Cabela's 2013 Annual Report Download - page 53

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of the subject property (Level 2 inputs). The appraiser determined that the highest and best use of the Colorado
Property was as raw land, because the demographics, excess retail space, and the economy in the geographic area
would no longer support a value high enough to justify the cost of developing the property.
At December 2013 and 2012, we classified all of our unimproved land not used in our merchandising business
as “other property” and included the carrying value of $15 million and $23 million at the end of 2013 and 2012,
respectively, in other assets in the consolidated balance sheet. We intend to sell any of our remaining other property
as soon as any such sale could be economically feasible, and we continue to monitor such property for impairment.
In the fourth quarter of 2012, we also recognized an impairment loss on a second property based on an arms-
length sales contract of adjoining land anticipated to close in mid-2013 (Level 2 inputs). Subsequently, this tract
of land was sold in December 2013. No adjustments to the carrying value of other properties were recognized in
2013. We recognized impairment losses on other property of $18 million in 2012. There were no impairment losses
related to other property in 2013.
In the fourth quarter of 2012, we received information on one project that the development would be
delayed thus reducing the amount expected to be received and delaying the timing of projected cash flows.
Therefore, the fair value of this economic development bond was determined to be below carrying value, with
the decline in fair value deemed to be other than temporary. This fair value adjustment totaled $5 million in
2012, reduced the carrying value of the economic development bond portfolio at the end 2012 and resulted in
corresponding reductions in deferred grant income. This reduction in deferred grant income resulted in increases
in depreciation expense of $1 million in 2012, which has been included in impairment and restructuring charges
in the consolidated statements of income. The discounted cash flow models for our other bonds did not result in
other than temporary impairments. In 2013, none of the bonds with a fair value below carrying value were deemed
to have other than a temporary impairment. At the end of 2012, the total amount of impairment adjustments that
were made to deferred grant income, which has been recorded as a reduction of property and equipment, was
$39 million. These impairment adjustments made to deferred grant income resulted from events or changes in
circumstances that indicated the amount of deferred grant income may not be recovered or realized in cash through
collection, sales, or other proceeds from the economic development bonds. All impairment and restructuring
charges related to economic development bonds were recorded to the Corporate Overhead and Other segment.
Operating Income
Operating income is revenue less cost of revenue, selling, distribution, and administrative expenses, and
impairment and restructuring charges. Operating income for our merchandise business segments excludes
costs associated with operating expenses of distribution centers, procurement activities, and other corporate
overhead costs.
Comparisons and analysis of operating income are presented below for the years ended:
2013 2012 Increase (Decrease) % Change
(Dollars in Thousands)
Total operating income $ 361,361 $ 275,699 $ 85,662 31.1%
Total operating income as a percentage of total revenue 10.0% 8.9% 1.1%
Operating income by business segment:
Retail $ 428,361 $ 345,040 $ 83,321 24.1
Direct 157,227 155,237 1,990 1.3
Financial Services 104,402 74,182 30,220 40.7
Operating income as a percentage of segment revenue:
Retail 19.2% 18.7% 0.5%
Direct 16.1 16.7 (0.6)
Financial Services 27.8 23.2 4.6