Cabela's 2008 Annual Report Download - page 65

Download and view the complete annual report

Please find page 65 of the 2008 Cabela's annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 117

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117

60
Charges on the credit cards issued by our Financial Services segment were priced at a margin over the defined
national prime lending rate, subject to certain interest rate floors. No interest is charged if the account is paid in full
within 20 days of the billing cycle, which represent 30.7% of total balances outstanding. Credit card balances with a
zero percentage interest rate have increased over prior years due to an increase in promotional merchandise offers.
Some of the zero percentage promotion expenses are passed through to the merchandise vendors for each specific
promotion offered.
Management has performed several interest rate risk analyses to measure the effects of the timing of the
repricing of our interest sensitive assets and liabilities. Based on these analyses, we believe that an immediate 200
basis point, or 2.0%, increase in market rates for which our assets and liabilities are indexed would cause a pre-tax
decrease to income of $5 million for our Financial Services segment over the next twelve months, which could have
a material effect on our operating results.
Merchandising Business Interest Rate Risk
The interest payable on our line of credit is based on variable interest rates and therefore affected by changes in
market interest rates. If interest rates on existing variable rate debt increased 1.0%, our interest expense and results
from operations and cash flows would not be materially affected.
Foreign Currency Risk
We purchase a significant amount of inventory from vendors outside of the United States in transactions that are
primarily U. S. dollar transactions. A small percentage of our international purchase transactions are in currencies
other than the U. S. dollar. Any currency risks related to these transactions are immaterial to us. A decline in the
relative value of the U. S. dollar to other foreign currencies could, however, lead to increased merchandise costs. For
our retail store in Canada, we intend to fund all transactions in Canadian dollars, and we will utilize our unsecured
revolving credit agreement of $15 million to fund such operations.