Cabela's 2010 Annual Report Download - page 58

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48
• Improved efficiencies in advertising resulting in a decrease of $4 million in advertising and
promotional costs.
• An increase in marketing fees of $3 million received from the Financial Services segment.
Direct Business Segment:
• A net decrease in catalog and Internet related marketing costs of $16 million compared to 2008 primarily
due to a reduction in catalog page count and lower circulation.
• A decrease of $3 million in employee compensation and benefits.
• An increase in marketing fees of $1 million received from the Financial Services segment.
Financial Services:
• An increase of $4 million in the marketing fee paid by the Financial Services segment to the Direct
business segment ($1 million) and the Retail segment ($3 million).
• An increase in professional fees of $2 million due to higher amortization of fees related to recently
completed securitizations and to increases in FDIC assessments and consulting fees.
• An increase in third party processing fees of $1 million due to an increase in the volume of transactions.
• An increase in compensation and benefits of $2 million.
Corporate Overhead, Distribution Centers, and Other:
• An increase of $9 million in employee compensation and benefits primarily due to an increase in
incentive compensation of $12 million compared to 2008.
• An increase of $2 million in costs for professional services.
• A net increase of $1 million in depreciation expense, and equipment and software expenses.
Impairment and Restructuring Charges
Impairment and restructuring charges totaling $67 million were recognized in 2009 compared to
$6 million in 2008. In connection with the preparation of our consolidated financial statements, we evaluated the
recoverability of certain assets and consequently recognized impairment losses totaling $62 million in 2009 and
$4 million in 2008. We incurred charges totaling $4 million and $2 million for severance and related benefits
in 2008 and 2009, respectively, primarily from outplacement costs and in 2009 a voluntary retirement plan
implemented in February.
Operating Income
Operating income decreased $48 million, or 34.3%, in 2009 compared to 2008. Operating income as a
percentage of revenue also decreased to 3.5% in 2009 from 5.5% in 2008. The decrease in total operating income
and total operating income as a percentage of total revenue was primarily due to additional asset impairment
charges and retirement and severance benefits recorded in 2009, lower revenue from our Direct business segment,
and a lower merchandise gross margin. These decreases were partially offset by increases in revenue from our
Retail business and Financial Services segments, a decrease in catalog and Internet related marketing costs due
to a managed reduction in catalog page count, and improved efficiencies in compensation and advertising in our
Retail business.
Interest (Expense) Income, Net
Interest expense, net of interest income, decreased $7 million to $23 million in 2009 compared to 2008. The
net decrease in interest expense was primarily due to a lower average balance of debt outstanding from managed
debt reduction and lower weighted average interest rates in 2009 compared to 2008.
Other Non-Operating Income, Net
Other income was $7 million for both 2009 and 2008. This income is principally from the interest earned on
our economic development bonds.