UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended ~~April~~July 1, 2017



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-32227

CABELA’S INCORPORATED

(Exact name of registrant as specified in its charter)



	Delaware		20-0486586
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

	One Cabela Drive, Sidney, Nebraska		69160
	(Address of principal executive offices)		(Zip Code)

(308) 254-5505

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o

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

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common stock, $0.01 par value: 68,~~908~~929,~~678~~533 shares as of ~~May~~July 131, 2017

CABELA’S INCORPORATED

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~APRIL~~JULY 1, 2017

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION		3
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2729
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4758
Item 4.	Controls and Procedures	4758
PART II - OTHER INFORMATION		4859
Item 1.	Legal Proceedings	4859
Item 1A.	Risk Factors	4859
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4959
Item 3.	Defaults Upon Senior Securities	4959
Item 4.	Mine Safety Disclosures	4959
Item 5.	Other Information	4959
Item 6.	Exhibits	4959
SIGNATURES		5060
INDEX TO EXHIBITS		5161

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CABELA’S INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except Earnings Per Share)
(Unaudited)
	Three Months Ended						Six Months Ended
	April 1, 2017			April 2, 2016
	July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
Revenue:
Merchandise sales	$	~~678~~737,~~021~~384		$	~~719~~786,~~915~~203		$	1,415,405		$	1,506,118
Financial Services revenue	~~149~~147,~~999~~196			~~140~~135,~~823~~081			297,195			275,904
Other revenue	65,~~869~~862			38,~~924~~613			12,731			12,537
Total revenue	~~834~~890,~~889~~442			~~864~~929,~~662~~897			1,725,331			1,794,559
Cost of revenue:
Merchandise costs (exclusive of depreciation and amortization)	~~465~~496,~~082~~360			~~487~~527,~~992~~409			961,442			1,015,401
Cost of other revenue	~~1,030~~515			~~153~~4,138			1,545			4,291
Total cost of revenue (exclusive of depreciation and amortization)	~~466~~496,~~112~~875			~~488~~531,~~145~~547			962,987			1,019,692
Selling, distribution, and administrative expenses	~~327~~335,~~857~~693			329,~~189~~682			663,550			658,871
Impairment and restructuring charges	~~2,407~~829			~~2,972~~959			3,236			3,931
Operating income	3857,~~513~~045			4467,~~356~~709			95,558			112,065
Interest expense, net	(7,~~676~~689		)	(98,~~231~~285		)	(15,365		)	(17,516		)
Other non-operating income, net	~~569~~911			~~901~~2,780			1,480			3,681
Income before provision for income taxes	3150,~~406~~267			3662,~~026~~204			81,673			98,230
Provision for income taxes	1221,~~343~~919			1324,~~137~~445			34,262			37,582
Net income	$	1928,~~063~~348		$	2237,~~889~~759		$	47,411		$	60,648
Earnings per basic share	$	0.2841		$	0.3455		$	0.69		$	0.89
Earnings per diluted share	$	0.2841		$	0.3355		$	0.68		$	0.88
Basic weighted average shares outstanding	68,~~640~~914,~~257~~407			6768,~~925~~388,~~173~~426			68,777,332			68,168,772
Diluted weighted average shares outstanding	69,~~314~~352,~~868~~449			68,~~687~~909,~~596~~403			69,332,304			68,799,980

Refer to notes to unaudited condensed consolidated financial statements.

CABELA’S INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
	Three Months Ended				Six Months Ended
	April 1, 2017		April 2, 2016
	July 1, 2017		July 2, 2016		July 1, 2017		July 2, 2016
Net income	$	1928,~~063~~348	$	2237,~~889~~759	$	47,411	$	60,648
Other comprehensive income:
Unrealized gain on economic development bonds, net of taxes of $555 and $570	1,590		564
Unrealized gain on economic development bonds, net of taxes of $1,077, $697, $1,632, and $1,267	1,834		1,100		3,424		1,664
Foreign currency translation adjustments	26,~~501~~517		141,~~680~~782		9,018		16,462
Total other comprehensive income	48,~~091~~351		152,~~244~~882		12,442		18,126
Comprehensive income	$	2336,~~154~~699	$	3840,~~133~~641	$	59,853	$	78,774

Refer to notes to unaudited condensed consolidated financial statements.

CABELA’S INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands Except Par Values)
(Unaudited)
	April 1, 2017			December 31, 2016			April 2, 2016
	July 1, 2017			December 31, 2016			July 2, 2016
ASSETS
CURRENT
Cash and cash equivalents	$	~~258~~167,~~681~~629		$	263,825		$	~~141~~542,~~973~~067
Restricted cash of the Trust	4651,~~330~~233			48,697			40,~~475~~978
Accounts receivable, net	2937,~~640~~112			76,140			3539,~~450~~278
Credit card loans (includes restricted credit card loans of the Trust of $5,289,655, $5,661,101, and $4,824,323), net of allowance for loan losses of $112,095, $118,343, and $74,753	5,205,937			5,579,575			4,779,153
Credit card loans (includes restricted credit card loans of the Trust of $5,517,628, $5,661,101, and $5,114,711), net of allowance for loan losses of $120,474, $118,343, and $83,950	5,425,509			5,579,575			5,062,226
Inventories	~~894~~863,~~475~~834			860,360			~~905~~888,~~122~~209
Prepaid expenses and other current assets	~~125~~128,~~517~~235			132,250			~~120~~122,~~156~~139
Income taxes receivable	6752,~~824~~555			75,731			7360,~~391~~180
Total current assets	6,~~628~~726,~~404~~107			7,036,578			6,~~095~~755,~~720~~077
Property and equipment, net	1,~~796~~785,~~668~~999			1,807,209			1,~~840~~839,~~530~~451
Deferred income taxes	—			—			2528,~~159~~417
Other assets	124,~~877~~087			127,037			~~139~~142,~~800~~314
Total assets	$	8,~~549~~636,~~949~~193		$	8,970,824		$	8,~~101~~765,~~209~~259
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT
Accounts payable, including unpresented checks of $34,082, $41,132, and $17,958	$	292,612		$	347,784		$	266,936
Accounts payable, including unpresented checks of $34,869, $41,132, and $28,667	$	270,921		$	347,784		$	253,488
Gift instruments, credit card rewards, and loyalty rewards programs	~~368~~372,~~407~~740			387,865			~~346~~353,~~771~~570
Accrued expenses and other liabilities	~~129~~147,~~318~~945			172,744			~~161~~165,~~537~~610
Time deposits	~~179~~252,~~157~~358			177,015			~~177~~187,~~052~~324
Current maturities of secured variable funding obligations of the Trust	~~725~~1,395,000			420,000			~~330,000~~—
Current maturities of secured long-term obligations of the Trust, net	~~424,907~~—			1,104,685			1,~~189~~359,~~088~~032
Current maturities of long-term debt	688,~~121~~131			79,677			868,~~456~~461
Total current liabilities	2,~~187~~447,~~522~~095			2,689,770			2,~~479~~387,~~840~~485
Long-term time deposits	1846,~~047,019~~709			991,842			~~688~~1,~~504~~009,549
Secured long-term obligations of the Trust, less current maturities, net	2,467,~~181~~787			2,466,576			2,~~042~~466,~~598~~054
Long-term debt, less current maturities, net	~~670~~654,~~226~~569			671,509			~~884~~842,~~099~~728
Deferred income taxes	96,~~187~~449			7,288			—
Other long-term liabilities	~~134~~137,~~738~~737			132,240			~~133~~134,~~188~~349
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value; Authorized – 10,000,000 shares; Issued – none	—			—			—
Common stock, $0.01 par value:
Class A Voting, Authorized – 245,000,000 shares
Issued – 71,595,020 shares for all periods	716			716			716
Outstanding – 68,905,430, 68,502,256, and 68,243,858 shares
Outstanding – 68,929,479, 68,502,256, and 68,465,082 shares
Additional paid-in capital	~~364~~368,~~176~~126			384,353			~~373~~372,~~307~~994
Retained earnings	1,~~817~~846,~~872~~220			1,798,809			1,~~674~~712,~~751~~510
Accumulated other comprehensive loss	(4133,~~831~~480		)	(45,922		)	(3532,~~670~~788		)
Treasury stock, at cost – 2,689,590, 3,092,764, and 3,351,162 shares	(106,857		)	(126,357		)	(140,124		)
Treasury stock, at cost – 2,665,541, 3,092,764, and 3,129,938 shares	(105,735		)	(126,357		)	(128,338		)
Total stockholders’ equity	2,~~034~~075,~~076~~847			2,011,599			1,~~872~~925,~~980~~094
Total liabilities and stockholders’ equity	$	8,~~549~~636,~~949~~193		$	8,970,824		$	8,~~101~~765,~~209~~259
Refer to notes to unaudited condensed consolidated financial statements.

CABELA’S INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
	Three Months Ended
	Six Months Ended
	April 1, 2017			April 2, 2016
	July 1, 2017			July 2, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1947,~~063~~411		$	2260,~~889~~648
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization	3876,~~298~~473			3574,~~710~~696
Impairment and restructuring charges	12,~~244~~882			24,~~040~~202
Stock-based compensation	610,~~031~~602			612,~~442~~555
Deferred income taxes	1(2,~~344~~471		)	2(1,~~313~~643		)
Provision for loan losses	3176,~~086~~332			2255,~~820~~224
Other, net	~~498~~(390		)	(18,~~339~~816		)
Change in operating assets and liabilities, net:
Accounts receivable	4639,~~799~~474			4339,~~699~~714
Credit card loans originated from internal operations, net	7178,~~528~~475			8079,~~359~~398
Inventories	(~~33,609~~568		)	(8163,~~244~~674		)
Prepaid expenses and other current assets	72,~~392~~322			(31,~~894~~935		)
Accounts payable and accrued expenses and other liabilities	(~~105~~88,~~311~~266		)	(8676,~~220~~069		)
Gift instruments, credit card rewards, and loyalty rewards programs	(1915,~~621~~489		)	(1912,~~159~~476		)
Other long-term liabilities	25,~~434~~640			(32,~~333~~118		)
Income taxes receivable	723,~~907~~176			417,~~307~~517
Net cash provided by operating activities	75255,~~083~~603			25177,~~390~~223
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions	(2645,~~290~~963		)	(6199,~~360~~284		)
Proceeds from sale of other property	24,~~143~~081			—
Change in credit card loans originated externally, net	~~271,024~~(741		)	~~152~~(161,~~935~~581		)
Change in restricted cash of the Trust, net	(2,~~367~~536		)	~~508~~5
Other investing changes, net	14,~~824~~047			~~505~~1,900
Net cash provided by investing activities	251,068			92,588
Net cash used in investing activities	(41,112		)	(258,960		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in unpresented checks net of bank balances	(76,~~051~~263		)	(5,~~622~~087		)
Change in time deposits, net	57(69,~~172~~937		)	~~(14~~316,~~343~~974		)
Borrowings on secured obligations of the Trust	13,~~375~~030,000			~~595~~2,740,000
Repayments on secured obligations of the Trust	(13,~~750~~160,000		)	(~~920~~2,800,000		)
Borrowings on revolving credit facilities and inventory financing	~~345~~555,~~478~~432			~~484~~665,~~762~~261
Repayments on revolving credit facilities and inventory financing	(~~325~~575,~~200~~328		)	(~~210~~401,~~489~~990		)
Payments on long-term debt	(1979,686		)	(223,~~218~~295		)
Employee stock option exercises, net of tax withholdings on share-based payment awards	(6,~~708~~205		)	(1,~~576~~673		)
Excess tax benefit on share-based payment awards	—			13,~~503~~753
Other financing changes, net	(1,201		)	—(2,421		)
Net cash used in financing activities	(332,196		)	(293,983		)
Net cash provided by (used in) financing activities	(313,188		)	305,042
Effect of exchange rates on cash and cash equivalents	~~901~~2,501			23,~~912~~696
Net change in cash and cash equivalents	(596,~~144~~196		)	~~(173~~227,~~093~~001		)
Cash and cash equivalents, at beginning of period	263,825			315,066
Cash and cash equivalents, at end of period	$	~~258~~167,~~681~~629		$	~~141~~542,~~973~~067
Refer to notes to unaudited condensed consolidated financial statements.

CABELA’S INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in Thousands)
(Unaudited)
	Common StockShares	CommonStock		AdditionalPaid-inCapital			RetainedEarnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
Balance, beginning of 2016	71,595,020	$	716	$	389,754		$	1,651,862	$	(50,914	)	$	(162,775	)	$	1,828,643
Net income	—	—		—			2260,~~889~~648		—			—			2260,~~889~~648
Other comprehensive income	—	—		—			—		1518,~~244~~126			—			1518,~~244~~126
Stock-based compensation	—	—		612,~~277~~251			—		—			—			612,~~277~~251
Exercise of employee stock options and tax withholdings on share-based payment awards, net	—	—		(2432,~~227~~764		)	—		—			2234,~~651~~437			(1,~~576~~673		)
Excess tax benefit on share-based payment awards	—	—		13,~~503~~753			—		—			—			13,~~503~~753
Balance at April 2, 2016	71,595,020	$	716	$	373,307		$	1,674,751	$	(35,670	)	$	(140,124	)	$	1,872,980
Balance at July 2, 2016	71,595,020	$	716	$	372,994		$	1,712,510	$	(32,788	)	$	(128,338	)	$	1,925,094
Balance, beginning of 2017	71,595,020	$	716	$	384,353		$	1,798,809	$	(45,922	)	$	(126,357	)	$	2,011,599
Net income	—	—		—			1947,~~063~~411		—			—			1947,~~063~~411
Other comprehensive income	—	—		—			—		412,~~091~~442			—			412,~~091~~442
Stock-based compensation	—	—		610,~~031~~600			—		—			—			610,~~031~~600
Exercise of employee stock options and tax withholdings on share-based payment awards, net	—	—		(26,~~208~~827		)	—		—			1920,~~500~~622			(6,~~708~~205		)
Balance at April 1, 2017	71,595,020	$	716	$	364,176		$	1,817,872	$	(41,831	)	$	(106,857	)	$	2,034,076
Balance at July 1, 2017	71,595,020	$	716	$	368,126		$	1,846,220	$	(33,480	)	$	(105,735	)	$	2,075,847
Refer to notes to unaudited condensed consolidated financial statements.

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

1. MANAGEMENT REPRESENTATIONS

Principles of Consolidation – The condensed consolidated financial statements included herein are unaudited and have been prepared by management of Cabela’s Incorporated and its wholly-owned subsidiaries (“Cabela’s,” “Company,” “we,” “our,” or “us”) pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The Company’s condensed consolidated balance sheet as of December 31, 2016, was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and reflect all adjustments which are, in the opinion of management, necessary to summarize fairly our financial position and results of operations, comprehensive income, and cash flows for the periods presented. All of these adjustments are of a normal recurring nature. All intercompany accounts and transactions have been eliminated in consolidation.

World’s Foremost Bank (“WFB,” “Financial Services segment,” or “Cabela’s CLUB”), a Nebraska banking corporation and a wholly-owned bank subsidiary of Cabela’s, is the primary beneficiary of the Cabela’s Master Credit Card Trust and related entities (collectively referred to as the “Trust”). The Trust was consolidated for all reporting periods of Cabela’s in this report.

Because of the seasonal nature of the Company’s operations, results of operations of any single reporting period should not be considered as indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2016.

Cash and Cash Equivalents – Cash and cash equivalents of the Financial Services segment were $~~172~~98 million, $150 million, and $72455 million at ~~April~~July 1, 2017, December 31, 2016, and ~~April~~July 2, 2016, respectively. Due to regulatory restrictions on WFB, the Company cannot use WFB’s cash for non-banking operations.

Reporting Periods – Unless otherwise stated, the fiscal periods referred to in the notes to these condensed consolidated financial statements are the 13 weeks ended ~~April~~July 1, 2017 (“three months ended ~~April~~July 1, 2017”), the 13 weeks ended ~~April~~July 2, 2016 (“three months ended ~~April~~July 2, 2016”), the 26 weeks ended July 1, 2017 (“six months ended July 1, 2017”), the 26 weeks ended July 2, 2016 (“six months ended July 2, 2016”), and the 52 weeks ended December 31, 2016 (“fiscal year ended 2016”). WFB follows a calendar fiscal period and, accordingly, the respective three and six month periods ended on ~~March~~June 3130, 2017 and 2016, and the fiscal year ended on December 31, 2016.

Adoption of New Accounting Principles – In the first quarter of 2017, we adopted the guidance of Accounting Standard Update (“ASU”) 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The provisions of ASU 2016-09 related to the recognition of excess tax benefits in the income statement and classification in the statement of cash flows were adopted prospectively and the prior periods were not retrospectively adjusted. The Company has elected to continue estimating forfeitures of share-based awards when determining compensation cost to be recognized each period. The adoption of ASU 2016-09 did not have a material impact on the accompanying condensed consolidated financial statements.

In addition in the first quarter of 2017, we adopted on a prospective basis the provisions of ASU 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. The adoption of ASU 2015-11 did not have a material impact on the accompanying condensed consolidated financial statements.

2. MERGER AGREEMENT

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

~~Amendment”), by and among the Company, Parent and Sub (the Original Merger Agreement, as amended by the Merger Agreement Amendment, the “Merger Agreement”)~~2. MERGER The Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement have been unanimously approved by the Company’s board of directors. The Merger Agreement provides for the merger of Sub with and into the Company, on the terms and subject to the conditions set forth in the Merger Agreement (the “Merger”), with the Company continuing as the surviving corporation in the Merger. As a result of the Merger, the Company would become a wholly owned subsidiary of Bass Pro Group.AGREEMENT

~~Pursuant~~On toOctober 3, 2016, the Company entered into an Agreement and Plan of Merger (the “Original Merger Agreement”), atby ~~the~~and ~~effective~~among ~~time~~Bass ofPro ~~the~~Group, LLC, a Delaware limited liability company (“Bass Pro Group”), Prairie Merger Sub, ~~each~~Inc., ~~share~~a ofDelaware ~~Class~~corporation Aand ~~common~~a ~~stock~~wholly owned subsidiary of Bass Pro Group (“Sub”), and the Company. On April 17, 2017, the Company entered into an Amendment to the Agreement and Plan of Merger, dated as ~~defined~~of inApril 17, 2017 (the “Merger Agreement Amendment”), ~~par~~by ~~value~~and ~~$0.01~~among ~~per~~the ~~share~~Company, ofParent and Sub (the ~~Company~~Original ~~issued~~Merger Agreement, as amended by the Merger Agreement Amendment and ~~outstanding~~as ~~immediately~~otherwise ~~prior~~amended from time to time, the ~~Effective~~“Merger ~~Time~~Agreement”). ~~will~~The beMerger ~~cancelled~~Agreement and ~~automatically~~the ~~converted~~consummation ~~into~~of the ~~right~~transactions tocontemplated ~~receive~~by ~~$61~~the Merger Agreement have been unanimously approved by the Company’s board of directors.50 inOn ~~cash~~July 11, ~~without~~2017, ~~interest~~the ~~thereon~~Company’s stockholders also adopted and approved the Merger Agreement. The Merger Agreement provides for the merger of Sub with and into the Company, ~~which~~on ~~amount~~the isterms and subject to ~~adjustments~~the conditions set forth in ~~certain~~the ~~circumstances~~Merger ~~specified~~Agreement (the “Merger”), with the Company continuing as the surviving corporation in the Merger. ~~Agreement~~As ~~Amendment~~a result of the Merger, the Company would become a wholly owned subsidiary of Bass Pro Group.

~~The~~Pursuant ~~consummation~~to of the Merger ~~is subject to the satisfaction or waiver of specified closing conditions~~Agreement, ~~including~~at ~~(i)~~ the ~~affirmative~~effective ~~vote~~time ~~in favor~~ of the ~~adoption of the~~ Merger, ~~Agreement~~each byshare ~~the holders~~ of aClass ~~majority~~A ofcommon ~~the~~stock, ~~outstanding~~par ~~shares~~value of$0.01 ~~Company~~per ~~Common Stock entitled to vote thereon~~share, ~~(ii) the consummation~~ of the ~~purchase~~Company issued and ~~sale~~outstanding ofimmediately ~~the~~prior ~~banking~~to ~~business of WFB, in accordance with~~ the ~~Bank~~Effective ~~Framework~~Time ~~Agreement~~will ~~(as~~be ~~defined~~cancelled ~~below) or an alternative agreement in accordance with the Merger Agreement~~ and ~~merger~~automatically ofconverted ~~WFB~~ into the ~~Company~~right orto ~~another~~receive ~~subsidiary~~$61.50 ofin ~~the Company and termination of its bank charter~~cash, ~~(iii)~~without ~~any~~interest ~~applicable waiting periods (or extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 having expired or been terminated~~thereon, ~~(iv)~~which ~~the~~amount ~~absence~~is ofsubject ~~any~~to ~~order~~adjustments byin ~~any~~certain ~~governmental~~circumstances ~~entity~~specified ~~rendering~~in the Merger ~~illegal,~~Agreement ~~or prohibiting, enjoining or otherwise preventing the Merger, and (v) other customary closing conditions~~Amendment.

~~Additionally,~~The onconsummation ~~April~~of ~~17, 2017, and in connection with~~ the Merger ~~Agreement~~is ~~Amendment,~~subject to the ~~Company~~satisfaction ~~entered~~or ~~into~~waiver ~~(i)~~of aspecified ~~Framework~~closing ~~Agreement~~conditions, ~~dated~~including ~~as of April 17, 2017~~ (~~the “Bank Framework Agreement”~~i), ~~by and among~~ the ~~Company,~~consummation ~~WFB, Synovus Bank, a Georgia state member bank (“Synovus”), Capital One Bank (USA), National Association, a national banking association (“Capital One”) and an affiliate~~ of ~~Capital One, National Association, a national banking association (“CONA”), and, solely for~~ the ~~purposes~~purchase ~~set forth therein, CONA, (ii) an Asset~~ and ~~Deposit~~sale ~~Purchase Agreement, dated as~~ of ~~April 17, 2017 (~~the ~~“Synovus~~banking ~~Bank~~business ~~Asset~~of ~~Purchase Agreement”), by and among the Company,~~ WFB ~~and Synovus and (iii) an Asset Purchase Agreement~~, ~~dated~~in asaccordance ofwith ~~April 17, 2017 (~~the ~~“Capital One~~ Bank ~~Asset~~Framework ~~Purchase~~ Agreement” ~~and,~~(as ~~together~~defined ~~with~~below) ~~the~~or ~~Synovus~~an ~~Bank~~alternative ~~Asset~~agreement ~~Purchase~~in ~~Agreement,~~accordance ~~the “Bank Asset Purchase Agreements” and, together~~ with the ~~Synovus~~Merger ~~Bank Asset Purchase~~ Agreement and ~~the~~merger ~~Bank~~of ~~Framework~~WFB ~~Agreement,~~into the ~~“Related~~Company ~~Bank~~or ~~Transactions”),~~another bysubsidiary ~~and~~of ~~among~~ the Company, ~~WFB~~ and ~~Capital~~termination ~~One,~~of ~~which~~its ~~amend~~bank ~~and~~charter, ~~restate~~(ii) the ~~Sale~~absence ~~and Purchase Agreement, dated as~~ of ~~October~~any 3,order ~~2016,~~ by ~~and~~any ~~among~~governmental entity rendering the ~~Company,~~Merger ~~WFB~~illegal, ~~and~~or ~~CONA~~prohibiting, ~~and~~enjoining ~~continue~~or tootherwise ~~provide~~preventing ~~for~~ the ~~sale~~Merger, ofand ~~substantially~~(iii) ~~all~~other ofcustomary ~~the business of WFB in connection with the~~ closing ~~of the Merger~~conditions.

Additionally, on April 17, 2017, and in connection with the Merger Agreement Amendment, the Company entered into (i) a Framework Agreement (the “Bank Framework Agreement”), by and among the Company, WFB, Synovus Bank, a Georgia state member bank (“Synovus”), Capital One Bank (USA), National Association, a national banking association (“Capital One”) and an affiliate of Capital One, National Association, a national banking association (“CONA”), and, solely for the purposes set forth therein, CONA, (ii) an Asset and Deposit Purchase Agreement (the “Synovus Bank Asset Purchase Agreement”), by and among the Company, WFB and Synovus and (iii) an Asset Purchase Agreement (the “Capital One Bank Asset Purchase Agreement” and, together with the Synovus Bank Asset Purchase Agreement, the “Bank Asset Purchase Agreements” and, together with the Synovus Bank Asset Purchase Agreement and the Bank Framework Agreement, the “Related Bank Transactions”), by and among the Company, WFB and Capital One, which amended and restated the Sale and Purchase Agreement, dated as of October 3, 2016, by and among the Company, WFB, and CONA, and continue to provide for the sale of substantially all of the business of WFB in connection with the closing of the Merger.

Pursuant to the Related Bank Transactions and an Asset Purchase Agreement entered into between Synovus and Capital One on the same date, by way of three transactions, (1) Synovus has agreed to acquire assets and assume liabilities of WFB, which collectively constitute substantially all of the business of WFB, (2) Capital One has agreed to acquire certain other assets and assume certain other liabilities of WFB and (3) immediately following the transaction referred to in the foregoing clause (1), Synovus has agreed to sell and assign to Capital One, and Capital One has agreed to acquire and assume, certain of such assets and liabilities acquired and assumed by Synovus from WFB, such that Synovus retains all deposits of WFB and certain

other assets and liabilities relating to deposits of WFB and Capital One acquires the assets and liabilities relating to the Cabela’s CLUB co-branded credit card accounts and equity interests in certain securitization funding vehicles. The consummation of the transactions contemplated by the Related Bank Transactions is subject to the satisfaction or waiver of various specified closing conditions.

The Merger Agreement also contains certain termination rights for both the Company and Bass Pro Group~~, and in certain specified circumstances upon termination of the Merger Agreement the Company would be required to pay Bass Pro Group a termination fee of $126 million~~. The Bank Framework Agreement also contains certain termination rights for both the Company and Capital One, and in certain circumstances the Company would be required to pay Capital One a termination fee of $14 million and under certain other circumstances, the Company will be obligated to reimburse Capital One for up to $10 million of a termination fee and reimbursement of expenses Capital One may owe to Synovus.

There can be no assurance that the requisite closing conditions will be satisfied in a timely manner, or at all, or if the Merger will close.

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

There can be no assurance that the requisite closing conditions will be satisfied in a timely manner, or at all, or if the Merger will close.

3. CABELA’S MASTER CREDIT CARD TRUST

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 owns notes issued by the Trust from some of the securitizations, which in some cases may be subordinated to other notes issued.

The following table presents the components of the consolidated assets and liabilities of the Trust at the periods ended:

	April 1, 2017		December 31, 2016		April 2, 2016
	July 1, 2017		December 31, 2016		July 2, 2016
Consolidated assets:
Restricted credit card loans, net of allowance of $111,780, $117,860, and $74,510	$	5,177,875	$	5,543,241	$	4,749,813
Restricted credit card loans, net of allowance of $120,160, $117,860, and $83,671	$	5,397,468	$	5,543,241	$	5,031,040
Restricted cash	4651,~~330~~233		48,697		40,~~475~~978
Total	$	5,~~224~~448,~~205~~701	$	5,591,938	$	45,~~790~~072,~~288~~018
Consolidated liabilities:
Secured variable funding obligations	$	~~725~~1,395,000	$	420,000	$	~~330,000~~—
Secured long-term obligations, net of unamortized debt issuance costs of $6,412, $7,239, and $6,814	2,892,088		3,571,261		3,231,686
Secured long-term obligations, net of unamortized debt issuance costs of $5,713, $7,239, and $8,414	2,467,787		3,571,261		3,825,086
Interest due to third party investors	45,~~211~~081		3,826		2,~~722~~703
Total	$	3,~~621~~867,~~299~~868	$	3,995,087	$	3,~~564~~827,~~408~~789

4. CREDIT CARD LOANS AND ALLOWANCE FOR LOAN LOSSES

The following table reflects the composition of the credit card loans at the periods ended:

	April 1, 2017			December 31, 2016			April 2, 2016
	July 1, 2017			December 31, 2016			July 2, 2016
Restricted credit card loans of the Trust (restricted for repayment of secured obligations of the Trust)	$	5,~~289~~517,~~655~~628		$	5,661,101		$	45,~~824~~114,~~323~~711
Unrestricted credit card loans	2324,~~585~~147			31,270			2426,~~034~~385
Total credit card loans	5,~~313~~541,~~240~~775			5,692,371			45,~~848~~141,~~357~~096
Allowance for loan losses	(~~112~~120,~~095~~474		)	(118,343		)	(7483,~~753~~950		)
Deferred credit card origination costs	4,~~792~~208			5,547			5,~~549~~080
Credit card loans, net	$	5,~~205~~425,~~937~~509		$	5,579,575		$	45,~~779~~062,~~153~~226

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

Allowance for Loan Losses:

The following table reflects the activity in the allowance for loan losses by credit card segment for the periods presented:

	Three Months Ended
	April 1, 2017									April 2, 2016
	July 1, 2017									July 2, 2016
	Credit Card Loans			Restructured Credit Card Loans			Total Credit Card Loans			Credit Card Loans			Restructured Credit Card Loans			Total Credit Card Loans
Balance, beginning of period	$	~~109~~104,~~903~~433		$	87,~~440~~662		$	~~118~~112,~~343~~095		$	6766,~~653~~431		$	8,~~258~~322		$	7574,~~911~~753
Provision for loan losses	3044,~~134~~260			~~952~~986			3145,~~086~~246			2030,~~826~~692			1,~~994~~712			2232,~~820~~404
Charge-offs	(4243,~~607~~232		)	(2,~~467~~403		)	(45,~~074~~635		)	(2627,~~969~~132		)	(2,~~709~~446		)	(29,~~678~~578		)
Recoveries	7,~~003~~976			~~737~~792			78,~~740~~768			45,~~921~~541			~~779~~830			56,~~700~~371
Net charge-offs	(35,~~604~~256		)	(1,~~730~~611		)	(3736,~~334~~867		)	(2221,~~048~~591		)	(1,~~930~~616		)	(23,~~978~~207		)
Balance, end of period	$	~~104~~113,~~433~~437		$	7,~~662~~037		$	~~112~~120,~~095~~474		$	6675,~~431~~532		$	8,~~322~~418		$	7483,~~753~~950
	Six Months Ended
	July 1, 2017									July 2, 2016
	Credit Card Loans			Restructured Credit Card Loans			Total Credit Card Loans			Credit Card Loans			Restructured Credit Card Loans			Total Credit Card Loans
Balance, beginning of period	$	109,903		$	8,440		$	118,343		$	67,654		$	8,257		$	75,911
Provision for loan losses	74,394			1,938			76,332			51,518			3,706			55,224
Charge-offs	(85,839		)	(4,871		)	(90,710		)	(54,101		)	(5,155		)	(59,256		)
Recoveries	14,979			1,530			16,509			10,461			1,610			12,071
Net charge-offs	(70,860		)	(3,341		)	(74,201		)	(43,640		)	(3,545		)	(47,185		)
Balance, end of period	$	113,437		$	7,037		$	120,474		$	75,532		$	8,418		$	83,950

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

Credit Quality Indicators, Delinquent, and Non-Accrual Loans:

The following table provides information on current, non-accrual, past due, and restructured credit card loans by class using the respective quarter Fair Isaac Corporation (“FICO”) score at the periods ended:

FICO Score of Credit Card Loans Segment

Restructured Credit Card Loans Segment (1)

April 1, 2017:

691 and Below

692 - 758

759 and Above

Total

July 1, 2017:

691 and Below

692 - 758

759 and Above

Total

Credit card loan status:

Current

~~978~~925,~~182~~895

1,~~842~~931,~~204~~004

2,~~347~~520,~~555~~502

3029,~~237~~423

5,~~198~~406,~~178~~824

1 to 29 days past due

3138,~~533~~890

1521,~~286~~638

1217,~~671~~344

2,~~063~~408

6180,~~553~~280

30 to 59 days past due

1516,~~337~~691

2,~~258~~834

~~481~~490

1,~~365~~303

1921,~~441~~318

60 or more days past due

3130,~~331~~878

~~178~~528

91101

21,~~468~~846

3433,~~068~~353

Total past due

7886,~~201~~459

1725,~~722~~000

1317,~~243~~935

5,~~896~~557

~~115~~134,~~062~~951

Total credit card loans

1,~~056~~012,~~383~~354

1,~~859~~956,~~926~~004

2,~~360~~538,~~798~~437

3634,~~133~~980

5,~~313~~541,~~240~~775

90 days or more past due and still accruing

1615,~~962~~443

7855

4814

~~1,066~~796

1816,~~154~~308

Non-accrual

—

65,~~417~~763

December 31, 2016:
Credit card loan status:
Current	$	945,494	$	1,916,307	$	2,665,307	$	29,495	$	5,556,603
1 to 29 days past due	39,394		21,520		16,731		2,940		80,585
30 to 59 days past due	16,339		2,291		466		1,675		20,771
60 or more days past due	31,315		391		92		2,614		34,412
Total past due	87,048		24,202		17,289		7,229		135,768
Total credit card loans	$	1,032,542	$	1,940,509	$	2,682,596	$	36,724	$	5,692,371
90 days or more past due and still accruing	$	16,730	$	98	$	43	$	1,254	$	18,125
Non-accrual	—		—		—		6,281		6,281
April 2, 2016:
July 2, 2016:
Credit card loan status:
Current	$	~~825~~823,~~756~~146	$	1,~~634~~718,~~674~~604	$	2,~~261~~455,~~728~~453	$	30,~~402~~669	$	45,~~752~~027,~~560~~872
1 to 29 days past due	2834,~~082~~035		1519,~~441~~596		1216,~~310~~515		2,~~455~~913		5873,~~288~~059
30 to 59 days past due	1012,~~883~~284		1,~~657~~828		~~408~~442		1,~~780~~664		1416,~~728~~218
60 or more days past due	1921,~~509~~171		~~220~~368		7295		2,~~980~~313		2223,~~781~~947
Total past due	5867,~~474~~490		1721,~~318~~792		1217,~~790~~052		76,~~215~~890		95113,~~797~~224
Total credit card loans	$	~~884~~890,~~230~~636	$	1,~~651~~740,~~992~~396	$	2,~~274~~472,~~518~~505	$	37,~~617~~559	$	45,~~848~~141,~~357~~096
90 days or more past due and still accruing	$	10,~~133~~844	$	5760	$	2214	$	1,~~313~~018	$	11,~~525~~936
Non-accrual	—		—		—		7,~~278~~179		7,~~278~~179

(1) Included in the allowance for loan losses were specific allowances for loan losses of $87 million at ~~April~~July 1, 2017, and $8 million at both December 31, 2016 and ~~April~~July 2, 2016.

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

5. BORROWINGS OF FINANCIAL SERVICES SEGMENT

The Trust issues fixed and floating (variable) rate term securitizations, which are considered secured obligations backed by restricted credit card loans. A summary of the secured fixed and variable rate obligations of the Trust by series, the expected maturity dates, and the respective weighted average interest rates are presented in the following tables at the periods ended:

April 1, 2017:
July 1, 2017:
Series	ExpectedMaturity Date	Fixed Rate Obligations			Interest Rate		Variable Rate Obligations			Interest Rate		Total Obligations			Interest Rate
Series 2012-II	June 2017	$	300,000		1.45	%	$	125,000		1.39	%	$	425,000		1.43	%
Series 2013-I	February 2023	$	327,250		2.71	%	$	—		—	%	$	327,250		2.71	%
Series 2013-I	February 2023	327,250			2.71		—			—		327,250			2.71
Series 2013-II	August 2018	100,000			2.17		197,500			1.81		297,500			1.93
Series 2013-II	August 2018	100,000			2.17		197,500			1.56		297,500			1.77
Series 2014-II	July 2019	—			—		340,000			1.61		340,000			1.61
Series 2014-II	July 2019	—			—		340,000			1.36		340,000			1.36
Series 2015-I	March 2020	218,750			2.26		100,000			1.70		318,750			2.08
Series 2015-I	March 2020	218,750			2.26		100,000			1.45		318,750			2.01
Series 2015-II	July 2020	240,000			2.25		100,000			1.83		340,000			2.13
Series 2015-II	July 2020	240,000			2.25		100,000			1.58		340,000			2.05
Series 2016-I	June 2019	570,000			1.78		280,000			2.01		850,000			1.86
Series 2016-I	June 2019	570,000			1.78		280,000			1.76		850,000			1.77
Secured obligations of the Trust		1,456,000					1,017,500					2,473,500
Secured obligations of the Trust		1,756,000					1,142,500					2,898,500
Less unamortized debt issuance costs		(3,721		)			(1,992		)			(5,713		)
Less unamortized debt issuance costs		(4,138		)			(2,274		)			(6,412		)
Secured obligations of the Trust, net		1,452,279					1,015,508					2,467,787
Secured obligations of the Trust, net		1,751,862					1,140,226					2,892,088
Less current maturities of secured long-term obligations of the Trust, net		—					—					—
Less current maturities of secured long-term obligations of the Trust, net		(299,934		)			(124,973		)			(424,907		)
Secured long-term obligations of the Trust, less current maturities, net		$	1,452,279				$	1,015,508				$	2,467,787
Secured long-term obligations of the Trust, less current maturities, net		$	1,451,928				$	1,015,253				$	2,467,181

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)



December 31, 2016:
Series	Expected Maturity Date	Fixed Rate Obligations			Interest Rate		Variable Rate Obligations			Interest Rate		Total Obligations			Interest Rate

Series 2012-I	February 2017	$	275,000		1.63	%	$	150,000		1.23	%	$	425,000		1.49	%
Series 2012-II	June 2017	300,000			1.45		125,000			1.18		425,000			1.37
Series 2013-I	February 2023	327,250			2.71		—			—		327,250			2.71
Series 2013-II	August 2018	100,000			2.17		197,500			1.35		297,500			1.63
Series 2014-I	March 2017	—			—		255,000			1.05		255,000			1.05
Series 2014-II	July 2019	—			—		340,000			1.15		340,000			1.15
Series 2015-I	March 2020	218,750			2.26		100,000			1.24		318,750			1.94
Series 2015-II	July 2020	240,000			2.25		100,000			1.37		340,000			1.99
Series 2016-I	June 2019	570,000			1.78		280,000			1.55		850,000			1.71

Secured obligations of the Trust		2,031,000					1,547,500					3,578,500
Less unamortized debt issuance costs		(4,594		)			(2,645		)			(7,239		)
Secured obligations of the Trust, net		2,026,406					1,544,855					3,571,261
Less current maturities of secured long-term obligations of the Trust, net		(574,829		)			(529,856		)			(1,104,685		)
Secured long-term obligations of the Trust, less current maturities, net		$	1,451,577				$	1,014,999				$	2,466,576

April 2, 2016:
July 2, 2016:
Series	ExpectedMaturity Date	Fixed Rate Obligations			Interest Rate		Variable Rate Obligations			Interest Rate		Total Obligations			Interest Rate
Series 2011-II	June 2016	$	155,000		2.39	%	$	100,000		1.04	%	$	255,000		1.86	%
Series 2011-IV	October 2016	$	165,000		1.90	%	$	90,000		0.99	%	$	255,000		1.58	%
Series 2011-IV	October 2016	165,000			1.90		90,000			0.99		255,000			1.58
Series 2012-I	February 2017	275,000			1.63		150,000			0.97		425,000			1.40
Series 2012-II	June 2017	300,000			1.45		125,000			0.92		425,000			1.29
Series 2013-I	February 2023	327,250			2.71		—			—		327,250			2.71
Series 2013-II	August 2018	100,000			2.17		197,500			1.09		297,500			1.45
Series 2014-I	March 2017	—			—		255,000			0.79		255,000			0.79
Series 2014-II	July 2019	—			—		340,000			0.89		340,000			0.89
Series 2015-I	March 2020	218,750			2.26		100,000			0.98		318,750			1.86
Series 2015-II	July 2020	240,000			2.25		100,000			1.11		340,000			1.9192
Secured obligations of the Trust		1,781,000					1,457,500					3,238,500
Series 2016-I	June 2019	570,000			1.78		280,000			1.35		850,000			1.64
Less unamortized debt issuance costs		(3,938		)			(2,876		)			(6,814		)
Secured obligations of the Trust		2,196,000					1,637,500					3,833,500
Secured obligations of the Trust, net		1,777,062					1,454,624					3,231,686
Less unamortized debt issuance costs		(5,137		)			(3,277		)			(8,414		)
Less current maturities of secured long-term obligations of the Trust, net		(594,650		)			(594,438		)			(1,189,088		)
Secured obligations of the Trust, net		2,190,863					1,634,223					3,825,086
Secured long-term obligations of the Trust, less current maturities, net		$	1,182,412				$	860,186				$	2,042,598
Less current maturities of secured long-term obligations of the Trust, net		(739,525		)			(619,507		)			(1,359,032		)
Secured long-term obligations of the Trust, less current maturities, net		$	1,451,338				$	1,014,716				$	2,466,054

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

The Series 2012-I ($425 million), ~~and~~ Series 2014-I ($255 million) and Series 2012-II ($425 million) notes matured and were repaid in full using restricted cash of the Trust on February 15, 2017, March 15, 2017, and ~~March~~June 15, 2017, respectively.

The Trust also issues variable funding facilities which are considered secured obligations backed by restricted credit card loans. At ~~April~~July 1, 2017, the Trust had three variable funding facilities with total third party funding capacity of $3.0 billion of which $~~725~~1.4 ~~million~~billion was outstanding. At ~~April~~July 1, 2017, maturities for the three variable funding facilities were as follows:


•	the $500 million Series 2008-III facility with $200 million due October 2017, and $300 million due March 2018;


•	the $1.3 billion Series 2011-I facility with $800 million due March 2018, and $500 million due March 2019; and


•	the $1.2 billion Series 2011-III facility with $700 million due March 2018, and $500 million due September 2019.

Each of these variable funding facilities includes an option to renew subject to certain terms and conditions. Variable rate note interest is priced at a benchmark rate, LIBOR, or commercial paper rate, plus a spread, which ranges from 0.80% to 0.90%. The variable rate notes provide for a fee ranging from 0.45% to 0.50% on the unused portion of the facilities. During the ~~three~~six months ended ~~April~~July 1, 2017, and ~~April~~July 2, 2016, the daily average balance outstanding on these notes was $~~654~~850 million and $~~329~~344 million, with a weighted average interest rate of 1.6786% and 1.1823%, respectively.

The Financial Services segment has unsecured federal funds purchase agreements with two financial institutions. The maximum amount that can be borrowed is $100 million. There were no amounts outstanding at ~~April~~July 1, 2017, December 31, 2016, or ~~April~~July 2, 2016.

6. LONG-TERM DEBT AND CAPITAL LEASES

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

	April 1, 2017			December 31, 2016			April 2, 2016
	July 1, 2017			December 31, 2016			July 2, 2016
Unsecured $775 million revolving credit facility	$	~~121~~106,~~771~~046		$	115,000		$	~~256~~275,~~366~~000
Unsecured senior notes due 2017 with interest at 6.08%	~~60,000~~—			60,000			60,000
Unsecured senior notes due 2017-2018 with interest at 7.20%	8,143			16,286			16,286
Unsecured senior notes due 2020, 2022, and 2025; with interest rates ranging from 3.23% to 4.11%	550,000			550,000			550,000
Capital lease obligations contractually payable through 2036	—			11,544			11,777
Capital lease obligations	—			11,544			11,700
Total debt	~~739~~664,~~914~~189			752,830			~~894~~912,~~429~~986
Less current portion of debt	(688,~~121~~131		)	(79,677		)	(868,~~456~~461		)
Less unamortized debt issuance costs	(1,~~567~~489		)	(1,644		)	(1,~~874~~797		)
Long-term debt, less current maturities, net	$	~~670~~654,~~226~~569		$	671,509		$	~~884~~842,~~099~~728

Unsecured senior notes for $60 million matured and were paid in full on June 15, 2017. The Company’s credit agreement provides for an unsecured $775 million revolving credit facility and permits the issuance of letters of credit up to $75 million and swing line loans up to $30 million. The credit facility may be increased to $800 million subject to certain terms and conditions. The term of the credit facility expires on June 18, 2019.

During the ~~three~~six months ended ~~April~~July 1, 2017, and ~~April~~July 2, 2016, the daily average principal balance outstanding on the line of credit was $~~164~~138 million and $~~114~~250 million, respectively, and the weighted average interest rate was 2.1727% and 1.81%, respectively. Letters of credit and standby letters of credit totaling $2230 million and $2334 million were outstanding at ~~April~~July 1, 2017, and ~~April~~July 2, 2016, respectively. The daily average outstanding amount of total letters of credit during the ~~three~~six months ended ~~April~~July 1, 2017, and ~~April~~July 2, 2016, was $710 million and $1013 million, respectively.

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

The Company also has an unsecured $20 million Canadian (“CAD”) revolving credit facility for its operations in Canada. Borrowings are payable on demand with interest payable monthly. This credit facility permits the issuance of letters of credit up to $10 million CAD in the aggregate, which reduces the overall available credit limit. There were no amounts outstanding at July 1, 2017, December 31, 2016, or July 2, 2016.

At ~~April~~July 1, 2017, the Company was in compliance with the financial covenant requirements of its $775 million credit agreement with a fixed charge coverage ratio of 7.8480 to 1 (minimum requirement is 2.00 to 1), a leverage ratio of 1.7262 to 1 (requirement is no more than 3.00 to 1), and a consolidated net worth that was $~~672~~700 million in excess of the minimum, as defined in the agreement. At ~~April~~July 1, 2017, the Company was in compliance with all financial covenants under its 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 senior notes through at least the next 12 months.

7. IMPAIRMENT AND RESTRUCTURING CHARGES

Impairment and restructuring charges consisted of the following for the periods presented:

	Three Months Ended				Six Months Ended
	April 1, 2017		April 2, 2016
	July 1, 2017		July 2, 2016		July 1, 2017		July 2, 2016
Impairment losses on other property	$	904	$	141
Impairment losses relating to:
Restructuring charges for severance and related benefits	1,503		2,831
Property, equipment, and other assets	$	—	$	454	$	—	$	454
Total	$	2,407	$	2,972
Impairment losses on other property	—		—		904		141
Accumulated amortization of deferred grant income	63		—		63		—
	63		454		967		595
Restructuring charges for severance and related benefits	766		505		2,269		3,336
Total	$	829	$	959	$	3,236	$	3,931

Impairment – We evaluate the recoverability of economic development bonds (“EDB”), property (including existing store locations and future retail store sites), equipment, goodwill, other property, and other intangibles whenever indicators of impairment exist. In the three months ended April 1, 2017, we recognized an impairment loss of $1 million on a parcel of unimproved land based on a sales contract. After the impairment loss was recognized, the carrying value of this particular property was $10 million. In the three months ended April 2, 2016, we recognized an impairment loss of $0.1 million on a parcel of unimproved land based on a sales contract. The value of the property adjusted for selling costs was $1.3 million and its carrying value was $1.4 million. These impairment losses were recognized in the Merchandising segment.

~~Local~~The ~~economic~~following ~~trends,~~impairment ~~government~~losses ~~regulations,~~were ~~and~~recognized ~~other restrictions where we own properties may impact management projections that could change undiscounted cash flows~~ in ~~future periods which could trigger possible future write downs.~~2017:

~~Restructuring~~• ~~Charges~~In –the Insecond quarter of 2017, we received information on one of the ~~respective~~EDBs ~~three~~that ~~month~~indicated ~~periods~~the ~~ended~~actual ~~April~~property 1,tax ~~2017~~revenues associated with the property would be lower than previously projected. Therefore, ~~and~~the ~~April~~related 2discounted cash flows indicated that the fair value of the EDB was below its respective carrying value, ~~2016~~with the decline in fair value deemed to be other than temporary. This resulted in a fair value adjustment totaling $1.6 million that reduced the carrying value of the EDB. Accordingly, wedeferred ~~incurred~~grant ~~charges~~income ~~for~~was ~~severance~~also ~~and~~reduced ~~related~~by ~~benefits~~$1.6 ~~primarily~~million ~~attributable~~due to ~~our~~the ~~corporate~~other ~~restructuring~~than ~~and~~temporary impairment losses recognized on these bonds. The reduction in ~~the~~deferred ~~number~~grant income resulted in an increase in depreciation expense of ~~personnel~~$0.1 ~~These~~million ~~charges~~which ~~for~~was ~~all~~included ~~periods~~in ~~were~~impairment ~~recognized~~and restructuring charges in the ~~Merchandising~~consolidated ~~segment~~statements of income for 2017.

~~The~~• ~~activity~~An ~~relating~~impairment toloss ~~the~~of ~~liability~~$1 ~~for~~million ~~these~~on ~~severance~~a ~~benefits,~~parcel ~~which~~of ~~was~~unimproved ~~included~~land inbased ~~accrued~~on ~~expenses~~a ~~and~~sales ~~other~~contract ~~liabilities~~ in ~~our~~the ~~condensed~~six ~~consolidated~~months ~~balance~~ended ~~sheets~~July 1, is2017. ~~summarized~~After in the ~~following~~impairment ~~table~~loss ~~for~~was recognized, the ~~periods~~carrying ~~presented:~~ value of this particular property was $10 million.

	Three Months Ended
	April 1, 2017			April 2, 2016
Balance, beginning of period	$	1,043		$	2,799
Charges for severance and related benefits	1,503			2,831
Payments	(340		)	(1,899		)
Balance, end of period	$	2,206		$	3,731

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

The following impairment losses were recognized in 2016:


•	An impairment loss of $0.5 million on a property based on a sales contract in the three months ended July 2, 2016. The value of the property adjusted for selling costs was $0.3 million and its carrying value was $0.8 million.


•	An impairment loss of $0.1 million on a parcel of unimproved land based on a sales contract in the six months ended July 2, 2016. The value of the property adjusted for selling costs was $1.3 million and its carrying value was $1.4 million.

All these impairment losses were recognized in the Merchandising segment. Local economic trends, government regulations, and other restrictions where we own properties may impact management projections that could change undiscounted cash flows in future periods which could trigger possible future write downs.

Restructuring Charges – In the three and six month periods ended July 1, 2017, and July 2, 2016, we incurred charges for severance and related benefits primarily attributable to our corporate restructuring and reduction in the number of personnel. These charges for all periods were recognized in the Merchandising segment.

The activity relating to the liability for these severance benefits, which was included in accrued expenses and other liabilities in our condensed consolidated balance sheets, is summarized in the following table for the periods presented:



	Three Months Ended						Six Months Ended
	July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016

Balance, beginning of period	$	2,206		$	3,731		$	1,043		$	2,799
Charges for severance and related benefits	766			505			2,269			3,336
Payments	(1,575		)	(1,710		)	(1,915		)	(3,609		)
Balance, end of period	$	1,397		$	2,526		$	1,397		$	2,526

8. INCOME TAXES

The effective income tax rate was 3943.36% and 42.0% for the three and six months ended ~~April~~July 1, 2017, compared to 3639.53% and 38.3% for the three and six months ended ~~April~~July 2, 2016.

Unrecognized tax benefits totaled $6871 million at ~~April~~July 1, 2017, $68 ~~and~~million at December 31, 2016, and $7069 million at ~~April~~July 2, 2016, and were included in other long-term liabilities in our condensed consolidated balance sheets. The changes compared to the balances at ~~April~~July 2, 2016, were due primarily to our assessments of uncertain tax positions related to prior period tax positions and settlement of our 2007 and 2008 Internal Revenue Service examinations. Since the Company is routinely under audit by various taxing authorities, it is reasonably possible that the amount of unrecognized tax benefits will change during the next 12 months. However, we do not expect the change, if any, to have a material effect on the Company’s consolidated financial condition or results of operations within the next 12 months.

9. COMMITMENTS AND CONTINGENCIES

The Company leases various buildings, computer and other equipment, and storage space under operating leases which expire on various dates through January 2041. Rent expense on these leases, as well as other month to month rentals, was $5 million in the three months ended April 1, 2017, compared to $6 million in the three months ended April 2, 2016.

The following is a schedule of future minimum rental payments under operating leases at April 1, 2017:

For the nine months ending December 30, 2017	$	16,629
For the fiscal years ending:
2018	22,109
2019	21,600
2020	21,563
2021	21,191
Thereafter	265,533
Total	$	368,625

The Company leases seven retail stores and owns 25 stores subject to ground leases. Certain of these leases include tenant allowances that are amortized over the life of the lease. No tenant allowances were received in the three months ended April 1, 2017, or April 2, 2016. The Company does not expect to receive any tenant allowances under leases during the remainder of fiscal year 2017.

We have entered into real estate purchase, construction, and/or economic incentive agreements for various new retail store site locations. At April 1, 2017, we estimated we had total cash commitments of approximately $72 million outstanding for projected expenditures related to the development, construction, and completion of new retail stores. This amount excludes any estimated costs associated with new stores where the Company does not have a commitment as of April 1, 2017. We expect to fund these estimated capital expenditures over the next 12 months with funds from operations and borrowings.

In the past, we have received grant funding in exchange for commitments, such as assurance of agreed employment and wage levels at the retail store or that the retail store will remain open, made by us to the state or local government providing the funding. If we failed to maintain the commitments during the applicable period, the funds received may have to be repaid or other adverse consequences may arise, which could affect the Company’s cash flows and profitability. The total amount of grant funding subject to a specific contractual remedy was $24 million and $42 million at April 1, 2017, and April 2, 2016. No grant funding subject to contractual remedy was received in the three months ended April 1, 2017, or April 2, 2016. At April 1, 2017, and December 31, 2016, we had recorded $1 million in the condensed consolidated balance sheets relating to these grants (classified as long-term liabilities). At April 2, 2016, we had recorded $17 million in the condensed consolidated balance sheets relating to these grants with $16 million in current liabilities and $1 million in long-term liabilities.

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

~~The Company operates an open account document instructions program, which provides for Cabela’s-issued letters of credit~~9. COMMITMENTS WeAND ~~had~~CONTINGENCIES ~~obligations to pay participating vendors $62 million, $49 million, and $40 million at April 1, 2017, December 31, 2016, and April 2, 2016, respectively.~~

The ~~Financial~~Company ~~Services~~leases ~~segment~~various ~~enters~~buildings, ~~into~~computer ~~financial~~and ~~instruments~~other ~~with~~equipment, ~~off-balance~~and ~~sheet~~storage ~~risk~~space inunder ~~the~~operating ~~normal~~leases ~~course~~which ofexpire ~~business~~on ~~through~~various ~~the~~dates ~~origination~~through ofJanuary ~~unsecured credit card loans~~2041. ~~Unsecured~~Rent ~~credit~~expense ~~card~~on ~~accounts~~these ~~are~~leases, ~~commitments~~as towell ~~extend~~as ~~credit~~other ~~and~~month ~~totaled~~to ~~$36~~month ~~billion at April 1~~rentals, ~~2017~~was ~~and~~$6 ~~December~~million ~~31, 2016,~~ and $3511 ~~billion~~million ~~at April 2, 2016. These commitments are~~ in ~~addition~~the tothree ~~any~~and ~~current~~six ~~outstanding~~months ~~balances~~ended ofJuly ~~a cardholder. Unsecured credit card loans involve~~1, ~~to varying degrees~~2017, ~~elements~~compared ofto ~~credit~~$5 ~~risk~~million inand ~~excess~~$11 ofmillion ~~the amount recognized~~ in the ~~condensed~~three consolidated balance sheets. The principal amounts of these instruments reflect the Financial Services segment’s maximum related exposure. The Financial Services segment has the right to reduce or cancel the available lines of credit at any time, and ~~has~~six ~~not~~months ~~experienced,~~ended ~~and~~July ~~does not anticipate~~2, ~~that all customers will exercise the entire available line of credit at any given point in time~~2016.

The following is a schedule of future minimum rental payments under operating leases at July 1, 2017:



For the six months ending December 30, 2017	$	11,702
For the fiscal years ending:
2018	22,161
2019	21,652
2020	21,615
2021	21,243
Thereafter	265,538
Total	$	363,911

The Company leases nine retail stores and owns 25 stores subject to ground leases. Certain of these leases include tenant allowances that are amortized over the life of the lease. No tenant allowances were received in the six months ended July 1, 2017, or July 2, 2016. The Company does not expect to receive any tenant allowances under leases during the remainder of fiscal year 2017.

We have entered into real estate purchase, construction, and/or economic incentive agreements for various new retail store site locations. At July 1, 2017, we estimated we had total cash commitments of approximately $45 million outstanding for projected expenditures related to the development, construction, and completion of new retail stores. This amount excludes any estimated costs associated with new stores where the Company does not have a commitment as of July 1, 2017. We expect to fund these estimated capital expenditures over the next 12 months with funds from operations and borrowings.

In the past, we have received grant funding in exchange for commitments, such as assurance of agreed employment and wage levels at the retail store or that the retail store will remain open, made by us to the state or local government providing the funding. If we failed to maintain the commitments during the applicable period, the funds received may have to be repaid or other adverse consequences may arise, which could affect the Company’s cash flows and profitability. The total amount of grant funding subject to a specific contractual remedy was $24 million and $43 million at July 1, 2017, and July 2, 2016. No grant funding subject to contractual remedy was received in the six months ended July 1, 2017, or July 2, 2016. At July 1, 2017, and December 31, 2016, we had recorded $1 million in the condensed consolidated balance sheets relating to these grants (classified as long-term liabilities). At July 2, 2016, we had recorded $17 million in the condensed consolidated balance sheets relating to these grants with $16 million in current liabilities and $1 million in long-term liabilities.

The Company operates an open account document instructions program, which provides for Cabela’s-issued letters of credit. We had obligations to pay participating vendors $87 million, $49 million, and $66 million at July 1, 2017, December 31, 2016, and July 2, 2016, respectively.

The Financial Services segment enters into financial instruments with off-balance sheet risk in the normal course of business through the origination of unsecured credit card loans. Unsecured credit card accounts are commitments to extend credit and totaled $40 billion at July 1, 2017, and $36 billion at December 31, 2016, and July 2, 2016, respectively. These commitments are in addition to any current outstanding balances of a cardholder. Unsecured credit card loans involve, to varying degrees, elements of credit risk in excess of the amount recognized in the condensed consolidated balance sheets. The principal amounts of these instruments reflect the Financial Services segment’s maximum related exposure. The Financial Services segment has the right to reduce or cancel the available lines of credit at any time, and has not experienced, and does not anticipate, that all customers will exercise the entire available line of credit at any given point in time.

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

Litigation and Claims – The Company is party to various legal proceedings arising in the ordinary course of business. These actions include commercial, intellectual property, employment, regulatory, and product liability claims. Some of these actions involve complex factual and legal issues and are subject to uncertainties. The activities of WFB are subject to complex federal and state laws and regulations. WFB's regulators are authorized to conduct compliance examinations and impose penalties for violations of these laws and regulations and, in some cases, to order WFB to pay restitution. The Company cannot predict with assurance the outcome of the actions brought against it. Accordingly, adverse developments, settlements, or resolutions may occur and have a material effect on the Company's results of operations for the period in which such development, settlement, or resolution occurs. However, the Company does not believe that the outcome of any current legal proceedings will have a material effect on its results of operations, cash flows, or financial position taken as a whole.

From June 7, 2017, through June 14, 2017, several putative class action lawsuits were filed in the United States District Court for the District of Delaware in connection with the Merger, and were subsequently consolidated under the caption In re Cabela’s Inc. Shareholder Litigation, Consolidated C.A. No. 1:17-cv-00698-RGA (the “Merger Litigation”). The Merger Litigation named as defendants the Company and the members of the Company’s board of directors, and alleged that the definitive proxy statement filed on June 5, 2017 (the “Proxy Statement”) in connection with the Merger was false and misleading. On June 8, 2017, one of the plaintiffs in the Merger Litigation moved to enjoin the stockholder vote on the Merger until such time as the defendants made certain supplemental disclosures as identified by the plaintiff. The Company believes that the claims asserted in the Merger Litigation were without merit. However, in order to moot the plaintiffs’ unmeritorious disclosure claims, alleviate the costs, risks, and uncertainties inherent in litigation, and provide additional information to its stockholders, on June 22, 2017, the Company voluntarily supplemented the Proxy Statement through the filing of a Form 8-K. The same day, in light of the supplemental disclosures, the plaintiff withdrew his motion for preliminary injunction. On July 27, 2017, the Court entered the parties’ stipulation of voluntary dismissal of the Merger Litigation.

The Company is party to a putative class action lawsuit in the United States District Court for the Western District of Kentucky alleging that the Company violated the Telephone Consumer Protection Act by placing calls using an automatic telephone dialing system to cellular telephones without first obtaining consent due to reassignment of the number or revocation of prior consent. At the present time, the Company cannot reasonably estimate any loss or range of loss that may arise from this matter. Accordingly, the Company has not accrued a liability related to this matter.

10. STOCK-BASED COMPENSATION PLANS AND EMPLOYEE BENEFIT PLANS

Stock-Based Compensation – The Company recognized total stock-based compensation expense of $65 million inand ~~both~~$11 million for the three and six months ended ~~April~~July 1, 2017, and $6 million and $13 million for the three and six months ended ~~April~~July 2, 2016. Compensation expense related to the Company’s stock-based payment awards is recognized in selling, distribution, and administrative expenses in the condensed consolidated statements of income. At ~~April~~July 1, 2017, the total unrecognized deferred stock-based compensation balance for all equity awards issued, net of expected forfeitures, was $2319 million, net of tax, which is expected to be amortized over a weighted average period of 2.20 years.

Employee Stock Plans – Since June 5, 2013, all awards are granted under the Cabela’s Incorporated 2013 Stock Plan (the “2013 Stock Plan”) and have a term of no greater than ten years from the grant date and become exercisable under the vesting schedule determined at the time of grant. As of ~~April~~July 1, 2017, the maximum number of shares available for awards under the 2013 Stock Plan was 2,~~036~~072,~~456~~683. As of ~~April~~July 1, 2017, there were 1,~~428~~393,~~760~~273 awards outstanding under the 2013 Stock Plan and ~~835~~823,~~373~~707 awards outstanding under the Cabela’s Incorporated 2004 Stock Plan. To the extent available, we will issue treasury shares for the exercise of stock options before issuing new shares.

During the ~~three~~six months ended ~~April~~July 1, 2017, there were ~~284~~297,~~650~~271 options exercised. The aggregate intrinsic value of all awards exercised was $2627 million and $2231 million during the ~~three~~six months ended ~~April~~July 1, 2017, and ~~April~~July 2, 2016, respectively. Based on the Company’s closing stock price of $5359.1142 at ~~April~~July 1, 2017, the total number of in-the-money awards exercisable as of ~~April~~July 1, 2017, was ~~791~~946,~~248~~384.

Pursuant to the terms of the Merger Agreement, without the prior written consent of Bass Pro Group, no option awards or stock unit awards may be granted under the 2013 Stock Plan beginning on or after October 3, 2016. Accordingly, during the ~~three~~six months ended ~~April~~July 1, 2017, there were no option awards orand no stock unit awards granted.

1819

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

Employee Stock Purchase Plan – Pursuant to the terms of the Merger Agreement, no shares may be purchased under the Cabela’s Incorporated 2013 Employee Stock Purchase Plan with respect to offering periods beginning on or after October 3, 2016. At ~~April~~July 1, 2017, there were 1,738,226 shares of common stock authorized and available for issuance.


11.	STOCKHOLDERS’ EQUITY AND DIVIDEND RESTRICTIONS

Retained Earnings – The most significant restrictions on the payment of dividends by the Company to stockholders are contained within the covenants under its revolving credit and unsecured senior notes purchase agreements. Also, Nebraska banking laws govern the amount of dividends that WFB can pay to Cabela’s. On March 31, 2017, WFB paid a dividend of $50 million to Cabela’s. At ~~April~~July 1, 2017, the Company had unrestricted retained earnings of $215 million available for dividends. However, the Company has never declared or paid any cash dividends on its common stock.

Pursuant to the terms of the Merger Agreement, the Company is also prohibited from declaring or paying any dividends or other distributions on its common stock. The Company does not anticipate paying any dividends or other distributions on its common stock in the foreseeable future.

Accumulated Other Comprehensive Loss – The components of accumulated other comprehensive loss, net of related taxes, are as follows for the periods ended:

	April 1, 2017			December 31, 2016			April 2, 2016
	July 1, 2017			December 31, 2016			July 2, 2016
Accumulated net unrealized holding gains on economic development bonds	$	911,~~693~~526		$	8,103		$	1011,~~661~~761
Cumulative foreign currency translation adjustments	(5145,~~524~~006		)	(54,025		)	(4644,~~331~~549		)
Total accumulated other comprehensive loss	$	(4133,~~831~~480	)	$	(45,922	)	$	(3532,~~670~~788	)

Treasury Stock – On September 1, 2015, we announced that our Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $500 million of its common stock over a two-year period. This authorization was in addition to the standing annual authorization to repurchase shares to offset dilution resulting from equity-based awards issued under the Company’s equity compensation plans. 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. We did not engage in any stock repurchase activity in the ~~three~~six months ended ~~April~~July 1, 2017, or ~~April~~July 2, 2016. As of ~~April~~July 1, 2017, up to $426 million of authorization to repurchase our common stock remained under this program.

Pursuant to the terms of the Merger Agreement, the Company generally may not repurchase shares of its common stock, except in connection with the exercise of outstanding stock options or the settlement of restricted stock unit awards. As a result, the Company does not anticipate repurchasing any further shares under this program.

The following table reconciles the Company’s treasury stock activity for the periods presented.

	Three Months Ended				Six Months Ended
	April 1, 2017		April 2, 2016
	July 1, 2017		July 2, 2016		July 1, 2017		July 2, 2016
Balance, beginning of period	32,~~092~~689,~~764~~590		3,~~776~~351,~~305~~162		3,092,764		3,776,305
Treasury shares issued on exercise of stock options and share-based payment awards	(~~403~~24,~~174~~049	)	(~~425~~221,~~143~~224	)	(427,223	)	(646,367	)
Balance, end of period	2,~~689~~665,~~590~~541		3,~~351~~129,~~162~~938		2,665,541		3,129,938

1920

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

12. EARNINGS PER SHARE

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

	Three Months Ended		Six Months Ended
	April 1, 2017	April 2, 2016
	July 1, 2017	July 2, 2016	July 1, 2017	July 2, 2016
Common shares – basic	68,~~640~~914,~~257~~407	6768,~~925~~388,~~173~~426	68,777,332	68,168,772
Effect of incremental dilutive securities:
Stock options and nonvested stock units	~~674~~438,~~611~~042	~~762~~520,~~423~~977	554,972	631,208
Common shares – diluted	69,~~314~~352,~~868~~449	68,~~687~~909,~~596~~403	69,332,304	68,799,980
Stock options outstanding considered anti-dilutive excluded from calculation	1871,~~109,169~~503	1,~~591~~287,~~206~~951	968,859	1,511,148

13. SUPPLEMENTAL CASH FLOW INFORMATION

The following table sets forth non-cash financing and investing activities and other cash flow information for the ~~three~~six months ended:

	April 1, 2017			April 2, 2016
	July 1, 2017			July 2, 2016
Non-cash financing and investing activities:
Accrued property and equipment additions (1)	$	67,~~844~~020		$	65,~~446~~941
Other cash flow information:
Interest paid (2)	$	3266,~~062~~975		$	3068,~~414~~230
Capitalized interest	(~~353~~682		)	(12,~~567~~284		)
Interest paid, net of capitalized interest	$	3166,~~709~~293		$	2865,~~847~~946
Income taxes paid, net of refunds	$	210,~~347~~255		$	821,~~206~~845


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

(2) Includes interest paid by the Financial Services segment totaling $2551 million and $1939 million, respectively.

2021

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

14. SEGMENT REPORTING

The Company accounts for its operations as two reportable segments: Merchandising and Financial Services. The Merchandising segment sells products and services through the Company’s retail stores, our e-commerce websites (Cabelas.com and Cabelas.ca), and our catalogs. The United States merchandising and Canada merchandising operating segments have been aggregated into our reportable Merchandising segment. We are an omni-channel retailer with capabilities that allow a customer to use more than one channel when making a purchase, including retail stores, online, and mobile channels, and have it fulfilled, in most cases, either through in-store customer pickup or by direct shipment to the customer from one of our distribution centers, retail stores, or vendor drop-ship. Other non-merchandise revenue included in our Merchandising segment primarily includes the value of unredeemed points earned that are associated with the Company’s loyalty rewards programs for Cabela’s CLUB issued credit cards, net of the estimated costs of the points; real estate rental income; and real estate land sales.

The Financial Services segment issues co-branded credit cards which are available through all of our channels in the United States. Our Cabela’s CLUB cardholders also earn points from our loyalty rewards programs that can be redeemed through all of our customer shopping channels in the United States.

Primary operating costs by segment are summarized below.

Merchandising Segment:


•	Employee compensation and benefits, advertising and marketing costs, depreciation, and retail store related occupancy costs.


•	Costs relating to receiving, distribution, and storage of inventory; and merchandising, order processing, and quality assurance costs.


•	Corporate headquarters occupancy costs, other general and administrative costs, and costs relating to operations of various ancillary subsidiaries such as real estate.


•	Consulting fees and other expenses associated with the Company’s corporate restructuring initiatives and the pending merger.

Financial Services Segment:


•	Advertising and promotion, license fees, third party services for processing credit card transactions, employee compensation and benefits, and other general and administrative costs.

Segment assets are those directly used in each operating segment’s operations. Depreciation, amortization, and property and equipment expenditures are recognized as directly expensed and used in each respective segment. Major assets by segment are summarized below.

Merchandising Segment:


•	Land, buildings, fixtures, and leasehold improvements, including corporate headquarters and facilities.


•	Inventory, receivables, and prepaid expenses.

• Technology infrastructure and related information technology systems, corporate cash and cash equivalents, ~~Economic~~economic ~~Development~~development ~~Bonds (EDBs)~~bonds, deferred income taxes, and other corporate long-lived assets.

Financial Services Segment:


•	Cash, credit card loans, restricted cash, receivables, property and equipment, and other assets.

2122

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

Under an Intercompany Agreement, the Financial Services segment pays to the Merchandising segment a fixed license fee that includes 70 basis points on all originated charge volume of the Cabela’s CLUB Visa credit card portfolio. Among other items, the agreement also requires the Financial Services segment to reimburse the Merchandising segment for certain promotional costs, which are recorded as a reduction to Financial Services segment revenue and as a reduction to merchandise costs associated with the Merchandising segment. In addition, if the total risk-based capital ratio of WFB is greater than 13% at any quarter end, the Financial Services segment must pay an additional license fee to the Merchandising segment equal to 50% of the amount that the total risk-based capital ratio exceeds 13%. No additional license fee was paid in either the ~~three~~six months ended ~~April~~July 1, 2017, or ~~April~~July 2, 2016.

Financial information for our two segments is presented in the following table for the periods presented:

				Financial Services
Three Months Ended April 1, 2017:	Merchandising						Total
Three Months Ended July 1, 2017:	Merchandising						Total
Merchandise sales	$	~~678~~737,~~021~~384		$	—		$	~~678~~737,~~021~~384
Non-merchandise revenue:
Financial Services	—			~~145~~141,~~236~~686			~~145~~141,~~236~~686
Other	65,~~869~~862			—			65,~~869~~862
Total revenue before intersegment eliminations	~~684~~743,~~890~~246			~~145~~141,~~236~~686			~~830~~884,~~126~~932
Intersegment revenue eliminated in consolidation	—			45,~~763~~510			45,~~763~~510
Total revenue as reported	$	~~684~~743,~~890~~246		$	~~149~~147,~~999~~196		$	~~834~~890,~~889~~442
Operating income (loss)	$	(304,~~071~~414	)	$	6861,~~584~~459		$	3857,~~513~~045
Operating income (loss) as a percentage of revenue	(40.46		)%	4743.24		%	4.6.4		%
Depreciation and amortization	$	36,~~841~~854		$	1,~~457~~321		$	38,~~298~~175
Assets	32,~~024~~958,~~457~~890			5,~~525~~677,~~492~~303			8,~~549~~636,~~949~~193
Property and equipment additions including accrued amounts	2522,~~913~~704			4368			2522,~~956~~772
Three Months Ended April 2, 2016:
Three Months Ended July 2, 2016:
Merchandise sales	$	~~719~~786,~~915~~203		$	—		$	~~719~~786,~~915~~203
Non-merchandise revenue:
Financial Services	—			~~135~~129,~~996~~662			~~135~~129,~~996~~662
Other	38,~~924~~613			—			38,~~924~~613
Total revenue before intersegment eliminations	~~723~~794,~~839~~816			~~135~~129,~~996~~662			~~859~~924,~~835~~478
Intersegment revenue eliminated in consolidation	—			45,~~827~~419			45,~~827~~419
Total revenue as reported	$	~~723~~794,~~839~~816		$	~~140~~135,~~823~~081		$	~~864~~929,~~662~~897
Operating income (loss)	$	(16,395	)	$	60,751		$	44,356
Operating income	$	18,024		$	49,685		$	67,709
Operating income (loss) as a percentage of revenue	(2.3		)%	44.7		%	5.1		%
Operating income as a percentage of revenue	2.3		%	38.3		%	7.3		%
Depreciation and amortization	$	3538,~~294~~551		$	~~416~~435		$	3538,~~710~~986
Assets	3,~~078~~112,~~888~~758			5,~~022~~652,~~321~~501			8,~~101~~765,~~209~~259
Property and equipment additions including accrued amounts	5436,~~404~~259			~~216~~412			5436,~~620~~671

2223

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)




				Financial Services
Six Months Ended July 1, 2017:	Merchandising			Financial Services			Total

Merchandise sales	$	1,415,405		$	—		$	1,415,405
Non-merchandise revenue:
Financial Services	—			286,922			286,922
Other	12,731			—			12,731
Total revenue before intersegment eliminations	1,428,136			286,922			1,715,058
Intersegment revenue eliminated in consolidation	—			10,273			10,273
Total revenue as reported	$	1,428,136		$	297,195		$	1,725,331

Operating income (loss)	$	(34,485	)	$	130,043		$	95,558
Operating income (loss) as a percentage of revenue	(2.4		)%	45.3		%	5.5		%
Depreciation and amortization	$	73,695		$	2,778		$	76,473
Assets	2,958,890			5,677,303			8,636,193
Property and equipment additions including accrued amounts	48,617			111			48,728

Six Months Ended July 2, 2016:

Merchandise sales	$	1,506,118		$	—		$	1,506,118
Non-merchandise revenue:
Financial Services	—			265,658			265,658
Other	12,537			—			12,537
Total revenue before intersegment eliminations	1,518,655			265,658			1,784,313
Intersegment revenue eliminated in consolidation	—			10,246			10,246
Total revenue as reported	$	1,518,655		$	275,904		$	1,794,559

Operating income	$	1,629		$	110,436		$	112,065
Operating income as a percentage of revenue	0.1		%	41.6		%	6.2		%
Depreciation and amortization	$	73,845		$	851		$	74,696
Assets	3,112,758			5,652,501			8,765,259
Property and equipment additions including accrued amounts	90,663			628			91,291

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

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

	Three Months Ended						Six Months Ended
	April 1, 2017			April 2, 2016
	July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
Interest and fee income	$	~~164~~171,~~644~~938		$	~~139~~141,~~748~~180		$	336,582		$	280,928
Interest expense	(2627,~~320~~283		)	(1920,~~873~~929		)	(53,603		)	(40,802		)
Provision for loan losses	(3145,~~086~~246		)	(2232,~~820~~404		)	(76,332		)	(55,224		)
Net interest income, net of provision for loan losses	~~107~~99,~~238~~409			9787,~~055~~847			206,647			184,902
Non-interest income:
Interchange income	94105,~~366~~792			94104,~~996~~841			200,158			199,837
Other non-interest income	~~757~~959			~~670~~875			1,716			1,545
Total non-interest income	95106,~~123~~751			95105,~~666~~716			201,874			201,382
Less: Customer rewards costs	(5258,~~362~~964		)	(5158,~~898~~482		)	(111,326		)	(110,380		)
Financial Services revenue	$	~~149~~147,~~999~~196		$	~~140~~135,~~823~~081		$	297,195		$	275,904

The following table sets forth the percentage of our merchandise revenue contributed by major product categories for our Merchandising segment for the periods presented:

	Three Months Ended
	Three Months Ended (1)				Six Months Ended (1)
	April 1, 2017		April 2, 2016
	July 1, 2017		July 2, 2016		July 1, 2017		July 2, 2016
Hunting Equipment	5040.34	%	4941.62	%	45.7	%	45.9	%
General Outdoors	3143.01		3142.50		36.7		36.2
Clothing and Footwear	1816.75		1816.98		17.6		17.9
Total	100.0	%	100.0	%	100.0	%	100.0	%

(1) There were some hierarchy changes between the major product categories in the three months ended July 1, 2017. Prior period percentages of our merchandise revenue contributed by major product categories have been updated accordingly for comparison purposes.


15.	FAIR VALUE MEASUREMENTS

Financial instrument assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:


•	Level 1 – Quoted market prices in active markets for identical assets or liabilities.


•	Level 2 – Observable inputs other than quoted market prices.


•	Level 3 – Unobservable inputs corroborated by little, if any, market data. Level 3 is comprised of financial instruments whose fair value is estimated based on internally developed models or methodologies utilizing significant inputs that are primarily unobservable from objective sources.

At ~~April~~July 1, 2017, the financial instruments subject to fair value measurements carried on our condensed consolidated balance sheets consisted of economic development bonds (included in other assets) and were classified as Level 3 for valuation purposes. There were no transfers in or out of Levels 1, 2, or 3 for the ~~three~~six months ended ~~April~~July 1, 2017, and ~~April~~July 2, 2016.

2325

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

~~There~~In ~~were~~the nosecond ~~significant~~quarter ~~changes~~of in2017, ~~the~~we ~~fair~~received ~~value~~information on one of the economic development bonds ~~which~~that ~~are~~indicated ~~measured~~the onactual property tax revenues associated with the property would be lower than previously projected. Therefore, the related discounted cash flows indicated that the fair value of the EDB was below its respective carrying value, with the decline in fair value deemed to be other than temporary. This resulted in a ~~recurring~~fair ~~basis~~value ~~using~~adjustment ~~significant~~totaling ~~unobservable~~$1.6 ~~inputs~~million ~~(Level~~that 3)reduced ~~for~~the carrying value of the EDB. Accordingly, deferred grant income was also reduced by $1.6 million due to the other than temporary impairment losses recognized on these bonds. The reduction in deferred grant income resulted in an increase in depreciation expense of $0.1 million which was included in impairment and restructuring charges in the consolidated statements of income for three months ended ~~April~~ July 1, 2017,. ~~compared~~We todid ~~the~~not ~~fiscal~~have ~~year~~any ~~ended~~other ~~December~~than ~~31,~~temporary ~~2016~~fair orvalue adjustments in the three months ended ~~April~~July 2, 2016.

There were no other than temporary fair value adjustments of economic development bonds and no adjustments of deferred grant income related to economic development bonds in the three months ended April 1, 2017, or April 2, 2016. In the three months ended April 1, 2017, we recognized an impairment loss of $1 million on a parcel of unimproved land based on a sales contract. After the impairment loss was recognized, the carrying value of this particular property was $10 million. In the three months ended April 2, 2016, we recognized an impairment loss of $0.1 million on a parcel of unimproved land based on a sales contract. The value of the property adjusted for selling costs was $1.3 million and its carrying value was $1.4 million.

The table below presents the estimated fair values of the Company’s financial instruments that are not carried at fair value on our condensed consolidated balance sheets at the periods indicated. The fair values of all financial instruments listed below were estimated based on internally developed models or methodologies utilizing observable inputs (Level 2).

April 1, 2017

December 31, 2016

April 2, 2016

July 1, 2017

December 31, 2016

July 2, 2016

Carrying Value

Estimated Fair Value

Carrying Value

Estimated Fair Value

Carrying Value

Estimated Fair Value

Financial Assets:

Credit card loans, net

5,~~205~~425,~~937~~509

5,579,575

45,~~779~~062,~~153~~226

Financial Liabilities:

Time deposits

1,~~226~~099,~~176~~067

1,~~224~~100,~~714~~027

1,168,857

1,171,001

~~865~~1,~~556~~196,873

~~879~~1,~~451~~215,001

Secured variable funding obligations of the Trust

~~725~~1,395,000

420,000

~~330,000~~—

Secured obligations of the Trust (1)

2,~~898~~473,500

2,~~891~~472,~~423~~652

3,578,500

3,559,438

3,~~238~~833,500

3,~~206~~843,~~108~~397

Long-term debt (1)

~~739~~664,~~914~~189

~~759~~681,~~064~~177

752,830

772,311

~~894~~911,~~429~~189

~~918~~936,~~643~~137


(1)	Balances do not include related debt issuance costs as a direct deduction from such balances.

2426

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

16. ACCOUNTING PRONOUNCEMENTS

The following accounting standards are grouped by their effective date applicable to the Company:

Effective the first quarter of fiscal year 2018:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which has been further clarified and amended in 2015 and 2016. ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Early adoption is permitted. We are evaluating the provisions of this statement for potential impacts to our business as well as any changes to accounting policies, processes or systems necessary to adopt the requirements of the new standard. Specifically, we are assessing the potential impact that the standard may have on key areas including, but not limited to, accounting for credit card points in the Merchandising segment, gift instrument breakage revenue, and the timing of revenue recognition when merchandise is shipped to the customer. We are in the process of reviewing and assessing how adoption of the new standard will affect the consolidated financial statements and disclosures upon adoption, as well as the adoption method. We do not intend to early adopt, and have not determined what impact such adoption will have on the Company’s consolidated financial position or results of operations.

25In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows - Restricted Cash” (“ASU 2016-18”). This standard requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash

CABELA’S INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Tables are in Thousands Except Share and Per Share Amounts)

(Unaudited)

~~In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows - Restricted Cash” (“ASU 2016-18”). This standard requires entities to show the changes in the total of cash, cash~~ equivalents, ~~restricted cash, and restricted cash equivalents~~ in the statement of cash flows. Early adoption is permitted and must be adopted retrospectively. We do not intend to early adopt the provisions of this statement and do not believe that adoption will have a material effect on the Company’s consolidated financial position or results of operations.

Effective the first quarter of fiscal year 2019:

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Under this standard, operating and finance leases with a lease term of more than 12 months will be recorded in the balance sheet as right-of-use assets with offsetting lease liabilities based on the present value of future lease payments. The standard also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. Early adoption is permitted and requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. We are evaluating the provisions of this statement, including which period to adopt, and have not determined what impact the adoption of ASU 2016-02 will have on the Company’s consolidated results of operations or financial position except that leased assets (as defined), total assets, related lease liabilities, and total liabilities will significantly increase.

Effective the first quarter of fiscal year 2020:

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 will change the accounting for credit impairment by adding an impairment model that is based on expected losses rather than incurred losses. Under this standard, an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. Early adoption is permitted beginning January 1, 2019. We are evaluating the provisions of this statement, including which period to adopt, and have not determined what impact the adoption of ASU 2016-13 will have on the Company’s consolidated financial position or results of operations.

2628


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

This report contains “forward-looking statements” that are based on our beliefs, assumptions, and expectations of future events, taking into account the information currently available to us. All statements other than statements of current or historical fact contained in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. The words “believe,” “may,” “should,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,” “plan,” “confident,” and similar statements are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause our actual results, performance, or financial condition to differ materially from the expectations of future results, performance, or financial condition we express or imply in any forward-looking statements. These risks and uncertainties include, but are not limited to:

• the satisfaction of the conditions precedent to the consummation of the proposed merger by and among Bass Pro Group, LLC, Prairie Merger Sub, Inc., a wholly owned subsidiary of Bass Pro Group, LLC, and the Company, including, without limitation, the receipt of ~~stockholder and~~ regulatory approvals, including as a result of the inability of Synovus Bank, a Georgia state member bank, to timely obtain regulatory approvals for its consummation of its purchase of the assets of World’s Foremost Bankapproval;

•

unanticipated difficulties or expenditures relating to the proposed merger; legal proceedings, judgments, or settlements, including those that may be instituted against the Company, the Company’s board of directors, executive officers, and others following the announcement of the proposed merger; disruptions of current plans and operations caused by the announcement and pendency of the proposed merger; potential difficulties in employee retention due to the announcement and pendency of the proposed merger; the response of customers, suppliers, business partners, and regulators to the announcement of the proposed merger;


•	the state of the economy and the level of discretionary consumer spending, including changes in consumer preferences, demand for firearms and ammunition, and demographic trends;


•	adverse changes in the capital and credit markets or the availability of capital and credit;


•	our ability to successfully execute our omni-channel strategy;


•	increasing competition in the outdoor sporting goods industry and for credit card products and reward programs;


•	the cost of our products, including increases in fuel prices;


•	the availability of our products due to political or financial instability in countries where the goods we sell are manufactured;


•	supply and delivery shortages or interruptions, and other interruptions or disruptions to our systems, processes, or controls, caused by system changes or other factors;


•	increased or adverse government regulations, including regulations relating to firearms and ammunition;


•	our ability to protect our brand, intellectual property, and reputation;


•	our ability to prevent cybersecurity breaches and mitigate cybersecurity risks;


•	the outcome of litigation, administrative, and/or regulatory matters (including the ongoing audits by tax authorities and compliance examinations by the Federal Deposit Insurance Corporation);


•	our ability to manage credit, liquidity, interest rate, operational, legal, regulatory capital, and compliance risks;


•	our ability to increase credit card receivables while managing credit quality;


•	our ability to securitize our credit card receivables at acceptable rates or access the deposits market at acceptable rates;


•	the impact of legislation, regulation, and supervisory regulatory actions in the financial services industry; and

• other risks, relevant factors, and uncertainties identified in our filings with the Securities and Exchange Commission (“SEC”) (including the information set forth in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and in Part II, Item 1A, of ~~this~~our ~~report~~Quarterly Report on Form 10-Q for the first quarter ended April 1, 2017), which filings are available at the SEC’s website at www.sec.gov.

Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Our forward-looking statements speak only as of the date of this report. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

The following discussion and analysis of financial condition, results of operations, liquidity, and capital resources should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the SEC, and our unaudited interim condensed consolidated financial statements and the 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.”

2729

Critical Accounting Policies and Use of Estimates

Our critical accounting policies and use of estimates utilized in the preparation of the condensed consolidated financial statements as of ~~April~~July 1, 2017, remain unchanged from December 31, 2016.

Merger Agreement

On October 3, 2016, the Company entered into an Agreement and Plan of Merger (the “Original Merger Agreement”), by and among Bass Pro Group, LLC, a Delaware limited liability company (“Bass Pro Group”), Prairie Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Bass Pro Group (“Sub”), and the Company. On April 17, 2017, the Company entered into an Amendment to the Agreement and Plan of Merger, dated as of April 17, 2017 (the “Merger Agreement Amendment”), by and among the Company, Parent, and Sub (the Original Merger Agreement, as amended by the Merger Agreement Amendment and as otherwise amended from time to time, the “Merger Agreement”). On July 11, 2017, the Company’s stockholders also adopted and approved the Merger Agreement. The Merger Agreement provides for the merger of Sub with and into the Company, on the terms and subject to the conditions set forth in the Merger Agreement (the “Merger”), with the Company continuing as the surviving corporation in the Merger. As a result of the Merger, the Company would become a wholly owned subsidiary of Bass Pro Group.

Additionally, on April 17, 2017, and in connection with the Merger Agreement Amendment, the Company entered into (i) a Framework Agreement, ~~dated as of April 17, 2017~~ (the “Bank Framework Agreement”), by and among the Company, WFB, Synovus Bank, a Georgia state member bank (“Synovus”), Capital One Bank (USA), National Association, a national banking association (“Capital One”) and an affiliate of Capital One, National Association, a national banking association (“CONA”), and, solely for the purposes set forth therein, CONA, (ii) an Asset and Deposit Purchase Agreement, ~~dated as of April 17, 2017~~ (the “Synovus Bank Asset Purchase Agreement”), by and among the Company, WFB and Synovus, and (iii) an Asset Purchase Agreement, ~~dated as of April 17, 2017~~ (the “Capital One Bank Asset Purchase Agreement” and, together with the Synovus Bank Asset Purchase Agreement, the “Bank Asset Purchase Agreements” and, together with the Synovus Bank Asset Purchase Agreement and the Bank Framework Agreement, the “Related Bank Transactions”), by and among the Company, WFB, and Capital One, which ~~amend~~amended and ~~restate~~restated the Sale and Purchase Agreement, dated as of October 3, 2016, by and among the Company, WFB, and CONA, and continue to provide for the sale of substantially all of the business of WFB in connection with the closing of the Merger.

Pursuant to the Related Bank Transactions and an Asset Purchase Agreement entered into between Synovus and Capital One on the same date, by way of three transactions, (1) Synovus has agreed to acquire assets and assume liabilities of WFB, which collectively constitute substantially all of the business of WFB, (2) Capital One has agreed to acquire certain other assets and assume certain other liabilities of WFB, and (3) immediately following the transaction referred to in the foregoing clause (1), Synovus has agreed to sell and assign to Capital One, and Capital One has agreed to acquire and assume, certain of such assets and liabilities acquired and assumed by Synovus from WFB, such that Synovus retains all deposits of WFB and certain other assets and liabilities relating to deposits of WFB and Capital One acquires the assets and liabilities relating to the Cabela’s CLUB co-branded credit card accounts and equity interests in certain securitization funding vehicles.

For additional information related to the Merger Agreement, the Bank Framework Agreement, and related transactions, refer to Part II, Item 1A, ~~“Risk~~of ~~Factors”~~our –Quarterly ~~“Risk~~Report ~~Factors~~on ~~Related~~Form to10-Q for the ~~Proposed~~first ~~Merger~~quarter ~~with~~ended ~~Bass~~April ~~Pro Group~~1, ~~LLC and the Related Bank Transactions~~2017,” our Current Reports on Form 8-K filed with the SEC on October 7, 2016, November 29, 2016, December 30, 2016, ~~and~~ April 18, 2017, June 22, 2017, June 26, 2017, July 5, 2017, and July 12, 2017, and subsequent filings, and Note 2 “Merger Agreement” of the Notes to Condensed Consolidated Financial Statements.

2830

Executive Overview

We are a leading specialty omni-channel retailer of hunting, fishing, camping, shooting sports, and related outdoor merchandise. We provide a quality service to our customers who are able to access our multiple channels when making a purchase, including retail stores, online, and mobile channels. We supply our customers products through our multi-channel merchandising distribution network consisting of in-store customer pickup or by direct shipment to the customer from one of our distribution centers, retail stores, or vendor drop-ship. Our Internet and catalog business is comprised of our highly acclaimed website and supplemented by our catalog distributions as a selling and marketing tool. Our Financial Services segment is comprised of our credit card services, which reinforces our strong brand, strengthens our customer loyalty through our credit card loyalty programs and plays an integral role in supporting our merchandising business.

Results on the following strategic focus areas of the Company – (i) improve top-line sales, (ii) increase bottom-line profits, (iii) retail store expansion, and (iv) grow the CLUB, are discussed below and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” – “~~Three~~Six Months Ended ~~April~~July 1, 2017, Compared to ~~April~~July 2, 2016.”

We operate 86 stores, including the Gainesville, Virginia; store that we opened on March 9, 2017. We now have 75 stores located in the United States and 11 in Canada. Our total retail square footage is now 8.6 million square feet, which represents a 1% increase compared to our 8.5 million of retail square feet at the end of 2016. For the remainder of 2017, we plan to open three additional new stores in the following locations: Chesterfield Township, Michigan; El Paso, Texas; and Albuquerque, New Mexico. We are currently evaluating store locations and new stores to open beyond 2017, and we have announced plans to open a new ~~stores~~store in Halifax, Nova Scotia, Canada ~~and McDonough, Georgia~~.

Comparisons and analysis of selected financial data are presented below for the following periods:

	Three Months Ended
	April 1, 2017		April 2, 2016		Increase (Decrease)			% Change
	July 1, 2017		July 2, 2016		Increase (Decrease)			% Change
	(Dollars in Thousands Except Earnings Per Diluted Share)
Revenue:
Merchandise sales	$	~~678~~737,~~021~~384	$	~~719~~786,~~915~~203	$	(4148,~~894~~819	)	(56.82	)%
Financial Services	~~149~~147,~~999~~196		~~140~~135,~~823~~081		912,~~176~~115			69.50
Other revenue	65,~~869~~862		38,~~924~~613		(2,~~945~~751		)	75(31.19	)
Total revenue	$	~~834~~890,~~889~~442	$	~~864~~929,~~662~~897	$	(2939,~~773~~455	)	(3.4.2	)%
Operating income	$	3857,~~513~~045	$	4467,~~356~~709	$	(510,~~843~~664	)	(1315.27	)%
Net income	$	1928,~~063~~348	$	2237,~~889~~759	$	(39,~~826~~411	)	(1624.79	)%
Earnings per diluted share	$	0.2841	$	0.3355	$	(0.0514	)	(1525.25	)%

Revenues in the three months ended April 1, 2017, totaled $835 million, a decrease of $30 million, or 3.4%, compared to the three months ended April 2, 2016. Merchandise sales decreased $42 million comparing the respective periods with the most significant factors contributing to the decrease as follows:




	Six Months Ended
	July 1, 2017		July 2, 2016		Increase (Decrease)			% Change
	July 1, 2017		July 2, 2016		Increase (Decrease)			% Change
	(Dollars in Thousands Except Earnings Per Diluted Share)
Revenue:
Merchandise sales	$	1,415,405	$	1,506,118	$	(90,713	)	(6.0	)%
Financial Services	297,195		275,904		21,291			7.7
Other revenue	12,731		12,537		194			1.5
Total revenue	$	1,725,331	$	1,794,559	$	(69,228	)	(3.9	)%

Operating income	$	95,558	$	112,065	$	(16,507	)	(14.7	)%

Net income	$	47,411	$	60,648	$	(13,237	)	(21.8	)%

Earnings per diluted share	$	0.68	$	0.88	$	(0.20	)	(22.7	)%

•Revenues ~~Comparable~~in ~~store sales on a consolidated basis for~~ the three months ended ~~April~~July 1, 2017, ~~decreased~~totaled $48890 million, a decrease of $39 million, or 84.92%, compared to the three months ended ~~April~~July 2, 2016. ~~The~~Merchandise ~~decrease~~sales indecreased ~~comparable~~$49 ~~store~~million ~~sales~~ comparing the respective periods ~~was~~with ~~driven by a decrease in~~ the ~~number~~most ofsignificant ~~transactions~~factors ofcontributing ~~10.1%,~~to ~~partially offset by an increase in~~ the ~~average~~decrease ~~sales~~as ~~per transaction of 1.2%.~~follows:

• Comparable store sales ~~results~~on ~~for~~a ~~our~~consolidated ~~stores~~basis infor the ~~United~~three ~~States,~~months ~~which~~ended ~~exclude~~July ~~Canada~~1, ~~results and the impact of foreign currency exchange rate fluctuations~~2017, decreased $4657 million, or 9.13%, compared to the three months ended ~~April~~July 2, 2016,. ~~primarily~~The ~~due~~decrease toin comparable store sales comparing the respective periods was driven by a decrease in the ~~hunting~~number ~~equipment~~of ~~product~~transactions ~~category~~of 11.8%, partially offset by an increase in the average sales per transaction of 2.4%.

•Comparable Anstore ~~increase~~sales results for our stores in the United States, which exclude Canada results and the impact of foreign currency exchange rate fluctuations, decreased $3355 million ~~due~~or 9.7%, compared to the ~~addition~~three ofmonths ~~new~~ended ~~retail~~July ~~stores~~2, 2016, primarily due to a decrease in the hunting equipment product category.

• AAn ~~decrease~~increase of $2015 million, ~~or 12.6%, in Internet and catalog sales, which was~~ due to ~~decreases~~the inaddition ~~all~~of ~~major~~new ~~product~~retail ~~categories~~stores.

29• A decrease of $6 million, or 3.9%, in Internet and catalog sales, which was due to decreases in the clothing and footwear and general outdoor product categories, partially offset by an increase in the hunting equipment product category.

Revenues in the six months ended July 1, 2017, totaled $1.7 billion, a decrease of $69 million, or 3.9%, compared to the six months ended July 2, 2016. Merchandise sales decreased $91 million comparing the respective periods with the most significant factors contributing to the decrease as follows:


•	Comparable store sales on a consolidated basis for the six months ended July 1, 2017, decreased $105 million, or 9.1%, compared to the six months ended July 2, 2016. The decrease in comparable store sales comparing the respective periods was driven by a decrease in the number of transactions of 11.0%, partially offset by an increase in the average sales per transaction of 1.8%.

Comparable store sales results for our stores in the United States, which exclude Canada results and the impact of foreign currency exchange rate fluctuations, decreased $101 million or 9.4%, compared to the six months ended July 2, 2016, primarily due to a decrease in the hunting equipment product category.


•	An increase of $48 million due to the addition of new retail stores.


•	A decrease of $25 million, or 8.5%, in Internet and catalog sales, which was due to decreases in all major product categories.


•	A net decrease of $7 million primarily attributable to adjustments in the allowance for Retail store sales returns that were estimated at the time merchandise sales were recognized based upon the Company’s evaluation of anticipated merchandise sales returns.

Financial Services revenue increased $912 million, or 69.50%, in the three months ended ~~April~~July 1, 2017, compared to the three months ended ~~April~~July 2, 2016, and $21 million, or 7.7%, in the six months ended July 1, 2017, compared to the six months ended July 2, 2016. The ~~increase~~increases in Financial Services revenue were primarily due to increases in interest and fee income, ofoffset ~~$25~~by ~~million~~increases in provision for loan losses and interest expense. The increase in interest and fee income was primarily due to increases in credit card loans and increases in late fees. The increase in the provision for loan losses ~~of $8 million~~ was due to increases in loan delinquencies and, to a lesser extent, growth in the average outstanding balance of credit card loans. The increase in interest expense ~~of $6 million~~ was due to increases in debt as a result of financing the growth of receivables and liquidity needs.

Merchandise gross profit decreased $1918 million, or 86.29%, in the three months ended ~~April~~July 1, 2017, compared to the three months ended ~~April~~July 2, 2016, and $37 million, or 7.5%, in the six months ended July 1, 2017, compared to the six months ended July 2, 2016 primarily due to a decrease in merchandise sales.

Merchandise gross profit as a percentage of merchandise sales decreased 8020 basis points to 3132.47% in the three months ended ~~April~~July 1, 2017, compared to the three months ended ~~April~~July 2, 2016., ~~This~~and ~~decrease~~50 ~~was~~basis ~~primarily~~points ~~attributable~~ to ~~the~~32.1% ~~impacts~~in ofthe ~~increased~~six ~~sales~~months ~~discounts~~ended ~~and~~July ~~promotional~~1, ~~activity~~2017, ~~which~~compared ~~had~~to anthe ~~impact~~six ofmonths ~~approximately~~ended 70July ~~basis points~~2, as2016. ~~well~~The assmall ~~merchandise~~decrease ~~mix,~~was ~~which~~attributable ~~had~~to an ~~impact~~increase ofin ~~approximately~~sales 10discounts ~~basis~~and ~~points~~promotional activity.

The following discussions related to selling, distribution, and administrative (“SD&A”) expenses; impairment and restructuring charges; operating income; operating income of the Merchandising segment; and operating income of the Financial Services segment are presented in accordance with generally accepted accounting principles (“GAAP”) and as non-GAAP adjusted financial measures. In light of the nature and magnitude, we believe these items should be presented separately to enhance a reader’s overall understanding of the Company’s ongoing operations. These non-GAAP adjusted financial measures should be considered in conjunction with the GAAP financial measures.

Accordingly, to supplement the following discussions related to SD&A expenses; SD&A expenses as a percentage of total revenue; impairment and restructuring charges; operating income; operating income as a percentage of total revenue; operating income of the Merchandising segment; operating income of the Merchandising segment as a percentage of total Merchandising segment revenue; operating income of the Financial Services segment; and operating income of the Financial Services segment as a percentage of total Financial Services segment revenue presented in accordance with GAAP, we are providing non-GAAP adjusted financial measures of operating results that exclude certain items, which are presented below both as GAAP reported and non-GAAP financial measures excluding:

• consulting fees and certain other expenses primarily related to our corporate restructuring initiatives and the pending merger totaling $8 million for the three months ended April 1, 2017, and $4 million for the three months ended April 2, 2016;33

• aconsulting ~~charge~~fees ~~recognized~~and oncertain aother ~~settlement~~expenses primarily related to our corporate restructuring initiatives and the pending merger totaling $411 million, ~~relating~~and to$5 amillion ~~lawsuit~~for inthe ~~California~~three ~~state~~months ~~court~~ended (aJuly ~~“lawsuit~~1, ~~settlement”)~~2017, and July 2, 2016, and $18 million, and $8 million for the ~~three~~six months ended ~~April~~July 1, 2017, and July 2, 2016;

• ~~charges~~a ~~related~~charge torecognized ~~the~~on ~~early~~a ~~extinguishment~~settlement oftotaling ~~certain~~$4 ~~certificates~~million ofrelating ~~deposit~~to ~~totaling~~a $1lawsuit ~~million~~in California state court (a “lawsuit settlement”) for the ~~three~~six months ended ~~April~~July 12, ~~2017~~2016; ~~and~~

• ~~impairment~~charges ~~and~~related ~~restructuring~~to ~~charges~~the early extinguishment of certain certificates of deposit totaling $20 million for the three months ended ~~April~~July 1, 2017, and July 2, 2016, and $31 million for the ~~three~~six months ended ~~April~~July 1, 2017, and July 2, 2016; and


•	impairment and restructuring charges totaling $1 million for the three months ended July 1, 2017, and $3 million for the six months ended July 1, 2017.

We believe these non-GAAP adjusted financial measures provide useful supplemental information to investors regarding the underlying business trends and performance of our ongoing operations and are useful for period-over-period comparisons of such operations. In addition, we evaluate results using non-GAAP adjusted operating income. These non-GAAP adjusted financial measures should not be considered in isolation or as a substitute for operating income, or any other measure calculated in accordance with GAAP.

The following table reconciles these financial measures to the related GAAP adjusted financial measures for the periods presented.

	Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures (1)
	Three Months Ended
	April 1, 2017									April 2, 2016
	July 1, 2017									July 2, 2016
	GAAP Basis as Reported			Non-GAAP Adjustments			Non-GAAP Amounts			GAAP Basis as Reported			Non-GAAP Adjustments			Non-GAAP Amounts
	(Dollars in Thousands)
SD&A expenses (2) (3)	$	327,857		$	(9,228	)	$	318,629		$	329,189		$	(7,503	)	$	321,686
SD&A expenses (2)	$	335,693		$	(10,538	)	$	325,155		$	329,682		$	(4,592	)	$	325,090
SD&A expenses as a percentage of total revenue	3937.37		%	(1.12		)%	3836.25		%	3835.15		%	(0.95		)%	3735.20		%
Impairment and restructuring charges (4)	$	2,407		$	(2,407	)	$	—		$	2,972		$	(2,972	)	$	—
Impairment and restructuring charges (3)	$	829		$	(829	)	$	—		$	959		$	(959	)	$	—
Operating income (2) (3) (4)	$	38,513		$	11,635		$	50,148		$	44,356		$	10,475		$	54,831
Operating income (2) (3)	$	57,045		$	11,367		$	68,412		$	67,709		$	5,551		$	73,260
Operating income as a percentage of total revenue	4.6.4		%	1.43		%	67.07		%	57.13		%	10.26		%	67.39		%
Merchandising segment:
Operating loss (2) (4)	$	(30,071	)	$	10,292		$	(19,779	)	$	(16,395	)	$	10,475		$	(5,920	)
Operating income (loss) (2) (3)	$	(4,414	)	$	11,367		$	6,953		$	18,024		$	5,551		$	23,575
Operating loss as a percentage of total segment revenue	(4.4		)%	1.5		%	(2.9		)%	(2.3		)%	1.5		%	(0.8		)%
Operating income (loss) as a percentage of total segment revenue	(0.6		)%	1.5		%	0.9		%	2.3		%	0.7		%	3.0		%
Financial Services segment:
Operating income (3)	$	68,584		$	1,343		$	69,927		$	60,751		$	—		$	60,751
Operating income (2)	$	61,459		$	—		$	61,459		$	49,685		$	—		$	49,685
Operating income as a percentage of total segment revenue	4743.24		%	~~0.9~~—		%	4843.14		%	4438.73		%	—		%	4438.73		%

(1) The presentation includes non-GAAP financial measures. These non-GAAP financial measures are not prepared under any comprehensive set of accounting rules or principles, and do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP.34



	Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures (1)
	Six Months Ended
	July 1, 2017									July 2, 2016
	GAAP Basis as Reported			Non-GAAP Adjustments			Non-GAAP Amounts			GAAP Basis as Reported			Non-GAAP Adjustments			Non-GAAP Amounts
	GAAP Basis as Reported			Non-GAAP Adjustments			Non-GAAP Amounts			GAAP Basis as Reported			Non-GAAP Adjustments			Non-GAAP Amounts
	(Dollars in Thousands Except Earnings Per Share)
SD&A expenses (2)	$	663,550		$	(19,766	)	$	643,784		$	658,871		$	(12,095	)	$	646,776
SD&A expenses as a percentage of total revenue	38.5		%	(1.1		)%	37.4		%	36.7		%	(0.7		)%	36.0		%
Impairment and restructuring charges (3)	$	3,236		$	(3,236	)	$	—		$	3,931		$	(3,931	)	$	—

Operating income (2) (3)	$	95,558		$	23,002		$	118,560		$	112,065		$	16,026		$	128,091
Operating income as a percentage of total revenue	5.5		%	1.3		%	6.8		%	6.2		%	0.9		%	7.1		%
Merchandising segment:
Operating income (loss) (2) (3)	$	(34,485	)	$	21,659		$	(12,826	)	$	1,629		$	16,026		$	17,655
Operating income (loss) as a percentage of total segment revenue	(2.4		)%	1.5		%	(0.9		)%	0.1		%	1.1		%	1.2		%
Financial Services segment:
Operating income (2)	$	130,043		$	1,343		$	131,386		$	110,436		$	—		$	110,436
Operating income as a percentage of total segment revenue	45.3		%	0.5		%	45.8		%	41.6		%	—		%	41.6		%


(1)	The presentation includes non-GAAP financial measures. These non-GAAP financial measures are not prepared under any comprehensive set of accounting rules or principles, and do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP.


(2)	Consists of the following for the respective periods:

	Three Months Ended				Six Months Ended
	April 1, 2017		April 2, 2016
	July 1, 2017		July 2, 2016		July 1, 2017		July 2, 2016
Consulting fees and certain other expenses primarily related to the Company’s corporate restructuring initiative and the pending merger	$	710,~~885~~538	$	34,~~653~~592	$	18,423	$	8,245
Charge related to a lawsuit settlement	—		~~3,850~~—		—		3,850
	$	7,885	$	7,503
Charges related to the early extinguishment of certain certificates of deposit	—		—		1,343		—
	$	10,538	$	4,592	$	19,766	$	12,095

(3) For the three months ended April 1, 2017, reflects $1 million of charges related to the early extinguishment of certain certificates of deposit. These charges reflect the portion of the payments related to the remaining interest due through the stated maturity date as well as the remaining unamortized broker fees related to the redeemed certificates of deposit.35

(43) Consists of the following for the respective periods:

	Three Months Ended				Six Months Ended
	April 1, 2017		April 2, 2016
	July 1, 2017		July 2, 2016		July 1, 2017		July 2, 2016
Charges for employee severance agreements and termination benefits related to the Company’s corporate restructuring and reduction in the number of personnel	$	~~1,503~~766	$	~~2,831~~505	$	2,269	$	3,336
Impairment losses on other property	~~904~~—		~~141~~—		904		141
	$	2,407	$	2,972
Impairment losses on property, equipment, and other assets	—		454		—		454
Accumulated amortization of deferred grant income relating to fair value adjustments on economic development bonds	63		—		63		—
	$	829	$	959	$	3,236	$	3,931

31SD&A expenses increased $6 million in the three months ended July 1, 2017, compared to the three months ended July 2, 2016, primarily due to increases in professional fees, contract labor, and equipment costs, partially offset by decreases in employee compensation, benefits, bonus, and travel expenses. A significant portion of the increase in SD&A expenses was due to expenses directly related to the Company’s corporate restructuring initiative and the pending merger. Additionally, the increase in contract labor, offset by a decrease in employee compensation, was a result of our shift to outsourcing some of our contact center employees. Operating expenses increased $6 million comparing the respective periods, and the operating expenses as a percentage of total revenue increased 220 basis points. On a non-GAAP basis, excluding the impact of certain expenses, as reflected in the table above entitled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures,” SD&A expenses increased $0.1 million comparing the respective periods, and as a percentage of total revenue, increased 150 basis points in the three months ended July 1, 2017, compared to the three months ended July 2, 2016.

SD&A expenses ~~decreased~~increased $15 million in the ~~three~~six months ended ~~April~~July 1, 2017, compared to the ~~three~~six months ended ~~April~~July 2, 2016, primarily due to increases in contract labor, professional fees, equipment costs and depreciation, partially offset by decreases in employee compensation, benefits, bonus, marketing expenses, and travel expenses. A significant portion of the increase in SD&A expenses was due to expenses directly related to the Company’s corporate restructuring initiative and the pending merger. Additionally, ~~partially~~the increase in contract labor, offset by ~~increases~~a decrease in ~~contract~~employee ~~labor~~compensation, ~~equipment~~was ~~costs~~a ~~and~~result ~~depreciation.~~of ~~Although~~our ~~operating~~shift to outsourcing some of our contact center employees. Operating expenses ~~decreased~~increased $15 million comparing the respective periods, and the operating expenses as a percentage of total revenue increased ~~120~~180 basis points primarily due to a decrease in merchandise sales. On a non-GAAP basis, excluding the impact of certain expenses, as reflected in the table above entitled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures,” SD&A expenses decreased $3 million comparing the respective periods, and as a percentage of total revenue, increased ~~100~~140 basis points in the ~~three~~six months ended ~~April~~July 1, 2017, compared to the ~~three~~six months ended ~~April~~July 2, 2016.

In the second half of 2015, we launched a major multi-year corporate restructuring project, ~~that~~which continued throughout 2016 and into 2017, aimed at lowering the Company’s operating expense base to increase our return on invested capital. We have identified numerous meaningful savings opportunities across the Company, including information technology process improvement, indirect procurement, retail labor optimization, merchandise sourcing, retail support functions, and supply chain enhancements, some of which we have already implemented. As we focus on expense management controls consistent with our multi-year corporate restructuring project, we plan to continue our omni-channel initiatives, our Cabela’s branded product investments, and our retail expansion. We will continue to manage our operating costs accordingly through fiscal year 2017 and beyond.

Operating income decreased $6 million in the three months ended April 1, 2017, compared to the three months ended April 2, 2016. Operating income as a percentage of total revenue decreased 50 basis points in the three months ended April 1, 2017, compared to the three months ended April 2, 2016. The decreases in operating income were primarily attributable to decreases in our merchandise gross profit, partially offset by increases in revenue from our Financial Services segment and a decrease in impairment and restructuring charges. On a non-GAAP basis, excluding the impact of certain expenses and charges, as reflected in the table above entitled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures,” operating income decreased $5 million, and operating income as a percentage of total revenue decreased 30 basis points, comparing the three months ended April 1, 2017, to the three months ended April 2, 2016.36

~~The~~Operating ~~following~~income ~~summarizes~~decreased $11 million in the ~~operating~~three ~~results~~months ended July 1, 2017, compared to the three months ended July 2, 2016, and $17 million in the six months ended July 1, 2017, compared to the six months ended July 2, 2016. Operating income as a percentage of total revenue decreased 90 basis points in the three months ended July 1, 2017, compared to the three months ended July 2, 2016, and decreased 70 basis points in the six months ended July 1, 2017, compared to the six months ended July 2, 2016. The decreases in operating income were primarily attributable to decreases in our ~~business~~merchandise ~~segments~~gross profit, partially offset by increases in revenue from our Financial Services segment and a decrease in impairment and restructuring charges. ~~For~~On a ~~more~~non-GAAP ~~detailed~~basis, ~~discussion~~excluding the impact of certain expenses and charges, ~~see~~as reflected in the table above entitled “~~Results~~Reconciliation of ~~Operations~~GAAP Reported to Non-GAAP ~~Three~~Adjusted ~~Months~~Financial ~~Ended~~Measures,” ~~April~~operating income decreased $5 million, and operating income as a percentage of total revenue decreased 20 basis points, comparing the three months ended July 1, 2017, ~~Compared~~to the three months ended July 2, 2016, and operating income decreased $10 million, and operating income as a percentage of total revenue decreased 30 basis points, comparing the six months ended July 1, 2017, to ~~April~~the six months ended July 2, 2016.”

~~Our~~The ~~Merchandising~~following ~~segment~~summarizes ~~business~~the isoperating ~~seasonal in nature and interim~~ results ~~may not be indicative~~ of ~~results~~our ~~for~~business ~~the full year~~segments. ~~Due~~For toa ~~buying~~more ~~patterns~~detailed ~~around~~discussion, ~~the~~see ~~holidays~~“Results ~~and the opening~~ of ~~hunting~~Operations ~~seasons,~~- ~~our~~Three ~~merchandise~~Months ~~revenue~~Ended isJuly ~~traditionally higher in the third and fourth quarters than in the first and second quarters~~1, ~~and we typically earn a disproportionate share of our operating income in the fourth quarter. Because of our retail store expansion~~2017, ~~and~~Compared ~~fixed~~to ~~costs~~July ~~associated with retail stores~~2, ~~our~~2016” ~~quarterly~~and ~~operating~~“Results ~~income~~of ~~may~~Operations be- ~~further~~Six ~~impacted~~Months byEnded ~~these~~July ~~seasonal fluctuations. Comparing Merchandising segment results in the three months ended April~~ 1, 2017, Compared to ~~the~~July ~~three months ended April~~ 2, 2016:.”

•Our ~~total~~Merchandising ~~sales~~segment ~~decreased~~business ~~$39~~is ~~million~~seasonal in nature and interim results may not be indicative of results for the full year. Due to buying patterns around the holidays and the opening of hunting seasons, orour 5merchandise revenue is traditionally higher in the third and fourth quarters than in the first and second quarters, and we typically earn a disproportionate share of our operating income in the fourth quarter.~~4%;~~ Because of our retail store expansion, and fixed costs associated with retail stores, our quarterly operating income may be further impacted by these seasonal fluctuations. Comparing Merchandising segment results in the three and six months ended July 1, 2017, to the three and six months ended July 2, 2016:

• ~~operating~~total ~~loss~~merchandise ~~increased~~sales and other revenue decreased $1452 million;, or 6.5%, and $91 million, or 6.0%, respectively;

• operating ~~loss~~income asdecreased a$22 ~~percentage~~million, ofand ~~Merchandising~~$36 ~~segment~~million, ~~revenue~~respectively; ~~increased 210 basis points.~~and

On• a non-GAAP basis, excluding the impact of certain expenses and charges as reflected in the table above entitled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures,” the Merchandising segment operating ~~loss~~income ~~increased $14 million, to $20 million, comparing the three months ended April 1, 2017, to the three months ended April 2, 2016. On a non-GAAP basis, operating loss~~ as a percentage of Merchandising segment revenue ~~increased~~decreased ~~210~~290 basis points, toand ~~2.9%,~~250 ~~comparing~~basis ~~the~~points ~~respective three month periods~~respectively.

~~Cabela’s~~On ~~CLUB~~a ~~continues~~non-GAAP tobasis, ~~manage~~excluding ~~its~~the ~~credit~~impact ~~card~~of ~~delinquencies~~certain expenses and ~~charge~~charges as reflected in the table above entitled “Reconciliation of GAAP Reported to Non-~~offs~~GAAP ~~through~~Adjusted ~~active~~Financial ~~account~~Measures,” ~~management.~~the ~~Comparing~~Merchandising ~~Cabela’s~~segment ~~CLUB~~operating ~~results~~income indecreased $17 million, to $7 million, comparing the three months ended ~~April~~July 1, 2017, to the three months ended ~~April~~July 2, 2016:, and operating income (loss) decreased $30 million, to $(13) million, comparing the six months ended July 1, 2017, to the six months ended July 2, 2016. On a non-GAAP basis, operating income as a percentage of Merchandising segment revenue decreased 210 basis points, to 0.9%, and operating income (loss) as a percentage of Merchandising segment revenue decreased 210 basis points, to (0.9)%, comparing the respective three- and six-month periods.

•Cabela’s ~~the~~CLUB ~~average~~continues ~~number~~to ofmanage ~~active~~its ~~accounts~~credit ~~increased~~card ~~2.4%,~~delinquencies toand 2charge-offs through active account management. Comparing Cabela’s CLUB results in the three and six months ended July 1, ~~million~~2017, ~~and~~to the ~~average~~three ~~balance~~and ~~per~~six ~~active~~months ~~account~~ended ~~increased~~July ~~$200;~~2, 2016:

• the average ~~balance~~number of ~~our~~active ~~credit~~accounts ~~card~~increased ~~loans~~1.6% ~~increased~~and 112.0%, to $52.41 ~~billion~~million, in both the three- and six-month periods, and the average balance per active account increased $183, and $192, respectively;

• ~~net~~the ~~purchases~~average onbalance of our credit card ~~accounts~~loans increased 19.2% and 10.1%, to $45.94 billion; in both the three- and six-month periods;

• net ~~charge-offs~~purchases ason ~~a percentage of average~~ credit card ~~loans~~accounts increased 931.7%, ~~basis~~and ~~points~~1.4%, to 3$5.~~18%~~5 billion, and $10.4 billion, respectively; and

~~During~~• ~~the~~net ~~three~~charge-offs ~~months~~as ~~ended~~a ~~April~~percentage 1,of ~~2017,~~average ~~the~~credit ~~Financial~~card ~~Services~~loans ~~segment~~increased ~~issued~~99 ~~$95~~basis ~~million~~points, into ~~certificates~~3.12%, ofand ~~deposit~~96 basis points, to 3.15%, respectively.

32During the six months ended July 1, 2017, the Financial Services segment issued $95 million in certificates of deposit.

Operations Review

Our operating results expressed as a percentage of revenue were as follows for the three months ended ~~April~~July 1, 2017, and ~~April~~July 2, 2016, each of which consisted of 13 weeks, and for the six months ended July 1, 2017, and July 2, 2016, each of which consisted of 26 weeks.

	Three Months Ended				Six Months Ended
	April 1, 2017		April 2, 2016
	July 1, 2017		July 2, 2016		July 1, 2017		July 2, 2016
Revenue	100.00	%	100.00	%	100.00	%	100.00	%
Cost of revenue (exclusive of depreciation and amortization)	55.8380		5657.4616		55.81		56.82
Gross profit (exclusive of depreciation and amortization)	44.1720		4342.5484		44.19		43.18
Selling, distribution, and administrative expenses	3937.2770		3835.0746		38.46		36.72
Impairment and restructuring charges	0.2909		0.3410		0.19		0.22
Operating income	46.6141		57.1328		5.54		6.24
Other income (expense):
Interest expense, net	(0.9286	)	(10.0689	)	(0.89	)	(0.98	)
Other income, net	0.0710		0.1030		0.09		0.21
Total other income (expense), net	(0.8576	)	(0.9659	)	(0.81	)	(0.77	)
Income before provision for income taxes	35.7665		46.1769		4.73		5.47
Provision for income taxes	12.4846		12.5263		1.99		2.09
Net income	23.2819	%	24.6506	%	2.74	%	3.38	%

3338

Results of Operations - Three Months Ended ~~April~~July 1, 2017, Compared to ~~April~~July 2, 2016

Revenues

Comparisons and analysis of our revenues are presented below for the three months ended:



	July 1, 2017				July 2, 2016				Increase (Decrease)			% Change
	July 1, 2017		%		July 2, 2016		%		Increase (Decrease)			% Change
	(Dollars in Thousands)

Merchandise	$	737,384	82.8	%	$	786,203	84.6	%	$	(48,819	)	(6.2	)%
Financial Services	147,196		16.5		135,081		14.5		12,115			9.0
Other	5,862		0.7		8,613		0.9		(2,751		)	(31.9	)
Total	$	890,442	100.0	%	$	929,897	100.0	%	$	(39,455	)	(4.2	)

	April 1, 2017				April 2, 2016				Increase (Decrease)			% Change
			%				%
	(Dollars in Thousands)
Merchandise	$	678,021	81.2	%	$	719,915	83.3	%	$	(41,894	)	(5.8	)%
Financial Services	149,999		18.0		140,823		16.3		9,176			6.5
Other	6,869		0.8		3,924		0.4		2,945			75.1
Total	$	834,889	100.0	%	$	864,662	100.0	%	$	(29,773	)	(3.4	)%

Merchandise Sales – Comparisons and analysis of our merchandise sales are presented below for the three months ended:

	April 1, 2017				April 2, 2016				Increase (Decrease)			% Change
	July 1, 2017				July 2, 2016				Increase (Decrease)			% Change
			%				%
	(Dollars in Thousands)
Retail store sales	$	~~541~~601,~~952~~665	7981.96	%	$	~~564~~644,~~205~~932	7882.40	%	$	(2243,~~253~~267	)	(36.97	)%
Internet and catalog sales	~~136~~135,~~069~~719		2018.14		~~155~~141,~~710~~271		2118.60		(195,~~641~~552		)	(123.69	)
Total merchandise sales	$	~~678~~737,~~021~~384	100.0	%	$	~~719~~786,~~915~~203	100.0	%	$	(4148,~~894~~819	)	(56.82	)%

	April 1, 2017		April 2, 2016
Hunting Equipment	50.3	%	49.6	%
General Outdoors	31.0		31.5
Clothing and Footwear	18.7		18.9
Total	100.0	%	100.0	%

Product Sales Mix – The following table sets forth the percentage of our merchandise revenue contributed by major product categories for our Merchandising segment for the three months ended:

Merchandise sales decreased $42 million, or 5.8%, in the three months ended April 1, 2017, compared to the three months ended April 2, 2016, primarily due to decreases of $48 million in comparable store sales and $20 million in Internet and catalog sales, partially offset by an increase of $33 million in revenue from the addition of new retail stores.



	Three Months Ended (1)
	July 1, 2017		July 2, 2016

Hunting Equipment	40.4	%	41.2	%
General Outdoors	43.1		42.0
Clothing and Footwear	16.5		16.8
Total	100.0	%	100.0	%

	April 1, 2017		April 2, 2016		Increase (Decrease)			% Change
	(Dollars in Thousands)
Comparable stores sales on a consolidated basis	$	488,159	$	535,745	$	(47,586	)	(8.9	)%
Comparable stores sales - United States stores only	461,049		507,315		(46,266		)	(9.1	)
Comparable stores sales on a constant currency basis (1)								(9.0	)
(1) Reflects the elimination of fluctuations in foreign currency exchange rates.

34Merchandise sales decreased $49 million, or 6.2%, in the three months ended July 1, 2017, compared to the three months ended July 2, 2016, primarily due to decreases in Internet and catalog sales of $6 million and $57 million in comparable store sales, partially offset by an increase in revenue from the addition of new retail stores of $15 million.

The net decrease in comparable store sales of $48 million for the three months ended April 1, 2017, compared to the three months ended April 2, 2016, was due to decreases of approximately $29 million in the hunting equipment product category, $11 million in the general outdoors product category, and $8 million in the clothing and footwear product category. The decrease in comparable store sales on a consolidated basis comparing the respective periods was driven by a decrease in the number of transactions of 10.1%, partially offset by an increase in the average sales per transaction of 1.2%.39

Comparable store sales and analysis, calculated on a shift-adjusted calendar basis, are presented below for the three months ended:

For fiscal year 2017, we are continuing to monitor and take steps that are needed to respond to a number of consumer-related factors that may impact our planned growth in comparable store sales on an annual basis. These steps include the timing of discounts offered and promotional events to meet consumer preferences or actions taken by our competitors, including demand for firearms and ammunition, which can be very volatile based on current events as well as potential future government regulation. We also are working closely with our vendors and actively managing our inventory levels to ensure that we have the adequate quantity and assortment of necessary products available to meet any such consumer-related factors. In addition, we are focused on outfitter knowledge and training to provide the winning combination of quality, value, and service to our customers.



	July 1, 2017		July 2, 2016		Increase (Decrease)			% Change
	(Dollars in Thousands)

Comparable store sales on a consolidated basis	$	554,234	$	611,214	$	(56,980	)	(9.3	)%
Comparable store sales - United States stores only	516,285		571,486		(55,201		)	(9.7	)
Comparable store sales on a constant currency basis (1)								(9.1	)

(1) Reflects the elimination of fluctuations in foreign currency exchange rates.

~~Internet~~The ~~and~~net ~~catalog~~decrease in comparable store sales ~~decreased~~of $2057 million, orwas ~~12.6%,~~due to decreases of $~~136~~9 million, in the ~~three~~clothing ~~months~~and ~~ended~~footwear ~~April~~product 1category, ~~2017,~~$16 ~~compared~~million toin the ~~three~~general ~~months~~outdoors ~~ended~~product ~~April 2~~category, ~~2016~~and $32 million in the hunting equipment product category. The ~~net~~ decrease ~~was~~in ~~primarily~~comparable ~~due~~store tosales ~~decreases~~on ofa ~~approximately~~consolidated $8basis ~~million~~comparing in the ~~clothing~~respective ~~and~~periods ~~footwear~~was ~~product~~driven ~~category,~~by $8a ~~million~~decrease in the ~~general~~number ~~outdoors~~of ~~product~~transactions ~~category~~of 11.8%, ~~and~~partially $4offset ~~million~~by an increase in the ~~hunting~~average ~~equipment~~sales ~~product~~per ~~category~~transaction of 2.4%.

Internet and catalog sales decreased $6 million, or 3.9%, to $136 million, in the three months ended July 1, 2017, compared to the three months ended July 2, 2016. The net decrease was primarily due to decreases of approximately $6 million in the clothing and footwear product category and $2 million in the general outdoors product category, partially offset by an increase of $3 million in the hunting equipment product category.

Financial Services Revenue – The following table sets forth the components of Financial Services revenue for the three months ended:

April 1, 2017

April 2, 2016

Increase (Decrease)

% Change

July 1, 2017

July 2, 2016

Increase (Decrease)

% Change

(Dollars in Thousands)

Interest and fee income

~~164~~171,~~644~~938

~~139~~141,~~748~~180

2430,~~896~~758

1721.8

Interest expense

(2627,~~320~~283

)

(1920,~~873~~929

)

6,~~447~~354

3230.4

Provision for loan losses

(3145,~~086~~246

)

(2232,~~820~~404

)

812,~~266~~842

3639.26

Net interest income, net of provision for loan losses

~~107~~99,~~238~~409

9787,~~055~~847

1011,~~183~~562

1013.52

Non-interest income:

Interchange income

94105,~~366~~792

94104,~~996~~841

~~(630~~951

)

(0.79

)

Other non-interest income

~~757~~959

~~670~~875

8784

139.06

Total non-interest income

95106,~~123~~751

95105,~~666~~716

~~(543~~1,035

)

(01.60

)

Less: Customer rewards costs

(5258,~~362~~964

)

(5158,~~898~~482

)

~~464~~482

0.98

Financial Services revenue

~~149~~147,~~999~~196

~~140~~135,~~823~~081

912,~~176~~115

69.50

Financial Services revenue increased $912 million, or 69.50%, for the three months ended ~~April~~July 1, 2017, compared to the three months ended ~~April~~July 2, 2016. The increase in interest and fee income of $2531 million was ~~primarily~~ due to increases in credit card loans and increases in late fees. The increase in the provision for loan losses of $813 million was due to increases in loan delinquencies and, to a lesser extent, growth in the average outstanding balance of credit card loans. The increase in interest expense of $6 million was due to increases in debt as a result of financing the growth of receivables and liquidity needs.

3540

The following table sets forth the components of Financial Services revenue as a percentage of average total credit card loans, including any accrued interest and fees, for the three months ended:

	April 1, 2017		April 2, 2016
	July 1, 2017		July 2, 2016
Interest and fee income	12.17	%	11.54	%
Interest expense	(12.90	)	(1.67	)
Provision for loan losses	(23.3	)	(12.96	)
Interchange income	7.08		7.8.4
Other non-interest income	~~0.1~~—		0.1
Customer rewards costs	(34.93	)	(4.37	)
Financial Services revenue	1110.19	%	1110.69	%

Key statistics reflecting the performance of Cabela’s CLUB are shown in the following chart for the three months ended:

April 1, 2017

April 2, 2016

Increase (Decrease)

% Change

July 1, 2017

July 2, 2016

Increase (Decrease)

% Change

(Dollars in Thousands Except Average Balance per Active Account )

Average balance of credit card loans (1)

5,~~401~~423,~~639~~286

4,~~867~~964,~~758~~603

~~533~~458,~~881~~683

119.02

Average number of active credit card accounts

2,074,~~771~~159

2,~~026~~041,~~054~~783

4832,~~717~~376

21.46

Average balance per active credit card account (1)

2,~~603~~615

2,~~403~~432

~~200~~183

87.35

Purchases on credit card accounts, net

45,~~879~~510,~~196~~132

45,~~826~~419,~~619~~361

5290,~~577~~771

1.17

Net charge-offs on credit card loans (1)

42,~~952~~339

2726,~~373~~490

15,~~579~~849

5659.98

Net charge-offs as a percentage of average credit card loans (1)

3.1812

2.2513

0.9399

(1) Includes accrued interest and fees

(1) Includes accrued interest and fees.

The average balance of credit card loans increased to $5.4 billion, or 119.02%, for the three months ended ~~April~~July 1, 2017, compared to the three months ended ~~April~~July 2, 2016, due to ~~increases~~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 2.1 million, or 21.46%, ~~in the three months ended April 1, 2017,~~ compared to the three months ended ~~April~~July 2, 2016, due to our successful marketing efforts in new account acquisitions. Net charge-offs as a percentage of average credit card loans increased to 3.1812% infor the three months ended ~~April~~July 1, 2017, up 9399 basis points compared to the three months ended ~~April~~July 2, 2016, primarily due to increases in ~~loan~~ delinquencies and, to a lesser extent, an increase in the average balance of credit card loans.

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 was $76 million in the three months ended ~~April~~July 1, 2017, compared to $49 million in the three months ended ~~April~~July 2, 2016, with the ~~increase~~decrease primarily due to ~~increases~~decreases in real estate sales revenues.

3641

Merchandise Gross Profit

Comparisons and analysis of our merchandise gross profit on merchandise sales are presented below for the three months ended:

	April 1, 2017			April 2, 2016			Increase (Decrease)			% Change
	July 1, 2017			July 2, 2016			Increase (Decrease)			% Change
	(Dollars in Thousands)
Merchandise sales	$	~~678~~737,~~021~~384		$	~~719~~786,~~915~~203		$	(4148,~~894~~819	)	(56.82	)%
Merchandise gross profit	~~212~~241,~~939~~024			~~231~~258,~~923~~794			(1817,~~984~~770		)	(86.29	)
Merchandise gross profit as a percentage of merchandise sales	3132.47		%	32.29		%	(0.82		)%

Merchandise gross profit decreased $1918 million, or 86.29%, to $~~213~~241 million in the three months ended ~~April~~July 1, 2017, compared to the three months ended ~~April~~July 2, 2016, primarily due to adecreases ~~decrease~~ in ~~merchandise~~ sales, increased price discounts, and promotional activity. Our merchandise gross ~~margin~~profit as a percentage of merchandise sales decreased 8020 basis points to 3132.47% in the three months ended ~~April~~July 1, 2017, compared to the three months ended ~~April~~July 2, 2016. ~~This~~The small decrease was ~~primarily~~ attributable to ~~the~~an ~~impacts~~increase ofin ~~increased~~ sales discounts and promotional activity~~, which had an impact of approximately 70 basis points, as well as merchandise mix, which had an impact of approximately 10 basis points~~.

Selling, Distribution, and Administrative Expenses

Comparisons and analysis of our SD&A expenses are presented below for the three months ended:

	April 1, 2017			April 2, 2016			Increase (Decrease)			% Change
	July 1, 2017			July 2, 2016			Increase (Decrease)			% Change
	(Dollars in Thousands)
SD&A expenses	$	~~327~~335,~~857~~693		$	329,~~189~~682		$	(16,~~332~~011	)	(01.48	)%
SD&A expenses as a percentage of total revenue	3937.37		%	3835.15		%	12.2		%
Retail store pre-opening costs	$	~~323~~732		$	31,~~850~~816		$	(31,~~527~~084	)	(9159.67	)
Non-GAAP amounts:
SD&A expenses on a non-GAAP basis	$	~~318~~325,~~629~~155		$	~~321~~325,~~686~~090		$	~~(3,057~~65	)	~~(1.0~~—	)%
SD&A expenses as a percentage of total revenue on a non-GAAP basis	3836.25		%	3735.20		%	1.05		%

SD&A expenses ~~decreased~~increased $16 million, or 01.48%, in the three months ended ~~April~~July 1, 2017, compared to the three months ended ~~April~~July 2, 2016, ~~but~~and increased ~~120~~220 basis points comparing the respective periods to 3937.37% as a percentage of total revenue. SD&A expenses ~~decreased~~increased primarily due to increases in professional fees, contract labor, and equipment costs, partially offset by decreases in employee compensation, benefits, bonus, and travel expenses. A significant portion of the increase in SD&A expenses was due to expenses directly related to the Company’s corporate restructuring initiative and the pending merger. Additionally, ~~partially~~the increase in contract labor, offset by ~~increases~~a decrease in ~~contract~~employee ~~labor~~compensation, ~~equipment~~was ~~costs~~a ~~and~~result ~~depreciation~~of our shift to outsourcing some of our contact center employees.

On a non-GAAP basis, excluding the impact of certain ~~costs~~expenses, as reflected in the table in the Executive Overview section of this report entitled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures,” SD&A expenses ~~decreased~~increased $30.1 million comparing the respective periods, and as a percentage of total revenue, increased ~~100~~150 basis points in the three months ended ~~April~~July 1, 2017, compared to the three months ended ~~April~~July 2, 2016.

37The most significant changes in SD&A expenses in the three months ended July 1, 2017, compared to the three months ended July 2, 2016, related to specific business segments, included:

~~The most significant changes in SD&A expenses in the three months ended April 1, 2017, compared to the three months ended April 2, 2016, related to specific business segments, included:~~42

Merchandising Segment:

• A decrease of $9 million in employee compensation, ~~benefits,~~ and ~~travel~~bonus ~~expenses~~ primarily due to our corporate restructuring project aimed at lowering the Company’s operating expenses.

• A decrease of $3 million in advertising and promotional costs.


•	An increase of $3 million in contract labor.

• An increase of $34 million in equipment costs and depreciation primarily due to additional costs from increases in the number of new stores and the operations and maintenance of our existing retail stores and corporate offices.


•	An increase of $7 million in professional fees primarily due to the company’s corporate restructuring initiative and the pending merger.

Financial Services Segment:


•	An increase of $2 million in contract labor primarily due to increases in third party call center and collection agency expenses.

• An increase of $1 million associated with the early extinguishment of certain certificates of deposit.

Impairment and Restructuring Charges

In the three months ended ~~April~~July 1, 2017, and ~~April~~in the three months ended July 2, 2016, we recognized impairment losses and incurred restructuring charges totaling $21 million ~~and $3 million, respectively~~. Both the impairment losses and restructuring charges were recognized in the Merchandising segment. For more information see Note 7 “Impairment and Restructuring Charges” of the Notes to Condensed Consolidated Financial Statements.

Operating Income

Comparisons and analysis of operating income are presented below for the three months ended:

	April 1, 2017			April 2, 2016			Increase (Decrease)			% Change
	July 1, 2017			July 2, 2016			Increase (Decrease)			% Change
	(Dollars in Thousands)
Operating income	$	3857,~~513~~045		$	4467,~~356~~709		$	(510,~~843~~664	)	(1315.27	)%
Operating income as a percentage of total revenue	4.6.4		%	57.13		%	(0.59		)%
Operating income (loss) by business segment:
Merchandising	$	(304,~~071~~414	)	$	~~(16~~18,~~395~~024	)	$	13(22,~~676~~438	)	83(124.45	)
Financial Services	6861,~~584~~459			6049,~~751~~685			711,~~833~~774			1223.97
Operating income (loss) as a percentage of segment revenue:
Merchandising	(40.46		)%	(2.3		)%	(2.19		)%
Financial Services	4743.24			4438.73			2.5.1
Non-GAAP amounts:
Operating income on a non-GAAP basis	$	5068,~~148~~412		$	5473,~~831~~260		$	(4,~~683~~848	)	(86.56	)
Operating income as a percentage of total revenue on a non-GAAP basis	67.07		%	67.39		%	(0.32		)%
Operating income (loss) by business segment on a non-GAAP basis:
Merchandising	$	~~(19~~6,~~779~~953	)	$	(523,~~920~~575	)	$	13(16,~~859~~622	)	~~234~~(70.15	)
Financial Services	6961,~~927~~459			6049,~~751~~685			911,~~176~~774			1523.17
Operating income (loss) as a percentage of segment revenue on a non-GAAP basis:
Merchandising	(20.9		)%	(03.80		)%	(2.1		)%
Financial Services	4843.14			4438.73			35.41

3843

Total operating income decreased $611 million, or 1315.27%, in the three months ended ~~April~~July 1, 2017, compared to the three months ended ~~April~~July 2, 2016~~, and total operating income as a percentage of total revenue decreased 50 basis points~~. The net decrease in operating income was primarily attributable to decreases in our merchandise gross profit, ~~partially~~and ~~offset by~~ increases in ~~revenue~~consolidated ~~from~~operating ~~our Financial Services segment~~expenses. On a non-GAAP basis, excluding the impact of certain ~~costs~~expenses and charges, as reflected in the table in the Executive Overview section of this report entitled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures,” operating income decreased $5 million, and total operating income as a percentage of total revenue decreased 3020 basis points, comparing the three months ended ~~April~~July 1, 2017, to the three months ended ~~April~~July 2, 2016.

The Merchandising segment operating income (loss) ~~increased~~decreased $1422 million, to $30(4) million, comparing the three months ended ~~April~~July 1, 2017, to the three months ended ~~April~~July 2, 2016, and operating ~~loss~~income as a percentage of Merchandising segment revenue ~~increased~~decreased ~~210~~290 basis points, to 4(0.46)%. The net ~~increase~~decrease in the Merchandising segment operating ~~loss~~income was primarily due to a decrease in our merchandise gross profit. On a non-GAAP basis, excluding the impact of certain expenses and charges as reflected in the table in the Executive Overview section of this report entitled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures,” the Merchandising segment operating ~~loss~~income ~~increased~~decreased $1417 million, to $207 million, comparing the three months ended ~~April~~July 1, 2017, to the three months ended ~~April~~July 2, 2016. On a non-GAAP basis, operating ~~loss~~income as a percentage of Merchandising segment revenue ~~increased~~decreased 210 basis points, to 20.9%, comparing the respective three -month periods.

The Financial Services segment operating income increased $812 million, to $6961 million, comparing the three months ended ~~April~~July 1, 2017, to the three months ended ~~April~~July 2, 2016, and operating income as a percentage of Financial Services segment revenue increased ~~250~~510 basis points, to 4743.24%. The net increase in the Financial Services operating income was primarily due to an increase in interest and fee income. OnThere awere ~~non-GAAP~~no ~~basis,~~differences ~~excluding~~between ~~the~~GAAP ~~impact of certain expenses~~ and ~~charges as reflected in the table in the Executive Overview section of this report entitled “Reconciliation of GAAP Reported to Non~~non-GAAP ~~Adjusted Financial Measures,” the Financial Services segment~~ operating income ~~increased~~for $9the ~~million, to $70 million, comparing~~ the three months ended July ~~April~~ 1, 2017, toand ~~the~~July ~~three months ended April~~ 2, 2016. ~~On a non-GAAP basis, operating income as a percentage of Financial Services segment revenue increased 340 basis points, to 48.1%, comparing the respective three month periods.~~

Under an Intercompany Agreement, described more fully in Note 14 “Segment Reporting” of the Notes to Condensed Consolidated Financial Statements, the Financial Services segment pays a license fee to the Merchandising segment and, among other items, reimburses the Merchandising segment for certain promotional costs. Total fees paid under this Intercompany Agreement by the Financial Services segment to the Merchandising segment decreased $12 million in the three months ended ~~April~~July 1, 2017, compared to the three months ended ~~April~~July 2, 2016.

Interest (Expense) Income, Net

Interest expense, net of interest income, was $8 million in both the three months ended ~~April~~July 1, 2017, ~~compared~~and ~~to $9 million in~~ the three months ended ~~April~~July 2, 2016. ~~The decrease in interest expense was primarily due to a repayment of our $215 million unsecured debt in February 2016.~~

Other Non-Operating Income, Net

Other non-operating income was $1 million in ~~both~~ the three months ended ~~April~~July 1, 2017, ~~and~~compared to $3 million in the three months ended ~~April~~July 2, 2016.

Provision for Income Taxes

Our effective tax rate was 3943.36% for the three months ended ~~April~~July 1, 2017, compared to 3639.53% for the three months ended ~~April~~July 2, 2016. Our effective tax rate increased comparing the respective periods primarily due to increases in nondeductible transaction expenses associated with the Bass Pro merger, an increase in prior period uncertain tax positions, tax adjustments attributable to changes in the mix of taxable income between the United States and foreign tax jurisdictions, and state income taxes.

3944

Results of Operations - Six Months Ended July 1, 2017, Compared to July 2, 2016

Revenues

Comparisons and analysis of our revenues are presented below for the six months ended:



	July 1, 2017				July 2, 2016				Increase (Decrease)			% Change
	July 1, 2017		%		July 2, 2016		%		Increase (Decrease)			% Change
	(Dollars in Thousands)

Merchandise	$	1,415,405	82.0	%	$	1,506,118	83.9	%	$	(90,713	)	(6.0	)%
Financial Services	297,195		17.2		275,904		15.4		21,291			7.7
Other	12,731		0.8		12,537		0.7		194			1.5
Total	$	1,725,331	100.0	%	$	1,794,559	100.0	%	$	(69,228	)	(3.9	)%

Merchandise Sales – Comparisons and analysis of our merchandise sales are presented below for the six months ended:



	July 1, 2017				July 2, 2016				Increase (Decrease)			% Change
	July 1, 2017		%		July 2, 2016		%		Increase (Decrease)			% Change
	(Dollars in Thousands)

Retail store sales	$	1,143,617	80.8	%	$	1,209,137	80.3	%	$	(65,520	)	(5.4	)%
Internet and catalog sales	271,788		19.2		296,981		19.7		(25,193		)	(8.5	)
Total merchandise sales	$	1,415,405	100.0	%	$	1,506,118	100.0	%	$	(90,713	)	(6.0	)%

Product Sales Mix – The following table sets forth the percentage of our merchandise sales contributed by major product categories for our Merchandising segment for the six months ended:



	Six Months Ended (1)
	July 1, 2017		July 2, 2016

Hunting Equipment	45.7	%	45.9	%
General Outdoors	36.7		36.2
Clothing and Footwear	17.6		17.9
Total	100.0	%	100.0	%

Merchandise sales decreased $91 million, or 6.0%, in the six months ended July 1, 2017, compared to the six months ended July 2, 2016, primarily due to decreases of $105 million in comparable store sales, $25 million in Internet and catalog sales, and $7 million primarily attributable to adjustments in the allowance for Retail store sales returns, partially offset by an increase of $48 million in revenue from the addition of new retail stores.

Comparable store sales and analysis are presented below for the six months ended:



	July 1, 2017		July 2, 2016		Increase (Decrease)			% Change
	(Dollars in Thousands)

Comparable store sales on a consolidated basis	$	1,042,444	$	1,146,991	$	(104,547	)	(9.1	)%
Comparable store sales - United States stores only	977,385		1,078,834		(101,449		)	(9.4	)
Comparable store sales on a constant currency basis (1)								(9.1	)

(1) Reflects the elimination of fluctuations in foreign currency exchange rates.

The net decrease in comparable store sales of $105 million for the six months ended July 1, 2017, compared to the six months ended July 2, 2016, was due to decreases of approximately $61 million in the hunting equipment product category, $27 million in the general outdoors product category, and $16 million in the clothing and footwear product category. The decrease in comparable store sales on a consolidated basis comparing the respective periods was driven by a decrease in the number of transactions of 11.0%, partially offset by an increase in the average sales per transaction of 1.8%.

For fiscal year 2017, we are continuing to monitor and take steps that are needed to respond to a number of consumer-related factors that may impact our planned growth in comparable store sales on an annual basis. These steps include the timing of discounts offered and promotional events to meet consumer preferences or actions taken by our competitors, including demand for firearms and ammunition, which can be very volatile based on current events as well as potential future government regulation. We also are working closely with our vendors and actively managing our inventory levels to ensure that we have an adequate quantity and assortment of products available to meet any such consumer-related factors. In addition, we are focused on outfitter knowledge and training to provide the winning combination of quality, value, and service to our customers.

Internet and catalog sales decreased $25 million, or 8.5%, to $272 million, in the six months ended July 1, 2017, compared to the six months ended July 2, 2016. The net decrease was primarily due to decreases of approximately $12 million in the clothing and footwear product category, $10 million in the general outdoors product category, and $3 million in the hunting equipment product category.

Financial Services Revenue – The following table sets forth the components of Financial Services revenue for the six months ended:



	July 1, 2017			July 2, 2016			Increase (Decrease)		% Change
	(Dollars in Thousands)

Interest and fee income	$	336,582		$	280,928		$	55,654	19.8	%
Interest expense	(53,603		)	(40,802		)	12,801		31.4
Provision for loan losses	(76,332		)	(55,224		)	21,108		38.2
Net interest income, net of provision for loan losses	206,647			184,902			21,745		11.8
Non-interest income:
Interchange income	200,158			199,837			321		0.2
Other non-interest income	1,716			1,545			171		11.1
Total non-interest income	201,874			201,382			492		0.2
Less: Customer rewards costs	(111,326		)	(110,380		)	946		0.9
Financial Services revenue	$	297,195		$	275,904		$	21,291	7.7	%

Financial Services revenue increased $21 million, or 7.7%, for the six months ended July 1, 2017, compared to the six months ended July 2, 2016. The increase in interest and fee income of $56 million was primarily due to increases in credit card loans and increases in late fees. The increase in the provision for loan losses of $21 million was due to increases in loan delinquencies and, to a lesser extent, growth in the average outstanding balance of credit card loans. The increase in interest expense of $13 million was due to increases in debt as a result of financing the growth of receivables and liquidity needs.

The following table sets forth the components of Financial Services revenue as a percentage of average total credit card loans, including any accrued interest and fees, for the six months ended:



	July 1, 2017		July 2, 2016

Interest and fee income	12.4	%	11.4	%
Interest expense	(2.0	)	(1.7	)
Provision for loan losses	(2.8	)	(2.2	)
Interchange income	7.4		8.1
Other non-interest income	0.1		0.1
Customer rewards costs	(4.1	)	(4.5	)
Financial Services revenue	11.0	%	11.2	%

Key statistics reflecting the performance of Cabela’s CLUB are shown in the following chart for the six months ended:



	July 1, 2017			July 2, 2016			Increase (Decrease)			% Change
	(Dollars in Thousands Except Average Balance per Active Account )

Average balance of credit card loans (1)	$	5,412,522		$	4,916,180		$	496,342		10.1	%
Average number of active credit card accounts	2,074,465			2,033,919			40,546			2.0
Average balance per active credit card account (1)	$	2,609		$	2,417		$	192		7.9
Purchases on credit card accounts, net	10,389,328			10,245,980			143,348			1.4
Net charge-offs on credit card loans (1)	85,291			53,863			31,428			58.3
Net charge-offs as a percentage of average credit card loans (1)	3.15		%	2.19		%	0.96		%

(1) Includes accrued interest and fees.

The average balance of credit card loans increased to $5.4 billion, or 10.1%, for the six months ended July 1, 2017, compared to the six months ended July 2, 2016, due to increases 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 2.1 million, or 2.0%, in the six months ended July 1, 2017, compared to the six months ended July 2, 2016, due to our successful marketing efforts in new account acquisitions. Net charge-offs as a percentage of average credit card loans increased to 3.15% in the six months ended July 1, 2017, up 96 basis points compared to the six months ended July 2, 2016, primarily due to increases in loan delinquencies and, to a lesser extent, an increase in the average balance of credit card loans.

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 was $13 million in both the six months ended July 1, 2017, and in the six months ended July 2, 2016.

Merchandise Gross Profit

Comparisons and analysis of our merchandise gross profit on merchandise sales are presented below for the six months ended:



	July 1, 2017			July 2, 2016			Increase (Decrease)			% Change
	(Dollars in Thousands)

Merchandise sales	$	1,415,405		$	1,506,118		$	(90,713	)	(6.0	)%
Merchandise gross profit	453,963			490,717			(36,754		)	(7.5	)
Merchandise gross profit as a percentage of merchandise sales	32.1		%	32.6		%	(0.5		)%

Merchandise gross profit decreased $37 million, or 7.5%, to $454 million in the six months ended July 1, 2017, compared to the six months ended July 2, 2016, primarily due to a decrease in merchandise sales. Our merchandise gross margin as a percentage of merchandise sales decreased 50 basis points to 32.1% in the six months ended July 1, 2017, compared to the six months ended July 2, 2016. The small decrease was attributable to an increase in sales discounts and promotional activity.

Selling, Distribution, and Administrative Expenses

Comparisons and analysis of our SD&A expenses are presented below for the six months ended:



	July 1, 2017			July 2, 2016			Increase (Decrease)			% Change
	(Dollars in Thousands)

SD&A expenses	$	663,550		$	658,871		$	4,679		0.7	%
SD&A expenses as a percentage of total revenue	38.5		%	36.7		%	1.8		%
Retail store pre-opening costs	$	1,055		$	5,666		$	(4,611	)	(81.4	)
Non-GAAP amounts:
SD&A expenses on a non-GAAP basis	$	643,784		$	646,776		$	(2,992	)	(0.5	)%
SD&A expenses as a percentage of total revenue on a non-GAAP basis	37.4		%	36.0		%	1.4		%

SD&A expenses increased $5 million, or 0.7%, in the six months ended July 1, 2017, compared to the six months ended July 2, 2016, and increased 180 basis points comparing the respective periods to 38.5% as a percentage of total revenue. SD&A expenses increased primarily due to increases in contract labor, professional fees, equipment costs and depreciation, partially offset by decreases in employee compensation, benefits, bonus, marketing expenses, and travel expenses. A significant portion of the increase in SD&A expenses was due to expenses directly related to the Company’s corporate restructuring initiative and the pending merger. Additionally, the increase in contract labor, offset by a decrease in employee compensation, was a result of our shift to outsourcing some of our contact center employees.

On a non-GAAP basis, excluding the impact of certain costs, as reflected in the table in the Executive Overview section of this report entitled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures,” SD&A expenses decreased $3 million comparing the respective periods, and as a percentage of total revenue, increased 140 basis points in the six months ended July 1, 2017, compared to the six months ended July 2, 2016.

The most significant changes in SD&A expenses in the six months ended July 1, 2017, compared to the six months ended July 2, 2016, related to specific business segments, included:

Merchandising Segment:


•	A decrease of $21 million in employee compensation, bonus, benefits, and travel expenses primarily due to our corporate restructuring project aimed at lowering the Company’s operating expenses.


•	A decrease of $3 million in advertising and promotional costs.


•	An increase of $6 million in contract labor.


•	An increase of $7 million in equipment costs and depreciation primarily due to additional costs from increases in the number of new stores and the operations and maintenance of our existing retail stores and corporate offices.


•	An increase of $7 million in professional fees primarily due to the company’s corporate restructuring initiative and the pending merger.

Financial Services Segment:


•	An increase of $5 million in contract labor primarily due to increases in third party call center and collection agency expenses.


•	An increase of $1 million associated with the early extinguishment of certain certificates of deposit.

Impairment and Restructuring Charges

In the six months ended July 1, 2017, and July 2, 2016, we recognized impairment losses and incurred restructuring charges totaling $3 million and $4 million, respectively. Both the impairment losses and restructuring charges were recognized in the Merchandising segment. For more information see Note 7 “Impairment and Restructuring Charges” of the Notes to Condensed Consolidated Financial Statements.

Operating Income

Comparisons and analysis of operating income are presented below for the six months ended:



	July 1, 2017			July 2, 2016			Increase (Decrease)			% Change
	(Dollars in Thousands)

Operating income	$	95,558		$	112,065		$	(16,507	)	(14.7	)%
Operating income as a percentage of total revenue	5.5		%	6.2		%	(0.7		)%

Operating income (loss) by business segment:
Merchandising	$	(34,485	)	$	1,629		$	(36,114	)	(2,216.9	)
Financial Services	130,043			110,436			19,607			17.8

Operating income (loss) as a percentage of segment revenue:
Merchandising	(2.4		)%	0.1		%	(2.5		)%
Financial Services	45.3			41.6			3.7

Non-GAAP amounts:
Operating income on a non-GAAP basis	$	118,560		$	128,091		$	(9,531	)	(7.4	)
Operating income as a percentage of total revenue on a non-GAAP basis	6.8		%	7.1		%	(0.3		)%

Operating income (loss) by business segment on a non-GAAP basis:
Merchandising	$	(12,826	)	$	17,655		$	(30,481	)	(172.6	)
Financial Services	131,386			110,436			20,950			19.0

Operating income (loss) as a percentage of segment revenue on a non-GAAP basis:
Merchandising	(0.9		)%	1.2		%	(2.1		)%
Financial Services	45.8			41.6			4.2

Total operating income decreased $17 million, or 14.7%, in the six months ended July 1, 2017, compared to the six months ended July 2, 2016, and total operating income as a percentage of total revenue decreased 70 basis points. The net decrease in operating income was primarily attributable to decreases in our merchandise gross profit, partially offset by increases in revenue from our Financial Services segment. On a non-GAAP basis, excluding the impact of certain costs and charges, as reflected in the table in the Executive Overview section of this report entitled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures,” operating income decreased $10 million, and total operating income as a percentage of total revenue decreased 30 basis points, comparing the six months ended July 1, 2017, to the six months ended July 2, 2016.

The Merchandising segment operating income (loss) decreased $36 million, to $(34) million, comparing the six months ended July 1, 2017, to the six months ended July 2, 2016, and operating income (loss) as a percentage of Merchandising segment revenue decreased 250 basis points, to (2.4)%. The net decrease in the Merchandising segment operating income (loss) was primarily due to a decrease in our merchandise gross profit. On a non-GAAP basis, excluding the impact of certain expenses and charges as reflected in the table in the Executive Overview section of this report entitled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures,” the Merchandising segment operating income (loss) decreased $30 million, to $(13) million, comparing the six months ended July 1, 2017, to the six months ended July 2, 2016. On a non-GAAP basis, operating income (loss) as a percentage of Merchandising segment revenue decreased 210 basis points, to (0.9)%, comparing the respective six-month periods.

The Financial Services segment operating income increased $20 million, to $130 million, comparing the six months ended July 1, 2017, to the six months ended July 2, 2016, and operating income as a percentage of Financial Services segment revenue increased 370 basis points, to 45.3%. The net increase in the Financial Services operating income was primarily due to an increase in interest and fee income. On a non-GAAP basis, excluding the impact of certain expenses and charges as reflected in the table in the Executive Overview section of this report entitled “Reconciliation of GAAP Reported to Non-GAAP Adjusted Financial Measures,” the Financial Services segment operating income increased $21 million, to $131 million, comparing the six months ended July 1, 2017, to the six months ended July 2, 2016. On a non-GAAP basis, operating income as a percentage of Financial Services segment revenue increased 420 basis points, to 45.8%, comparing the respective six-month periods.

Under an Intercompany Agreement, described more fully in Note 14 “Segment Reporting” of the Notes to Condensed Consolidated Financial Statements, the Financial Services segment pays a license fee to the Merchandising segment and, among other items, reimburses the Merchandising segment for certain promotional costs. Total fees paid under this Intercompany Agreement by the Financial Services segment to the Merchandising segment decreased $3 million in the six months ended July 1, 2017, compared to the six months ended July 2, 2016.

Interest (Expense) Income, Net

Interest expense, net of interest income, was $15 million in the six months ended July 1, 2017, compared to $18 million in the six months ended July 2, 2016. The decrease in interest expense was primarily due to a repayment of our $215 million unsecured debt in February 2016.

Other Non-Operating Income, Net

Other non-operating income was $1 million in the six months ended July 1, 2017, compared to $4 million in the six months ended July 2, 2016, primarily due to the changes in interest income.

Provision for Income Taxes

Our effective tax rate was 42.0% for the six months ended July 1, 2017, compared to 38.3% for the six months ended July 2, 2016. Our effective tax rate increased comparing the respective periods primarily due to increases in nondeductible transaction expenses associated with the Bass Pro merger, an increase in prior period uncertain tax positions, tax adjustments attributable to changes in the mix of taxable income between the United States and foreign tax jurisdictions, and state income taxes.

Asset Quality of Cabela’s CLUB

Delinquencies and Non-Accrual

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 at the periods ended:

	April 1, 2017		December 31, 2016		April 2, 2016
	July 1, 2017		December 31, 2016		July 2, 2016
Number of days delinquent:
Greater than 30 days	1.0907	%	1.05	%	0.8384	%
Greater than 60 days	0.7066		0.66		0.51
Greater than 90 days	0.3833		0.36		0.2726

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 periods ended:

	April 1, 2017		December 31, 2016		April 2, 2016
Number of days delinquent and still accruing (excludes non-accrual and restructured loans which are presented below):
Greater than 30 days	1.01	%	0.97	%	0.73	%
Greater than 60 days	0.65		0.62		0.45
Greater than 90 days	0.36		0.33		0.23
Non-accrual	0.12		0.11		0.15
Restructured	0.56		0.54		0.63



	July 1, 2017		December 31, 2016		July 2, 2016
Number of days delinquent and still accruing (excludes non-accrual and restructured loans which are presented below):
Greater than 30 days	1.01	%	0.97	%	0.76	%
Greater than 60 days	0.62		0.62		0.46
Greater than 90 days	0.31		0.33		0.24

Non-accrual	0.10		0.11		0.14
Restructured	0.53		0.54		0.59

Allowance for Loan Losses and Charge-offs

The following table shows the activity in our allowance for loan losses and charge-offs for the periods presented:

	Three Months Ended						Six Months Ended
	April 1, 2017			April 2, 2016
	July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
	(Dollars in Thousands)						(Dollars in Thousands)
Balance, beginning of period	$	~~118~~112,~~343~~095		$	7574,~~911~~753		$	118,343		$	75,911
Provision for loan losses	3145,~~086~~246			2232,~~820~~404			76,332			55,224
Charge-offs	(45,~~074~~635		)	(29,~~678~~578		)	(90,710		)	(59,256		)
Recoveries	78,~~740~~768			56,~~700~~371			16,509			12,071
Net charge-offs	(3736,~~334~~867		)	(23,~~978~~207		)	(74,201		)	(47,185		)
Balance, end of period	$	~~112~~120,~~095~~474		$	7483,~~753~~950		$	120,474		$	83,950
Net charge-offs on credit card loans	$	(3736,~~334~~867	)	$	(23,~~978~~207	)	$	(74,201	)	$	(47,185	)
Charge-offs of accrued interest and fees (recorded as a reduction in interest and fee income)	(5,~~618~~472		)	(3,~~395~~283		)	(11,090		)	(6,678		)
Total net charge-offs including accrued interest and fees	$	(42,~~952~~339	)	$	(2726,~~373~~490	)	$	(85,291	)	$	(53,863	)
Net charge-offs, including accrued interest and fees, as a percentage of average credit card loans, including accrued interest and fees	3.1812		%	2.2513		%	3.15		%	2.19		%

For the ~~three~~six months ended ~~April~~July 1, 2017, net charge-offs as a percentage of average credit card loans increased to 3.1815%, up 9396 basis points compared to 2.2519% for the ~~three~~six months ended ~~April~~July 2, 2016. Net charge-offs as a percentage of average credit card loans increased primarily due to increases in loan delinquencies and, to a lesser extent, an increase in the average balance of credit card loans. For the ~~three~~six months ended ~~April~~July 1, 2017, the allowance for loan losses was ~~reduced~~increased by a $6.2.1 million provision adjustment as compared to aan ~~reduction~~increase of an $18.20 million provision adjustment for the ~~three~~six months ended ~~April~~July 2, 2016. The ~~reduction~~$5.9 million difference in the ~~allowance~~provision ~~for~~adjustment ~~loan~~increase ~~losses~~ for the ~~three~~six months ended ~~April~~July 1, 2017 ~~was~~as ~~due~~compared to ~~improvements~~the insix ~~the~~months ~~roll~~ended ~~rates~~July ~~for~~2, ~~early~~2016 ~~stage~~was ~~delinquencies~~primarily ~~from~~due to the ~~end~~reduction ofin balances in the ~~fourth~~‘691 ~~quarter~~and ofBelow’ ~~2016~~FICO toscore ~~the~~loan ~~end~~segment ofduring the ~~first~~six ~~quarter~~months ofended July 1, 2017.

4152

Liquidity and Capital Resources

Overview

Our Merchandising segment 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 ~~April~~July 1, 2017, December 31, 2016, and ~~April~~July 2, 2016, cash on a consolidated basis totaled $~~259~~168 million, $264 million, and $~~142~~542 million, respectively, of which $~~172~~98 million, $150 million, and $72455 million, respectively, was cash at the Financial Services segment which is utilized to meet this segment’s liquidity requirements. We evaluate the credit markets for securitizations and certificates of deposit to determine the most cost -effective source of funds for the Financial Services segment. ~~During 2017, the Financial Services segment intends to issue additional certificates of deposit and utilize variable funding facilities.~~ The terms of the Framework Agreement limit the ability of the Financial Services segment to issue certificates of deposit and to engage in variable funding and term securitization transactions under certain circumstances prior to the closing of the Related Bank Transactions. Therefore, during 2017, the Financial Services segment intends to utilize variable funding facilities. The Financial Services segment will evaluate the issuance of certificates of deposit and term securitizations in the event that consummation of the Merger does not occur. We believe that these liquidity sources are sufficient to fund the Financial Services segment’s cash requirements, including maturities and near-term growth plans.

Merchandising Segment – Our credit agreement provides for an unsecured $775 million revolving credit facility and permits the issuance of letters of credit up to $75 million and swing line loans up to $30 million. The credit facility may be increased to $800 million subject to certain terms and conditions. The term of the credit facility expires on June 18, 2019. Advances under the credit facility will be used for the Company’s general business purposes, including working capital support.

Our unsecured $775 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 ~~April~~July 1, 2017, and ~~April~~July 2, 2016, 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 senior notes through at least the next 12 months.

We have 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.

On September 1, 2015, we announced that our Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $500 million of its common stock over a two-year period. This authorization is in addition to the standing annual authorization to repurchase shares to offset dilution resulting from equity-based awards issued under the Company’s equity compensation plans. 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. We did not engage in any stock repurchase activity in the three and ~~nine~~six months ended ~~April~~July 1, 2017. As of ~~April~~July 1, 2017, up to $426 million of authorization to repurchase our common stock remained under this program. Pursuant to the terms of the Merger Agreement, the Company generally may not repurchase shares of its common stock, except in connection with the exercise of outstanding stock options or the settlement of restricted stock unit awards. As a result, the Company does not anticipate repurchasing any further shares under this program.

Financial Services Segment – 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 variable funding 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. In addition, the terms of the Framework Agreement limit the ability of the Financial Services segment to engage in variable funding and term securitization transactions under certain circumstances prior to the closing of the Related Bank Transactions. During the ~~three~~six months ended ~~April~~July 1, 2017, the Financial Services segment issued $95 million in certificates of deposit. To address current maturities totaling $425 million of secured long-term obligations of the Trust, the Financial Services segment intends to issue additional certificates of deposit and continue to utilize variable funding facilities. We believe that these liquidity sources are sufficient to fund the Financial Services segment’s foreseeable cash requirements, including maturities and near-term growth plans.

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The total amounts and maturities for our credit card securitizations as of ~~April~~July 1, 2017, were as follows:

Series	Type	Total Available Capacity		Third Party Investor Available Capacity		Third Party Investor Outstanding		Interest Rate	Expected Maturity
		(Dollars in Thousands)
2012-II	Term	$	375,000	$	300,000	$	300,000	Fixed	June 2017
2013-I	Term	$	385,000	$	327,250	$	327,250	Fixed	February 2023
2012-II	Term	125,000		125,000		125,000		Floating	June 2017
2013-I	Term	385,000		327,250		327,250		Fixed	February 2023
2013-II	Term	152,500		100,000		100,000		Fixed	August 2018
2013-II	Term	197,500		197,500		197,500		Floating	August 2018
2014-II	Term	60,000		—		—		Fixed	July 2019
2014-II	Term	340,000		340,000		340,000		Floating	July 2019
2015-I	Term	275,000		218,750		218,750		Fixed	March 2020
2015-I	Term	100,000		100,000		100,000		Floating	March 2020
2015-II	Term	300,000		240,000		240,000		Fixed	July 2020
2015-II	Term	100,000		100,000		100,000		Floating	July 2020
2016-I	Term	720,000		570,000		570,000		Fixed	June 2019
2016-I	Term	280,000		280,000		280,000		Floating	June 2019
Total term		32,~~410~~910,000		2,~~898~~473,500		2,~~898~~473,500
2008-III	Variable Funding	578,035		500,000		—		Floating	~~March 2018~~(1)
2011-I	Variable Funding	1,529,412		1,300,000		~~450~~950,000		Floating	~~March 2019~~(2)
2011-III	Variable Funding	1,411,765		1,200,000		~~275~~445,000		Floating	~~September 2019~~(3)
Total variable		3,519,212		3,000,000		~~725~~1,395,000
Total available		$	6,~~929~~429,212	$	5,~~898~~473,500	$	3,~~623~~868,500

~~The~~(1) ~~securitized~~Includes ~~credit~~$200 ~~card~~million ~~loans~~ of ~~the~~notes ~~Financial~~due ~~Services~~October ~~segment could experience poor performance~~2017, ~~including increased delinquencies~~ and ~~credit~~$300 ~~losses,~~million ~~lower payment rates, or a decrease in excess spreads below certain thresholds. This could result in a downgrade or withdrawal~~ of ~~the~~notes ~~ratings~~due onMarch 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 levels2018. ~~Credit card loans performed within established guidelines and no events which could trigger an early amortization occurred during the three months ended April 1, 2017, and April 2, 2016.~~

~~The~~(2) ~~Financial~~Includes ~~Services~~$800 ~~segment~~million ~~utilizes certificates~~ of ~~deposit~~notes todue ~~partially~~March ~~finance its operating activities. At April 1~~2018, ~~2017, the Financial Services segment had $1.2 billion of certificates of deposit outstanding with maturities ranging from April 2017 to July 2023~~ and ~~with a weighted average effective annual fixed rate of 1.88%. This outstanding balance compares to~~ $~~1.2~~500 ~~billion and $866~~ million ~~at December 31, 2016, and April 2, 2016, respectively, with weighted average effective annual fixed rates~~ of ~~1.89%~~notes ~~and~~due ~~2.20%,~~March ~~respectively~~2019. The terms of the Framework Agreement limit the ability of the Financial Services segment to issue additional certificates of deposit under certain circumstances prior to the closing of the Related Bank Transactions.

43(3) Includes $700 million of notes due March 2018, and $500 million of notes due September 2019.

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 six months ended July 1, 2017, and July 2, 2016.

The Financial Services segment utilizes certificates of deposit to partially finance its operating activities. At July 1, 2017, the Financial Services segment had $1.1 billion of certificates of deposit outstanding with maturities ranging from July 2017 to July 2023 and with a weighted average effective annual fixed rate of 1.99%. This outstanding balance compares to $1.2 billion at both December 31, 2016, and July 2, 2016, with weighted average effective annual fixed rates of 1.89% and 1.92%, respectively. The terms of the Framework Agreement limit the ability of the Financial Services segment to issue additional certificates of deposit under certain circumstances prior to the closing of the Related Bank Transactions.

Operating, Investing, and Financing Activities

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

	April 1, 2017			April 2, 2016
	July 1, 2017			July 2, 2016
	(In Thousands)
Net cash provided by operating activities	$	75255,~~083~~603		$	25177,~~390~~223
Net cash provided by investing activities	251,068			92,588
Net cash used in investing activities	(41,112		)	(258,960		)
Net cash used in financing activities	(332,196		)	(293,983		)
Net cash provided by (used in) financing activities	(313,188		)	305,042

2017 versus 2016

Operating Activities – Cash provided by operating activities increased $5078 million in the ~~three~~six months ended ~~April~~July 1, 2017, compared to the ~~three~~six months ended ~~April~~July 2, 2016, primarily due to a net change of $4863 million in inventories, $114 million in prepaid expenses and other current assets, ~~and~~ $6 million in income taxes receivable, $8 million in other long-term liabilities, and $21 million in provision for loan losses. Partially offsetting these increases to operating activities was a $1912 million decrease in accounts payable and accrued expenses.

Investing Activities – Cash ~~provided~~used byin investing activities ~~increased~~decreased $~~158~~218 million in the ~~three~~six months ended ~~April~~July 1, 2017, compared to the ~~three~~six months ended ~~April~~July 2, 2016, primarily due to a net change of $~~118~~161 million related to our credit card loan activity from outside sources. Cash paid for property and equipment totaled $2646 million in the ~~three~~six months ended ~~April~~July 1, 2017, compared to $6199 million in the ~~three~~six months ended ~~April~~July 2, 2016. As of ~~April~~July 1, 2017, the Company estimated it had total cash commitments of approximately $7245 million outstanding for projected expenditures related to the development, construction, and completion of new retail stores. We expect to fund these estimated capital expenditures over the next 12 months with cash generated from operations and borrowings.

Financing Activities – Cash used in financing activities increased $38618 million in the ~~three~~six months ended ~~April~~July 1, 2017, compared to the ~~three~~six months ended ~~April~~July 2, 2016, primarily due to net increases of $~~254~~283 million in net borrowings on our revolving credit facilities and $5070 million in net ~~borrowings~~repayments on secured obligations of the Trust by the Financial Services segment. Partially offsetting these increases were decreases of $144 million related to arepayments ~~repayment~~ of our ~~$215 million~~ unsecured debt ~~in February 2016~~ and $72387 million related to a change in time deposits.

The following table presents the borrowing activities of our merchandising business and the Financial Services segment for the six months ended:

	April 1, 2017			April 2, 2016
	July 1, 2017			July 2, 2016
	(In Thousands)
Borrowings on revolving credit facilities and inventory financing, net of repayments	$	20(19,~~278~~896	)	$	~~274~~263,~~273~~271
Secured obligations of the Trust, net of repayments	(~~375~~130,000		)	(~~325~~60,000		)
Repayments of long-term debt	(1979,686		)	(223,~~218~~295		)
Borrowings, net of repayments	$	(~~374~~229,~~408~~582	)	$	(~~273~~20,~~945~~024	)

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The following table summarizes our availability under the Company’s debt and credit facilities, excluding the facilities of the Financial Services segment, at the periods ended:

	April 1, 2017			April 2, 2016
	July 1, 2017			July 2, 2016
	(In Thousands)
Amounts available for borrowing under credit facilities (1)	$	775,000		$	775,000
Principal amounts outstanding	(~~121~~106,~~771~~046		)	(~~256~~275,~~366~~000		)
Outstanding letters of credit and standby letters of credit	(2129,~~779~~699		)	(2233,~~975~~758		)
Remaining borrowing capacity, excluding the Financial Services segment facilities	$	~~631~~639,~~450~~255		$	~~495~~466,~~659~~242


(1)	Consists of our revolving credit facility which expires on June 18, 2019.

We also have an unsecured $20 million CAD credit facility with no outstanding balances at ~~April~~both July 1, 2017, and ~~April~~July 2, 2016. The Financial Services segment also has total borrowing availability of $100 million under its agreements to borrow federal funds. At ~~April~~July 1, 2017, the entire $100 million of borrowing capacity was available.

The following table provides summary information concerning other commercial commitments at ~~April~~July 1, 2017:

	(In Thousands)
Letters of credit (1)	$	1119,~~165~~965
Standby letters of credit (1)	109,~~614~~734
Revolving line of credit for boat and all-terrain vehicle inventory (2)	3511,~~932~~483
Cabela’s issued letters of credit	6186,~~555~~597
Total	$	~~119~~127,~~266~~779


(1)	Our credit agreement permits the issuance of letters of credit up to $75 million and swing line loans up to $30 million.


(2)	The line of credit for boat and all-terrain vehicles financing is limited by the $775 million revolving line of credit to $75 million of secured collateral.

Our $775 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) as of the last day of each fiscal quarter.

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 ~~April~~July 1, 2017, 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 senior notes through at least the next 12 months.

Economic Development Bonds and Grants

Economic Development Bonds – At ~~April~~July 1, 2017, and December 31, 2016, economic development bonds totaled $7069 million, and at ~~April~~July 2, 2016, totaled $8485 million. On a quarterly basis, we perform various procedures to analyze the amounts and timing of projected cash flows to be received from our economic development bonds. ~~For~~In the ~~three~~six months ended ~~April~~July 1, 2017, ~~and~~we ~~April~~recognized 2,an ~~2016,~~impairment ~~there~~loss ~~were~~on noone of the economic development bonds which resulted in an other than temporary fair value ~~adjustments~~adjustment of ~~economic~~$1.6 ~~development~~million. ~~bonds~~We ~~and~~did nonot ~~adjustments~~recognize ofany ~~deferred~~other ~~grant~~than ~~income~~temporary ~~related~~impairments toin ~~economic~~the ~~development~~six ~~bonds.~~months ended July 2, 2016.

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Grants – At ~~April~~July 1, 2017, and ~~April~~July 2, 2016, the total amount of grant funding subject to a specific contractual remedy was $24 million and $4243 million, respectively. At ~~April~~July 1, 2017, and December 31, 2016, the amount the Company had recorded in the condensed consolidated balance sheets relating to these grants (classified as long-term liabilities) was $1 million. At ~~April~~July 2, 2016, we had recorded $17 million in the condensed consolidated balance sheets relating to these grants with $16 million in current liabilities and $1 million in long-term liabilities.

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.

In the normal course of business, we enter into various contractual obligations that may require future cash payments. For a description of our contractual obligations and other commercial commitments as of December 31, 2016, see our annual report on Form 10-K for the fiscal year ending December 31, 2016, under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Contractual Obligations and Other Commercial Commitments.”

Off-Balance Sheet Arrangements

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 $3640 billion above existing balances at the end of ~~April~~July 1, 2017. These funding obligations are not included on our condensed 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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to interest rate risk through the operations of the Financial Services segment, and, to a lesser extent, through our merchandising operations. We also are exposed to foreign currency risk through our merchandising operations.

There were no material changes to our exposures to our market risks in the ~~three~~six months ended ~~April~~July 1, 2017, compared to fiscal year ended December 31, 2016.


Item 4.	Controls and Procedures

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

In connection with this quarterly report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on management’s evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that our disclosure controls and procedures were effective as of ~~April~~July 1, 2017.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~April~~July 1, 2017, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4758

PART II - OTHER INFORMATION


Item 1.	Legal Proceedings.

For a discussion of legal proceedings, see Note 9 “Commitments and Contingencies - Litigation and Claims” of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q, which is incorporated herein by reference.


Item 1A.	Risk Factors.

There have been no material changes to the risk factors disclosed in the “Risk Factors” ~~Related~~section toof our Annual Report on Form 10-K for the ~~Proposed~~fiscal ~~Merger~~year ~~with~~ended ~~Bass~~December ~~Pro~~31, ~~Group~~2016, ~~LLC~~ and in Part II, Item 1A, of our Quarterly Report on Form 10-Q for the ~~Related~~first ~~Bank~~quarter ~~Transactions~~ended April 1, 2017.

The announcement and pendency of the proposed Merger and the Related Bank Transactions (the “Transactions”) may adversely affect our business, financial condition, and results of operations.

Uncertainty about the effect of the proposed Transactions on our employees, customers, and other parties may have an adverse effect on our business, financial condition, and results of operations regardless of whether the Transactions are completed. These risks to our business include the following, all of which could be exacerbated by a delay in the completion of the proposed Transactions:

• the impairment of our ability to attract, retain, and motivate our employees, including key personnel;

• the diversion of significant management time and resources towards the completion of the proposed Transactions;

• difficulties maintaining relationships with customers, suppliers, and other business partners;

• delays or deferments of certain business decisions by our customers, suppliers, and other business partners;

• the inability to pursue alternative business opportunities or make appropriate changes to our business because of requirements in the Merger Agreement and the Bank Framework Agreement that we conduct our business in the ordinary course of business consistent with past practice and not engage in certain kinds of transactions prior to the completion of the proposed Transactions;

• litigation relating to the proposed Transactions and the costs related thereto; and

• the incurrence of significant costs, expenses, and fees for professional services and other transaction costs in connection with the proposed Transactions.

Failure to consummate the proposed Transactions within the expected timeframe or at all could have a material adverse impact on our business, financial condition, and results of operations.

There can be no assurance that the proposed Transactions will occur. Consummation of the Merger is subject to specified conditions, including:

• the affirmative vote in favor of the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Company common stock entitled to vote thereon;

• the consummation of the purchase and sale of the banking business of WFB in accordance with the Bank Framework Agreement or an alternative agreement in accordance with the Merger Agreement and merger of WFB into the Company or another subsidiary of the Company and termination of its bank charter;

• any applicable waiting periods (or extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”) having expired or been terminated;

• the absence of any order by any governmental entity rendering the Merger illegal, or prohibiting, enjoining or otherwise preventing the Merger; and

• other customary closing conditions.

The Related Bank Transactions are also subject to a variety of closing conditions, including:

• the absence of any order prohibiting or making illegal the closing of the transactions;

• the continued effectiveness of the Credit Card Program Agreement, dated as of October 3, 2016 and as amended (the “Bank Program Agreement”), by and among the Company, CONA and Capital One;

• the satisfaction or waiver of certain conditions set forth in the Merger Agreement;

• in the cases of Capital One and Synovus, as applicable, the absence of a Materially Burdensome Condition and a Synovus Burdensome Condition (as defined in the Bank Framework Agreement) on the receipt of required approvals, including regulatory approvals;

• the receipt of written notice from each of S&P Global Ratings, Fitch Ratings, Inc. and DBRS, Inc. that the transactions contemplated by the Related Bank Transactions and related transaction documents will not result in a reduction or

withdrawal of its then existing rating with respect to any outstanding series or class of asset-backed notes with respect to which it is a rating agency;

• the termination of each outstanding series of variable funding notes issued by Cabela’s Credit Card Master Note Trust;

• the receipt of legal and tax opinions and other customary documentation required in connection with the transfer of certain securitization vehicles and related securitization obligations; and

• certain other customary closing conditions.

There can be no assurance that these conditions will be satisfied in a timely manner or at all. For further information, see our Current Reports on Form 8-K filed with the SEC on October 7, 2016, November 29, 2016, December 30, 2016, and April 18, 2017, and subsequent filings.

The Merger Agreement also contains certain termination rights for both us and Bass Pro Group, and in certain specified circumstances upon termination of the Merger Agreement we would be required to pay Bass Pro Group a termination fee of $126 million. The Bank Framework Agreement also contains certain termination rights for both us and Capital One, and in certain circumstances we would be required to pay Capital One a termination fee of $14 million and under certain other circumstances, the Company will be obligated to reimburse Capital One for up to $10 million of a termination fee and reimbursement of expenses Capital One may owe to Synovus. If we are required to make these payments, doing so may materially adversely affect our business, financial condition, and results of operations.

There can be no assurance that a remedy will be available to us in the event of a breach of the Merger Agreement by Bass Pro Group or the Bank Framework Agreement by Capital One or Synovus. Further, any disruptions to our business resulting from the announcement and pendency of the Transactions, including any adverse changes in our relationships with our customers, suppliers, and employees, could continue or accelerate in the event of a failed transaction. In addition, if the Transactions are not completed, and there are no other parties willing and able to acquire the Company at a price of $61.50 per share or higher, on terms acceptable to us, the share price of our common stock will likely decline to the extent that the current market price of our common stock reflects an assumption that the Transactions will be completed. Also, we have incurred, and will continue to incur, significant costs, expenses, and fees for professional services and other transaction costs in connection with the proposed Transactions, for which we will have received little or no benefit if the Transactions are not completed. Many of these fees and costs will be payable by us even if the Transactions are not completed and may relate to activities that we would not have undertaken other than to complete the Transactions.

Other than as described above, there have been no material changes to the risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

We did not engage in any stock repurchase activity in any of the three fiscal months in the first fiscal quarter ended ~~April~~July 1, 2017. As of ~~April~~July 1, 2017, up to $426 million of authorization to repurchase our common stock remained under the Company’s $500 million share repurchase program announced on September 1, 2015. This share repurchase program does not obligate the Company to repurchase any outstanding shares of its common stock, and the program may be limited or terminated at any time. Pursuant to the terms of the Merger Agreement, the Company generally may not repurchase shares of its common stock, except in connection with the exercise of outstanding stock options or the settlement of restricted stock unit awards. As a result, the Company does not anticipate repurchasing any further shares under this program.


Item 3.	Defaults Upon Senior Securities.

Not applicable.


Item 4.	Mine Safety Disclosures.

Not applicable.


Item 5.	Other Information.

Not applicable.


Item 6.	Exhibits.

The list of exhibits in the Exhibit Index to this report is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CABELA’S INCORPORATED
Dated:	~~May~~August 43, 2017	By:	/s/ Thomas L. Millner
			Thomas L. Millner
			Chief Executive Officer
Dated:	~~May~~August 43, 2017	By:	/s/ Ralph W. Castner
			Ralph W. Castner
			Executive Vice President and Chief Financial Officer

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Exhibit Index

ExhibitNumber	Description
2.1	Framework Agreement, dated as of April 17, 2017, by and among Cabela’s Incorporated, World’s Foremost Bank, Synovus Bank, Capital One Bank (USA), National Association and, solely for purposes of the recitals thereto and Section 5.18, Section 8.2 and Article IX thereof, Capital One, National Association* (incorporated by reference from Exhibit 2.1 of our Current Report on Form 8-K, filed on April 18, 2017)
2.2	Asset and Deposit Purchase Agreement, dated as of April 17, 2017, by and among Cabela’s Incorporated, World’s Foremost Bank and Synovus Bank (incorporated by reference from Exhibit 2.2 of our Current Report on Form 8-K, filed on April 18, 2017)
2.3	Asset Purchase Agreement, dated as of April 17, 2017, by and among Cabela’s Incorporated, World’s Foremost Bank and Capital One Bank (USA), National Association (incorporated by reference from Exhibit 2.3 of our Current Report on Form 8-K, filed on April 18, 2017)
2.4	Amendment to the Agreement and Plan of Merger, dated as of April 17, 2017, by and among Cabela’s Incorporated, Bass Pro Group, LLC and Prairie Merger Sub, Inc. (incorporated by reference from Exhibit 2.4 of our Current Report on Form 8-K, filed on April 18, 2017)
31.1	Certification of CEO Pursuant to Rule 13a-14(a) under the Exchange Act
31.2	Certification of CFO Pursuant to Rule 13a-14(a) under the Exchange Act
32.1	Certifications Pursuant to 18 U.S.C. Section 1350
101.INS	XBRL Instance Document	Filed with this report.
101.SCH	XBRL Taxonomy Extension Schema Document	Submitted electronically with this report.
101.CAL	XBRL Taxonomy Calculation Linkbase Document	Submitted electronically with this report.
101.LAB	XBRL Taxonomy Label Linkbase Document	Submitted electronically with this report.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Submitted electronically with this report.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Submitted electronically with this report.

51* Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K under the Securities Act of 1933, as amended. A copy of any omitted schedule will be furnished supplementally to the Securities and Exchange Commission upon request.

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