Cabela's 2005 Annual Report Download - page 35

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We may incur costs from litigation or increased regulation relating to products that we sell,
particularly tree stands and firearms, which could adversely affect our revenue and profitability.
We may incur damages due to lawsuits relating to products we sell. We are currently a defendant in 19
product liability lawsuits, including seven lawsuits relating to tree stands. Tree stands are seating platforms used
by hunters to elevate themselves in a tree. In addition, sales of firearms and ammunition represented
approximately 5.6% of our merchandise revenue during fiscal 2005. We may incur losses due to lawsuits,
including potential class actions, relating to our performance of background checks on firearms purchases and
compliance with other sales laws as mandated by state and federal law. We may also incur losses from lawsuits
relating to the improper use of firearms or ammunition sold by us, including lawsuits by municipalities or other
organizations attempting to recover costs from manufacturers and retailers of firearms and ammunition. Our
insurance coverage and the insurance provided by our vendors for certain products they sell to us may be
inadequate to cover claims and liabilities related to products that we sell. In addition, claims or lawsuits related to
products that we sell or the unavailability of insurance for product liability claims, could result in the elimination
of these products from our product line reducing revenue. If one or more successful claims against us are not
covered by or exceed our insurance coverage, or if insurance coverage is no longer available, our available
working capital may be impaired and our operating results could be adversely affected. Even unsuccessful claims
could result in the expenditure of funds and management time and could have a negative impact on our
profitability and on future premiums we would be required to pay on our insurance policies.
Current and future government regulation may negatively impact demand for our products and our
ability to conduct our business.
Federal, state and local laws and regulations can affect our business and the demand for products. These
laws and regulations include:
• Federal Trade Commission regulations governing the manner in which orders may be solicited and
prescribing other obligations in fulfilling orders and consummating sales;
• laws and regulations that prohibit or limit the sale, in certain states and localities, of certain items we
offer such as firearms, black powder firearms, ammunition, bows, knives and similar products;
• the Bureau of Alcohol, Tobacco, Firearms and Explosives governing the manner in which we sell
firearms and ammunition;
• laws and regulations governing hunting and fishing;
• laws and regulations relating to the collecting and sharing of non-public customer information; and
• U.S. customs laws and regulations pertaining to proper item classification, quotas, payment of duties
and tariffs, and maintenance of documentation and internal control programs which relate to importing
taxidermy which we display in our destination retail stores.
Changes in these laws and regulations or additional regulation could cause the demand for and sales of our
products to decrease. Moreover, complying with increased or changed regulations could cause our operating
expenses to increase. This could adversely affect our revenue and profitability.
Our inability or failure to protect our intellectual property could have a negative impact on our
operating results.
Our trademarks, service marks, copyrights, patents, trade secrets, domain names and other intellectual
property are valuable assets that are critical to our success. Effective trademark and other intellectual property
protection may not be available in every country in which our products are made available. The unauthorized
reproduction or other misappropriation of our intellectual property could diminish the value of our brands or
goodwill and cause a decline in our revenue. Any infringement or other intellectual property claim made against
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