------------|----------------------|------------|
| ** **                                                                                              | ** ** | **2009**        | ** ** | **2009**             | ** ** |
| ** **                                                                                              | ** ** | **unaudited**   | ** ** | ** **           | ** ** |
| **Assets**                                                                                              |       |            |       | ** **           | ** ** |
| Current assets:                                                                                         |       |            |       |                 |       |
| Cash and cash equivalents                                                                               |       | $               | 1,546      |                 | $          | 1,655 |   |
| Accounts receivable                                                                                     |       | 16,539          |       | 10,784               |       |
| Income taxes receivable                                                                                 |       | —          |       | 62                   |       |
| Inventories                                                                                             |       | 370,930         |       | 358,127              |       |
| Prepaids and other current assets                                                                       |       | 17,943          |       | 12,132               |       |
| Total current assets                                                                                    |       | 406,958         |       | 382,760              |       |
| Property and equipment, net                                                                             |       | 158,814         |       | 162,180              |       |
| Goodwill                                                                                                |       | 47,114          |       | 47,114               |       |
| Acquired intangible assets, net                                                                         |       | 18,881          |       | 19,130               |       |
| Other assets, net                                                                                       |       | 1,811           |       | 1,936                |       |
| Total assets                                                                                            |       | $               | 633,578    |                 | $          | 613,120 |   |
| ** **                                                                                              |       |            |       |                 |       |
| **Liabilities and shareholders’  equity**                                                          |       |            |       |                 |       |
| Current liabilities:                                                                                    |       |            |       |                 |       |
| Borrowings under credit facility                                                                        |       | $               | 232,828    |                 | $          | 204,514 |   |
| Accounts payable                                                                                        |       | 81,546          |       | 63,863               |       |
| Accrued and other current liabilities                                                                   |       | 49,527          |       | 55,456               |       |
| Notes payable - related parties                                                                         |       | 10,000          |       | 10,000               |       |
| Current maturities of long term debt                                                                    |       | 15,486          |       | 15,628               |       |
| Total current liabilities                                                                               |       | 389,387         |       | 349,461              |       |
|                                                                                                    |       |            |       |                 |       |
| Long term debt                                                                                          |       | 49,313          |       | 50,402               |       |
| Deferred income taxes                                                                                   |       | 6,037           |       | 5,954                |       |
| Other long term liabilities                                                                             |       | 27,444          |       | 27,398               |       |
|                                                                                                    |       |            |       |                 |       |
| Shareholders’ equity:                                                                              |       |            |       |                 |       |
| Preferred stock ($.01 par value, 5,000,000 shares authorized;  no shares issued and outstanding)        |       | —          |       | —               |       |
| Common stock ($.01 par value, 100,000,000 shares  authorized; 24,195,736 shares issued and outstanding) |       | 242             |       | 242                  |       |
| Additional paid-in-capital                                                                              |       | 278,828         |       | 278,691              |       |
| Accumulated deficit                                                                                     |       | (117,673        | )          | (99,028              | )          |
| Total shareholders’ equity                                                                         |       | 161,397         |       | 179,905              |       |
| Total liabilities and shareholders’ equity                                                         |       | $               | 633,578    |                 | $          | 613,120 |   |

 

See accompanying notes tounaudited consolidated financial statements.

 

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**Gander Mountain Company**

**ConsolidatedStatements of Cash Flows - Unaudited**

**(In thousands)**

 
| ** **                                                                   | ** ** | **13 Weeks Ended** | ** ** |
|------------------------------------------------------------------------------|------------|--------------------|------------|
| ** **                                                                   | ** ** | **May 2,**    | ** ** | **May 3,** | ** ** |
| ** **                                                                   | ** ** | **2009**           | ** ** | **2008** | ** ** |
| **Operating activities**                                                     |       |               |       |   |   |
| Net loss                                                                     |       | $                  | (18,645    | ) | $ | (24,445 | ) |
| Adjustments to reconcile net loss to net cash used  in operating activities: |       |               |       |   |   |
| Depreciation and amortization                                                |       | 7,819              |       | 8,010 |   |
| Exit costs and related charges                                               |       | 236                |       | 605 |   |
| Stock-based compensation expense                                             |       | 137                |       | 381 |   |
| Gain on disposal of assets                                                   |       | (35                | )          | (6 | ) |
| Change in operating assets and liabilities:                                  |       |               |       |   |   |
| Accounts receivable                                                          |       | (5,779             | )          | (6,911 | ) |
| Inventories                                                                  |       | (12,803            | )          | (22,318 | ) |
| Prepaids and other current assets                                            |       | (5,726             | )          | (6,159 | ) |
| Other assets                                                                 |       | (28                | )          | (40 | ) |
| Accounts payable and other liabilities                                       |       | 11,603             |       | 32,259 |   |
| Deferred income taxes                                                        |       | 83                 |       | 134 |   |
| Net cash used in operating activities                                        |       | (23,138            | )          | (18,490 | ) |
|                                                                         |       |               |       |   |   |
| **Investing activities**                                                     |       |               |       |   |   |
| Purchases of property and equipment                                          |       | (2,748             | )          | (6,460 | ) |
| Acquisition of business and related expenses                                 |       | —             |       | (167 | ) |
| Proceeds from sale of assets                                                 |       | 35                 |       | 10 |   |
| Net cash used in investing activities                                        |       | (2,713             | )          | (6,617 | ) |
|                                                                         |       |               |       |   |   |
| **Financing activities**                                                     |       |               |       |   |   |
| Borrowings under credit facility, net                                        |       | 28,314             |       | 28,025 |   |
| Reductions in long term debt                                                 |       | (2,572             | )          | (1,517 | ) |
| Proceeds from exercise of stock options and  employee stock purchases        |       | —             |       | 17 |   |
| Net cash provided by financing activities                                    |       | 25,742             |       | 26,525 |   |
|                                                                         |       |               |       |   |   |
| Net (decrease) increase in cash                                              |       | (109               | )          | 1,418 |   |
| Cash, beginning of period                                                    |       | 1,655              |       | 2,622 |   |
| Cash, end of period                                                          |       | $                  | 1,546      |   | $ | 4,040 |   |

 

See accompanying notes tounaudited consolidated financial statements.

 

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**Gander Mountain Company**

 

**Notes to Unaudited Consolidated Financial Statements**

 

**Note 1. Basis of Presentation**

 

The accompanyingunaudited financial statements of Gander Mountain Company (“the Company”) havebeen prepared in accordance with the requirements for Form 10-Q and do notinclude all the disclosures normally required in annual financial statementsprepared in accordance with U.S. generally accepted accounting principles. Theinterim financial information as of May 2, 2009 and for the 13 weeks endedMay 2, 2009 and May 3, 2008, respectively, is unaudited and has beenprepared on the same basis as the audited annual financial statements. In theopinion of management, this unaudited information includes all adjustmentsnecessary for a fair presentation of the interim financial information. All ofthese adjustments are of a normal recurring nature. These interim financialstatements filed on this Form 10-Q and the discussions contained hereinshould be read in conjunction with the annual financial statements and notesincluded in the Annual Report on Form 10-K for the fiscal year ended January 31,2009, as filed with the Securities and Exchange Commission, which includesaudited financial statements for our three fiscal years ended January 31,2009.

 

The Company’s business isseasonal in nature and interim results may not be indicative of results for afull year. Historically, the Company has realized more of its sales in thelatter half of the fiscal year, which includes the hunting and holiday seasons.The Company’s business is also impacted by the timing of new store openings.Both variation in seasonality and new store openings impact the analysis of theresults of operations and financial condition for comparable periods.

 

With the acquisition ofOverton’s Holding Company (“Overton’s”) in December 2007, the Company’sconsolidated reporting includes its two reportable segments: Retail and Direct.The Retail segment sells its outdoor lifestyle products and services throughretail stores. The Direct segment is the internet and catalog operations underthe Company’s Overton’s brand name as well as the internet and catalogoperations under its Gander Mountain brand, which launched August 3, 2008.

 

The following table showsthe Company’s consolidated sales by product category for the comparable 13 weekperiods:

 
| ** **                                    | ** ** | **1st Quarter** | ** ** | **1st Quarter** | ** ** |
|-----------------------------------------------|------------|-----------------|------------|-----------------|------------|
| **Category**                                  | ** ** | **2009**        | ** ** | **2008**        | ** ** |
| Hunting  and Firearms                         |       | 47.4            | %          | 38.1            | %          |
| Fishing  and Marine (1)                       |       | 24.9            | %          | 27.9            | %          |
| Camping,  Paddlesports and Backyard Equipment |       | 5.4             | %          | 5.4             | %          |
| Apparel  and Footwear                         |       | 16.6            | %          | 17.7            | %          |
| Powersports                                   |       | 3.8             | %          | 8.3             | %          |
| Other                                         |       | 1.0             | %          | 1.4             | %          |
| Parts  and services                           |       | 0.9             | %          | 1.2             | %          |
| Total                                         |       | 100.0           | %          | 100.0           | %          |

 

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(1)          Direct segment sales from Overton’s for the firstquarters of fiscal 2009 and fiscal 2008 have been included in the Fishing andMarine category.

 

**Supplemental Cash Flow Information -**During the 13 weeks ended May 2,2009 and May 3, 2008, the Company acquired equipment totaling $1.3 millionand $1.5 million, respectively, which was financed through capital leases.Purchases of property and equipment in the statement of cash flows excludethese amounts.

 

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**Note 2. RecentAccounting Pronouncements**

 

In April 2009,the Financial Accounting Standards Board (“FASB”) issued three FASB StaffPositions:

 

1) FSP No. FAS157-4, *Determining Fair Value When theVolume and Level of Activity for the Asset or Liability Have SignificantlyDecreased and Identifying Transactions That Are Not Orderly*, 2) FSP No. FAS115-2 and FAS 124-2, *Recognition andPresentation of Other-Than-Temporary Impairments*, and 3) FSP No. FSPFAS 107-1 and APB 28-1, *Interim Disclosuresabout Fair Value of Financial Instruments.*

 

All three FSPs areeffective for interim and annual periods ending after June 15, 2009, withearly adoption permitted for periods ending after March 15, 2009. The Companyhas elected not to early adopt the FSPs and consequently will adopt themeffective for its second fiscal quarter of 2009.  The Company doesnot anticipate that the adoption will have a material impact on its financialstatements as such guidance was relevant to financial assets such as debt orequity securities and derivative instruments, which the Company does not hold.

 

FSP No. FAS157-4 indicates that when determining the fair value of an asset or liabilitythat is not a Level 1 fair value measurement, an entity should assess whetherthe volume and level of activity for the asset or liability has significantlydecreased when compared with normal market conditions. If the entity concludesthat 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 fairvalue and may require a significant adjustment.

 

FSP No. FAS115-2 and FAS 124-2 modifies the requirements for recognizingother-than-temporarily impaired debt securities and changes the existingimpairment model for such securities. It also modifies the presentation ofother-than-temporary impairment losses and increases the frequency of andexpands already required disclosures about other-than-temporary impairment fordebt and equity securities.

 

FSP No. FSPFAS 107-1 and APB 28-1 requires publicly traded companies, as defined inOpinion No. 28, to disclose the fair value of financial instruments withinthe scope of FAS No. 107 in interim financial statements, adding to thecurrent requirement to make those disclosures in annual financial statements.This staff position also requires that companies disclose the method or methodsand significant assumptions used to estimate the fair value of financialinstruments and a discussion of changes, if any, in the method or methods andsignificant assumptions during the period.

 

In March 2008, theFASB issued SFAS No. 161, *Disclosuresabout Derivative Instruments and Hedging Activities*, *an amendment of SFAS No. 133*. SFAS No. 161is intended to improve financial standards for derivative instruments andhedging activities by requiring enhanced disclosures to enable investors tobetter understand the effect these instruments and activities have on an entity’sfinancial position, financial performance and cash flows. Entities are requiredto provide enhanced disclosures about: how and why an entity uses derivativeinstruments; how derivative instruments and related hedged items are accountedfor under SFAS No. 133 and its related interpretations; and how derivativeinstruments and related hedged items affect an entity’s financial position,financial performance and cash flows. SFAS No. 161 is effective forfinancial statements issued for fiscal years and interim periods beginning afterNovember 15, 2008. The adoption of SFAS No. 161 in the first quarterof fiscal 2009 had no impact on the Company’s results of operations, cashflows, or financial position.

 

**Note 3. Credit Facility**

 

The Company maintains a $345million revolving credit facility with Bank of America, N.A.  The credit facility, in addition to the $20million Term Loan A, has a maturity date of June 30, 2012. The actualavailability under the credit facility is limited to specific advance rates oneligible inventory and accounts receivable. Typically, availability will behighest in the latter half of the fiscal year as inventory levels and advancerates increase. Interest on the outstanding indebtedness under the revolvingportion of the credit facility currently accrues at the lender’s primecommercial lending rate, or, if the Company elects, at the one, two, three orsix month LIBOR plus 1.25% to 1.75%, depending on the Company’s EBITDA, asdefined in the credit agreement. The Company’s obligations under the creditfacility are secured by interests in substantially all of its assets.

 

Availability under ourcredit facility was $34.1 million and $24.1 million as of May 2, 2009 and May 3,2008, respectively.

 

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Current financial covenantsunder the credit facility require that availability under the line of creditnot fall below 5% of the lower of the borrowing base, as defined, or the creditfacility limit. This availability test is applied and measured on a dailybasis. The 5% requirement increases to 7.5% in August 2009. The covenantsalso limit the Company’s annual capital expenditures. The credit facility alsocontains other covenants that, among other matters, restrict the Company’sability to incur substantial other indebtedness, create certain liens, engagein certain mergers and acquisitions, sell assets, enter into certain capitalleases or make junior payments, including cash dividends. The Company was incompliance with all covenants as of May 2, 2009 and January 31, 2009.

 

**Note 4. Long Term Debt**

 

The Company’s long term debtconsists of the following *(in thousands*):

 
| ** **                         | ** ** | **May 2,** | ** ** | **January 31,** | ** ** |
|------------------------------------|------------|-----------------|------------|----------------------|------------|
| ** **                         | ** ** | **2009**        | ** ** | **2009**             | ** ** |
| Term  loan B                       |       | $               | 37,500     |                 | $          | 37,500 |   |
| Equipment  financing notes         |       | 12,639          |       | 13,492               |       |
| Capitalized  lease obligations     |       | 12,970          |       | 13,390               |       |
| Term  notes - related parties      |       | 10,000          |       | 10,000               |       |
| Obligation  from acquisition       |       | 1,691           |       | 1,648                |       |
| Total  debt obligations            |       | 74,800          |       | 76,030               |       |
| Less:  amounts due within one year |       | (25,486         | )          | (25,628              | )          |
| **Long term debt**                 |       | $               | 49,313     |                 | $          | 50,402 |   |

 

***Term Loan B***—The Company secured a $40 million termloan with a final maturity date of September 30, 2011, in connection withthe acquisition of Overton’s. As of May 2, 2009, the required principalpayments remaining under Term Loan B are reflected below *(inthousands):*

 
| **Due Date**       | ** ** | **Principal Due** | ** ** |
|-------------------------|------------|------------------------|------------|
| ** **              | ** ** | ** **             | ** ** |
| July 31, 2009      |       | $                      | 2,500      |   |
| December 31, 2009  |       | 5,000                  |       |
| July 31, 2010      |       | 5,000                  |       |
| December 31, 2010  |       | 6,250                  |       |
| March 31, 2011     |       | 6,250                  |       |
| June 30, 2011      |       | 6,250                  |       |
| September 30, 2011 |       | 6,250                  |       |
|                    |       | $                      | 37,500     |   |

 

***Short Term Notes Payable—Related Parties.***  In March 2009, the Company extended thematurity date on its $10 million term loan with its two major shareholdersto June 30, 2009. The lenders under the agreement are Gratco LLC, anaffiliate of David Pratt, the Company’s chairman and interim chief executiveofficer, and Holiday Companies, an affiliate of Ronald A. Erickson, theCompany’s vice chairman, and Gerald A. Erickson, a director of theCompany.

 

***Capitalized Lease Obligations.***  The Company leases certain technologyequipment and leasehold improvements under leases that have been accounted foras capital leases. During the 13 weeks ended May 2, 2009 and May 3,2008, the Company leased equipment accounted for as capital leases in theamounts of $1.3 million and $1.5 million, respectively. The leases vary fromone to three years in term and require monthly payments of principal andinterest.

 

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**Note 5. Goodwill and Intangible Assets**

 

TheCompany accounts for goodwill according to the provisions of Statement ofFinancial Accounting Standards No. 142, *Goodwilland Other Intangible Assets.* The reported goodwill and intangibleassets, (net of amortization where appropriate), as of May 2, 2009 and thechanges in these accounts since the fiscal year end are as follows *(in thousands)*:

 
| ** **                          | ** ** | **Retail segment** | ** ** | **Direct segment** | ** ** | ** ** | ** ** |
|-------------------------------------|------------|--------------------|------------|--------------------|------------|------------|------------|
| ** **                          | ** ** | **Goodwill**       | ** ** | **Intangibles**    | ** ** | **Total**  | ** ** | **Goodwill** | ** ** | **Intangibles** | ** ** | **Total** | ** ** | **Consolidated** | ** ** |
| **Balances, January 31, 2009** |       | $                  | —     |               | $          | 400        |       | $ | 400 |   | $ | 47,114 |   | $ | 18,730 |   | $ | 65,844 |   | $ | 66,244 |   |
| Amortization                        |       | —             |       | (127               | )          | (127       | )          | — |   | (122 | ) | (122 | ) | (249 | ) |
| **Balances, May 2, 2009**      | ** ** | **$**              | **—** | ** **         | **$**      | **273**    | ** ** | **$** | **273** | ** ** | **$** | **47,114** | ** ** | **$** | **18,608** | ** ** | **$** | **65,722** | ** ** | **$** | **65,995** | ** ** |

 

Inaccordance with Statement of Financial Accounting Standards No. 142, *Goodwill and Other Intangible Assets*,goodwill is not subject to amortization. Both Goodwill and other IntangibleAssets are tested for impairment annually or more frequently if events orchanges in circumstances indicate that the asset may be impaired.

 

**Note 6. Stock-Based Compensation**

 

The Company has threeshare-based compensation plans: the 2004 Omnibus Stock Plan, the 2002 StockOption Plan and the Employee Stock Purchase Plan. In addition, the Companygranted certain stock option awards in fiscal 1998 and fiscal 2002 that werenot under a stock-based compensation plan (“non-plan” awards). However, as of May 2,2009, there were no “non-plan” option awards outstanding. The Company is notauthorized to grant any awards under the 2002 Stock Option Plan. The Company’sboard of directors has suspended the Employee Stock Purchase Plan, effective January 1,2009. The suspension will continue until it is lifted by future action of theboard. 

 

As of May 2, 2009,there were a total of 1,936,366 options to purchase common stock outstandingunder all of our stock option plans, with a weighted average exercise price of$10.32 and a weighted average remaining life of 6.3 years.  There were 1,483,563 options that wereexercisable as of May 2, 2009 with a weighted-average exercise price of$11.11.

 

Stock-based compensationexpense for the 13 weeks ended May 2, 2009 and May 3, 2008, was$137,000 and $381,000, respectively.  Asof May 2, 2009, there was approximately $1.1 million of unrecognizedcompensation expense related to stock options that is expected to be recognizedover a weighted-average period of 2.2 years.

 

As of May 2, 2009,there were 2,015,662 shares available for future grant under the 2004 OmnibusStock Plan.

 

Stock option activity forthe periods presented is as follows:

 
| ** **                                                    | ** ** | **13 weeks - May 2, 2009** | ** ** | **13 weeks - May 3, 2008** | ** ** |
|---------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                                    | ** ** | **Number of**                   | ** ** | **Weighted-**                   | ** ** | **Number of** | ** ** | **Weighted-** | ** ** |
| ** **                                                    | ** ** | **Shares Under**                | ** ** | **Average**                     | ** ** | **Shares Under** | ** ** | **Average** | ** ** |
| ** **                                                    | ** ** | **Option**                      | ** ** | **Exercise Price**              | ** ** | **Option** | ** ** | **Exercise Price** | ** ** |
| Outstanding  - Beginning                                      |       | 2,236,847                       |       | $                               | 10.06      |   | 3,507,113 |   | $ | 10.14 |   |
| Granted                                                       |       | —                          |       | —                          |       | 60,750 |   | 5.18 |   |
| Exercised                                                     |       | —                          |       | —                          |       | (2,877 | ) | 5.59 |   |
| Forfeited                                                     |       | (300,481                        | )          | 8.37                            |       | (211,943 | ) | 10.26 |   |
| Outstanding  -Ending                                          |       | 1,936,366                       |       | $                               | 10.32      |   | 3,353,043 |   | $ | 10.04 |   |
|                                                          |       |                            |       |                            |       |   |   |   |   |
| Weighted-average  Black-Scholes fair value of options granted |       |                            |       | no grants                       |       |   |   | $ | 2.99 |   |

 

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**Note 7. Selected Balance Sheet Information *(in thousands)***

** **
| *** ***                                     | ** ** | **May 2, 2009** | ** ** | **January 31,   2009** | ** ** |
|--------------------------------------------------|------------|----------------------|------------|-----------------------------|------------|
| *Property and equipment consists of :*           |       |                 |       |                        |       |
| Building                                         |       | $                    | 6,972      |                        | $          | 6,972 |   |
| Furniture  and equipment                         |       | 154,992              |       | 153,612                     |       |
| Leasehold  improvements                          |       | 66,377               |       | 66,329                      |       |
| Computer  software and hardware                  |       | 63,816               |       | 60,959                      |       |
|                                             |       | 292,157              |       | 287,872                     |       |
| Less:  Accumulated depreciation and amortization |       | (133,343             | )          | (125,692                    | )          |
| **Property and equipment, net**                  |       | $                    | 158,814    |                        | $          | 162,180 |   |

** **
| ** **                      | ** ** | **May 2, 2009** | ** ** | **January 31,   2009** | ** ** |
|---------------------------------|------------|----------------------|------------|-----------------------------|------------|
| *Other assets consists of:*     |       |                 |       |                        |       |
| Deferred  loan costs            |       | $                    | 6,768      |                        | $          | 6,790 |   |
| Other                           |       | 218                  |       | 167                         |       |
|                            |       | 6,986                |       | 6,957                       |       |
| Less:  Accumulated amortization |       | (5,175               | )          | (5,021                      | )          |
| **Other assets, net**           |       | $                    | 1,811      |                        | $          | 1,936 |   |

** **
| ** **                                          | ** ** | **May 2, 2009** | ** ** | **January 31,   2009** | ** ** |
|-----------------------------------------------------|------------|----------------------|------------|-----------------------------|------------|
| *Accrued and other current liabilities consist of:* | ** ** | ** **           | ** ** | ** **                  | ** ** |
| Gift  cards and gift certificate liabilities        |       | $                    | 19,159     |                        | $          | 24,853 |   |
| Payroll  and related fringe benefits                |       | 5,146                |       | 7,196                       |       |
| Sales,  property and use taxes                      |       | 9,446                |       | 9,138                       |       |
| Reserve  for exit costs and related charges         |       | 116                  |       | 210                         |       |
| Lease  related costs                                |       | 2,151                |       | 1,874                       |       |
| Insurance  reserves and liabilities                 |       | 2,396                |       | 2,335                       |       |
| Advertising  and marketing                          |       | 382                  |       | 133                         |       |
| Interest                                            |       | 631                  |       | 742                         |       |
| Other  accruals and current liabilities             |       | 10,100               |       | 8,975                       |       |
| **Accrued and other current liabilities**           |       | $                    | 49,527     |                        | $          | 55,456 |   |

** **
| ** **                                | ** ** | **May 2, 2009** | ** ** | **January 31,   2009** | ** ** |
|-------------------------------------------|------------|----------------------|------------|-----------------------------|------------|
| *Other long-term liabilities consist of:* |       |                 |       |                        |       |
| Deferred  rent                            |       | $                    | 25,585     |                        | $          | 25,753 |   |
| Insurance  reserves and other liabilities |       | 1,859                |       | 1,645                       |       |
| **Other long-term liabilities**           |       | $                    | 27,444     |                        | $          | 27,398 |   |

 

**Note 8. Exit Costs and Related Charges**

 

The Company presents thiscaption in the consolidated statement of operations to aggregate variouscharges related to exiting certain stores, impaired assets or other charges forassets no longer used, as well as severance charges. The Company believes it ismore meaningful to present these expenses on a separate line in theconsolidated statement of operations. Exit costs and related charges for eachof the 13 week periods ended May 2, 2009 and May 3, 3008 are detailedin the table below *(in thousands)*:

 

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| ** **                                              | ** ** | **13 weeks ended** | ** ** |
|---------------------------------------------------------|------------|--------------------|------------|
| ** **                                              | ** ** | **May 2,**    | ** ** | **May 3,** | ** ** |
| ** **                                              | ** ** | **2009**           | ** ** | **2008** | ** ** |
| **Expense Summary**                                     |       |               |       |   |   |
| Exit  costs for closed stores                           |       | $                  | —     |   | $ | 708 |   |
| Accretion  on closed-store liabilities                  |       | —             |       | 68 |   |
| Accelerated  depreciation on Powersports related assets |       | 238                |       | — |   |
| Severance  costs                                        |       | 47                 |       | — |   |
|                                                    |       | $                  | 285        |   | $ | 776 |   |

 

The Company’s reserve forexit costs and related charges as of May 2, 2009 and January 31,2009, was $116,000 and $210,000, respectively, representing unpaid severancecosts.

 

**Note 9. Income Taxes**

 

TheCompany’s effective income tax rate was (1.2) % and (1.1) % for the firstquarter of fiscal 2009 and first quarter of fiscal 2008, respectively. Thechange in the effective tax rate between periods is primarily the result of thechange in pretax earnings compared to the change in state income taxes anddeferred tax liabilities related to differences in the book-tax basis of certainacquired intangible assets.

 

TheCompany’s tax provision primarily represents minimum or net worth taxes due invarious states. Some states have adopted an adjusted gross receipts tax. TheCompany has no provision for Federal income tax for either period presented dueto accumulated operating losses. The Company determined that realization of thetax benefit related to the net deferred tax assets was uncertain. Accordingly,a valuation allowance is recorded for the entire balance of the net current andnon-current deferred tax assets.

 

**Note 10. Earnings Per Share**

 

Basic and diluted lossapplicable to common shareholders per share is based upon the weighted averagenumber of shares outstanding. All potentially dilutive stock options andconvertible securities to purchase shares of the Company’s common stock havebeen excluded from the calculation of weighted average shares outstanding forall years presented because their inclusion would have an anti-dilutive effecton loss per share. These shares of common stock subject to potential issuanceas a result of these securities totaled 1,936,366 and 3,353,043 as of May 2,2009 and May 3, 2008, respectively.

 

**Note 11. Contingencies**

 

*LegalProceedings***-**Various claims, lawsuits orother proceedings arising in the normal course of business may be pendingagainst the Company from time to time. The subject matter of these proceedingstypically relate to commercial disputes, employment issues, product liabilityand other matters. As of the date of this report, the Company is not a party toany legal proceedings that are expected, individually or in the aggregate, tohave a material adverse effect on its financial condition or results ofoperations.

 

**Note 12. Segment Reporting**

 

For the Retail segment,operating expenses primarily consist of distribution center expenses associatedwith moving product from the Company’s distribution center to its retailstores, occupancy costs of the retail stores, store labor, advertising,depreciation, and all other store operating expenses, as well as all expensesassociated with the functional support areas such as executive,merchandising/buying, human resources, information technology, andfinance/accounting.

 

For the Direct segment,operating expenses primarily consist of catalog expenses, e-commerceadvertising expenses, and order fulfillment expenses, as well as all expensesassociated with the functional support areas of the Direct segment such asmerchandising/buying, information technology, and finance/accounting.

 

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Segment assets andliabilities are those assets and liabilities directly used in the operatingsegment. For the Retail segment, assets primarily include inventory in theretail stores, fixtures, and leasehold improvements. For the Direct segment,assets primarily include inventory, goodwill and intangible assets, deferredcatalog costs and fixed assets.

 

Results by business segmentare presented in the following table *(in thousands)*:

 

**Statementof Operations data:**

 
| ** **                      | ** ** | **13 Weeks Ended**   | ** ** | **13 Weeks Ended**   | ** ** |
|---------------------------------|------------|----------------------|------------|----------------------|------------|
| ** **                      | ** ** | **May 2, 2009** | ** ** | **May 3, 2008** | ** ** |
| ** **                      | ** ** | **Retail**           | ** ** | **Direct**           | ** ** | **Total** | ** ** | **Retail** | ** ** | **Direct** | ** ** | **Total** | ** ** |
| Sales                           |       | $                    | 209,870    |                 | $          | 17,784 |   | $ | 227,654 |   | $ | 187,993 |   | $ | 19,669 |   | $ | 207,662 |   |
| Depreciation  and amortization  |       | 7,564                |       | 255                  |       | 7,819 |   | 7,381 |   | 629 |   | 8,010 |   |
| Exit  costs and related charges |       | 285                  |       | —               |       | 285 |   | 776 |   | — |   | 776 |   |
| Loss  from operations           |       | (14,132              | )          | (1,676               | )          | (15,808 | ) | (18,743 | ) | (588 | ) | (19,331 | ) |
| Net  loss                       |       | $                    | (16,360    | )                    | $          | (2,285 | ) | $ | (18,645 | ) | $ | (22,816 | ) | $ | (1,629 | ) | $ | (24,445 | ) |

 

**Balance Sheet data:**

 
| ** **                                | ** ** | **As of May 2, 2009** | ** ** | **As of January 31, 2009** | ** ** |
|-------------------------------------------|------------|----------------------------|------------|---------------------------------|------------|
| ** **                                | ** ** | **Retail**                 | ** ** | **Direct**                      | ** ** | **Total** | ** ** | **Retail** | ** ** | **Direct** | ** ** | **Total** | ** ** |
| Total  assets                             |       | $                          | 534,203    |                            | $          | 99,375 |   | $ | 633,578 |   | $ | 517,812 |   | $ | 95,308 |   | $ | 613,120 |   |
| Inventories                               |       | 346,654                    |       | 24,276                          |       | 370,930 |   | 334,868 |   | 23,259 |   | 358,127 |   |
| Goodwill &  acquired intangibles |       | 273                        |       | 65,722                          |       | 65,995 |   | 400 |   | 65,844 |   | 66,244 |   |
| Long  term debt                           |       | $                          | 19,313     |                            | $          | 30,000 |   | $ | 49,313 |   | $ | 20,402 |   | $ | 30,000 |   | $ | 50,402 |   |

 

**ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS**

 

**OVERVIEW**

 

Gander Mountain Companyoperates the nation’s largest retail network of stores specializing in hunting,fishing, camping, marine and outdoor lifestyle products and services. We haveexpanded our store base to 119 conveniently located Gander Mountain outdoorlifestyle stores, (including three outlet centers), providing approximately6.7 million square feet of retail space in 23 states. We opened our neweststore in March 2009, which we anticipate will be our only new store infiscal 2009 as we focus on growing our direct marketing business and continuingto improve the profitability of our retail operations. The sales of outdoorlifestyle products and services through our 119 retail stores constitutes ourRetail segment.

 

On December 6, 2007 weacquired Overton’s, Inc., a leading internet and catalog marketing companytargeting recreational boaters and water sports enthusiasts. Overton’s productline is extensive, ranging from water skis, wakeboards and apparel toelectronics, boat covers, boat seats and other marine accessories. Overton’sproducts are sold under two principal brands, Overton’s and Consumers Marine,through a multi-channel approach that includes catalogs, websites (*www.Overtons.com* and *www.Consumersmarine.com*) and three retailshowrooms. We acquired Overton’s for its established position in the marineaccessories business but also to provide us a platform from which to developand grow the internet and catalog retail channels for the Gander Mountainproduct categories. We believe an effective multi-channel retail offering inour industry sector would include deriving between 25% to 40% of our totalbusiness from the internet and catalog channels.

 

In August 2008, welaunched a new internet and catalog operation under our Gander Mountain brandoffering an initial assortment of the products available in our retail stores.We intend to expand our product assortment and continue to grow this componentof our direct business as we seek to build market share in an internet and catalogmarket. Together, the Overton’s business and our catalog and internet offeringsunder the Gander Mountain brand comprise our Direct segment.

 

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Our long-term strategicobjectives are to:

 

·      Develop an effectivemulti-channel offering to our customers by growing our Gander Mountain andOverton’s Direct marketing business through expanded product offerings,additional catalogs and enhanced customer service;

 

·      Grow retail stores’ revenuesand build upon the Gander Mountain brand by executing strategies centered uponincreasing customer traffic, focusing on well-defined customer segments anddeploying targeted, value-added merchandising and marketing tactics;

 

·      Offer our customers the bestcombination of a broad assortment of products and services, convenience andvalue in the outdoor lifestyle sector, including new products that meet theneeds of our customer segments; and

 

·      Continue to improve ourprofitability by leveraging our increasing scale to improve margins and bycontrolling expenses.

 

**Quarterly Results of Operations and Seasonality**

 

Our quarterly operatingresults may fluctuate significantly because of several factors, including thetiming of new store openings and related expenses, profitability of new stores,weather conditions and general economic conditions. Our business is alsosubject to seasonal fluctuation, with the highest sales activity in our Retailsegment normally occurring during the third and fourth quarters of our fiscalyear, which are primarily associated with the fall hunting seasons and theholiday season. In recent years, the second half of our fiscal years havegenerated approximately 57% to 63% of our annual sales. In addition, ourcustomers’ demand for our products and therefore our sales can be significantlyimpacted by unseasonable weather conditions that affect outdoor activities andthe demand for related apparel and equipment. Our grand opening activitiessurrounding our new store openings can also cause fluctuations in sales whencompared to operating periods in later months. It is for this reason we includea new store in our comparable store sales base in its fifteenth full month tominimize the effect of grand opening activities.

 

Seasonality also impactsinventory levels for our retail stores which tend to rise beginningapproximately in April, reach a peak in November, and decline to lower levelsafter the December holiday season.

 

The Overton’s business isalso subject to seasonal fluctuations, with its highest sales activity normallyoccurring during the first and second quarters of our fiscal year, which is theprimary season for boating, marine and watersports related products.Historically, Overton’s has generated approximately 65% to 70% of its salesduring the first half of our fiscal year and approximately 50% during thesecond quarter of our fiscal year. We expect the Gander Mountain Direct segmentbusiness to have similar seasonality as our retail stores as the productofferings are similar.

 

Our pre-opening expenseshave and will continue to vary significantly from quarter to quarter, primarilydue to the timing of store openings. We typically incur most pre-openingexpenses for a new store during the three months preceding, and the month of, itsopening. In addition, our labor and operating costs for a newly opened storecan be greater during the first one to two months of operation than what can beexpected after that time, both in aggregate dollars and as a percentage ofsales. Accordingly, the volume and timing of new store openings in any quarterhas had, and is expected to continue to have, a significant impact on quarterlypre-opening costs and store labor and operating expenses. Due to these factors,results for any particular quarter may not be indicative of results to beexpected for any other quarter or for a full fiscal year.

 

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**RESULTS OF OPERATIONS**

 

The following table presents, for the periods indicated, selected itemsin the consolidated statements of operations as a percentage of our sales:

 
| ** **                                    | ** ** | **13 Weeks Ended** | ** ** |
|-----------------------------------------------|------------|--------------------|------------|
| ** **                                    | ** ** | **May 2,**    | ** ** | **May 3.** | ** ** |
| ** **                                    | ** ** | **2009**           | ** ** | **2008** | ** ** |
| Sales                                         |       | 100.0              | %          | 100.0 | % |
| Cost  of goods sold                           |       | 79.4               | %          | 79.8 | % |
| Gross  profit                                 |       | 20.6               | %          | 20.2 | % |
| Operating  expenses:                          |       |               |       |   |   |
| Selling,  general and administrative expenses |       | 27.3               | %          | 28.4 | % |
| Exit  costs and related charges               |       | 0.1                | %          | 0.4 | % |
| Pre-opening  expenses                         |       | 0.1                | %          | 0.8 | % |
| Loss  from operations                         |       | (6.9               | )%         | (9.4 | )% |
| Interest  expense, net                        |       | 1.2                | %          | 2.3 | % |
| Loss  before income taxes                     |       | (8.1               | )%         | (11.7 | )% |
| Income  tax provision                         |       | 0.1                | %          | 0.1 | % |
| Net  loss                                     |       | (8.2               | )%         | (11.8 | )% |

 

In the first quarter offiscal 2009, the Retail segment represented 92% of our consolidated sales andproduced a net loss of $16.4 million, while the Direct segment representedapproximately 8% of our consolidated sales and incurred a net loss of $2.3million. The first quarter of our fiscal year for the Retail segment typicallyreflects the lowest sales levels of all fiscal quarters and consequently, thelargest net loss. The Direct segment loss includes operating losses due to thestart-up nature of the Gander Mountain Direct business.

 

The followingtable indicates the average percentage of consolidated sales represented by eachof our major product categories during the first quarters of fiscal 2009 and2008:

 
| ** **                                   | ** ** | **1st  Quarter** | ** ** | **1****st****Quarter** | ** ** |
|----------------------------------------------|------------|------------------|------------|------------------------|------------|
| **Category**                                 | ** ** | **2009**         | ** ** | **2008**               | ** ** |
| Hunting and Firearms                         |       | 47.4             | %          | 38.1                   | %          |
| Fishing and Marine (1)                       |       | 24.9             | %          | 27.9                   | %          |
| Camping, Paddlesports and Backyard Equipment |       | 5.4              | %          | 5.4                    | %          |
| Apparel and Footwear                         |       | 16.6             | %          | 17.7                   | %          |
| Powersports                                  |       | 3.8              | %          | 8.3                    | %          |
| Other                                        |       | 1.0              | %          | 1.4                    | %          |
| Parts and services                           |       | 0.9              | %          | 1.2                    | %          |
| Total                                        |       | 100.0            | %          | 100.0                  | %          |

 

----

(1)   Direct segmentsales from Overton’s for the first quarters of fiscal 2009 and fiscal 2008 havebeen included in the Fishing and Marine category.

 

***Financial Review -******13 Weeks Ended May 2, 2009 Compared to 13 Weeks Ended May 3,2008***

 

*Sales.*  Consolidatedsales increased by $20.0 million, or 9.6%, to $227.7 million in the firstquarter of fiscal 2009 from $207.7 million in the first quarter of fiscal 2008.

 

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Retail segment sales were$209.9 million for the first quarter of fiscal 2009, an increase of $21.9million, or 11.6% from $188.0 million for the first quarter of fiscal 2008. TheRetail segment sales increase resulted from sales of $13.3 million from newstores not included in the comparable store sales base, a comparable storesales increase of $13.3 million and a $4.7 million sales decrease from storesclosed during the first quarter of fiscal 2009 but open in fiscal 2008, as wellas changes in other revenue.  In thefirst quarter of fiscal 2009, we opened one new store.  During the first quarter of fiscal 2008, weopened three new stores and closed three stores, including one relocation andthe consolidation of two smaller format stores into one large format store.

 

Direct segment salesdeclined $1.9 million, or 9.6%, in the first quarter of fiscal 2009 ascompared to the first quarter of fiscal 2008 as consumer spending in theboating accessory business was curtailed by the economic environment.

 

Our Retail comparable storesales increased 7.4% for the first quarter of fiscal 2009, as compared to acomparable store sales decline of 6.7% for the first quarter of fiscal 2008.Excluding a negative (5.4) % impact of power boat and ATV sales and power sportservices which are categories the Company is in the process of exiting,comparable store sales were 12.8% for the first quarter of fiscal 2009. Theincrease was attributable to sales increases in the firearms, ammunition,firearm accessories, marine and camping categories and was also attributableto, we believe, increased advertising expenditures in the first quarter offiscal 2009.

 

Overall, the Retail salesmix for the first quarter of fiscal 2009 was relatively consistent with thefirst quarter of fiscal 2008. The notable exceptions were: (i) the firearms,ammunition and accessories category, which increased its share of the Retailsales mix by 983 basis points on strong market demand, (ii) lower sales inthe powersports category resulting in a 504 basis points lower share of thesales mix due to lower sales in ATVs and power boats as we exit thesecategories and (iii) the apparel category, which experienced a decline of176 basis points in its share of the sales mix.

 

*GrossProfit.*  Consolidated gross profitincreased by $4.9 million, or 11.6%, to $46.9 million in the first quarterof fiscal 2009 from $42.0 million in the first quarter of fiscal 2008. As apercentage of sales, consolidated gross profit increased 36 basis points to20.6% in the first quarter of fiscal 2009 from 20.2% in the first quarter offiscal 2008. The significant factors affecting our gross profit rate during thefirst quarter of fiscal 2009 were higher Retail gross profit of 96 basispoints, partially offset by a decline in Direct segment gross profit of 60basis points.

 

Retail segment initialmargins benefited from higher initial margin rates in firearms, ammunition andaccessories partially offset by lower margin rates in powersports and apparel.

 

Direct segment gross profitdeclined due to promotional start-up efforts related to our Gander Mountainbrand direct business as well as promotional efforts related to a difficultsales environment for the Overton’s brand.

 

*Selling,General and Administrative Expenses.*  Consolidated SG&A expenses increased by$3.2 million, or 5.4%, to $62.1 million in the first quarter of fiscal 2009from $59.0 million in the first quarter of fiscal 2008. As a percentage ofsales, consolidated SG&A expenses decreased 110 basis points to 27.3 % inthe first quarter of fiscal 2009 from 28.4% in the first quarter of fiscal2008.

 

The significant factorsaffecting consolidated SG&A expenses during the first quarter of fiscal2009 were leverage from cost controls in the Retail segment that had a positiveimpact of 127 basis points, partially offset by sales de-leverage in Directbusiness SG&A costs, which negatively impacted SG&A as a percentage ofsales by 17 basis points.

 

The positive comparablestore sales of 7.4% in the first quarter of fiscal 2009 allowed us to leverageour store labor and related costs more effectively, resulting in a 77 basispoint improvement as a percentage of sales. Other SG&A costs, as apercentage of sales, were also lower in the first quarter of fiscal 2009,resulting in 177 basis points of additional improvement. This improved leveragewas partially offset by Retail segment advertising costs which increased in thefirst quarter of fiscal 2009 and as a percentage of sales were 127 basis pointshigher as we increased our marketing activities.

 

*Exit Costsand Related Charges.* Wecontinued to incur these costs in fiscal 2009 which are primarily related tothe exit of the powersports categories. In the first quarter of fiscal 2008, weincurred exit costs associated with three closed stores.

 

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*Pre-openingExpenses.*  Pre-openingexpenses decreased $1.3 million, or 81.6%, to $0.3 million in the firstquarter of fiscal 2009 from $1.6 million in the first quarter of fiscal 2008.In the first quarter of fiscal 2009, we opened one new store. During the firstquarter of fiscal 2008, we opened three new stores.

 

*InterestExpense, Net.*  Interestexpense decreased by $2.2 million, or 45.9%, to $2.6 million in the firstquarter of fiscal 2009 from $4.8 million in the first quarter of fiscal2008.

 

Average outstandingborrowings during the first quarter of fiscal 2009 decreased approximately $33million, or 10%, as compared to the first quarter of fiscal 2008, due toincreased cash flows from operations and reduced capital expenditures. Averageinterest rates on our outstanding borrowings were 234 basis points lower duringthe first quarter of fiscal 2009 than in the first quarter of fiscal 2008, dueto general interest rate declines. The average effective interest rate on allof our outstanding borrowings as of May 2, 2009 and January 31, 2009was 3.55% and 4.65%, respectively.

 

*Income TaxProvision.*  Our taxprovisions for the first quarters of fiscal 2009 and fiscal 2008 primarilyrepresent minimum or net worth taxes due in various states. Certain states haveadopted an adjusted gross receipts tax. We have no provision for Federal incometax in the first quarter of fiscal 2009 or fiscal 2008 due to the uncertaintyof the realization of our net operating loss carryforwards. We have determinedthe realization of the tax benefit related to our net deferred tax asset isuncertain at this time and a valuation allowance was recorded for the entirebalance of our net deferred tax asset.

 

*Net Loss.*  Our net loss was $18.6 million for thefirst quarter of fiscal 2009, as compared to net loss of $24.4 million for thefirst quarter of fiscal 2008, due to the factors discussed above.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

Our primary capitalrequirements are for seasonal working capital needs, particularly wheninventories are increasing; capital expenditures; and to the extent of thehighly seasonal nature of our business, operating losses. During periods of newstore growth, property and equipment and pre-opening expenses to support thenew stores also require significant capital. Sources of liquidity for providingcapital to meet these needs have primarily been borrowings under our creditfacility, operating cash flows, and short and long-term debt financings frombanks and financial institutions as well as our two major shareholders.

 

Fiscal 2008 was the firstyear since we began our large-format store expansion in fiscal 2003 that wesubstantially slowed our new store growth. We opened one new store during ourfirst quarter of fiscal 2009 and do not expect any additional new storeopenings during the remainder of the fiscal year. We opened five new stores infiscal 2008, including three relocations/consolidations of small-format stores.This change in strategy had a positive impact on our cash flows and liquidityin fiscal 2008, as we substantially reduced cash used for new storeinventories, leasehold improvements, equipment and pre-opening expenses. Thisresult, coupled with improvements in retail profitability, contributed to a$38 million reduction in total debt for fiscal 2008. These changescontinued to impact us positively with respect to our financial position andliquidity, as inventory and debt levels remained lower in the first quarter offiscal 2009 versus the comparable period last year. The following chartsummarizes the principal elements of our cash flow for the comparable firstquarters of fiscal 2009 and fiscal 2008, and the number of stores opened duringeach period.

 

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| ** **                                         | ** ** | **Cash Flow Summary** | ** ** |
|----------------------------------------------------|------------|-----------------------|------------|
| ** **                                         | ** ** | **13 Weeks Ended**    | ** ** |
| ** **                                         | ** ** | **May 2,**       | ** ** | **May 3,** | ** ** |
| **(in thousands)**                                 | ** ** | **2009**              | ** ** | **2008** | ** ** |
| Net  cash (used in) operating activities           |       | $                     | (23,138    | ) | $ | (18,490 | ) |
| Net  cash (used in) investing activities           |       | (2,713                | )          | (6,617 | ) |
| Net  cash provided by financing activities         |       | 25,742                |       | 26,525 |   |
| Total  net (decrease) increase in cash             |       | $                     | (109       | ) | $ | 1,418 |   |
|                                               |       |                  |       |   |   |
| Details  of financing activities:                  |       |                  |       |   |   |
| Borrowings  under credit facility                  |       | $                     | 28,314     |   | $ | 28,025 |   |
| (Reductions)  in long-term debt                    |       | (2,572                | )          | (1,517 | ) |
| Proceeds  from stock sales and exercise of options |       | —                |       | 17 |   |
| Net  cash provided by financing activities         |       | $                     | 25,742     |   | $ | 26,525 |   |
|                                               |       |                  |       |   |   |
| New  store openings, including relocated stores    |       | 1                     |       | 3 |   |

 

*Net cash used in operatingactivities* was $23.1 million in the first quarter offiscal 2009, compared to net cash used in operating activities of$18.5 million in the first quarter of fiscal 2008. The overall $4.6million increase in net cash used by operating activities in the comparablequarters was primarily due to:

 

·      a decrease in cash providedof approximately $20.6 million from decreases in accounts payable andother liabilities primarily attributable to the reductions in floor-planfinanced inventory of boats and ATVs, which carried longer payment terms.Powerboats and ATV inventory receipts during our first quarter of fiscal 2009were approximately $10 million lower than during the first quarter of fiscal2008 with such purchases having payment terms typically between 90 and 180days. The remainder of the decrease in accounts payable correlated with generalinventory reductions in our Retail segment.

 

·      a decrease in cash used ofapproximately $9.5 million due primarily to lower inventory growth for newstores in the first quarter of fiscal 2009 as compared to the first quarter offiscal 2008.

 

·      a decrease in cash used of$5.2 million as a result of the reduction in the net loss, in the first quarterof fiscal 2009 as compared to the first quarter of fiscal 2008, as adjusted forchanges in non-cash charges (depreciation and amortization and exit costs andrelated charges);

 

*Net cash used in investingactivities* was $2.7 million in the first quarter of fiscal2009 and $6.6 million in the first quarter of fiscal 2008. Cash invested in thefirst quarters of fiscal 2009 and fiscal 2008 each consisted primarily ofpurchases of property and equipment for stores and for information technologyinvestments. We use cash for leasehold improvements and equipment to open newand relocated stores and to remodel and upgrade existing stores. Purchases ofproperty and equipment also include purchases of information technology systemsand expenditures for our distribution facility and our corporate headquarters.

 

*Financing activities* provided$25.7 million of cash in the first quarter of fiscal 2009 and provided$26.5 million of cash in the first quarter of fiscal 2008. In the comparableperiods, the borrowings under our credit facility funded our cash used inoperations as well as capital expenditures. Borrowings under the credit facility were offset by reductions in longterm debt through scheduled payments of $2.6 million in the first quarter offiscal 2009 and of $1.5 million in the first quarter of fiscal 2008.

 

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***Credit Facility***

 

We have maintained arevolving credit facility with Bank of America, N.A. since 2001. Currently therevolving credit facility is $345 million and offers an option to increasethe revolving facility by another $55 million subject to certain terms andconditions. The actual availability under the credit facility is limited tospecific advance rates on eligible inventory and accounts receivable.Typically, availability will be highest in the latter half of our fiscal yearas inventory levels and advance rates increase. Interest on the outstandingindebtedness under the revolving portion of the credit facility currentlyaccrues at the lender’s prime commercial lending rate, or, if we elect, at theone, two, three or six month LIBOR plus 1.25% to 1.75%, depending on ourEBITDA, as defined in the credit agreement. Our obligations under the creditfacility are secured by interests in substantially all of our assets.

 

*TermLoan A.*  In additionto the revolving credit facility, our credit facility includes a $20 millionterm loan. The amount of the term loan is not deducted in determiningavailability under the revolving credit facility, except to the extent that thebalance of the term loan exceeds approximately 4% to 5% of the eligibleborrowing base. The term loan matures on June 30, 2012 and bears interestat either (a) 1.25% over the higher of (i) Bank of America’s primerate or (ii) the federal funds rate plus 0.5%, or (b) LIBOR plus2.75%. This additional financing was obtained to maintain the liquidity levels necessaryto fund continued growth and seasonal cash flow needs.

 

*TermLoan B. *On December 6,2007, we entered into a Fourth Amended and Restated Loan and Security Agreementwith Bank of America, N.A.. The amendment and restatement was effected in orderto add an additional $40.0 million term loan to our secured creditfacility to partially fund the acquisition of Overton’s and to make certainother amendments, including reducing permitted capital expenditures andreplacing former covenants relating to minimum operating cash flow and EBITDAwith a minimum excess availability reserve covenant.

 

Term Loan B has a four yearmaturity. As of May 2, 2009, the required principal payments remainingunder Term Note B are reflected in the table below. Interest on Term LoanB is on a tiered schedule ranging from LIBOR plus 3.375% to LIBOR plus 3.875%,based on the principal amount outstanding. Term Loan B may be prepaid atany time without penalty, provided that any such prepayments are subject tospecified minimum availability tests. We will not have the ability to exercisethe $55 million accordion feature under our revolving credit facility whileTerm Loan B is outstanding. The long-term portion of Term Loan B is classifiedas long term debt in the consolidated balance sheets.

 
| **Due Date**            | ** ** | **Principal  Due** | ** ** |
|-------------------------|------------|--------------------|------------|
| ** **              | ** ** | **(in thousands)** | ** ** |
| July 31, 2009      |       | $                  | 2,500      |   |
| December 31, 2009  |       | 5,000              |       |
| July 31, 2010      |       | 5,000              |       |
| December 31, 2010  |       | 6,250              |       |
| March 31, 2011     |       | 6,250              |       |
| June 30, 2011      |       | 6,250              |       |
| September 30, 2011 |       | 6,250              |       |
|                    |       | $                  | 37,500     |   |

 

The table below summarizespertinent information regarding our credit facility with Bank of America, N.A.:

 
| ** **                                   | ** ** | **May 2, 2009** | ** ** | **January 31,  2009** | ** ** |
|----------------------------------------------|------------|----------------------|------------|----------------------------|------------|
|                                         |       | **(in thousands)**   |       |
| Maximum  revolving credit facility available |       | $                    | 345,000    |                       | $          | 345,000 |   |
| Revolver  and Term Loan A balance            |       | $                    | 232,828    |                       | $          | 204,514 |   |
| Term  Loan B balance                         |       | $                    | 37,500     |                       | $          | 37,500 |   |
| Outstanding  letters of credit               |       | $                    | 9,297      |                       | $          | 9,735 |   |
| Borrowing  availability                      |       | $                    | 34,133     |                       | $          | 23,318 |   |
| Interest  rate at period end                 |       | 2.8                  | %          | 3.0                        | %          |
| Agreement  maturity                          |       | June 2012       |       | June 2012             |       |

 

Borrowing availability under our creditfacility as of June 10, 2009 was $36.3 million.

 

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***Credit FacilityCovenants****.*

 

Effective with the December 6,2007 amendment, financial covenants under the credit facility require thatavailability under the line of credit not fall below 5% of the lower of theborrowing base, as defined, or the credit facility limit. This availabilitytest is applied and measured on a daily basis. The 5% requirement increases to7.5% in August 2009. The financial covenants also limit our annual capitalexpenditures. The credit facility also contains other covenants that, amongother matters, restrict our ability to incur substantial other indebtedness,create certain liens, engage in certain mergers and acquisitions, sell assets, enterinto certain capital leases or make junior payments, including cash dividends.We were in compliance with all covenants as of May 2, 2009 and January 31,2009.

 

Although our currentexpectations of future financial performance indicate that we will remain incompliance with the covenants under our credit facility, if actual financialperformance does not meet our current expectations, our ability to remain incompliance with these covenants will be adversely affected. We face a number ofuncertainties that may adversely affect our ability to generate sales andearnings, including the possibility of continued weakness in the retailenvironment in North America, which weakness may negatively affect futureretail sales.

 

***Other Financings***

 

During the first quarters offiscal 2009 and fiscal 2008, we purchased information technology equipmenttotaling $1.3 million and $1.5 million, respectively, financed through capitallease transactions. These capital lease purchases are excluded from the caption“purchases of property and equipment” in our statements of cash flows as theydid not require the use of cash.

 

***Income Taxes/Net Operating Losses***

 

Our tax provisions for thefirst quarters of fiscal 2009 and fiscal 2008 primarily represent minimum ornet worth taxes due in various states. Certain states have adopted an adjustedgross receipts tax. We have no provision for Federal income tax for the firstquarter of fiscal 2009 or fiscal 2008 due to the uncertainty of the realizationof our net operating loss carryforwards. We have determined the realization ofthe tax benefit related to our net deferred tax asset is uncertain at this timeand a valuation allowance was recorded for the entire balance of our netdeferred tax asset.

 

We have federal netoperating loss carry forwards of approximately $100.1 million expiringbetween 2021 and 2029. The amount of our net operating loss carry forwardssubject to the Section 382 limitation was $4.4 million at January 31,2009. Unrestricted net operating losses carry forwards were $95.7 millionat January 31, 2009. We do not expect this limitation to materially impactour future tax provision for financial reporting purposes.

 

**FUTURE CAPITAL REQUIREMENTS**

 

Our cash flows are highlyvariable, like most retailers, and are highly dependent on store-level sales.Future cash flows are unpredictable and depend, in part, on consumerconfidence, the general strength of the economy and the factors identifiedunder “Risk Factors” in our annual report for the three years ended January 31,2009, filed on Form 10-K with the Securities and Exchange Commission.

 

Our total capital expenditures for the full year of fiscal 2009 areexpected to be less than $15 million, including investment in our Directbusiness, costs for one new store and refurbishments to existing stores as wellas costs to continue to upgrade certain merchandise and information systems. Wehave started a significant project in fiscal 2009 to replace our point-of-salesystems to enhance our customers’ experience in the store and provide enhanceddata for analysis and reporting.

 

During the next12 months our focus will be to continue to grow the Direct segment andcontinue to improve the profitability of our Retail segment. Beginning with ouracquisition of Overton’s, and furthered by the launch of our Gander Mountainbranded internet and catalog operations, we have undertaken significant stepstoward our strategy of providing multi-channel offerings to our customers. Weexpect we will continue to make expenditures related to our Direct segment ofup to $2.0 million in the next 12 months to further this importantbusiness objective. Given the anticipated growth and the early-stage cycle ofthe Gander Mountain brand, we also anticipate a need to fund additional workingcapital for the Direct business in fiscal 2009.

 

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Our capital requirements and cash flows are critically dependent on theavailability and day-to-day use of our credit facility with Bank of America.Current borrowing availability under our facility as of June 10, 2009, was$36.3 million. However, if sales and cash flows from operations do not meetanticipated levels, if there are disruptions in the credit markets that impactour credit facility, or if conditions in the retail environment cause Bank ofAmerica to lower advance rates further, borrowing availability under ourfacility may not be sufficient to meet our needs and we will need to seekadditional debt or equity financing in the public or private markets.

 

As of May 2, 2009, wehave total debt obligations maturing within one year of $25.5 million,including:

 

(i)                                     the$10 million term loan — related party agreement,

 

(ii)                                  $7.5 millionof scheduled principal payment on our $37.5 million Term Loan B, and

 

(iii)                               $8.0 millionin current maturities of all other debt.

 

In March 2009, weextended the maturity date of the $10 million term loan with our two majorshareholders from March 31, 2009 to June 30, 2009.

 

We intend to satisfy all ofour capital requirements in the next 12 months with cash flows fromoperations and funds available under our credit facility. However, if capitalrequirements for our business strategy change, or if sales and cash flows fromoperations do not meet anticipated levels, we may need to seek additional debtor equity financing in the public or private markets. Beyond fiscal 2009, weanticipate needing additional financing to grow our business. There is noassurance that we will be successful in borrowing additional funds atreasonable rates of interest or issuing equity at a favorable valuation, or atall. The current downturn in the economy as a whole has had a significantnegative impact on the retail environment. The length and ultimate severity ofthis downturn are uncertain and may adversely impact our results of operationsand ability to obtain financing.

 

Our long term debt consistsof the following (in thousands):

 
| ** **                         | ** ** | **(in thousands)** | ** ** |
|------------------------------------|------------|-------------------------|------------|
| ** **                         | ** ** | **May 2,**         | ** ** | **January 31,** | ** ** |
| ** **                         | ** ** | **2009**                | ** ** | **2009** | ** ** |
| Term  loan B                       |       | $                       | 37,500     |   | $ | 37,500 |   |
| Equipment  financing notes         |       | 12,639                  |       | 13,492 |   |
| Capitalized  lease obligations     |       | 12,970                  |       | 13,390 |   |
| Term  notes - related parties      |       | 10,000                  |       | 10,000 |   |
| Obligation  from acquisition       |       | 1,691                   |       | 1,648 |   |
| Total  debt obligations            |       | 74,800                  |       | 76,030 |   |
| Less:  amounts due within one year |       | (25,486                 | )          | (25,628 | ) |
| **Long term debt**                 |       | $                       | 49,313     |   | $ | 50,402 |   |

 

**OTHERMATTERS**

 

**Impactof Inflation**

 

Webelieve that inflation has not had a material impact on our results ofoperations for each of the fiscal periods presented.  We cannot assure you that inflation will nothave an adverse impact on our operating results and financial condition infuture periods. Inflation in particular commodities, for example gasoline andfood, that impact the general economic well-being of consumers does impactconsumer confidence and therefore may negatively impact our sales, depending onthe severity of price increases and negative changes in economic conditions.

 

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**ContractualObligations and Other Commitments**

 

Ourmaterial off-balance sheet arrangements are operating lease obligations forsubstantially all of our retail stores, our distribution center and corporateoffice, as well as letters of credit.  Weexcluded these items from the balance sheet in accordance with U.S. generallyaccepted accounting principles. As of May 2, 2009, the minimum operatinglease payments due within one year were $74.9 million. As of May 2, 2009,total minimum operating lease payments remaining over all of our operatingleases were $751.5 million. These leases have an average remaining term ofapproximately ten years and typically provide us with several successiveoptions to extend the term at our election. The obligation amountsstated herein include future minimum lease payments only and exclude directoperating costs, insurance, taxes and maintenance. These direct operating costsrange from approximately 22% to 24% on average of our annual retail rentexpense. Issued and outstanding letters of credit were $9.3 million and $9.7million at May 2, 2009 and January 31, 2009, respectively, and wererelated primarily to importing of merchandise and supporting potentialinsurance program liabilities.

 

Inthe ordinary course of business, we enter into arrangements with vendors topurchase merchandise in advance of expected delivery. Because most of thesepurchase orders do not contain any termination payments or other penalties ifcanceled, they are not included as outstanding contractual obligations. Themerchandise purchases, for which we do have firm commitments outstanding, inaddition to letters of credit, were $6.8 million and $5.4 million as of May 2,2009 and January 31, 2009, respectively.

 

**Critical Accounting Policies and Use of Estimates**

 

Our financial statements areprepared in accordance with U.S. generally accepted accounting principles. Inconnection with the preparation of the financial statements, we are required tomake assumptions, make estimates and apply judgment that affect the reportedamounts of assets, liabilities, revenue, expenses and the related disclosures.We base our assumptions, estimates and judgments on historical experience,current trends and other factors that we believe to be relevant at the time thefinancial statements are prepared. On a regular basis, we review the accountingpolicies, assumptions, estimates and judgments to ensure that our financialstatements are presented fairly and in accordance with U.S. generally acceptedaccounting principles. However, because future events and their effects cannotbe determined with certainty, actual results could differ from our assumptionsand estimates, and such differences could be material.

 

Ourcritical accounting policies and use of estimates are discussed and should beread in conjunction with the annual financial statements and notes included inour Form 10-K, as filed with the Securities and Exchange Commission, whichincludes audited financial statements for our three fiscal years ended January 31,2009. Significantaccounting policies, including areas of critical management judgments andestimates, have primary impact on the following financial statement areas:

 

·                  Inventory Valuation

·                  Vendor Allowances

·                  Valuation of Long-Lived Assets

·                  Costs Associated with Exit Activities

·                  Goodwill and Intangible Assets

·                  Self-Insurance

 

**Impact of Recent Accounting Pronouncements**

 

In April 2009,the Financial Accounting Standards Board (“FASB”) issued three FASB StaffPositions:

 

1) FSP No. FAS157-4, *Determining Fair Value When theVolume and Level of Activity for the Asset or Liability Have SignificantlyDecreased and Identifying Transactions That Are Not Orderly*,  2) FSP No. FAS 115-2 and FAS 124-2, *Recognition and Presentation of Other-Than-TemporaryImpairments*, and  3) FSP No. FSPFAS 107-1 and APB 28-1, *Interim Disclosuresabout Fair Value of Financial Instruments.*

 

All three FSPs areeffective for interim and annual periods ending after June 15, 2009, withearly adoption permitted for periods ending after March 15, 2009. We haveelected not to early adopt the FSPs and consequently will adopt them effectivefor our second fiscal quarter of 2009.  We do not anticipate that theadoption will have a material impact on our financial statements as suchguidance was relevant to financial assets such as debt or equity securities andderivative instruments, which the Company does not hold.

 

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FSP No. FAS157-4 indicates that when determining the fair value of an asset or liabilitythat is not a Level 1 fair value measurement, an entity should assess whetherthe volume and level of activity for the asset or liability have significantlydecreased when compared with normal market conditions. If the entity concludesthat 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 fairvalue and may require a significant adjustment.

 

FSP No. FAS115-2 and FAS 124-2 modifies the requirements for recognizingother-than-temporarily impaired debt securities and changes the existingimpairment model for such securities. It also modifies the presentation ofother-than-temporary impairment losses and increases the frequency of andexpands already required disclosures about other-than-temporary impairment fordebt and equity securities.

 

FSP No. FSPFAS 107-1 and APB 28-1 requires publicly traded companies, as defined inOpinion No. 28, to disclose the fair value of financial instruments withinthe scope of FAS No. 107 in interim financial statements, adding to thecurrent requirement to make those disclosures in annual financial statements.This staff position also requires that companies disclose the method or methodsand significant assumptions used to estimate the fair value of financialinstruments and a discussion of changes, if any, in the method or methods andsignificant assumptions during the period.

 

In March 2008,the FASB issued SFAS No. 161, *Disclosuresabout Derivative Instruments and Hedging Activities*, *an amendment of SFAS No. 133*. SFAS No. 161is intended to improve financial standards for derivative instruments andhedging activities by requiring enhanced disclosures to enable investors tobetter understand the effect these instruments and activities have on an entity’sfinancial position, financial performance and cash flows. Entities are requiredto provide enhanced disclosures about: how and why an entity uses derivativeinstruments; how derivative instruments and related hedged items are accountedfor under SFAS No. 133 and its related interpretations; and how derivativeinstruments and related hedged items affect an entity’s financial position,financial performance and cash flows. SFAS No. 161 is effective forfinancial statements issued for fiscal years and interim periods beginningafter November 15, 2008. The adoption of SFAS No. 161 in the firstquarter of fiscal 2009 had no impact on our results of operations, cash flows,or financial position.

 

**ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Our earnings are affected bychanges in interest rates due to the impact those changes have on our interestexpense on borrowings under our credit facility. Our floating rate indebtednesswas $280.3 million at May 2, 2009 and averaged $265.4 million during thefirst quarter of fiscal 2009. Our floating rate indebtedness was $314.0 millionat May 3, 2008 and averaged $294.5 million during the first quarter offiscal 2008. If short-term floating interest rates on the average first quarterof fiscal 2009 variable rate debt had increased by 100 basis points, our annualinterest expense would have increased by approximately $551,000 assumingcomparable borrowing levels. These amounts are determined by considering theimpact of the hypothetical interest rates on our average amount of floatingrate indebtedness outstanding for each of the respective fiscal years.

 

We have not contracted forany derivative financial instruments. We have no international sales, but weimport certain items for sale in our stores. Substantially all of our purchasesare denominated in U.S. dollars.

 

**ITEM 4. CONTROLS AND PROCEDURES**

 

Asof the end of the period covered by this report, we conducted an evaluation,under the supervision and with the participation of the principal executiveofficer and principal financial and accounting officer, of our disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934). Based on this evaluation, the principal executive officer and principalfinancial and accounting officer concluded that our disclosure controls andprocedures are effective to ensure that information required to be disclosed byus in reports that we file or submit under the Securities Exchange Act of 1934is recorded, processed, summarized and reported within the time periodsspecified in Securities and Exchange Commission rules and forms. Ourprincipal executive officer and principal financial and accounting officer alsoconcluded that our disclosure controls and procedures are effective to ensurethat information required to be disclosed in the reports we file or submitunder the Securities Exchange Act of 1934 is accumulated and communicated toour management, including our principal executive officer and principalfinancial and accounting officer, to allow timely decisions regarding requireddisclosure.  There was no change in ourinternal control over financial reporting identified in connection with theevaluation required by Rule 13a-15(d) and 15d-15(d) of theSecurities Exchange Act of 1934 that occurred during the period covered by thisreport that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

 

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**PART II. OTHER INFORMATION**

 

**ITEM 1.  LEGAL PROCEEDINGS**

 

Various claims, lawsuits orother proceedings arising in the normal course of business may be pendingagainst us from time to time. The subject matter of these proceedings typicallyrelate to commercial disputes, employment issues, product liability and othermatters. As of the date of this report, we are not a party to any legalproceedings that are expected, individually or in the aggregate, to have amaterial adverse effect on our financial condition or results of operations.

 

**ITEM 1A.  RISK FACTORS**

 

Notapplicable.

 

**ITEM 2.  UNREGISTERED SALES OFEQUITY SECURITIES AND USE OF PROCEEDS**

 

Notapplicable.

 

**ITEM 3.  DEFAULTS UPON SENIORSECURITIES**

** **

Not applicable.

 

**ITEM4.  SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS**

 

Not applicable.

 

**ITEM 5.  OTHER INFORMATION**

 

Not applicable.

 

**ITEM 6.  EXHIBITS**

 

Theexhibits filed with this report are set forth on the Exhibit Index filedas a part of this report immediately following the signatures to this report.

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|               | GANDER MOUNTAIN COMPANY |
|--------------------|-------------------------|
|               |                    |
|               |                    |
| June 15, 2009 | By:                     | /s/ David C. Pratt |
|               |                    | David C. Pratt |
|               |                    | Chairman of the Board and  Interim Chief Executive Officer |
|               |                    | (Principal Executive  Officer) |
|               |                    |
|               |                    |
| June 15, 2009 | By:                     | /s/ Robert J. Vold |
|               |                    | Robert J. Vold |
|               |                    | Senior Vice President,  Chief Financial Officer and Treasurer |
|               |                    | (Principal Financial  and Accounting Officer) |

 

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**EXHIBIT INDEX**

 
| **Exhibit No.** | ** ** | **Description**                                                                                 | ** ** | **Method of Filing** |
|----------------------|------------|-------------------------------------------------------------------------------------------------|------------|--------------------------------|
| 3.1                  |       | Amended and Restated  Articles of Incorporation of the Registrant                               |       | Incorporated By  Reference (1) |
| 3.2                  |       | Amended and Restated  Bylaws of the Registrant                                                  |       | Incorporated By  Reference (2) |
| 31.1                 |       | Rule 13a-14(a)/15d-14(a) Certification  by Principal Executive Officer                |       | Filed Electronically           |
| 31.2                 |       | Rule 13a-14(a)/15d-14(a) Certification  by Principal Financial and Accounting Officer |       | Filed Electronically           |
| 32                   |       | Section 1350  Certifications                                                               |       | Filed Electronically           |

 

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| (1) | Incorporated  by reference to Exhibit 3.3 to Amendment No. 1 to the Registrant’s  Registration Statement on Form S-1 (Registration No. 333-112494), filed  with the Commission on March 15, 2004.      |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Incorporated  by reference to Exhibit 3.4 to Amendment No. 1 to the Registrant’s  Registration Statement on Form S-1 (Registration No. 333-112494),  filed with the Commission on March 15, 2004. |

 

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