Cabela's 2012 Annual Report Download - page 93

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CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
sufficient tax revenue not be generated by the subject properties, the Company may not receive all anticipated
payments and thus will be unable to realize the full carrying values of the economic development bonds, which
result in a corresponding decrease to deferred grant income.
Credit Card and Loyalty Rewards Programs – Cabela’s CLUB Visa cardholders receive Cabela’s points
based on the dollar amounts of transactions through credit cards issued by Cabela’s CLUB which may be redeemed
for Cabela’s products and services. Points may also be awarded for special promotions for the acquisition and
retention of accounts. The dollar amount of related points are accrued as earned by the cardholder and recorded
as a reduction in Financial Services revenue. In addition to the Cabela’s CLUB issued credit cards, customers
receive points for purchases at Cabela’s from various loyalty programs. The dollar amount of unredeemed credit
card points and loyalty points was $128,087 and $109,053 at the end of 2012 and 2011, respectively. The total cost
incurred for all credit card rewards and loyalty programs was $176,882, $158,630, and $136,375 for 2012, 2011, and
2010, respectively.
Income Taxes – The Company files consolidated federal and state income tax returns with its wholly-owned
subsidiaries. The consolidated group follows a policy of requiring each entity to provide for income taxes in an
amount equal to the income taxes that would have been incurred if each were filing separately. The Company
recognizes deferred income tax assets and liabilities for the expected future tax consequences of temporary
differences between the financial statement carrying amounts and the tax bases of our assets and liabilities. The
Company establishes valuation allowances if we believe it is more likely than not that some or all of the Company’s
deferred tax assets will not be realized.
Stock-Based Compensation – Compensation expense is estimated based on grant date fair value on a
straight-line basis over the requisite service period. Costs associated with awards are included in compensation
expense as a component of selling, distribution, and administrative expenses.
Financial Instruments and Credit Risk Concentrations – Financial instruments which may subject the
Company to concentrations of credit risk are primarily cash, cash equivalents, and accounts receivable. The
Company invests primarily in money market accounts or tax-free municipal bonds, with short-term maturities,
limiting the amount of credit exposure to any one entity. At December 29, 2012 and December 31, 2011, the
Company did not have any cash invested in overnight funds. Concentrations of credit risk on accounts receivable
are limited due to the nature of the Company’s receivables.
Fair Value of Financial Instruments – The carrying amount of cash and cash equivalents, accounts
receivable, restricted cash, accounts payable, gift instruments (including credit card rewards and loyalty rewards
programs), accrued expenses, short-term borrowings, and income taxes included in the consolidated balance
sheets approximate fair value given the short-term nature of these financial instruments. Credit card loans are
originated with variable rates of interest that adjust with changing market interest rates so the carrying value of
the credit card loans, including the carrying value of deferred credit card origination costs, less the allowance for
loan losses, approximates fair value. Time deposits are pooled in homogeneous groups, and the future cash flows
of those groups are discounted using current market rates offered for similar products for purposes of estimating
fair value. The fair value of the secured variable funding obligations of the Trust approximates the carrying value
since these obligations can fluctuate daily based on the short-term operational needs with advances and pay downs
at par value. The estimated fair value of secured long-term obligations of the Trust is based on future cash flows
associated with each type of debt discounted using current borrowing rates for similar types of debt of comparable
maturity. The estimated fair value of long-term debt is based on future cash flows associated with each type of debt
discounted using current borrowing rates for similar types of debt of comparable maturity.
Comprehensive Income – Comprehensive income consists of net income, foreign currency translation
adjustments, cash flow hedges, and unrealized gains and losses on available-for-sale economic development bonds,
net of related income taxes.