Cabela's 2014 Annual Report Download - page 115

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105
CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
23. SEGMENT REPORTING
The Company has three reportable segments: Retail, Direct, and Financial Services. The Retail segment
sells products and services through the Company’s retail stores. The Direct segment sells products through our
e-commerce websites (Cabelas.com and Cabelas.ca) and direct mail catalogs. The Financial Services segment
issues co-branded credit cards. Revenues included in Corporate Overhead and Other are primarily made up
of amounts received from outfitter services, real estate rental income, land sales, and fees earned through the
Company’s travel business and other complementary business services.
The following summarizes the primary operating costs by segment:
x Retail – labor, advertising, depreciation, and retail store related occupancy costs.
x Direct – direct marketing costs (e-commerce advertising and catalog costs) and order processing costs.
x Financial Services – advertising and promotion, license fees, third party services for processing credit
card transactions, employee compensation and benefits, and other general and administrative costs.
x Corporate Overhead and Other – unallocated shared-service costs, operations of various ancillary
subsidiaries such as real estate development and travel, and segment eliminations. Unallocated shared-
service costs include receiving, distribution, and storage costs of inventory, merchandising, and quality
assurance costs, as well as corporate headquarters occupancy costs.
Segment assets are those directly used in or clearly allocable to an operating segment’s operations.
Depreciation, amortization, and property and equipment expenditures are recognized in each respective segment.
Major assets by segment include:
x Retail – inventory in the retail stores; land, buildings, fixtures, and leasehold improvements; and
goodwill. The amount of goodwill in the Retail segment totaled $3,023 and $3,295 at December 27, 2014,
and December 28, 2013, respectively. The change in the carrying value of goodwill between periods was
due to foreign currency adjustments.
x Direct – fixed assets and deferred catalog costs.
x Financial Services – cash, credit card loans, restricted cash, receivables, fixtures, and other assets. Cash
and cash equivalents of the Financial Services segment were $49,294 and $94,112 at December 27, 2014,
and December 28, 2013, respectively.
x Corporate Overhead and Other – corporate headquarters and facilities, merchandise distribution
inventory, shared technology infrastructure and related information technology systems, corporate cash
and cash equivalents, economic development bonds, prepaid expenses, deferred income taxes, and other
corporate long-lived assets.
Under an Intercompany Agreement, the Financial Services segment pays to the Retail and Direct segments
a fixed license fee that includes 70 basis points on all originated charge volume of the Cabela’s CLUB Visa credit
card portfolio. In addition, among other items, the agreement requires the Financial Services segment to reimburse
the Retail and Direct segments for certain promotional costs, which are recorded as a reduction to Financial
Services segment revenue and as a reduction to merchandise costs associated with the Retail and Direct segments.
Beginning in the second quarter of 2014, this reimbursement from our Financial Services segment to our Retail and
Direct segments for certain promotional costs has been adjusted to eliminate in consolidation. Prior periods have
not been adjusted.
Also, if the total risk-based capital ratio of WFB is greater than 13% at any quarter end, the Financial
Services segment must pay an additional license fee to the Retail and Direct business segments equal to 50% of
the amount that the total risk-based capital ratio exceeds 13%. At March 31, 2014, the total risk-based capital ratio
of WFB exceeded this 13% threshold; therefore, an additional license fee of $10,945 was paid in April 2014 by
the Financial Services segment to the Retail ($6,676) and Direct ($4,269) segments and was classified in selling,
distribution, and administrative expenses.