Cabela's 2014 Annual Report Download - page 54

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44
Under an Intercompany Agreement, the Financial Services segment pays to the Retail and Direct business
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 $11 million was paid in April 2014 by the Financial Services segment to the Retail segment
($7 million) and the Direct segment ($4 million). Total fees paid under the Intercompany Agreement by the
Financial Services segment to these two segments, including the $11 million payment triggered by the excess total
risk-based capital ratio provision, increased $20 million in 2014 compared to 2013; a $24 million increase to the
Retail segment and a $4 million decrease to the Direct segment.
Interest (Expense) Income, Net
Interest expense, net of interest income, was $22 million in both 2014 and 2013. We incur interest expense
on our revolving credit facilities, our long-term debt, and on the balance of unrecognized tax benefits. The amount
of interest capitalized increased to $8 million in 2014 compared to $4 million in 2013 primarily due to more stores
opened. However, the increase in the amount of interest capitalized comparing the respective years was offset by
additional interest expense recognized in 2014 associated with our uncertain tax positions and increases in interest
expense due to higher outstanding balances on our revolving credit facility.
Other Non-Operating Income, Net
Other non-operating income was $5 million in 2014 compared to $4 million in 2013. This income is primarily
from interest earned on our economic development bonds.
Provision for Income Taxes
Our effective tax rate was 36.7% in 2014 compared to 34.7% in 2013. The increase in our effective tax
rate comparing the respective fiscal years is due to an increase of $4 million in accrued income tax related to
tax adjustments attributable to changes in the mix of prior year taxable income between the United States and
foreign tax jurisdictions and an increase in our state effective tax rate. The balance of unrecognized tax benefits
totaled $102 million at December 27, 2014, with $46 million classified in accrued expenses and other liabilities
and $56 million in long-term liabilities in our consolidated balance sheet, compared to a total of $65 million at
December 28, 2013, classified in other long-term liabilities.