Cabela's 2008 Annual Report Download - page 72

Download and view the complete annual report

Please find page 72 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

67
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars 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 a retailer of hunting, fishing, and outdoor gear, offering products
through retail stores, the Internet, and regular and special catalog mailings. Cabela’s operates 29 retail stores, 26
located in 20 states and one located in Winnipeg, Manitoba. World’s Foremost Bank (“WFB” or “bank”), a wholly-
owned subsidiary of Cabela’s, is a limited purpose bank formed under the Competitive Equality Banking Act of 1987.
The lending activities of WFB are limited to credit card lending and its 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 (“Cabela’s,” “Company,” “we,” “our,” or “us”). All material
intercompany accounts and transactions have been eliminated in consolidation.
Reporting Year – Our fiscal year ends on the Saturday nearest to December 31. Unless otherwise stated, the
fiscal years referred to in the notes to these consolidated financial statements are the 52 weeks ended December 27,
2008 (“2008” or “year ended 2008”), the 52 weeks ended December 29, 2007 (“2007” or “year ended 2007”), and
the 52 weeks ended December 30, 2006 (“2006” or “year ended 2006”). WFB follows a calendar fiscal period and,
accordingly, fiscal years end on December 31st.
Use of Estimates – The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue Recognition – Revenue is recognized for retail store sales at the time of the sale in the store and for
Direct sales when the merchandise is delivered to the customer. We recognize a reserve for estimated product returns
based on our historical returns experience. Shipping fees charged to customers are included in net revenue and
shipping costs are included in cost of revenue.
Revenue from the sale of gift certificates, gift cards, and e-certificates is recognized in revenue when the gift
instruments are redeemed for merchandise or services. We record gift instrument breakage as revenue when the
probability of redemption is remote. Historically, the Company recognized breakage seven years after the issuance
of a gift certificate or gift card. In the fourth quarter of 2008, we began recognizing breakage on gift instruments
four years after issuance as a result of changes in trends in the types of gift instruments issued and the related
redemption rates. The impact of the change in estimate in the fourth quarter of 2008 was an increase in revenue and
operating income of $8,702. Total gift instrument breakage was $10,152, $1,458, and $1,402 for 2008, 2007, and 2006,
respectively. Our gift instrument liability at the end of 2008 and 2007 was $106,159 and $113,302, respectively.
WFB recognizes gains on sales of credit card loans as these loans are securitized and sold. Interchange income
is earned when a charge is made to a customer’s account.
Credit Card Interest and Fees – Financial Services revenue includes credit card interest and fees relating
to late payments, over limit, returned check, payment assurance, and cash advance transactions. 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
agreements on credit card loans until the date of charge-off. Charge-offs for credit card loans are recorded when
accounts are, at a minimum, 130 days contractually delinquent. Accounts relating to cardholder bankruptcies,
cardholder deaths, and fraudulent transactions are charged off earlier. Prior to June 2007, our policy was to charge-
off accounts on the 24th day of the month after an account became 115 days contractually past due, except in the case
of cardholder bankruptcies, cardholder deaths, and fraudulent transactions, which were charged off earlier. Interest
income is accrued on accounts that carry a balance from the statement date through the end of the month.