** **

** **

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**WASHINGTON, D.C. 20549

** **

**FORM 10-Q**

 

**QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 3, 2008.**

 

**Commission File Number: 000-50659**

 

**GANDERMOUNTAIN COMPANY******(Exact name of Registrant as Specified in its Charter)

 

| **Minnesota**                                                    | ** ** | **180  East Fifth Street, Suite 1300  Saint Paul, Minnesota 55101  (651) 325-4300**                                       | ** ** | **41-1990949**                        |
|------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|
| (State or Other  Jurisdiction of  Incorporation or Organization) |       | (Address, including  zip code, and  telephone number, including area  code, of Registrant’s Principal  Executive Offices) |       | (I.R.S. Employer  Identification No.) |

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes x No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer,” “acceleratedfiler” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.   Checkone:

 
| o large  accelerated filer              | o accelerated  filer         |
|----------------------------------------------|-----------------------------------|
| x non-accelerated  filer                | o smaller  reporting company |
| (Do not check if  smaller reporting company) |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange 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; 24,051,941 shares outstanding as of June 11,2008.

 

 

 

 

 

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**GANDER MOUNTAIN COMPANY**

**QUARTERLY PERIOD ENDED MAY 3, 2008**

**Index**

 
| ** **                          | ** **                                                                                  | **Page** |
|-------------------------------------|---------------------------------------------------------------------------------------------|----------|
| PART I. FINANCIAL  INFORMATION | 2                                                                                           |
| Item 1.                             | Financial Statements                                                                        | 2        |
|                                | Consolidated  Statements of Operation                                                       | 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 | 10       |
| Item 3.                             | Quantitative and  Qualitative Disclosures About Market Risk                                 | 18       |
| Item 4.                             | Controls and Procedures                                                                     | 18       |
|                                |                                                                                        |     |
| PART II. OTHER  INFORMATION    | 18                                                                                          |
| Item 1.                             | Legal Proceedings                                                                           | 18       |
| Item 1A.                            | Risk Factors                                                                                | 19       |
| Item 2.                             | Unregistered Sales of  Equity Securities and Use of Proceeds                                | 19       |
| Item 3.                             | Defaults Upon Senior  Securities                                                            | 19       |
| Item 4.                             | Submission of Matters  to a Vote of Security Holders                                        | 19       |
| Item 5.                             | Other Information                                                                           | 19       |
| Item 6.                             | Exhibits                                                                                    | 19       |
| SIGNATURES                          | 20                                                                                          |

 

 

 

**PART I. FINANCIAL INFORMATION**

 

**ITEM 1.  CONSOLIDATED FINANCIALSTATEMENTS**

 

**Gander Mountain Company**

**ConsolidatedStatements of Operations - Unaudited**

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

** **

 
| ** **                                   | ** ** | **13 Weeks Ended** | ** ** |
|----------------------------------------------|------------|--------------------|------------|
| ** **                                   | ** ** | **May 3,**    | ** ** | **May 5,** | ** ** |
| ** **                                   | ** ** | **2008**           | ** ** | **2007** | ** ** |
| Sales                                        |       | $                  | 207,662    |   | $ | 175,749 |   |
| Cost of goods sold                           |       | 165,633            |       | 141,872 |   |
| Gross profit                                 |       | 42,029             |       | 33,877 |   |
| Operating expenses:                          |       |               |       |   |   |
| Selling, general and administrative expenses |       | 58,957             |       | 51,543 |   |
| Exit costs, impairment and other charges     |       | 776                |       | 334 |   |
| Pre-opening expenses                         |       | 1,627              |       | 730 |   |
| Loss from operations                         |       | (19,331            | )          | (18,730 | ) |
| Interest expense, net                        |       | 4,842              |       | 3,976 |   |
| Loss before income taxes                     |       | (24,173            | )          | (22,706 | ) |
| Income tax provision                         |       | 272                |       | 125 |   |
| Net loss                                     |       | $                  | (24,445    | ) | $ | (22,831 | ) |
|                                         |       |               |       |   |   |
| Basic and diluted loss per  common share     |       | $                  | (1.02      | ) | $ | (1.14 | ) |
|                                         |       |               |       |   |   |
| Weighted average common  shares outstanding  |       | 24,051             |       | 20,089 |   |

 

 

See accompanyingnotes to unaudited consolidated financial statements.

 

2

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**GanderMountain Company**

**ConsolidatedBalance Sheets**

**(Inthousands)**

 
| ** **                                                                                                             | ** ** | **May 3,** | ** ** | **February 2,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|-----------------|------------|----------------------|------------|
| ** **                                                                                                             | ** ** | **2008**        | ** ** | **2008**             | ** ** |
| **Assets**                                                                                                             | ** ** | **(Unaudited)** | ** ** | ** **           | ** ** |
| Current assets:                                                                                                        |       |            |       |                 |       |
| Cash and cash equivalents                                                                                              |       | $               | 4,040      |                 | $          | 2,622 |   |
| Accounts receivable                                                                                                    |       | 17,910          |       | 10,992               |       |
| Income taxes receivable                                                                                                |       | 479             |       | 486                  |       |
| Inventories                                                                                                            |       | 426,001         |       | 403,683              |       |
| Prepaids and other current assets                                                                                      |       | 22,147          |       | 15,987               |       |
| Total current assets                                                                                                   |       | 470,577         |       | 433,770              |       |
| Property and equipment,  net                                                                                           |       | 170,750         |       | 168,685              |       |
| Goodwill                                                                                                               |       | 48,970          |       | 48,803               |       |
| Acquired intangible  assets, net                                                                                       |       | 24,843          |       | 25,098               |       |
| Other assets, net                                                                                                      |       | 3,466           |       | 3,576                |       |
| Total assets                                                                                                           |       | $               | 718,606    |                 | $          | 679,932 |   |
| ** **                                                                                                             | ** ** | ** **      | ** ** | ** **           | ** ** |
| **Liabilities and shareholders’  equity**                                                                         | ** ** | ** **      | ** ** | ** **           | ** ** |
| Current liabilities:                                                                                                   |       |            |       |                 |       |
| Borrowings under credit facility                                                                                       |       | $               | 274,038    |                 | $          | 246,013 |   |
| Accounts payable                                                                                                       |       | 112,477         |       | 72,563               |       |
| Accrued and other current liabilities                                                                                  |       | 55,261          |       | 60,606               |       |
| Current maturities of long term debt                                                                                   |       | 9,334           |       | 8,247                |       |
| Total current liabilities                                                                                              |       | 451,110         |       | 387,429              |       |
|                                                                                                                   |       |            |       |                 |       |
| Long term debt                                                                                                         |       | 63,062          |       | 64,173               |       |
| Deferred income taxes                                                                                                  |       | 7,247           |       | 7,113                |       |
| Other long term  liabilities                                                                                           |       | 27,414          |       | 27,397               |       |
|                                                                                                                   |       |            |       |                 |       |
| 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; 24,051,941  and 24,049,064 shares issued and outstanding) |       | 241             |       | 241                  |       |
| Additional paid-in-capital                                                                                             |       | 277,508         |       | 277,110              |       |
| Accumulated deficit                                                                                                    |       | (107,976        | )          | (83,531              | )          |
| Total shareholders’ equity                                                                                        |       | 169,773         |       | 193,820              |       |
| Total liabilities and  shareholders’ equity                                                                       |       | $               | 718,606    |                 | $          | 679,932 |   |

 

 

See accompanying notes tounaudited consolidated financial statements.

 

3

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**Gander Mountain Company**

**Consolidated Statements of CashFlows - Unaudited**

**(In thousands)**

 

 
| ** **                                                                   | ** ** | **13 Weeks Ended** | ** ** |
|------------------------------------------------------------------------------|------------|--------------------|------------|
| ** **                                                                   | ** ** | **May 3,**    | ** ** | **May 5,** | ** ** |
| **Operating activities**                                                     | ** ** | **2008**           | ** ** | **2007** | ** ** |
| Net loss                                                                     |       | $                  | (24,445    | ) | $ | (22,831 | ) |
| Adjustments to reconcile net loss to net cash used in operating  activities: |       |               |       |   |   |
| Depreciation and amortization                                                |       | 8,010              |       | 6,202 |   |
| Exit costs, impairment and other charges                                     |       | 605                |       | — |   |
| Stock-based compensation expense                                             |       | 381                |       | 393 |   |
| (Gain)/ loss on disposal of assets                                           |       | (6                 | )          | 34 |   |
| Change in operating assets and liabilities:                                  |       |               |       |   |   |
| Accounts receivable                                                          |       | (6,911             | )          | (5,246 | ) |
| Inventories                                                                  |       | (22,318            | )          | (44,180 | ) |
| Prepaids and other current assets                                            |       | (6,159             | )          | (895 | ) |
| Other assets                                                                 |       | (40                | )          | (174 | ) |
| Accounts payable and other liabilities                                       |       | 32,259             |       | 19,566 |   |
| Deferred income taxes                                                        |       | 134                |       | — |   |
| Net cash used in operating  activities                                       |       | (18,490            | )          | (47,131 | ) |
| **Investing activities**                                                     | ** ** | ** **         | ** ** | ** ** | ** ** |
| Purchases of property and  equipment                                         |       | (6,460             | )          | (8,851 | ) |
| Acquisition related  expenses                                                |       | (167               | )          | — |   |
| Proceeds from sale of  assets                                                |       | 10                 |       | — |   |
| Net cash used in investing  activities                                       |       | (6,617             | )          | (8,851 | ) |
| **Financing activities**                                                     | ** ** | ** **         | ** ** | ** ** | ** ** |
| Borrowings under credit  facility                                            |       | 28,025             |       | 55,120 |   |
| Proceeds from exercise of  stock options and employee stock purchases        |       | 17                 |       | 1,501 |   |
| Reductions in long term  debt                                                |       | (1,517             | )          | (617 | ) |
| Net cash provided by  financing activities                                   |       | 26,525             |       | 56,004 |   |
|                                                                         |       |               |       |   |   |
| Net increase in cash                                                         |       | 1,418              |       | 22 |   |
| Cash, beginning of period                                                    |       | 2,622              |       | 1,342 |   |
| Cash, end of period                                                          |       | $                  | 4,040      |   | $ | 1,364 |   |

 

 

See accompanying notes tounaudited consolidated financial statements.

 

4

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**Gander Mountain Company**

**Notes to Unaudited Consolidated Financial Statements**

**Quarterly Period Ended May 3, 2008**

 

**Note 1.Basis of Presentation**

 

The accompanying unaudited financialstatements of Gander Mountain Company (“we” or “us”) have been prepared inaccordance with the requirements for Form 10-Q and do not include all thedisclosures normally required in annual financial statements prepared inaccordance with U.S. generally accepted accounting principles. The interimfinancial information as of May 3, 2008 and for the 13 weeks ended May 3,2008 and May 5, 2007, is unaudited and has been prepared on the same basisas the audited annual financial statements. In the opinion of management, thisunaudited information includes all adjustments necessary for a fairpresentation of the interim financial information. All of these adjustments areof a normal recurring nature. These interim financial statements filed on this Form 10-Qand the discussions contained herein should be read in conjunction with theannual financial statements and notes included in our Annual Report on Form 10-Kfor the fiscal year ended February 2, 2008, as filed with the Securitiesand Exchange Commission, which includes audited financial statements for ourthree fiscal years ended February 2, 2008.

 

Our business is seasonal in nature andinterim results may not be indicative of results for a full year. Historically,we have realized more of our sales in the latter half of our fiscal year, whichincludes the hunting and holiday seasons. Our business is also impacted by thetiming of new store openings. Both variation in seasonality and new storeopenings impact the analysis of the results of operations and financialcondition for comparable periods.

 

With theacquisition of Overton’s Holding Company (“Overton’s”) in December 2007, ourconsolidated reporting includes our two reportable segments: Retail and Direct.The Retail segment sells its outdoor lifestyle products and services throughour retail stores. The Direct segment is the internet and catalog operations ofOverton’s.

 

The followingtable shows our consolidated sales by product category:

** **
| ** **                                    | ** ** | **1st  Quarter** | ** ** | **1st  Quarter** | ** ** |
|-----------------------------------------------|------------|------------------|------------|------------------|------------|
| **Category**                                  | ** ** | **2008**         | ** ** | **2007**         | ** ** |
| Hunting and Firearms                          |       | 38.1             | %          | 42.3             | %          |
| Fishing and Marine (1)                        |       | 28.0             | %          | 20.6             | %          |
| Camping, Paddlesports and  Backyard Equipment |       | 5.4              | %          | 6.4              | %          |
| Apparel and Footwear                          |       | 17.7             | %          | 20.7             | %          |
| Powersports                                   |       | 8.2              | %          | 6.9              | %          |
| Other                                         |       | 1.4              | %          | 1.8              | %          |
| Parts and services                            |       | 1.2              | %          | 1.3              | %          |
| Total                                         |       | 100.0            | %          | 100.0            | %          |

 

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(1) Overton’s sales of $19.7 million for the first quarter offiscal 2008 have been included in the Fishing and Marine category.  The fishing and marine category as apercentage of sales, without the inclusion of Overton’s sales in the firstquarter of fiscal 2008, would have been 20.4%.

 

 

**Note 2. New Accounting Pronouncement**

 

InSeptember 2006, the FASB issued SFAS No. 157, *Fair ValueMeasurements.*SFAS No. 157 defines fair value, establishes aframework for measuring fair value in generally accepted accounting principlesand expands disclosures about fair value measurements. SFAS No. 157applies to other accounting pronouncements that require or permit fair valuemeasurements, as the FASB previously concluded in those accountingpronouncements that fair value is the relevant measurement attribute.Accordingly, SFAS No. 157 does not require any new fair valuemeasurements. SFAS No. 157 is effective for fiscal years beginning after November 15,2007.

 

InFebruary 2008, the FASB issued FASB Staff Position FAS 157-2, which delays theeffective date for the implementation of SFAS 157 solely for non-financialassets and non-financial liabilities, except those non-financial items that arerecognized at fair value in the financial statements on a recurring basis (i.e.,at least annually).  The effective datefor non-financial assets and liabilities would be the beginning of our fiscalyear 2009.

 

Weadopted SFAS No. 157 as of February 3, 2008, except as it applies to thosenonfinancial assets and liabilities affected by the one-year delay.  The adoption of the applicable provisions ofSFAS No. 157 did not have a material impact on our results of operations, cashflows, or financial position.  We do notexpect the adoption of the remaining provisions of SFAS No. 157 to have amaterial impact on our results of operations, cash flows, or financialposition.

 

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InFebruary 2007, the FASB issued SFAS No. 159, *The FairValue Option for Financial Assets and Liabilities — Including an Amendment ofFASB Statement No. 115.*SFAS No. 159 permits us to chooseto measure certain financial assets and liabilities at fair value that are notcurrently required to be measured at fair value (the “Fair Value Option”).Election of the Fair Value Option is made on an instrument-by-instrument basisand is irrevocable. At the adoption date, unrealized gains and losses onfinancial assets and liabilities for which the Fair Value Option has beenelected would be reported as a cumulative adjustment to beginning retainedearnings. If we elect the Fair Value Option for certain financial assets andliabilities, we will report unrealized gains and losses due to changes in theirfair value in earnings at each subsequent reporting date. The Company has adopted SFAS No. 159but has elected not to apply the Fair Value Option of SFAS No. 159.

 

In December 2007,the FASB issued FAS No. 141R, *BusinessCombinations,* which replaces SFAS No. 141. SFAS 141Restablishes principles and requirements for how the acquirer of a businessrecognizes and measures in its financial statements the identifiable assetsacquired and the liabilities assumed. In addition, under SFAS 141(R) adjustmentsassociated with changes in tax contingencies that occur after the one yearmeasurement period are recorded as adjustments to income. This statement iseffective for all business combinations for which the acquisition date is on orafter the beginning of an entity’s first fiscal year that begins after December 15,2008; however, the guidance in this standard regarding the treatment of incometax contingencies is retrospective to business combinations completed prior to January 1,2009. We will adopt SFAS 141(R) for any business combinationsoccurring at or subsequent to February 1, 2009.

 

**Note 3.Credit Facility**

 

We have maintaineda revolving credit facility with Bank of America, N.A. since 2001. Our creditfacility provides us with the capital to fund the operations and growth of ourbusiness. Our revolving credit facility has a limit of $345.0 million, with anoption to increase this limit by another $55.0 million subject to certain termsand conditions.Interest on the outstanding indebtedness under the revolving portion of thecredit facility currently accrues at the lender’s prime commercial lendingrate, or, if we elect, at the one, two, three or six month LIBOR plus 1.25% to1.75%, depending on our EBITDA, as defined in the credit agreement. Ourobligations under the credit facility are secured by interests in substantiallyall of the Company’s assets. The credit facility matures on June 30, 2012.

 

In addition to therevolving credit facility, our credit facility includes a $20.0 millionterm loan (“Term Loan A”). The term loan matures on June 30, 2012 andbears interest at either (a) 1.25% over the higher of (i) Bank ofAmerica’s prime rate or (ii) the federal funds rate plus 0.5%, or (b) LIBORplus 2.75%.

 

On December 6,2007, the Company entered into a Fourth Amended and Restated Loan and SecurityAgreement. The amendment and restatement was effected in order to add anadditional $40.0 million term loan (“Term Loan B”) to the Company’ssecured credit facility to partially fund the acquisition of Overton’s.  The maturity date for the $40.0 million termloan is September 30, 2011.

 

The Company willnot have the ability to exercise the $55.0 million option to increase therevolving credit facility while our $40.0 million Term Loan B is outstanding.

 

Outstandingborrowings under the credit facility, including Term Loan A and includingletters of credit, were $282.2 and $238.7 as of May 3, 2008 and May 5,2007, respectively.  The actual availability under the creditfacility is limited to specific advance rates on eligible inventory andaccounts receivable. Typically, availability will be highest in the latter halfof the fiscal year as inventory levels and advance rates increase. Theseadvance rates are seasonal as well, increasing as we approach our hunting andholiday seasons and decreasing during non-peak periods. Based oneligible inventory and accounts receivable balances as of May 3, 2008 and February 2,2008, our available borrowing capacity under the credit facility, after subtractingletters of credit, was $24.1 million and $22.3 million, respectively. As of May 5, 2007, our remainingborrowing capacity under the credit facility, after subtracting letters ofcredit, was $28.3 million.

 

Effective with theDecember 6, 2007 amendment, financial covenants under the credit facilityrequire that availability under the line of credit not fall below 5% of thelower of the borrowing base, as defined, or the credit facility limit. Thisavailability test is applied and measured on a daily basis. The 5% requirementincreases to 7.5% in August 2009. The credit facility also contains othercovenants that, among other matters, restrict our ability to incur substantialother indebtedness, create certain liens, engage in certain mergers and acquisitions,sell assets, enter into certain capital leases or make junior payments,including cash dividends. We were in compliance with all covenants as of May 3,2008. Although our current expectations of future financial performanceindicate that we will remain in compliance with the covenants under our creditfacility, if actual financial performance does not meet our currentexpectations, our ability to remain in compliance with these covenants will beadversely affected. We face a number of uncertainties that may adversely affectour ability to generate sales and earnings, including the possibility ofcontinued weakness in the retail environment in North America, which weaknessmay negatively affect future retail sales.

 

**TermLoans****- The value of our eligible inventory,and the related advance rates under our secured credit facility are subject toperiodic adjustment based on independent valuations of our collateral performedon behalf of the banks. Any downward adjustment in the value of our inventory orin our advance rates, whether based on an assessment of the nature and qualityof our inventory or a perceived increase in the difficulty of sellingcollateral under current economic conditions, would adversely affect ouravailability. Effective June 11, 2008, our lender adjusted our advancerates downward, on average approximately 160 basis points, in response togeneral retail environment conditions. In order to maintain appropriate levelsof availability under our secured credit facility, on June 9, 2008, weentered into a $10 million term loan agreement with our two major shareholders.Amounts advanced under the agreement mature on December 31, 2008,bear interest at LIBOR plus 1%, and may be prepaid and re-borrowed withoutpenalty until the maturity date.  The loans are unsecured and the loanagreement contains no restrictive covenants. Proceeds from the loans wereused to reduce outstanding borrowings under our credit facility. The lendersunder the agreement are Gratco LLC, an affiliate of David C. Pratt, ourchairman, and Holiday Companies, an affiliate of Ronald A. Erickson, ourvice-chairman, and Gerald A. Erickson, a director of the company. There were nomaterial transaction costs associated with the placement.

 

 

**Note 4.Business Acquisition**

 

                On December 6, 2007, we completed theacquisition of all of the outstanding equity securities of Overton’s HoldingCompany (“Overton’s”) pursuant to a Securities Purchase Agreement among us, Overton’sand the sellers named therein. As a result of this transaction, Overton’sbecame a wholly owned subsidiary of Gander Mountain Company. The total purchaseprice for the acquisition was $72.3 million. Overton’s results ofoperations are included in our statement of operations for the first quarter offiscal 2008. The transaction was accounted for using the purchase method ofaccounting in accordance with SFAS No. 141, *Business Combinations*.

 

In accordance withSFAS No. 141, the total purchase price was allocated to Overton’s nettangible and intangible assets and liabilities based upon their fair values asof December 6, 2007. This allocation was preliminary and is subject to thefinalization of a valuation by an independent appraiser. During the firstquarter of fiscal 2008, we incurred $167,000 of 

 

6

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additional direct costsof the acquisition which was recorded as additional goodwill. We expect tofinalize the purchase price allocation in the second quarter of fiscal 2008.

 

 

**Note 5.Stock-Based Compensation**

 

We have three share-based compensation plans:the 2004 Omnibus Stock Plan, the 2002 Stock Option Plan and the Employee StockPurchase Plan. In addition, we granted certain stock option awards in fiscal1998 and fiscal 2002 that were not under a stock-based compensation plan. Weare no longer authorized to grant any awards under the 2002 Stock OptionPlan.  As of May 3, 2008, there werea total of 3,353,043 options to purchase common stock outstanding under all ofour stock option plans and non-plan option awards, with a weighted averageexercise price of $10.04 and a weighted average remaining life of 6.9years.  There were 2,381,296 options thatwere exercisable as of May 3, 2008 with a weighted-average exercise priceof $10.67.

 

Stock-based compensation expense for the quarterended May 3, 2008 and May 5, 2007, was $381,0000 and $393,000,respectively.  As of May 3, 2008,there was approximately $3.0 million of unrecognized compensation expenserelated to stock options that is expected to be recognized over a weighted-averageperiod of 2.7 years.

 

During our first quarter of fiscal 2008,there were 2,877 options exercised with an immaterial aggregate intrinsic valueand immaterial cash proceeds to us.  Forthe first quarter of fiscal 2007, there were 157,352 options exercised with anaggregate intrinsic value of $383,821, which generated $1.5 million in net cashproceeds for us.

 

As of May 3, 2008, there were 1,198,843 shares available forfuture grant under the 2004 Omnibus Stock Plan.

 

                Stock option activity for theperiods presented is as follows:

** **
| ** **                                                   | ** ** | **13 weeks - May 3, 2008** | ** ** | **13 weeks - May 5, 2007** | ** ** |
|--------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                                   | ** ** | **Number of**                   | ** ** | **Weighted-**                   | ** ** | **Number of** | ** ** | **Weighted-** | ** ** |
| ** **                                                   | ** ** | **Shares Under**                | ** ** | **Average**                     | ** ** | **Shares Under** | ** ** | **Average** | ** ** |
| ** **                                                   | ** ** | **Option**                      | ** ** | **Exercise Price**              | ** ** | **Option** | ** ** | **Exercise Price** | ** ** |
| Outstanding - Beginning                                      |       | 3,507,113                       |       | $                               | 10.14      |   | 3,945,475 |   | $ | 10.16 |   |
| Granted                                                      |       | 60,750                          |       | 5.18                            |       | 48,700 |   | 10.95 |   |
| Exercised                                                    |       | (2,877                          | )          | 5.59                            |       | (157,352 | ) | 9.55 |   |
| Forfeited                                                    |       | (211,943                        | )          | 10.26                           |       | (80,278 | ) | 9.02 |   |
| Outstanding -Ending                                          |       | 3,353,043                       |       | $                               | 10.04      |   | 3,756,545 |   | $ | 10.20 |   |
|                                                         |       |                            |       |                            |       |   |   |   |   |
| Weighted-average Black-Scholes fair value of options granted |       |                            |       | $                               | 2.99       |   |   |   | $ | 5.38 |   |

 

 

**Note 6.Earnings Per Share**

 

Basic and diluted income orloss per share is based upon the weighted average number of sharesoutstanding.  Diluted loss per share forthe 13 weeks ended May 3, 2008 and May 5, 2007, excludes potentiallydilutive stock options from the calculation of weighted average sharesoutstanding because including them would have an anti-dilutive effect on lossper share.  As of May 3, 2008 and May 5,2007, there were a total of 3,353,043 and 3,756,545 options to purchase commonstock outstanding, respectively.

 

7

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

 
| *Property and equipment consists of :*               | ** ** | **May 3,  2008** | ** ** | **February 2,  2008** | ** ** |
|------------------------------------------------------|------------|-----------------------|------------|----------------------------|------------|
| * *                                             | ** ** | ** **            | ** ** | ** **                 | ** ** |
| Building                                             |       | $                     | 6,972      |                       | $          | 6,972 |   |
| Furniture and equipment                              |       | 146,189               |       | 141,826                    |       |
| Leasehold improvements                               |       | 65,362                |       | 66,102                     |       |
| Computer software and  hardware                      |       | 55,334                |       | 52,179                     |       |
|                                                 |       | 273,857               |       | 267,080                    |       |
| Less: Accumulated  depreciation and amortization     |       | (103,107              | )          | (98,396                    | )          |
| **Property and equipment, net**                      |       | $                     | 170,750    |                       | $          | 168,685 |   |
|                                                 |       |                  |       |                       |       |
| *Other assets consists of:*                          | ** ** | **May 3,  2008** | ** ** | **February 2,  2008** | ** ** |
| Deferred loan costs                                  |       | $                     | 6,673      |                       | $          | 6,666   |   |
| Other                                                |       | 1,334                 |       | 1,295                      |       |
|                                                 |       | 8,007                 |       | 7,961                      |       |
| Less: Accumulated amortization                       |       | (4,541                | )          | (4,385)                    |       |
| **Other assets, net**                                |       | $                     | 3,466      |                       | $          | 3,576 |   |
|                                                 |       |                  |       |                       |       |
| *Accrued and other current  liabilities consist of:* | ** ** | **May 3,  2008** | ** ** | **February 2,  2008** | ** ** |
| Gift cards and gift  certificate liabilities         |       | $                     | 23,065     |                       | $          | 29,223 |   |
| Payroll and related fringe  benefits                 |       | 4,852                 |       | 8,393                      |       |
| Sales, property and use  taxes                       |       | 7,184                 |       | 5,219                      |       |
| Reserve for store exit  costs                        |       | 3,292                 |       | 3,612                      |       |
| Lease related costs                                  |       | 1,685                 |       | 1,593                      |       |
| Insurance reserves and  liabilities                  |       | 2,007                 |       | 1,979                      |       |
| Advertising and marketing                            |       | 530                   |       | 1,745                      |       |
| Interest                                             |       | 1,934                 |       | 938                        |       |
| Other accruals and current  liabilities              |       | 10,712                |       | 7,905                      |       |
| **Accrued and other current liabilities**            |       | $                     | 55,261     |                       | $          | 60,606 |   |
|                                                 |       |                  |       |                       |       |
| *Other long-term liabilities  consist of:*           | ** ** | **May 3,  2008** | ** ** | **February 2,  2008** | ** ** |
| Deferred rent                                        |       | $                     | 25,945     |                       | $          | 25,898 |   |
| Insurance reserves and other  liabilities            |       | 1,469                 |       | 1,499                      |       |
| **Other long-term liabilities**                      |       | $                     | 27,414     |                       | $          | 27,397 |   |

 

 

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**Note 8. Supplemental Cash Flow Information**

 

During the first fiscal quarters of fiscal 2008 and fiscal 2007, weacquired equipment totaling $1.5 million and $1.3 million, respectively, which wasfinanced through capital leases. Purchases of property and equipment in thestatement of cash flows exclude these amounts. Purchases ofproperty and equipment in the statement of cash flows for the first quarterof fiscal 2008 alsoexcludes $1.7 million in non-cash accruals for property and equipment placed inservice that did not yet require the use of cash.

 

 

**Note 9.Exit Costs, Impairment and Other Charges**

 

Exit costs,impairment and other charges for the first quarter of fiscal 2008 include leasetermination charges associated with the replacement of three stores, accretionexpense on liabilities for lease termination charges and other residual costsof closed stores. For the first quarter of fiscal 2007, these expensesrepresent severance costs. The activity of our reserve for store exit costs and other charges****during the first quarter of fiscal 2008 is as follows:

 
| ** **                          | *** *** | ***(in thousands)*** | *** *** |
|-------------------------------------|--------------|----------------------|--------------|
|                                |         |                 |         |
| Balance - February 2,  2008    |         | $                    | 3,612        |   |
| Charges for three  relocated stores |         | 604                  |         |
| Accretion                           |         | 68                   |         |
| Other expenses                      |         | 104                  |         |
| Payments                            |         | (1,096               | )            |
| Balance - May 3, 2008          |         | $                    | 3,292        |   |

 

 

**Note 10. Income Taxes**

 

Our effective income taxrate was -1.1% and -0.6% for the first quarter of fiscal 2008 and first quarterof fiscal 2007, respectively. The change in the effective tax rate betweenperiods is primarily the result of state income taxes as well as an increase indeferred tax liabilities related to differences in the book-tax basis ofcertain acquired intangible assets.

 

 

**Note 11. Contingencies**

 

***TrademarkLitigation—***OnJuly 2, 2004, we filed a complaint in the U.S. District Court for theDistrict of Minnesota seeking declaratory relief that the contingent trademarklicensing provision of a noncompetition agreement dated May 16, 1996, madebetween our predecessor and Cabela’s Incorporated, is invalid andunenforceable. Although the noncompetition provisions of the noncompetitionagreement expired in June 2003, Cabela’s contends that a contingenttrademark licensing provision of the noncompetition agreement now requires usto grant Cabela’s a license that would preclude our use of certain of ourtrademarks for direct marketing purposes.

 

On July 10, 2007,the U.S. District Court issued an order granting our motion for summaryjudgment, ruling that the contingent trademark licensing provision wasunenforceable.  The order provides, inpart, that we are free to use our trademarks in all respects including directmarketing to consumers.  Cabela’s hasappealed the ruling to the U.S. Court of Appeals, 8th Circuit.

 

We are not able topredict the ultimate outcome of this litigation, but it could be costly anddisruptive. The total costs may not be reasonably estimated at this time.  If the July 10, 2007 order is reversed,subsequent proceedings might impact the manner in which we market our productsin certain distribution channels in the future. Such an adverse result is notexpected to have an affect on our marketing of products through our retailstores. Nor would an unfavorable result preclude us from engaging in directmarketing activities using trademarks not in dispute. A favorable result wouldconfirm our right to use the subject trademarks in all direct marketingactivities.

 

***OtherLegal Claims—***Variousclaims and lawsuits 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, 

 

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product liability andother matters. 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.

 

 

**Note 12. Subsequent Events**

 

***Private Placement of Debt with Related Parties -***On June 9,2008, we entered into a $10 million term loan agreement with affiliates of ourtwo major shareholders. Amounts advanced under the agreement mature on December 31,2008, bear interest at LIBOR plus 1%, and may be prepaid and re-borrowedwithout penalty until the maturity date.  The loans are unsecured and theloan agreement contains no restrictive covenants. Proceeds from the loanswere used to reduce outstanding borrowings under our credit facility. Thelenders under the agreement are GRATCO LLC, an affiliate of David C. Pratt, ourchairman, and Holiday Companies, an affiliate of Ronald A. Erickson, ourvice-chairman, and Gerald A. Erickson, a director of the company. There were nomaterial transaction costs associated with the placement.

 

 

**Note 13.Segment Reporting**

 

For the Retailsegment, operating expenses primarily consist of distribution center expensesassociated with moving product from our distribution center to our retail stores,occupancy costs of the retail stores, store labor, advertising, depreciation,and all other store operating expenses, as well as all expenses associated withthe functional support areas such as executive, merchandising/buying, humanresources, information technology, and finance/accounting.

 

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

 

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.

 

Prior to theacquisition of Overton’s Holding Co. on December 6, 2007, we operatedunder one segment, Retail. Results and selected balance sheet data by businesssegment are presented in the following table:

 
| **First Quarter of Fiscal 2008** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------|------------|------------|------------|------------|------------|------------|------------|
| *in thousands*                   | * *   | * *   | * *   | * *   | * *   | * *   | * *   |
|                             |       | **Retail** | ** ** | **Direct** | ** ** | **Total**  |       |
| Sales                            |       | $          | 187,993    |       | $          | 19,669     |       | $ | 207,662 |   |
| Loss from Operations             |       | (18,743    | )          | (588       | )          | (19,331    | )          |
| Net Loss                         |       | (22,816    | )          | (1,629     | )          | (24,445    | )          |
|                             |       |       |       |       |       |       |       |
| Total assets                     |       | 615,456    |       | 103,150    |       | 718,606    |       |
| Inventories                      |       | 402,724    |       | 23,277     |       | 426,001    |       |
| Goodwill and intangible  assets  |       | 7,053      |       | 66,760     |       | 73,813     |       |
| Long term debt                   |       | $          | 25,562     |       | $          | 37,500     |       | $ | 63,062 |   |

 

 

 

**ITEM 2.  MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**Forward Looking Statements**

 

The followingdiscussion may contain forward-looking statements regarding us, our businessprospects and our results of operations that are subject to certain risks anduncertainties posed by many factors and events that could cause our actualbusiness, prospects and results of operations to differ materially from those thatmay be anticipated by such forward-

 

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looking statements.Factors that could cause or contribute to such differences include, but are notlimited to, those described in Item 1A—“Risk Factors of our Form 10-K forthe fiscal year 2007.” Readers are cautioned not to place undue reliance onthese forward-looking statements, which speak only as of the date of thisreport. We undertake no obligation to revise any forward-looking statements inorder to reflect events or circumstances that may subsequently arise. Readersare urged to carefully review and consider the various disclosures made by usin this report and in our other reports filed with the Commission that adviseinterested parties of the risks and factors that may affect our business.

 

**Overview**

 

Gander MountainCompany operates the nation’s largest retail network of stores specializing inhunting, fishing, camping, marine and outdoor lifestyle products and services. Asof May 3, 2008, we have expanded our store base to 113 convenientlylocated Gander Mountain outdoor lifestyle stores, providing approximately 6.4 millionsquare feet of retail space in 23 states: Alabama, Arkansas, Colorado,Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Michigan,Minnesota, Mississippi, New York, North Carolina, North Dakota, Ohio,Pennsylvania, Tennessee, Texas, Virginia, West Virginia and Wisconsin. Duringthe first quarter of fiscal 2008, we opened three new stores, including onerelocation and the consolidation of two smaller format stores into onelarge-format store. We opened two other new stores in the second quarter offiscal 2008, completing our five new store openings for the year.

 

Our core strategyis to provide our target customers with a unique and broad assortment ofoutdoor equipment, accessories, related technical apparel and footwear; expertservices; convenient locations and value pricing. Our stores feature anextensive selection of leading national and regional brands as well as our company’sowned brands. In March 2003, we began transforming our market positionfrom a traditional specialty store to a large-format, category-focused store.We did this by opening new stores in a large format and increasing the sellingspace within our original, small-format stores. Prior to March 2003, ourtypical store was approximately 31,000 square feet. Our large-format storesrange from approximately 50,000 to 120,000 square feet, with our current focusprimarily upon stores of 60,000 to 65,000 square feet plus an outside sellingarea. Our large-format stores are generally located with convenient access to amajor highway and have an open-style shopping environment characterized by wideaisles, open bar-joist ceilings and high-density racking. To further build uponour brand’s reputation for high quality and exceptional value, we areoutfitting certain stores and our new stores with additional features such asbrick and stone accents, log-wrapped columns, and improved branding, fixture,flooring and signage elements. As of May 3, 2008, 71 of our113 stores were in our large format.

 

On December 6,2007 we acquired Overton’s, Inc., a leading internet and catalog marketingcompany targeting recreational boaters and water sports enthusiasts.. Overton’sproduct line 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. Overton’s is a wholly-owned subsidiary of Gander Mountainheadquartered in Greenville, North Carolina.

 

Since theacquisition of Overton’s, our consolidated reporting includes our tworeportable segments: Retail and Direct. The Retail segment sells its outdoorlifestyle products and services through its 113 retail stores located in23 states. The Direct segment is the internet and catalog operations ofOverton’s, offering primarily boating and watersports accessory productsthrough numerous direct mail catalogs and its e-commerce websites.

 

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**ConsolidatedResults of Operations**

 

Thefollowing table represents our unaudited consolidated statements of operationsreflected as a percentage of sales:

 
| ** **                               | ** ** | **13 Weeks Ended** | ** ** |
|------------------------------------------|------------|--------------------|------------|
|                                     |       | **May 3,**    | ** ** | **May 5,** |   |
|                                     |       | **2008**           | ** ** | **2007** |   |
| Sales                                    |       | 100.0              | %          | 100.0 | % |
| Cost of goods sold                       |       | 79.8               | %          | 80.7 | % |
| Gross profit                             |       | 20.2               | %          | 19.3 | % |
| Operating expenses:                      |       |               |       |   |   |
| Selling, general and administrative      |       | 28.4               | %          | 29.3 | % |
| Exit costs, impairment and other charges |       | 0.4                | %          | 0.2 | % |
| Pre-opening expenses                     |       | 0.8                | %          | 0.4 | % |
| Loss from operations                     |       | (9.4               | )%         | (10.6 | )% |
| Interest expense, net                    |       | 2.3                | %          | 2.3 | % |
| Loss before income taxes                 |       | (11.7              | )%         | (12.9 | )% |
| Income tax provision                     |       | 0.1                | %          | 0.1 | % |
| Net Loss                                 |       | (11.8              | )%         | (13.0 | )% |

 

Sales consist ofsales from comparable stores, new stores and non-comparable stores, as well assales of our Direct segment, operated through our wholly owned subsidiary, Overton’s.A store is included in the comparable store base in its fifteenth full month ofoperations. A relocated store returns to the comparable store base in itsfifteenth full month after relocation. New store sales include sales fromstores we opened during the current period. Non-comparable store sales includesales in the current period from our stores opened during the previous fiscalyear before they have begun their fifteenth month of operation.

 

Cost of goods soldincludes the cost of merchandise, freight, distribution, inventory shrinkageand store occupancy costs. Store occupancy costs include rent, real estatetaxes and common area maintenance charges. Cost of goods sold also includes thecost of merchandise and freight expenses of our Direct segment.

 

Selling, generaland administrative expenses include store associate payroll, taxes and fringebenefits, advertising, maintenance, utilities, depreciation, insurance, bankand credit card charges and other store level expenses. It also includes all expensesassociated with operating our corporate headquarters in St. Paul, MN aswell as the fulfillment, distribution and corporate expenses of our Directsegment.

 

Pre-openingexpenses consist primarily of payroll, rent, recruiting, advertising and other costsincurred prior to a new store opening.

 

***Thirteen Weeks Ended May 3, 2008 Compared to Thirteen Weeks Ended May 5,2007***

 

*Sales.* Sales increased by $31.9 million, or 18.2%, to $207.7 million in thefirst quarter of fiscal 2008 from $175.7 million in the first quarter of fiscal2007. The increase resulted from sales of $26.8 million from fiscal 2008 andfiscal 2007 new stores not included in the comparable store sales base, acomparable store sales decrease of $11.1 million and an $3.5 million sales decreasefrom stores closed during 2008 but open in 2007 as well as changes in otherrevenue. The increase in sales also reflects sales from our Direct business of $19.7million for the first quarter of fiscal 2008.

 

During the firstquarter of fiscal 2008, we opened three new stores and closed three stores,including one relocation and the consolidation of two smaller format storesinto one large-format store. On a net basis for the quarter, we added 177,000square feet of retail selling space, a 2.9% increase. During the first quarterof fiscal 2007, we opened one new store, a relocation of a small format store. Ourcomparable store sales declined 6.7% for the first quarter of fiscal 2008, versusa comparable store sales increase of 1.0% for the first quarter of fiscal 2007.The comparable store sales decline was impacted by the overall economic environment,including credit concerns, housing market foreclosures, rising fuel and foodprices, and decreased consumer confidence, and their effects on discretionary spending.Additionally, we believe less advertising expenditures in the first quarter offiscal 2008 as compared to the first quarter of fiscal 2007 impacted thecomparable store sales decline.

 

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*GrossProfit.*  Gross profit increased by $8.2 million, or 24.1%,to $42.0 million in the first quarter of fiscal 2008 from $33.9 million in thefirst quarter of fiscal 2007. As a percentage of sales, gross profit increased 96basis points to 20.2% in the first quarter of fiscal 2008 from 19.3% in thefirst quarter of fiscal 2007.  Thesignificant factor affecting gross profit during the quarter was an initialproduct margin increase of 104 basis points resulting primarily from (i) theinclusion of the Direct business, with margins for the first quarter of fiscal2008 that were 830 basis points higher than our Retail business, and (ii) acontinuing trend in improved Retail margins. The Retail margins benefited from increasingscale, increased penetration of sales of our owned-brand merchandise, and bettermanagement of clearance merchandise.  Theincrease in Retail margins was partially offset by an approximately 60 basispoints negative impact from the change in our product mix, largely due toincreased lower margin power sports sales and decreased higher-margin apparelsales.

 

Our gross profit wasnegatively impacted by a deleveraging of our store occupancy costs as a resultof lower comparable store sales and lower sales per square foot at our newer,less mature stores. This negative impact was offset by the additional salesfrom the inclusion of the Direct business in the first quarter of fiscal 2008.Thus store occupancy costs, which are included in gross profit, wereapproximately the same as a percentage of sales.

 

*Selling,General and Administrative Expenses.*  SG&Aexpenses increased by $7.4 million, or 14.4%, to $59.0  million in thefirst quarter of fiscal 2008 from $51.5 million in the first quarter of fiscal2007. As a percentage of sales, SG&A expenses decreased 94 basis points to 28.4%in the first quarter of fiscal 2008 from 29.3% in the first quarter of fiscal2007. The primary factors in this decrease were cost reductions ofapproximately 500 basis points in labor, advertising and other general andadministrative costs of the Retail business, offset by the inclusion, in the firstquarter of fiscal 2008, of $8.3 million, or 400 basis points, of selling,general and administrative costs of the Direct business.

 

*ExitCosts, Impairment and Other Charges.*   Exit costs, impairment and other chargesincreased $0.4 million, or 132.2%, to $776,000 in the first quarter of fiscal2008 from $334,000 in the first quarter of fiscal 2007. These expenses for thefirst quarter of fiscal 2008 include lease termination charges associated withthe replacement of three stores, accretion expense on liabilities for leasetermination charges and other residual costs of closed stores. For the firstquarter of fiscal 2007, these expenses represent severance costs.

 

*Pre-openingExpenses.*  Pre-opening expenses increased $0.9 million,or 123.0%, to $1.6 million in the first quarter of fiscal 2008 from $0.7 millionin the first quarter of fiscal 2007. During the first quarter of fiscal 2008,we opened three new stores and incurred costs for two other new stores thatopened in May 2008. During the first quarter of fiscal 2007, we opened onenew store and incurred costs for three other new stores that opened in May 2007.

 

*InterestExpense, net.*  Interest expense increased by $0.9 million,or 21.8%, to $4.8 million in the first quarter of fiscal 2008 from $4.0 millionin the first quarter of fiscal 2007. The increase in interest expense resultedfrom higher average outstanding borrowings. Average outstanding borrowingsduring the first quarter of fiscal 2008 increased 53%, as compared to the firstquarter of fiscal 2007, due primarily to (i) the debt incurred inconnection with the Overton’s acquisition in December 2007 and (ii) borrowingsincurred to fund operating losses and store growth. Interest expense from higheraverage borrowings was substantially offset by an approximately 160 basispoints decrease in average interest rates due to general interest rate declines.  The average effective interest rate on all ofour outstanding borrowings as of May 3, 2008 was 5.9%.

 

*IncomeTax Provision.*  Our effective income tax rate was -1.1% and -0.6%for the first quarter of fiscal 2008 and first quarter of fiscal 2007,respectively. The change in the effective tax rate between periods is primarilythe result of state income taxes as well as an increase in deferred taxliabilities related to differences in the book-tax basis of certain acquiredintangible assets.

 

*NetLoss.*  Our net loss was $24.4 million for the firstquarter of fiscal 2008, as compared to net loss of $22.8 million for the firstquarter of fiscal 2007, due to the factors discussed above.

 

 

**Liquidityand Capital Resources**

 

Our primary capital requirements are for inventory, property andequipment and pre-opening expenses to support our new store growth plans, and,to the extent of the highly seasonal nature of our business, operating losses. The following chart summarizes theprincipal elements of our consolidated cash flow for the comparable firstquarters of our fiscal years and the number of stores opened during those periods.

 

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| ** **                                        | ** ** | **Cash Flow Summary** | ** ** | ** **          | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|---------------------|------------|
| ** **                                        | ** ** | **First Quarter**     | ** ** | **Change in Cash**  | ** ** |
| ** **                                        | ** ** | **13 weeks**          | ** ** | **13 weeks**        | ** ** | **Provided /** | ** ** |
| ** **                                        | ** ** | **May 3, 2008**  | ** ** | **May 5,2007** | ** ** | **(Used)** | ** ** |
| Net cash used in operating activities             |       | $                     | (18,490    | )                   | $          | (47,131 | ) | $ | 28,641 |   |
| Net cash used in investing activities             |       | (6,617                | )          | (8,851              | )          | 2,234 |   |
| Net cash provided by financing activities         |       | 26,525                |       | 56,004              |       | (29,479 | ) |
| Total net increase in cash                        |       | $                     | 1,418      |                | $          | 22 |   | $ | 1,396 |   |
|                                              |       |                  |       |                |       |   |   |
| Details of financing  activities:                 |       |                  |       |                |       |   |   |
| Borrowings under credit facility                  |       | $                     | 28,025     |                | $          | 55,120 |   | $ | (27,095 | ) |
| Reductions in long-term debt                      |       | (1,517                | )          | (617                | )          | (900 | ) |
| Proceeds from stock sales and exercise of options |       | 17                    |       | 1,501               |       | (1,484 | ) |
| Net cash provided by financing activities         |       | $                     | 26,525     |                | $          | 56,004 |   | $ | (29,479 | ) |
|                                              |       |                  |       |                |       |   |   |
| New store openings,  including relocated stores   |       | 3                     |       | 1                   |       |   |   |

 

*Operating Activities.*  Net cash used in operating activities for thefirst quarter of fiscal 2008 decreased by $28.6 million to $18.5 million, ascompared to $47.1 million for the first quarter of fiscal 2007.

 

Thisdecrease was primarily the result of the $21.9 million of less cash used forinventory growth and additional cash provided of $12.7 million from increasedlevels of accounts payable and accrued expenses in the first quarter of fiscal2008 versus the first quarter of fiscal 2007. Inventory increases in the firstquarter of fiscal 2007 consumed more cash than the first quarter of fiscal 2008because of increased inventory levels in powersports resulting from theroll-out of the Tracker Marine boat program, increased ATV inventory as aresult of more large-format stores that carry ATVs and our tactical efforts tomerchandise certain seasonal inventory in our stores earlier.  Accounts payable funding was increased in thefirst quarter of fiscal 2008 due partially to increased new store inventories,the inclusion in 2008 of our Direct business, and increased levels of boatinventories, all of which have longer invoice terms.

 

*Investing Activities*.  Net cash used in investing activities for thefirst quarter of fiscal 2008 decreased by $2.2 million to $6.6 million, ascompared to $8.9 million for the first quarter of fiscal 2007.

 

We used cash primarily for equipment to open new stores, forinformation technology equipment at our corporate offices and to upgradeexisting stores. The decrease in net cash used of $2.2 million was primarilydue to timing of expenditures and $1.7 million in non-cash accruals in the first quarter offiscal 2008 for property and equipment placed in service that did not yetrequire the use of cash.  Additionally, during thefirst quarters of fiscal 2008 and fiscal 2007, we acquired equipment totalingapproximately $1.5 million and $1.3 million, respectively, that was financedthrough capital leases. These amounts are excluded from purchases of propertyand equipment in the statements of cash flows.

 

*Financing Activities*. * *Net cash provided by financingactivities for the first quarter of fiscal 2008 decreased by $29.5 million to $26.5million, as compared to $56.0 million in the first quarter of fiscal 2007.

 

Cash used or provided by financing activities is primarily the netborrowings needed under our credit facility to fund operating and investingactivities. These borrowings for the first quarter of fiscal 2008 decreased$29.5 million in correlation with the reductions in use of cash describedabove.

 

 

**Credit Facility**

 

We have maintaineda revolving credit facility with Bank of America, N.A. since 2001. Our creditfacility provides us with the capital to fund the operations and growth of ourbusiness. Our revolving credit facility has a limit of $345.0 million, with anoption to increase this limit by another $55.0 million subject to certain termsand conditions.Interest on the outstanding indebtedness under the revolving portion of thecredit facility currently accrues at the lender’s prime commercial lendingrate, or, if we elect, at the one, two, three or six month LIBOR plus 1.25% to1.75%, depending on our EBITDA, as 

 

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defined in the creditagreement. Our obligations under the credit facility are secured by interestsin substantially all of the Company’s assets. The credit facility matures on June 30,2012.

 

In addition to therevolving credit facility, our credit facility includes a $20.0 millionterm loan (“Term Loan A”). The term loan matures on June 30, 2012 andbears interest at either (a) 1.25% over the higher of (i) Bank ofAmerica’s prime rate or (ii) the federal funds rate plus 0.5%, or (b) LIBORplus 2.75%.

 

On December 6,2007, the Company entered into a Fourth Amended and Restated Loan and SecurityAgreement. The amendment and restatement was effected in order to add anadditional $40.0 million term loan (“Term Loan B”) to the Company’ssecured credit facility to partially fund the acquisition of Overton’s.  The maturity date for the $40.0 million termloan is September 30, 2011.

 

The Company willnot have the ability to exercise the $55.0 million option to increase therevolving credit facility while our $40.0 million Term Loan B is outstanding.

 

Outstandingborrowings under the credit facility, including Term Loan A and includingletters of credit, were $282.2 and $238.7 as of May 3, 2008 and May 5,2007, respectively.  The actual availability under the creditfacility is limited to specific advance rates on eligible inventory andaccounts receivable. Typically, availability will be highest in the latter halfof the fiscal year as inventory levels and advance rates increase. Theseadvance rates are seasonal as well, increasing as we approach our hunting andholiday seasons and decreasing during non-peak periods. Based oneligible inventory and accounts receivable balances as of May 3, 2008 and February 2,2008, our available borrowing capacity under the credit facility, aftersubtracting letters of credit, was $24.1 million and $22.3 million,respectively. As of May 5,2007, our remaining borrowing capacity under the credit facility, aftersubtracting letters of credit, was $28.3 million.

 

Effective with theDecember 6, 2007 amendment, financial covenants under the credit facilityrequire that availability under the line of credit not fall below 5% of thelower of the borrowing base, as defined, or the credit facility limit. Thisavailability test is applied and measured on a daily basis. The 5% requirementincreases to 7.5% in August 2009. The credit facility also contains othercovenants that, among other matters, restrict our ability to incur substantialother indebtedness, create certain liens, engage in certain mergers andacquisitions, sell assets, enter into certain capital leases or make juniorpayments, including cash dividends. We were in compliance with all covenants asof May 3, 2008. Although our current expectations of future financialperformance indicate that we will remain in compliance with the covenants underour credit facility, if actual financial performance does not meet our currentexpectations, our ability to remain in compliance with these covenants will beadversely affected. We face a number of uncertainties that may adversely affectour ability to generate sales and earnings, including the possibility ofcontinued weakness in the retail environment in North America, which weaknessmay negatively affect future retail sales.

 

**TermLoans** - The valueof our eligible inventory, and the related advance rates under our securedcredit facility are subject to periodic adjustment based on independentvaluations of our collateral performed on behalf of the banks. Any downwardadjustment in the value of our inventory or in our advance rates, whether basedon an assessment of the nature and quality of our inventory or a perceivedincrease in the difficulty of selling collateral under current economic conditions,would adversely affect our availability. Effective June 11, 2008, ourlender adjusted our advance rates downward, on average approximately 160 basispoints, in response to general retail environment conditions. In order tomaintain appropriate levels of availability under our secured credit facility,on June 9, 2008, we entered into a $10 million term loan agreement withour two major shareholders. Amounts advanced under the agreement mature onDecember 31, 2008, bear interest at LIBOR plus 1%, and may be prepaid andre-borrowed without penalty until the maturity date.  The loans areunsecured and the loan agreement contains no restrictivecovenants. Proceeds from the loans were used to reduce outstandingborrowings under our credit facility. The lenders under the agreement areGratco LLC, an affiliate of David C. Pratt, our chairman, and HolidayCompanies, an affiliate of Ronald A. Erickson, our vice-chairman, and Gerald A.Erickson, a director of the company. There were no material transaction costsassociated with the placement.

 

** **

**IncomeTaxes / Net Operating Losses**

 

Our effective income taxrate was -1.1% and -0.6% for the first quarter of fiscal 2008 and firstquarter of fiscal 2007, respectively. The change in the effective tax ratebetween periods is primarily the result of state income taxes as well as anincrease in deferred tax liabilities related to differences in the book-taxbasis of certain acquired intangible assets. Due to the uncertainty ofthe realization of net operating loss carry forwards, we have determined therealization of the tax benefit related to our net deferred tax asset isuncertain at this time and a valuation allowance was recorded for the 

 

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netdeferred tax assets, excluding the deferred tax liabilities related to acquiredindefinite lived intangible assets. As of May 3, 2008, we have federal andstate net operating loss carryforwards of approximately $83.4 million expiringbetween 2016 and 2027.

 

 

**FutureCapital Requirements**

 

Our future capitalrequirements will primarily depend on the growth and success of our directmarketing business, the number of new stores we open, the timing of thoseopenings within a given fiscal year and the need to fund operating losses.These requirements will include costs directly related to opening new storesand may also include costs necessary to ensure that our infrastructure,including technology and distribution capabilities, is able to support ourstore base and expected growth in our retail stores and internet and catalogbusiness. We opened 13, 8 and 19 new stores in each of fiscal years 2007, 2006and 2005, respectively, including one to three relocated/consolidated stores ineach year. Our cash used in investing activities, for property and equipmentpurchases, was approximately $46 million, $28 million and$50 million in fiscal 2007, 2006 and 2005, respectively.

 

We have opened allfive of our fiscal 2008 new stores as of May 31, 2008, including onerelocation and the consolidation of two smaller format stores into onelarge-format store. We expect our total capital expenditures in fiscal 2008 tobe approximately $22 to $25 million, including capital expenditures toimprove certain existing stores. However, business conditions, businessstrategy or other factors may cause us to adjust these plans. We believe thatwe will be able to service our business from our existing distributionfacilities through fiscal 2009. We believe the timing of any expansion of ourdistribution capabilities will depend on the number of new stores we open, thegrowth of our internet and catalog business and the ability to finance anexpansion. The number of new stores we open will depend on the success of ourbusiness in fiscal 2008 and fiscal 2009.

 

On June 9, 2008, we entered into a $10 million term loan agreement withour two major shareholders.  Amountsadvanced under the agreement mature on December 31, 2008.

 

Withour acquisition of Overton’s, we have undertaken a significant step toward ourstrategy of providing multi-channel offerings to our customers. We expect wewill continue to make expenditures in the next 12 months to further thisimportant business objective and we may need to fund up to approximately $1.0million over the next 12 months for capital expenditures related to our Directbusiness.

 

In2006, we began a significant effort to upgrade our merchandise and informationsystems that will provide enhanced efficiencies in buying, receiving, payablesmanagement and provide better and more detailed operating information fordecision making and continued supply chain improvement. We expect to continueto evaluate, modify and update our information systems.

 

We intend tosatisfy our capital requirements in the next 12 months with cash flows fromoperations, funds available under our credit facility and equipment financingleases. However, if capital requirements for our business strategy change, orif sales and cash flows from operations do not meet anticipated levels, we mayneed to seek additional debt or equity financing in the public or privatemarkets. Beyond fiscal 2008, we anticipate needing additional financing to growour business. There is no assurance that we will be successful in borrowingadditional funds at reasonable rates of interest or issuing equity at afavorable valuation, or at all.

 

 

**ContractualObligations and Other Commitments**

 

Our material off-balancesheet arrangements are operating lease obligations for substantially all of ourretail stores, our distribution center and corporate office, as well as lettersof credit.  We excluded these items fromthe balance sheet in accordance with U.S. generally accepted accountingprinciples. As of May 3, 2008, the minimum operating lease payments duewithin one year were $72.7 million. As of May 3, 2008, total minimumoperating lease payments remaining over all of our operating leases were $802.8million. These leases have an average remaining term of approximately 10 yearsand typically provide us with several successive options to extend the term atour election. These obligation amounts include future minimum lease paymentsand exclude direct operating costs such as common area costs and real estatetaxes.

 

Issued and outstandingletters of credit were $8.1 million and $15.1 million at May 3, 2008 and May 5,2007, respectively, and were related primarily to importing of merchandise andsupporting potential insurance 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 

 

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firmcommitments outstanding, in addition to letters of credit, were $1.6 millionand $0.6 million as of May 3, 2008 and May 5, 2007, respectively.

 

**QuarterlyResults of Operations and Seasonality**

 

Our quarterlyoperating results may fluctuate significantly because of several factors,including the timing of new store openings and related expenses, profitabilityof new stores, weather conditions and general economic conditions. Our businessis also subject to seasonal fluctuation, with the highest sales activitynormally occurring during the third and fourth quarters of our fiscal year,which are primarily associated with the fall hunting seasons and the holidayseason. In recent years, the second half of our fiscal years have generatedapproximately 60% to 65% of our annual sales, including new store sales. Inaddition, our customers’ demand for our products and therefore our sales can besignificantly impacted by unseasonable weather conditions that affect outdooractivities and the demand for related apparel and equipment. Our grand openingactivities surrounding our new store openings can also cause fluctuations insales when compared to operating periods in later months. It is for this reasonwe include a new store in our comparable store sales base in its fifteenth fullmonth to minimize the effect of grand opening activities.

 

This seasonalityalso impacts our inventory levels, which tend to rise beginning approximatelyin April, reach a peak in November, and decline to lower levels after the December holidayseason.

 

The recentlyacquired Overton’s business is also subject to seasonal fluctuations, with itshighest sales activity normally occurring during the first and second quartersof our fiscal year, which is the primary season for boating, marine andwatersports related products. Historically, Overton’s has generatedapproximately 65% to 70% of its sales during the first half of our fiscal yearand approximately 50% during the second quarter of our fiscal year.

 

Our pre-openingexpenses have and will continue to vary significantly from quarter to quarter,primarily due to the timing of store openings. We typically incur mostpre-opening expenses for a new store during the three months preceding, and themonth of, it’s opening. In addition, our labor and operating costs for a newlyopened store can be greater during the first one to two months of operationthan what can be expected after that time, both in aggregate dollars and as apercentage of sales. Accordingly, the volume and timing of new store openingsin any quarter has had, and is expected to continue to have, a significantimpact on quarterly pre-opening costs and store labor and operating expenses.Due to these factors, results for any particular quarter may not be indicativeof results to be expected for any other quarter or for a full fiscal year.

 

 

**CriticalAccounting Policies and Use of Estimates**

 

Our financialstatements are prepared in accordance with U.S. generally accepted accountingprinciples. In connection with the preparation of the financial statements, weare required to make assumptions, make estimates and apply judgment that affectthe reported amounts of assets, liabilities, revenue, expenses and the relateddisclosures. We base our assumptions, estimates and judgments on historicalexperience, current trends and other factors that we believe to be relevant atthe time the financial statements are prepared. On a regular basis, we reviewthe accounting policies, assumptions, estimates and judgments to ensure thatour financial statements are presented fairly and in accordance with U.S.generally accepted accounting principles. However, because future events andtheir effects cannot be determined with certainty, actual results could differfrom our assumptions and 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 February 2,2008.

 

 

**NewAccounting Pronouncements**

 

InSeptember 2006, the FASB issued SFAS No. 157, *Fair ValueMeasurements.* SFAS No. 157defines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles and expands disclosures about fairvalue measurements. SFAS No. 157 applies to other accountingpronouncements that require or permit fair value measurements, as the FASBpreviously concluded in those accounting pronouncements that fair value is therelevant measurement attribute. Accordingly, SFAS No. 157 does not requireany new fair value measurements. SFAS No. 157 is effective for fiscalyears beginning after November 15, 2007.

 

InFebruary 2008, the FASB issued FASB Staff Position FAS 157-2, which delays theeffective date for the implementation of SFAS 157 solely for non-financialassets and non-financial liabilities, except those non-financial items that arerecognized at fair value in the financial statements on a recurring basis (i.e.,at least annually).  The effective datefor non-financial assets and liabilities would be the beginning of our fiscalyear 2009.

 

Weadopted SFAS No. 157 as of February 3, 2008, except as it applies to thosenonfinancial assets and liabilities affected by the one-year delay.  The adoption of the applicable provisions of SFASNo. 157 did not have a material impact on our results of operations, cashflows, or financial position.  We do notexpect the adoption of the remaining provisions of SFAS No. 157 to have amaterial impact on our results of operations, cash flows, or financialposition.

 

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InFebruary 2007, the FASB issued SFAS No. 159, *The FairValue Option for Financial Assets and Liabilities — Including an Amendment ofFASB Statement No. 115.* SFAS No. 159 permits us to choose tomeasure certain financial assets and liabilities at fair value that are notcurrently required to be measured at fair value (the “Fair Value Option”).Election of the Fair Value Option is made on an instrument-by-instrument basisand is irrevocable. At the adoption date, unrealized gains and losses onfinancial assets and liabilities for which the Fair Value Option has beenelected would be reported as a cumulative adjustment to beginning retainedearnings. If we elect the Fair Value Option for certain financial assets andliabilities, we will report unrealized gains and losses due to changes in theirfair value in earnings at each subsequent reporting date. The Company has adopted SFASNo. 159 but has elected not to apply the Fair Value Option of SFAS No. 159.

 

In December 2007,the FASB issued FAS No. 141R, *BusinessCombinations,* which replaces SFAS No. 141. SFAS 141Restablishes principles and requirements for how the acquirer of a businessrecognizes and measures in its financial statements the identifiable assetsacquired and the liabilities assumed. In addition, under SFAS 141(R) adjustmentsassociated with changes in tax contingencies that occur after the one yearmeasurement period are recorded as adjustments to income. This statement iseffective for all business combinations for which the acquisition date is on orafter the beginning of an entity’s first fiscal year that begins after December 15,2008; however, the guidance in this standard regarding the treatment of incometax contingencies is retrospective to business combinations completed prior to January 1,2009. We will adopt SFAS 141(R) for any business combinationsoccurring at or subsequent to February 1, 2009.

 

 

**ITEM 3.  QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

We are exposed to market risk from changes ininterest rates on borrowings under our credit facility. This floating rateindebtedness was $314.0 million at May 3, 2008 and averaged $294.5 millionduring the first quarter of fiscal 2008. Our average interest rate for thefirst quarter of fiscal 2008 under our credit facility, including Term Loans Aand B, was approximately 5.9% and was approximately 160 basis points lower thanthe same period last year due primarily to general interest rate reductions andreductions we obtained in the pricing structure relative to the revolvingcredit facility and term loan. If short-term floating interest rates on ouraverage variable rate debt for the first quarter of fiscal 2008 had increasedby 100 basis points, our interest expense would have increased by approximately$744,000, assuming comparable borrowing levels. These amounts are determined byconsidering the impact of the hypothetical interest rates on our average amountof floating rate indebtedness outstanding and cash equivalents balances.

 

We have no derivative financial instrumentsor derivative commodity instruments.   Wehave no international sales, however, we import certain items for sale in ourstores.  Substantially all of ourpurchases are 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 1934 isrecorded, processed, summarized and reported within the time periods specifiedin Securities and Exchange Commission rules and forms. Our principalexecutive officer and principal financial and accounting officer also concludedthat our disclosure controls and procedures are effective to ensure thatinformation required to be disclosed in the reports we file or submit under theSecurities Exchange Act of 1934 is accumulated and communicated to ourmanagement, including our principal executive officer and principal financialand 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.

 

#### **PART II. OTHER INFORMATION**

####  

**ITEM 1.  LEGAL PROCEEDINGS**

 

***TrademarkLitigation—***OnJuly 2, 2004, we filed a complaint in the U.S. District Court for theDistrict of Minnesota seeking declaratory relief that the contingent trademarklicensing provision of a noncompetition agreement dated 

 

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May 16, 1996, madebetween our predecessor and Cabela’s Incorporated, is invalid andunenforceable. Although the noncompetition provisions of the noncompetitionagreement expired in June 2003, Cabela’s contends that a contingenttrademark licensing provision of the noncompetition agreement now requires usto grant Cabela’s a license that would preclude our use of certain of ourtrademarks for direct marketing purposes.

 

On July 10, 2007,the U.S. District Court issued an order granting our motion for summaryjudgment, ruling that the contingent trademark licensing provision wasunenforceable.  The order provides, inpart, that we are free to use our trademarks in all respects including directmarketing to consumers.  Cabela’s hasappealed the ruling to the U.S. Court of Appeals, 8th Circuit.

 

We are not able topredict the ultimate outcome of this litigation, but it could be costly anddisruptive. The total costs may not be reasonably estimated at this time.  If the July 10, 2007 order is reversed,subsequent proceedings might impact the manner in which we market our productsin certain distribution channels in the future. Such an adverse result is notexpected to have an affect on our marketing of products through our retailstores. Nor would an unfavorable result preclude us from engaging in directmarketing activities using trademarks not in dispute. A favorable result wouldconfirm our right to use the subject trademarks in all direct marketingactivities.

 

***OtherLegal Claims—***Variousclaims and lawsuits 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 SENIOR SECURITIES**

** **

Not applicable.

 

**ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.**

 

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 17, 2008 |   |   |   | By:                     | /s/ Mark R. Baker |   |
|               |   |   |   |                    | Mark R. Baker |
|               |   |   |   |                    | President and Chief  Executive Officer |
|               |   |   |   |                    | (Principal Executive  Officer) |
|               |   |   |   |                    |   |
|               |   |   |   |                    |   |
| June 17, 2008 |   |   |   | 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) |
| 4.1                  |       | Form of promissory  note pursuant to the Term Loan Agreement dated as of June 9, 2008 among  the Registrant, GRATCO LLC and Holiday Companies |       | Filed Electronically           |
| 10.1                 |       | Term Loan Agreement,  dated as of June 9, 2008, among the Registrant, GRATCO LLC and Holiday  Companies                                            |       | Filed Electronically           |
| 10.2                 |       | Description of Fiscal  2008 Executive Cash Incentive Program                                                                                            |       | Incorporated By  Reference (3) |
| 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. |
| (3) |   | Incorporated  by reference to Item 5.02 of the Registrant’s Current Report on Form 8-K  dated April 8, 2008 (Commission File No. 000-50659), filed with the  Commission on April 11, 2008.             |

 

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