Cabela's 2012 Annual Report Download - page 72

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Financing Activities – Cash provided by financing activities improved $599 million in 2011 compared to
2010. This net change was primarily due to an increase in time deposits, which WFB utilizes to fund its credit card
operations, of $470 million in 2011, compared to $36 million in 2010. Also, net borrowings on secured obligations
of the Trust by WFB increased $168 million. At the end of 2011 and 2010, there were no amounts outstanding
on our unsecured revolving credit facilities. In the fourth quarter of 2011, we repurchased 800,000 shares of our
outstanding common stock in open market transactions at a cost of $20 million.
Economic Development Bonds and Grants
In the past, we have negotiated economic development arrangements relating to the construction of a number
of our new retail stores, including free land, monetary grants, and the recapture of incremental sales, property, or
other taxes through economic development bonds, with many local and state governments. Where appropriate, we
intend to continue to utilize economic development arrangements with state and local governments to offset some
of the construction costs and improve the return on investment of our new retail stores.
Economic Development Bonds – Economic development bonds are related to the Company’s government
economic assistance arrangements relating to the construction of new retail stores or retail development. State
or local governments may sell economic development bonds primarily to provide funding for the construction
and equipping of our retail stores. In the past, we have primarily been the sole purchaser of these bonds. While
purchasing these bonds involves an initial cash outlay by us in connection with a new store or property, some or all
of these costs can be recaptured through the repayments of the bonds. The payments of principal and interest on
the bonds are typically tied to sales, property, or lodging taxes generated from the store and, in some cases, from
businesses in the surrounding area, over periods which range between 15 and 30 years. Some of our bonds may be
repurchased for par value by the governmental entity prior to the maturity date of the bonds. The governmental
entity from which we purchase the bonds is not otherwise liable for repayment of principal and interest on the
bonds to the extent that the associated taxes are insufficient to pay the bonds. If sufficient tax revenue is not
generated by the subject properties, we will not receive scheduled payments and will be unable to realize the full
value of the bonds carried on our consolidated balance sheet. At December 29, 2012, and December 31, 2011,
economic development bonds totaled $85 million and $87 million, respectively.
Grants – We generally have received grant funding in exchange for commitments made by us to the state
or local government providing the funding. The commitments, such as assurance of agreed employment and
wage levels at our retail stores or that the retail store will remain open, typically phase out over approximately
five to ten years. If we fail to maintain the commitments during the applicable period, the funds we received may
have to be repaid or other adverse consequences may arise, which could affect our cash flows and profitability.
At December 29, 2012, and December 31, 2011, the total amount of grant funding subject to specific contractual
remedies was $7 million and $10 million, respectively.
Securitization of Credit Card Loans
The Financial Services segment historically has funded most of its growth in credit card loans through an
asset securitization program. The Financial Services segment utilizes the Trust for the purpose of routinely selling
and securitizing credit card loans and issuing beneficial interest to investors. The Trust issues variable funding
facilities and long-term notes each of which has an undivided interest in the assets of the Trust. The Financial
Services segment must retain a minimum 20 day average of 5% of the loans in the securitization trust which ranks
pari passu with the investors’ interests in the securitization trusts. In addition, the Financial Services segment
owns notes issued by the Trust from some of the securitizations, which in some cases may be subordinated to
other notes issued. The Financial Services segment’s retained interests are eliminated upon consolidation of the
Trust. The consolidated assets of the Trust are subject to credit, payment, and interest rate risks on the transferred
credit card loans. The credit card loans of the Trust are restricted for the repayment of the secured borrowings of
the Trust.
To protect investors, the securitization structures include certain features that could result in earlier-than-
expected repayment of the securities, which could cause the Financial Services segment to sustain a loss of one
or more of its retained interests and could prompt the need to seek alternative sources of funding. The primary