Cabela's 2013 Annual Report Download - page 106

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96
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
The Company paid a total sum of $53,418 in prior years as deposits for federal taxes related to prior period
uncertain tax positions in 2012 and 2011. The deposits were classified as a current asset netted within income taxes
receivable and deferred income taxes in the consolidated balance sheet.
The reconciliation of unrecognized tax benefits, the balance of which was classified as other long-term
liabilities in the consolidated balance sheet, was as follows for the years ended:
2013 2012 2011
Unrecognized tax benefits, beginning of year $ 39,252 $ 37,608 $ 43,198
Gross decreases related to prior period tax positions (3,428) (2,369) (12,705)
Gross increases related to prior period tax positions 15,759 49 855
Gross increases related to current period tax positions 13,217 4,964 6,260
Gross decreases related to current period tax positions - (1,000) -
Unrecognized tax benefits, end of year $ 64,800 $ 39,252 $ 37,608
The Company’s policy is to accrue interest expense, and penalties as appropriate, on estimated unrecognized
tax benefits as a charge to interest expense in the consolidated statements of income. We recorded a net credit to
interest expense of $592 in 2012 and net interest expense of $3,425 and $798 in 2013 and 2011, respectively. The
net credit in 2012 was due to the gross decrease of certain unrecognized tax benefits. No penalties were accrued.
The liability for estimated interest on unrecognized tax benefits totaling $9,122 and $5,696 at the end of 2013 and
2012, respectively, was included in other long-term liabilities in the consolidated balance sheet. The total amount of
unrecognized tax benefits that, if recognized, would affect the effective tax rate was $15,537.
The Company’s tax years 2007 through 2011 are under examination by the Internal Revenue Service (“IRS”).
In late 2012, the IRS issued a revenue agent report summarizing its determination of the adjustments required to
the 2007 and 2008 income tax returns. We disagree with the adjustments made by the IRS in their revenue agent
report and are currently appealing the adjustments. We expect the appeals process for the 2007 and 2008 tax years
to be completed within the next 12 months. We do not expect the examination and related appeal for the 2009, 2010,
and 2011 tax years to be completed within the next 12 months. We have reserved for potential adjustments to the
provision for income taxes that may result from examinations by the tax authorities and we believe that the final
outcome of these examinations or agreements will not have a material effect on the Company’s financial condition,
results of operations, or cash flows.
Since the Company is routinely under audit by various taxing authorities, and the Company expects to resolve
the tax issues at appeals for the 2007 and 2008 examination years in 2014, it is reasonably possible that the amount
of unrecognized tax benefits will change during the next 12 months. However, we do not expect the change, if any,
to have a material effect on the Company’s consolidated financial condition or results of operations within the next
12 months.
The Company files income tax returns in the United States, Canada, Hong Kong, and various states. The tax
years 2007 through 2012 remain open to examination by major taxing jurisdictions to which Cabela’s is subject.