Cabela's 2008 Annual Report Download - page 51

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Charge-offs
Charge-offs consist of the uncollectible principal, interest, and fees on a customer’s account. Recoveries are
the amounts collected on previously charged-off accounts. Most bankcard issuers charge-off accounts at 180 days.
Beginning in June 2007, we began charging off credit card loans on a daily basis after an account becomes at a
minimum 130 days contractually delinquent to allow us to manage the collection process more efficiently. Accounts
relating to cardholder bankruptcies, cardholder deaths, and fraudulent transactions are charged off earlier. Prior
to June 2007, we charged-off credit card loans on the 24th day of the month after an account became 115 days
contractually delinquent resulting in a 129-day average for charging-off an account. Our charge-off activity for the
managed portfolio is summarized below for the years ended:
2008 2007 2006
(Dollars in Thousands)
Charge-offs $70,944 $42,853 $31,068
Recoveries 9,496 8,955 5,869
Net charge-offs $61,448 $33,898 $25,199
Net charge-offs as a percentage of average
managed credit card loans 2.95%2.01%1.86%
For 2008, net charge-offs as a percentage of average managed credit card loans increased to 2.95%, up 94 basis
points compared to 2.01% for 2007, principally because of the challenging economic environment. We believe our
charge-off levels remain well below industry average and that our increase in net charge-offs in 2008 compared to
2007 was lower than industry averages.
Liquidity and Capital Resources
Overview
We believe that we will have sufficient capital available from cash on hand, our revolving credit facility, and
other borrowing sources to fund our foreseeable cash requirements and near-term growth plans. At the end of 2008
and 2007, cash on a consolidated basis totaled $410 million and $131 million, respectively, of which $402 million
and $123 million, respectively, related to cash at our Financial Services business segment, which is expected to
be utilized by our Financial Services business segment to meet its liquidity requirements. In 2008, our Financial
Services business completed two term securitizations totaling $700 million, added two variable funding facilities
totaling $500 million, and renewed a $350 million variable funding facility. We expect these additional liquidity
sources, as well as the brokered and non-brokered certificates of deposit market, to provide adequate liquidity to
this segment for 2009. On February 19, 2009, Moody’s Investors Service announced that it had downgraded the
ratings on 21 classes of asset-backed notes issued by the trust of our Financial Services business segment. Moody’s
Investors Service is one of three rating agencies that rate our Financial Services business’ term securitizations. We
do not believe that this downgrade will have a significant impact on the ability of our Financial Services business to
complete other securitization transactions on acceptable terms or to access financing.
Our Retail and Direct business segments and our Financial Services business segment have significantly
differing liquidity and capital needs. The primary cash requirements of our merchandising business relate to capital
for new retail stores, purchases of inventory, investments in our management information systems and infrastructure,
purchases of economic development bonds related to the construction of new retail stores, and general working capital
needs. We historically have met these requirements with cash generated from our merchandising business operations,
borrowing under revolving credit facilities, issuing debt and equity securities, obtaining economic development
grants from state and local governments in connection with developing our retail stores, collecting principal and
interest payments on our economic development bonds, and from the retirement of economic development bonds.