Cabela's 2012 Annual Report Download - page 66

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Liquidity and Capital Resources
Overview
Our Retail and Direct segments and our Financial Services segment have significantly differing liquidity
and capital needs. We believe that we will have sufficient capital available from cash on hand, our revolving credit
facility, and other borrowing sources to fund our cash requirements and near-term growth plans for at least the
next 12 months. At the end of 2012 and 2011, cash on a consolidated basis totaled $289 million and $305 million,
of which $91 million and $117 million, respectively, was cash at the Financial Services segment which will be
utilized to meet this segment’s liquidity requirements. In 2012, our Financial Services business issued $156 million
in certificates of deposit, renewed its $225 million variable funding facility for an additional year, and completed
two securitization transactions totaling $500 million in term securitizations. We evaluate the credit markets for
certificates of deposit and securitizations to determine the most cost effective source of funds for the Financial
Services segment.
As of December 29, 2012, cash and cash equivalents held by our foreign subsidiaries totaled $28 million.
Our intent is to permanently reinvest a portion of these funds outside the United States for capital expansion and
to repatriate a portion of these funds. The Company has not provided United States income taxes and foreign
withholding taxes on the portion of undistributed earnings of foreign subsidiaries that the Company considers to
be indefinitely reinvested outside of the United States as of the end of year 2012. If these foreign earnings were
to be repatriated in the future, the related United States tax liability may be reduced by any foreign income taxes
previously paid on these earnings. As of the year ended 2012, the cumulative amount of earnings upon which
United States income taxes have not been provided is approximately $122 million. If those earnings were not
considered indefinitely invested, the Company estimates that an additional income tax expense of approximately
$26 million would be recorded. Based on our current projected capital needs and the current amount of cash and
cash equivalents held by our foreign subsidiaries, we do not anticipate incurring any material tax costs beyond
our accrued tax position in connection with any repatriation, but we may be required to accrue for unanticipated
additional tax costs in the future if our expectations or the amount of cash held by our foreign subsidiaries change.
On October 11, 2011, the Federal Reserve, the Office of the Comptroller of Currency, the FDIC, and the
SEC issued proposed regulations implementing certain provisions under the Reform Act limiting proprietary
trading and sponsorship or investment in hedge funds and private equity funds (the “Volcker Rule”). The proposed
regulations are complex and have been the subject of extensive comment. As proposed, these regulations may apply
to us and could limit our ability to engage in the types of transactions covered by the Volcker Rule and may impose
potentially burdensome compliance, monitoring, and reporting obligations. There remains considerable uncertainty
regarding whether the final regulations implementing the Volcker Rule will differ from the proposed regulations,
and the effect of any final regulations on our Retail and Direct businesses and the business of the Financial
Services segment, and its ability and willingness to sponsor securitization transactions in the future.
Retail and Direct Segments – 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, 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, collecting principal and interest payments on our economic development bonds, and from the retirement
of economic development bonds.
The cash flow we generate from our merchandising business is seasonal, with our peak cash requirements for
inventory occurring from April through November. While we have consistently generated overall positive annual
cash flow from our operating activities, other sources of liquidity are required by our merchandising business
during these peak cash use periods. These sources historically have included short-term borrowings under our
revolving credit facility and access to debt markets. While we generally have been able to manage our cash needs
during peak periods, if any disruption occurred to our funding sources, or if we underestimated our cash needs,
we would be unable to purchase inventory and otherwise conduct our merchandising business to its maximum
effectiveness, which could result in reduced revenue and profits.