Analysis of Financing Activities: Cabela's

Current Liabilities

The working capital of Cabela’s increased year over year from 2005 to 2006 by 130% providing for more available funds for operations. The company was able to achieve this increase in working capital by increasing its current assets by 37%, primarily in the increase of cash and cash equivalents, while only increasing current liabilities by 13% over the same period. The company increased its deferred income taxes, gift certificates and credit card reward points and accounts payable by 350%, 19% and 47% respectively which were responsible for the year over year increase in current liabilities. The increase in deferred income taxes and accounts payable can be attributed to the growth in inventory levels as a result of the growth in its destination retail locations. The increase in rewards liabilities can also be attributed to the growth of its retail destination stores which provide for additional customer traffic and increased sales. The ability of the company to improve its working capital position provided for an increase in its current ratio from 1.3 to 1.5 while maintaining its quick ratio of .5 over the same period. The company has improved its ability to fund operational activities and its ability to pay its short-term debt commitments.

Long-Term Liabilities

The company increased its long-term liabilities by 124% from the previous year. This increase is due to the issuance of a 5.99% 10 year note in the amount of 215,000,000 which was responsible for the majority of the 214% increase in long-term debt over the previous year. The company currently has four unsecured notes payable in the amount of $297,434,000 due between the current year and 2016 with an average rate of 5.8%. Additionally, the company has capital leases for its Boise, Idaho retail store and its Wheeling, West Virginia distribution facility. The current obligation for these capital leases is $13,948,000 through 2036. The significant increase in long-term liabilities resulted in the ratio assets-to-long-term-liabilities to decrease from 7.7 to 4.4 year over year. The decrease in this ratio due to the increase in long-term debt brings the company more in line with its competition in does not expose it to an unacceptable level of risk.

Stockholders’ Equity

At fiscal year end 2006, the Company has 59,556,431 and 56,691,249 shares of Class A Voting issued and outstanding. It also has 5,807,305 and 8,073,205 shares of Class B Non-voting issued and outstanding. During 2006, the Company sold an additional 2.8 million shares of Class A and bought back 2.2 million shares of Class B resulting in a net increase in paid-in capital of 3.3%. The Company trades on the NYSE under ticker symbol CAB currently trading at $16.15 and with a 52 week price range of $15.41 to $28.80. Earning per share of $1.32 was reported for 2006, up $0.20, or 17.8% from 2005. The company improved its assets-to-equity position over this period as evidenced by the ratio improving from 2.14 in 2005 to 2.39 in 2006.

Capital Structure Issues

The Company has improved its performance in profitability for stockholders by improving its return on equity from 11.3% to 11.7% for 2006. The Company was able to achieve this result by increasing its financial leverage. The percentage of assets financed by debt increased from 53.2% to 58.1% in 2006 and the amount of liabilities per dollar of stockholders’ equity increased by 0.25. The Company is funding its expansion by taking on additional long-term debt.