Cabela's 2012 Annual Report Download - page 63

53
Other Non-Operating Income, Net
Other non-operating income was $7 million for both 2011 and 2010. This income is primarily from interest
earned on our economic development bonds.
Provision for Income Taxes
Our effective tax rate was 33.5% in 2011 compared to 32.7% in 2010. The effective tax rate for 2011
compared to 2010 was impacted primarily by the mix of taxable income between the United States and foreign
tax jurisdictions. The balance of unrecognized tax benefits, which is classified with long-term liabilities in the
consolidated balance sheet, totaled $38 million at December 31, 2011, compared to $43 million at January 1, 2011.
Asset Quality of Cabela’s CLUB
Delinquencies and Non-Accrual
We consider the entire balance of an account, including any accrued interest and fees, delinquent if the
minimum payment is not received by the payment due date. Our aging method is based on the number of
completed billing cycles during which a customer has failed to make a required payment. As part of collection
efforts, a credit card loan may be closed and placed on non-accrual or restructured in a fixed payment plan prior to
charge off. Our fixed payment plans consist of a lower interest rate, reduced minimum payment, and elimination of
fees. Loans on fixed payment plans include loans in which the customer has engaged a consumer credit counseling
agency to assist them in managing their debt. Non-accrual loans with two consecutive missed payments will
resume accruing interest at the rate they had accrued at before they were placed on non-accrual. Payments received
on non-accrual loans will be applied to principal and reduce the amount of the loan.
The quality of our credit card loan portfolio at any time reflects, among other factors: 1) the creditworthiness of
cardholders, 2) general economic conditions, 3) the success of our account management and collection activities, and
4) the life-cycle stage of the portfolio. During periods of economic weakness, delinquencies and net charge-offs are
more likely to increase. We have mitigated periods of economic weakness by selecting a customer base that is very
creditworthy. We use the scores of Fair Isaac Corporation (“FICO”), a widely-used tool for assessing an individual’s
credit rating, as the primary credit quality indicator. During the second quarter of 2012, the Financial Services
segment incorporated a newer version of FICO that utilizes the same factors as the previous scoring model, but is
more sensitive to utilization of available credit, delinquencies considered serious and frequent, and maintenance of
various types of credit. Management of the Financial Services segment believes the newer version will enable us to
improve our risk management decisions. The newer version FICO score resulted in a slightly higher median score of
our credit cardholders, which was 793 at the end of 2012 compared to 788 at the end of 2011.
The following table reports delinquencies, including any delinquent non-accrual and restructured credit card
loans, as a percentage of our credit card loans, including any accrued interest and fees, in a manner consistent with
our monthly external reporting for the years ended:
2012 2011 2010
Number of days delinquent:
Greater than 30 days 0.72% 0.87% 1.13%
Greater than 60 days 0.46 0.53 0.72
Greater than 90 days 0.24 0.27 0.37
Delinquencies declined as a result of improvements in the economic environment and our conservative
underwriting criteria and active account management.