News Column

CABELAS INC - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

February 21, 2014

The following discussion and analysis of financial condition, results of operations, liquidity, and capital resources should be read in conjunction with our audited consolidated financial statements and notes thereto appearing elsewhere in this report. Cabela's Incorporated and its wholly-owned subsidiaries are referred to herein as "Cabela's," "Company," "we," "our," or "us." Forward Looking Statements - Our discussion contains forward-looking statements with respect to our plans and strategies for our businesses and the business environment that are impacted by risks and uncertainties. Refer to "Special Note Regarding Forward-Looking Statements" preceding PART I, ITEM 1, and to ITEM 1A "Risk Factors" for information regarding certain of the risks and uncertainties that affect our business and the industries in which we operate. Please note that our actual results may differ materially from those we may estimate or project in any of these forward-looking statements. Cabela'sฎ We are a leading specialty retailer, and the world's largest direct marketer, of hunting, fishing, camping, and related outdoor merchandise. We provide a quality service to our customers who enjoy an outdoor lifestyle by supplying outdoor products through our omni-channel retail business consisting of our Retail and Direct segments. As of the end of 2013, our Retail business segment operated 50 stores, including the 10 stores that we opened during 2013, which consisted of three Outpost stores in: •Saginaw, Michigan, on February 14, 2013; •Waco, Texas, on October 30, 2013; and •Kalispell, Montana, on November 7, 2013; and seven next-generation stores in: •Columbus, Ohio, on March 7, 2013; •Grandville, Michigan, on March 21, 2013; •Louisville, Kentucky, on April 11, 2013; •Green Bay, Wisconsin, on July 25, 2013; •Thornton, Colorado, and Lone Tree, Colorado, on August 15, 2013; and •Regina, Saskatchewan, Canada, on September 19, 2013. We have 46 stores located in the United States and four in Canada with total retail square footage of 5.9 million square feet, an increase of 15% over 2012. Our Direct business segment is comprised of our highly acclaimed website and supplemented by our catalog distributions as a selling and marketing tool.



World's Foremost Bank ("WFB," "Financial Services segment," or "Cabela's CLUB") also plays an integral role in supporting our merchandising business. The Financial Services segment is comprised of our credit card services, which reinforce our strong brand and strengthen our customer loyalty through our credit card loyalty programs.

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Fiscal 2013 Executive Overview

Increase 2013 2012 (Decrease) % Change (Dollars in Thousands Except Earnings Per Diluted Share) Revenue: Retail $ 2,233,322$ 1,849,582$ 383,740 20.7 % Direct 973,614 930,943 42,671 4.6 Total 3,206,936 2,780,525 426,411 15.3 Financial Services 375,810 319,399 56,411 17.7 Other revenue 16,831 12,758 4,073 31.9 Total revenue $ 3,599,577$ 3,112,682$ 486,895 15.6 Operating income $ 361,361$ 275,699$ 85,662 31.1 Net income $ 224,390$ 173,513$ 50,877 29.3 Earnings per diluted share $ 3.13$ 2.42$ 0.71 29.3 Revenues presented in the table above are consistent with our presentation for segment reporting. Revenues for 2013 totaled $3.6 billion, an increase of $487 million, or 15.6%, over 2012. Total merchandise sales increased $426 million, or 15.3%, in 2013 compared to 2012. The net increase in total merchandise sales comparing 2013 to 2012 was primarily due to: • a net increase of $304 million in revenue from new retail stores, and



• an increase of $68 million, or 3.9%, in comparable store sales, led by an

increase in sales in the hunting equipment product category.

These increases were complemented by an increase of $43 million in Direct revenue, primarily due to increases in the hunting equipment product category. Financial Services revenue increased $56 million, or 17.7%, in 2013 compared to 2012 due to increases in interest income and interchange income, partially offset by higher customer reward costs due to growth in the number of active accounts and average balance per account and increased interest expense due to the issuances of securitizations and certificates of deposit in 2013 to fund growth. Interchange income in 2013 was positively impacted by $3 million due to adjustments to our liability for the Visa U.S.A., Inc. ("Visa") settlement. We adjusted our liability for the effect of certain plaintiffs opting out in 2013 and analysis of our merchant charge volume based on Visa's interchange reduction reports to WFB. Operating income for 2013 increased $86 million, or 31.1%, compared to 2012, and operating income as a percentage of revenue increased 110 basis points to 10.0% in 2013 compared to 8.9% in 2012. The increases in total operating income and total operating income as a percentage of total revenue were primarily due to increases in revenue from all three business segments as well as an increase in our merchandise gross profit. Selling, distribution, and administrative expenses increased primarily due to increases in comparable and new store costs and related support areas. In addition, pre-opening costs totaled $22 million in 2013 compared to $13 million in 2012. Expressed as a percentage of total revenue, selling, distribution, and administrative expenses decreased 20 basis points to 33.4% in 2013. Impairment losses decreased $14 million in 2013 compared to 2012. 29

-------------------------------------------------------------------------------- Our vision is to be the best omni-channel retail company in the world by creating intense customer loyalty for our outdoor brand. This loyalty will be created through two pillars of excellence: highly engaged outfitters and shareholders who support our short and long term goals. We will focus on these areas to achieve our vision:



• Intensify Customer Loyalty. We will deepen our customer relationships,

aggressively serve current and developing market segments, and increase

our innovation in Cabela's products and services.

• Grow Profitably and Sustainably. Through sustaining and adapting our

culture, we will continuously seek ways to improve profitability and increase revenue in all business segments.



• Enhance Technology Capability. We will implement a strategic technology

road map, streamline our systems, and accelerate customer-facing technologies.



• Simplify Our Business. As we focus on our priorities, we will align our

goals to foster collaboration and streamline cross-functional processes. • Improve Marketing Effectiveness. We will optimize all marketing channels and expand our digital and e-commerce capabilities while continuing to strengthen the Cabela's brand. Improvements in these areas have led to an increase in our return on invested capital, an important measure of how effectively we have deployed capital in our operations in generating cash flows. Increases in our return on invested capital, on an after-tax basis, indicate improvements in our use of capital, thereby creating value in our Company. We offer our customers integrated opportunities to access and use our retail store, website, and catalog channels. Our in-store pick-up program allows customers to order products through our catalogs, website, and store kiosks and have them delivered to the retail store of their choice without incurring shipping costs, thereby helping to increase foot traffic in our stores. Conversely, our expanding retail stores introduce customers to our website and catalog channels. We are capitalizing on our omni-channel model by building on the strengths of each channel, primarily through improvements in our merchandise planning system. This system, along with our replenishment system, allows us to identify the correct product mix in each of our retail stores, maintain the proper inventory levels to satisfy customer demand in both our Retail and Direct business channels, and improve our distribution efficiencies. In 2013, we continued to enhance our omni-channel efforts through greater use of digital marketing, the limited roll out of omni-channel fulfillment, and the improvements to our mobile platform. We continue to work with vendors to negotiate the best prices on products and to manage inventory levels, as well as to ensure vendors deliver all products and services as expected. Our efforts continue in detailed pre-season planning, in-season monitoring of sales, and management of inventory to focus product assortments on our core customer base. As a result, our merchandise gross margin as a percentage of merchandise revenue increased 50 basis points to 36.8% in 2013 compared to 36.3% in 2012. These increases were primarily attributable to improved in-season and pre-season merchandise inventory planning, improvements in vendor collaboration, an ongoing focus on private label products, and improvements in price optimization to ensure we are optimizing markdowns. The increases in our merchandise gross profit as a percentage of merchandise sales were partially offset by an adverse product mix shift due to increased sales of firearms and ammunition, which carry a lower margin. We have improved our retail store merchandising processes, information technology systems, and distribution and logistics capabilities. We have also improved our visual merchandising within the stores and coordinated merchandise at our stores by adding more regional product assortments. Our outfitters also benefited through the launch of our new retail product information application which is available via hand held devices. This provides quick and convenient access to product information, allowing outfitters to be more efficient and engaging with customers. In addition, to enhance customer service at our retail stores, we have continued our management training and mentoring programs for our retail store managers. Comparing Retail segment results for 2013 to 2012: • operating income increased $83 million, or 24.1%,



• operating income as a percentage of Retail segment revenue increased 50

basis points to 19.2%, and

• comparable store sales increased 3.9%.

Our Retail business segment currently consists of 50 stores, including the seven next-generation stores and the three Outpost stores that we opened in 2013. The new store formats are more productive and generate higher returns which will help to increase our return on invested capital. Our total retail store square footage at the end of 2013 was 5.9 million square feet, an increase of 15% compared to the end of 2012. In May 2013, we relocated our former 44,000 square foot Winnipeg, Manitoba, retail store and opened a new 70,000 square foot next-generation store. 30 --------------------------------------------------------------------------------



In 2014, we currently have plans to open new retail stores located as follows: • next-generation stores in Christiana, Delaware; Greenville, South

Carolina; Anchorage, Alaska; Woodbury, Minnesota; Tualatin, Oregon;

Cheektowaga, New York; Acworth, Georgia; Edmonton, Alberta, Canada;

Barrie, Ontario, Canada; and Nanaimo, British Columbia, Canada; and • Outpost stores in Lubbock, Texas; Missoula, Montana; Augusta, Georgia;



and Bowling Green, Kentucky.

For 2015 and thereafter, we currently have plans to open new retail stores located as follows: • next-generation stores in Berlin, Massachusetts; Sun Prairie, Wisconsin; Garner, North Carolina; Fort Mill, South Carolina; Bristol, Virginia; Moncton, New Brunswick, Canada; Ammon, Idaho; Fort Oglethorpe, Georgia; and Short Pump, Virginia. We plan to open 13 to 15 retail stores each year. The retail stores planned for 2014 represent approximately one million new square feet of retail space or 17% square footage growth over 2013. It is expected that the planned openings of these next-generation and Outpost stores will continue to generate an increase in profit per square foot compared to the legacy store base. We are focusing on improving our customers' digital shopping experiences on Cabelas.com and via mobile devices. Our marketing focus continues to be on developing a seamless omni-channel experience for our customers regardless of their transaction channel. Our digital transformation continues with efforts around enhancing our website to support the Direct business. The amount of traffic coming through mobile devices is growing significantly. As a result, we continue to utilize best-in-class technology to improve our customers' digital shopping experiences and build on the advances we have made to capitalize on the variety of ways customers are shopping at Cabela's today. We have seen early successes in our social marketing initiatives and now have over 2.9 million fans on Facebook. Our omni-channel marketing efforts are resulting in increases in new customers, as well as in customer engagement with a consistent experience across all channels. Our goal is to create a digital presence that mirrors our customers' in-store shopping experience. Continuing in 2013, we realized improvements in our website traffic, growth in multi-channel customers, and very early progress in our print-to-digital transformation. We have developed a multi-year approach to reverse the downward trend in our Direct segment and transform our legacy catalog business into an omni-channel enterprise supporting transformation to digital, e-commerce, and mobile while optimizing the customer experience with our growing retail footprint. We are in the very early stages of this effort. Near term efforts have been focusing on our print-to-digital transformation and testing targeted shipping offers. Also in January 2013, we opened an office in Westminster, Colorado, to attract high-quality talent to improve our website, social media, and mobile applications.



Comparing Direct segment results for 2013 to 2012: • revenue increased $43 million, or 4.6%,

• operating income increased $2 million to $157 million, and

• operating income as a percentage of Direct segment revenue decreased

60 basis points to 16.1%. The growth in Direct revenue was due to an increase in the hunting equipment product category. This growth was impacted beginning in the third quarter of 2013 by a significant deceleration in ammunition sales compared to 2012 and a more cautious consumer. During the fourth quarter of 2013, we launched our new mobile website and our omni-channel fulfillment program. Cabela's CLUB continues to manage credit card delinquencies and charge-offs below industry average by adhering to our conservative underwriting criteria and active account management. Comparing Cabela's CLUB results for 2013 to 2012: • Financial Services revenue increased $56 million, or 17.7%; • the number of average active accounts increased 9.9% to 1.7 million, and the average balance per active account increased 2.9%; • the average balance of our credit card loans increased 13.1% to $3.5 billion; and • net charge offs as a percentage of average credit card loans decreased seven basis points to 1.80% in 2013 from 1.87% in 2012. In 2013, the Financial Services segment issued $395 million in certificates of deposit, early renewed its $300 million variable funding facility and extended the commitment for an additional two years, and completed term securitizations of $385 million and $350 million that will mature in February 2023 and August 2018, respectively. 31

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Current Business Environment

Worldwide Credit Markets and Macroeconomic Environment - Beginning in August 2013, and throughout the remainder of fiscal 2013, we experienced a significant deceleration in the sales of firearms and ammunition as well as a challenging consumer environment across all business channels. These trends have continued into the first quarter of fiscal 2014. To address these trends, we increased our promotional spending while managing other expenses to levels consistent with how our business is performing. We plan to continue managing those costs accordingly through the remainder of fiscal 2014. The Financial Services segment continues to monitor developments in the securitization and certificates of deposit markets to ensure adequate access to liquidity. We expect our charge-off rates and delinquency levels to remain below industry averages. Developments in Legislation and Regulation - Since the later part of 2012, there has been significant discussion regarding enacted gun control legislation and potential gun control legislation, primarily aimed at modern sporting rifles, certain semiautomatic pistols, and high capacity magazines. For example, the States of Colorado, Connecticut, Maryland, and New York enacted legislation that prohibits the sale of certain high capacity magazines and, in some cases, the sale of certain firearms. We do not expect the recently enacted state legislation to have a significant impact on our business. Any new federal legislation that prohibits the sale of certain modern sporting rifles, semiautomatic pistols, or ammunition could negatively impact our hunting equipment sales. The Federal Deposit Insurance Corporation ("FDIC") conducted compliance examinations in 2009 and 2011 and found that certain former practices of WFB were improper. As a result of these compliance examinations, WFB was required to enter into a consent order and pay restitution and civil money penalties. The FDIC conducted another compliance examination in 2013, and WFB may be ordered to pay restitution and civil money penalties as a result of the 2013 compliance examination. On July 9, 2013, the FDIC adopted interim final rules which revised its risk-based and leverage capital requirements for FDIC-supervised institutions. These interim final rules are substantially identical to the joint final rules issued by the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System on July 2, 2013. The interim final rules and the joint final rules implement the regulatory capital reforms recommended by the Basel Committee on Banking Supervision in December 2010, commonly referred to as "Basel III," and capital reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Reform Act"). Among other things, the interim final rules and the joint final rules revise the agencies' prompt corrective action framework by introducing a common equity tier 1 capital requirement and a higher minimum tier 1 capital requirement. In addition, the interim final rules and the joint final rules include a supplementary leverage ratio for depository institutions subject to the advanced approaches capital rules. The phase-in period for the interim final rules will begin in January 2015 for WFB. WFB is continuing to assess how the interim final rules and the joint final rules will impact it and its ability to comply with the new common equity tier 1 capital requirement and higher minimum tier 1 capital requirement. The Reform Act was signed into law in July 2010 and has made extensive changes to the laws regulating financial services firms and credit rating agencies and requires significant rule-making. The changes resulting from the Reform Act may impact our profitability, require changes to certain Financial Services segment business practices, impose upon the Financial Services segment more stringent capital, liquidity, and leverage ratio requirements, increase FDIC deposit insurance premiums, or otherwise adversely affect the Financial Services segment's business. These changes may also require the Financial Services segment to invest significant management attention and resources to evaluate and make necessary changes. The Reform Act established the new independent Consumer Financial Protection Bureau (the "Bureau") which has broad rulemaking, supervisory, and enforcement authority over consumer products, including credit cards. WFB is subject to the Bureau's regulation, and while the Bureau will not examine WFB, it will receive information from WFB's primary federal regulator. The Bureau is specifically authorized to issue rules identifying as unlawful acts or practices it defines as "unfair, deceptive or abusive acts" in connection with any transaction with a consumer or in connection with a consumer financial product or service. It is uncertain what rules will be adopted by the Bureau, how such rules will be enforced, and whether or not such rules will require WFB to modify existing practices or procedures. The Bureau, the FDIC, and other agencies have recently announced several high-profile enforcement actions against credit card issuers for deceptive marketing and other illegal practices related to the advertising of ancillary products, collection practices, and other matters. By these recent public enforcement actions, the Bureau and the FDIC have signaled a heightened scrutiny of credit card issuers. We anticipate increased activity by regulators in pursuing consumer protection claims going forward.



Several rules and regulations have recently been proposed or adopted that may substantially affect issuers of asset-backed securities.

32 -------------------------------------------------------------------------------- On December 10, 2013, the Federal Reserve, the Office of the Comptroller of the Currency, the FDIC, and the SEC approved joint final regulations implementing the provisions of the Reform Act commonly referred to as the "Volcker Rule." Generally, the Volcker Rule and the implementing regulations prohibit any banking entity from engaging in proprietary trading and from investing in, sponsoring, or having certain relationships with a hedge fund or private equity fund, subject to exemptions for certain permitted activities. These regulations limit our ability to engage in the types of transactions covered by the Volcker Rule, and may impose compliance, monitoring, and reporting obligations on us and WFB under certain circumstances. Although the effective date of the regulations is April 1, 2014, the Federal Reserve approved an extension of the conformance period until July 21, 2015. We are continuing to assess the impact, if any, that the Volcker Rule and the implementing regulation will have on our Retail, Direct, and Financial Services segments. The Cabela'sMaster Credit Card Trust and related entities (collectively referred to as the "Trust") is structured to qualify for the exemption from the Investment Company Act of 1940, as amended (the "Investment Company Act") provided by Investment Company Act Rule 3a-7. On August 31, 2011, the SEC issued an advance notice of proposed rulemaking regarding possible amendments to Investment Company Act Rule 3a-7. At this time, it is uncertain what form the related proposed and final rules will take, whether the Trust would continue to be eligible to rely on the exemption provided by Investment Company Act Rule 3a-7, and whether the Trust would qualify for any other Investment Company Act exemption. On July 26, 2011, the SEC re-proposed certain rules for asset-backed securities offerings ("SEC Regulation AB II"), which were originally proposed by the SEC on April 7, 2010. If adopted, SEC Regulation AB II would substantially change the disclosure, reporting, and offering process for public and private offerings of asset-backed securities. As currently proposed, SEC Regulation AB II would, among other things, impose as a condition for the shelf registration of asset-backed securities the filing of a certification concerning the disclosure contained in the prospectus and the design of the securitization at the time of each offering off the shelf and the appointment of a credit risk manager to review assets when credit enhancement requirements are not met or at the direction of investors. Issuers of publicly offered asset-backed securities would be required to disclose more information regarding the underlying assets. Moreover, proposed SEC Regulation AB II would alter the safe harbor standards for private placements of asset-backed securities imposing informational requirements similar to those applicable to registered public offerings. The final form that SEC Regulation AB II may take is uncertain at this time, but it may impact the Financial Services segment's ability and/or desire to sponsor securitization transactions in the future. On August 28, 2013, pursuant to the provisions of the Reform Act, the SEC, the Federal Reserve, the FDIC, and certain other federal agencies re-proposed regulations requiring securitization sponsors to retain an economic interest in assets that they securitize. We cannot predict at this time whether WFB's existing forms of risk retention will satisfy the regulatory requirements, whether structural changes will be necessary, or whether the final rules will impact the Financial Services segment's ability or desire to continue to rely on the securitization market for funding. On September 19, 2011, the SEC proposed a new rule under the Securities Act of 1933, as amended, to implement certain provisions of the Reform Act. Under the proposed rule, an underwriter, placement agent, initial purchaser, or sponsor of an asset-backed security, or any affiliate of any such person, shall not at any time within one year after the first closing of the sale of the asset-backed security engage in any transaction that would involve or result in any material conflict of interest with respect to any investor in a transaction arising out of such activity. The proposed rule would exempt certain risk mitigating hedging activities, liquidity commitments, and bona fide market-making activity. It is not clear how the final rule will differ from the proposed rule, if at all. The final rule's impact on the securitization market and the Financial Services segment is also unclear at this time. Visa Litigation Settlement - In June 2005, a number of entities, each purporting to represent a class of retail merchants, sued Visa and several member banks, and other credit card associations, alleging, among other things, that Visa and its member banks have violated United States antitrust laws by conspiring to fix the level of interchange fees. On July 13, 2012, the parties to this litigation announced that they had entered into a memorandum of understanding, which subject to certain conditions, including court approval, obligates the parties to enter into a settlement agreement to resolve the claims brought by the class members. On December 13, 2013, the settlement received final court approval. The settlement agreement requires, among other things, (i) the distribution to class merchants of an amount equal to 10 basis points of default interchange across all credit rate categories for a period of eight consecutive months, which otherwise would have been paid to issuers like WFB, (ii) Visa to change its rules to allow merchants to charge a surcharge on credit card transactions subject to a cap, and (iii) Visa to meet with merchant buying groups that seek to negotiate interchange rates collectively. To date, WFB has not been named as a defendant in any credit card industry lawsuits. We determined that the 10 basis point reduction of default interchange across all credit rate categories for the period of eight consecutive months from July 29, 2013, through March 28, 2014, would result in a reduction of interchange income of approximately $12.5 million in the Financial Services segment. Accordingly, a liability of $12.5 million was recorded as of December 29, 2012, to accrue for this settlement. 33 -------------------------------------------------------------------------------- In 2013, certain plaintiffs opted out of the proposed settlement resulting in management re-evaluating the impact of the 10 basis point reduction of default interchange to the Financial Services segment. Also, Visa issued interchange reduction reports to WFB through November 2013 resulting in assessments of $4.6 million. Based on re-evaluations due to opt-outs and analysis of the merchant charge volume based on the Visa interchange reduction reports, management determined that the estimated effect for this settlement should be reduced by $3.2 million as of December 28, 2013. Therefore, the remaining liability balance for this settlement was $4.7 million at December 28, 2013.



Operations Review

Our operating results expressed as a percentage of revenue were as follows for the years ended: 2013 2012 2011 Revenue 100.00 % 100.00 % 100.00 % Cost of revenue 56.42 56.86 57.39 Gross profit (exclusive of depreciation and amortization) 43.58 43.14



42.61

Selling, distribution, and administrative expenses 33.38 33.63



33.94

Impairment and restructuring charges 0.16 0.65 0.43 Operating income 10.04 8.86 8.24 Other income (expense): Interest expense, net (0.61 ) (0.65 ) (0.87 ) Other income, net 0.11 0.20 0.26 Total other income (expense), net (0.50 ) (0.45 ) (0.61 ) Income before provision for income taxes 9.54 8.41 7.63 Provision for income taxes 3.31 2.83 2.56 Net income 6.23 % 5.58 % 5.07 % 34

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Results of Operations - 2013 Compared to 2012 Revenues Retail revenue includes sales realized and customer services performed at our retail stores, sales from orders placed through our retail store website kiosks, and sales from customers utilizing our in-store pick-up program. Direct revenue includes sales from orders placed through our website, over the phone, and by mail where the merchandise is shipped to non-retail store locations. Financial Services revenue is comprised of interest and fee income, interchange income, other non-interest income, interest expense, provision for loan losses, and customer rewards costs from our credit card operations. Other revenue sources include fees for our hunting and fishing outfitter services, fees for our full-service travel agency business, real estate rental income and land sales, and other complementary business services. Comparisons and analysis of our revenues are presented below for the years ended: Increase 2013 % 2012 % (Decrease) % Change (Dollars in Thousands) Retail $ 2,233,322 62.0 % $ 1,849,582 59.4 % $ 383,740 20.7 % Direct 973,614 27.1 930,943 29.9 42,671 4.6 Financial Services 375,810 10.4 319,399 10.3 56,411 17.7 Other 16,831 0.5 12,758 0.4 4,073 31.9 Total $ 3,599,577 100.0 % $ 3,112,682 100.0 % $ 486,895 15.6



Product Sales Mix - The following table sets forth the percentage of our merchandise revenue contributed by major product categories for our Retail and Direct segments and in total for the years ended:

Retail Direct Total 2013 2012 2013 2012 2013 2012 Product Category: Hunting Equipment 51.0 % 49.5 % 41.2 % 37.1 % 48.0 % 45.3 % General Outdoors 26.8 28.7 29.1 32.0 27.5 29.8 Clothing and Footwear 22.2 21.8 29.7 30.9 24.5 24.9 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % The hunting equipment merchandise category includes a wide variety of firearms, ammunition, optics, archery products, and related accessories and supplies. The general outdoors merchandise category includes a full range of equipment and accessories supporting all outdoor activities, including all types of fishing and tackle products, boats and marine equipment, camping gear and equipment, food preparation and outdoor cooking products, all-terrain vehicles and accessories for automobiles and all-terrain vehicles, and gifts and home furnishings. The general outdoors merchandise category also includes wildlife and land management products and services, including compact tractors and tractor attachments. The clothing and footwear merchandise category includes fieldwear apparel and footwear, sportswear, casual clothing and footwear, and workwear products. Retail Revenue - Retail revenue increased $384 million, or 20.7%, in 2013 primarily due to an increase of $304 million in revenue from the addition of new retail stores comparing the respective periods and an increase in comparable store sales of $68 million. Retail revenue growth was led by an increase in the hunting equipment product category primarily from increases in firearms and ammunition, hunting apparel, archery, and optics, as well as men's apparel and general outdoors. Ammunition sales, while still above prior year levels, slowed during the third quarter of 2013 and decreased during the fourth quarter of 2013. 35 -------------------------------------------------------------------------------- We recognize revenue as gift certificates, gift cards, and e-certificates ("gift instruments") are redeemed for merchandise or services. We record gift instrument breakage as Retail revenue when the probability of redemption is remote. Gift instrument breakage recognized was $7 million and $8 million for 2013 and 2012, respectively. Our gift instrument liability at the end of 2013 and 2012 was $145 million and $135 million, respectively. Comparable store sales and analysis are presented below for the years ended: Increase 2013 2012 (Decrease) (Dollars in Thousands) Comparable stores sales $ 1,810,185$ 1,741,827$ 68,358 Comparable stores sales growth percentage 3.9 % 2.8 % Comparable store sales increased $68 million, or 3.9%, in 2013 principally because of the strength in our hunting equipment category. A store is included in our comparable store sales base on the first day of the month following the fifteen month anniversary of 1) its opening or acquisition, or 2) any changes to retail store space greater than 25% of total square footage of the store. Average sales per square foot for stores that were open during the entire year were $385 for 2013 compared to $362 for 2012. The increase in average sales per square foot is a result of our next-generation and Outpost stores performing better than our legacy stores on a sales per square foot basis. Additionally, the increase in comparable store sales contributed to the increase in average sales per square foot. Direct Revenue - Direct revenue increased $43 million, or 4.6%, in 2013 compared to 2012. The increase in Direct revenue compared to 2012 was primarily due to an increase in the hunting equipment product category. This increase was negatively impacted as ammunition growth slowed faster than we anticipated leading to a lower average customer order. Internet sales increased in 2013 compared to 2012. The number of visitors to our website increased 25.8% during 2013 as we continued to focus our efforts on utilizing Direct marketing programs to increase traffic to our website and social media networks. Our hunting equipment and clothing and footwear categories were the largest dollar volume contributors to our Direct revenue for 2013. The number of active Direct customers, which we define as those customers who have purchased merchandise from us in the last twelve months, remained even compared to 2012. We continue to focus on smaller, more specialized catalogs, and we have reduced the number of pages mailed and decreased total circulation, leading to continued reductions in catalog related costs. Mostly offsetting the reductions in catalog related costs were increases in website and mobile platform related expenses due to our expanded use of digital marketing channels and enhancements to our website. Increase 2013 2012 (Decrease) % Change Percentage increase year over year in our website visitors 25.8 % 18.3 % Pages of paper circulation (in millions) 13,165 17,433 (4,268 ) (24.5 )% Number of separate titles circulated 127 108 19 36 --------------------------------------------------------------------------------



Financial Services Revenue - The following table sets forth the components of our Financial Services revenue for the years ended:

Increase 2013 2012 (Decrease) % Change (Dollars in Thousands) Interest and fee income $ 343,353$ 301,699$ 41,654 13.8 % Interest expense (63,831 ) (54,092 ) 9,739 18.0 Provision for loan losses (43,223 ) (42,760 ) 463 1.1 Net interest income, net of provision for loan losses 236,299 204,847 31,452 15.4 Non-interest income: Interchange income 344,979 292,151 52,828 18.1 Other non-interest income 7,530 12,364 (4,834 ) (39.1 ) Total non-interest income 352,509 304,515 47,994 15.8 Less: Customer rewards costs (212,998 ) (189,963 ) 23,035 12.1 Financial Services revenue $ 375,810$ 319,399 $



56,411 17.7

Financial Services revenue increased $56 million, or 17.7%, in 2013 compared to 2012. The increase in interest and fee income of $42 million was due to an increase in credit card loans. The increase in interest expense of $10 million was due to the issuances of securitization and certificates of deposit in 2013, which were used to fund growth. The increases in interchange income of $53 million and customer rewards costs of $23 million were primarily due to an increase in credit card purchases. Also impacting interchange income was a $12.5 million accrual in 2012 for the estimated liability for the Visa settlement compared to a $3.2 million reduction of the estimated liability in 2013. The decrease in other non-interest income was a result of the discontinuance of our payment assurance program in the third quarter of 2012, partially offset by approximately $3 million of identity theft program income recognized in 2013. The following table sets forth the components of our Financial Services revenue as a percentage of average credit card loans, including any accrued interest and fees, for the years ended: 2013 2012 Interest and fee income 9.8 % 9.7 % Interest expense (1.8 ) (1.7 ) Provision for loan losses (1.2 ) (1.4 ) Interchange income 9.8 9.4 Other non-interest income 0.2 0.4 Customer rewards costs (6.1 ) (6.1 ) Financial Services revenue 10.7 % 10.3 % Interchange income as a percentage of average credit card loans, including any accrued interest and fees, would have been 9.8% for both 2013 and 2012, and Financial Services revenue as a percentage of average credit card loans, including any accrued interest and fees, would have been 10.6% and 10.7% for 2013 and 2012, respectively, excluding the effect of the $3.2 million increase and the $12.5 million decrease in 2013 and 2012, respectively, to interchange income from the Visa settlement. Our Cabela's CLUB Visa credit card loyalty program allows customers to earn points whenever and wherever they use their credit card, and then redeem earned points for products and services at our retail stores or through our Direct business. The percentage of our merchandise sold to customers using the Cabela's CLUB Visa credit card approximated 30% for 2013. The dollar amounts related to points are accrued as earned by the cardholder and recorded as a reduction in Financial Services revenue. The dollar amount of unredeemed credit card points and loyalty points was $146 million at the end of 2013 compared to $128 million at the end of 2012. 37

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Key statistics reflecting the performance of Cabela's CLUB are shown in the following chart for the years ended:

2013 2012



Increase (Decrease) % Change

(Dollars in Thousands Except



Average Balance per Account)

Average balance of credit card loans (1) $ 3,500,536$ 3,095,781 $ 404,755 13.1 % Average number of active credit card accounts 1,688,843 1,537,209 151,634 9.9 Average balance per active credit card account (1) $ 2,073$ 2,014 $ 59 2.9 Net charge-offs on credit card loans (1) $ 63,152$ 57,803 $ 5,349 9.3 Net charge-offs as a percentage of average credit card loans (1) 1.80 % 1.87 %



(0.07 )%

(1) Includes accrued interest and fees.

The average balance of credit card loans increased to $3.5 billion, or 13.1%, for 2013 compared to 2012 due to an increase in the number of active accounts and the average balance per account. We define an active credit card account as any account with an outstanding debit or credit balance at the end of any respective month. The average number of active accounts increased to 1.7 million, or 9.9%, compared to 2012 due to our successful marketing efforts in new account acquisitions. Net charge-offs as a percentage of average credit card loans decreased to 1.80% for 2013, down seven basis points compared to 2012, due to improvements in bankruptcies, delinquencies, and delinquency roll rates, partially offset by a decrease in recoveries. See "Asset Quality of Cabela's CLUB" in this report for additional information on trends in delinquencies and non-accrual loans and analysis of our allowance for loan losses. Other Revenue Other revenue increased $4 million in 2013 to $17 million compared to 2012 primarily due to an increase in real estate sales revenue in 2013 compared to 2012. Merchandise Gross Profit Merchandise gross profit is defined as merchandise sales less the costs of related merchandise sold and shipping costs. Comparisons of gross profit and gross profit as a percentage of revenue for our operations, year over year, and to the retail industry in general, are impacted by: • shifts in customer preferences;



• retail store, distribution, and warehousing costs (including depreciation

and amortization), which we exclude from our cost of revenue;

• royalty fees we include in merchandise sales for which there are no costs of

revenue; • Financial Services revenue we include in revenue for which there are no costs of revenue; • real estate land sales we include in revenue for which costs vary by transaction;



• customer service related revenue we include in revenue for which there are

no costs of revenue; and

• customer shipping charges in revenue.

Comparisons and analysis of our gross profit on merchandising revenue are presented below for the years ended:

Increase 2013 2012 (Decrease) % Change (Dollars in Thousands) Merchandise sales $ 3,205,632$ 2,778,903$ 426,729 15.4 % Merchandise gross profit 1,178,440 1,009,742 168,698 16.7 Merchandise gross profit as a percentage of merchandise sales 36.8 % 36.3 % 0.5 % 38

-------------------------------------------------------------------------------- Merchandise Gross Profit - Our merchandise gross profit increased $169 million, or 16.7%, to $1.2 billion in 2013 compared to 2012. The increase in our merchandise gross profit was primarily due to firearms and ammunition, as well as continued improvements in vendor collaboration, an increase in private label products, and further advancements in price optimization. Ammunition sales, while still above prior year levels, slowed during the third quarter of 2013 and decreased during the fourth quarter of 2013 compared to the fourth quarter of 2012. Our merchandise gross profit as a percentage of merchandise sales increased to 36.8% in 2013 from 36.3% in 2012. The increase in the merchandise gross profit as a percentage of merchandise sales in 2013 compared to 2012 was primarily due to the elimination of free shipping to Cabela's CLUB members, increased penetration of Cabela's brand merchandise, fewer sales discounts and markdowns, and higher margins in a our soft goods category. The increase in our merchandise gross profit as a percentage of merchandise sales was enhanced by the shift from firearms and ammunition to our soft goods categories, and was partially offset by the overall increase in sales of firearms and ammunition year over year, which carry a lower margin. Selling, Distribution, and Administrative Expenses Selling, distribution, and administrative expenses include all operating expenses related to our retail stores, website, distribution centers, product procurement, Cabela's CLUB credit card operations, and overhead costs, including: advertising and marketing, catalog costs, employee compensation and benefits, occupancy costs, information systems processing, and depreciation and amortization. Comparisons and analysis of our selling, distribution, and administrative expenses are presented below for the years ended: 2013 2012 Increase (Decrease) % Change (Dollars in Thousands) Selling, distribution, and administrative expenses $ 1,201,519$ 1,046,861 $ 154,658 14.8 % SD&A expenses as a percentage of total revenue 33.4 % 33.6 % (0.2 )% Retail store pre-opening costs $ 22,405$ 12,523 $ 9,882 78.9 % Selling, distribution, and administrative expenses increased $155 million, or 14.8%, in 2013 compared to 2012. However, expressed as a percentage of total revenue, selling, distribution, and administrative expenses decreased 20 basis points to 33.4% in 2013 compared to 33.6% in 2012. The most significant factors contributing to the changes in selling, distribution, and administrative expenses in 2013 compared to 2012 included: • an increase of $92 million in employee compensation, benefits, and contract



labor primarily due to the opening of new retail stores and increases in

staff for other retail stores, merchandising support areas, distribution

centers, credit card growth support, and general corporate overhead support;

• an increase of $23 million in building costs and depreciation primarily

related to the operations and maintenance of our new and existing retail

stores as well as corporate offices;

• an increase of $13 million in advertising, promotional, and direct marketing

costs to support customer relationships, for new store openings, and from an

increase in account origination costs in our Financial Services segment;

• an increase of $10 million in professional fees; and

• an increase of $6 million in equipment supplies and software expense

primarily to support operational growth.

Significant changes in our selling, distribution, and administrative expenses related to specific business segments included the following:

Retail Segment: • An increase of $54 million in employee compensation, benefits, and contract labor primarily due to the opening of new retail stores and increases in staff for other retail stores and merchandising teams. • An increase of $15 million in building costs primarily related to the operations and maintenance of our new and existing retail stores.



• An increase of $10 million in advertising and promotional costs related to

new and existing retail stores. • An increase of $5 million in professional fees and an increase of $1 million in equipment supplies and software expense primarily to support operational growth. 39

--------------------------------------------------------------------------------



Direct Segment: • An increase of $3 million in employee compensation, benefits, and contract

labor. • An increase of $2 million in advertising and direct marketing costs



primarily due to increased expenses related to our expanded use of digital

marketing channels and enhancements to our website, partially offset by reduced catalog related costs.



• An increase of $2 million in professional fees.

Financial Services Segment: • An increase of $5 million in employee compensation, benefits, and contract

labor principally for positions added to support the growth of credit card

operations.

• An increase of $2 million in professional fees.

Corporate Overhead, Distribution Centers, and Other: • An increase of $30 million in employee compensation, benefits, and contract labor in general corporate and the distribution centers to support operational growth. • An increase of $8 million in building costs primarily related to the maintenance and expansion of our administrative buildings.



• An increase of $5 million in equipment supplies and software expense

primarily related to new equipment and updates to support operational

growth. • An increase of $1 million in professional fees and an increase of $1 million in advertising and promotional costs.



Impairment and Restructuring Charges

Impairment losses consisted of the following for the years ended:

2013 2012



Impairment losses relating to: Accumulated amortization of deferred grant income $ 4,931$ 1,309 Property, equipment, and other assets

937 1,321 Other property - 17,694 Total $ 5,868$ 20,324 Long-lived assets are evaluated for possible impairment (i) whenever changes in circumstances may indicate that the carrying value of an asset may not be recoverable and (ii) at least annually for recurring fair value measurements and for those assets not subject to amortization. In 2013 and 2012, we evaluated the recoverability of economic development bonds, property (including existing store locations and future retail store sites), equipment, goodwill, other property, and other intangible assets. On February 4, 2014, a U. S. district court entered a judgment against the Company in the amount of $14 million. This judgment consists of two issues. The court ordered us to repay a $5 million incentive that we received in conjunction with a retail store we opened in 2007. In addition, a jury trial determined that we pay $9 million relating to the real property we received in 2007. Pursuant to this judgment, we recognized a liability of $14 million at December 28, 2013, including an estimated amount for legal fees and costs, in our consolidated balance sheet. The recognition of this liability at December 28, 2013, to repay these grants resulted in the Company recording an increase to the carrying amount of the related retail store property through a reduction in deferred grant income by the amount repayable, plus legal and other costs. The cumulative additional depreciation that would have been recognized through December 28, 2013, as an expense in the absence of these grants was recognized in 2013 as depreciation expense. Therefore, the adjustment that reduced the deferred grant income of this retail store property at December 28, 2013, resulted in an increase in depreciation expense of $5 million in 2013, which was included in impairment and restructuring charges in the consolidated statements of income. This impairment loss was recorded to the Retail segment. Refer to Note 14 "Impairment and Restructuring Charges" of the Notes to Consolidated Financial Statements for additional financial information regarding this matter. 40 -------------------------------------------------------------------------------- We recognized an impairment loss totaling $1 million in 2013 related to the store closure of our former Winnipeg, Manitoba, Canada, retail site. The impairment loss of $1 million included leasehold improvements write-offs as well as lease cancellation and restoration costs. This impairment loss was recorded to the Retail and Corporate Overhead and Other segments. In 2004, the Company acquired property near Denver, Colorado ("the Colorado Property") with the intent to build a Cabela's retail store at that location. The appraised value of the Colorado Property at that time was based on the projected cash flows from the Company's prospective retail store development. In the second quarter ended June 2011, we made a decision not to locate a retail store on the Colorado Property, nor to further develop the Colorado Property, but to dispose of it, and instead to build two retail stores in different locations in the greater Denver area. We publicly announced this decision in July 2011. As a result, we classified the Colorado Property as other property in the Corporate Overhead and Other segment. Shortly after we publicly announced that we would not develop a retail store on the Colorado Property, we received a letter of intent from a developer offering to purchase the property. The letter of intent provided evidence of the fair value of the Colorado Property, which, at the time, resulted in an impairment loss of $3 million that was recognized in the third quarter of 2011. The developer's purchase offer expired in 2012, and the Company continued to market the property for sale and sought an appraisal. In January 2013, we received an appraisal report on the Colorado Property. This appraisal report concluded that the carrying value of the Colorado Property was higher than the estimated fair value, resulting in an additional impairment loss of $15 million, which was recognized in the fourth quarter of 2012. After the impairment loss was recognized, the carrying value of the Colorado Property was $6 million at the end of 2012. The 2013 appraisal was based on the sales comparison approach to estimate the "as-is" fee simple market value of the subject property (Level 2 inputs). The appraiser determined that the highest and best use of the Colorado Property was as raw land, because the demographics, excess retail space, and the economy in the geographic area would no longer support a value high enough to justify the cost of developing the property. At December 2013 and 2012, we classified all of our unimproved land not used in our merchandising business as "other property" and included the carrying value of $15 million and $23 million at the end of 2013 and 2012, respectively, in other assets in the consolidated balance sheet. We intend to sell any of our remaining other property as soon as any such sale could be economically feasible, and we continue to monitor such property for impairment. In the fourth quarter of 2012, we also recognized an impairment loss on a second property based on an arms-length sales contract of adjoining land anticipated to close in mid-2013 (Level 2 inputs). Subsequently, this tract of land was sold in December 2013. No adjustments to the carrying value of other properties were recognized in 2013. We recognized impairment losses on other property of $18 million in 2012. There were no impairment losses related to other property in 2013. In the fourth quarter of 2012, we received information on one project that the development would be delayed thus reducing the amount expected to be received and delaying the timing of projected cash flows. Therefore, the fair value of this economic development bond was determined to be below carrying value, with the decline in fair value deemed to be other than temporary. This fair value adjustment totaled $5 million in 2012, reduced the carrying value of the economic development bond portfolio at the end 2012 and resulted in corresponding reductions in deferred grant income. This reduction in deferred grant income resulted in increases in depreciation expense of $1 million in 2012, which has been included in impairment and restructuring charges in the consolidated statements of income. The discounted cash flow models for our other bonds did not result in other than temporary impairments. In 2013, none of the bonds with a fair value below carrying value were deemed to have other than a temporary impairment. At the end of 2012, the total amount of impairment adjustments that were made to deferred grant income, which has been recorded as a reduction of property and equipment, was $39 million. These impairment adjustments made to deferred grant income resulted from events or changes in circumstances that indicated the amount of deferred grant income may not be recovered or realized in cash through collection, sales, or other proceeds from the economic development bonds. All impairment and restructuring charges related to economic development bonds were recorded to the Corporate Overhead and Other segment. 41

--------------------------------------------------------------------------------



Operating Income

Operating income is revenue less cost of revenue, selling, distribution, and administrative expenses, and impairment and restructuring charges. Operating income for our merchandise business segments excludes costs associated with operating expenses of distribution centers, procurement activities, and other corporate overhead costs. Comparisons and analysis of operating income are presented below for the years ended: 2013 2012 Increase (Decrease) % Change (Dollars in Thousands) Total operating income $ 361,361$ 275,699 $ 85,662 31.1 % Total operating income as a percentage of total revenue 10.0 % 8.9 % 1.1 % Operating income by business segment: Retail $ 428,361$ 345,040 $ 83,321 24.1 Direct 157,227 155,237 1,990 1.3 Financial Services 104,402 74,182 30,220 40.7 Operating income as a percentage of segment revenue: Retail 19.2 % 18.7 % 0.5 % Direct 16.1 16.7 (0.6 ) Financial Services 27.8 23.2 4.6 Operating income increased $86 million, or 31.1%, in 2013 compared to 2012, and operating income as a percentage of revenue increased 110 basis points to 10.0% for 2013. The increase in total operating income was primarily due to increases in revenue from all business segments as well as an increase in our merchandise gross profit. This improvement was partially offset by higher consolidated operating expenses. Selling, distribution, and administrative expenses increased in 2013 compared to 2012 primarily due to increases in comparable and new store costs and related support areas. Under an Intercompany Agreement, the Financial Services segment pays to the Retail and Direct business segments a fixed license fee equal to 70 basis points on all originated charge volume of the Cabela's CLUB Visa credit card portfolio. In addition, among other items, the agreement requires the Financial Services segment to reimburse the Retail and Direct segments for certain operating and promotional costs. Fees paid under the Intercompany Agreement by the Financial Services segment to these two segments increased $18 million in 2013 compared to 2012; a $19 million increase to the Retail segment and a $1 million decrease to the Direct segment. Interest (Expense) Income, Net Interest expense, net of interest income, increased $2 million to $22 million in 2013 compared to $20 million in 2012. Interest expense is accrued on our revolving credit facilities and long-term debt as well as on unrecognized tax benefits.



Other Non-Operating Income, Net

Other non-operating income was $4 million in 2013 compared to $6 million in 2012. This income is primarily from interest earned on our economic development bonds.

Provision for Income Taxes Our effective tax rate was 34.7% in 2013 compared to 33.7% in 2012. The effective tax rates for both years differed from our statutory rate primarily due to the mix of taxable income between the United States and foreign tax jurisdictions. The balance of unrecognized tax benefits, which was classified with long-term liabilities in the consolidated balance sheet, totaled $65 million at December 28, 2013, compared to $39 million at December 29, 2012. 42 --------------------------------------------------------------------------------

Results of Operations - 2012 Compared to 2011 Revenues Comparisons and analysis of our revenues are presented below for the years ended: Increase 2012 % 2011 % (Decrease) % Change (Dollars in Thousands) Retail $ 1,849,582 59.4 % $ 1,550,442 55.2 % $ 299,140 19.3 % Direct 930,943 29.9 956,834 34.0 (25,891 ) (2.7 ) Financial Services 319,399 10.3 291,746 10.4 27,653 9.5 Other 12,758 0.4 12,144 0.4 614 5.1 $ 3,112,682 100.0 % $ 2,811,166 100.0 % $ 301,516 10.7



Product Sales Mix - The following table sets forth the percentage of our merchandise revenue contributed by major product categories for our Retail and Direct segments and in total for the years ended:

Retail Direct Total 2012 2011 2012 2011 2012 2011 Product Category: Hunting Equipment 49.5 % 45.7 % 37.1 % 33.4 % 45.3 % 41.1 % General Outdoors 28.7 30.7 32.0 32.7 29.8 31.5 Clothing and Footwear 21.8 23.6 30.9 33.9 24.9 27.4 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Retail Revenue - Retail revenue increased $299 million, or 19.3%, in 2012 primarily due to an increase of $195 million in revenue from the addition of new retail stores comparing year over year and an increase in revenue from comparable store sales of $102 million. Retail revenue growth, including the increase in comparable store sales, was led by increases in the hunting equipment product category in large part due to increased sales of firearms and ammunition. Gift instrument breakage recognized was $8 million, $7 million, and $5 million for 2012, 2011, and 2010, respectively. Comparable store sales and analysis are presented below for the years ended: Increase 2012 2011 (Decrease) (Dollars in Thousands) Comparable stores sales $ 1,573,824$ 1,472,032$ 101,792 Comparable stores sales growth percentage 6.9 % 2.8 % Comparable store sales increased $102 million, or 6.9%, in 2012 principally because of the strength in our hunting equipment category. Average sales per square foot for stores that were open during the entire year were $362 for 2012 compared to $328 for 2011. The increase in average sales per square foot resulted from the increase in comparable store sales. In addition, our next-generation stores performed better on a sales per square foot basis than our legacy stores. Direct Revenue - Our Direct revenue decreased $26 million, or 2.7%, in 2012 compared to 2011. The decrease in Direct revenue compared to 2011 was primarily due to a decrease in the clothing and footwear product category and a decrease in revenue from our catalog and call centers. These decreases in Direct revenue were partially offset by increased sales attributable to the CLUB Visa free shipping offer and advertising promotions in digital marketing. The free shipping offer to our Cabela's CLUB Visa customers resulted in increased merchandise sales, greater order frequency, and increases in the number of new Visa cardholder accounts. 43 -------------------------------------------------------------------------------- Internet sales increased in 2012 compared to 2011. The number of website visitors increased 18.3% during 2012 as we continued to focus our efforts on utilizing Direct marketing programs to increase traffic to our website and social media networks. Our hunting equipment and clothing and footwear categories were the largest dollar volume contributor to our Direct revenue for 2012. The number of active Direct customers, which we define as those customers who have purchased merchandise from us in the last twelve months, remained even compared to 2011. We continued to focus on smaller, more specialized catalogs, and we have reduced the number of pages mailed and decreased total circulation, leading to continued reductions in catalog related costs. Mostly offsetting the reductions in catalog related costs were increases in Internet related expenses due to our expanded use of digital marketing channels and enhancements to our website. Financial Services Revenue - The following table sets forth the components of our Financial Services revenue for the years ended: Increase 2012 2011 (Decrease) % Change (Dollars in Thousands) Interest and fee income $ 301,699$ 277,242$ 24,457 8.8 % Interest expense (54,092 ) (70,303 ) (16,211 ) (23.1 ) Provision for loan losses (42,760 ) (39,287 ) 3,473 8.8 Net interest income, net of provision for loan losses 204,847 167,652 37,195 22.2 Non-interest income: Interchange income 292,151 267,106 25,045 9.4 Other non-interest income 12,364 13,620 (1,256 ) (9.2 ) Total non-interest income 304,515 280,726 23,789 8.5 Less: Customer rewards costs (189,963 ) (156,632 ) 33,331 21.3 Financial Services revenue $ 319,399$ 291,746 $



27,653 9.5

Financial Services revenue increased $28 million, or 9.5%, in 2012 compared to 2011. The increase in interest and fee income of $24 million was due to an increase in credit card loans, partially offset by changes in the mix of credit card loan balances at each interest rate. Interest expense decreased $16 million due to decreases in interest rates. The provision for loan losses increased $3 million in 2012 compared to 2011 due to growth in our credit card loan balances, even though our net charge-off rates and allowance for loan losses decreased. The increase in interchange income of $25 million was due to an increase in credit card purchases, partially offset by $12.5 million pursuant to the proposed settlement regarding the Visa litigation. Customer rewards costs increased $33 million due to an increase in credit card purchases. The following table sets forth the components of our Financial Services revenue as a percentage of average managed credit card loans, including any accrued interest and fees, for the years ended: 2012 2011 Interest and fee income 9.7 % 10.1 % Interest expense (1.7 ) (2.6 ) Provision for loan losses (1.4 ) (1.4 ) Interchange income 9.4 9.7 Other non-interest income 0.4 0.5 Customer rewards costs (6.1 ) (5.7 ) Financial Services revenue 10.3 % 10.6 % Excluding the effect of the $12.5 million adjustment reducing interchange income from the proposed Visa settlement, interchange income and Financial Services revenue as a percentage of average credit card loans, including any accrued interest and fees, would have been 9.8% and 10.7%, respectively. 44 --------------------------------------------------------------------------------



Key statistics reflecting the performance of Cabela's CLUB are shown in the following chart for the years ended:

2012 2011



Increase (Decrease) % Change

(Dollars in Thousands Except



Average Balance per Account)

Average balance of managed credit card loans (1) $ 3,095,781$ 2,745,118 $ 350,663 12.8 % Average number of active credit card accounts 1,537,209 1,416,887 120,322 8.5 Average balance per active credit card account (1) $ 2,014$ 1,937 $ 77 4.0 Net charge-offs on managed loans (1) $ 57,803$ 64,520 $ (6,717 ) (10.4 ) Net charge-offs as a percentage of average managed credit card loans (1) 1.87 % 2.35 %



(0.48 )%

(1) Includes accrued interest and fees.

The average balance of credit card loans increased to $3.1 billion, or 12.8%, for 2012 compared to 2011 due to an increase in the number of active accounts and the average balance per account. The average number of active accounts increased to 1.5 million, or 8.5%, compared to 2011 due to our successful marketing efforts in new account acquisitions. Net charge-offs as a percentage of average credit card loans decreased to 1.87% for 2012, down 48 basis points compared to 2011, due to improvements in delinquencies and delinquency roll-rates. Other Revenue Other revenue increased $1 million in 2012 to $13 million compared to 2011 primarily due to an increase of $1 million in real estate sales revenue in 2012 compared to 2011. Merchandise Gross Profit Comparisons and analysis of our gross profit on merchandising revenue are presented below for the years ended: Increase 2012 2011 (Decrease) % Change (Dollars in Thousands) Merchandise sales $ 2,778,903$ 2,505,733$ 273,170 10.9 % Merchandise gross profit 1,009,742 892,492 117,250 13.1 Merchandise gross profit as a percentage of merchandise sales 36.3 % 35.6 %



0.7 %

Merchandise Gross Profit - Our merchandise gross profit increased $117 million, or 13.1%, to $1 billion in 2012 compared to 2011. The increase in our merchandise gross profit was primarily due to better inventory management, which reduced the need to mark down product, continued improvements in vendor collaboration, an ongoing focus on private label products, and further improvements in price optimization. Our merchandise gross profit as a percentage of merchandise sales increased to 36.3% in 2012 from 35.6% in 2011. The increase in the merchandise gross profit as a percentage of merchandise sales in 2012 compared to 2011 was primarily due to continued improvements in pre-season and in-season inventory management and vendor collaboration, which allowed us to avoid significant end of season markdowns as we transitioned from fall to spring merchandise. The increase in our merchandise gross profit as a percentage of merchandise sales was partially offset by an adverse product mix shift due to increased sales of firearms, ammunition, and power sports products, which carry a lower margin. 45 --------------------------------------------------------------------------------



Selling, Distribution, and Administrative Expenses Comparisons and analysis of our selling, distribution, and administrative expenses were as follows for the years ended:

2012 2011 Increase (Decrease) % Change (Dollars in Thousands) Selling, distribution, and administrative expenses $ 1,046,861$ 954,125 $ 92,736 9.7 % SD&A expenses as a percentage of total revenue 33.6 % 33.9 % (0.3 )% Retail store pre-opening costs $ 12,523$ 9,700 $ 2,823 29.1 Selling, distribution, and administrative expenses increased $93 million, or 9.7%, in 2012 compared to 2011. Expressed as a percentage of total revenue, selling, distribution, and administrative expenses decreased 30 basis points to 33.6% in 2012 compared to 33.9% in 2011. The most significant factors contributing to the changes in selling, distribution, and administrative expenses in 2012 compared to 2011 included: • an increase of $59 million in employee compensation, benefits, and contract



labor primarily due to the opening of new retail stores and increases in

staff for other retail stores, merchandising support areas, distribution

centers, credit card growth support, and general corporate overhead support;

• an increase of $15 million in building costs and depreciation primarily

related to the operations and maintenance of our new and existing retail

stores as well as corporate offices;

• an increase of $11 million in advertising and direct marketing costs, in

advertising and promotional costs to support customer relationships, for new

store openings, and from an increase in account origination costs in our

Financial Services segment; and

• an increase of $3 million in equipment and software expense primarily to

support operational growth.

Significant selling, distribution, and administrative expense increases and decreases related to specific business segments included the following: Retail Segment: • An increase of $29 million in employee compensation, benefits, and contract

labor primarily due to the opening of new retail stores and increases in staff for other retail stores and merchandising teams. • An increase of $12 million in building costs primarily related to the operations and maintenance of our new and existing retail stores.



• An increase of $15 million in advertising and promotional costs related to

new and existing retail stores.

Direct Segment: • A net increase of $3 million in advertising and direct marketing costs

primarily due to increases in Internet related expenses due to our expanded

use of digital marketing channels and enhancements to our website, partially

offset by reduced catalog related costs.

• An increase of $1 million in building costs and depreciation primarily

related to improvements to our distribution centers.

• A decrease of $2 million in employee compensation, benefits, and contract

labor.



Financial Services Segment: • An increase of $8 million in employee compensation, benefits, and contract

labor principally for positions added to support the growth of credit card

operations.

• A decrease of $7 million in advertising and promotional costs primarily due

to the classification of new account origination costs.

• An increase of $2 million in losses from fraudulent transactions on Cabela's

CLUB Visa cards. 46

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Corporate Overhead, Distribution Centers, and Other: • An increase of $24 million in employee compensation and benefits in general

corporate and the distribution centers to support operational growth.

• An increase of $4 million in equipment and software expense primarily

related to new equipment and updates to support operational growth. • An increase of $2 million in building costs primarily related to the maintenance and expansion of our administrative buildings. Impairment and Restructuring Charges Impairment and restructuring charges consisted of the following for the years ended: 2012 2011 Impairment losses relating to: Other property $ 17,694 $



4,617

Property, equipment, and other assets 1,321



154

Accumulated amortization of deferred grant income 1,309



6,538

20,324



11,309

Restructuring charges for severance and related benefits - 935 Total $ 20,324$ 12,244 In December 2012, we received an appraisal report that updated the value from a previous appraisal on one property held for sale. Results from the 2012 appraisal report concluded that the carrying value was higher than the estimated fair value, resulting in an impairment loss. This 2012 appraisal was based on the sales comparison approach to estimate the "as-is" fee simple market value of the subject property. This approach involved a process in which a market value estimate was derived from analyzing the market for similar properties that have sold or that were available for sale (Level 2 inputs). In the fourth quarter of 2012, we also impaired a second property held for sale based on an arms-length sales contract of adjoining land anticipated to close in mid-2013 (Level 2 inputs). In 2011, we wrote down the carrying value of certain other property based on signed agreements for their sale. We recognized impairment losses on other property of $18 million and $5 million in 2012 and 2011, respectively. In the fourth quarter of 2012, we received information on one project that the development would be delayed thus reducing the amount expected to be received and delaying the timing of projected cash flows. Therefore, the fair value of this economic development bond was determined to be below carrying value, with the decline in fair value deemed to be other than temporary. In the fourth quarter of 2011, we received information on three projects that development was either delayed or that actual tax revenues were lower than estimated, thus reducing the amount expected to be received and delaying the timing of projected cash flows. Therefore, the discounted cash flows indicated that the fair value of these three economic development bonds was below carrying value, with the decline in fair value deemed to be other than temporary. These fair value adjustments totaling $5 million and $24 million in 2012 and 2011, respectively, reduced the carrying value of the economic development bond portfolio at the end of 2012 and 2011 and resulted in corresponding reductions in deferred grant income. These reductions in deferred grant income resulted in increases in depreciation expense of $1 million and $7 million in 2012 and 2011, respectively, which were included in impairment and restructuring charges in the consolidated statements of income. The discounted cash flow models for our other bonds did not result in other than temporary impairments. At the end of 2012 and 2011, the total amount of impairment adjustments that were made to deferred grant income, which has been recorded as a reduction of property and equipment, was $39 million and $34 million, respectively. These impairment adjustments made to deferred grant income resulted from events or changes in circumstances that indicated the amount of deferred grant income may not be recovered or realized in cash through collection, sales, or other proceeds from the economic development bonds. In 2011, we incurred charges totaling $1 million for severance and related benefits primarily from outplacement costs and a voluntary retirement plan. All impairment and restructuring charges were recorded to the Corporate Overhead and Other segment. 47

-------------------------------------------------------------------------------- Operating Income Comparisons and analysis of operating income comparisons were as follows for the years ended: 2012 2011 Increase (Decrease) % Change (Dollars in Thousands) Total operating income $ 275,699$ 231,548 $ 44,151 19.1 % Total operating income as a percentage of total revenue 8.9 % 8.2 % 0.7 % Operating income by business segment: Retail $ 345,040$ 263,010 $ 82,030 31.2 Direct 155,237 172,163 (16,926 ) (9.8 ) Financial Services 74,182 59,032 15,150 25.7 Operating income as a percentage of segment revenue: Retail 18.7 % 17.0 % 1.7 % Direct 16.7 18.0 (1.3 ) Financial Services 23.2 20.2 3.0 Operating income increased $44 million, or 19.1%, in 2012 compared to 2011, and operating income as a percentage of revenue increased 70 basis points to 8.9% for 2012. The increases in total operating income and total operating income as a percentage of total revenue were primarily due to increases in revenue from our Retail and Financial Services segments as well as an increase in our merchandise gross profit. These increases were partially offset by lower revenue from our Direct business, higher consolidated operating expenses, and higher impairment losses primarily related to land held for sale. In addition, interchange income in 2012 in our Financial Services segment was reduced by $12.5 million pursuant to the proposed settlement regarding the Visa litigation. Selling, distribution, and administrative expenses increased in 2012 compared to 2011 primarily due to increases in comparable and new store costs and related support areas. Prior to January 1, 2012, under an Intercompany Agreement, the Financial Services segment had incurred a marketing fee that was paid to the Retail and Direct segments. Effective January 1, 2012, this Intercompany Agreement was amended with the marketing fee component eliminated and replaced with a fixed license fee equal to 70 basis points on all originated charge volume of the Cabela's CLUB Visa credit card portfolio. In addition, among other changes, the agreement requires the Financial Services segment to reimburse the Retail and Direct segments for certain operating and promotional costs. Reported operating income by segment, and the components of operating income for each segment, were not materially impacted for 2012 compared to prior years by the amendments to the Intercompany Agreement. Fees paid under the Intercompany Agreement by the Financial Services segment to these two segments increased $14 million in 2012 compared to 2011 - a $16 million increase to the Retail segment and a $2 million decrease to the Direct business segment. Interest (Expense) Income, Net Interest expense, net of interest income, decreased $4 million to $20 million in 2012 compared to $24 million in 2011. Interest expense is accrued on our revolving credit facilities and long-term debt as well as on unrecognized tax benefits. The decrease in interest expense was primarily due to an increase in capitalized interest in 2012 compared to 2011.



Other Non-Operating Income, Net

Other non-operating income was $6 million for 2012 and $7 million for 2011. This income was primarily from interest earned on our economic development bonds.

48 -------------------------------------------------------------------------------- Provision for Income Taxes Our effective tax rate was 33.7% in 2012 compared to 33.5% in 2011. The effective tax rates for both years differed from our statutory rate primarily due to the mix of taxable income between the United States and foreign tax jurisdictions. The balance of unrecognized tax benefits, which was classified with long-term liabilities in the consolidated balance sheet, totaled $39 million at December 29, 2012, compared to $38 million at December 31, 2011. Asset Quality of Cabela's CLUB Delinquencies and Non-Accrual We consider the entire balance of an account, including any accrued interest and fees, delinquent if the minimum payment is not received by the payment due date. Our aging method is based on the number of completed billing cycles during which a customer has failed to make a required payment. As part of collection efforts, a credit card loan may be closed and placed on non-accrual or restructured in a fixed payment plan prior to charge off. Our fixed payment plans require payment of the loan within 60 months and consist of a lower interest rate, reduced minimum payment, and elimination of fees. Loans on fixed payment plans include loans in which the customer has engaged a consumer credit counseling agency to assist them in managing their debt. Customers who miss two consecutive payments once placed on a payment plan or non-accrual will resume accruing interest at the rate they had accrued at before they were placed on a plan. Interest and fees are accrued in accordance with the terms of the applicable cardholder agreements or payment plan on credit card loans until the date of charge-off unless placed on non-accrual. Payments received on non-accrual loans will be applied to principal and reduce the amount of the loan. The quality of our credit card loan portfolio at any time reflects, among other factors: 1) the creditworthiness of cardholders, 2) general economic conditions, 3) the success of our account management and collection activities, and 4) the life-cycle stage of the portfolio. During periods of economic weakness, delinquencies and net charge-offs are more likely to increase. We have mitigated periods of economic weakness by selecting a customer base that is very creditworthy. We use the scores of Fair Isaac Corporation ("FICO"), a widely-used tool for assessing an individual's credit rating, as the primary credit quality indicator. The median FICO score of our credit cardholders was 793 at the end of both 2013 and 2012. The following table reports delinquencies, including any delinquent non-accrual and restructured credit card loans, as a percentage of our credit card loans, including any accrued interest and fees, in a manner consistent with our monthly external reporting for the years ended: 2013 2012 2011



Number of days delinquent: Greater than 30 days 0.69 % 0.72 % 0.87 % Greater than 60 days 0.42 0.46 0.53 Greater than 90 days 0.22 0.24 0.27

Delinquencies declined as a result of improvements in the economic environment and our conservative underwriting criteria and active account management.

49 --------------------------------------------------------------------------------



The table below shows delinquent, non-accrual, and restructured loans as a percentage of our credit card loans, including any accrued interest and fees, at the years ended:

2013 2012



2011

Number of days delinquent and still accruing (1): Greater than 30 days 0.57 % 0.57 % 0.64 % Greater than 60 days 0.35 0.36 0.38 Greater than 90 days 0.19 0.19 0.20



(1) Excludes non-accrual and restructured loans which are presented below.

Non-accrual 0.13 0.17 0.20 Restructured 0.95 1.35 1.91



Allowance for Loan Losses and Charge-offs

The allowance for loan losses represents management's estimate of probable losses inherent in the credit card loan portfolio. The allowance for loan losses is established through a charge to the provision for loan losses and is regularly evaluated by management for adequacy. Loans on a payment plan or non-accrual are segmented from the rest of the credit card loan portfolio into a restructured credit card loan segment before establishing an allowance for loan losses as these loans have a higher probability of loss. Management estimates losses inherent in the credit card loans segment and restructured credit card loans segment based on a model which tracks historical loss experience on delinquent accounts, bankruptcies, death, and charge-offs, net of estimated recoveries. The Financial Services segment uses a migration analysis and historical bankruptcy and death rates to estimate the likelihood that a credit card loan in the credit card loan segment will progress through the various stages of delinquency and to charge-off. This analysis estimates the gross amount of principal that will be charged off over the next twelve months, net of recoveries. The Financial Services segment uses historical charge-off rates to estimate the likelihood that a restructured credit card loan will charge-off over the life of the loan, net of recoveries. This estimate is used to derive an estimated allowance for loan losses. In addition to these methods of measurement, management also considers other factors such as general economic and business conditions affecting key lending areas, credit concentration, changes in origination and portfolio management, and credit quality trends. Since the evaluation of the inherent loss with respect to these factors is subject to a high degree of uncertainty, the measurement of the overall allowance is subject to estimation risk, and the amount of actual losses can vary significantly from the estimated amounts. Charge-offs consist of the uncollectible principal, interest, and fees on a customer's account. Recoveries are the amounts collected on previously charged-off accounts. Most bankcard issuers charge off accounts at 180 days. We charge off credit card loans on a daily basis after an account becomes at a minimum 130 days contractually delinquent to allow us to manage the collection process more efficiently. Accounts relating to cardholder bankruptcies, cardholder deaths, and fraudulent transactions are charged off earlier. The Financial Services segment records charged-off cardholder fees and accrued interest receivable directly against interest and fee income included in Financial Services revenue. 50 --------------------------------------------------------------------------------



The following table shows the activity in our allowance for loan losses and charge off activity for the years ended:

2013 2012 2011 (Dollars in Thousands) Balance, beginning of year $ 65,600$ 73,350$ 90,900 Provision for loan losses 43,223 42,760 39,287 Charge-offs (72,959 ) (68,834 ) (75,599 ) Recoveries 17,246 18,324 18,762 Net charge-offs (55,713 ) (50,510 ) (56,837 ) Balance, end of year $ 53,110$ 65,600$ 73,350 Net charge-offs on credit card loans $ (55,713 ) $ (50,510



) $ (56,837 ) Charge-offs of accrued interest and fees (recorded as a reduction in interest and fee income)

(7,439 ) (7,293 ) (7,683 ) Total net charge-offs including accrued interest and fees $ (63,152 ) $ (57,803



) $ (64,520 )

Net charge-offs, including accrued interest and fees, as a percentage of average credit card loans, including accrued interest and fees 1.80 % 1.87



% 2.35 %

For 2013, net charge-offs as a percentage of average credit card loans decreased to 1.80%, down seven basis points compared to 1.87% for 2012. We believe our charge-off levels remain well below industry averages. Our net charge-off rates and allowance for loan losses have decreased due to improved outlooks in the quality of our credit card portfolio evidenced by lower delinquencies, lower delinquency roll-rates, favorable charge-off trends, and declining loan balances in our restructured loan portfolio.



Aging of Credit Cards Loans Outstanding

The following table shows our credit card loans outstanding at the end of 2013 and 2012 segregated by the number of months passed since the accounts were opened. 2013 2012 Loans Percentage of Loans Percentage of Months Since Account Opened Outstanding Total Outstanding Total (Dollars in Thousands) 6 months or less $ 171,206 4.3 % $ 153,709 4.3 % 7 - 12 months 170,840 4.3 126,586 3.6 13 - 24 months 336,250 8.4 318,397 9.0 25 - 36 months 330,048 8.3 265,345 7.4 37 - 48 months 273,569 6.9 281,501 7.9 49 - 60 months 287,381 7.2 292,506 8.2 61 - 72 months 291,419 7.3 323,986 9.1 73 - 84 months 324,751 8.1 266,641 7.4 More than 84 months 1,800,385 45.2 1,528,818 43.1 Total $ 3,985,849 100.0 % $ 3,557,489 100.0 % 51

-------------------------------------------------------------------------------- Liquidity and Capital Resources



Overview

Our Retail and Direct segments and our Financial Services segment have significantly differing liquidity and capital needs. We believe that we will have sufficient capital available from cash on hand, our revolving credit facility, and other borrowing sources to fund our cash requirements and near-term growth plans for at least the next 12 months. At the end of 2013 and 2012, cash on a consolidated basis totaled $199 million and $289 million, of which $94 million and $91 million, respectively, was cash at the Financial Services segment which will be utilized to meet this segment's liquidity requirements. In 2013, our Financial Services business issued $395 million in certificates of deposit, early renewed its $300 million variable funding facility and extended the commitment for an additional two years, and completed two term securitizations totaling $735 million. We evaluate the credit markets for certificates of deposit and securitizations to determine the most cost effective source of funds for the Financial Services segment. As of December 28, 2013, cash and cash equivalents held by our foreign subsidiaries totaled $96 million. Our intent is to permanently reinvest a portion of these funds outside the United States for capital expansion and to repatriate a portion of these funds. The Company has not provided United States income taxes and foreign withholding taxes on the portion of undistributed earnings of foreign subsidiaries that the Company considers to be indefinitely reinvested outside of the United States as of December 28, 2013. If these foreign earnings were to be repatriated in the future, the related United States tax liability may be reduced by any foreign income taxes previously paid on these earnings. As of the year ended 2013, the cumulative amount of earnings upon which United States income taxes have not been provided is approximately $152 million. If those earnings were not considered indefinitely invested, the Company estimates that an additional income tax expense of approximately $30 million would be recorded. Based on our current projected capital needs and the current amount of cash and cash equivalents held by our foreign subsidiaries, we do not anticipate incurring any material tax costs beyond our accrued tax position in connection with any repatriation, but we may be required to accrue for unanticipated additional tax costs in the future if our expectations or the amount of cash held by our foreign subsidiaries change. On December 10, 2013, the Federal Reserve, the Office of the Comptroller of the Currency, the FDIC, and the SEC approved joint final regulations implementing the provisions of the Reform Act commonly referred to as the "Volcker Rule." Generally, the Volcker Rule and the implementing regulations prohibit any banking entity from engaging in proprietary trading and from investing in, sponsoring, or having certain relationships with a hedge fund or private equity fund, subject to exemptions for certain permitted activities. These regulations limit our ability to engage in the types of transactions covered by the Volcker Rule and may impose compliance, monitoring, and reporting obligations on us and WFB under certain circumstances. Although the effective date of the regulations is April 1, 2014, the Federal Reserve approved an extension of the conformance period until July 21, 2015. We are continuing to assess the impact, if any, that the Volcker Rule and the implementing regulation will have on our Retail, Direct, and Financial Services segments. Retail and Direct Segments - The primary cash requirements of our merchandising business relate to capital for new retail stores, purchases of inventory, investments in our management information systems and infrastructure, and general working capital needs. We historically have met these requirements with cash generated from our merchandising business operations, borrowing under revolving credit facilities, issuing debt and equity securities, collecting principal and interest payments on our economic development bonds, and from the retirement of economic development bonds. The cash flow we generate from our merchandising business is seasonal, with our peak cash requirements for inventory occurring from April through November. While we have consistently generated overall positive annual cash flow from our operating activities, other sources of liquidity are required by our merchandising business during these peak cash use periods. These sources historically have included short-term borrowings under our revolving credit facility and access to debt markets. While we generally have been able to manage our cash needs during peak periods, if any disruption occurred to our funding sources, or if we underestimated our cash needs, we would be unable to purchase inventory and otherwise conduct our merchandising business to its maximum effectiveness, which could result in reduced revenue and profits. We have a $415 million revolving credit facility that expires on November 2, 2016, and permits the issuance of letters of credit up to $100 million and swing line loans up to $20 million. This credit facility may be increased to $500 million subject to certain terms and conditions. Advances under the credit facility will be used for the Company's general business purposes, including working capital support. 52 -------------------------------------------------------------------------------- Our unsecured $415 million revolving credit facility and unsecured senior notes contain certain financial covenants, including the maintenance of minimum debt coverage, a fixed charge coverage ratio, a leverage ratio, and a minimum consolidated net worth standard. In the event that we failed to comply with these covenants, a default would trigger and all principal and outstanding interest would immediately be due and payable. At December 28, 2013, and December 29, 2012, we were in compliance with all financial covenants under our credit agreements and unsecured notes. We anticipate that we will continue to be in compliance with all financial covenants under our credit agreements and unsecured notes through at least the next 12 months. Effective August 28, 2013, we entered into an unsecured $20 million Canadian ("CAD") revolving credit facility for our operations in Canada. Borrowings are payable on demand with interest payable monthly. The credit facility permits the issuance of letters of credit up to $10 million CAD in the aggregate, which reduce the overall credit limit available under the credit facility. We announced on February 14, 2013, that we intended to repurchase up to 750,000 shares of our outstanding common stock in open market transactions through February 2014 pursuant to our share repurchase program. During 2013, we repurchased 181,179 shares of our common stock, which included 163,740 shares purchased for $10 million, as well as 17,439 shares withheld to offset tax withholding obligations upon the vesting and release of certain restricted shares. On February 13, 2014, we announced our intent to repurchase up to 650,000 shares of our common stock in open market transactions through February 2015. This share repurchase program does not obligate us to repurchase any outstanding shares of our common stock, and the program may be limited or terminated at any time. There is no guarantee as to the exact number of shares that we will repurchase. Financial Services Segment - The primary cash requirements of the Financial Services segment relate to the financing of credit card loans. These cash requirements will increase if our credit card originations increase or if our cardholders' balances or spending increase. The Financial Services segment sources operating funds in the ordinary course of business through various financing activities, which include funding obtained from securitization transactions, obtaining brokered and non-brokered certificates of deposit, borrowing under its federal funds purchase agreements, and generating cash from operations. During 2013, the Financial Services segment issued $395 million in certificates of deposit, early renewed its $300 million variable funding facility and extended the commitment for an additional two years, and completed term securitizations of $385 million and $350 million that will mature in February 2023 and August 2018, respectively. We believe that these liquidity sources are sufficient to fund the Financial Services segment's foreseeable cash requirements and near-term growth plans. WFB is prohibited by regulations from lending money to Cabela's or other affiliates. WFB is subject to capital requirements imposed by Nebraska banking law and the Visa U.S.A., Inc. membership rules, and its ability to pay dividends is also limited by Nebraska and Federal banking law. If there are any disruptions in the credit markets, the Financial Services segment, like many other financial institutions, may increase its funding from certificates of deposit which may result in increased competition in the deposits market with fewer funds available or at unattractive rates. Our ability to issue certificates of deposit is reliant on our current regulatory capital levels. WFB is classified as a "well-capitalized" bank, the highest category under the regulatory framework for prompt corrective action. If WFB were to be classified as an "adequately-capitalized" bank, which is the next level category down from "well-capitalized," we would be required to obtain a waiver from the FDIC in order to continue to issue certificates of deposit. We will invest additional capital in the Financial Services segment, if necessary, in order for WFB to continue to meet the minimum requirements for the "well-capitalized" classification under the regulatory framework for prompt corrective action. In addition to the non-brokered certificates of deposit market to fund growth and maturing securitizations, we have access to the brokered certificates of deposit market through multiple financial institutions for liquidity and funding purposes. On July 9, 2013, the FDIC adopted interim final rules which revised its risk-based and leverage capital requirements for FDIC-supervised institutions. These interim final rules are substantially identical to the joint final rules issued by the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System on July 2, 2013. The interim final rules and the joint final rules implement the regulatory capital reforms recommended by the Basel Committee on Banking Supervision in December 2010, commonly referred to as "Basel III," and capital reforms required by the Reform Act. Among other things, the interim final rules and the joint final rules revise the agencies' prompt corrective action framework by introducing a common equity tier 1 capital requirement and a higher minimum tier 1 capital requirement. In addition, the interim final rules and the joint final rules include a supplementary leverage ratio for depository institutions subject to the advanced approaches capital rules. The phase-in period for the interim final rules will begin in January 2015 for WFB. WFB is continuing to assess how the interim final rules and the joint final rules will impact it and its ability to comply with the new common equity tier 1 capital requirement and higher minimum tier 1 capital requirement. 53 -------------------------------------------------------------------------------- The ability of the Financial Services segment to engage in securitization transactions on favorable terms or at all could be adversely affected by disruptions in the capital markets or other events, which could materially affect our business and cause the Financial Services segment to lose an important source of capital. The Reform Act, which was signed into law in July 2010, will also affect a number of significant changes relating to asset-backed securities, including additional oversight and regulation of credit rating agencies and additional reporting and disclosure requirements. In addition, several rules and regulations have recently been proposed or adopted that may substantially affect issuers of asset-backed securities. On September 19, 2011, the SEC proposed a new rule under the Securities Act of 1933, as amended, to implement certain provisions of the Reform Act. Under the proposed rule, an underwriter, placement agent, initial purchaser, or sponsor of an asset-backed security, or any affiliate of any such person, shall not at any time within one year after the first closing of the sale of the asset-backed security, engage in any transaction that would involve or result in any material conflict of interest with respect to any investor in a transaction arising out of such activity. The proposed rule would exempt certain risk-mitigating hedging activities, liquidity commitments, and bona fide market-making activity. It is not clear how the final rule will differ from the proposed rule, if at all. The final rule's impact on the securitization market and the Financial Services segment is also unclear at this time. The Trust is structured to qualify for the exemption from the Investment Company Act provided by Investment Company Act Rule 3a-7. On August 31, 2011, the SEC issued an advance notice of proposed rulemaking regarding possible amendments to Investment Company Act Rule 3a-7. At this time, it is uncertain what form the related proposed and final rules will take, whether the Trust would continue to be eligible to rely on the exemption provided by Investment Company Act Rule 3a-7, and whether the Trust would qualify for any other Investment Company Act exemption. On July 26, 2011, the SEC re-proposed certain rules for asset-backed securities offerings ("SEC Regulation AB II"), which were originally proposed by the SEC on April 7, 2010. If adopted, SEC Regulation AB II would substantially change the disclosure, reporting, and offering process for public and private offerings of asset-backed securities. As currently proposed, SEC Regulation AB II would, among other things, impose as a condition for the shelf registration of asset-backed securities the filing of a certification concerning the disclosure contained in the prospectus and the design of the securitization at the time of each offering off the shelf and the appointment of a credit risk manager to review assets when credit enhancement requirements are not met or at the direction of investors. Issuers of publicly offered asset-backed securities would be required to disclose more information regarding the underlying assets. Moreover, proposed SEC Regulation AB II would alter the safe harbor standards for private placements of asset-backed securities imposing informational requirements similar to those applicable to registered public offerings. The final form that SEC Regulation AB II may take is uncertain at this time, but it may impact the Financial Services segment's ability and/or desire to sponsor securitization transactions in the future. On August 28, 2013, pursuant to the provisions of the Reform Act, the SEC, the Federal Reserve, the FDIC, and certain other federal agencies re-proposed regulations requiring securitization sponsors to retain an economic interest in assets that they securitize. We cannot predict at this time whether WFB's existing forms of risk retention will satisfy the regulatory requirements, whether structural changes will be necessary, or whether the final rules will impact the Financial Services segment's ability or desire to continue to rely on the securitization market for funding. Operating, Investing and Financing Activities The following table presents changes in our cash and cash equivalents for the years ended: 2013 2012 2011 (In Thousands) Net cash provided by operating activities $ 345,004$ 234,629$ 366,468 Net cash used in investing activities (793,031 ) (612,367 ) (532,040 ) Net cash provided by financing activities 358,349 361,809 333,832 54

-------------------------------------------------------------------------------- 2013 versus 2012 Operating Activities - Cash from operating activities increased $110 million in 2013 compared to 2012. This increase was primarily the result of higher earnings of $51 million in 2013, a decrease in income taxes paid of $54 million, and a $51 million decrease from 2012 in prepaid expenses related to the Visa interchange funding of our Financial Services segment. In 2013, we paid $83 million in income taxes compared to $137 million in 2012. Partially offsetting these increases to cash from operating activities was a reduction in accounts payable of $24 million compared to 2012 and a net change in cash expended of $34 million for inventories. Our inventories increased $92 million at December 28, 2013, to $645 million, compared to 2012, while inventories increased $58 million at December 29, 2012, resulting in a net cash outflow of $34 million. The increase in inventories in 2013 was primarily due to the addition of new retail stores. Investing Activities - Cash used in investing activities increased $181 million in 2013 compared to 2012. Cash paid for property and equipment additions totaled $333 million in 2013 compared to $214 million in 2012. At December 28, 2013, we estimated total capital expenditures for the development, construction, and completion of retail stores to approximate $384 million through the next 12 months. We expect to fund these estimated capital expenditures with funds from operations. In addition, we had a net decrease in cash of $51 million related to our credit card loans originated from outside sources. The following table presents the growth of our retail stores, and the activity of economic development bonds related to the construction of these stores and related projects, for the years ended: 2013 2012 (Dollars in Thousands) Cash paid for property and equipment additions $ 333,009



$ 214,267 Proceeds from retirements and maturities of economic development bonds

3,473



3,151

Number of new retail stores opened during the year, including the Winnipeg relocation

11 6 Number of retail stores at the end of the year 50 40 Retail square footage at the end of the year 5,890,000



5,142,000

Financing Activities - Cash provided by financing activities decreased $3 million in 2013 compared to 2012. This net change was primarily due to an increase in net borrowings on secured obligations of the Trust by the Financial Services segment of $60 million. This increase was partially offset by a decrease in time deposits of $45 million, which the Financial Services segment utilizes to fund its credit card operations. Also, in 2013 we repurchased shares of our common stock for $10 million compared to $29 million in 2012. We expect to repurchase our common stock in the future to offset future equity grants and to fund any repurchases with cash from operations. The following table presents the borrowing activities of our merchandising business and the Financial Services segment for the years ended: 2013 2012 (In Thousands)



Borrowings (repayments) on revolving credit facilities and inventory financing, net

$ 3,023$ (391 ) Secured obligations of the Trust, net 349,750 290,000 Repayments of long-term debt (8,402 ) (8,387 ) Total $ 344,371$ 281,222 55

-------------------------------------------------------------------------------- The following table summarizes our availability under the Company's debt and credit facilities, excluding the facilities of the Financial Services segment, at the years ended: 2013 2012 (In Thousands)



Amounts available for borrowing under credit facilities (1)

$ 435,000 $



430,000

Principal amounts outstanding 2,932



-

Outstanding letters of credit and standby letters of credit

(17,378 )



(22,143 ) Remaining borrowing capacity, excluding the Financial Services segment facilities

$ 420,554$ 407,857



(1) For 2013, consists of our revolving credit facility of $415 million and $20

million CAD from the credit facility for our operations in Canada.

The Financial Services segment also has total borrowing availability of $85 million under its agreements to borrow federal funds. At December 28, 2013, the entire $85 million of borrowing capacity was available.

Our $415 million unsecured credit agreement requires us to comply with certain financial and other customary covenants, including: • a fixed charge coverage ratio (as defined) of no less than 2.00 to 1 as

of the last day of any fiscal quarter for the most recently ended four fiscal quarters (as defined);



• a leverage ratio (as defined) of no more than 3.00 to 1 as of the last

day of any fiscal quarter; and

• a minimum consolidated net worth standard (as defined).

In addition, our unsecured senior notes contain various covenants and restrictions that are usual and customary for transactions of this type. Also, the debt agreements contain cross default provisions to other outstanding credit facilities. In the event that we failed to comply with these covenants, a default would trigger and all principal and outstanding interest would immediately be due and payable. At December 28, 2013, we were in compliance with all financial covenants under our credit agreements and unsecured notes. We anticipate that we will continue to be in compliance with all financial covenants under our credit agreements and unsecured notes through the next 12 months. Effective August 28, 2013, we entered into an unsecured $20 million CAD revolving credit facility for our operations in Canada. This revolving credit facility replaced our $15 million CAD unsecured revolving credit facility, which was terminated January 31, 2013. Borrowings are payable on demand with interest payable monthly. The credit facility permits the issuance of letters of credit up to $10 million CAD in the aggregate, which reduce the overall credit limit available under the credit facility. 2012 versus 2011 Operating Activities - Cash from operating activities decreased $132 million in 2012 compared to 2011. Inventories increased $58 million at December 29, 2012, to $553 million, compared to 2011, while inventories decreased $14 million at December 31, 2011, compared to 2010, a net change of $72 million. The increase in inventories in 2012 was primarily due to the addition of new retail stores. Comparing the respective periods, there were increases of $96 million in income taxes and $22 million in net credit card loans originated at Cabela's through our Retail and Direct businesses. In 2012, we paid $137 million in income taxes compared to $45 million in 2011. Offsetting these decreases in cash from operations comparing the respective periods were increases of $30 million in accounts payable and accrued expenses, $31 million in cash generated from operations, and $35 million in accounts receivable and prepaid expenses. Investing Activities - Cash used in investing activities increased $80 million in 2012 compared to 2011. Cash paid for property and equipment additions totaled $214 million in 2012 compared to $127 million in 2011. At December 29, 2012, we estimated total capital expenditures for the development, construction, and completion of retail stores to approximate $202 million through the next 12 months. 56 -------------------------------------------------------------------------------- Financing Activities - Cash provided by financing activities increased $28 million in 2012 compared to 2011. This net change was primarily due to an increase in net borrowings on secured obligations of the Trust by the Financial Services segment of $411 million. This increase was primarily offset by a decrease in time deposits, which the Financial Services segment utilizes to fund its credit card operations, of $66 million in 2012, compared to $470 million in 2011. At the end of 2012 and 2011, there were no amounts outstanding on our unsecured revolving credit facilities. During 2012, we repurchased shares of our common stock for $29 million compared to $20 million in 2011. We expect to repurchase our common stock in the future to offset future equity grants and to fund any repurchases with cash from operations. Economic Development Bonds and Grants In the past, we have negotiated economic development arrangements relating to the construction of a number of our new retail stores, including free land, monetary grants, and the recapture of incremental sales, property, or other taxes through economic development bonds, with many local and state governments. Where appropriate, we intend to continue to utilize economic development arrangements with state and local governments to offset some of the construction costs and improve the return on investment of our new retail stores. Economic Development Bonds - Economic development bonds are related to the Company's government economic assistance arrangements relating to the construction of new retail stores or retail development. State or local governments may sell economic development bonds primarily to provide funding for the construction and equipping of our retail stores. In the past, we have primarily been the sole purchaser of these bonds. While purchasing these bonds involves an initial cash outlay by us in connection with a new store or property, some or all of these costs can be recaptured through the repayments of the bonds. The payments of principal and interest on the bonds are typically tied to sales, property, or lodging taxes generated from the store and, in some cases, from businesses in the surrounding area, over periods which range between 15 and 30 years. Some of our bonds may be repurchased for par value by the governmental entity prior to the maturity date of the bonds. The governmental entity from which we purchase the bonds is not otherwise liable for repayment of principal and interest on the bonds to the extent that the associated taxes are insufficient to pay the bonds. If sufficient tax revenue is not generated by the subject properties, we will not receive scheduled payments and will be unable to realize the full value of the bonds carried on our consolidated balance sheet. At December 28, 2013, and December 29, 2012, economic development bonds totaled $79 million and $85 million, respectively. Grants - We generally have received grant funding in exchange for commitments made by us to the state or local government providing the funding. The commitments, such as assurance of agreed employment and wage levels at our retail stores or that the retail store will remain open, typically phase out over approximately five to ten years. If we fail to maintain the commitments during the applicable period, the funds we received may have to be repaid or other adverse consequences may arise, which could affect our cash flows and profitability. At December 28, 2013, the total amount of grant funding subject to specific contractual remedies was $44 million. At December 28, 2013, and December 29, 2012, the amount the Company has recorded in liabilities relating to these grants was $23 million and $7 million, respectively. Securitization of Credit Card Loans The Financial Services segment historically has funded most of its growth in credit card loans through an asset securitization program. The Financial Services segment utilizes the Trust for the purpose of routinely securitizing credit card loans and issuing beneficial interest to investors. The Trust issues variable funding facilities and long-term notes (collectively referred to herein as "secured obligations of the Trust"), each of which has an undivided interest in the assets of the Trust. The Financial Services segment must retain a minimum 20 day average of 5% of the loans in the securitization trust which ranks pari passu with the investors' interests in the Trust. In addition, the Financial Services segment owns notes issued by the Trust from some of the securitizations, which in some cases may be subordinated to other notes issued. The Financial Services segment's retained interests are eliminated upon consolidation of the Trust. The consolidated assets of the Trust are subject to credit, payment, and interest rate risks on the transferred credit card loans. The credit card loans of the Trust are restricted for the repayment of the secured obligations of the Trust. 57 -------------------------------------------------------------------------------- To protect the holders of the secured obligations of the Trust (the "investors"), the securitization structures include certain features that could result in earlier-than-expected repayment of the securities, which could cause the Financial Services segment to sustain a loss of one or more of its retained interests and could prompt the need to seek alternative sources of funding. The primary investor protection feature relates to the availability and adequacy of cash flows in the securitized pool of loans to meet contractual requirements, the insufficiency of which triggers early repayment of the securities. The Financial Services segment refers to this as the early amortization feature. Investors are allocated cash flows derived from activities related to the accounts comprising the securitized pool of loans, the amounts of which reflect finance charges collected, certain fee assessments collected, allocations of interchange, and recoveries on charged off accounts. These cash flows are considered to be restricted under the governing documents to pay interest to investors, servicing fees, and to absorb the investor's share of charge-offs occurring within the securitized pool of loans. Any cash flows remaining in excess of these requirements are reported to investors as excess spread. An excess spread of less than zero percent for a contractually specified period, generally a three-month average, would trigger an early amortization event. Such an event could result in the Financial Services segment incurring losses related to its retained interests. In addition, if the retained interest in the loans of the Financial Services segment falls below the 5% minimum 20 day average and the Financial Services segment fails to add new accounts to the securitized pool of loans, an early amortization event would be triggered. Another feature, which is applicable to secured obligations of the Trust, is one in which excess cash flows generated by the transferred loans are held at the Trust for the benefit of the investors. This cash reserve account funding is triggered when the three-month average excess spread rate of the Trust decreases to below 4.50% with increasing funding requirements as excess spread levels decline below preset levels or as contractually required by the governing documents. Similar to early amortization, this feature also is designed to protect the investors' interests from loss thus making the cash restricted. Upon scheduled maturity or early amortization of a securitization, the Financial Services segment is required to remit principal payments received on the securitized pool of loans to the Trust which are restricted for the repayment of the investors' principal note. The investors have no recourse to the Financial Services segment's other assets for failure of debtors to pay other than for breaches of certain customary representations, warranties, and covenants. These representations, warranties, covenants, and the related indemnities do not protect the Trust or third party investors against credit-related losses on the loans. 58

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The total amounts and maturities for our credit card securitizations as of December 28, 2013, were as follows:

Third Party Investor Third Party Total Available Available Investor Series Type Capacity Capacity Outstanding Interest Rate Expected Maturity (Dollars in Thousands) Series 2010-I Term $ 45,000 $ - $ - Fixed January 2015 Series 2010-I Term 255,000 255,000 255,000 Floating January 2015 Series 2010-II Term 165,000 127,500 127,500 Fixed September 2015 Series 2010-II Term 85,000 85,000 85,000 Floating September 2015 Series 2011-II Term 200,000 155,000 155,000 Fixed June 2016 Series 2011-II Term 100,000 100,000 100,000 Floating June 2016 Series 2011-IV Term 210,000 165,000 165,000 Fixed October 2016 Series 2011-IV Term 90,000 90,000 90,000 Floating October 2016 Series 2012-I Term 350,000 275,000 275,000 Fixed February 2017 Series 2012-I Term 150,000 150,000 150,000 Floating February 2017 Series 2012-II Term 375,000 300,000 300,000 Fixed June 2017 Series 2012-II Term 125,000 125,000 125,000 Floating June 2017 Series 2013-I Term 385,000 327,250 327,250 Fixed February 2023 Series 2013-II Term 152,500 100,000 100,000 Fixed August 2018 Series 2013-II Term 197,500 197,500 197,500 Floating August 2018 Total term 2,885,000 2,452,250 2,452,250 Series 2008-III Variable Funding 260,115 225,000 - Floating March 2015 Series 2011-I Variable Funding 352,941 300,000 - Floating March 2016 Series 2011-III Variable Funding 411,765 350,000 50,000 Floating September 2014 Total variable 1,024,821 875,000 50,000 Total available $ 3,909,821$ 3,327,250$ 2,502,250 We have been, and will continue to be, particularly reliant on funding from securitization transactions for the Financial Services segment. A failure to renew existing facilities or to add additional capacity on favorable terms as it becomes necessary could increase our financing costs and potentially limit our ability to grow the business of the Financial Services segment. Unfavorable conditions in the asset-backed securities markets generally, including the unavailability of commercial bank liquidity support or credit enhancements, could have a similar effect. During 2013, the Financial Services segment issued $395 million in certificates of deposit, early renewed its $300 million variable funding facility and extended the commitment for an additional two years, and completed term securitizations of $385 million and $350 million that will mature in February 2023 and August 2018, respectively. In 2014, the Financial Services segment intends to issue additional certificates of deposit, early renew and potentially increase its $350 million variable funding facility, and issue additional term securitizations. We believe that these liquidity sources are sufficient to fund the Financial Services segment's foreseeable cash requirements and near-term growth plans. Furthermore, the securitized credit card loans of the Financial Services segment could experience poor performance, including increased delinquencies and credit losses, lower payment rates, or a decrease in excess spreads below certain thresholds. This could result in a downgrade or withdrawal of the ratings on the outstanding securities issued in the Financial Services segment's securitization transactions, cause early amortization of these securities, or result in higher required credit enhancement levels. Credit card loans performed within established guidelines and no events which could trigger an "early amortization" occurred during the years ended December 28, 2013, and December 29, 2012. 59 -------------------------------------------------------------------------------- Certificates of Deposit The Financial Services segment utilizes brokered and non-brokered certificates of deposit to partially finance its operating activities. The Financial Services segment issues certificates of deposit in a minimum amount of one hundred thousand dollars in various maturities. At December 28, 2013, the Financial Services segment had $1.1 billion of certificates of deposit outstanding with maturities ranging from January 2014 to July 2023 and with a weighted average effective annual fixed rate of 2.14%. This outstanding balance compares to $1.0 billion at December 29, 2012, with a weighted average effective annual fixed rate of 2.22%. See "Contractual Obligations and Other Commercial Commitments" for a table showing the maturity schedule of certificates of deposit.



Impact of Inflation

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



Contractual Obligations and Other Commercial Commitments

The following tables provide summary information concerning our future contractual obligations at December 28, 2013.

2014 2015 2016 2017 2018 Thereafter Total (In Thousands)



Long-term debt (1) $ 8,143$ 8,143$ 226,075$ 68,143$ 8,142 $ - $ 318,646 Interest payments on long-term debt (2) 19,189 18,581 11,554 2,997

293 - 52,614 Capital lease obligations 1,000 1,000 1,000 1,000 1,000 17,500 22,500



Operating leases 16,035 20,956 20,489 20,098 26,516 269,619 373,713 Time deposits by maturity

297,645 273,385 216,619



26,110 20,911 234,692 1,069,362 Interest payments on time deposits

19,490 14,788 34,823 7,019 6,798 28,517 111,435 Secured obligations of the Trust 50,000 467,500 510,000 850,000 297,500 327,250 2,502,250 Interest payments on secured obligations of the Trust (2) 39,367 34,674 28,722 16,152 11,390 36,952 167,257 Obligations under retail store arrangements (3) 243,032 157,132 548 569 571 5,084 406,936 Purchase obligations (4) 571,306 19,634 9,277 4,106 450 - 604,773 Unrecognized tax benefits (5) - - - - - 64,800 64,800 Total $ 1,265,207$ 1,015,793$ 1,059,107$ 996,194$ 373,571$ 984,414$ 5,694,286



(1) Excludes amounts owed under capital lease obligations.

(2) These amounts do not include estimated interest payments due under our

revolving credit facilities or our secured variable funding obligations

because the amount that will be borrowed under these facilities in future

years is uncertain.

(3) Includes approximately $384 million of estimated contractual obligations and

commitments associated with projected new retail store-related expansion. The

table does not include any amounts for contractual obligations associated

with retail store locations where we are in the process of certain

negotiations.

(4) Our purchase obligations relate primarily to purchases of inventory,

shipping, and other goods and services in the ordinary course of business

under binding purchase orders or contracts. The amount of purchase

obligations shown is based on assumptions regarding the legal enforceability

against us of purchase orders or contracts we had outstanding at the end of

2013. Under different assumptions regarding our rights to cancel our purchase

orders or contracts, or different assumptions regarding the enforceability of

the purchase orders or contracts under applicable laws, the amount of

purchase obligations shown in the preceding table would be less.

(5) Amounts for unrecognized tax benefits are not reflected in years 2014 through

2018 since the ultimate amount and timing of any future cash settlements

cannot be predicted with reasonable certainty. 60

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The following table provides summary information concerning other commercial commitments at December 28, 2013:

(In Thousands) Letters of credit (1) $ 12,149 Standby letters of credit (1) 5,229 Revolving line of credit for boat and ATV inventory (2) 1,573 Cabela's issued letters of credit 48,409 Bank - federal funds (3) - Secured variable funding obligations of the Trust (4) 50,000 Total $ 117,360



(1) Our credit agreement allows for maximum borrowings of $415 million including

lender letters of credit and standby letters of credit. At December 28,

2013, the total amount of borrowings under this revolving line of credit was

$20 million, which consisted of lender letters of credit and standby letters

of credit. Our credit agreement for operations in Canada is for $20 million

CAD, of which all was available for borrowing at December 28, 2013.

(2) The line of credit for boat and all-terrain vehicles financing is limited by

the aforementioned $415 million revolving line of credit to $100 million of

secured collateral.

(3) The maximum amount that can be borrowed on the federal funds agreements is

$85 million. (4) The maximum amount that can be borrowed from third party investors on the variable funding facilities is $875 million.



Off-Balance Sheet Arrangements

Operating Leases - We lease various items of office equipment and buildings. Rent expense for these operating leases is recorded in selling, distribution, and administrative expenses in the consolidated statements of income. Future obligations are shown in the preceding contractual obligations table. Credit Card Limits - The Financial Services segment bears off-balance sheet risk in the normal course of its business. One form of this risk is through the Financial Services segment's commitment to extend credit to cardholders up to the maximum amount of their credit limits. The aggregate of such potential funding requirements totaled $25 billion above existing balances at the end of 2013. These funding obligations are not included in our consolidated balance sheet. While the Financial Services segment has not experienced, and does not anticipate that it will experience, a significant draw down of unfunded credit lines by its cardholders, such an event would create a cash need at the Financial Services segment which likely could not be met by our available cash and funding sources. The Financial Services segment has the right to reduce or cancel these available lines of credit at any time. Critical Accounting Policies and Use of Estimates Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America which requires management to make estimates and judgments that affect amounts reported in the consolidated financial statements and accompanying notes. Management has discussed the development, selection, and disclosure of critical accounting policies and estimates with the Audit Committee of Cabela's Board of Directors. While our estimates and assumptions are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately differ from our estimates and assumptions. Our estimation processes contain uncertainties because they require management to make assumptions and apply judgment to make these estimates. Should actual results be different than our estimates, we could be exposed to gains or losses from differences that may be material. For a summary of our significant accounting policies, please refer to Note 1 "Nature of Business and Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements. We believe the accounting policies discussed below represent accounting policies we apply that are the most critical to understanding our consolidated financial statements. 61 --------------------------------------------------------------------------------



Merchandise Revenue Recognition

Revenue is recognized on our Direct sales when merchandise is delivered to the customer at the point of delivery, with the point of delivery based on our estimate of shipping time from our distribution centers to the customer. We recognize reserves for estimated product returns based upon our historical return experience and expectations. Had our estimate of merchandise in-transit to customers and our estimate of product returns been different by 10% at the end of 2013, our operating income would have been higher or lower by approximately $0.9 million. Sales of gift instruments are recorded in merchandise revenue when the gift instruments are redeemed in exchange for merchandise or services and as a liability prior to redemption. We recognize breakage on gift instruments as revenue when the probability of redemption is remote. Had our estimate of breakage on our recorded liability for gift instruments been different by 10% of the recorded liability at the end of 2013, our merchandise revenue would have been higher or lower by approximately $0.7 million. Inventories We estimate provisions for inventory shrinkage, damaged goods returned values, and obsolete and slow-moving items based on historical loss and product performance statistics and future merchandising objectives. Had our estimated inventory reserves been different by 10% at the end of 2013, our cost of sales would have been higher or lower by approximately $1.2 million.



Allowance for Loan Losses on Credit Cards

The allowance for loan losses represents management's estimate of probable losses inherent in the credit card loan portfolio. The allowance for loan losses is established through a charge to the provision for loan losses and is evaluated by management for adequacy. Loans on a payment plan or non-accrual are segmented from the rest of the credit card loan portfolio into a restructured credit card loan segment before establishing an allowance for loan losses as these loans have a higher probability of loss. Management estimates losses inherent in the credit card loans segment and restructured credit card loans segment based on a model which tracks historical loss experience on delinquent accounts, bankruptcies, death, and charge-offs, net of estimated recoveries. The Financial Services segment uses a migration analysis and historical bankruptcy and death rates to estimate the likelihood that a credit card loan in the credit card loans segment will progress through the various stages of delinquency and to charge-off. This analysis estimates the gross amount of principal that will be charged off over the next 12 months, net of recoveries. The Financial Services segment uses historical charge-off rates to estimate the charge-offs over the life of the restructured credit card loan, net of recoveries. This estimate is used to derive an estimated allowance for loan losses. In addition to these methods of measurement, management also considers other factors such as general economic and business conditions affecting key lending areas, credit concentration, changes in origination and portfolio management, and credit quality trends. Since the evaluation of the inherent loss with respect to these factors is subject to a high degree of uncertainty, the measurement of the overall allowance is subject to estimation risk, and the amount of actual losses can vary significantly from the estimated amounts. For example, had management's estimate of net losses over the next 12 months been different by 10% at the end of 2013, the Financial Services segment's allowance for loan losses and provision for loan losses would have changed by approximately $5.3 million. Credit card loans that have been modified through a fixed payment plan or placed on non-accrual are considered impaired and are collectively evaluated for impairment. The Financial Services segment charges off credit card loans and restructured credit card loans on a daily basis after an account becomes at a minimum 130 days contractually delinquent. Accounts relating to cardholder bankruptcies, cardholder deaths, and fraudulent transactions are charged off earlier. The Financial Services segment recognizes charged-off cardholder fees and accrued interest receivable in interest and fee income that is included in Financial Services revenue. Long-Lived Assets Long-lived assets other than goodwill and other intangible assets, which generally are tested separately for impairment on an annual basis, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The calculation for an impairment loss compares the carrying value of the asset to that asset's estimated fair value, which may be based on estimated future discounted cash flows, observable market prices, or unobservable market prices. We recognize an impairment loss if the asset's carrying value exceeds its estimated fair value. Frequently our impairment loss calculations contain multiple uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flows and asset fair values, including forecasting cash flows under different scenarios. We have consistently applied our accounting methodologies that we use to assess impairment loss. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material. 62 --------------------------------------------------------------------------------



Economic Development Bonds

Economic development bonds are generally repaid through incremental sales and/or property tax revenues generated from our retail store locations or additional developments in the local development or tax increment financing district. Each quarter we revalue each economic development bond using discounted cash flow models based on available market interest rates and management estimates, including the estimated amounts and timing of expected future tax payments to be received by the municipalities under development zones. Each quarter, we also evaluate the projected underlying cash flows of our economic development bonds to determine if the carrying amount of any such bonds, including interest accrued under the bonds, can be recovered. To the extent the expected cash flows are not sufficient to recover the carrying amount, the bonds are assessed for impairment. Deficiencies in projected discounted cash flows below the recorded carrying amount of the economic development bonds evidences that we do not expect to recover the cost basis. Consequently, the valuation results in an other than temporary impairment. We also reassess the amount of grant income that will ultimately be received. Accordingly, the cumulative amount of depreciation expense that would be recognized to date as an expense in the absence of the grant income is recognized immediately as an expense. Had our fair value estimates been lower by 10% as of the end of 2013, the value of economic development bonds reflected in our consolidated financial statements would have been approximately $8 million less with the unrealized loss reflected in comprehensive income if the loss was deemed to be temporary. Any declines in the fair value of available-for-sale economic development bonds below cost that are deemed to be other than temporary are reflected in earnings as realized losses. Income Taxes Income taxes are estimated for each jurisdiction in which we operate and require significant judgment, the use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in determining the timing and amounts of deductible and taxable items, and in evaluating the ultimate resolution of tax matters in dispute with tax authorities. Deferred tax assets and liabilities are provided for based on these assessments. We record a liability for unrecognized tax benefits resulting from tax positions taken, or expected to be taken, in an income tax return. We periodically reassess these probabilities and record any changes in the financial statements as deemed appropriate. We have not provided United States income taxes on undistributed earnings of foreign subsidiaries that we consider to be indefinitely reinvested outside of the United States as of the end of year 2013. If these foreign earnings were to be repatriated in the future, the related United States tax liability may be reduced by any foreign income taxes previously paid on these earnings. We have reserved for potential adjustments to the provision for income taxes that may result from examinations by tax authorities, and we believe that the final outcome of these examinations or agreements will not have a material effect on our financial condition, results of operations, or cash flows. Recent Accounting Standards and Pronouncements Effective February 5, 2013, the Financial Accounting Standards Board issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which adds additional disclosure requirements relating to the reclassification of items out of accumulated other comprehensive income. This ASU was effective for the first quarter of 2013 for us. During 2013, this pronouncement did not have a material impact on our consolidated financial statements or disclosures. On September 13, 2013, the U. S. Treasury and Internal Revenue Service issued final Tangible Property Regulations ("TPR") under Internal Revenue Code ("IRC") Section 162 and IRC Section 263(a). The regulations are not effective until tax years beginning on or after January 1, 2014; however, certain portions may require a tax method change on a retroactive basis, thus requiring an IRC Section 481(a) adjustment related to fixed and real asset deferred taxes. The accounting guidance under Accounting Standards Codification 740 - Income Taxes, treats the release of these regulations as a change in tax law as of the date of issuance and require us to determine whether there will be an impact on our consolidated financial statements for the fiscal year ended December 28, 2013. Any such impact of the final tangible property regulations would affect temporary deferred taxes only and result in a consolidated balance sheet reclassification between current and deferred taxes. We have analyzed the expected impact of the TPR on the Company as of December 28, 2013, and concluded that the expected impact is minimal. We will continue to prospectively monitor the impact of any future changes to the TPR on the Company. 63



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