Cabela's 2013 Annual Report Download - page 64

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Liquidity and Capital Resources
Overview
Our Retail and Direct segments and our Financial Services segment have significantly differing liquidity
and capital needs. We believe that we will have sufficient capital available from cash on hand, our revolving credit
facility, and other borrowing sources to fund our cash requirements and near-term growth plans for at least the
next 12 months. At the end of 2013 and 2012, cash on a consolidated basis totaled $199 million and $289 million, of
which $94 million and $91 million, respectively, was cash at the Financial Services segment which will be utilized
to meet this segment’s liquidity requirements. In 2013, our Financial Services business issued $395 million in
certificates of deposit, early renewed its $300 million variable funding facility and extended the commitment for an
additional two years, and completed two term securitizations totaling $735 million. We evaluate the credit markets
for certificates of deposit and securitizations to determine the most cost effective source of funds for the Financial
Services segment.
As of December 28, 2013, cash and cash equivalents held by our foreign subsidiaries totaled $96 million.
Our intent is to permanently reinvest a portion of these funds outside the United States for capital expansion and
to repatriate a portion of these funds. The Company has not provided United States income taxes and foreign
withholding taxes on the portion of undistributed earnings of foreign subsidiaries that the Company considers to
be indefinitely reinvested outside of the United States as of December 28, 2013. If these foreign earnings were to
be repatriated in the future, the related United States tax liability may be reduced by any foreign income taxes
previously paid on these earnings. As of the year ended 2013, the cumulative amount of earnings upon which
United States income taxes have not been provided is approximately $152 million. If those earnings were not
considered indefinitely invested, the Company estimates that an additional income tax expense of approximately
$30 million would be recorded. Based on our current projected capital needs and the current amount of cash and
cash equivalents held by our foreign subsidiaries, we do not anticipate incurring any material tax costs beyond
our accrued tax position in connection with any repatriation, but we may be required to accrue for unanticipated
additional tax costs in the future if our expectations or the amount of cash held by our foreign subsidiaries change.
On December 10, 2013, the Federal Reserve, the Office of the Comptroller of the Currency, the FDIC, and
the SEC approved joint final regulations implementing the provisions of the Reform Act commonly referred to
as the “Volcker Rule.” Generally, the Volcker Rule and the implementing regulations prohibit any banking entity
from engaging in proprietary trading and from investing in, sponsoring, or having certain relationships with
a hedge fund or private equity fund, subject to exemptions for certain permitted activities. These regulations
limit our ability to engage in the types of transactions covered by the Volcker Rule and may impose compliance,
monitoring, and reporting obligations on us and WFB under certain circumstances. Although the effective date
of the regulations is April 1, 2014, the Federal Reserve approved an extension of the conformance period until
July 21, 2015. We are continuing to assess the impact, if any, that the Volcker Rule and the implementing regulation
will have on our Retail, Direct, and Financial Services segments.
Retail and Direct Segments – The primary cash requirements of our merchandising business relate to
capital for new retail stores, purchases of inventory, investments in our management information systems and
infrastructure, and general working capital needs. We historically have met these requirements with cash generated
from our merchandising business operations, borrowing under revolving credit facilities, issuing debt and equity
securities, collecting principal and interest payments on our economic development bonds, and from the retirement
of economic development bonds.
The cash flow we generate from our merchandising business is seasonal, with our peak cash requirements for
inventory occurring from April through November. While we have consistently generated overall positive annual
cash flow from our operating activities, other sources of liquidity are required by our merchandising business
during these peak cash use periods. These sources historically have included short-term borrowings under our
revolving credit facility and access to debt markets. While we generally have been able to manage our cash needs
during peak periods, if any disruption occurred to our funding sources, or if we underestimated our cash needs,
we would be unable to purchase inventory and otherwise conduct our merchandising business to its maximum
effectiveness, which could result in reduced revenue and profits.