Cabela's 2014 Annual Report Download - page 91

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CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share and Per Share Amounts)
value of the bond, we adjust the carrying value of the individual bonds to their revised estimated fair value. The
governmental entity from which the Company purchases the bonds is not liable for repayment of principal and
interest on the bonds to the extent that the associated taxes are insufficient to fund principal and interest amounts
under the bonds. Should sufficient tax revenue not be generated by the subject properties, we may not receive
all anticipated payments and thus will be unable to realize the full carrying values of the economic development
bonds, which result in a corresponding decrease to deferred grant income.
Credit Card and Loyalty Rewards Programs – Cabela’s CLUB Visa cardholders receive Cabela’s points
based on the dollar amounts of transactions through credit cards issued by Cabela’s CLUB which may be redeemed
for Cabela’s products and services. Points may also be awarded for special promotions for the acquisition and
retention of accounts. The dollar amount of related points are accrued as earned by the cardholder and recorded
as a reduction in Financial Services revenue. In addition to the Cabela’s CLUB issued credit cards, customers
receive points for purchases at Cabela’s from various loyalty programs. The dollar amount of unredeemed credit
card points and loyalty points was $165,018 and $146,081 at the end of 2014 and 2013, respectively, and the Cabela’s
CLUB points issued never expire. The total cost incurred for all credit card rewards and loyalty programs was
$210,190, $198,687, and $176,882 for 2014, 2013, and 2012, respectively.
Income Taxes – The Company files consolidated federal and state income tax returns with its wholly-owned
subsidiaries. The consolidated group follows a policy of requiring each entity to provide for income taxes in an
amount equal to the income taxes that would have been incurred if each were filing separately. We recognize
deferred income tax assets and liabilities for the expected future tax consequences of temporary differences
between the financial statement carrying amounts and the tax bases of our assets and liabilities. The Company
establishes valuation allowances if we believe it is more likely than not that some or all of the Company’s deferred
tax assets will not be realized.
Stock-Based Compensation – Compensation expense is estimated based on grant date fair value on a
straight-line basis over the requisite service period. Costs associated with awards are included in compensation
expense as a component of selling, distribution, and administrative expenses.
Financial Instruments and Credit Risk Concentrations – Financial instruments which may subject the
Company to concentrations of credit risk are primarily cash, cash equivalents, and accounts receivable. The
Company invests primarily in money market accounts or tax-free municipal bonds, with short-term maturities,
limiting the amount of credit exposure to any one entity. The Company had $915 and $32,885 invested in overnight
funds at the end of 2014 and 2013, respectively. Concentrations of credit risk on accounts receivable are limited due
to the nature of the Company’s receivables.
Fair Value of Financial Instruments – The carrying amount of cash and cash equivalents, accounts
receivable, restricted cash, accounts payable, gift instruments (including credit card rewards and loyalty rewards
programs), accrued expenses and other liabilities, short-term borrowings, and income taxes included in the
consolidated balance sheets approximate fair value given the short-term nature of these financial instruments.
Credit card loans (level 2) are originated with variable rates of interest that adjust with changing market
interest rates so the carrying value of the credit card loans, including the carrying value of deferred credit card
origination costs, less the allowance for loan losses, approximates fair value. Time deposits (level 2) are pooled
in homogeneous groups, and the future cash flows of those groups are discounted using current market rates
offered for similar products for purposes of estimating fair value. The fair value of the secured variable funding
obligations of the Trust (level 2) approximates the carrying value since these obligations can fluctuate daily based
on the short-term operational needs with advances and pay downs at par value. The estimated fair value of secured
long-term obligations of the Trust is based on future cash flows associated with each type of debt discounted using
current borrowing rates for similar types of debt with comparable maturities. The estimated fair value of long-term
debt (level 2) is based on future cash flows associated with each type of debt discounted using current borrowing
rates for similar types of debt with comparable maturities.