Cabela's 2010 Annual Report Download - page 55

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result from the use of the asset plus any expected proceeds from the disposition of the asset, if any, are less than
its carrying value. When an impairment loss is recognized, the carrying amount of the asset is recorded to its
estimated fair value based on independent outside market prices or other valuation techniques.
Operating Income
Operating income is revenue less cost of revenue and selling, distribution, and administrative expenses.
Operating income for our merchandise business segments excludes costs associated with operating expenses of
distribution centers, procurement activities, and other corporate overhead costs.
2010 2009 Increase (Decrease) % Change
(Dollars in Thousands)
Total operating income $ 186,762 $92,678 $94,084 101.5%
Total operating income as a percentage
of total revenue 7.0%3.5%3.5%
Operating income by business segment:
Retail $205,768 $163,018 $42,750 26.2
Direct 156,255 161,052 (4,797)(3.0)
Financial Services 52,401 49,598 2,803 5.7
Operating income as a percentage of
segment revenue:
Retail 14.6%11.7%2.9%
Direct 15.6 15.2 0.4
Financial Services 23.0 28.9 (5.9)
Operating income increased $94 million, or 101.5%, in 2010 compared to 2009, and operating income as
a percentage of revenue increased to 7.0% for 2010. The increases in total operating income and total operating
income as a percentage of total revenue were primarily due to a decrease of $61 million in impairment and
restructuring charges compared to 2009, an increase in revenue from our Retail and Financial Services segments,
improved merchandise gross margin, a decrease in direct marketing costs due to a managed reduction in catalog
page count, and improved labor efficiencies in our Retail business. These improvements were partially offset by
lower revenue from our Direct business segment.
Under a contractual arrangement, the Financial Services segment incurs a marketing fee paid to the Retail
and Direct business segments. The marketing fee was calculated based on the terms of a contractual arrangement
and was consistently applied to both years presented. The marketing fee is included in selling, distribution, and
administrative expenses as an expense for the Financial Services segment and as a credit to expense for the Retail
and Direct business segments. The marketing fee paid by the Financial Services segment to these two business
segments increased $38 million in 2010 compared to 2009 – a $21 million increase to the Retail segment and a
$17 million increase to the Direct business segment.
Interest (Expense) Income, Net
Interest expense, net of interest income, increased $4 million to $27 million in 2010 compared to 2009. The
net increase in interest expense was primarily due to interest expense accrued on increases in certain unrecognized
tax benefits reflected in 2010, partially offset by a decrease in interest expense due to a lower average balance of
debt outstanding from managed debt reduction and lower weighted average interest rates in 2010 compared to 2009.
Other Non-Operating Income, Net
Other non-operating income was $7 million for both 2010 and 2009. This income is primarily from interest
earned on our economic development bonds.