Cabela's 2009 Annual Report Download - page 32

Download and view the complete annual report

Please find page 32 of the 2009 Cabela's annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 131

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131

23
comments on proposed amendments to the FDIC’s regulation that apply to securitization transactions completed
after March 31, 2010. We cannot predict the terms and conditions of the FDIC’s ultimate regulation relating to the
treatment of financial assets transferred in a securitization. Until these issues are resolved, our ability to complete
new securitization transactions after March 31, 2010, on acceptable terms or at all may be adversely affected.
It may be difficult to sustain the historical growth and profitability of our Financial Services business,
and we will be subject to various risks as we attempt to grow the business.
We may not be able to retain existing cardholders, grow account balances, or attract new cardholders and the
profits from our Financial Services business could decline, for a variety of reasons, many of which are beyond our
control, including:
• credit risk related to the loans we make to cardholders and the charge-off levels of our credit card
accounts;
• inability of cardholders to make payments to us due to current economic conditions and limited access to
other credit sources;
• inability to manage credit risk and keep credit models up to date with current consumer credit trends;
• lack of growth of potential new customers generated by our Retail and Direct businesses;
• liquidity and funding risk relating to our ability to create the liquidity necessary to extend credit to our
cardholders and provide the capital necessary to meet the requirements of government regulators and
Visa;
• operational risk related to our ability to acquire the necessary operational and organizational infrastructure,
manage expenses as we expand, and recruit management and operations personnel with the experience to
run an increasingly complex and highly-regulated business; and
• the credit card industry is highly competitive with increased use of advertising, target marketing, reward
programs, and pricing competition in interest rates and cardholder fees as both traditional and new credit
card issuers seek to expand or to enter the market and compete for customers.
Economic downturns and social and other factors could cause our credit card charge-offs and
delinquencies to increase, or credit card balances to decrease, which would decrease our profitability.
The continued economic downturn and other conditions beyond our control have adversely affected
unemployment rates, consumer spending, consumer indebtedness, and availability of consumer credit, which in
turn adversely affected the ability and willingness of the cardholders to pay amounts owed to our Financial Services
business. These factors have led to increased delinquencies and charge-offs. The economic downturn may continue,
unemployment may continue to rise, the housing market may continue to be depressed, and consumer credit availability
may continue to decrease. The ability and willingness of cardholders to pay could continue to be adversely affected,
which would increase delinquencies and charge-offs. In addition, with the deterioration in economic conditions, the
number of transactions and average purchase amount of transactions on the credit card accounts may be reduced,
which would reduce the revenue of our Financial Services business. A variety of social and other factors also may
cause changes in credit card use, payment patterns, and the rate of defaults by cardholders. These social factors
include changes in consumer confidence levels, the public’s perception of the use of credit cards, changing attitudes
about incurring debt, and the stigma of personal bankruptcy. Our underwriting criteria and portfolio management,
product design, and collection operations may be insufficient to protect the growth and profitability of our Financial
Services business during a sustained period of economic downturn or recession or a material shift in social attitudes,
and may be insufficient to protect against these additional negative factors.
The performance of our Financial Services business may be negatively affected by the performance of
our merchandising businesses.
Negative developments in our Retail and Direct businesses could affect our ability to grow or maintain our
Financial Services business. We believe our ability to maintain cardholders and attract new cardholders is highly
correlated with customer loyalty to our merchandising businesses and to the strength of the Cabela’s brand. In
addition, transactions on cardholder accounts produce loyalty points which the cardholder may apply to future