Cabela's 2014 Annual Report Download - page 106

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CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
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 the end of year 2014. 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 2014, the cumulative amount of earnings upon which United States income taxes have not
been provided was approximately $166,000. If those earnings were not considered indefinitely invested, the
Company estimates that an additional income tax expense of approximately $33,000 would be recorded.
As of December 27, 2014, cash and cash equivalents held by our foreign subsidiaries totaled $74,069.
Our intent is to permanently reinvest these funds outside the United States for capital expansion. Based on the
Company’s 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.
At December 27, 2014, our foreign subsidiary in Canada had a net operating loss carry forward of $8,330
with a related tax benefit of $2,199 that expires between 2033 and 2034. Due to the uncertainty of the ultimate
realization of this net operating loss, the subsidiary’s benefits and associated deferred tax liabilities of $507 have
been fully offset by a valuation allowance of $1,692.
In the three months ended September 27, 2014, the Company paid a deposit of $50,000 for federal taxes
related to prior period uncertain tax positions. In addition, the Company paid a total of $53,418 in prior years as
deposits for federal taxes related to prior period uncertain tax positions in 2012 and 2011, for a total of $103,418
in deposits outstanding. These deposits were classified as a current asset included in income taxes receivable and
deferred income taxes in the consolidated balance sheet.
The reconciliation of unrecognized tax benefits was as follows for the years ended:
2014 2013 2012
Unrecognized tax benefits, beginning of year $ 64,800 $ 39,252 $ 37,608
Gross decreases related to prior period tax positions (4,686) (3,428) (2,369)
Gross increases related to prior period tax positions 29,281 15,759 49
Gross increases related to current period tax positions 12,501 13,217 4,964
Gross decreases related to current period tax positions (17) - (1,000)
Unrecognized tax benefits, end of year $ 101,879 $ 64,800 $ 39,252
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 net interest
expense of $4,989 and $3,425 in 2014 and 2013, respectively, and a net credit to interest expense of $592 in 2012.
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 totaled $14,111 at the end of 2014 with
$1,806 included in current liabilities (accrued expenses and other liabilities) and $12,305 included in other long-
term liabilities in our consolidated balance sheet, compared to $9,122 at the end of 2013 that was included in other
long-term liabilities. The total amount of unrecognized tax benefits that, if recognized, would affect the effective
tax rate was $11,016.
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