Cabela's 2005 Annual Report Download - page 36

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us, whether or not it has merit, could be time-consuming, result in costly litigation, cause product delays or
require us to enter into royalty or licensing agreements. As a result, any such claim could have an adverse effect
on our operating results.
Failure to successfully integrate any business we acquire could have an adverse impact on our
profitability.
We may from time to time acquire businesses which we believe to be complementary to our business.
Acquisitions may result in difficulties in assimilating acquired companies and may result in the diversion of our
capital and our management’s attention from other business issues and opportunities. We may not be able to
successfully integrate operations that we acquire, including their personnel, financial systems, distribution,
operations and general operating procedures. If we fail to successfully integrate acquisitions, we could
experience increased costs associated with operating inefficiencies which could have an adverse effect on our
profitability.
Risks Related to Our Financial Services Business
We may experience limited availability of financing or variation in funding costs for our financial
services business, which could limit growth of the business and decrease our profitability.
Our financial services business requires a significant amount of cash to operate. These cash requirements
will increase if our credit card originations increase or if our cardholders’ balances or spending increase.
Historically, we have relied upon external financing sources to fund these operations, and we intend to continue
to access external sources to fund our growth. A number of factors such as our financial results and losses,
changes within our organization, disruptions in the capital markets, our corporate and regulatory structure,
interest rate fluctuations, general economic conditions and accounting and regulatory changes and relations could
make such financing more difficult or impossible to obtain or more expensive.
We have been, and will continue to be, particularly reliant on funding from securitization transactions for
our financial services business. Securitization funding sources include both a commercial paper conduit facility
and fixed and floating rate term securitizations. Our commercial paper conduit facility renews annually in June,
and our first term securitization expires in November 2006. A failure to renew this facility, to resecuritize the
term securitizations as they mature or to add additional term securitizations and commercial paper conduits on
favorable terms as it becomes necessary could increase our financing costs and potentially limit our ability to
grow our financial services business. Unfavorable conditions in the asset-backed securities markets generally,
including the unavailability of commercial bank liquidity support or credit enhancements, such as financial
guaranty insurance, could have a similar effect.
Furthermore, even if we are able to securitize our credit card loans consistent with past practice, poor
performance of our securitized loans, including increased delinquencies and credit losses, lower payment rates or
a decrease in excess spreads below certain thresholds, could result in a downgrade or withdrawal of the ratings on
the outstanding securities issued in our securitization transactions, cause early amortization of these securities or
result in higher required credit enhancement levels. This could jeopardize our ability to complete other
securitization transactions on acceptable terms, decrease our liquidity and force us to rely on other potentially
more expensive funding sources, to the extent available, which would decrease our profitability.
We may have to reallocate capital from our direct and retail businesses to meet the capital needs of
our financial services business, which could alter our destination retail store expansion program.
Our bank subsidiary must satisfy the capital maintenance requirements of government regulators and its
agreement with VISA International, Inc., or VISA. A variety of factors could cause the capital requirements of
our bank subsidiary to exceed our ability to generate capital internally or from third party sources. For example,
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