Cabela's 2011 Annual Report Download - page 87

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77
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
Land grants typically include land associated with the retail store and may include other land for sale and
further development. Land grants are recognized at the fair value of the land on date of grant. Deferred grant
income on land grants is recognized as a reduction to depreciation expense over the estimated life of the related
assets of the developments. In 2011, the Company did not receive any land under these grants. In 2010, the
Company received land grants with a fair value of $6,847.
Certain grants contain covenants the Company is required to comply with regarding minimum employment
levels, maintaining retail stores in certain locations, and maintaining office facilities in certain locations. For these
grants the Company recognizes grant revenue as the milestones associated with the grant are met. For 2011 and
2010, the Company was in compliance with the requirements under these grants.
Economic Development Bonds – Economic development bonds issued by state and local municipalities are
classified as available-for-sale and recorded at their fair value. Fair values of bonds are estimated using discounted
cash flow projections based on available market interest rates and management estimates including the estimated
amounts and timing of expected future tax payments to be received by the municipalities under development
zones. These fair values do not reflect any premium or discount that could result from offering these bonds for
sale or through early redemption, or any related income tax impact. Declines in the fair value of available-for-sale
economic development bonds below cost that are deemed to be other than temporary are reflected in earnings.
Credit Card and Loyalty Rewards Programs – Cabela’s CLUB Visa cardholders receive Cabela’s points
based on the dollar amounts of transactions through WFB issued credit cards which may be redeemed for Cabela’s
products and services. Points may also be awarded for special promotions for the acquisition and retention of
accounts. The dollar amount of related points are accrued as earned by the cardholder and recorded as a reduction
in Financial Services revenue. In addition to the WFB issued credit cards, customers receive points for purchases
at Cabela’s from various loyalty programs. The dollar amount of unredeemed credit card points and loyalty points
was $109,053 and $91,750 at the end of 2011 and 2010, respectively. The total cost incurred for all credit card
rewards and loyalty programs was $158,630, $136,375, and $121,512 for 2011, 2010, and 2009, respectively.
Income Taxes – The Company files consolidated federal and state income tax returns with its wholly-owned
subsidiaries. The consolidated group follows a policy of requiring each entity to provide for income taxes in an
amount equal to the income taxes that would have been incurred if each were filing separately. The Company
recognizes deferred income tax assets and liabilities for the expected future tax consequences of temporary
differences between the financial statement carrying amounts and the tax bases of our assets and liabilities. The
Company establishes valuation allowances if we believe it is more likely than not that some or all of the Company’s
deferred tax assets will not be realized.
Stock-Based Compensation – Compensation expense is estimated based on grant date fair value on a
straight-line basis over the requisite service period. Costs associated with awards are included in compensation
expense as a component of selling, distribution, and administrative expenses.
Financial Instruments and Credit Risk Concentrations – Financial instruments which may subject the
Company to concentrations of credit risk are primarily cash, cash equivalents, and accounts receivable. The
Company invests primarily in money market accounts or tax-free municipal bonds, with short-term maturities,
limiting the amount of credit exposure to any one entity. At December 31, 2011, the Company did not have any
cash invested in overnight funds. At January 1, 2011, the Company had approximately $45,970 in cash invested in
overnight funds at a major financial institution. Concentrations of credit risk on accounts receivable are limited due
to the nature of the Company’s receivables.