Cabela's 2005 Annual Report Download - page 80

CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar Amounts in Thousands Except Share and Per Share Amounts)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business—Cabela’s Incorporated is the World’s Foremost Outfitter of hunting, fishing and
outdoor gear. The Company is a retailer and direct merchant, offering its products through regular and special
catalog mailings, the Internet and 14 destination retail stores located in Nebraska, Kansas, Minnesota, South
Dakota, Michigan, Wisconsin, Pennsylvania, West Virginia, Texas and Utah. The Company’s products are sold
throughout the United States as well as many foreign countries. On January 8, 2004, the Company incorporated
in the state of Delaware; previously the Company was incorporated in Nebraska. World’s Foremost Bank
(“WFB”), a wholly owned bank subsidiary, is a limited purpose bank formed under the Competitive Equality
Banking Act (“CEBA”) of 1987. Due to the limited nature of its charter, WFB’s lending activities are limited to
credit card lending and the bank’s deposit issuance is limited to time deposits of at least one hundred thousand
dollars.
Principles of Consolidation—The consolidated financial statements include the accounts of Cabela’s
Incorporated and its wholly owned subsidiaries (the “Company”). All material intercompany accounts and
transactions have been eliminated.
Initial Public Offering—On June 30, 2004, the Company closed its initial public offering of 6,250,000
shares of common stock, resulting in proceeds of $114,219, net of underwriting discounts and other expenses.
The Company used $38,088 of the net proceeds to repay the outstanding balance on its open line of credit. The
remaining amount was used for capital expenditures and the purchase of economic development bonds related to
the construction and opening of new destination retail stores. Transaction costs of $3,343 were recognized as a
reduction to the proceeds.
Reporting Year—The Company’s fiscal year ends on the Saturday nearest December 31. Unless otherwise
stated, references to years in this report relate to fiscal years rather than to calendar years. WFB’s fiscal year ends
on December 31.
Fiscal Year Ended Weeks
2005 .......................................... December 31, 2005 52
2004 .......................................... January 1, 2005 52
2003 .......................................... January 3, 2004 53
Revenue Recognition—Revenue is recognized for retail sales at the time of the sale in the store and for
direct sales when the merchandise is delivered to the customer. The Company records a reserve for estimated
product returns in each reporting period, which is equal to the gross profit on projected merchandise returns and
impairment of merchandise, based on its historical returns experience. Shipping fees charged to customers are
included in net revenue and shipping costs are included in cost of revenue. The Company’s policy regarding gift
certificates is to record revenue as the certificates are redeemed for merchandise. Prior to their redemption, the
certificates are recorded as a liability. The gift certificate liability for fiscal years 2005 and 2004 was $73,182 and
$58,690, respectively. WFB recognizes gains on sales as credit card loans are securitized and sold. Interchange
income is earned when a charge is made to a customer’s account.
Credit Card Interest and Fees—Credit card interest and fees are included in Financial Services revenue and
include late fees, interest, over limit, returned check, cash advance transaction fees and other credit card fees.
These fees are assessed according to the terms of the related cardholder agreements and recognized as revenue
when charged to the cardholders’ accounts. Interest and fees are accrued in accordance with the terms of the
applicable cardholder agreement on credit card loans until the date of charge-off, which is generally on the
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