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This conference call will include forward-looking statements. These statements are made on the basis of our views and assumptions as of this time and are not guarantees of future performance. Actual events or results may differ materially from those statements.For information about certain factors that could cause such differences, investors should consult our annual report on Form 10-K, and quarterly report on Form 10Q, filed with the Securities and Exchange Commission, and available on our website, including the information set forth, under the captions, risk factors and special note regarding forward-looking statements. Additionally, this conference call will include certain non-GAAP financial measures. Please refer to our earnings release to find reconciliations of these non-GAAP financial measures to GAAP. Now, on to the financial results. Through the quarter, adjusting for divestitures, consolidated revenues decreased 3.3% to $526 million. Retail revenue decrease 2 1/2 % to $294 million. And direct revenue decreased 11.7% to $172 million. For the quarter, financial services revenue increased to 28% to $56 million as compared to $44 million in year ago quarter. Recall that second quarter 2009, financial service revenue included a $8 million gain related to the valuation of our interest only strips. The increase in financial services revenue was due to lower provision for loan losses, higher interchange and interest and fee income, and lower interest expense. Operating income, increased 62% to $30.7 million as compared to $18.9 million in the year ago quarter. And earnings per share increased 98% to $0.26 in the quarter compared to $0.14 in the year-ago quarter. Second Quarter 2010 results include $1.4 million after-tax impairment charge, related to land held for sale. Second Quarter 2009 results included impairment and other special items, netting to $2.1 million after tax. Excluding these items in each quarter, earnings per share for the second quarter of 2010 were $0.28 compared to $0.17 in the second quarter of 2009.
Now, I’ll turn the call over to Tommy Millner, Cabela's Chief Executive Officer.Tommy Millner Thank you, Chris. And good morning, everyone. We are encouraged by our second quarter results, which reflect the continued progress we’re making in our areas of strategic focus, improved results at World’s Foremost Bank, and a keen focus on a balance sheet and return on invested capital. Let me start with the progress we continue to make on our areas of strategic focus. We are particularly pleased with the improvement in merchandise gross margin we realized in the quarter. For the quarter, merchandise gross margins increased 80 basis points; the first increase in the past year. The improvements were broad based as margins increased in 11 of 13 merchandise subcategories. Improvements in merchandise gross margin are a result of lower markdowns and liquidation of problematic inventory due to better inventory management, and early progress related to vendor collaboration and price optimization. We’re still in the early stages of our gross margin expansion initiatives, which provide us with greater confidence that we will continue to see margin expansion for the remainder of this year and into next year. And that we are on track to improve merchandise gross margins 200 to 300 basis points by the end of 2012. Partly due to improvement and gross margins and despite lower revenue, retail segment operating margins increased 270 basis points in the quarter. This is the fifth consecutive quarter of increases in retail segment operating margin. In addition to higher gross margins the retail segment received higher marketing fees from our bank in the second quarter this year compared to the year ago quarter. Increasing retail profitability is a key component of our retail expansion strategy. And this margin expansion combined with early successes at our next generation stores, enhances our confidence in future retailing expansion opportunities. And we continue to be pleased with the early success of our Grand Junction Store, 90 days into its grand opening. Read the rest of this transcript for free on seekingalpha.com